140
under such appointment only for the remainder of such
term.
‘‘(D) GENERAL AUTHORITY.—The Administrator
shall be responsible for the exercise of all powers and
the discharge of all duties of the Administration, and
shall have authority and control over all personnel and
activities thereof.
‘‘(E) RULEMAKING
AUTHORITY.—The Adminis-
trator may prescribe such rules and regulations as the
Administrator determines necessary or appropriate to
carry out the functions of the Administration. The reg-
ulations prescribed by the Administrator shall be sub-
ject to the rulemaking procedures established under
section 553 of title 5, United States Code.
‘‘(F) AUTHORITY TO ESTABLISH ORGANIZATIONAL
UNITS.—The Administrator may establish, alter, con-
solidate, or discontinue such organizational units or
components within the Administration as the Adminis-
trator considers necessary or appropriate, except as
specified in this section.
‘‘(G) AUTHORITY TO DELEGATE.—The Adminis-
trator may assign duties, and delegate, or authorize
successive redelegations of, authority to act and to
render decisions, to such officers and employees of the
Administration as the Administrator may find nec-
essary. Within the limitations of such delegations, re-
delegations, or assignments, all official acts and deci-
sions of such officers and employees shall have the
same force and effect as though performed or rendered
by the Administrator.
‘‘(2) DEPUTY ADMINISTRATOR.—
‘‘(A) IN GENERAL.—There shall be a Deputy Ad-
ministrator of the Medicare Benefits Administration
who shall be appointed by the President, by and with
the advice and consent of the Senate.
‘‘(B) COMPENSATION.—The Deputy Administrator
shall be paid at the rate of basic pay payable for level
141
IV of the Executive Schedule under section 5315 of
title 5, United States Code.
‘‘(C) TERM
OF
OFFICE.—The Deputy Adminis-
trator shall be appointed for a term of 5 years. In any
case in which a successor does not take office at the
end of a Deputy Administrator’s term of office, such
Deputy Administrator may continue in office until the
entry upon office of such a successor. A Deputy Ad-
ministrator appointed to a term of office after the com-
mencement of such term may serve under such ap-
pointment only for the remainder of such term.
‘‘(D) DUTIES.—The Deputy Administrator shall
perform such duties and exercise such powers as the
Administrator shall from time to time assign or dele-
gate. The Deputy Administrator shall be Acting Ad-
ministrator of the Administration during the absence or
disability of the Administrator and, unless the Presi-
dent designates another officer of the Government as
Acting Administrator, in the event of a vacancy in the
office of the Administrator.
‘‘(3) CHIEF ACTUARY.—
‘‘(A) IN GENERAL.—There is established in the
Administration the position of Chief Actuary. The
Chief Actuary shall be appointed by, and in direct line
of authority to, the Administrator of such Administra-
tion. The Chief Actuary shall be appointed from among
individuals who have demonstrated, by their education
and experience, superior expertise in the actuarial
sciences. The Chief Actuary may be removed only for
cause.
‘‘(B) COMPENSATION.—The Chief Actuary shall
be compensated at the highest rate of basic pay for the
Senior Executive Service under section 5382(b) of title
5, United States Code.
‘‘(C) DUTIES.—The Chief Actuary shall exercise
such duties as are appropriate for the office of the
142
Chief Actuary and in accordance with professional
standards of actuarial independence.
‘‘(4) SECRETARIAL COORDINATION OF PROGRAM AD-
MINISTRATION.—The Secretary shall ensure appropriate
coordination between the Administrator and the Adminis-
trator of the Centers for Medicare & Medicaid Services in
carrying out the programs under this title.
‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—
‘‘(1) DUTIES.—
‘‘(A) GENERAL DUTIES.—The Administrator shall
carry out parts C and D, including—
‘‘(i) negotiating, entering into, and enforcing,
contracts 
with 
plans 
for 
the 
offering 
of
Medicare+Choice plans under part C, including the
offering of qualified prescription drug coverage
under such plans; and
‘‘(ii) negotiating, entering into, and enforcing,
contracts with PDP sponsors for the offering of
prescription drug plans under part D.
‘‘(B) OTHER
DUTIES.—The Administrator shall
carry out any duty provided for under part C or part
D, including demonstration projects carried out in part
or in whole under such parts, the programs of all-inclu-
sive care for the elderly (PACE program) under section
1894, the social health maintenance organization
(SHMO) demonstration projects (referred to in section
4104(c) of the Balanced Budget Act of 1997), and
through a Medicare+Choice project that demonstrates
the application of capitation payment rates for frail el-
derly medicare beneficiaries through the use of a inter-
disciplinary team and through the provision of primary
care services to such beneficiaries by means of such a
team at the nursing facility involved).
‘‘(C) PRESCRIPTION DRUG CARD.—The Adminis-
trator shall carry out section 1807 (relating to the
medicare prescription drug discount card endorsement
program).
143
‘‘(D) NONINTERFERENCE.—In carrying out its
duties with respect to the provision of qualified pre-
scription drug coverage to beneficiaries under this title,
the Administrator may not—
‘‘(i) require a particular formulary or institute
a price structure for the reimbursement of covered
outpatient drugs;
‘‘(ii) interfere in any way with negotiations be-
tween PDP sponsors and Medicare+Choice organi-
zations and drug manufacturers, wholesalers, or
other suppliers of covered outpatient drugs; and
‘‘(iii) otherwise interfere with the competitive
nature of providing such coverage through such
sponsors and organizations.
‘‘(E) ANNUAL REPORTS.—Not later March 31 of
each year, the Administrator shall submit to Congress
and the President a report on the administration of
parts C and D during the previous fiscal year.
‘‘(2) STAFF.—
‘‘(A) IN GENERAL.—The Administrator, with the
approval of the Secretary, may employ, without regard
to chapter 31 of title 5, United States Code, other than
sections 3110 and 3112, such officers and employees as
are necessary to administer the activities to be carried
out through the Medicare Benefits Administration. The
Administrator shall employ staff with appropriate and
necessary expertise in negotiating contracts in the pri-
vate sector.
‘‘(B) FLEXIBILITY WITH RESPECT TO COMPENSA-
TION.—
‘‘(i) IN GENERAL.—The staff of the Medicare
Benefits Administration shall, subject to clause (ii),
be paid without regard to the provisions of chapter
51 (other than section 5101) and chapter 53 (other
than section 5301) of such title (relating to classi-
fication and schedule pay rates).
144
‘‘(ii) MAXIMUM RATE.—In no case may the
rate of compensation determined under clause (i)
exceed the rate of basic pay payable for level IV of
the Executive Schedule under section 5315 of title
5, United States Code.
‘‘(C) LIMITATION
ON
FULL-TIME
EQUIVALENT
STAFFING
FOR
CURRENT
CMS
FUNCTIONS
BEING
TRANSFERRED.—The Administrator may not employ
under this paragraph a number of full-time equivalent
employees, to carry out functions that were previously
conducted by the Centers for Medicare & Medicaid
Services and that are conducted by the Administrator
by reason of this section, that exceeds the number of
such full-time equivalent employees authorized to be
employed by the Centers for Medicare & Medicaid Serv-
ices to conduct such functions as of the date of the en-
actment of this Act.
‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS OF THE
CENTERS FOR MEDICARE & MEDICAID SERVICES.—
‘‘(A) IN GENERAL.—The Secretary, the Adminis-
trator, and the Administrator of the Centers for Medi-
care & Medicaid Services shall establish an appropriate
transition of responsibility in order to redelegate the
administration of part C from the Secretary and the
Administrator of the Centers for Medicare & Medicaid
Services to the Administrator as is appropriate to carry
out the purposes of this section.
‘‘(B) TRANSFER OF DATA AND INFORMATION.—
The Secretary shall ensure that the Administrator of
the Centers for Medicare & Medicaid Services transfers
to the Administrator of the Medicare Benefits Adminis-
tration such information and data in the possession of
the Administrator of the Centers for Medicare & Med-
icaid Services as the Administrator of the Medicare
Benefits Administration requires to carry out the du-
ties described in paragraph (1).
145
‘‘(C) CONSTRUCTION.—Insofar as a responsibility
of the Secretary or the Administrator of the Centers
for Medicare & Medicaid Services is redelegated to the
Administrator under this section, any reference to the
Secretary or the Administrator of the Centers for Medi-
care & Medicaid Services in this title or title XI with
respect to such responsibility is deemed to be a ref-
erence to the Administrator.
‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—
‘‘(1) ESTABLISHMENT.—The Secretary shall establish
within the Medicare Benefits Administration an Office of
Beneficiary Assistance to coordinate functions relating to
outreach and education of medicare beneficiaries under this
title, including the functions described in paragraph (2).
The Office shall be separate operating division within the
Administration.
‘‘(2) DISSEMINATION OF INFORMATION ON BENEFITS
AND APPEALS RIGHTS.—
‘‘(A) DISSEMINATION
OF
BENEFITS
INFORMA-
TION.—The Office of Beneficiary Assistance shall dis-
seminate, directly or through contract, to medicare
beneficiaries, by mail, by posting on the Internet site
of the Medicare Benefits Administration and through a
toll-free telephone number, information with respect to
the following:
‘‘(i) Benefits, and limitations on payment (in-
cluding cost-sharing, stop-loss provisions, and for-
mulary restrictions) under parts C and D.
‘‘(ii) Benefits, and limitations on payment
under parts A and B, including information on
medicare supplemental policies under section 1882.
Such information shall be presented in a manner so
that medicare beneficiaries may compare benefits under
parts A, B, D, and medicare supplemental policies with
benefits under Medicare+Choice plans under part C.
‘‘(B) DISSEMINATION OF APPEALS RIGHTS INFOR-
MATION.—The Office of Beneficiary Assistance shall
146
disseminate to medicare beneficiaries in the manner
provided under subparagraph (A) a description of pro-
cedural rights (including grievance and appeals proce-
dures) of beneficiaries under the original medicare fee-
for-service program under parts A and B, the
Medicare+Choice program under part C, and the Vol-
untary Prescription Drug Benefit Program under part
D.
‘‘(e) MEDICARE POLICY ADVISORY BOARD.—
‘‘(1) ESTABLISHMENT.—There is established within
the Medicare Benefits Administration the Medicare Policy
Advisory Board (in this section referred to the ‘Board’).
The Board shall advise, consult with, and make rec-
ommendations to the Administrator of the Medicare Bene-
fits Administration with respect to the administration of
parts C and D, including the review of payment policies
under such parts.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—With respect to matters of
the administration of parts C and D, the Board shall
submit to Congress and to the Administrator of the
Medicare Benefits Administration such reports as the
Board determines appropriate. Each such report may
contain such recommendations as the Board determines
appropriate for legislative or administrative changes to
improve the administration of such parts, including the
topics described in subparagraph (B). Each such report
shall be published in the Federal Register.
‘‘(B) 
TOPICS
DESCRIBED.—Reports 
required
under subparagraph (A) may include the following top-
ics:
‘‘(i) 
FOSTERING
COMPETITION.—Rec-
ommendations or proposals to increase competition
under parts C and D for services furnished to
medicare beneficiaries.
‘‘(ii) EDUCATION
AND
ENROLLMENT.—Rec-
ommendations for the improvement to efforts to
147
provide medicare beneficiaries information and edu-
cation on the program under this title, and specifi-
cally parts C and D, and the program for enroll-
ment under the title.
‘‘(iii) 
IMPLEMENTATION
OF
RISK-ADJUST-
MENT.—Evaluation of the implementation under
section 1853(a)(3)(C) of the risk adjustment meth-
odology to payment rates under that section to
Medicare+Choice 
organizations 
offering
Medicare+Choice plans that accounts for variations
in per capita costs based on health status and other
demographic factors.
‘‘(iv) DISEASE
MANAGEMENT
PROGRAMS.—
Recommendations on the incorporation of disease
management programs under parts C and D.
‘‘(v) RURAL
ACCESS.—Recommendations to
improve competition and access to plans under
parts C and D in rural areas.
‘‘(C) MAINTAINING INDEPENDENCE OF BOARD.—
The Board shall directly submit to Congress reports re-
quired under subparagraph (A). No officer or agency of
the United States may require the Board to submit to
any officer or agency of the United States for approval,
comments, or review, prior to the submission to Con-
gress of such reports.
‘‘(3) DUTY OF ADMINISTRATOR OF MEDICARE BENE-
FITS ADMINISTRATION.—With respect to any report sub-
mitted by the Board under paragraph (2)(A), not later
than 90 days after the report is submitted, the Adminis-
trator of the Medicare Benefits Administration shall submit
to Congress and the President an analysis of recommenda-
tions made by the Board in such report. Each such analysis
shall be published in the Federal Register.
‘‘(4) MEMBERSHIP.—
‘‘(A) APPOINTMENT.—Subject to the succeeding
provisions of this paragraph, the Board shall consist of
seven members to be appointed as follows:
148
‘‘(i) Three members shall be appointed by the
President.
‘‘(ii) Two members shall be appointed by the
Speaker of the House of Representatives, with the
advice of the chairmen and the ranking minority
members of the Committees on Ways and Means
and on Energy and Commerce of the House of
Representatives.
‘‘(iii) Two members shall be appointed by the
President pro tempore of the Senate with the ad-
vice of the chairman and the ranking minority
member of the Senate Committee on Finance.
‘‘(B) QUALIFICATIONS.—The members shall be
chosen on the basis of their integrity, impartiality, and
good judgment, and shall be individuals who are, by
reason of their education and experience in health care
benefits management, exceptionally qualified to perform
the duties of members of the Board.
‘‘(C) PROHIBITION
ON
INCLUSION
OF
FEDERAL
EMPLOYEES.—No officer or employee of the United
States may serve as a member of the Board.
‘‘(5) COMPENSATION.—Members of the Board shall
receive, for each day (including travel time) they are en-
gaged in the performance of the functions of the board,
compensation at rates not to exceed the daily equivalent to
the annual rate in effect for level IV of the Executive
Schedule under section 5315 of title 5, United States Code.
‘‘(6) TERMS OF OFFICE.—
‘‘(A) IN GENERAL.—The term of office of mem-
bers of the Board shall be 3 years.
‘‘(B) TERMS OF INITIAL APPOINTEES.—As des-
ignated by the President at the time of appointment,
of the members first appointed—
‘‘(i) one shall be appointed for a term of 1
year;
‘‘(ii) three shall be appointed for terms of 2
years; and
149
‘‘(iii) three shall be appointed for terms of 3
years.
‘‘(C) REAPPOINTMENTS.—Any person appointed
as a member of the Board may not serve for more than
8 years.
‘‘(D) VACANCY.—Any member appointed to fill a
vacancy occurring before the expiration of the term for
which the member’s predecessor was appointed shall be
appointed only for the remainder of that term. A mem-
ber may serve after the expiration of that member’s
term until a successor has taken office. A vacancy in
the Board shall be filled in the manner in which the
original appointment was made.
‘‘(7) CHAIR.—The Chair of the Board shall be elected
by the members. The term of office of the Chair shall be
3 years.
‘‘(8) MEETINGS.—The Board shall meet at the call of
the Chair, but in no event less than three times during
each fiscal year.
‘‘(9) DIRECTOR AND STAFF.—
‘‘(A) APPOINTMENT
OF
DIRECTOR.—The Board
shall have a Director who shall be appointed by the
Chair.
‘‘(B) IN
GENERAL.—With the approval of the
Board, the Director may appoint, without regard to
chapter 31 of title 5, United States Code, such addi-
tional personnel as the Director considers appropriate.
‘‘(C) FLEXIBILITY WITH RESPECT TO COMPENSA-
TION.—
‘‘(i) IN GENERAL.—The Director and staff of
the Board shall, subject to clause (ii), be paid with-
out regard to the provisions of chapter 51 and
chapter 53 of such title (relating to classification
and schedule pay rates).
‘‘(ii) MAXIMUM RATE.—In no case may the
rate of compensation determined under clause (i)
exceed the rate of basic pay payable for level IV of
150
the Executive Schedule under section 5315 of title
5, United States Code.
‘‘(D) ASSISTANCE FROM THE ADMINISTRATOR OF
THE MEDICARE BENEFITS ADMINISTRATION.—The Ad-
ministrator of the Medicare Benefits Administration
shall make available to the Board such information and
other assistance as it may require to carry out its func-
tions.
‘‘(10) CONTRACT AUTHORITY.—The Board may con-
tract with and compensate government and private agencies
or persons to carry out its duties under this subsection,
without regard to section 3709 of the Revised Statutes (41
U.S.C. 5).
‘‘(f) FUNDING.—There is authorized to be appropriated, in
appropriate part from the Federal Hospital Insurance Trust
Fund and from the Federal Supplementary Medical Insurance
Trust Fund (including the Medicare Prescription Drug Ac-
count), such sums as are necessary to carry out this section.’’.
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by sub-
section (a) shall take effect on the date of the enactment
of this Act.
(2) TIMING OF INITIAL APPOINTMENTS.—The Admin-
istrator and Deputy Administrator of the Medicare Bene-
fits Administration may not be appointed before March 1,
2003.
(3) DUTIES WITH RESPECT TO ELIGIBILITY DETER-
MINATIONS AND ENROLLMENT.—The Administrator of the
Medicare Benefits Administration shall carry out enroll-
ment under title XVIII of the Social Security Act, make
eligibility determinations under such title, and carry out
part C of such title for years beginning or after January
1, 2005.
(4) TRANSITION.—Before the date the Administrator
of the Medicare Benefits Administration is appointed and
assumes responsibilities under this section and section
1807 of the Social Security Act, the Secretary of Health
151
and Human Services shall provide for the conduct of any
responsibilities of such Administrator that are otherwise
provided under law.
(c) MISCELLANEOUS ADMINISTRATIVE PROVISIONS.—
(1) ADMINISTRATOR AS MEMBER OF THE BOARD OF
TRUSTEES
OF
THE
MEDICARE
TRUST
FUNDS.—Section
1817(b) and section 1841(b) (42 U.S.C. 1395i(b),
1395t(b)) are each amended by striking ‘‘and the Secretary
of Health and Human Services, all ex officio,’’ and insert-
ing ‘‘the Secretary of Health and Human Services, and the
Administrator of the Medicare Benefits Administration, all
ex officio,’’.
(2) INCREASE IN GRADE TO EXECUTIVE LEVEL III FOR
THE ADMINISTRATOR OF THE CENTERS FOR MEDICARE &
MEDICAID SERVICES; LEVEL FOR MEDICARE BENEFITS AD-
MINISTRATOR.—
(A) IN GENERAL.—Section 5314 of title 5, United
States Code, by adding at the end the following:
‘‘Administrator of the Centers for Medicare &
Medicaid Services .
‘‘Administrator of the Medicare Benefits Adminis-
tration.’’.
(B) CONFORMING AMENDMENT.—Section 5315 of
such title is amended by striking ‘‘Administrator of the
Health Care Financing Administration.’’.
(C) EFFECTIVE DATE.—The amendments made by
this paragraph take effect on January 1, 2003.
TITLE VIII—REGULATORY REDUC-
TION 
AND 
CONTRACTING 
RE-
FORM
Subtitle A—Regulatory Reform
SEC. 801. CONSTRUCTION; DEFINITION OF SUPPLIER.
(a) CONSTRUCTION.—Nothing in this title shall be
construed—
(1) to compromise or affect existing legal remedies for
addressing fraud or abuse, whether it be criminal prosecu-
152
tion, civil enforcement, or administrative remedies, includ-
ing under sections 3729 through 3733 of title 31, United
States Code (known as the False Claims Act); or
(2) to prevent or impede the Department of Health
and Human Services in any way from its ongoing efforts
to eliminate waste, fraud, and abuse in the medicare pro-
gram.
Furthermore, the consolidation of medicare administrative con-
tracting set forth in this Act does not constitute consolidation
of the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund or reflect any
position on that issue.
(b) DEFINITION OF SUPPLIER.—Section 1861 (42 U.S.C.
1395x) is amended by inserting after subsection (c) the fol-
lowing new subsection:
‘‘Supplier
‘‘(d) The term ‘supplier’ means, unless the context other-
wise requires, a physician or other practitioner, a facility, or
other entity (other than a provider of services) that furnishes
items or services under this title.’’.
SEC. 802. ISSUANCE OF REGULATIONS.
(a) CONSOLIDATION
OF
PROMULGATION
TO
ONCE
A
MONTH.—
(1) IN GENERAL.—Section 1871 (42 U.S.C. 1395hh)
is amended by adding at the end the following new sub-
section:
‘‘(d)(1) Subject to paragraph (2), the Secretary shall issue
proposed or final (including interim final) regulations to carry
out this title only on one business day of every month.
‘‘(2) The Secretary may issue a proposed or final regula-
tion described in paragraph (1) on any other day than the day
described in paragraph (1) if the Secretary—
‘‘(A) finds that issuance of such regulation on another
day is necessary to comply with requirements under law; or
‘‘(B) finds that with respect to that regulation the lim-
itation of issuance on the date described in paragraph (1)
is contrary to the public interest.
153
If the Secretary makes a finding under this paragraph, the
Secretary shall include such finding, and brief statement of the
reasons for such finding, in the issuance of such regulation.
‘‘(3) The Secretary shall coordinate issuance of new regu-
lations described in paragraph (1) relating to a category of pro-
vider of services or suppliers based on an analysis of the collec-
tive impact of regulatory changes on that category of providers
or suppliers.’’.
(2) GAO REPORT ON PUBLICATION OF REGULATIONS
ON A QUARTERLY BASIS.—Not later than 3 years after the
date of the enactment of this Act, the Comptroller General
of the United States shall submit to Congress a report on
the feasibility of requiring that regulations described in sec-
tion 1871(d) of the Social Security Act be promulgated on
a quarterly basis rather than on a monthly basis.
(3) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall apply to regulations promulgated on or
after the date that is 30 days after the date of the enact-
ment of this Act.
(b) REGULAR TIMELINE
FOR PUBLICATION
OF FINAL
RULES.—
(1) IN
GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)) is amended by adding at the end the following
new paragraph:
‘‘(3)(A) The Secretary, in consultation with the Director
of the Office of Management and Budget, shall establish and
publish a regular timeline for the publication of final regula-
tions based on the previous publication of a proposed regulation
or an interim final regulation.
‘‘(B) Such timeline may vary among different regulations
based on differences in the complexity of the regulation, the
number and scope of comments received, and other relevant
factors, but shall not be longer than 3 years except under ex-
ceptional circumstances. If the Secretary intends to vary such
timeline with respect to the publication of a final regulation,
the Secretary shall cause to have published in the Federal Reg-
ister notice of the different timeline by not later than the
154
timeline previously established with respect to such regulation.
Such notice shall include a brief explanation of the justification
for such variation.
‘‘(C) In the case of interim final regulations, upon the ex-
piration of the regular timeline established under this para-
graph for the publication of a final regulation after opportunity
for public comment, the interim final regulation shall not con-
tinue in effect unless the Secretary publishes (at the end of the
regular timeline and, if applicable, at the end of each suc-
ceeding 1-year period) a notice of continuation of the regulation
that includes an explanation of why the regular timeline (and
any subsequent 1-year extension) was not complied with. If
such a notice is published, the regular timeline (or such
timeline as previously extended under this paragraph) for publi-
cation of the final regulation shall be treated as having been
extended for 1 additional year.
‘‘(D) The Secretary shall annually submit to Congress a
report that describes the instances in which the Secretary failed
to publish a final regulation within the applicable regular
timeline under this paragraph and that provides an explanation
for such failures.’’.
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall take effect on the date of the enact-
ment of this Act. The Secretary shall provide for an appro-
priate transition to take into account the backlog of pre-
viously published interim final regulations.
(c) LIMITATIONS ON NEW MATTER IN FINAL REGULA-
TIONS.—
(1) IN
GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)), as amended by subsection (b), is further
amended by adding at the end the following new para-
graph:
‘‘(4) If the Secretary publishes notice of proposed rule-
making relating to a regulation (including an interim final reg-
ulation), insofar as such final regulation includes a provision
that is not a logical outgrowth of such notice of proposed rule-
making, that provision shall be treated as a proposed regulation
155
and shall not take effect until there is the further opportunity
for public comment and a publication of the provision again as
a final regulation.’’.
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall apply to final regulations published on
or after the date of the enactment of this Act.
SEC. 803. COMPLIANCE WITH CHANGES IN REGULA-
TIONS AND POLICIES.
(a) NO RETROACTIVE APPLICATION
OF SUBSTANTIVE
CHANGES.—
(1) IN GENERAL.—Section 1871 (42 U.S.C. 1395hh),
as amended by section 802(a), is amended by adding at the
end the following new subsection:
‘‘(e)(1)(A) A substantive change in regulations, manual in-
structions, interpretative rules, statements of policy, or guide-
lines of general applicability under this title shall not be applied
(by extrapolation or otherwise) retroactively to items and serv-
ices furnished before the effective date of the change, unless
the Secretary determines that—
‘‘(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 the enactment of this Act.
(b) TIMELINE
FOR COMPLIANCE WITH SUBSTANTIVE
CHANGES AFTER NOTICE.—
(1) IN GENERAL.—Section 1871(e)(1), as added by
subsection (a), is amended by adding at the end the fol-
lowing:
‘‘(B)(i) Except as provided in clause (ii), a substantive
change referred to in subparagraph (A) shall not become effec-
tive before the end of the 30-day period that begins on the date
that the Secretary has issued or published, as the case may be,
the substantive change.
156
‘‘(ii) The Secretary may provide for such 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 waiv-
er 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 Secretary provides for an
earlier effective date pursuant to this clause, the Secretary
shall include in the issuance or publication of the substantive
change a finding described in the first sentence, and a brief
statement of the reasons for such finding.
‘‘(C) No action shall be taken against a provider of serv-
ices or supplier with respect to noncompliance with such a sub-
stantive change for items and services furnished before the ef-
fective date of such a change.’’.
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall apply to compliance actions undertaken
on or after the date of the enactment of this Act.
(c) RELIANCE ON GUIDANCE.—
(1) IN GENERAL.—Section 1871(e), as added by sub-
section (a), is further amended by adding at the end the
following new paragraph:
‘‘(2)(A) If—
‘‘(i) a provider of services or supplier follows the writ-
ten guidance (which may be transmitted electronically) pro-
vided by the Secretary or by a medicare contractor (as de-
fined in section 1889(g)) acting within the scope of the
contractor’s contract authority, with respect to the fur-
nishing of items or services and submission of a claim for
benefits for such items or services with respect to such pro-
vider or supplier;
‘‘(ii) the Secretary determines that the provider of
services or supplier has accurately presented the cir-
cumstances relating to such items, services, and claim to
the contractor in writing; and
‘‘(iii) the guidance was in error;
the provider of services or supplier shall not be subject to any
sanction (including any penalty or requirement for repayment
157
of any amount) if the provider of services or supplier reason-
ably relied on such guidance.
‘‘(B) Subparagraph (A) shall not be construed as pre-
venting the recoupment or repayment (without any additional
penalty) relating to an overpayment insofar as the overpayment
was solely the result of a clerical or technical operational
error.’’.
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall take effect on the date of the enact-
ment of this Act but shall not apply to any sanction for
which notice was provided on or before the date of the en-
actment of this Act.
SEC. 804. REPORTS AND STUDIES RELATING TO REGU-
LATORY REFORM.
(a) GAO STUDY ON ADVISORY OPINION AUTHORITY.—
(1) STUDY.—The Comptroller General of the United
States shall conduct a study to determine the feasibility
and appropriateness of establishing in the Secretary au-
thority to provide legally binding advisory opinions on ap-
propriate interpretation and application of regulations to
carry out the medicare program under title XVIII of the
Social Security Act. Such study shall examine the appro-
priate timeframe for issuing such advisory opinions, as well
as the need for additional staff and funding to provide such
opinions.
(2) REPORT.—The Comptroller General shall submit
to Congress a report on the study conducted under para-
graph (1) by not later than January 1, 2004.
(b) REPORT
ON LEGAL
AND REGULATORY INCONSIST-
ENCIES.—Section 1871 (42 U.S.C. 1395hh), as amended by
section 803(a), is amended by adding at the end the following
new subsection:
‘‘(f)(1) Not later than 2 years after the date of the enact-
ment of this subsection, and every 2 years thereafter, the Sec-
retary shall submit to Congress a report with respect to the ad-
ministration of this title and areas of inconsistency or conflict
among the various provisions under law and regulation.
158
‘‘(2) In preparing a report under paragraph (1), the Sec-
retary shall collect—
‘‘(A) information from individuals entitled to benefits
under part A or enrolled under part B, or both, providers
of services, and suppliers and from the Medicare Bene-
ficiary Ombudsman and the Medicare Provider Ombuds-
man with respect to such areas of inconsistency and con-
flict; and
‘‘(B) information from medicare contractors that
tracks the nature of written and telephone inquiries.
‘‘(3) A report under paragraph (1) shall include a descrip-
tion of efforts by the Secretary to reduce such inconsistency or
conflicts, and recommendations for legislation or administrative
action that the Secretary determines appropriate to further re-
duce such inconsistency or conflicts.’’.
Subtitle B—Contracting Reform
SEC. 811. INCREASED FLEXIBILITY IN MEDICARE AD-
MINISTRATION.
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE AD-
MINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by insert-
ing 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 eligible entity
to serve as a medicare administrative contractor with re-
spect to the performance of any or all of the functions de-
scribed in paragraph (4) or parts of those functions (or, to
the extent provided in a contract, to secure performance
thereof by other entities).
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is eligible
to enter into a contract with respect to the performance of
a particular function described in paragraph (4) only if—
‘‘(A) the entity has demonstrated capability to
carry out such function;
159
‘‘(B) the entity complies with such conflict of in-
terest standards as are generally applicable to Federal
acquisition and procurement;
‘‘(C) the entity has sufficient assets to financially
support the performance of such function; and
‘‘(D) the entity meets such other requirements as
the Secretary may impose.
‘‘(3) MEDICARE
ADMINISTRATIVE
CONTRACTOR
DE-
FINED.—For purposes of this title and title XI—
‘‘(A) IN GENERAL.—The term ‘medicare adminis-
trative contractor’ means an agency, organization, or
other person with a contract under this section.
‘‘(B) APPROPRIATE
MEDICARE
ADMINISTRATIVE
CONTRACTOR.—With respect to the performance of a
particular function in relation to an individual entitled
to benefits under part A or enrolled under part B, or
both, a specific provider of services or supplier (or class
of such providers of services or suppliers), the ‘appro-
priate’ medicare administrative contractor is the medi-
care administrative contractor that has a contract
under this section with respect to the performance of
that function in relation to that individual, provider of
services or supplier or class of provider of services or
supplier.
‘‘(4) FUNCTIONS DESCRIBED.—The functions referred
to in paragraphs (1) and (2) are payment functions, pro-
vider services functions, and functions relating to services
furnished to individuals entitled to benefits under part A
or enrolled under part B, or both, as follows:
‘‘(A) DETERMINATION OF PAYMENT AMOUNTS.—
Determining (subject to the provisions of section 1878
and to such review by the Secretary as may be provided
for by the contracts) the amount of the payments re-
quired pursuant to this title to be made to providers of
services, suppliers and individuals.
‘‘(B) MAKING PAYMENTS.—Making payments de-
scribed in subparagraph (A) (including receipt, dis-
160
bursement, and accounting for funds in making such
payments).
‘‘(C) BENEFICIARY
EDUCATION
AND
ASSIST-
ANCE.—Providing education and outreach to individ-
uals entitled to benefits under part A or enrolled under
part B, or both, and providing assistance to those indi-
viduals with specific issues, concerns or problems.
‘‘(D) PROVIDER CONSULTATIVE SERVICES.—Pro-
viding consultative services to institutions, agencies,
and other persons to enable them to establish and
maintain fiscal records necessary for purposes of this
title and otherwise to qualify as providers of services or
suppliers.
‘‘(E) COMMUNICATION
WITH
PROVIDERS.—Com-
municating to providers of services and suppliers any
information or instructions furnished to the medicare
administrative contractor by the Secretary, and facili-
tating communication between such providers and sup-
pliers and the Secretary.
‘‘(F) PROVIDER EDUCATION AND TECHNICAL AS-
SISTANCE.—Performing the functions relating to pro-
vider education, training, and technical assistance.
‘‘(G) ADDITIONAL FUNCTIONS.—Performing such
other functions as are necessary to carry out the pur-
poses of this title.
‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
‘‘(A) NONDUPLICATION OF DUTIES.—In entering
into contracts under this section, the Secretary shall
assure that functions of medicare administrative con-
tractors in carrying out activities under parts A and B
do not duplicate activities carried out under the Medi-
care Integrity Program under section 1893. The pre-
vious sentence shall not apply with respect to the activ-
ity described in section 1893(b)(5) (relating to prior
authorization of certain items of durable medical equip-
ment under section 1834(a)(15)).
161
‘‘(B) CONSTRUCTION.—An entity shall not be
treated as a medicare administrative contractor merely
by reason of having entered into a contract with the
Secretary under section 1893.
‘‘(6) APPLICATION OF FEDERAL ACQUISITION REGULA-
TION.—Except to the extent inconsistent with a specific re-
quirement of this title, the Federal Acquisition 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 acquisition and
procurement or in subparagraph (B), the Secretary
shall use competitive procedures when entering into
contracts with medicare administrative contractors
under this section, taking into account performance
quality as well as price and other factors.
‘‘(B) RENEWAL OF CONTRACTS.—The Secretary
may renew a contract with a medicare administrative
contractor under this section from term to term with-
out regard to section 5 of title 41, United States Code,
or any other provision of law requiring competition, if
the medicare administrative contractor has met or ex-
ceeded the performance requirements applicable with
respect to the contract and contractor, except that the
Secretary shall provide for the application of competi-
tive procedures under such a contract not less fre-
quently than once every five years.
‘‘(C) TRANSFER OF FUNCTIONS.—The Secretary
may transfer functions among medicare administrative
contractors consistent with the provisions of this para-
graph. The Secretary shall ensure that performance
quality is considered in such transfers. The Secretary
shall provide public notice (whether in the Federal Reg-
ister or otherwise) of any such transfer (including a de-
scription of the functions so transferred, a description
of the providers of services and suppliers affected by
162
such transfer, and contact information for the contrac-
tors involved).
‘‘(D) INCENTIVES FOR QUALITY.—The Secretary
shall provide incentives for medicare administrative
contractors to provide quality service and to promote
efficiency.
‘‘(2) COMPLIANCE
WITH
REQUIREMENTS.—No con-
tract under this section shall be entered into with any
medicare administrative contractor unless the Secretary
finds that such medicare administrative contractor will per-
form its obligations under the contract efficiently and effec-
tively and will meet such requirements as to financial re-
sponsibility, legal authority, quality of services provided,
and other matters as the Secretary finds pertinent.
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT OF SPECIFIC PERFORMANCE
REQUIREMENTS.—In developing contract performance
requirements, the Secretary shall develop performance
requirements applicable to functions described in sub-
section (a)(4).
‘‘(B) CONSULTATION.— In developing such re-
quirements, the Secretary may consult with providers
of services and suppliers, organizations representing in-
dividuals entitled to benefits under part A or enrolled
under part B, or both, and organizations and agencies
performing functions necessary to carry out the pur-
poses of this section with respect to such performance
requirements.
‘‘(C) INCLUSION IN CONTRACTS.—All contractor
performance requirements shall be set forth in the con-
tract between the Secretary and the appropriate medi-
care administrative contractor. Such performance
requirements—
‘‘(i) shall reflect the performance requirements
developed under subparagraph (A), but may in-
clude additional performance requirements;
163
‘‘(ii) shall be used for evaluating contractor
performance under the contract; and
‘‘(iii) shall be consistent with the written state-
ment of work provided under the contract.
‘‘(4) INFORMATION
REQUIREMENTS.—The Secretary
shall not enter into a contract with a medicare administra-
tive contractor under this section unless the contractor
agrees—
‘‘(A) to furnish to the Secretary such timely infor-
mation and reports as the Secretary may find nec-
essary in performing his functions under this title; and
‘‘(B) to maintain such records and afford such ac-
cess thereto as the Secretary finds necessary to assure
the correctness and verification of the information and
reports under subparagraph (A) and otherwise to carry
out the purposes of this title.
‘‘(5) SURETY BOND.—A contract with a medicare ad-
ministrative contractor under this section may require the
medicare administrative contractor, and any of its officers
or employees certifying payments or disbursing funds pur-
suant to the contract, or otherwise participating in carrying
out the contract, to give surety bond to the United States
in such amount as the Secretary may deem appropriate.
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—A contract with any medicare ad-
ministrative contractor under this section may contain such
terms and conditions as the Secretary finds necessary or
appropriate and may provide for advances of funds to the
medicare administrative contractor for the making of pay-
ments by it under subsection (a)(4)(B).
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN DATA
COLLECTION.—The Secretary may not require, as a condi-
tion of entering into, or renewing, a contract under this
section, that the medicare administrative contractor match
data obtained other than in its activities under this title
with data used in the administration of this title for pur-
164
poses of identifying situations in which the provisions of
section 1862(b) may apply.
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE ADMINIS-
TRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual designated
pursuant to a contract under this section as a certifying of-
ficer shall, in the absence of gross negligence or intent to
defraud the United States, be liable with respect to any
payments certified by the individual under this section.
‘‘(2) DISBURSING
OFFICER.—No disbursing officer
shall, in the absence of gross negligence or intent to de-
fraud the United States, be liable with respect to any pay-
ment by such officer under this section if it was based upon
an authorization (which meets the applicable requirements
for such internal controls established by the Comptroller
General) of a certifying officer designated as provided in
paragraph (1) of this subsection.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE CON-
TRACTOR.—No medicare administrative contractor shall be
liable to the United States for a payment by a certifying
or disbursing officer unless in connection with such pay-
ment or in the supervision of or selection of such officer
the medicare administrative contractor acted with gross
negligence.
‘‘(4) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN GENERAL.—Subject to subparagraphs (B)
and (D), in the case of a medicare administrative con-
tractor (or a person who is a director, officer, or em-
ployee of such a contractor or who is engaged by the
contractor to participate directly in the claims adminis-
tration process) who is made a party to any judicial or
administrative proceeding arising from or relating di-
rectly to the claims administration process under this
title, the Secretary may, to the extent the Secretary de-
termines to be appropriate and as specified in the con-
tract with the contractor, indemnify the contractor and
such persons.
165
‘‘(B) CONDITIONS.—The Secretary may not pro-
vide indemnification under subparagraph (A) insofar as
the liability for such costs arises directly from conduct
that is determined by the judicial proceeding or by the
Secretary to be criminal in nature, fraudulent, or
grossly negligent. If indemnification is provided by the
Secretary with respect to a contractor before a deter-
mination that such costs arose directly from such con-
duct, the contractor shall reimburse the Secretary for
costs of indemnification.
‘‘(C) SCOPE OF INDEMNIFICATION.—Indemnifica-
tion by the Secretary under subparagraph (A) may in-
clude payment of judgments, settlements (subject to
subparagraph (D)), awards, and costs (including rea-
sonable legal expenses).
‘‘(D) WRITTEN APPROVAL FOR SETTLEMENTS.—A
contractor or other person described in subparagraph
(A) may not propose to negotiate a settlement or com-
promise of a proceeding described in such subpara-
graph without the prior written approval of the Sec-
retary to negotiate such settlement or compromise. Any
indemnification under subparagraph (A) with respect to
amounts paid under a settlement or compromise of a
proceeding described in such subparagraph are condi-
tioned upon prior written approval by the Secretary of
the final settlement or compromise.
‘‘(E) CONSTRUCTION.—Nothing in this paragraph
shall be construed—
‘‘(i) to change any common law immunity that
may be available to a medicare administrative con-
tractor or person described in subparagraph (A); or
‘‘(ii) to permit the payment of costs not other-
wise allowable, reasonable, or allocable under the
Federal Acquisition Regulations.’’.
(2) CONSIDERATION OF INCORPORATION OF CURRENT
LAW STANDARDS.—In developing contract performance re-
quirements under section 1874A(b) of the Social Security
166
Act, as inserted by paragraph (1), the Secretary shall con-
sider inclusion of the performance standards described in
sections 1816(f)(2) of such Act (relating to timely proc-
essing 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 the enact-
ment 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—
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and (3)(A), by
striking ‘‘agreement under this section’’ and inserting
‘‘contract under section 1874A that provides for mak-
ing 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 con-
tract with a medicare administrative contractor under
section 1874A with respect to the administration of
this part’’; and
(B) by striking ‘‘such agency or organization’’ and
inserting ‘‘such medicare administrative contractor’’
each place it appears.
(7) Subsection (l) is repealed.
170
(B) CONSTRUCTION FOR CURRENT CONTRACTS.—
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 bidding under such
amendments.
(C) DEADLINE FOR COMPETITIVE BIDDING.—The
Secretary shall provide for the letting by competitive
bidding of all contracts for functions of medicare ad-
ministrative contractors for annual contract periods
that begin on or after October 1, 2009.
(D) WAIVER
OF
PROVIDER
NOMINATION
PROVI-
SIONS DURING TRANSITION.—During the period begin-
ning on the date of the enactment of this Act and be-
fore the date specified under subparagraph (A), the
Secretary may enter into new agreements under section
1816 of the Social Security Act (42 U.S.C. 1395h)
without regard to any of the provider nomination provi-
sions of such section.
(2) GENERAL
TRANSITION
RULES.—The Secretary
shall take such steps, consistent with paragraph (1)(B) and
(1)(C), as are necessary to provide for an appropriate tran-
sition 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 Secu-
rity Act (42 U.S.C. 1395ddd(d)(2)) shall continue to apply
notwithstanding the amendments made by this section, and
any reference in such provisions to an agreement or con-
tract shall be deemed to include a contract under section
171
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 pro-
vided under subsection (d)(1), any reference to a fiscal inter-
mediary or carrier under title XI or XVIII of the Social Secu-
rity 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, 2003, the Secretary shall submit a report to
Congress and the Comptroller General of the United States
that describes the plan for implementation of the amend-
ments 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 Secretary
shall submit a report to Congress not later than October
1, 2007, that describes the status of implementation of
such amendments and that includes a description of the
following:
(A) The number of contracts that have been com-
petitively bid as of such date.
(B) The distribution of functions among contracts
and contractors.
(C) A timeline for complete transition to full com-
petition.
(D) A detailed description of how the Secretary
has modified oversight and management of medicare
contractors to adapt to full competition.
172
SEC. 812. REQUIREMENTS FOR INFORMATION SECURITY
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS.
(a) IN GENERAL.—Section 1874A, as added by section
811(a)(1), is amended by adding at the end the following new
subsection:
‘‘(e) REQUIREMENTS FOR INFORMATION SECURITY.—
‘‘(1) DEVELOPMENT OF INFORMATION SECURITY PRO-
GRAM.—A medicare administrative contractor that per-
forms the functions referred to in subparagraphs (A) and
(B) of subsection (a)(4) (relating to determining and mak-
ing payments) shall implement a contractor-wide informa-
tion security program to provide information security for
the operation and assets of the contractor with respect to
such functions under this title. An information security
program under this paragraph shall meet the requirements
for information security programs imposed on Federal
agencies under section 3534(b)(2) of title 44, United States
Code (other than requirements under subparagraphs
(B)(ii), (F)(iii), and (F)(iv) of such section).
‘‘(2) INDEPENDENT AUDITS.—
‘‘(A) PERFORMANCE OF ANNUAL EVALUATIONS.—
Each year a medicare administrative contractor that
performs the functions referred to in subparagraphs
(A) and (B) of subsection (a)(4) (relating to deter-
mining and making payments) shall undergo an evalua-
tion of the information 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 Department of Health and Human
Services may establish; and
‘‘(ii) test the effectiveness of information secu-
rity control techniques for an appropriate subset of
the contractor’s information systems (as defined in
section 3502(8) of title 44, United States Code) re-
173
lating to such functions under this title and an as-
sessment of compliance with the requirements of
this subsection and related information security
policies, procedures, standards and guidelines.
‘‘(B) DEADLINE FOR INITIAL EVALUATION.—
‘‘(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 subsection (a)(4) (relating to determining and
making payments) as a fiscal intermediary or car-
rier under section 1816 or 1842, the first inde-
pendent evaluation conducted pursuant subpara-
graph (A) shall be completed prior to commencing
such functions.
‘‘(ii) OTHER CONTRACTORS.—In the case of a
medicare administrative contractor covered by this
subsection that is not described in clause (i), the
first independent evaluation conducted pursuant
subparagraph (A) shall be completed within 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 re-
sults of independent evaluations under subpara-
graph (A) shall be submitted promptly to the In-
spector General of the Department of Health and
Human Services.
‘‘(ii) TO CONGRESS.—The Inspector General
of Department of Health and Human Services shall
submit to Congress annual reports on the results of
such evaluations.’’.
(b) APPLICATION OF REQUIREMENTS TO FISCAL INTER-
MEDIARIES AND CARRIERS.—
(1) 
IN
GENERAL.—The 
provisions 
of 
section
1874A(e)(2) of the Social Security Act (other than sub-
paragraph (B)), as added by subsection (a), shall apply to
174
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 contrac-
tors under such provisions.
(2) DEADLINE FOR INITIAL EVALUATION.—In the case
of such a fiscal intermediary or carrier with an agreement
or contract under such respective section 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.
Subtitle C—Education and Outreach
SEC. 821. PROVIDER EDUCATION AND TECHNICAL AS-
SISTANCE.
(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 activities
provided through medicare contractors (as defined in sub-
section (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 enact-
ment of this Act.
(3) REPORT.—Not later than October 1, 2003, the
Secretary shall submit to Congress a report that includes
a description and evaluation of the steps taken to coordi-
nate the funding of provider education under section
1889(a) of the Social Security Act, as added by paragraph
(1).
175
(b) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE.—
(1) IN GENERAL.—Section 1874A, as added by section
811(a)(1) and as amended by section 812(a), is amended
by adding at the end the following new subsection:
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE IN PROVIDER EDUCATION AND OUTREACH.—In order to
give medicare administrative contractors an incentive to imple-
ment effective education and outreach programs for providers
of services and suppliers, the Secretary shall develop and imple-
ment 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 So-
cial 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 contrac-
tors under such provisions.
(3) GAO REPORT ON ADEQUACY OF METHODOLOGY.—
Not later than October 1, 2003, the Comptroller General
of the United States shall submit to Congress and to the
Secretary a report on the adequacy of the methodology
under section 1874A(f)) of the Social Security Act, as
added by paragraph (1), and shall include in the report
such recommendations as the Comptroller General deter-
mines appropriate with respect to the methodology.
(4) REPORT ON USE OF METHODOLOGY IN ASSESSING
CONTRACTOR PERFORMANCE.—Not later than October 1,
2003, the Secretary shall submit to Congress a report that
describes how the Secretary intends to use such method-
ology in assessing medicare contractor performance in im-
plementing effective education and outreach programs, in-
cluding whether to use such methodology as a basis for per-
formance bonuses. The report shall include an analysis of
176
the sources of identified errors and potential changes in
systems of contractors and rules of the Secretary that could
reduce claims error rates.
(c) PROVISION OF ACCESS TO AND PROMPT RESPONSES
FROM MEDICARE ADMINISTRATIVE CONTRACTORS.—
(1) IN GENERAL.—Section 1874A, as added by section
811(a)(1) and as amended by section 812(a) and sub-
section (b), is further amended by adding at the end the
following new subsection:
‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PROVIDERS
OF SERVICES AND SUPPLIERS.—
‘‘(1) COMMUNICATION
STRATEGY.—The Secretary
shall develop a strategy for communications with individ-
uals entitled to benefits under part A or enrolled under
part B, or both, and with providers of services and sup-
pliers under this title.
‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each medi-
care administrative contractor shall, for those providers of
services and suppliers which submit claims to the con-
tractor for claims processing and for those individuals enti-
tled to benefits under part A or enrolled under part B, or
both, with respect to whom claims are submitted for claims
processing, provide general written responses (which may
be through electronic transmission) in a clear, concise, and
accurate manner to inquiries of providers of services, sup-
pliers and individuals entitled to benefits under part A or
enrolled under part B, or both, concerning the programs
under this title within 45 business days of the date of re-
ceipt of such inquiries.
‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Secretary
shall ensure that each medicare administrative contractor
shall provide, for those providers of services and suppliers
which submit claims to the contractor for claims processing
and for those individuals entitled to benefits under part A
or enrolled under part B, or both, with respect to whom
claims are submitted for claims processing, a toll-free tele-
phone number at which such individuals, providers of serv-
177
ices and suppliers may obtain information regarding billing,
coding, claims, coverage, and other appropriate information
under this title.
‘‘(4) MONITORING OF CONTRACTOR RESPONSES.—
‘‘(A) IN GENERAL.—Each medicare administrative
contractor 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, consistency, and
timeliness of the information so provided.
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN GENERAL.—The Secretary shall estab-
lish and make public standards to monitor the ac-
curacy, consistency, and timeliness of the informa-
tion provided in response to written and telephone
inquiries under this subsection. Such standards
shall be consistent with the performance require-
ments established under subsection (b)(3).
‘‘(ii) EVALUATION.—In conducting evaluations
of individual medicare administrative contractors,
the Secretary shall take into account the results of
the monitoring conducted under subparagraph (A)
taking into account as performance requirements
the standards established under clause (i). The
Secretary shall, in consultation with organizations
representing providers of services, suppliers, and
individuals entitled to benefits under part A or en-
rolled under part B, or both, establish standards
relating to the accuracy, consistency, and timeliness
of the information so provided.’’.
‘‘(C) DIRECT MONITORING.—Nothing in this para-
graph shall be construed as preventing the Secretary
from directly monitoring the accuracy, consistency, and
timeliness of the information so provided.’’.
178
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall take effect October 1, 2003.
(3) APPLICATION
TO
FISCAL
INTERMEDIARIES
AND
CARRIERS.—The provisions of section 1874A(g) of the So-
cial 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 contrac-
tors under such provisions.
(d) IMPROVED PROVIDER EDUCATION AND TRAINING.—
(1) IN GENERAL.—Section 1889, as added by sub-
section (a), is amended by adding at the end the following
new subsections:
‘‘(b) ENHANCED EDUCATION AND TRAINING.—
‘‘(1) ADDITIONAL RESOURCES.—There are authorized
to be appropriated to the Secretary (in appropriate part
from the Federal Hospital Insurance Trust Fund and the
Federal Supplementary Medical Insurance Trust Fund)
$25,000,000 for each of fiscal years 2004 and 2005 and
such sums as may be necessary for succeeding fiscal years.
‘‘(2) USE.—The funds made available under para-
graph (1) shall be used to increase the conduct by medicare
contractors of education and training of providers of serv-
ices and suppliers regarding billing, coding, and other ap-
propriate items and may also be used to improve the accu-
racy, consistency, and timeliness of contractor responses.
‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVITIES
FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare contractor
conducts education and training activities, it shall tailor
such activities to meet the special needs of small providers
of services or suppliers (as defined in paragraph (2)).
‘‘(2) SMALL PROVIDER OF SERVICES OR SUPPLIER.—
In this subsection, the term ‘small provider of services or
supplier’ means—
179
‘‘(A) a provider of services with fewer than 25 full-
time-equivalent employees; or
‘‘(B) a supplier with fewer than 10 full-time-equiv-
alent employees.’’.
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall take effect on October 1, 2003.
(e) REQUIREMENT TO MAINTAIN INTERNET SITES.—
(1) IN GENERAL.—Section 1889, as added by sub-
section (a) and as amended by subsection (d), is further
amended by adding at the end the following new sub-
section:
‘‘(d) INTERNET SITES; FAQS.—The Secretary, and each
medicare contractor insofar as it provides services (including
claims processing) for providers of services or suppliers, shall
maintain an Internet site which—
‘‘(1) provides answers in an easily accessible format to
frequently asked questions, and
‘‘(2) includes other published materials of the con-
tractor,
that relate to providers of services and suppliers under the pro-
grams under this title (and title XI insofar as it relates to such
programs).’’.
(2) EFFECTIVE
DATE.—The amendment made by
paragraph (1) shall take effect on October 1, 2003.
(f) ADDITIONAL PROVIDER EDUCATION PROVISIONS.—
(1) IN GENERAL.—Section 1889, as added by sub-
section (a) and as amended by subsections (d) and (e), is
further amended by adding at the end the following new
subsections:
‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDUCATION
PROGRAM ACTIVITIES.—A medicare contractor may not use a
record of attendance at (or failure to attend) educational activi-
ties or other information gathered during an educational pro-
gram conducted under this section or otherwise by the Sec-
retary to select or track providers of services or suppliers for
the purpose of conducting any type of audit or prepayment re-
view.
195
understood by the individual entitled to benefits under part
A or enrolled under part B, or both.’’.
(2) RECONSIDERATIONS.—Section 1869(c)(3)(E) (42
U.S.C. 1395ff(c)(3)(E)), as amended by BIPA, is
amended—
(A) by inserting ‘‘be written in a manner cal-
culated to be understood by the individual entitled to
benefits under part A or enrolled under part B, or
both, and shall include (to the extent appropriate)’’
after ‘‘in writing, ’’; and
(B) by inserting ‘‘and a notification of the right to
appeal such determination and instructions on how to
initiate such appeal under this section’’ after ‘‘such de-
cision, ’’.
(3) 
APPEALS.—Section 
1869(d) 
(42 
U.S.C.
1395ff(d)), as amended by BIPA, is amended—
(A) in the heading, by inserting ‘‘; NOTICE’’ after
‘‘SECRETARY’’; and
(B) by adding at the end the following new para-
graph:
‘‘(4) NOTICE.—Notice of the decision of an adminis-
trative law judge shall be in writing in a manner calculated
to be understood by the individual entitled to benefits
under part A or enrolled under part B, or both, and shall
include—
‘‘(A) the specific reasons for the determination (in-
cluding, to the extent appropriate, a summary of the
clinical or scientific evidence used in making the deter-
mination);
‘‘(B) the procedures for obtaining additional infor-
mation concerning the decision; and
‘‘(C) notification of the right to appeal the deci-
sion and instructions on how to initiate such an appeal
under this section.’’.
(4) SUBMISSION OF RECORD FOR APPEAL.—Section
1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by striking
‘‘prepare’’ and inserting ‘‘submit’’ and by striking ‘‘with re-
208
of claims for review in the case of an abnormal billing pat-
tern.’’.
(b) EFFECTIVE DATES AND DEADLINES.—
(1) USE OF REPAYMENT PLANS.—Section 1893(f)(1)
of the Social Security Act, as added by subsection (a), shall
apply to requests for repayment plans made after the date
of the enactment of this Act.
(2) 
LIMITATION
ON
RECOUPMENT.—Section
1893(f)(2) of the Social Security Act, as added by sub-
section (a), shall apply to actions taken after the date of
the enactment of this Act.
(3) USE OF EXTRAPOLATION.—Section 1893(f)(3) of
the Social Security Act, as added by subsection (a), shall
apply to statistically valid random samples initiated after
the date that is 1 year after the date of the enactment of
this Act.
(4) PROVISION OF SUPPORTING DOCUMENTATION.—
Section 1893(f)(4) of the Social Security Act, as added by
subsection (a), shall take effect on the date of the enact-
ment of this Act.
(5) CONSENT
SETTLEMENT.—Section 1893(f)(5) of
the Social Security Act, as added by subsection (a), shall
apply to consent settlements entered into after the date of
the enactment of this Act.
(6) NOTICE OF OVERUTILIZATION.—Not later than 1
year after the date of the enactment of this Act, the Sec-
retary shall first establish the process for notice of over-
utilization of billing codes under section 1893A(f)(6) of the
Social Security Act, as added by subsection (a).
(7) PAYMENT
AUDITS.—Section 1893A(f)(7) of the
Social Security Act, as added by subsection (a), shall apply
to audits initiated after the date of the enactment of this
Act.
(8) STANDARD FOR ABNORMAL BILLING PATTERNS.—
Not later than 1 year after the date of the enactment of
this Act, the Secretary shall first establish a standard
methodology for selection of sample claims for abnormal