IB
Union Calendar No. 331
107TH CONGRESS
2D SESSION
H. R. 4985
[Report No. 107–550, Part 1]
To amend title XVIII of the Social Security Act to revitalize the
Medicare+Choice program, establish a Medicare+Choice competition pro-
gram, and to improve payments to hospitals and other providers under
part A of the medicare program.
IN THE HOUSE OF REPRESENTATIVES
JUNE 21, 2002
Mr. TAUZIN introduced the following bill; which was referred to the Committee
on Energy and Commerce, and in addition to the Committee on Ways
and Means, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
JUNE 26, 2002
Reported from the Committee on Energy and Commerce
JUNE 26, 2002
Referral to the Committee on Ways and Means extended for a period ending
not later than June 28, 2002
JUNE 28, 2002
Committee on Ways and Means discharged; committed to the Committee of
the Whole House on the State of the Union and ordered to be printed
A BILL
To amend title XVIII of the Social Security Act to revitalize
the 
Medicare+Choice 
program, 
establish 
a
Medicare+Choice competition program, and to improve
payments to hospitals and other providers under part
A of the medicare program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
TITLE 
II—MEDICARE+CHOICE
REVITALIZATION 
AND
MEDICARE+CHOICE 
COM-
PETITION PROGRAM
Subtitle A—Medicare+Choice
Revitalization
SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.
(a) EQUALIZING PAYMENTS BETWEEN FEE-FOR-
SERVICE AND MEDICARE+CHOICE.—
(1) IN
GENERAL.—Section 1853(c)(1) (42
U.S.C. 1395w–23(c)(1)) is amended by adding at
the end the following:
‘‘(D) BASED
ON
100
PERCENT
OF
FEE-
FOR-SERVICE COSTS.—
‘‘(i) IN
GENERAL.—For 2003 and
2004, the adjusted average per capita cost
for the year involved, determined under
section 
1876(a)(4) 
for 
the
Medicare+Choice payment area for serv-
ices covered under parts A and B for indi-
viduals entitled to benefits under part A
and enrolled under part B who are not en-
rolled in a Medicare+Choice plan under
this part for the year, but adjusted to ex-
clude costs attributable to payments under
section 1886(h).
‘‘(ii) INCLUSION OF COSTS OF VA AND
DOD
MILITARY
FACILITY
SERVICES
TO
MEDICARE-ELIGIBLE
BENEFICIARIES.—In
determining the adjusted average per cap-
ita cost under clause (i) for a year, such
cost shall be adjusted to include the Sec-
retary’s estimate, on a per capita basis, of
the amount of additional payments that
would have been made in the area involved
under this title if individuals entitled to
benefits under this title had not received
services from facilities of the Department
of Veterans Affairs or the Department of
Defense.’’.
(2) CONFORMING AMENDMENT.—Such section
is further amended, in the matter before subpara-
graph (A), by striking ‘‘or (C)’’ and inserting ‘‘(C),
or (D)’’.
(b) REVISION OF BLEND.—
(1) REVISION OF NATIONAL AVERAGE USED IN
CALCULATION
OF
BLEND.—Section
1853(c)(4)(B)(i)(II) 
(42 
U.S.C. 
1395w–
23(c)(4)(B)(i)(II)) is amended by inserting ‘‘who
(with respect to determinations for 2003 and for
2004) are enrolled in a Medicare+Choice plan’’
after ‘‘the average number of medicare bene-
ficiaries’’.
(2) CHANGE IN BUDGET NEUTRALITY.—Section
1853(c) (42 U.S.C. 1395w–23(c)) is amended—
(A) in paragraph (1)(A), by inserting ‘‘(for
a year before 2003)’’ after ‘‘multiplied’’; and
(B) in paragraph (5), by inserting ‘‘(before
2003)’’ after ‘‘for each year’’.
(c) REVISION IN MINIMUM PERCENTAGE INCREASE
FOR 2003 AND 2004.—Section 1853(c)(1)(C) (42 U.S.C.
1395w–23(c)(1)(C)) is amended by striking clause (iv)
and inserting the following:
‘‘(iv) For 2002, 102 percent of the
annual Medicare+Choice capitation rate
under this paragraph for the area for
2001.
‘‘(v) For 2003 and 2004, 103 percent
of the annual Medicare+Choice capitation
rate under this paragraph for the area for
the previous year.
‘‘(iv) For 2005 and each succeeding
year, 
102 
percent 
of 
the 
annual
Medicare+Choice capitation rate under
this paragraph for the area for the pre-
vious year.’’.
(d) INCLUSION OF COSTS OF DOD AND VA MILI-
TARY
FACILITY
SERVICES
TO
MEDICARE-ELIGIBLE
BENEFICIARIES IN CALCULATION OF MEDICARE+CHOICE
PAYMENT
RATES.—Section 
1853(c)(3) 
(42 
U.S.C.
1395w–23(c)(3)) is amended—
(1) in subparagraph (A), by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B) and
(E)’’, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(E) INCLUSION OF COSTS OF DOD AND
VA MILITARY FACILITY SERVICES TO MEDICARE-
ELIGIBLE BENEFICIARIES.—In determining the
area-specific Medicare+Choice capitation rate
under subparagraph (A) for a year (beginning
with 2003), the annual per capita rate of pay-
ment for 1997 determined under section
1876(a)(1)(C) shall be adjusted to include in
the rate the Secretary’s estimate, on a per cap-
ita basis, of the amount of additional payments
that would have been made in the area involved
under this title if individuals entitled to benefits
under this title had not received services from
facilities of the Department of Defense or the
Department of Veterans Affairs.’’.
(e) 
ANNOUNCEMENT
OF
REVISED
MEDICARE+CHOICE PAYMENT RATES.—Within 2 weeks
after the date of the enactment of this Act, the Secretary
shall determine, and shall announce (in a manner intended
to provide notice to interested parties) Medicare+Choice
capitation rates under section 1853 of the Social Security
Act (42 U.S.C. 1395w–23) for 2003, revised in accordance
with the provisions of this section.
(f) MEDPAC STUDY OF AAPCC.—
(1) STUDY.—The Medicare Payment Advisory
Commission shall conduct a study that assesses the
method used for determining the adjusted average
per capita cost (AAPCC) under section 1876(a)(4)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395mm(a)(4)). Such study shall examine—
(A) the bases for variation in such costs
between different areas, including differences in
input prices, utilization, and practice patterns;
(B) the appropriate geographic area for
payment under the Medicare+Choice program
under part C of title XVIII of such Act; and
(C) the accuracy of risk adjustment meth-
ods in reflecting differences in costs of pro-
viding care to different groups of beneficiaries
served under such program.
(2) REPORT.—Not later than 9 months after
the date of the enactment of this Act, the Commis-
sion shall submit to Congress a report on the study
conducted under paragraph (1). Such report shall
include recommendations regarding changes in the
methods for computing the adjusted average per
capita cost among different areas.
SEC. 
202. 
MAKING 
PERMANENT 
CHANGE 
IN
MEDICARE+CHOICE REPORTING DEADLINES
AND ANNUAL, COORDINATED ELECTION PE-
RIOD.
(a) CHANGE
IN REPORTING DEADLINE.—Section
1854(a)(1) (42 U.S.C. 1395w–24(a)(1)), as amended by
section 532(b)(1) of the Public Health Security and Bio-
terrorism Preparedness and Response Act of 2002, is
amended by striking ‘‘2002, 2003, and 2004 (or July 1
of each other year)’’ and inserting ‘‘2002 and each subse-
quent year (or July 1 of each year before 2002)’’.
(b) DELAY IN ANNUAL, COORDINATED ELECTION
PERIOD.—Section 1851(e)(3)(B) (42 U.S.C. 1395w–
21(e)(3)(B)), as amended by section 532(c)(1)(A) of the
Public Health Security and Bioterrorism Preparedness
and Response Act of 2002, is amended by striking ‘‘and
after 2005, the month of November before such year and
with respect to 2003, 2004, and 2005’’ and inserting ‘‘,
the month of November before such year and with respect
to 2003 and any subsequent year’’.
(c) 
ANNUAL
ANNOUNCEMENT
OF
PAYMENT
RATES.—Section 
1853(b)(1) 
(42 
U.S.C. 
1395w–
23(b)(1)), as amended by section 532(d)(1) of the Public
Health Security and Bioterrorism Preparedness and Re-
sponse Act of 2002, is amended by striking ‘‘and after
2005 not later than March 1 before the calendar year con-
cerned and for 2004 and 2005’’ and inserting ‘‘not later
than March 1 before the calendar year concerned and for
2004 and each subsequent year’’.
(d) REQUIRING PROVISION OF AVAILABLE INFORMA-
TION COMPARING PLAN OPTIONS.—The first sentence of
section 
1851(d)(2)(A)(ii) 
(42 
U.S.C. 
1395w–
21(d)(2)(A)(ii)) is amended by inserting before the period
the following: ‘‘to the extent such information is available
at the time of preparation of materials for the mailing’’.
SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.
(a) IN GENERAL.—Section 1856(b)(3) (42 U.S.C.
1395w–26(b)(3)) is amended to read as follows:
‘‘(3) RELATION TO STATE LAWS.—The stand-
ards established under this subsection shall super-
sede any State law or regulation (other than State
licensing laws or State laws relating to plan sol-
vency) with respect to Medicare+Choice plans which
are offered by Medicare+Choice organizations under
this part.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 204. SPECIALIZED MEDICARE+CHOICE PLANS FOR
SPECIAL NEEDS BENEFICIARIES.
(a) TREATMENT AS COORDINATED CARE PLAN.—
Section 1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is
amended by adding at the end the following new sentence:
‘‘Specialized Medicare+Choice plans for special needs
beneficiaries (as defined in section 1859(b)(4)) may be
any type of coordinated care plan.’’.
(b) SPECIALIZED MEDICARE+CHOICE PLAN
FOR
SPECIAL
NEEDS
BENEFICIARIES
DEFINED.—Section
1859(b) (42 U.S.C. 1395w–29(b)) is amended by adding
at the end the following new paragraph:
‘‘(4) SPECIALIZED
MEDICARE+CHOICE
PLANS
FOR SPECIAL NEEDS BENEFICIARIES.—
‘‘(A) IN GENERAL.—The term ‘specialized
Medicare+Choice plan for special needs bene-
ficiaries’ means a Medicare+Choice plan that
exclusively serves special needs beneficiaries (as
defined in subparagraph (B)).
‘‘(B) SPECIAL NEEDS BENEFICIARY.—The
term ‘special needs beneficiary’ means a
Medicare+Choice eligible individual who—
‘‘(i) is institutionalized (as defined by
the Secretary);
‘‘(ii) is entitled to medical assistance
under a State plan under title XIX; or
‘‘(iii) meets such requirements as the
Secretary may determine would benefit
from enrollment in such a specialized
Medicare+Choice plan described in sub-
paragraph (A) for individuals with severe
or disabling chronic conditions.’’.
(c) RESTRICTION ON ENROLLMENT PERMITTED.—
Section 1859 (42 U.S.C. 1395w–29) is amended by add-
ing at the end the following new subsection:
‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIAL-
IZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS