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(5) Subsections (d) through (i) are repealed.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(7) Subsection (l) is repealed.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
(RELATING
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 fol-
lows:
‘‘(a) The administration of this part shall be con-
ducted 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
policyholders and subscribers of the car-
rier’’ and inserting ‘‘to the policyholders
and subscribers of the medicare adminis-
trative contractor’’;
(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,’’; and
(D) by striking paragraph (5);
(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 sec-
tion 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’’; and
(E) by striking paragraphs (5) and (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
subsection (a)’’ and inserting ‘‘The Sec-
retary’’; 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
making payments under this part’’; and
(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 strik-
ing ‘‘carrier’’.
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN
GENERAL.—Except as otherwise
provided in this subsection, the amendments
made by this section shall take effect on Octo-
ber 1, 2003, and the Secretary is authorized to
take such steps before such date as may be nec-
essary 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
(except as otherwise provided under this Act,
other than under this section) until such date
as the contract is let out for competitive bid-
ding 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 contrac-
tors for annual contract periods that begin on
or after October 1, 2008.
(D) WAIVER
OF
PROVIDER
NOMINATION
PROVISIONS DURING TRANSITION.—During the
period beginning on the date of the enactment
of this Act and before the date specified under
subparagraph (A), the Secretary may enter into
new agreements under section 1816 of the So-
cial Security Act (42 U.S.C. 1395h) without re-
gard to any of the provider nomination provi-
sions of such section.
(2) GENERAL
TRANSITION
RULES.—The Sec-
retary shall take such steps, consistent with para-
graph (1)(B) and (1)(C), as are necessary to provide
for an appropriate transition from contracts under
section 1816 and section 1842 of the Social Security
Act (42 U.S.C. 1395h, 1395u) to contracts under
section 1874A, as added by subsection (a)(1).
(3) AUTHORIZING
CONTINUATION
OF
MIP
FUNCTIONS
UNDER
CURRENT
CONTRACTS
AND
AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—
The provisions contained in the exception in section
1893(d)(2) of the Social Security Act (42 U.S.C.
1395ddd(d)(2)) shall continue to apply notwith-
standing the amendments made by this section, and
any reference in such provisions to an agreement or
contract shall be deemed to include a contract under
section 1874A of such Act, as inserted by subsection
(a)(1), that continues the activities referred to in
such provisions.
(e) REFERENCES.—On and after the effective date
provided 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
provided under section 1874A of the Social Security Act).
(f) REPORTS ON IMPLEMENTATION.—
(1) PLAN FOR IMPLEMENTATION.—By not later
than October 1, 2002, the Secretary shall submit a
report to Congress and the Comptroller General of
the United States that describes the plan for imple-
mentation of the amendments made by this section.
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 include 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, 2006, that describes the status of
implementation of such amendments and that in-
cludes 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 com-
petition.
SEC. 202. REQUIREMENTS FOR INFORMATION SECURITY
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS.
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 201(a)(1), is amended by adding at the end the fol-
lowing new subsection:
‘‘(e) REQUIREMENTS
FOR
INFORMATION
SECU-
RITY.—
‘‘(1) DEVELOPMENT
OF
INFORMATION
SECU-
RITY
PROGRAM.—A medicare administrative con-
tractor that performs the functions referred to in
subparagraphs (A) and (B) of subsection (a)(4) (re-
lating to determining and making payments) shall
implement a contractor-wide information security
program to provide information security for the op-
eration and assets of the contractor with respect to
such functions under this title. An information secu-
rity program under this paragraph shall meet the re-
quirements for information security programs im-
posed on Federal agencies under section 3534(b)(2)
of title 44, United States Code (other than require-
ments under subparagraphs (B)(ii), (F)(iii), and
(F)(iv) of such section).
‘‘(2) INDEPENDENT AUDITS.—
‘‘(A) PERFORMANCE OF ANNUAL EVALUA-
TIONS.—Each year a medicare administrative
contractor that performs the functions referred
to in subparagraphs (A) and (B) of subsection
(a)(4) (relating to determining and making pay-
ments) shall undergo an evaluation of the infor-
mation security of the contractor with respect
to such functions under this title. The evalua-
tion shall—
‘‘(i) be performed by an entity that
meets such requirements for independence
as the Inspector General of the Depart-
ment of Health and Human Services may
establish; and
‘‘(ii) test the effectiveness of informa-
tion security control techniques for an ap-
propriate subset of the contractor’s infor-
mation systems (as defined in section
3502(8) of title 44, United States Code)
relating to such functions under this title
and an assessment of compliance with the
requirements of this subsection and related
information security policies, procedures,
standards and guidelines.
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case
of a medicare administrative contractor
covered by this subsection that has not
previously performed the functions referred
to in subparagraphs (A) and (B) of sub-
section (a)(4) (relating to determining and
making payments) as a fiscal intermediary
or carrier under section 1816 or 1842, the
first independent evaluation conducted
pursuant subparagraph (A) shall be com-
pleted prior to commencing such functions.
‘‘(ii) OTHER
CONTRACTORS.—In the
case of a medicare administrative con-
tractor covered by this subsection that is
not described in clause (i), the first inde-
pendent evaluation conducted pursuant
subparagraph (A) shall be completed with-
in 1 year after the date the contractor
commences functions referred to in clause
(i) under this section.
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE INSPECTOR GENERAL.—
The results of independent evaluations
under subparagraph (A) shall be submitted
promptly to the Inspector General of the
Department of Health and Human Serv-
ices.
‘‘(ii) TO
CONGRESS.—The Inspector
General of Department of Health and
Human Services shall submit to Congress
annual reports on the results of such eval-
uations.’’.
(b) APPLICATION
OF REQUIREMENTS
TO FISCAL
INTERMEDIARIES AND CARRIERS.—
(1) IN
GENERAL.—The provisions of section
1874A(e)(2) of the Social Security Act (other than
subparagraph (B)), as added by subsection (a), shall
apply to each fiscal intermediary under section 1816
of the Social Security Act (42 U.S.C. 1395h) and
each carrier under section 1842 of such Act (42
U.S.C. 1395u) in the same manner as they apply to
medicare administrative contractors under such pro-
visions.
(2) DEADLINE FOR INITIAL EVALUATION.—In
the case of such a fiscal intermediary or carrier with
an agreement or contract under such respective sec-
tion in effect as of the date of the enactment of this
Act, 
the 
first 
evaluation 
under 
section
1874A(e)(2)(A) of the Social Security Act (as added
by subsection (a)), pursuant to paragraph (1), shall
be completed (and a report on the evaluation sub-
mitted to the Secretary) by not later than 1 year
after such date.
TITLE III—EDUCATION AND
OUTREACH
SEC. 301. 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 fol-
lowing new section:
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE
‘‘SEC. 1889. (a) COORDINATION
OF EDUCATION
FUNDING.—The Secretary shall coordinate the edu-
cational activities provided through medicare contractors
(as defined in subsection (g), including under section
1893) in order to maximize the effectiveness of Federal
education efforts for providers of services and suppliers.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act.
(3) REPORT.—Not later than October 1, 2002,
the Secretary shall submit to Congress a report that
includes a description and evaluation of the steps
taken to coordinate the funding of provider edu-
cation under section 1889(a) of the Social Security
Act, as added by paragraph (1).
(b) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE.—
(1) IN GENERAL.—Section 1874A, as added by
section 201(a)(1) and as amended by section 202(a),
is amended by adding at the end the following new
subsection:
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—
In order to give medicare administrative contractors an
incentive to implement effective education and outreach
programs for providers of services and suppliers, the Sec-
retary shall develop and implement a methodology to
measure the specific claims payment error rates of such
contractors in the processing or reviewing of medicare
claims.’’.
(2) APPLICATION TO FISCAL INTERMEDIARIES
AND CARRIERS.—The provisions of section 1874A(f)
of the Social Security Act, as added by paragraph
(1), shall apply to each fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C.
1395h) and each carrier under section 1842 of such
Act (42 U.S.C. 1395u) in the same manner as they
apply to medicare administrative contractors under
such provisions.
(3) GAO REPORT ON ADEQUACY OF METHOD-
OLOGY.—Not later than October 1, 2002, the Comp-
troller General of the United States shall submit to
Congress and to the Secretary a report on the ade-
quacy of the methodology under section 1874A(f)(1)
of the Social Security Act, as added by paragraph
(1), and shall include in the report such rec-
ommendations as the Comptroller General deter-
mines appropriate with respect to the methodology.
(4) REPORT ON USE OF METHODOLOGY IN AS-
SESSING
CONTRACTOR
PERFORMANCE.—Not later
than October 1, 2002, the Secretary shall submit to
Congress a report that describes how the Secretary
intends to use such methodology in assessing medi-
care contractor performance in implementing effec-
tive education and outreach programs, including
whether to use such methodology as a basis for per-
formance bonuses. The report shall include an anal-
ysis of the sources of identified errors and potential
changes in systems of contractors and rules of the
Secretary that could reduce claims error rates.