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(b) 
CONFORMING
PAYMENT
PROVISION.—Section
1814(i) (42 U.S.C. 1395f(i)) is amended by adding at the
end the following new paragraph:
‘‘(4) In the case of hospice care provided by a hospice
program under arrangements under section 1861(dd)(5)(D)
made by another hospice program, the hospice program that
made the arrangements shall bill and be paid for the hospice
care.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to hospice care provided on or after Oc-
tober 1, 2004.
SEC. 407. SERVICES PROVIDED TO HOSPICE PATIENTS BY
NURSE PRACTITIONERS, CLINICAL NURSE
SPECIALISTS, AND PHYSICIAN ASSISTANTS.
(a) IN GENERAL.—Section 1812(d)(2)(A) (42 U.S.C.
1395d(d)(2)(A) in the matter following clause (i)(II), is
amended—
(1) by inserting ‘‘or services described in section
1861(s)(2)(K)’’ after ‘‘except that clause (i) shall not
apply to physicians’ services’’; and
(2) by inserting ‘‘, or by a physician assistant,
nurse practitioner, or clinical nurse specialist whom
is not an employee of the hospice program, and who
the individual identifies as the health care provider
having the most significant role in the determination
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and delivery of medical care to the individual at the
time the individual makes an election to receive hos-
pice care,’’ after the ‘‘(if not an employee of the hos-
pice program)’’.
(b) PERMITTING NURSE PRACTITIONERS, PHYSICIAN
ASSISTANTS, AND CLINICAL NURSE SPECIALIST TO REVIEW
HOSPICE PLANS
OF CARE.—Section 1814(a)(7)(B) is
amended by inserting ‘‘(or by a physician assistant, nurse
practitioner or clinical nurse specialist who is not an em-
ployee of the hospice program, and whom the individual
identifies as the health care provider having the most sig-
nificant role in the determination and delivery of medical
care to the individual at the time the individual makes an
election to receive hospice care)’’ after ‘‘and is periodically
reviewed by the individual’s attending physician’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to hospice care furnished on or after Oc-
tober 1, 2004.
SEC. 408. AUTHORITY TO INCLUDE COSTS OF TRAINING OF
PSYCHOLOGISTS 
IN 
PAYMENTS 
TO 
HOS-
PITALS UNDER MEDICARE.
Effective for cost reporting periods beginning on or
after October 1, 2004, for purposes of payments to hospitals
under the medicare program under title XVIII of the Social
Security Act for costs of approved educational activities (as
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defined in section 413.85 of title 42 of the Code of Federal
Regulations), such approved educational activities shall in-
clude professional educational training programs, recog-
nized by the Secretary, for psychologists.
SEC. 409. REVISION OF FEDERAL RATE FOR HOSPITALS IN
PUERTO RICO.
Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is
amended—
(1) in subparagraph (A)—
(A) in clause (i), by striking ‘‘for discharges
beginning on or after October 1, 1997, 50 percent
(and for discharges between October 1, 1987, and
September 30, 1997, 75 percent)’’ and inserting
‘‘the applicable Puerto Rico percentage (specified
in subparagraph (E))’’; and
(B) in clause (ii), by striking ‘‘for dis-
charges beginning in a fiscal year beginning on
or after October 1, 1997, 50 percent (and for dis-
charges between October 1, 1987, and September
30, 1997, 25 percent)’’ and inserting ‘‘the appli-
cable Federal percentage (specified in subpara-
graph (E))’’; and
(2) by adding at the end the following new sub-
paragraph:
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‘‘(E) For purposes of subparagraph (A), for discharges
occurring—
‘‘(i) between October 1, 1987, and September 30,
1997, the applicable Puerto Rico percentage is 75 per-
cent and the applicable Federal percentage is 25 per-
cent;
‘‘(ii) on or after October 1, 1997, and before Oc-
tober 1, 2004, the applicable Puerto Rico percentage
is 50 percent and the applicable Federal percentage is
50 percent;
‘‘(iii) on or after October 1, 2004, and before Oc-
tober 1, 2009, the applicable Puerto Rico percentage
is 0 percent and the applicable Federal percentage is
100 percent; and
‘‘(iv) on or after October 1, 2009, the applicable
Puerto Rico percentage is 50 percent and the applica-
ble Federal percentage is 50 percent.’’.
SEC. 410. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR
GERIATRIC RESIDENCY OR FELLOWSHIP PRO-
GRAMS.
(a) CLARIFICATION
OF CONGRESSIONAL INTENT.—
Congress intended section 1886(h)(5)(F)(ii) of the Social
Security Act (42 U.S.C. 1395ww(h)(5)(F)(ii)), as added by
section 9202 of the Consolidated Omnibus Budget Reconcili-
ation Act of 1985 (Public Law 99–272), to provide an ex-
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ception to the initial residency period for geriatric resi-
dency or fellowship programs such that, where a particular
approved geriatric training program requires a resident to
complete 2 years of training to initially become board eligi-
ble in the geriatric specialty, the 2 years spent in the geri-
atric training program are treated as part of the resident’s
initial residency period, but are not counted against any
limitation on the initial residency period.
(b) INTERIM FINAL REGULATORY AUTHORITY AND EF-
FECTIVE DATE.—The Secretary shall promulgate interim
final regulations consistent with the congressional intent ex-
pressed in this section after notice and pending opportunity
for public comment to be effective for cost reporting periods
beginning on or after October 1, 2003.
SEC. 411. CLARIFICATION OF CONGRESSIONAL INTENT RE-
GARDING THE COUNTING OF RESIDENTS IN A
NONPROVIDER SETTING AND A TECHNICAL
AMENDMENT REGARDING THE 3-YEAR ROLL-
ING AVERAGE AND THE IME RATIO.
(a) CLARIFICATION OF REQUIREMENTS FOR COUNTING
RESIDENTS TRAINING IN NONPROVIDER SETTING.—
(1) D–GME.—Section 1886(h)(4)(E) (42 U.S.C.
1395ww(h)(4)(E)) is amended by adding at the end
the following new sentence: For purposes of the pre-
ceding sentence time shall only be counted from the ef-
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fective date of a written agreement between the hos-
pital and the entity owning or operating a nonpro-
vider setting. The effective date of such written agree-
ment shall be determined in accordance with gen-
erally accepted accounting principles. All, or substan-
tially all, of the costs for the training program in
that setting shall be defined as the residents’ stipends
and benefits and other costs, if any, as determined by
the parties.’’.
(2) IME.—Section 1886(d)(5)(B)(iv) (42 U.S.C.
1395ww(d)(5)(B)(iv)) is amended by adding at the
end the following new sentence: For purposes of the
preceding sentence time shall only be counted from the
effective date of a written agreement between the hos-
pital and the entity owning or operating a nonpro-
vider setting. The effective date of such written agree-
ment shall be determined in accordance with gen-
erally accepted accounting principles. All, or substan-
tially all, of the costs for the training program in
that setting shall be defined as the residents’ stipends
and benefits and other costs, if any, as determined by
the parties.’’.
(b) LIMITING ONE-YEAR LAG IN THE INDIRECT MED-
ICAL EDUCATION (IME) RATIO AND THREE-YEAR ROLLING
AVERAGE IN RESIDENT COUNT FOR IME AND FOR DIRECT
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GRADUATE MEDICAL EDUCATION (D–GME) TO MEDICAL
RESIDENCY PROGRAMS.—
(1) IME RATIO AND IME ROLLING AVERAGE.—
Section 1886(d)(5)(B)(vi) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(B)(vi)) is amended by add-
ing at the end the following new sentence: ‘‘For cost
reporting periods beginning during fiscal years begin-
ning on or after October 1, 2004, subclauses (I) and
(II) shall be applied only with respect to a hospital’s
approved medical residency training programs in the
fields of allopathic and osteopathic medicine.’’.
(2) 
D–GME 
ROLLING
AVERAGE.—Section
1886(h)(4)(G) of the Social Security Act (42 U.S.C.
1395ww(h)(4)(G)) is amended by adding at the end
the following new clause:
‘‘(iv) APPLICATION FOR FISCAL YEAR
2004 AND SUBSEQUENT YEARS.—For cost re-
porting periods beginning during fiscal
years beginning on or after October 1, 2004,
clauses (i) through (iii) shall be applied
only with respect to a hospital’s approved
medical residency training program in the
fields of allopathic and osteopathic medi-
cine.’’.
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SEC. 412. LIMITATION ON CHARGES FOR INPATIENT HOS-
PITAL CONTRACT HEALTH SERVICES PRO-
VIDED TO INDIANS BY MEDICARE PARTICI-
PATING HOSPITALS.
(a) IN GENERAL.—Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended—
(1) in subparagraph (R), by striking ‘‘and’’ at
the end;
(2) in subparagraph (S), by striking the period
and inserting ‘‘, and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(T) in the case of hospitals which furnish
inpatient hospital services for which payment
may be made under this title, to be a partici-
pating provider of medical care—
‘‘(i) under the contract health services
program funded by the Indian Health Serv-
ice and operated by the Indian Health
Service, an Indian tribe, or tribal organiza-
tion (as those terms are defined in section
4 of the Indian Health Care Improvement
Act), with respect to items and services that
are covered under such program and fur-
nished to an individual eligible for such
items and services under such program; and
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‘‘(ii) under a program funded by the
Indian Health Service and operated by an
urban Indian organization with respect to
the purchase of items and services for an el-
igible urban Indian (as those terms are de-
fined in such section 4),
in accordance with regulations promulgated by
the Secretary regarding admission practices,
payment methodology, and rates of payment (in-
cluding the acceptance of no more than such
payment rate as payment in full for such items
and services).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply as of a date specified by the Secretary
of Health and Human Services (but in no case later than
6 months after the date of enactment of this Act) to medi-
care participation agreements in effect (or entered into) on
or after such date.
SEC. 413. GAO STUDY AND REPORT ON APPROPRIATENESS
OF PAYMENTS UNDER THE PROSPECTIVE
PAYMENT SYSTEM FOR INPATIENT HOSPITAL
SERVICES.
(a) STUDY.—The Comptroller General of the United
States, using the most current data available, shall conduct
a study to determine—
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(1) the appropriate level and distribution of pay-
ments in relation to costs under the prospective pay-
ment system under section 1886 of the Social Security
Act (42 U.S.C. 1395ww) for inpatient hospital serv-
ices furnished by subsection (d) hospitals (as defined
in subsection (d)(1)(B) of such section); and
(2) whether there is a need to adjust such pay-
ments under such system to reflect legitimate dif-
ferences in costs across different geographic areas,
kinds of hospitals, and types of cases.
(b) REPORT.—Not later than 24 months after the date
of enactment of this Act, the Comptroller General of the
United States shall submit to Congress a report on the study
conducted under subsection (a) together with such rec-
ommendations for legislative and administrative action as
the Comptroller General determines appropriate.
SEC. 414. RURAL COMMUNITY HOSPITAL DEMONSTRATION
PROGRAM.
(a) ESTABLISHMENT
OF RURAL COMMUNITY HOS-
PITAL (RCH) DEMONSTRATION PROGRAM.—
(1) IN GENERAL.—The Secretary shall establish
a demonstration program to test the feasibility and
advisability of the establishment of rural community
hospitals that furnish rural community hospital serv-
ices to medicare beneficiaries.
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(2) DESIGNATION OF RCHS.—
(A) APPLICATION.—Each hospital that is
located in a demonstration area described in
subparagraph (C) that desires to participate in
the demonstration program under this section
shall submit an application to the Secretary at
such time, in such manner, and containing such
information as the Secretary may require.
(B) DESIGNATION.—The Secretary shall
designate any hospital that is located in a dem-
onstration area described in subparagraph (C),
submits an application in accordance with sub-
paragraph (A), and meets the other requirements
of this section as a rural community hospital for
purposes of the demonstration program.
(C) DEMONSTRATION
AREAS.—There shall
be four demonstration areas within this pro-
gram. Two of these demonstration areas de-
scribed in this subparagraph shall include Kan-
sas and Nebraska.
(3) DURATION.—The Secretary shall conduct the
demonstration program under this section for a 5-
year period.
(4) IMPLEMENTATION.—The Secretary shall im-
plement the demonstration program not later than
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January 1, 2005, but may not implement the pro-
gram before October 1, 2004.
(b) PAYMENT.—
(1) 
INPATIENT
HOSPITAL
SERVICES.—The
amount of payment under the demonstration program
for inpatient hospital services furnished in a rural
community hospital, other than such services fur-
nished in a psychiatric or rehabilitation unit of the
hospital which is a distinct part, is, at the election
of the hospital in the application referred to in sub-
section (a)(2)(A)—
(A) the reasonable costs of providing such
services, without regard to the amount of the cus-
tomary or other charge; or
(B) the amount of payment provided for
under the prospective payment system for inpa-
tient hospital services under section 1886(d) of
the Social Security Act (42 U.S.C. 1395ww(d)).
(2) OUTPATIENT
SERVICES.—The amount of
payment under the demonstration program for out-
patient services furnished in a rural community hos-
pital is, at the election of the hospital in the applica-
tion referred to in subsection (a)(2)(A)—
(A) the reasonable costs of providing such
services, without regard to the amount of the cus-
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tomary or other charge and any limitation
under section 1861(v)(1)(U) of the Social Secu-
rity Act (42 U.S.C. 1395x(v)(1)(U)); or
(B) the amount of payment provided for
under the prospective payment system for cov-
ered OPD services under section 1833(t) of the
Social Security Act (42 U.S.C. 1395l(t)).
(3) HOME HEALTH SERVICES.—In determining
payments under the demonstration program for home
health services furnished by a qualified RCH-based
home health agency (as defined in paragraph (2))—
(A) the agency may make a one-time elec-
tion to waive application of the prospective pay-
ment system established under section 1895 of
the Social Security Act (42 U.S.C. 1395fff) to
such services furnished by the agency; and
(B) in the case of such an election, payment
shall be made on the basis of the reasonable costs
incurred in furnishing such services as deter-
mined under section 1861(v) of the Social Secu-
rity Act (42 U.S.C. 1395x(v)), but without re-
gard to the amount of the customary or other
charges with respect to such services or the limi-
tations established under paragraph (1)(L) of
such section.
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(4) CONSOLIDATED
BILLING.—The Secretary
shall permit consolidated billing under section
1842(b)(6)(E) of the Social Security Act (42 U.S.C.
1395u(b)(6)(E)).
(5) EXEMPTION FROM 30 PERCENT REDUCTION IN
REIMBURSEMENT
FOR
BAD
DEBT.—In determining
the reasonable costs for rural community hospitals,
section 1861(v)(1)(T) of the Social Security Act (42
U.S.C. 1395x(v)(1)(T)) shall not apply.
(6) BENEFICIARY
COST-SHARING
FOR
OUT-
PATIENT SERVICES.—The amounts of beneficiary cost-
sharing for outpatient services furnished in a rural
community hospital under the demonstration pro-
gram shall be as follows:
(A) For items and services that would have
been paid under section 1833(t) of the Social Se-
curity Act (42 U.S.C. 1395l(t)) if provided by a
hospital, the amount of cost-sharing determined
under paragraph (8) of such section.
(B) For items and services that would have
been paid under section 1833(h) of such Act (42
U.S.C. 1395l(h)) if furnished by a provider or
supplier, no cost-sharing shall apply.
(C) For all other items and services, the
amount of cost-sharing that would apply to the
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item or service under the methodology that would
be used to determine payment for such item or
service if provided by a physician, provider, or
supplier, as the case may be.
(7) RETURN ON EQUITY.—
(A) IN
GENERAL.—Notwithstanding sub-
paragraph 
(P)(i) 
and 
(S)(i) 
of 
section
1861(v)(1) of the Social Security Act (42 U.S.C.
1395x(v)(1)) and section 1886(g)(2) of such Act
(42 U.S.C. 1395ww(g)(2)), in determining the
reasonable costs of the services described in sub-
clause (II) furnished by a rural community hos-
pital for payment of a return on equity capital
at a rate of return equal to 150 percent of the
average specified in section 1861(v)(1)(P)(i) of
such Act (42 U.S.C. 1395x(v)(1)(P)(i)).
(B) SERVICES DESCRIBED.—The services re-
ferred to in subclause (I) are rural community
hospital services.
(C) DISREGARD OF PROPRIETARY PROVIDER
STATUS.—Payment under the demonstration
program shall be made without regard to wheth-
er a provider is a proprietary provider.
(8) REMOVING BARRIERS TO ESTABLISHMENT OF
DISTINCT PART UNITS BY RCH FACILITIES.—Notwith-
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standing section 1886(d)(1)(B) of the Social Security
Act (42 U.S.C. 1395ww(d)(1)(B)), the Secretary shall
permit rural community hospitals to establish dis-
tinct part units for purposes of applying such section.
(c) FUNDING.—
(1) IN GENERAL.—The Secretary shall provide
for the transfer from the Federal Hospital Insurance
Trust Fund under section 1817 of the Social Security
Act (42 U.S.C. 1395i) and the Federal Supple-
mentary Insurance Trust Fund established under sec-
tion 1841 of such Act (42 U.S.C. 1395t), in such pro-
portion as the Secretary determines to be appropriate,
of such funds as are necessary for the costs of car-
rying out the demonstration program under this sec-
tion.
(2) BUDGET
NEUTRALITY.—In conducting the
demonstration program under this section, the Sec-
retary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration pro-
gram under this section was not implemented.
(d) WAIVER AUTHORITY.—The Secretary may waive
such requirements of titles XI and XVIII of the Social Secu-
rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
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necessary for the purpose of carrying out the demonstration
program under this section.
(e) REPORT.—Not later than 6 months after the com-
pletion of the demonstration program under this section,
the Secretary shall submit to Congress a report on such pro-
gram, together with recommendations for such legislation
and administrative action as the Secretary determines to
be appropriate.
(f) DEFINITIONS.—In this section:
(1) RURAL COMMUNITY HOSPITAL.—
(A) IN GENERAL.—The term ‘‘rural commu-
nity hospital’’ means a hospital (as defined in
section 1861(e) of the Social Security Act (42
U.S.C. 1395x(e))) that—
(i) is located in a rural area (as de-
fined in section 1886(d)(2)(D) of such Act
(42 U.S.C. 1395ww(d)(2)(D))) or treated as
being 
so 
located 
pursuant 
to 
section
1886(d)(8)(E) of such Act (42 U.S.C.
1395ww(d)(8)(E));
(ii) subject to subparagraph (B), has
less than 51 acute care inpatient beds, as
reported in its most recent cost report;
(iii) makes available 24-hour emer-
gency care services;
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(iv) subject to subparagraph (C), has a
provider agreement in effect with the Sec-
retary and is open to the public as of Janu-
ary 1, 2003; and
(v) applies to the Secretary for such
designation.
(B) TREATMENT OF PSYCHIATRIC AND RE-
HABILITATION
UNITS.—For purposes of para-
graph (1)(B), beds in a psychiatric or rehabilita-
tion unit of the hospital which is a distinct part
of the hospital shall not be counted.
(C) TYPES OF HOSPITALS THAT MAY PAR-
TICIPATE.—Subparagraph (1)(D) shall not be
construed to prohibit any of the following from
qualifying as a rural community hospital:
(i) A replacement facility (as defined
by the Secretary in regulations in effect on
January 1, 2003) with the same service
area (as defined by the Secretary in regula-
tions in effect on such date).
(ii) A facility obtaining a new pro-
vider number pursuant to a change of own-
ership.
(iii) A facility which has a binding
written agreement with an outside, unre-
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lated party for the construction, reconstruc-
tion, lease, rental, or financing of a build-
ing as of January 1, 2003.
(D) INCLUSION OF CAHS.—Nothing in this
subsection shall be construed as prohibiting a
critical access hospital from qualifying as a
rural community hospital if the critical access
hospital meets the conditions otherwise applica-
ble to hospitals under section 1861(e) of the So-
cial Security Act (42 U.S.C. 1395x(e)) and sec-
tion 1866 of such Act (42 U.S.C. 1395cc).
(2) QUALIFIED
RCH-BASED
HOME
HEALTH
AGENCY DEFINED.—The term ‘‘qualified RCH-based
home health agency’’ is a home health agency that is
a provider-based entity (as defined in section 404 of
the Medicare, Medicaid, and SCHIP Benefits Im-
provement and Protection Act of 2000 (Public Law
106–554; Appendix F, 114 Stat. 2763A–506)) of a
rural community hospital that is located—
(A) in a county in which no main or
branch office of another home health agency is lo-
cated; or
(B) at least 35 miles from any main or
branch office of another home health agency.
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SEC. 415. CRITICAL ACCESS HOSPITAL IMPROVEMENT DEM-
ONSTRATION PROGRAM.
(a) ESTABLISHMENT OF CRITICAL ACCESS HOSPITAL
DEMONSTRATION PROGRAM.—
(1) IN GENERAL.—The Secretary shall establish
a demonstration program to test various methods to
improve the critical access hospital program under
section 1820 of the Social Security Act (42 U.S.C.
1395i–4).
(2) 
CRITICAL
ACCESS
HOSPITAL
IMPROVE-
MENT.—In conducting the demonstration program
under this section, the Secretary shall apply rules
with respect to critical access hospitals participating
in the program as follows:
(A) EXCLUSION
OF
CERTAIN
BEDS
FROM
BED COUNT.—In determining the number of beds
of a facility for purposes of applying the bed
limitations 
referred 
to 
in 
subsections
(c)(2)(B)(iii) and (f) of section 1820 of the So-
cial Security Act (42 U.S.C. 1395i–4), the Sec-
retary shall not take into account any bed of a
distinct part psychiatric or rehabilitation unit
(described in the matter following clause (v) of
section 1886(d)(1)(B) of such Act (42 U.S.C.
1395ww(d)(1)(B))) of the facility, except that the
total number of beds that are not taken into ac-
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count pursuant to this subparagraph with re-
spect to a facility shall not exceed 10.
(B) EXCLUSION
FROM
HOME
HEALTH
PPS.—Notwithstanding section 1895 of the So-
cial Security Act (42 U.S.C. 1395fff), in deter-
mining payments under the demonstration pro-
gram for home health services furnished by a
home health agency that is owned and operated
by a critical access hospital participating in the
demonstration program—
(i) the agency may make an election to
waive application of the prospective pay-
ment system established under such section
to such services furnished by the agency;
and
(ii) in the case of such an election,
payment shall be made on the basis of the
reasonable costs incurred in furnishing such
services 
as 
determined 
under 
section
1861(v), but without regard to the amount
of the customary or other charges with re-
spect to such services or the limitations es-
tablished under paragraph (1)(L) of such
section.
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(C) EXEMPTION OF CAH FACILITIES FROM
PPS.—Notwithstanding section 1888(e) of the So-
cial Security Act (42 U.S.C. 1395yy(e)), in de-
termining payments under this part for covered
skilled nursing facility services furnished by a
skilled nursing facility that is a distinct part
unit of a critical access hospital participating in
the demonstration program or is owned and op-
erated by a critical access hospital participating
in the demonstration program—
(i) the prospective payment system es-
tablished under such section shall not apply;
and
(ii) payment shall be made on the
basis of the reasonable costs incurred in fur-
nishing such services as determined under
section 1861(v) of such Act (42 U.S.C.
1395x(v)), but without regard to the amount
of the customary or other charges with re-
spect to such services.
(D) CONSOLIDATED
BILLING.—The Sec-
retary shall permit consolidated billing under
section 1842(b)(6)(E) of the Social Security Act
(42 U.S.C. 1395u(b)(6)(E)).
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(E) EXEMPTION OF CERTAIN DISTINCT PART
PSYCHIATRIC OR REHABILITATION UNITS FROM
COST LIMITS.—Notwithstanding section 1886(b)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395ww(b)), in determining payments under the
demonstration program for inpatient hospital
services furnished by a distinct part psychiatric
or rehabilitation unit (described in the matter
following section 1886(d)(1)(B)(v) of such Act
(42 U.S.C. 1395ww(d)(1)(B)(v))) of a critical
access hospital participating in the demonstra-
tion program—
(i) the limits imposed under the pre-
ceding paragraphs of this subsection shall
not apply; and
(ii) payment shall be made on the
basis of the reasonable costs incurred in fur-
nishing such services as determined under
section 1861(v) of such Act (42 U.S.C.
1395x(v)), but without regard to the amount
of the customary or other charges with re-
spect to such services.
(F) RETURN ON EQUITY.—
(i) 
IN
GENERAL.—Notwithstanding
subparagraph (P)(i) and (S)(i) of section
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1861(v)(1) of the Social Security Act (42
U.S.C. 1395x(v)(1)) and section 1886(g)(2)
of such Act (42 U.S.C. 1395ww(g)(2)), in
determining the reasonable costs of the serv-
ices described in subclause (II) furnished by
a critical access hospital participating in
the demonstration program for payment of
a return on equity capital at a rate of re-
turn equal to 150 percent of the average
specified in section 1861(v)(1)(P)(i) of such
Act (42 U.S.C. 1395x(v)(1)(P)(i)).
(ii) SERVICES DESCRIBED.—The serv-
ices referred to in subclause (I) are inpa-
tient critical access hospital services, out-
patient critical access hospital services, ex-
tended care services, posthospital extended
care services, home health services, ambu-
lance services, and inpatient hospital serv-
ices.
(iii) DISREGARD
OF
PROPRIETARY
PROVIDER
STATUS.—Payment under the
demonstration program shall be made with-
out regard to whether a provider is a pro-
prietary provider.
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(G) REMOVING
BARRIERS
TO
ESTABLISH-
MENT OF DISTINCT PART UNITS BY CAH FACILI-
TIES.—Notwithstanding section 1886(d)(1)(B) of
the 
Social 
Security 
Act 
(42 
U.S.C.
1395ww(d)(1)(B)), the Secretary shall permit
critical access hospitals participating in the
demonstration program to establish distinct part
units for purposes of applying such section.
(3) PARTICIPATION OF CAHS.—
(A) APPLICATION.—Each critical access
hospital that is located in a demonstration area
described in subparagraph (C) that desires to
participate in the demonstration program under
this section shall submit an application to the
Secretary at such time, in such manner, and
containing such information as the Secretary
may require.
(B) PARTICIPATION.—The Secretary shall
permit any critical access hospital that is located
in a demonstration area described in subpara-
graph (C), submits an application in accordance
with subparagraph (A), and meets the other re-
quirements of this section to participate in the
demonstration program.
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(C) DEMONSTRATION
AREAS.—There shall
be four demonstration areas within this pro-
gram. Two of these demonstration areas de-
scribed in this subparagraph shall include Kan-
sas and Nebraska.
(4) DURATION.—The Secretary shall conduct the
demonstration program under this section for a 5-
year period.
(5) IMPLEMENTATION.—The Secretary shall im-
plement the demonstration program not later than
January 1, 2005, but may not implement the pro-
gram before October 1, 2004.
(b) FUNDING.—
(1) IN GENERAL.—The Secretary shall provide
for the transfer from the Federal Hospital Insurance
Trust Fund under section 1817 of the Social Security
Act (42 U.S.C. 1395i) and the Federal Supple-
mentary Insurance Trust Fund established under sec-
tion 1841 of such Act (42 U.S.C. 1395t), in such pro-
portion as the Secretary determines to be appropriate,
of such funds as are necessary for the costs of car-
rying out the demonstration program under this sec-
tion.
(2) BUDGET
NEUTRALITY.—In conducting the
demonstration program under this section, the Sec-
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retary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration pro-
gram under this section was not implemented.
(c) WAIVER AUTHORITY.—The Secretary may waive
such requirements of titles XI and XVIII of the Social Secu-
rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
necessary for the purpose of carrying out the demonstration
program under this section.
(d) REPORT.—Not later than 6 months after the com-
pletion of the demonstration program under this section,
the Secretary shall submit to Congress a report on such pro-
gram, together with recommendations for such legislation
and administrative action as the Secretary determines to
be appropriate.
SEC. 416. TREATMENT OF GRANDFATHERED LONG-TERM
CARE HOSPITALS.
(a) IN
GENERAL.—The last sentence of section
1886(d)(1)(B) is amended by inserting ‘‘, and the Secretary
may not impose any special conditions on the operation,
size, number of beds, or location of any hospital so classified
for continued participation under this title or title XIX or
for continued classification as a hospital described in clause
(iv)’’ before the period at the end.
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(b) TREATMENT OF PROPOSED REVISION.—The Sec-
retary shall not adopt the proposed revision to section
412.22(f) of title 42, Code of Federal Regulations contained
in 68 Federal Register 27154 (May 19, 2003) or any revi-
sion reaching the same or substantially the same result as
such revision.
(c) EFFECTIVE DATE.—The amendment made by, and
provisions of, this section shall apply to cost reporting peri-
ods ending on or after December 31, 2002.
SEC. 417. TREATMENT OF CERTAIN ENTITIES FOR PUR-
POSES OF PAYMENTS UNDER THE MEDICARE
PROGRAM.
(a) PAYMENTS TO HOSPITALS.—
(1) IN
GENERAL.—Notwithstanding any other
provision of law, effective for discharges occurring on
or after October 1, 2003, for purposes of making pay-
ments to hospitals (as defined in section 1886(d) and
1833(t) of the Social Security Act (42 U.S.C.
1395(d)) under the medicare program under title
XVIII of such Act (42 U.S.C. 1395 et seq.), Iredell
County, North Carolina, and Rowan County, North
Carolina, are deemed to be located in the Charlotte-
Gastonia-Rock Hill, North Carolina, South Carolina
Metropolitan Statistical Area.
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(2) BUDGET
NEUTRAL
WITHIN
NORTH
CARO-
LINA.—The Secretary shall adjust the area wage
index referred to in paragraph (1) with respect to
payments to hospitals located in North Carolina in a
manner which assures that the total payments made
under section 1886(d) of the Social Security Act (42
U.S.C., 1395(ww)(d)) in a fiscal year for the oper-
ating cost of inpatient hospital services are not great-
er or less than the total of such payments that would
have been made in the year if this subsection had not
been enacted.
(b) PAYMENTS TO SKILLED NURSING FACILITIES AND
HOME HEALTH AGENCIES.—
(1) IN
GENERAL.—Notwithstanding any other
provision of law, effective beginning October 1, 2003,
for purposes of making payments to skilled nursing
facilities (SNFs) and home health agencies (as defined
in sections 1861(j) and 1861(o) of the Social Security
Act (42 U.S.C. 1395x(j); 1395x(o)) under the medi-
care program under title XVIII of such Act, Iredell
County, North Carolina, and Rowan County, North
Carolina, are deemed to be located in the Charlotte-
Gastonia-Rock Hill, North Carolina, South Carolina
Metropolitan Statistical Area.
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(2) APPLICATION AND BUDGET NEUTRAL WITHIN
NORTH CAROLINA.—Effective for fiscal year 2004, the
skilled nursing facility PPS and home health PPS
rates for Iredell County, North Carolina, and Rowan
County, North Carolina, will be updated by the
prefloor, prereclassified hospital wage index available
for the Charlotte-Gastonia-Rock Hill, North Carolina,
South Carolina Metropolitan Statistical Area. This
subsection shall be implemented in a budget neutral
manner, using a methodology that ensures that the
total amount of expenditures for skilled nursing facil-
ity services and home health services in a year does
not exceed the total amount of expenditures that
would have been made in the year if this subsection
had not been enacted. Required adjustments by reason
of the preceding sentence shall be done with respect to
skilled nursing facilities and home health agencies lo-
cated in North Carolina.
(c) CONSTRUCTION.—The provisions of this section
shall have no effect on the amount of payments made under
title XVIII of the Social Security Act to entities located in
States other than North Carolina.
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SEC. 418. REVISION OF THE INDIRECT MEDICAL EDU-
CATION (IME) ADJUSTMENT PERCENTAGE.
(a) IN
GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)) is amended—
(1) in subclause (VI), by striking ‘‘and’’ after the
semicolon at the end;
(2) in subclause (VII)—
(A) by striking ‘‘on or after October 1,
2002’’ and inserting ‘‘during fiscal year 2003’’;
and
(B) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new sub-
clauses:
‘‘(VIII) during each of fiscal years 2004
and 2005, ‘c’ is equal to 1.36; and
‘‘(IX) on or after October 1, 2005, ‘c’ is
equal to 1.355.’’.
(b) CONFORMING AMENDMENT RELATING TO DETER-
MINATION
OF
STANDARDIZED
AMOUNT.—Section
1886(d)(2)(C)(i) 
(42 
U.S.C. 
1395ww(d)(2)(C)(i)) 
is
amended—
(1) by striking ‘‘1999 or’’ and inserting ‘‘1999,’’;
and
(2) by inserting ‘‘, or the Prescription Drug and
Medicare Improvement Act of 2003’’ after ‘‘2000’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to discharges occurring on or after Octo-
ber 1, 2003.
SEC. 419. CALCULATION OF WAGE INDICES FOR HOSPITALS.
Notwithstanding any other provision of law, in the
calculation of a wage index in a State for purposes of mak-
ing payments for discharges occurring during fiscal year
2004, the Secretary may waive such other criteria for re-
classification, as deemed appropriate by the Secretary.
SEC. 420. CONFORMING CHANGES REGARDING FEDERALLY
QUALIFIED HEALTH CENTERS.
Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) is amended
by inserting ‘‘(which regulations shall exclude any cost in-
curred for the provision of services pursuant to a contract
with an eligible entity (as defined in section 1860D(4)) op-
erating a Medicare Prescription Drug plan or with an enti-
ty with a contract under section 1860D–13(e), for which
payment is made by the entity)’’ after ‘‘the Secretary may
prescribe in regulations’’.
SEC. 420A. INCREASE FOR HOSPITALS WITH DISPROPOR-
TIONATE INDIGENT CARE REVENUES.
(a) DISPROPORTIONATE SHARE ADJUSTMENT PER-
CENTAGE.—Section 
1886(d)(5)(F)(iii) 
(42 
U.S.C.
1395ww(d)(5)(F)(iii)) is amended by striking ‘‘35 percent’’
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and inserting ‘‘35 percent (or, for discharges occurring on
or after October 1, 2003, 40 percent)’’.
(b) CAPITAL
COSTS.—Section 1886(g)(1)(B) (42
U.S.C. 1395ww(g)(1)(B)) is amended—
(1) in clause (iii), by striking ‘‘and’’ at the end;
(2) in clause (iv), by striking the period at the
end and inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(v) in the case of cost reporting periods begin-
ning on or after October 1, 2003, shall provide for a
disproportionate share adjustment in the same man-
ner as section 1886(d)(5)(F)(iii).’’.
SEC. 420B. TREATMENT OF GRANDFATHERED LONG-TERM
CARE HOSPITALS.
(a) IN
GENERAL.—The last sentence of section
1886(d)(1)(B) is amended by inserting ‘‘, and the Secretary
may not impose any special conditions on the operation,
size, number of beds, or location of any hospital so classified
for continued participation under this title or title XIX or
for continued classification as a hospital described in clause
(iv)’’ before the period at the end.
(b) TREATMENT OF PROPOSED REVISION.—The Sec-
retary shall not adopt the proposed revision to section
412.22(f) of title 42, Code of Federal Regulations contained
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in 68 Federal Register 27154 (May 19, 2003) or any revi-
sion reaching the same or substantially the same result as
such revision.
(c) EFFECTIVE DATE.—The amendment made by, and
provisions of, this section shall apply to cost reporting peri-
ods ending on or after December 31, 2002.
Subtitle B—Provisions Relating to
Part B
SEC. 421. ESTABLISHMENT OF FLOOR ON GEOGRAPHIC AD-
JUSTMENTS OF PAYMENTS FOR PHYSICIANS’
SERVICES.
Section 1848(e)(1) (42 U.S.C. 1395w–4(e)(1)) is
amended—
(1) in subparagraph (A), by striking ‘‘subpara-
graphs (B) and (C)’’ and inserting ‘‘subparagraphs
(B), (C), (E), and (F)’’; and
(2) by adding at the end the following new sub-
paragraphs:
‘‘(E) FLOOR FOR WORK GEOGRAPHIC INDI-
CES.—
‘‘(i) IN
GENERAL.—For purposes of
payment for services furnished on or after
January 1, 2004, and before January 1,
2008, after calculating the work geographic
indices in subparagraph (A)(iii), the Sec-
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retary shall increase the work geographic
index to the work floor index for any local-
ity for which such geographic index is less
than the work floor index.
‘‘(ii) WORK FLOOR INDEX.—For pur-
poses of clause (i), the term ‘applicable floor
index’ means—
‘‘(I) 0.980 with respect to services
furnished during 2004; and
‘‘(II) 1.000 for services furnished
during 2005, 2006, and 2007.
‘‘(F) FLOOR FOR PRACTICE EXPENSE AND
MALPRACTICE GEOGRAPHIC INDICES.—For pur-
poses of payment for services furnished on or
after January 1, 2005, and before January 1,
2008, after calculating the practice expense and
malpractice indices in clauses (i) and (ii) of sub-
paragraph (A) and in subparagraph (B), the
Secretary shall increase any such index to 1.00
for any locality for which such index is less than
1.00.’’.
SEC. 422. MEDICARE INCENTIVE PAYMENT PROGRAM IM-
PROVEMENTS.
(a) PROCEDURES FOR SECRETARY, AND NOT PHYSI-
CIANS, TO DETERMINE WHEN BONUS PAYMENTS UNDER
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MEDICARE INCENTIVE PAYMENT PROGRAM SHOULD BE
MADE.—Section 
1833(m) 
(42 
U.S.C. 
1395l(m)) 
is
amended—
(1) by inserting ‘‘(1)’’ after ‘‘(m)’’; and
(2) by adding at the end the following new para-
graph:
‘‘(2) The Secretary shall establish procedures under
which the Secretary, and not the physician furnishing the
service, is responsible for determining when a payment is
required to be made under paragraph (1).’’.
(b) EDUCATIONAL PROGRAM REGARDING THE MEDI-
CARE INCENTIVE PAYMENT PROGRAM.—The Secretary shall
establish and implement an ongoing educational program
to provide education to physicians under the medicare pro-
gram on the medicare incentive payment program under
section 1833(m) of the Social Security Act (42 U.S.C.
1395l(m)).
(c) ONGOING GAO STUDY AND ANNUAL REPORT ON
THE MEDICARE INCENTIVE PAYMENT PROGRAM.—
(1) ONGOING STUDY.—The Comptroller General
of the United States shall conduct an ongoing study
on the medicare incentive payment program under
section 1833(m) of the Social Security Act (42 U.S.C.
1395l(m)). Such study shall focus on whether such
program increases the access of medicare beneficiaries
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who reside in an area that is designated (under sec-
tion 332(a)(1)(A) of the Public Health Service Act
(42 U.S.C. 254e(a)(1)(A))) as a health professional
shortage area to physicians’ services under the medi-
care program.
(2) ANNUAL REPORTS.—Not later than 1 year
after the date of enactment of this Act, and annually
thereafter, the Comptroller General of the United
States shall submit to Congress a report on the study
conducted under paragraph (1), together with rec-
ommendations as the Comptroller General considers
appropriate.
SEC. 423. EXTENSION OF HOLD HARMLESS PROVISIONS
FOR SMALL RURAL HOSPITALS AND TREAT-
MENT OF CERTAIN SOLE COMMUNITY HOS-
PITALS TO LIMIT DECLINE IN PAYMENT
UNDER THE OPD PPS.
(a) 
SMALL
RURAL
HOSPITALS.—Section
1833(t)(7)(D)(i) (42 U.S.C. 1395l(t)(7)(D)(i)) is amended
by inserting ‘‘and during 2006’’ after ‘‘2004,’’.
(b) 
SOLE
COMMUNITY
HOSPITALS.—Section
1833(t)(7)(D) (42 U.S.C. 1395l(t)(7)(D)) is amended by
adding at the end the following:
‘‘(iii) TEMPORARY
TREATMENT
FOR
SOLE COMMUNITY HOSPITALS.—In the case
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of a sole community hospital (as defined in
section 1886(d)(5)(D)(iii)) located in a
rural area, for covered OPD services fur-
nished in 2006, for which the PPS amount
is less than the pre-BBA amount, the
amount of payment under this subsection
shall be increased by the amount of such
difference.’’.
SEC. 424. INCREASE IN PAYMENTS FOR CERTAIN SERVICES
FURNISHED BY SMALL RURAL AND SOLE
COMMUNITY HOSPITALS UNDER MEDICARE
PROSPECTIVE PAYMENT SYSTEM FOR HOS-
PITAL OUTPATIENT DEPARTMENT SERVICES.
(a) INCREASE.—
(1) IN GENERAL.—In the case of an applicable
covered OPD service (as defined in paragraph (2))
that is furnished by a hospital described in clause (i)
or (iii) of paragraph (7)(D) of section 1833(t) of the
Social Security Act (42 U.S.C. 1395l(t)), as amended
by section 424, on or after January 1, 2005, and be-
fore January 1, 2008, the Secretary shall increase the
medicare OPD fee schedule amount (as determined
under paragraph (4)(A) of such section) that is appli-
cable for such service in that year (determined with-
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out regard to any increase under this section in a
previous year) by 5 percent.
(2) APPLICABLE
COVERED
OPD
SERVICES
DE-
FINED.—For purposes of this section, the term ‘‘appli-
cable covered OPD service’’ means a covered clinic or
emergency room visit that is classified within the
groups of covered OPD services (as defined in para-
graph (1)(B) of section 1833(t) of the Social Security
Act (42 U.S.C. 1395l(t))) established under paragraph
(2)(B) of such section.
(b) NO EFFECT ON COPAYMENT AMOUNT.—The Sec-
retary shall compute the copayment amount for applicable
covered OPD services under section 1833(t)(8)(A) of the So-
cial Security Act (42 U.S.C. 1395l(t)(8)(A)) as if this sec-
tion had not been enacted.
(c) NO EFFECT ON INCREASE UNDER HOLD HARM-
LESS OR OUTLIER PROVISIONS.—The Secretary shall apply
the temporary hold harmless provision under clause (i) and
(iii) of paragraph (7)(D) of section 1833(t) of the Social
Security Act (42 U.S.C. 1395l(t)) and the outlier provision
under paragraph (5) of such section as if this section had
not been enacted.
(d) WAIVING BUDGET NEUTRALITY AND NO REVISION
OR ADJUSTMENTS.—The Secretary shall not make any revi-
sion or adjustment under subparagraph (A), (B), or (C)
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of section 1833(t)(9) of the Social Security Act (42 U.S.C.
1395l(t)(9)) because of the application of subsection (a)(1).
(e) NO EFFECT ON PAYMENTS AFTER INCREASE PE-
RIOD ENDS.—The Secretary shall not take into account any
payment increase provided under subsection (a)(1) in deter-
mining payments for covered OPD services (as defined in
paragraph (1)(B) of section 1833(t) of the Social Security
Act (42 U.S.C. 1395l(t))) under such section that are fur-
nished after January 1, 2008.
(f) TECHNICAL AMENDMENT.—Section 1833(t)(2)(B)
(42 U.S.C. 1395l(t)(2)(B)) is amended by inserting ‘‘(and
periodically revise such groups pursuant to paragraph
(9)(A))’’ after ‘‘establish groups’’.
SEC. 425. TEMPORARY INCREASE FOR GROUND AMBU-
LANCE SERVICES.
Section 1834(l) (42 U.S.C. 1395m(l)), as amended by
section 405(b)(2), is amended by adding at the end the fol-
lowing new paragraphs:
‘‘(10) TEMPORARY INCREASE FOR GROUND AM-
BULANCE SERVICES.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this subsection, in the case of
ground ambulance services furnished on or after
January 1, 2005, and before January 1, 2008,
for which the transportation originates in—
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‘‘(i) a rural area described in para-
graph (9) or in a rural census tract de-
scribed in such paragraph, the fee schedule
established under this section shall provide
that the rate for the service otherwise estab-
lished, after application of any increase
under such paragraph, shall be increased by
5 percent; and
‘‘(ii) an area not described in clause
(i), the fee schedule established under this
section shall provide that the rate for the
service otherwise established shall be in-
creased by 2 percent.
‘‘(B) APPLICATION
OF
INCREASED
PAY-
MENTS
AFTER
2007.—The increased payments
under subparagraph (A) shall not be taken into
account in calculating payments for services fur-
nished on or after the period specified in such
subparagraph.
‘‘(11) CONVERSION FACTOR ADJUSTMENTS.—The
Secretary shall not adjust downward the conversion
factor in any year because of an evaluation of the
prior year conversion factor.’’.
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SEC. 426. ENSURING APPROPRIATE COVERAGE OF AIR AM-
BULANCE SERVICES UNDER AMBULANCE FEE
SCHEDULE.
(a) 
COVERAGE.—Section 
1834(l) 
(42 
U.S.C.
1395m(l)), as amended by section 426, is amended by add-
ing at the end the following new paragraph:
‘‘(11) ENSURING
APPROPRIATE
COVERAGE
OF
AIR AMBULANCE SERVICES.—
‘‘(A) IN
GENERAL.—The regulations de-
scribed in section 1861(s)(7) shall ensure that
air ambulance services (as defined in subpara-
graph (C)) are reimbursed under this subsection
at the air ambulance rate if the air ambulance
service—
‘‘(i) is medically necessary based on
the health condition of the individual being
transported at or immediately prior to the
time of the transport; and
‘‘(ii) complies with equipment and
crew requirements established by the Sec-
retary.
‘‘(B) MEDICALLY NECESSARY.—An air am-
bulance service shall be considered to be medi-
cally necessary for purposes of subparagraph
(A)(i) if such service is requested—
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‘‘(i) by a physician or a hospital in
accordance with the physician’s or hos-
pital’s responsibilities under section 1867
(commonly known as the Emergency Med-
ical Treatment and Active Labor Act);
‘‘(ii) as a result of a protocol estab-
lished by a State or regional emergency
medical service (EMS) agency;
‘‘(iii) by a physician, nurse practi-
tioner, physician assistant, registered nurse,
or emergency medical responder who rea-
sonably determines or certifies that the pa-
tient’s condition is such that the time need-
ed to transport the individual by land or
the lack of an appropriate ground ambu-
lance, significantly increases the medical
risks for the individual; or
‘‘(iv) by a Federal or State agency to
relocate patients following a natural dis-
aster, an act of war, or a terrorist attack.
‘‘(C) 
AIR
AMBULANCE
SERVICES
DE-
FINED.—For purposes of this paragraph, the
term ‘air ambulance service’ means fixed wing
and rotary wing air ambulance services.’’.
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(b) CONFORMING AMENDMENT.—Section 1861(s)(7)
(42 U.S.C. 1395x(s)(7)) is amended by inserting ‘‘, subject
to section 1834(l)(11),’’ after ‘‘but’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished on or after January
1, 2005.
SEC. 427. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC
LABORATORY TESTS FURNISHED BY A SOLE
COMMUNITY HOSPITAL.
Notwithstanding subsections (a), (b), and (h) of section
1833 of the Social Security Act (42 U.S.C. 1395l) and sec-
tion 1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in
the case of a clinical diagnostic laboratory test covered
under part B of title XVIII of such Act that is furnished
in 2005 or 2006 by a sole community hospital (as defined
in section 1886(d)(5)(D)(iii) of such Act (42 U.S.C.
1395ww(d)(5)(D)(iii))) as part of services furnished to pa-
tients of the hospital, the following rules shall apply:
(1) PAYMENT BASED ON REASONABLE COSTS.—
The amount of payment for such test shall be 100 per-
cent of the reasonable costs of the hospital in fur-
nishing such test.
(2) NO BENEFICIARY COST-SHARING.—Notwith-
standing section 432, no coinsurance, deductible, co-
payment, or other cost-sharing otherwise applicable
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under such part B shall apply with respect to such
test.
SEC. 428. IMPROVEMENT IN RURAL HEALTH CLINIC REIM-
BURSEMENT.
Section 1833(f) (42 U.S.C. 1395l(f)) is amended—
(1) in paragraph (1), by striking ‘‘, and’’ at the
end and inserting a semicolon;
(2) in paragraph (2)—
(A) by striking ‘‘in a subsequent year’’ and
inserting ‘‘in 1989 through 2004’’; and
(B) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new para-
graphs:
‘‘(3) in 2005, at $80 per visit; and
‘‘(4) in a subsequent year, at the limit estab-
lished under this subsection for the previous year in-
creased by the percentage increase in the MEI (as so
defined) applicable to primary care services (as so de-
fined) furnished as of the first day of that year.’’.
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SEC. 429. ELIMINATION OF CONSOLIDATED BILLING FOR
CERTAIN SERVICES UNDER THE MEDICARE
PPS FOR SKILLED NURSING FACILITY SERV-
ICES.
(a) CERTAIN RURAL HEALTH CLINIC AND FEDERALLY
QUALIFIED HEALTH CENTER SERVICES.—Section 1888(e)
(42 U.S.C. 1395yy(e)) is amended—
(1) in paragraph (2)(A)(i)(II), by striking
‘‘clauses (ii) and (iii)’’ and inserting ‘‘clauses (ii),
(iii), and (iv)’’; and
(2) by adding at the end of paragraph (2)(A) the
following new clause:
‘‘(iv) EXCLUSION OF CERTAIN RURAL
HEALTH CLINIC AND FEDERALLY QUALIFIED
HEALTH
CENTER
SERVICES.—Services de-
scribed in this clause are—
‘‘(I) rural health clinic services
(as defined in paragraph (1) of section
1861(aa)); and
‘‘(II) Federally qualified health
center services (as defined in para-
graph (3) of such section);
that would be described in clause (ii) if such
services were furnished by a physician or
practitioner not affiliated with a rural
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health clinic or a Federally qualified health
center.’’.
(b) CERTAIN SERVICES FURNISHED BY AN ENTITY
JOINTLY OWNED BY HOSPITALS AND CRITICAL ACCESS
HOSPITALS.—For purposes of applying section 411.15(p)–
(3)(iii) of title 42 of the Code of Federal Regulations, the
Secretary shall treat an entity that is 100 percent owned
as a joint venture by 2 Medicare-participating hospitals or
critical access hospitals as a Medicare-participating hos-
pital or a critical access hospital.
(c) 
TECHNICAL
AMENDMENTS.—Sections
1842(b)(6)(E) 
and 
1866(a)(1)(H)(ii) 
(42 
U.S.C.
1395u(b)(6)(E); 1395cc(a)(1)(H)(ii)) are each amended by
striking ‘‘section 1888(e)(2)(A)(ii)’’ and inserting ‘‘clauses
(ii), (iii), and (iv) of section 1888(e)(2)(A)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section and the provision of subsection (b) shall apply to
services furnished on or after January 1, 2005.
SEC. 430. FREEZE IN PAYMENTS FOR CERTAIN ITEMS OF
DURABLE MEDICAL EQUIPMENT AND CER-
TAIN ORTHOTICS; ESTABLISHMENT OF QUAL-
ITY STANDARDS AND ACCREDITATION RE-
QUIREMENTS FOR DME PROVIDERS.
(a) FREEZE
FOR DME.—Section 1834(a)(14) (42
U.S.C. 1395m(a)(14)) is amended—
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(1) in subparagraph (E), by striking ‘‘and’’ at
the end;
(2) in subparagraph (F)—
(A) by striking ‘‘a subsequent year’’ and in-
serting ‘‘2003’’; and
(B) by striking ‘‘the previous year.’’ and in-
serting ‘‘2002;’’; and
(3) by adding at the end the following new sub-
paragraphs:
‘‘(G) for each of the years 2004 through
2010—
‘‘(i) in the case of class III medical de-
vices described in section 513(a)(1)(C) of
the Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 360(c)(1)(C)), the percentage in-
crease described in subparagraph (B) for
the year involved; and
‘‘(ii) in the case of covered items not
described in clause (i), 0 percentage points;
and
‘‘(H) for a subsequent year, the percentage
increase described in subparagraph (B) for the
year involved.’’.
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(b) FREEZE FOR OFF-THE-SHELF ORTHOTICS.—Sec-
tion 1834(h)(4)(A) of the Social Security Act (42 U.S.C.
1395m(h)(4)(A)) is amended—
(1) in clause (vii), by striking ‘‘and’’ at the end;
(2) in clause (viii), by striking ‘‘a subsequent
year’’ and inserting ‘‘2003’’; and
(3) by adding at the end the following new
clauses:
‘‘(ix) for each of the years 2004
through 2010—
‘‘(I) in the case of orthotics that
have not been custom-fabricated, 0 per-
cent; and
‘‘(II) in the case of prosthetics,
prosthetic devices, and custom-fab-
ricated orthotics, the percentage in-
crease described in clause (viii) for the
year involved; and
‘‘(x) for 2011 and each subsequent
year, the percentage increase described in
clause (viii) for the year involved;’’.
(c) ESTABLISHMENT OF QUALITY STANDARDS AND AC-
CREDITATION REQUIREMENTS
FOR DURABLE MEDICAL
EQUIPMENT
PROVIDERS.—Section 1834(a) (42 U.S.C.
1395m(a)) is amended—
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(1) by redesignating paragraph (17), as added
by section 4551(c)(1) of the Balanced Budget Act of
1997 (111 Stat. 458), as paragraph (19); and
(2) by adding at the end the following new para-
graph:
‘‘(20) IDENTIFICATION
OF
QUALITY
STAND-
ARDS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (C), the Secretary shall establish and im-
plement quality standards for providers of dura-
ble medical equipment throughout the United
States that are developed by recognized inde-
pendent accreditation organizations (as des-
ignated under subparagraph (B)(i)) and with
which such providers shall be required to comply
in order to—
‘‘(i) participate in the program under
this title;
‘‘(ii) furnish any item or service de-
scribed in subparagraph (D) for which pay-
ment is made under this part; and
‘‘(iii) receive or retain a provider or
supplier number used to submit claims for
reimbursement for any item or service de-
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scribed in subparagraph (D) for which pay-
ment may be made under this title.
‘‘(B) DESIGNATION
OF
INDEPENDENT
AC-
CREDITATION ORGANIZATIONS.—
‘‘(i) IN GENERAL.—Not later that the
date that is 6 months after the date of en-
actment of the Prescription Drug and Medi-
care Improvement Act of 2003, the Sec-
retary shall designate independent accredi-
tation organizations for purposes of sub-
paragraph (A).
‘‘(ii) CONSULTATION.—In determining
which independent accreditation organiza-
tions to designate under clause (i), the Sec-
retary shall consult with an expert outside
advisory panel composed of an appropriate
selection of representatives of physicians,
practitioners, suppliers, and manufacturers
to review (and advise the Secretary con-
cerning) selection of accrediting organiza-
tions and the quality standards of such or-
ganizations.
‘‘(C) QUALITY
STANDARDS.—The quality
standards described in subparagraph (A) may
not be less stringent than the quality standards
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that would otherwise apply if this paragraph did
not apply and shall include consumer services
standards.
‘‘(D) ITEMS AND SERVICES DESCRIBED.—
The items and services described in this subpara-
graph are covered items (as defined in para-
graph (13)) for which payment may otherwise be
made under this subsection, other than items
used in infusion, and inhalation drugs used in
conjunction with durable medical equipment.
‘‘(E) PHASED-IN
IMPLEMENTATION.—The
application of the quality standards described in
subparagraph (A) shall be phased-in over a pe-
riod that does not exceed 3 years.’’.
SEC. 431. APPLICATION OF COINSURANCE AND DEDUCT-
IBLE FOR CLINICAL DIAGNOSTIC LABORA-
TORY TESTS.
(a) COINSURANCE.—
(1) IN GENERAL.—Section 1833(a) (42 U.S.C.
1395l(a)) is amended—
(A) in paragraph (1)(D)(i), by striking ‘‘(or
100 percent, in the case of such tests for which
payment is made on an assignment-related
basis)’’; and
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(B) in paragraph (2)(D)(i), by striking
‘‘(or 100 percent, in the case of such tests for
which payment is made on an assignment-re-
lated basis or to a provider having an agreement
under section 1866)’’.
(2) CONFORMING AMENDMENT.—The third sen-
tence of section 1866(a)(2)(A) of the Social Security
Act (42 U.S.C. 1395cc(a)(2)(A) is amended by strik-
ing ‘‘and with respect to clinical diagnostic labora-
tory tests for which payment is made under part B’’.
(b) DEDUCTIBLE.—Section 1833(b) of the Social Secu-
rity Act (42 U.S.C. 1395l(b)) is amended—
(1) by striking paragraph (3); and
(2) by redesignating paragraphs (4), (5), and (6)
as paragraphs (3), (4), and (5), respectively.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to tests furnished on or after January
1, 2004.
SEC. 432. BASING MEDICARE PAYMENTS FOR COVERED
OUTPATIENT DRUGS ON MARKET PRICES.
(a) MEDICARE MARKET BASED PAYMENT AMOUNT.—
Section 1842(o) (42 U.S.C. 1395u(o)) is amended—
(1) in paragraph (1), by striking ‘‘equal to 95
percent of the average wholesale price.’’ and inserting
‘‘equal to—
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‘‘(A) in the case of a drug or biological furnished
prior to January 1, 2004, 95 percent of the average
wholesale price; and
‘‘(B) in the case of a drug or biological furnished
on or after January 1, 2004, the payment amount
specified in—
‘‘(i) in the case of such a drug or biological
that is first available for payment under this
part on or before April 1, 2003, paragraph (4);
and
‘‘(ii) in the case of such a drug or biological
that is first available for payment under this
part after such date, paragraph (5).’’; and
(2) by adding at the end the following new para-
graphs:
‘‘(4)(A) Subject to subparagraph (C), the payment
amount specified in this paragraph for a year for a drug
or biological is an amount equal to the lesser of—
‘‘(i) the average wholesale price for the drug or
biological; or
‘‘(ii) the amount determined under subpara-
graph (B)
‘‘(B)(i) Subject to clause (ii), the amount determined
under this subparagraph is an amount equal to—
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‘‘(I) in the case of a drug or biological furnished
in 2004, 85 percent of the average wholesale price for
the drug or biological (determined as of April 1,
2003); and
‘‘(II) in the case of a drug or biological furnished
in 2005 or a subsequent year, the amount determined
under this subparagraph for the previous year in-
creased by the percentage increase in the consumer
price index for medical care for the 12-month period
ending with June of the previous year.
‘‘(ii) In the case of a vaccine described in subpara-
graph (A) or (B) of section 1861(s)(10), the amount deter-
mined under this subparagraph is an amount equal to the
average wholesale price for the drug or biological.
‘‘(C)(i) The Secretary shall establish a process under
which the Secretary determines, for such drugs or
biologicals as the Secretary determines appropriate, wheth-
er the widely available market price to physicians or sup-
pliers for the drug or biological furnished in a year is dif-
ferent from the payment amount established under subpara-
graph (B) for the year. Such determination shall be based
on the information described in clause (ii) as the Secretary
determines appropriate.
‘‘(ii) The information described in this clause is the
following information:
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for purposes of applying subparagraph (A)(ii)(I) for
the year and all subsequent years.
‘‘(II) The Secretary may make subsequent deter-
minations under clause (i) with respect to the widely
available market price for the drug or biological.
‘‘(III) If the Secretary does not make a subse-
quent determination under clause (i) with respect to
the widely available market price for the drug or bio-
logical for a year, the amount determined under this
subparagraph shall be an amount equal to the
amount determined under this subparagraph for the
previous year increased by the percentage increase de-
scribed in subparagraph (B)(i)(II) for the year in-
volved.
‘‘(iv) If the first determination made under clause (i)
with respect to the widely available market price for a drug
or biological would result in a payment amount in a year
that is more than 15 percent less than the amount deter-
mined under subparagraph (B) for the drug or biological
for the previous year (or, for 2004, the payment amount
determined under paragraph (1)(A), determined as of April
1, 2003), the Secretary shall provide for a transition to the
amount determined under clause (i) so that the payment
amount is reduced in annual increments equal to 15 per-
cent of the payment amount in such previous year until
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the payment amount is equal to the amount determined
under clause (i), as increased each year by the percentage
increase described in subparagraph (B)(i)(II) for the year.
The preceding sentence shall not apply to a drug or biologi-
cal where a generic version of the drug or biological first
enters the market on or after January 1, 2004 (even if the
generic version of the drug or biological is not marketed
under the chemical name of such drug or biological).
‘‘(5) In the case of a drug or biological that is first
available for payment under this part after April 1, 2003,
the following rules shall apply:
‘‘(A) As a condition of obtaining a code to report
such new drug or biological and to receive payment
under this part, a manufacturer shall provide the
Secretary (in a time, manner, and form approved by
the Secretary) with data and information on prices
at which the manufacturer estimates physicians and
suppliers will be able to routinely obtain the drug or
biological in the market during the first year that the
drug or biological is available for payment under this
part and such additional information that the manu-
facturer determines appropriate.
‘‘(B) During the year that the drug or biological
is first available for payment under this part, the
manufacturer of the drug or biological shall provide
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the Secretary (in a time, manner, and form approved
by the Secretary) with updated information on the
actual market prices paid by such physicians or sup-
pliers for the drug or biological in the year.
‘‘(C) The amount specified in this paragraph for
a drug or biological for the year described in subpara-
graph (B) is equal to an amount determined by the
Secretary based on the information provided under
subparagraph (A) and other information that the Sec-
retary determines appropriate.
‘‘(D) The amount specified in this paragraph for
a drug or biological for the year after the year de-
scribed in subparagraph (B) is equal to an amount
determined by the Secretary based on the information
provided under subparagraph (B) and other informa-
tion that the Secretary determines appropriate.
‘‘(E) The amount specified in this paragraph for
a drug or biological for the year beginning after the
year described in subparagraph (D) and each subse-
quent year is equal to the lesser of—
‘‘(i) the average wholesale price for the drug
or biological; or
‘‘(ii) the amount determined—
‘‘(I) by the Secretary under paragraph
(4)(C)(i) with respect to the widely avail-
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able market price for the drug or biological
for the year, if such paragraph was applied
by substituting ‘the payment determined
under paragraph (5)(E)(ii)(II) for the year’
for ‘established under subparagraph (B) for
the year’; and
‘‘(II) if no determination described in
subclause (I) is made for the drug or bio-
logical for the year, under this subpara-
graph with respect to the drug or biological
for the previous year increased by the per-
centage increase described in paragraph
(4)(B)(i)(II) for the year involved.’’.
(b) ADJUSTMENTS TO PAYMENT AMOUNTS FOR ADMIN-
ISTRATION OF DRUGS AND BIOLOGICALS.—
(1) ADJUSTMENT IN PHYSICIAN PRACTICE EX-
PENSE RELATIVE VALUE UNITS.—Section 1848(c)(2)
(42 U.S.C. 1395w–4(c)(2)) is amended—
(A) in subparagraph (B)—
(i) in clause (ii)(II), by striking ‘‘The
adjustments’’ and inserting ‘‘Subject to
clause (iv), the adjustments’’; and
(ii) by adding at the end the following
new clause:
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‘‘(iv) EXEMPTION FROM BUDGET NEU-
TRALITY IN 2004.—Any additional expendi-
tures under this part that are attributable
to subparagraph (H) shall not be taken into
account in applying clause (ii)(II) for
2004.’’; and
(B) by adding at the end the following new
subparagraph:
‘‘(H) ADJUSTMENTS IN PRACTICE EXPENSE
RELATIVE VALUE UNITS FOR DRUG ADMINISTRA-
TION SERVICES FOR 2004.—In establishing the
physician fee schedule under subsection (b) with
respect to payments for services furnished in
2004, the Secretary shall, in determining prac-
tice expense relative value units under this sub-
section, utilize a survey submitted to the Sec-
retary as of January 1, 2003, by a physician
specialty organization pursuant to section 212 of
the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999 if the survey—
‘‘(i) covers practice expenses for oncol-
ogy administration services; and
‘‘(ii) meets criteria established by the
Secretary for acceptance of such surveys.’’.
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(2) PAYMENT
FOR
MULTIPLE
CHEMOTHERAPY
AGENTS FURNISHED ON A SINGLE DAY THROUGH THE
PUSH TECHNIQUE.—
(A) REVIEW
OF
POLICY.—The Secretary
shall review the policy, as in effect on the date
of enactment of this Act, with respect to payment
under section 1848 of the Social Security Act (42
U.S.C. 1395w–4) for the administration of more
than 1 anticancer chemotherapeutic agent to an
individual on a single day through the push
technique.
(B) MODIFICATION OF POLICY.—After con-
ducting the review under subparagraph (A), the
Secretary shall modify such payment policy if
the Secretary determines such modification to be
appropriate.
(C) EXEMPTION FROM BUDGET NEUTRALITY
UNDER PHYSICIAN FEE SCHEDULE.—If the Sec-
retary modifies such payment policy pursuant to
subparagraph (B), any increased expenditures
under title XVIII of the Social Security Act re-
sulting from such modification shall be treated
as additional expenditures attributable to sub-
paragraph (H) of section 1848(c)(2) of the Social
Security Act (42 U.S.C. 1395w–4(c)(2)), as
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added by paragraph (1)(B), for purposes of ap-
plying the exemption to budget neutrality under
subparagraph (B)(iv) of such section, as added
by paragraph (1)(A).
(3) TREATMENT
OF
OTHER
SERVICES
CUR-
RENTLY
IN
THE
NONPHYSICIAN
WORK
POOL.—The
Secretary shall make adjustments to the nonphysician
work pool methodology (as such term is used in the
final rule promulgated by the Secretary in the Fed-
eral Register on December 31, 2002 (67 Fed. Reg.
251)), for the determination of practice expense rel-
ative value units under the physician fee schedule
under section 1848(c)(2)(C)(ii) of the Social Security
Act (42 U.S.C. 1395w–4(c)(2)(C)(ii)), so that the
practice expense relative value units for services deter-
mined under such methodology are not disproportion-
ately reduced relative to the practice expense relative
value units of services not determined under such
methodology, as a result of the amendments to such
Act made by paragraph (1).
(4) ADMINISTRATION OF BLOOD CLOTTING FAC-
TORS.—Section 1842(o) (42 U.S.C. 1395u(o)), as
amended by subsection (a)(2), is amended by adding
at the end the following new paragraph:
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‘‘(6)(A) Subject to subparagraph (B), in the case of
clotting factors furnished on or after January 1, 2004, the
Secretary shall, after reviewing the January 2003 report
to Congress by the Comptroller General of the United States
entitled ‘Payment for Blood Clotting Factor Exceeds Pro-
viders Acquisition Cost’ (GAO–03–184), provide for a sepa-
rate payment for the administration of such blood clotting
factors in an amount that the Secretary determines to be
appropriate.
‘‘(B) In determining the separate payment amount
under subparagraph (A) for blood clotting factors furnished
in 2004, the Secretary shall ensure that the total amount
of payments under this part (as estimated by the Secretary)
for such factors under paragraphs (4) and (5) and such sep-
arate payments for such factors does not exceed the total
amount of payments that would have been made for such
factors under this part (as estimated by the Secretary) if
the amendments made by section 433 of the Prescription
Drug and Medicare Improvement Act of 2003 had not been
enacted.
‘‘(C) The separate payment amount under this sub-
paragraph for blood clotting factors furnished in 2005 or
a subsequent year shall be equal to the separate payment
amount determined under this paragraph for the previous
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year increased by the percentage increase described in para-
graph (4)(B)(i)(II) for the year involved.’’.
(5) INCREASE
IN
COMPOSITE
RATE
FOR
END
STAGE RENAL DISEASE FACILITIES.—Section 1881(b)
(42 U.S.C. 1395rr(b) is amended—
(A) in paragraph (7), by adding at the end
the following new sentence: ‘‘In the case of dialy-
sis services furnished in 2004 or a subsequent
year, the composite rate for such services shall be
determined under paragraph (12).’’; and
(B) by adding at the end the following new
paragraph:
‘‘(12)(A) In the case of dialysis services furnished dur-
ing 2004, the composite rate for such services shall be the
composite rate that would otherwise apply under paragraph
(7) for the year increased by an amount to ensure (as esti-
mated by the Secretary) that—
‘‘(i) the sum of the total amount of—
‘‘(I) the composite rate payments for such
services for the year, as increased under this
paragraph; and
‘‘(II) the payments for drugs and biologicals
(other than erythropoetin) furnished in connec-
tion with the furnishing of renal dialysis services
and separately billed by renal dialysis facilities
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under paragraphs (4) and (5) of section 1842(o)
for the year; is equal to
‘‘(ii) the sum of the total amount of the com-
posite rate payments under paragraph (7) for the
year and the payments for the separately billed drugs
and biologicals described in clause (i)(II) that would
have been made if the amendments made by section
433 of the Prescription Drug and Medicare Improve-
ment Act of 2003 had not been enacted.
‘‘(B) Subject to subparagraph (E), in the case of dialy-
sis services furnished in 2005, the composite rate for such
services shall be an amount equal to the composite rate es-
tablished under subparagraph (A), increased by 0.05 per-
cent and further increased by 1.6 percent.
‘‘(C) Subject to subparagraph (E), in the case of dialy-
sis services furnished in 2006, the composite rate for such
services shall be an amount equal to the composite rate es-
tablished under subparagraph (B), increased by 0.05 per-
cent and further increased by 1.6 percent.
‘‘(D) Subject to subparagraph (E), in the case of dialy-
sis services furnished in 2007 and all subsequent years, the
composite rate for such services shall be an amount equal
to the composite rate established under this paragraph for
the previous year, increased by 0.05 percent.
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‘‘(E) If the Secretary implements a reduction in the
payment amount under paragraph (4)(C) or (5) for a drug
or biological described in subparagraph (A)(i)(II) for a
year after 2004, the Secretary shall, as estimated by the
Secretary—
‘‘(i) increase the composite rate for dialysis serv-
ices furnished in such year in the same manner that
the composite rate for such services for 2004 was in-
creased under subparagraph (A); and
‘‘(ii) increase the percentage increase under sub-
paragraph (C) or (D) (as applicable) for years after
the year described in clause (i) to ensure that such in-
creased percentage would result in expenditures equal
to the sum of the total composite rate payments for
such services for such years and the total payments
for drugs and biologicals described in subparagraph
(A)(i)(II) is equal to the sum of the total amount of
the composite rate payments under this paragraph for
such years and the payments for the drugs and
biologicals described in subparagraph (A)(i)(II) that
would have been made if the reduction in payment
amount described in subparagraph had not been
made.
‘‘(F) There shall be no administrative or judicial re-
view under section 1869, section 1878, or otherwise, of de-
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terminations of payment amounts, methods, or adjustments
under this paragraph.’’.
(6) HOME
INFUSION
DRUGS.—Section 1842(o)
(42 U.S.C. 1395u(o)), as amended by subsection
(a)(2) and paragraph (4), is amended by adding at
the end the following new paragraph:
‘‘(7)(A) Subject to subparagraph (B), in the case of
infusion drugs and biologicals furnished through an item
of durable medical equipment covered under section 1861(n)
on or after January 1, 2004, the Secretary may make sepa-
rate payments for furnishing such drugs and biologicals in
an amount determined by the Secretary if the Secretary de-
termines such separate payment to be appropriate.
‘‘(B) In determining the amount of any separate pay-
ment under subparagraph (A) for a year, the Secretary
shall ensure that the total amount of payments under this
part for such infusion drugs and biologicals for the year
and such separate payments for the year does not exceed
the total amount of payments that would have been made
under this part for the year for such infusion drugs and
biologicals if section 433 of the Prescription Drug and
Medicare Improvement Act of 2003 had not been enacted.’’.
(7) INHALATION
DRUGS.—Section 1842(o) (42
U.S.C. 1395u(o)), as amended by subsection (a)(2)
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and paragraphs (4) and (6), is amended by adding
at the end the following new paragraph:
‘‘(8)(A) Subject to subparagraph (B), in the case of
inhalation drugs and biologicals furnished through durable
medical equipment covered under section 1861(n) on or
after January 1, 2004, the Secretary may increase pay-
ments for such equipment under section 1834(a) and may
make separate payments for furnishing such drugs and
biologicals if the Secretary determines such increased or
separate payments are necessary to appropriately furnish
such equipment and drugs and biologicals to beneficiaries.
‘‘(B) The total amount of any increased payments and
separate payments under subparagraph (A) for a year may
not exceed an amount equal to 10 percent of the amount
(as estimated by the Secretary) by which—
‘‘(i) the total amount of payments that would
have been made for such drugs and biologicals for the
year if section 433 of the Prescription Drug and
Medicare Improvement Act of 2003 had not been en-
acted; exceeds
‘‘(ii) the total amount of payments for such
drugs and biologicals under paragraphs (4) and (5).’’.
(8) PHARMACY DISPENSING FEE FOR CERTAIN
DRUGS
AND
BIOLOGICALS.—Section 1842(o)(2) (42
U.S.C. 1395u(o)(2)) is amended to read as follows:
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‘‘(2) If payment for a drug or biological is made to
a licensed pharmacy approved to dispense drugs or
biologicals under this part, the Secretary—
‘‘(A) in the case of an immunosuppressive drug
described in subparagraph (J) of section 1861(s)(2)
and an oral drug described in subparagraph (Q) or
(T) of such section, shall pay a dispensing fee deter-
mined appropriate by the Secretary (less the applica-
ble deductible and coinsurance amounts) to the phar-
macy; and
‘‘(B) in the case of a drug or biological not de-
scribed in subparagraph (A), may pay a dispensing
fee determined appropriate by the Secretary (less the
applicable deductible and coinsurance amounts) to the
pharmacy.’’.
(9) PAYMENT FOR CHEMOTHERAPY DRUGS PUR-
CHASED BUT NOT ADMINISTERED BY PHYSICIANS.—
Section 1842(o) (42 U.S.C. 1395u(o)), as amended by
subsection (a)(2) and paragraphs (4), (6) and (7), is
amended by adding at the end the following new
paragraph:
‘‘(9)(A) Subject to subparagraph (B), the Sec-
retary may increase (in an amount determined ap-
propriate) the amount of payments to physicians for
anticancer chemotherapeutic drugs or biologicals that
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would otherwise be made under this part in order to
compensate 
such 
physicians 
for 
anticancer
chemotherapeutic drugs or biologicals that are pur-
chased by physicians with a reasonable intent to ad-
minister to an individual enrolled under this part but
which cannot be administered to such individual de-
spite the reasonable efforts of the physician.
‘‘(B) The total amount of increased payments
made under subparagraph (A) in a year (as esti-
mated by the Secretary) may not exceed an amount
equal to 1 percent of the total amount of payments
made under paragraphs (4) and (5) for such
anticancer chemotherapeutic drugs or biologicals fur-
nished by physicians in such year (as estimated by
the Secretary).’’.
(c) LINKAGE OF REVISED DRUG PAYMENTS AND IN-
CREASES
FOR DRUG ADMINISTRATION.—The Secretary
shall not implement the revisions in payment amounts for
a category of drug or biological as a result of the amend-
ments made by subsection (a) unless the Secretary concur-
rently implements the adjustments to payment amounts for
administration of such category of drug or biological for
which the Secretary is required to make an adjustment, as
specified in the amendments made by, and provisions of,
subsection (b).
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(d) PROHIBITION OF ADMINISTRATIVE AND JUDICIAL
REVIEW.—
(1) 
DRUGS.—Section 
1842(o) 
(42 
U.S.C.
1395u(o)), as amended by subsection (a)(2) and para-
graphs (4), (6), (7), and (9) of subsection (b), is
amended by adding at the end the following new
paragraph:
‘‘(10) There shall be no administrative or judicial re-
view under section 1869, section 1878, or otherwise, of de-
terminations of payment amounts, methods, or adjustments
under paragraph (2) or paragraphs (4) through (9).’’.
(2) 
PHYSICIAN
FEE
SCHEDULE.—Section
1848(i)(1) (42 U.S.C. 1395w–4(i)(1)) is amended—
(A) in subparagraph (D), by striking ‘‘and’’
at the end;
(B) in subparagraph (E), by striking the
period at the end and inserting ‘‘, and’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(F) adjustments in practice expense rel-
ative value units under subsection (c)(2)(H).’’.
(3) MULTIPLE
CHEMOTHERAPY
AGENTS
AND
OTHER SERVICES CURRENTLY ON THE NON-PHYSICIAN
WORK POOL.—There shall be no administrative or ju-
dicial review under section 1869, section 1878, or oth-
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erwise, of determinations of payment amounts, meth-
ods, or adjustments under paragraphs (2) and (3) of
subsection (b).
(e) STUDIES AND REPORTS.—
(1) GAO STUDY AND REPORT ON BENEFICIARY
ACCESS TO DRUGS AND BIOLOGICALS.—
(A) STUDY.—The Comptroller General of
the United States shall conduct a study that ex-
amines the impact the provisions of, and the
amendments made by, this section have on access
by 
medicare 
beneficiaries 
to 
drugs 
and
biologicals covered under the medicare program.
(B) REPORT.—Not later than January 1,
2006, the Comptroller General shall submit a re-
port to Congress on the study conducted under
subparagraph (A) together with such rec-
ommendations as the Comptroller General deter-
mines to be appropriate.
(2) STUDY AND REPORT BY THE HHS INSPECTOR
GENERAL
ON
MARKET
PRICES
OF
DRUGS
AND
BIOLOGICALS.—
(A) STUDY.—The Inspector General of the
Department of Health and Human Services shall
conduct 1 or more studies that—
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(i) examine the market prices that
drugs and biologicals covered under the
medicare program are widely available to
physicians and suppliers; and
(ii) compare such widely available
market prices to the payment amount for
such drugs and biologicals under section
1842(o) of the Social Security Act (42
U.S.C. 1395u(o).
(B) REQUIREMENT.—In conducting the
study under subparagraph (A), the Inspector
General 
shall 
focus 
on 
those 
drugs 
and
biologicals that represent the largest portions of
expenditures under the medicare program for
drugs and biologicals.
(C) REPORT.—The Inspector General shall
prepare a report on any study conducted under
subparagraph (A).
SEC. 433. INDEXING PART B DEDUCTIBLE TO INFLATION.
The first sentence of section 1833(b) (42 U.S.C.
1395l(b)) is amended by striking ‘‘and $100 for 1991 and
subsequent years’’ and inserting the following: ‘‘, $100 for
1991 through 2005, $125 for 2006, and for 2007 and there-
after, the amount in effect for the previous year, increase
by the percentage increase in the consumer price index for
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all urban consumers (U.S. city average) for the 12-month
period ending with June of the previous year, rounded to
the nearest dollar’’.
SEC. 434. REVISIONS TO REASSIGNMENT PROVISIONS.
(a) IN
GENERAL.—Section 1842(b)(6)(A)(ii) (42
U.S.C. 1395u(b)(6)(A)(ii)) is amended to read as follows:
‘‘(ii) where the service was provided under a contractual
arrangement between such physician or other person and
an entity (as defined by the Secretary), to the entity if
under such arrangement such entity submits the bill for
such service and such arrangement meets such program in-
tegrity and other safeguards as the Secretary may deter-
mine to be appropriate,’’.
(b) CONFORMING AMENDMENT.—The second sentence
of section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended
by striking ‘‘except to an employer or facility as described
in clause (A)’’ and inserting ‘‘except to an employer or enti-
ty as described in subparagraph (A)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to payments made on or after the date
of enactment of this Act.
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SEC. 435. EXTENSION OF TREATMENT OF CERTAIN PHYSI-
CIAN PATHOLOGY SERVICES UNDER MEDI-
CARE.
Section 542(c) of BIPA (114 Stat. 2763A–551) is
amended by inserting ‘‘, and for services furnished during
2005’’ before the period at the end.
SEC. 436. ADEQUATE REIMBURSEMENT FOR OUTPATIENT
PHARMACY THERAPY UNDER THE HOSPITAL
OUTPATIENT PPS.
(a) SPECIAL RULES FOR DRUGS AND BIOLOGICALS.—
Section 1833(t) (42 U.S.C. 1395(t)) is amended—
(1) by redesignating paragraph (13) as para-
graph (14); and
(2) by inserting after paragraph (12) the fol-
lowing new paragraph:
‘‘(13) SPECIAL RULES FOR CERTAIN DRUGS AND
BIOLOGICALS.—
‘‘(A) BEFORE 2007.—
‘‘(i) IN
GENERAL.—Notwithstanding
paragraph (6), but subject to clause (ii),
with respect to a separately payable drug or
biological described in subparagraph (D)
furnished on or after January 1, 2005, and
before January 1, 2007, hospitals shall be
reimbursed as follows:
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‘‘(I) DRUGS
AND
BIOLOGICALS
FURNISHED AS PART OF A CURRENT
OPD
SERVICE.—The amount of pay-
ment for a drug or biological described
in subparagraph (D) provided as a
part of a service that was a covered
OPD service on May 1, 2003, shall be
the applicable percentage (as defined
in subparagraph (C)) of the average
wholesale price for the drug or biologi-
cal that would have been determined
under section 1842(o) on such date.
‘‘(II) DRUGS
AND
BIOLOGICALS
FURNISHED AS PART OF OTHER OPD
SERVICES.—The amount of payment
for a drug or biological described in
subparagraph (D) provided as part of
any other covered OPD service shall be
the applicable percentage (as defined
in subparagraph (C)) of the average
wholesale price that would have been
determined under section 1842(o) on
May 1, 2003, if payment for such a
drug or biological could have been
made under this part on that date.
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‘‘(ii) UPDATE FOR 2006.—For 2006, the
amounts determined under clauses (i) and
(ii) shall be the amount established for 2005
increased by the percentage increase in the
Consumer Price Index for all urban con-
sumers (U.S. urban average) for the 12-
month period ending with June of the pre-
vious year.
‘‘(B) AFTER 2007.—
‘‘(i) ONGOING STUDY AND REPORTS ON
ADEQUATE REIMBURSEMENTS.—
‘‘(I) STUDY.—The Secretary shall
contract with an eligible organization
(as defined in subclause (IV)) to con-
duct a study to determine the hospital
acquisition, pharmacy services, and
handling costs for each individual drug
or biological described in subparagraph
(D).
‘‘(II) STUDY
REQUIREMENTS.—
The study conducted under subclause
(I) shall—
‘‘(aa) be accurate to within 3
percent of true mean hospital ac-
quisition and handling costs for
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each drug and biological at the 95
percent confidence level;
‘‘(bb) begin not later than
January 1, 2005; and
‘‘(cc) be updated annually
for changes in hospital costs and
the addition of newly marketed
products.
‘‘(III) REPORTS.—Not later than
January 1 of each year (beginning
with 2006), the Secretary shall submit
to Congress a report on the study con-
ducted under clause (i) together with
recommendations for such legislative or
administrative action as the Secretary
determines to be appropriate.
‘‘(IV) ELIGIBLE
ORGANIZATION
DEFINED.—In this clause, the term ‘el-
igible organization’ means a private,
nonprofit 
organization 
within 
the
meaning of section 501(c) of the Inter-
nal Revenue Code.
‘‘(ii) ESTABLISHMENT
OF
PAYMENT
METHODOLOGY.—Notwithstanding 
para-
graph (6), the Secretary, in establishing a
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payment methodology on or after the date of
enactment of the Prescription Drug and
Medicare Improvement Act of 2003, shall
take into consideration the findings of the
study conducted under clause (i)(I) in de-
termining payment amounts for each drug
and biological provided as part of a covered
OPD service furnished on or after January
1, 2007.
‘‘(C) APPLICABLE PERCENTAGE DEFINED.—
In this paragraph, the term ‘applicable percent-
age’ means—
‘‘(i) with respect to a biological prod-
uct (approved under a biologics license ap-
plication under section 351 of the Public
Health Service Act), a single source drug
(as defined in section 1927(k)(7)(A)(iv)), or
an orphan product designated under section
526 of the Food, Drug, and Cosmetic Act to
which the prospective payment system es-
tablished under this subsection did not
apply under the final rule for 2003 pay-
ments under such system, 94 percent;
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‘‘(ii) with respect to an innovator mul-
tiple source drug (as defined in section
1927(k)(7)(A)(ii)), 91 percent; and
‘‘(iii) with respect to a noninnovator
multiple source drug (as defined in as de-
fined in section 1927(k)(7)(A)(iii)), 71 per-
cent.
‘‘(D) 
DRUGS
AND
BIOLOGICALS
DE-
SCRIBED.—A drug or biological described in this
paragraph is any drug or biological—
‘‘(i) for which the amount of payment
was determined under paragraph (6) prior
to January 1, 2005; and
‘‘(ii)(I) which is assigned to a drug
specific ambulatory payment classification
on or after the date of enactment of the Pre-
scription Drug and Medicare Improvement
Act of 2003; or
‘‘(II) that would have been reimbursed
under paragraph (6) but for the application
of this paragraph.’’.
(b) EXCEPTIONS TO BUDGET NEUTRALITY REQUIRE-
MENT.—Section 1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B)) is
amended by adding at the end the following: ‘‘In deter-
mining the budget neutrality adjustment required by the
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preceding sentence for fiscal years 2005 and 2006, the Sec-
retary shall not take into account any expenditures that
would not have been made but for the application of para-
graph (13).’’.
SEC. 437. LIMITATION OF APPLICATION OF FUNCTIONAL
EQUIVALENCE STANDARD.
Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended
by adding at the end the following new subparagraph:
‘‘(F) LIMITATION OF APPLICATION OF FUNC-
TIONAL EQUIVALENCE STANDARD.—
‘‘(i) IN GENERAL.—The Secretary may
not publish regulations that apply a func-
tional equivalence standard to a drug or bi-
ological under this paragraph.
‘‘(ii) 
APPLICATION.—Paragraph 
(1)
shall apply to the application of a func-
tional equivalence standard to a drug or bi-
ological on or after the date of enactment of
the Prescription Drug and Medicare Im-
provement Act of 2003 unless—
‘‘(I) such application was being
made to such drug or biological prior
to such date of enactment; and
‘‘(II) the Secretary applies such
standard to such drug or biological
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only for the purpose of determining eli-
gibility of such drug or biological for
additional payments under this para-
graph and not for the purpose of any
other payments under this title.
‘‘(iii) RULE OF CONSTRUCTION.—Noth-
ing in this subparagraph shall be construed
to effect the Secretary’s authority to deem a
particular drug to be identical to another
drug if the 2 products are pharmaceutically
equivalent and bioequvalent, as determined
by the Commissioner of Food and Drugs.
SEC. 438. MEDICARE COVERAGE OF ROUTINE COSTS ASSO-
CIATED WITH CERTAIN CLINICAL TRIALS.
(a) IN GENERAL.—With respect to the coverage of rou-
tine costs of care for beneficiaries participating in a quali-
fying clinical trial, as set forth on the date of the enactment
of this Act in National Coverage Determination 30–1 of the
Medicare Coverage Issues Manual, the Secretary shall deem
clinical trials conducted in accordance with an investiga-
tional device exemption approved under section 520(g) of
the Federal Food, Drug, and Cosmetic Act (42 U.S.C.
360j(g)) to be automatically qualified for such coverage.
(b) RULE OF CONSTRUCTION.—Nothing in this section
shall be construed as authorizing or requiring the Secretary
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to modify the regulations set forth on the date of the enact-
ment of this Act at subpart B of part 405 of title 42, Code
of Federal Regulations, or subpart A of part 411 of such
title, relating to coverage of, and payment for, a medical
device that is the subject of an investigational device exemp-
tion by the Food and Drug Administration (except as may
be necessary to implement subsection (a)).
(c) LIMITATION OF EXPENDITURES IN YEARS PRIOR
TO 2014.—
(1) IN
GENERAL.—The Secretary shall ensure
that the total amount of expenditures under title
XVIII of the Social Security Act (including amounts
expended by reason of this section) in a year prior to
2014 does not exceed the sum of—
(A) the total amount of expenditures under
such title XVIII that would have made if this
section had not been enacted; and
(B) the applicable amount.
(2) APPLICABLE
AMOUNT.—For purposes of
paragraph (1), the term ‘‘applicable amount’’
means—
(A) for 2005, $32,000,000;
(B) for 2006, $34,000,000;
(C) for 2007, $36,000,000;
(D) for 2008, $38,000,000;
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(E) for 2009, $40,000,000;
(F) for 2010, $42,000,000;
(G) for 2011, $44,000,000;
(H) for 2012, $48,000,000; and
(I) for 2013, $50,000,000.
(3) STEPS TO ENSURE FUNDING LIMITATION NOT
VIOLATED.—If the Secretary determines that the ap-
plication of this section will result in the funding
limitation described in paragraph (1) being violated
for any year, the Secretary shall take appropriate
steps to stay within such funding limitation, includ-
ing through limiting the number of clinical trials
deemed under subsection (a) and only covering a por-
tion of the routine costs described in such subsection.
(d) EFFECTIVE DATE.—This section shall apply to
clinical trials begun on or after January 1, 2005.
SEC. 439. WAIVER OF PART B LATE ENROLLMENT PENALTY
FOR CERTAIN MILITARY RETIREES; SPECIAL
ENROLLMENT PERIOD.
(a) WAIVER OF PENALTY.—
(1) IN GENERAL.—Section 1839(b) (42 U.S.C.
1395r(b)) is amended by adding at the end the fol-
lowing new sentence: ‘‘No increase in the premium
shall be effected for a month in the case of an indi-
vidual who is 65 years of age or older, who enrolls
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under this part during 2002, 2003, 2004, or 2005 and
who demonstrates to the Secretary before December
31, 2005, that the individual is a covered beneficiary
(as defined in section 1072(5) of title 10, United
States Code). The Secretary shall consult with the
Secretary of Defense in identifying individuals de-
scribed in the previous sentence.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to premiums for months
beginning with January 2005. The Secretary shall es-
tablish a method for providing rebates of premium
penalties paid for months on or after January 2005
for which a penalty does not apply under such
amendment but for which a penalty was previously
collected.
(b) MEDICARE PART B SPECIAL ENROLLMENT PE-
RIOD.—
(1) IN GENERAL.—In the case of any individual
who, as of the date of enactment of this Act, is 65
years of age or older, is eligible to enroll but is not
enrolled under part B of title XVIII of the Social Se-
curity Act, and is a covered beneficiary (as defined
in section 1072(5) of title 10, United States Code), the
Secretary shall provide for a special enrollment pe-
riod during which the individual may enroll under
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such part. Such period shall begin 1 year after the
date of the enactment of this Act and shall end on De-
cember 31, 2005.
(2) COVERAGE PERIOD.—In the case of an indi-
vidual who enrolls during the special enrollment pe-
riod provided under paragraph (1), the coverage pe-
riod under part B of title XVIII of the Social Secu-
rity Act shall begin on the first day of the month fol-
lowing the month in which the individual enrolls.
SEC. 440. DEMONSTRATION OF COVERAGE OF CHIRO-
PRACTIC SERVICES UNDER MEDICARE.
(a) DEFINITIONS.—In this section:
(1) CHIROPRACTIC SERVICES.—The term ‘‘chiro-
practic services’’ has the meaning given that term by
the Secretary for purposes of the demonstration
projects, but shall include, at a minimum—
(A) care for neuromusculoskeletal conditions
typical among eligible beneficiaries; and
(B) diagnostic and other services that a chi-
ropractor is legally authorized to perform by the
State or jurisdiction in which such treatment is
provided.
(2) DEMONSTRATION PROJECT.—The term ‘‘dem-
onstration project’’ means a demonstration project es-
tablished by the Secretary under subsection (b)(1).
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(3) ELIGIBLE BENEFICIARY.—The term ‘‘eligible
beneficiary’’ means an individual who is enrolled
under part B of the medicare program.
(4) MEDICARE PROGRAM.—The term ‘‘medicare
program’’ means the health benefits program under
title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.).
(b) DEMONSTRATION OF COVERAGE OF CHIROPRACTIC
SERVICES UNDER MEDICARE.—
(1) ESTABLISHMENT.—The Secretary shall estab-
lish demonstration projects in accordance with the
provisions of this section for the purpose of evaluating
the feasibility and advisability of covering chiro-
practic services under the medicare program (in addi-
tion to the coverage provided for services consisting of
treatment by means of manual manipulation of the
spine to correct a subluxation described in section
1861(r)(5) of the Social Security Act (42 U.S.C.
1395x(r)(5))).
(2) NO PHYSICIAN APPROVAL REQUIRED.—In es-
tablishing the demonstration projects, the Secretary
shall ensure that an eligible beneficiary who partici-
pates in a demonstration project, including an eligi-
ble beneficiary who is enrolled for coverage under a
Medicare+Choice plan (or, on and after January 1,
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2006, under a MedicareAdvantage plan), is not re-
quired to receive approval from a physician or other
health care provider in order to receive a chiropractic
service under a demonstration project.
(3) CONSULTATION.—In establishing the dem-
onstration projects, the Secretary shall consult with
chiropractors, organizations representing chiroprac-
tors, eligible beneficiaries, and organizations rep-
resenting eligible beneficiaries.
(4) PARTICIPATION.—Any eligible beneficiary
may participate in the demonstration projects on a
voluntary basis.
(c) CONDUCT OF DEMONSTRATION PROJECTS.—
(1) DEMONSTRATION SITES.—
(A) 
SELECTION
OF
DEMONSTRATION
SITES.—The Secretary shall conduct demonstra-
tion projects at 6 demonstration sites.
(B) GEOGRAPHIC DIVERSITY.—Of the sites
described in subparagraph (A)—
(i) 3 shall be in rural areas; and
(ii) 3 shall be in urban areas.
(C) SITES LOCATED IN HPSAS.—At least 1
site described in clause (i) of subparagraph (B)
and at least 1 site described in clause (ii) of such
subparagraph shall be located in an area that is
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designated under section 332(a)(1)(A) of the
Public 
Health 
Service 
Act 
(42 
U.S.C.
254e(a)(1)(A)) as a health professional shortage
area.
(2) IMPLEMENTATION; DURATION.—
(A) IMPLEMENTATION.—The Secretary shall
not implement the demonstration projects before
October 1, 2004.
(B) DURATION.—The Secretary shall com-
plete the demonstration projects by the date that
is 3 years after the date on which the first dem-
onstration project is implemented.
(d) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall conduct
an evaluation of the demonstration projects—
(A) to determine whether eligible bene-
ficiaries who use chiropractic services use a less-
er overall amount of items and services for which
payment is made under the medicare program
than eligible beneficiaries who do not use such
services;
(B) to determine the cost of providing pay-
ment for chiropractic services under the medicare
program;
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(C) to determine the satisfaction of eligible
beneficiaries participating in the demonstration
projects and the quality of care received by such
beneficiaries; and
(D) to evaluate such other matters as the
Secretary determines is appropriate.
(2) REPORT.—Not later than the date that is 1
year after the date on which the demonstration
projects conclude, the Secretary shall submit to Con-
gress a report on the evaluation conducted under
paragraph (1) together with such recommendations
for legislation or administrative action as the Sec-
retary determines is appropriate.
(e) WAIVER OF MEDICARE REQUIREMENTS.—The Sec-
retary shall waive compliance with such requirements of the
medicare program to the extent and for the period the Sec-
retary finds necessary to conduct the demonstration
projects.
(f) FUNDING.—
(1) DEMONSTRATION PROJECTS.—
(A) IN GENERAL.—Subject to subparagraph
(B) and paragraph (2), the Secretary shall pro-
vide for the transfer from the Federal Supple-
mentary Insurance Trust Fund under section
1841 of the Social Security Act (42 U.S.C.
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1395t) of such funds as are necessary for the
costs of carrying out the demonstration projects
under this section.
(B) LIMITATION.—In conducting the dem-
onstration projects under this section, the Sec-
retary shall ensure that the aggregate payments
made by the Secretary under the medicare pro-
gram do not exceed the amount which the Sec-
retary would have paid under the medicare pro-
gram if the demonstration projects under this
section were not implemented.
(2) EVALUATION AND REPORT.—There are au-
thorized to be appropriated such sums as are nec-
essary for the purpose of developing and submitting
the report to Congress under subsection (d).
SEC. 441. MEDICARE HEALTH CARE QUALITY DEMONSTRA-
TION PROGRAMS.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by
inserting after section 1866B the following new section:
‘‘HEALTH CARE QUALITY DEMONSTRATION PROGRAM
‘‘SEC. 1866C. (a) DEFINITIONS.—In this section:
‘‘(1) 
BENEFICIARY.—The 
term 
‘beneficiary’
means a beneficiary who is enrolled in the original
medicare fee-for-service program under parts A and B
or a beneficiary in a staff model or dedicated group
model health maintenance organization under the
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Medicare+Choice program (or, on and after January
1, 2006, under the MedicareAdvantage program)
under part C.
‘‘(2) HEALTH CARE GROUP.—
‘‘(A) IN GENERAL.—The term ‘health care
group’ means—
‘‘(i) a group of physicians that is orga-
nized at least in part for the purpose of
providing physician’s services under this
title;
‘‘(ii) an integrated health care delivery
system that delivers care through coordi-
nated hospitals, clinics, home health agen-
cies, ambulatory surgery centers, skilled
nursing facilities, rehabilitation facilities
and clinics, and employed, independent, or
contracted physicians; or
‘‘(iii) an organization representing re-
gional coalitions of groups or systems de-
scribed in clause (i) or (ii).
‘‘(B) INCLUSION.—As the Secretary deter-
mines appropriate, a health care group may in-
clude a hospital or any other individual or enti-
ty furnishing items or services for which pay-
ment may be made under this title that is affili-
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ated with the health care group under an ar-
rangement structured so that such hospital, indi-
vidual, or entity participates in a demonstration
project under this section.
‘‘(3) PHYSICIAN.—Except as otherwise provided
for by the Secretary, the term ‘physician’ means any
individual who furnishes services that may be paid
for as physicians’ services under this title.
‘‘(b) DEMONSTRATION
PROJECTS.—The Secretary
shall establish a 5-year demonstration program under
which the Secretary shall approve demonstration projects
that examine health delivery factors that encourage the de-
livery of improved quality in patient care, including—
‘‘(1) the provision of incentives to improve the
safety of care provided to beneficiaries;
‘‘(2) the appropriate use of best practice guide-
lines by providers and services by beneficiaries;
‘‘(3) reduced scientific uncertainty in the deliv-
ery of care through the examination of variations in
the utilization and allocation of services, and out-
comes measurement and research;
‘‘(4) encourage shared decision making between
providers and patients;
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‘‘(5) the provision of incentives for improving the
quality and safety of care and achieving the efficient
allocation of resources;
‘‘(6) the appropriate use of culturally and eth-
nically sensitive health care delivery; and
‘‘(7) the financial effects on the health care mar-
ketplace of altering the incentives for care delivery
and changing the allocation of resources.
‘‘(c) ADMINISTRATION BY CONTRACT.—
‘‘(1) IN GENERAL.—Except as otherwise provided
in this section, the Secretary may administer the
demonstration program established under this section
in a manner that is similar to the manner in which
the demonstration program established under section
1866A is administered in accordance with section
1866B.
‘‘(2) 
ALTERNATIVE
PAYMENT
SYSTEMS.—A
health care group that receives assistance under this
section may, with respect to the demonstration project
to be carried out with such assistance, include pro-
posals for the use of alternative payment systems for
items and services provided to beneficiaries by the
group that are designed to—
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‘‘(A) encourage the delivery of high quality
care while accomplishing the objectives described
in subsection (b); and
‘‘(B) streamline documentation and report-
ing requirements otherwise required under this
title.
‘‘(3) BENEFITS.—A health care group that re-
ceives assistance under this section may, with respect
to the demonstration project to be carried out with
such assistance, include modifications to the package
of benefits available under the traditional fee-for-serv-
ice program under parts A and B or the package of
benefits available through a staff model or a dedicated
group model health maintenance organization under
part C. The criteria employed under the demonstra-
tion program under this section to evaluate outcomes
and determine best practice guidelines and incentives
shall not be used as a basis for the denial of medicare
benefits under the demonstration program to patients
against their wishes (or if the patient is incompetent,
against the wishes of the patient’s surrogate) on the
basis of the patient’s age or expected length of life or
of the patient’s present or predicted disability, degree
of medical dependency, or quality of life.
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‘‘(d) ELIGIBILITY CRITERIA.—To be eligible to receive
assistance under this section, an entity shall—
‘‘(1) be a health care group;
‘‘(2) meet quality standards established by the
Secretary, including—
‘‘(A) the implementation of continuous
quality improvement mechanisms that are aimed
at integrating community-based support services,
primary care, and referral care;
‘‘(B) the implementation of activities to in-
crease the delivery of effective care to bene-
ficiaries;
‘‘(C) encouraging patient participation in
preference-based decisions;
‘‘(D) the implementation of activities to en-
courage the coordination and integration of med-
ical service delivery; and
‘‘(E) the implementation of activities to
measure and document the financial impact on
the health care marketplace of altering the incen-
tives of health care delivery and changing the al-
location of resources; and
‘‘(3) meet such other requirements as the Sec-
retary may establish.
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‘‘(e) WAIVER AUTHORITY.—The Secretary may waive
such requirements of titles XI and XVIII as may be nec-
essary to carry out the purposes of the demonstration pro-
gram established under this section.
‘‘(f) BUDGET NEUTRALITY.—With respect to the 5-year
period of the demonstration program under subsection (b),
the aggregate expenditures under this title for such period
shall not exceed the aggregate expenditures that would have
been expended under this title if the program established
under this section had not been implemented.
‘‘(g) NOTICE REQUIREMENTS.—In the case of an indi-
vidual that receives health care items or services under a
demonstration program carried out under this section, the
Secretary shall ensure that such individual is notified of
any waivers of coverage or payment rules that are applica-
ble to such individual under this title as a result of the
participation of the individual in such program.
‘‘(h) PARTICIPATION
AND
SUPPORT
BY
FEDERAL
AGENCIES.—In carrying out the demonstration program
under this section, the Secretary may direct—
‘‘(1) the Director of the National Institutes of
Health to expand the efforts of the Institutes to evalu-
ate current medical technologies and improve the
foundation for evidence-based practice;
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‘‘(2) the Administrator of the Agency for
Healthcare Research and Quality to, where possible
and appropriate, use the program under this section
as a laboratory for the study of quality improvement
strategies and to evaluate, monitor, and disseminate
information relevant to such program; and
‘‘(3) the Administrator of the Centers for Medi-
care & Medicaid Services and the Administrator of
the Center for Medicare Choices to support linkages of
relevant medicare data to registry information from
participating health care groups for the beneficiary
populations served by the participating groups, for
analysis supporting the purposes of the demonstration
program, consistent with the applicable provisions of
the Health Insurance Portability and Accountability
Act of 1996.
‘‘(i) IMPLEMENTATION.—The Secretary shall not im-
plement the demonstration program before October 1,
2004.’’.
SEC. 442. MEDICARE COMPLEX CLINICAL CARE MANAGE-
MENT PAYMENT DEMONSTRATION.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary shall establish
a demonstration program to make the medicare pro-
gram more responsive to needs of eligible beneficiaries
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by promoting continuity of care, helping stabilize
medical conditions, preventing or minimizing acute
exacerbations of chronic conditions, and reducing ad-
verse health outcomes, such as adverse drug inter-
actions related to polypharmacy.
(2) SITES.—The Secretary shall designate 6 sites
at which to conduct the demonstration program under
this section, of which at least 3 shall be in an urban
area and at least 1 shall be in a rural area. One of
the sites shall be located in the State of Arkansas.
(3) DURATION.—The Secretary shall conduct the
demonstration program under this section for a 3-
year period.
(4) IMPLEMENTATION.—The Secretary shall not
implement the demonstration program before October
1, 2004.
(b) PARTICIPANTS.—Any eligible beneficiary who re-
sides in an area designated by the Secretary as a dem-
onstration site under subsection (a)(2) may participate in
the demonstration program under this section if such bene-
ficiary identifies a principal care physician who agrees to
manage the complex clinical care of the eligible beneficiary
under the demonstration program.
(c) PRINCIPAL CARE PHYSICIAN RESPONSIBILITIES.—
The Secretary shall enter into an agreement with each prin-
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cipal care physician who agrees to manage the complex
clinical care of an eligible beneficiary under subsection (b)
under which the principal care physician shall—
(1) serve as the primary contact of the eligible
beneficiary in accessing items and services for which
payment may be made under the medicare program;
(2) maintain medical information related to care
provided by other health care providers who provide
health care items and services to the eligible bene-
ficiary, including clinical reports, medication and
treatments prescribed by other physicians, hospital
and hospital outpatient services, skilled nursing home
care, home health care, and medical equipment serv-
ices;
(3) monitor and advocate for the continuity of
care of the eligible beneficiary and the use of evidence-
based guidelines;
(4) promote self-care and family caregiver in-
volvement where appropriate;
(5) have appropriate staffing arrangements to
conduct patient self-management and other care co-
ordination activities as specified by the Secretary;
(6) refer the eligible beneficiary to community
services organizations and coordinate the services of
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such organizations with the care provided by health
care providers; and
(7) meet such other complex care management
requirements as the Secretary may specify.
(d) COMPLEX CLINICAL CARE MANAGEMENT FEE.—
(1) PAYMENT.—Under an agreement entered into
under subsection (c), the Secretary shall pay to each
principal care physician, on behalf of each eligible
beneficiary under the care of that physician, the com-
plex clinical care management fee developed by the
Secretary under paragraph (2).
(2) DEVELOPMENT OF FEE.—The Secretary shall
develop a complex care management fee under this
paragraph that is paid on a monthly basis and which
shall be payment in full for all the functions per-
formed by the principal care physician under the
demonstration program, including any functions per-
formed by other qualified practitioners acting on be-
half of the physician, appropriate staff under the su-
pervision of the physician, and any other person
under a contract with the physician, including any
person who conducts patient self-management and
caregiver education under subsection (c)(4).
(e) FUNDING.—
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(1) IN GENERAL.—The Secretary shall provide
for the transfer from the Federal Supplementary In-
surance Trust Fund established under section 1841 of
the Social Security Act (42 U.S.C. 1395t) of such
funds as are necessary for the costs of carrying out
the demonstration program under this section.
(2) BUDGET
NEUTRALITY.—In conducting the
demonstration program under this section, the Sec-
retary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration pro-
gram under this section was not implemented.
(f) WAIVER AUTHORITY.—The Secretary may waive
such requirements of titles XI and XVIII of the Social Secu-
rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
necessary for the purpose of carrying out the demonstration
program under this section.
(g) REPORT.—Not later than 6 months after the com-
pletion of the demonstration program under this section,
the Secretary shall submit to Congress a report on such pro-
gram, together with recommendations for such legislation
and administrative action as the Secretary determines to
be appropriate.
(h) DEFINITIONS.—In this section:
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(1) ACTIVITY OF DAILY LIVING.—The term ‘‘ac-
tivity of daily living’’ means eating, toiling, transfer-
ring, bathing, dressing, and continence.
(2) CHRONIC
CONDITION.—The term ‘‘chronic
condition’’ means a biological, physical, or mental
condition that is likely to last a year or more, for
which there is no known cure, for which there is a
need for ongoing medical care, and which may affect
an individual’s ability to carry out activities of daily
living or instrumental activities of daily living, or
both.
(3) ELIGIBLE BENEFICIARY.—The term ‘‘eligible
beneficiary’’ means any individual who—
(A) is enrolled for benefits under part B of
the medicare program;
(B) has at least 4 complex medical condi-
tions (one of which may be cognitive impair-
ment); and
(C) has—
(i) an inability to self-manage their
care; or
(ii) a functional limitation defined as
an impairment in 1 or more activity of
daily living or instrumental activity of
daily living.
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(4) INSTRUMENTAL ACTIVITY OF DAILY LIVING.—
The term ‘‘instrumental activity of daily living’’
means meal preparation, shopping, housekeeping,
laundry, money management, telephone use, and
transportation use.
(5) MEDICARE PROGRAM.—The term ‘‘medicare
program’’ means the health care program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.).
(6) PRINCIPAL
CARE
PHYSICIAN.—The term
‘‘principal care physician’’ means the physician with
primary responsibility for overall coordination of the
care of an eligible beneficiary (as specified in a writ-
ten plan of care) who may be a primary care physi-
cian or a specialist.
SEC. 443. MEDICARE FEE-FOR-SERVICE CARE COORDINA-
TION DEMONSTRATION PROGRAM.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary shall establish
a demonstration program to contract with qualified
care management organizations to provide health risk
assessment and care management services to eligible
beneficiaries who receive care under the original
medicare fee-for-service program under parts A and B
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of title XVIII of the Social Security Act to eligible
beneficiaries.
(2) SITES.—The Secretary shall designate 6 sites
at which to conduct the demonstration program under
this section. In selecting sites under this paragraph,
the Secretary shall give preference to sites located in
rural areas.
(3) DURATION.—The Secretary shall conduct the
demonstration program under this section for a 5-
year period.
(4) IMPLEMENTATION.—The Secretary shall not
implement the demonstration program before October
1, 2004.
(b) PARTICIPANTS.—Any eligible beneficiary who re-
sides in an area designated by the Secretary as a dem-
onstration site under subsection (a)(2) may participate in
the demonstration program under this section if such bene-
ficiary identifies a care management organization who
agrees to furnish care management services to the eligible
beneficiary under the demonstration program.
(c) CONTRACTS WITH CMOS.—
(1) IN GENERAL.—The Secretary shall enter into
a contract with care management organizations to
provide care management services to eligible bene-
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ficiaries residing in the area served by the care man-
agement organization.
(2) CANCELLATION.—The Secretary may cancel
a contract entered into under paragraph (1) if the
care management organization does not meet nego-
tiated savings or quality outcomes targets for the
year.
(3) NUMBER OF CMOS.—The Secretary may con-
tract with more than 1 care management organiza-
tion in a geographic area.
(d) PAYMENT TO CMOS.—
(1) PAYMENT.—Under an contract entered into
under subsection (c), the Secretary shall pay care
management organizations a fee for which the care
management organization is partially at risk based
on bids submitted by care management organizations.
(2) PORTION OF PAYMENT AT RISK.—The Sec-
retary shall establish a benchmark for quality and
cost against which the results of the care management
organization are to be measured. The Secretary may
not pay a care management organization the portion
of the fee described in paragraph (1) that is at risk
unless the Secretary determines that the care manage-
ment organization has met the agreed upon savings
and outcomes targets for the year.
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(e) FUNDING.—
(1) IN GENERAL.—The Secretary shall provide
for the transfer from the Federal Hospital Insurance
Trust Fund under section 1817 of the Social Security
Act (42 U.S.C. 1395i) and the Federal Supple-
mentary Insurance Trust Fund established under sec-
tion 1841 of such Act (42 U.S.C. 1395t), in such pro-
portion as the Secretary determines to be appropriate,
of such funds as are necessary for the costs of car-
rying out the demonstration program under this sec-
tion.
(2) BUDGET
NEUTRALITY.—In conducting the
demonstration program under this section, the Sec-
retary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration pro-
gram under this section was not implemented.
(f) WAIVER AUTHORITY.—
(1) IN
GENERAL.—The Secretary may waive
such requirements of titles XI and XVIII of the Social
Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as
may be necessary for the purpose of carrying out the
demonstration program under this section.
(2) WAIVER
OF
MEDIGAP
PREEMPTIONS.—The
Secretary shall waive any provision of section 1882
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of the Social Security Act that would prevent an in-
surance carrier described in subsection (h)(3)(D) from
participating in the demonstration program under
this section.
(g) REPORT.—Not later than 6 months after the com-
pletion of the demonstration program under this section,
the Secretary shall submit to Congress a report on such pro-
gram, together with recommendations for such legislation
and administrative action as the Secretary determines to
be appropriate.
(h) DEFINITIONS.—In this section:
(1) CARE
MANAGEMENT
SERVICES.—The term
‘‘care management services’’ means services that are
furnished to an eligible beneficiary (as defined in
paragraph (2)) by a care management organization
(as defined in paragraph (3)) in accordance with
guidelines established by the Secretary that are con-
sistent with guidelines established by the American
Geriatrics Society.
(2) ELIGIBLE BENEFICIARY.—The term ‘‘eligible
beneficiary’’ means an individual who is—
(A) entitled to (or enrolled for) benefits
under part A and enrolled for benefits under
part B of the Social Security Act (42 U.S.C.
1395c et seq.; 1395j et seq.);
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(B) not enrolled with a Medicare+Choice
plan or a MedicareAdvantage plan under part
C; and
(C) at high-risk (as defined by the Sec-
retary, but including eligible beneficiaries with
multiple sclerosis or another disabling chronic
condition, eligible beneficiaries residing in a
nursing home or at risk for nursing home place-
ment, or eligible beneficiaries eligible for assist-
ance under a State plan under title XIX).
(3) CARE
MANAGEMENT
ORGANIZATION.—The
term ‘‘care management organization’’ means an or-
ganization that meets such qualifications as the Sec-
retary may specify and includes any of the following:
(A) A physician group practice, hospital,
home health agency, or hospice program.
(B) A disease management organization.
(C) 
A 
Medicare+Choice 
or
MedicareAdvantage organization.
(D) Insurance carriers offering medicare
supplemental policies under section 1882 of the
Social Security Act (42 U.S.C. 1395ss).
(E) Such other entity as the Secretary de-
termines to be appropriate.
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SEC. 444. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN
PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study of differences in payment
amounts under the physician fee schedule under section
1848 of the Social Security Act (42 U.S.C. 1395w–4) for
physicians’ services in different geographic areas. Such
study shall include—
(1) an assessment of the validity of the geo-
graphic adjustment factors used for each component of
the fee schedule;
(2) an evaluation of the measures used for such
adjustment, including the frequency of revisions;
(3) an evaluation of the methods used to deter-
mine professional liability insurance costs used in
computing the malpractice component, including a
review of increases in professional liability insurance
premiums and variation in such increases by State
and physician specialty and methods used to update
the geographic cost of practice index and relative
weights for the malpractice component;
(4) an evaluation of whether there is a sound
economic basis for the implementation of the adjust-
ment under subparagraphs (E) and (F) of section
1848(e)(1) of the Social Security Act (42 U.S.C.
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1395w–4(e)(1)), as added by section 421, in those
areas in which the adjustment applies;
(5) an evaluation of the effect of such adjustment
on physician location and retention in areas affected
by such adjustment, taking into account—
(A) differences in recruitment costs and re-
tention rates for physicians, including special-
ists, between large urban areas and other areas;
and
(B) the mobility of physicians, including
specialists, over the last decade;
(6) an evaluation of the appropriateness of ex-
tending such adjustment or making such adjustment
permanent;
(7) an evaluation of the adjustment of the work
geographic practice cost index required under section
1848(e)(1)(A)(iii) of the Social Security Act (42
U.S.C. 1395w–4(e)(1)(A)(iii)) to reflect 1⁄4 of the area
cost difference in physician work;
(8) an evaluation of the effect of the adjustment
described in paragraph (7) on physician location and
retention in higher than average cost-of-living areas,
taking into account difference in recruitment costs
and retention rates for physicians, including special-
ists; and
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(9) an evaluation of the appropriateness of the
1⁄4 adjustment for the work geographic practice cost
index.’’.
(b) REPORT.—Not later than 1 year after the date of
enactment of this Act, the Comptroller General of the United
States shall submit to Congress a report on the study con-
ducted under subsection (a). The report shall include rec-
ommendations regarding the use of more current data in
computing geographic cost of practice indices as well as the
use of data directly representative of physicians’ costs (rath-
er than proxy measures of such costs).
SEC. 445. IMPROVED PAYMENT FOR CERTAIN MAMMOG-
RAPHY SERVICES.
(a) EXCLUSION FROM OPD FEE SCHEDULE.—Section
1833(t)(1)(B)(iv) (42 U.S.C. 13951(t)(1)(B)(iv)) is amend-
ed by inserting before the period at the end the following:
‘‘and does not include screening mammography (as defined
in section 1861(jj)) and unilateral and bilateral diagnostic
mammography’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to mammography performed on or
after January 1, 2005.
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SEC. 446. IMPROVEMENT OF OUTPATIENT VISION SERVICES
UNDER PART B.
(a) COVERAGE UNDER PART B.—Section 1861(s)(2)
(42 U.S.C. 1395x(s)(2)) is amended—
(1) in subparagraph (U), by striking ‘‘and’’ after
the semicolon at the end;
(2) in subparagraph (V)(iii), by adding ‘‘and’’
after the semicolon at the end; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(W) vision rehabilitation services (as defined in
subsection (ww)(1));’’.
(b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C.
1395x) is amended by adding at the end the following new
subsection:
‘‘Vision Rehabilitation Services; Vision Rehabilitation
Professional
‘‘(ww)(1)(A) The term ‘vision rehabilitation services’
means rehabilitative services (as determined by the Sec-
retary in regulations) furnished—
‘‘(i) to an individual diagnosed with a vision
impairment (as defined in paragraph (6));
‘‘(ii) pursuant to a plan of care established by
a qualified physician (as defined in subparagraph
(C)) or by a qualified occupational therapist that is
periodically reviewed by a qualified physician;
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‘‘(iii) in an appropriate setting (including the
home of the individual receiving such services if speci-
fied in the plan of care); and
‘‘(iv) by any of the following individuals:
‘‘(I) A qualified physician.
‘‘(II) A qualified occupational therapist.
‘‘(III) A vision rehabilitation professional
(as defined in paragraph (2)) while under the
general supervision (as defined in subparagraph
(D)) of a qualified physician.
‘‘(B) In the case of vision rehabilitation services fur-
nished by a vision rehabilitation professional, the plan of
care may only be established and reviewed by a qualified
physician.
‘‘(C) The term ‘qualified physician’ means—
‘‘(i) a physician (as defined in subsection (r)(1))
who is an ophthalmologist; or
‘‘(ii) a physician (as defined in subsection (r)(4)
(relating to a doctor of optometry)).
‘‘(D) The term ‘general supervision’ means, with re-
spect to a vision rehabilitation professional, overall direc-
tion and control of that professional by the qualified physi-
cian who established the plan of care for the individual,
but the presence of the qualified physician is not required
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during the furnishing of vision rehabilitation services by
that professional to the individual.
‘‘(2) The term ‘vision rehabilitation professional’
means any of the following individuals:
‘‘(A) An orientation and mobility specialist (as
defined in paragraph (3)).
‘‘(B) A rehabilitation teacher (as defined in
paragraph (4)).
‘‘(C) A low vision therapist (as defined in para-
graph (5)).
‘‘(3) The term ‘orientation and mobility specialist’
means an individual who—
‘‘(A) if a State requires licensure or certification
of orientation and mobility specialists, is licensed or
certified by that State as an orientation and mobility
specialist;
‘‘(B)(i) holds a baccalaureate or higher degree
from an accredited college or university in the United
States (or an equivalent foreign degree) with a con-
centration in orientation and mobility; and
‘‘(ii) has successfully completed 350 hours of
clinical practicum under the supervision of an ori-
entation and mobility specialist and has furnished
not less than 9 months of supervised full-time orienta-
tion and mobility services;
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‘‘(C) has successfully completed the national ex-
amination in orientation and mobility administered
by the Academy for Certification of Vision Rehabilita-
tion and Education Professionals; and
‘‘(D) meets such other criteria as the Secretary
establishes.
‘‘(4) The term ‘rehabilitation teacher’ means an indi-
vidual who—
‘‘(A) if a State requires licensure or certification
of rehabilitation teachers, is licensed or certified by
the State as a rehabilitation teacher;
‘‘(B)(i) holds a baccalaureate or higher degree
from an accredited college or university in the United
States (or an equivalent foreign degree) with a con-
centration in rehabilitation teaching, or holds such a
degree in a health field; and
‘‘(ii) has successfully completed 350 hours of
clinical practicum under the supervision of a reha-
bilitation teacher and has furnished not less than 9
months of supervised full-time rehabilitation teaching
services;
‘‘(C) has successfully completed the national ex-
amination in rehabilitation teaching administered by
the Academy for Certification of Vision Rehabilita-
tion and Education Professionals; and
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‘‘(D) meets such other criteria as the Secretary
establishes.
‘‘(5) The term ‘low vision therapist’ means an indi-
vidual who—
‘‘(A) if a State requires licensure or certification
of low vision therapists, is licensed or certified by the
State as a low vision therapist;
‘‘(B)(i) holds a baccalaureate or higher degree
from an accredited college or university in the United
States (or an equivalent foreign degree) with a con-
centration in low vision therapy, or holds such a de-
gree in a health field; and
‘‘(ii) has successfully completed 350 hours of
clinical practicum under the supervision of a physi-
cian, and has furnished not less than 9 months of su-
pervised full-time low vision therapy services;
‘‘(C) has successfully completed the national ex-
amination in low vision therapy administered by the
Academy for Certification of Vision Rehabilitation
and Education Professionals; and
‘‘(D) meets such other criteria as the Secretary
establishes.
‘‘(6) The term ‘vision impairment’ means vision loss
that constitutes a significant limitation of visual capability
resulting from disease, trauma, or a congenital or degenera-
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tive condition that cannot be corrected by conventional
means, including refractive correction, medication, or sur-
gery, and that is manifested by 1 or more of the following:
‘‘(A) Best corrected visual acuity of less than 20/
60, or significant central field defect.
‘‘(B) Significant peripheral field defect including
homonymous or heteronymous bilateral visual field
defect or generalized contraction or constriction of
field.
‘‘(C) Reduced peak contrast sensitivity in con-
junction with a condition described in subparagraph
(A) or (B).
‘‘(D) Such other diagnoses, indications, or other
manifestations as the Secretary may determine to be
appropriate.’’.
(c) PAYMENT UNDER PART B.—
(1) 
PHYSICIAN
FEE
SCHEDULE.—Section
1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by
inserting ‘‘(2)(W),’’ after ‘‘(2)(S),’’.
(2) CARVE
OUT
FROM
HOSPITAL
OUTPATIENT
DEPARTMENT PROSPECTIVE PAYMENT SYSTEM.—Sec-
tion 1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv))
is amended by inserting ‘‘vision rehabilitation serv-
ices (as defined in section 1861(ww)(1)) or’’ after
‘‘does not include’’.
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(3) 
CLARIFICATION
OF
BILLING
REQUIRE-
MENTS.—The first sentence of section 1842(b)(6) of
such Act (42 U.S.C. 1395u(b)(6)) is amended—
(A) by striking ‘‘and’’ before ‘‘(G)’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, and (H) in the case of vision rehabili-
tation 
services 
(as 
defined 
in 
section
1861(ww)(1)) furnished by a vision rehabilita-
tion 
professional 
(as 
defined 
in 
section
1861(ww)(2)) while under the general super-
vision (as defined in section 1861(ww)(1)(D)) of
a qualified physician (as defined in section
1861(ww)(1)(C)), payment shall be made to (i)
the qualified physician or (ii) the facility (such
as a rehabilitation agency, a clinic, or other fa-
cility) through which such services are furnished
under the plan of care if there is a contractual
arrangement between the vision rehabilitation
professional and the facility under which the fa-
cility submits the bill for such services’’.
(d) PLAN OF CARE.—Section 1835(a)(2) (42 U.S.C.
1395n(a)(2)) is amended—
(1) in subparagraph (E), by striking ‘‘and’’ after
the semicolon at the end;
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(2) in subparagraph (F), by striking the period
at the end and inserting ‘‘; and’’; and
(3) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G) in the case of vision rehabilitation
services, (i) such services are or were required be-
cause the individual needed vision rehabilitation
services, (ii) an individualized, written plan for
furnishing such services has been established (I)
by a qualified physician (as defined in section
1861(ww)(1)(C)), (II) by a qualified occupa-
tional therapist, or (III) in the case of such serv-
ices furnished by a vision rehabilitation profes-
sional, by a qualified physician, (iii) the plan is
periodically reviewed by the qualified physician,
and (iv) such services are or were furnished
while the individual is or was under the care of
the qualified physician.’’.
(e) RELATIONSHIP
TO
REHABILITATION
ACT
OF
1973.—The provision of vision rehabilitation services under
the medicare program under title XVIII (42 U.S.C. 1395
et seq.) shall not be taken into account for any purpose
under the Rehabilitation Act of 1973 (29 U.S.C. 701 et
seq.).
(f) EFFECTIVE DATE.—
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(1) INTERIM, FINAL
REGULATIONS.—The Sec-
retary shall publish a rule under this section in the
Federal Register by not later than 180 days after the
date of enactment of this Act to carry out the provi-
sions of this section. Such rule shall be effective and
final immediately on an interim basis, but is subject
to change and revision after public notice and oppor-
tunity for a period for public comment of not less
than 60 days.
(2) CONSULTATION.—The Secretary shall consult
with the National Vision Rehabilitation Cooperative,
the Association for Education and Rehabilitation of
the Blind and Visually Impaired, the Academy for
Certification of Vision Rehabilitation and Education
Professionals, the American Academy of Ophthal-
mology, the American Occupational Therapy Associa-
tion, the American Optometric Association, and such
other qualified professional and consumer organiza-
tions as the Secretary determines appropriate in pro-
mulgating regulations to carry out this section.
SEC. 447. GAO STUDY AND REPORT ON THE PROPAGATION
OF CONCIERGE CARE.
(a) STUDY.—
(1) IN GENERAL.—The Comptroller General of
the United States shall conduct a study on concierge
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care (as defined in paragraph (2)) to determine the
extent to which such care—
(A) is used by medicare beneficiaries (as de-
fined in section 1802(b)(5)(A) of the Social Secu-
rity Act (42 U.S.C. 1395a(b)(5)(A))); and
(B) has impacted upon the access of medi-
care beneficiaries (as so defined) to items and
services for which reimbursement is provided
under the medicare program under title XVIII of
the Social Security Act (42 U.S.C. 1395 et seq.).
(2) CONCIERGE CARE.—In this section, the term
‘‘concierge care’’ means an arrangement under which,
as a prerequisite for the provision of a health care
item or service to an individual, a physician, practi-
tioner (as described in section 1842(b)(18)(C) of the
Social Security Act (42 U.S.C. 1395u(b)(18)(C))), or
other individual—
(A) charges a membership fee or another in-
cidental fee to an individual desiring to receive
the health care item or service from such physi-
cian, practitioner, or other individual; or
(B) requires the individual desiring to re-
ceive the health care item or service from such
physician, practitioner, or other individual to
purchase an item or service.
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(b) REPORT.—Not later than the date that is 12
months after the date of enactment of this Act, the Comp-
troller General of the United States shall submit to Congress
a report on the study conducted under subsection (a)(1) to-
gether with such recommendations for legislative or admin-
istrative action as the Comptroller General determines to
be appropriate.
SEC. 448. COVERAGE OF MARRIAGE AND FAMILY THERA-
PIST SERVICES AND MENTAL HEALTH COUN-
SELOR SERVICES UNDER PART B OF THE
MEDICARE PROGRAM.
(a) COVERAGE OF SERVICES.—
(1) IN GENERAL.—Section 1861(s)(2) (42 U.S.C.
1395x(s)(2)) is amended—
(A) in subparagraph (U), by striking ‘‘and’’
after the semicolon at the end;
(B) in subparagraph (V)(iii), by inserting
‘‘and’’ after the semicolon at the end; and
(C) by adding at the end the following new
subparagraph:
‘‘(W) marriage and family therapist services (as
defined in subsection (ww)(1)) and mental health
counselor 
services 
(as 
defined 
in 
subsection
(ww)(3));’’.
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(2) DEFINITIONS.—Section 1861 (42 U.S.C.
1395x) is amended by adding at the end the following
new subsection:
‘‘Marriage and Family Therapist Services; Marriage and
Family Therapist; Mental Health Counselor Services;
Mental Health Counselor
‘‘(ww)(1) The term ‘marriage and family therapist
services’ means services performed by a marriage and fam-
ily therapist (as defined in paragraph (2)) for the diagnosis
and treatment of mental illnesses, which the marriage and
family therapist is legally authorized to perform under
State law (or the State regulatory mechanism provided by
State law) of the State in which such services are performed,
as would otherwise be covered if furnished by a physician
or as an incident to a physician’s professional service, but
only if no facility or other provider charges or is paid any
amounts with respect to the furnishing of such services.
‘‘(2) The term ‘marriage and family therapist’ means
an individual who—
‘‘(A) possesses a master’s or doctoral degree
which qualifies for licensure or certification as a mar-
riage and family therapist pursuant to State law;
‘‘(B) after obtaining such degree has performed
at least 2 years of clinical supervised experience in
marriage and family therapy; and
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‘‘(C) in the case of an individual performing
services in a State that provides for licensure or cer-
tification of marriage and family therapists, is li-
censed or certified as a marriage and family therapist
in such State.
‘‘(3) The term ‘mental health counselor services’ means
services performed by a mental health counselor (as defined
in paragraph (4)) for the diagnosis and treatment of mental
illnesses which the mental health counselor is legally author-
ized to perform under State law (or the State regulatory
mechanism provided by the State law) of the State in which
such services are performed, as would otherwise be covered
if furnished by a physician or as incident to a physician’s
professional service, but only if no facility or other provider
charges or is paid any amounts with respect to the fur-
nishing of such services.
‘‘(4) The term ‘mental health counselor’ means an in-
dividual who—
‘‘(A) possesses a master’s or doctor’s degree in
mental health counseling or a related field;
‘‘(B) after obtaining such a degree has performed
at least 2 years of supervised mental health counselor
practice; and
‘‘(C) in the case of an individual performing
services in a State that provides for licensure or cer-
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tification of mental health counselors or professional
counselors, is licensed or certified as a mental health
counselor or professional counselor in such State.’’.
(3) PROVISION FOR PAYMENT UNDER PART B.—
Section 1832(a)(2)(B) (42 U.S.C. 1395k(a)(2)(B)) is
amended by adding at the end the following new
clause:
‘‘(v) marriage and family therapist
services and mental health counselor serv-
ices;’’.
(4) AMOUNT OF PAYMENT.—Section 1833(a)(1)
(42 U.S.C. 1395l(a)(1)) is amended—
(A) by striking ‘‘and (U)’’ and inserting
‘‘(U)’’; and
(B) by inserting before the semicolon at the
end the following: ‘‘, and (V) with respect to
marriage and family therapist services and men-
tal health counselor services under section
1861(s)(2)(W), the amounts paid shall be 80 per-
cent of the lesser of the actual charge for the serv-
ices or 75 percent of the amount determined for
payment of a psychologist under subparagraph
(L)’’.
(5) EXCLUSION OF MARRIAGE AND FAMILY THER-
APIST SERVICES AND MENTAL HEALTH COUNSELOR
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SERVICES
FROM
SKILLED
NURSING
FACILITY
PRO-
SPECTIVE
PAYMENT
SYSTEM.—Section
1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)), as
amended in section 301(a), is amended by inserting
‘‘marriage and family therapist services (as defined
in subsection (ww)(1)), mental health counselor serv-
ices (as defined in section 1861(ww)(3)),’’ after
‘‘qualified psychologist services,’’.
(6) INCLUSION
OF
MARRIAGE
AND
FAMILY
THERAPISTS AND MENTAL HEALTH COUNSELORS AS
PRACTITIONERS FOR ASSIGNMENT OF CLAIMS.—Sec-
tion 1842(b)(18)(C) (42 U.S.C. 1395u(b)(18)(C)) is
amended by adding at the end the following new
clauses:
‘‘(vii) A marriage and family therapist (as de-
fined in section 1861(ww)(2)).
‘‘(viii) A mental health counselor (as defined in
section 1861(ww)(4)).’’.
(b) COVERAGE OF CERTAIN MENTAL HEALTH SERV-
ICES PROVIDED IN CERTAIN SETTINGS.—
(1) RURAL
HEALTH
CLINICS
AND
FEDERALLY
QUALIFIED
HEALTH
CENTERS.—Section
1861(aa)(1)(B) 
(42 
U.S.C. 
1395x(aa)(1)(B)) 
is
amended by striking ‘‘or by a clinical social worker
(as defined in subsection (hh)(1)),’’ and inserting ‘‘,
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by a clinical social worker (as defined in subsection
(hh)(1)), by a marriage and family therapist (as de-
fined in subsection (ww)(2)), or by a mental health
counselor (as defined in subsection (ww)(4)),’’.
(2) 
HOSPICE
PROGRAMS.—Section
1861(dd)(2)(B)(i)(III) 
(42 
U.S.C.
1395x(dd)(2)(B)(i)(III)) is amended by inserting ‘‘or
a marriage and family therapist (as defined in sub-
section (ww)(2))’’ after ‘‘social worker’’.
(c) AUTHORIZATION
OF
MARRIAGE
AND
FAMILY
THERAPISTS TO DEVELOP DISCHARGE PLANS FOR POST-
HOSPITAL SERVICES.—Section 1861(ee)(2)(G) (42 U.S.C.
1395x(ee)(2)(G)) is amended by inserting ‘‘marriage and
family therapist (as defined in subsection (ww)(2)),’’ after
‘‘social worker,’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to services furnished on or
after January 1, 2004.
SEC. 449. MEDICARE DEMONSTRATION PROJECT FOR DI-
RECT ACCESS TO PHYSICAL THERAPY SERV-
ICES.
(a) IN GENERAL.—The Secretary shall conduct a dem-
onstration project under this section (in this section referred
to as the ‘‘project’’) to demonstrate the impact of allowing
medicare fee-for-service beneficiaries direct access to out-
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patient physical therapy services and physical therapy
services furnished as comprehensive rehabilitation facility
services on—
(1) costs under the medicare program under title
XVIII of the Social Security Act; and
(2) the satisfaction of beneficiaries receiving such
services.
(b) DEADLINE
FOR
ESTABLISHMENT; DURATION;
SITES.—
(1) DEADLINE.—The Secretary shall establish the
project not later than 1 year after the date of enact-
ment of this Act.
(2) DURATION; SITES.—The project shall—
(A) be conducted for a period of 3 years;
(B) include sites in at least 5 States; and
(C) to the extent feasible, be conducted on a
statewide basis in each State included under sub-
paragraph (B).
(3) 
EARLY
TERMINATION.—Notwithstanding
paragraph (2)(A), the Secretary may terminate the
operation of the project at a site before the end of the
3-year period specified in such paragraph if the Sec-
retary determines, based on actual data, that the total
amount expended for all services under this title for
individuals at such site for a 12-month period are
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greater than the total amount that would have been
expended for such services for such individuals for
such period but for the operation of the project at
such site.
(c) WAIVER OF MEDICARE REQUIREMENTS.—The Sec-
retary shall waive compliance with such requirements of the
medicare program under title XVIII of the Social Security
Act to the extent and for the period the Secretary finds nec-
essary to conduct the demonstration project.
(d) EVALUATIONS AND REPORTS.—
(1) EVALUATIONS.—
(A) IN GENERAL.—The Secretary shall con-
duct interim and final evaluations of the project.
(B) FOCUS.—The evaluations conducted
under paragraph (1) shall—
(i) focus on the impact of the project
on program costs under title XVIII of the
Social Security Act and patient satisfaction
with health care items and services for
which payment is made under such title;
and
(ii) include comparisons, with respect
to episodes of care involving direct access to
physical therapy services and episodes of
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care involving a physician referral for such
services, of—
(I) the average number of claims
paid per episode for outpatient phys-
ical therapy services and physical ther-
apy services furnished as comprehen-
sive outpatient rehabilitation facility
services;
(II) the average number of physi-
cian office visits per episode; and
(III) the average expenditures
under such title per episode.
(2) INTERIM
AND
FINAL
REPORTS.—The Sec-
retary shall submit to the Committee on Finance of
the Senate and the Committees on Ways and Means
and Energy and Commerce of the House of Represent-
atives reports on the evaluations conducted under
paragraph (1) by—
(A) in the case of the report on the interim
evaluation, not later than the end of the second
year the project has been in operation; and
(B) in the case of the report on the final
evaluation, not later than 180 days after the
closing date of the project.
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(3) FUNDING FOR EVALUATION.—There are au-
thorized to be appropriated such sums as may be nec-
essary to provide for the evaluations and reports re-
quired by this subsection.
(e) DEFINITIONS.—In this section:
(1) COMPREHENSIVE OUTPATIENT REHABILITA-
TION SERVICES.—Subject to paragraph (2), the term
‘‘comprehensive outpatient rehabilitation services’’ has
the meaning given to such term in section 1861(cc) of
the Social Security Act (42 U.S.C. 1395x(cc)).
(2) DIRECT ACCESS.—The term ‘‘direct access’’
means, with respect to outpatient physical therapy
services and physical therapy services furnished as
comprehensive outpatient rehabilitation facility serv-
ices, coverage of and payment for such services in ac-
cordance with the provisions of title XVIII of the So-
cial Security Act, except that sections 1835(a)(2),
1861(p), and 1861(cc) of such Act (42 U.S.C.
1395n(a)(2), 1395x(p), and 1395x(cc), respectively)
shall be applied—
(A) without regard to any requirement
that—
(i) an individual be under the care of
(or referred by) a physician; or
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(ii) services be provided under the su-
pervision of a physician; and
(B) by allowing a physician or a qualified
physical therapist to satisfy any requirement
for—
(i) certification and recertification;
and
(ii) establishment and periodic review
of a plan of care.
(3) 
FEE-FOR-SERVICE
MEDICARE
BENE-
FICIARY.—The term ‘‘fee-for-service medicare bene-
ficiary’’ means an individual who—
(A) is enrolled under part B of title XVIII
of the Social Security Act (42 U.S.C. 1395j et
seq.); and
(B) is not enrolled in—
(i) a Medicare+Choice plan under
part C of such title (42 U.S.C. 1395w–21 et
seq.);
(ii) a plan offered by an eligible orga-
nization under section 1876 of such Act (42
U.S.C. 1395mm);
(iii) a program of all-inclusive care for
the elderly (PACE) under section 1894 of
such Act (42 U.S.C. 1395eee); or
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(iv) a social health maintenance orga-
nization (SHMO) demonstration project es-
tablished under section 4018(b) of the Om-
nibus Budget Reconciliation Act of 1987
(Public Law 100–203).
(4) OUTPATIENT
PHYSICAL
THERAPY
SERV-
ICES.—Subject to paragraph (2), the term ‘‘outpatient
physical therapy services’’ has the meaning given to
such term in section 1861(p) of the Social Security
Act (42 U.S.C. 1395x(p)), except that such term shall
not include the speech-language pathology services de-
scribed in the fourth sentence of such section.
(5) PHYSICIAN.—The term ‘‘physician’’ has the
meaning given to such term in section 1861(r)(1) of
such Act (42 U.S.C. 1395x(r)(1)).
(6) QUALIFIED PHYSICAL THERAPIST.—The term
‘‘qualified physical therapist’’ has the meaning given
to such term for purposes of section 1861(p) of such
Act (42 U.S.C. 1395x(p)), as in effect on the date of
enactment of this Act.
SEC. 450. DEMONSTRATION PROJECT TO CLARIFY THE DEF-
INITION OF HOMEBOUND.
(a) DEMONSTRATION PROJECT.—Not later than 180
days after the date of enactment of this Act, the Secretary
shall conduct a two-year demonstration project under part
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B of title XVIII of the Social Security Act under which
medicare beneficiaries with chronic conditions described in
subsection (b) are deemed to be homebound for purposes of
receiving home health services under the medicare program.
(b) MEDICARE BENEFICIARY DESCRIBED.—For pur-
poses of subsection (a), a medicare beneficiary is eligible
to be deemed to be homebound, without regard to the pur-
pose, frequency, or duration of absences from the home, if
the beneficiary—
(1) has been certified by one physician as an in-
dividual who has a permanent and severe condition
that will not improve;
(2) requires the individual to receive assistance
from another individual with at least 3 out of the 5
activities of daily living for the rest of the individ-
ual’s life;
(3) requires 1 or more home health services to
achieve a functional condition that gives the indi-
vidual the ability to leave home; and
(4) requires technological assistance or the assist-
ance of another person to leave the home.
(c) DEMONSTRATION
PROJECT
SITES.—The dem-
onstration project established under this section shall be
conducted in 3 States selected by the Secretary to represent
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the Northeast, Midwest, and Western regions of the United
States.
(d) LIMITATION ON NUMBER OF PARTICIPANTS.—The
aggregate number of such beneficiaries that may participate
in the project may not exceed 15,000.
(e) DATA.—The Secretary shall collect such data on
the demonstration project with respect to the provision of
home health services to medicare beneficiaries that relates
to quality of care, patient outcomes, and additional costs,
if any, to the medicare program.
(f) REPORT TO CONGRESS.—Not later than 1 year
after the date of the completion of the demonstration project
under this section, the Secretary shall submit to Congress
a report on the project using the data collected under sub-
section (e) and shall include—
(1) an examination of whether the provision of
home health services to medicare beneficiaries under
the project—
(A) adversely effects the provision of home
health services under the medicare program; or
(B) directly causes an unreasonable increase
of expenditures under the medicare program for
the provision of such services that is directly at-
tributable to such clarification;
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(2) the specific data evidencing the amount of
any increase in expenditures that is a directly attrib-
utable to the demonstration project (expressed both in
absolute dollar terms and as a percentage) above ex-
penditures that would otherwise have been incurred
for home health services under the medicare program;
and
(3) specific recommendations to exempt perma-
nently and severely disabled homebound beneficiaries
from restrictions on the length, frequency and purpose
of their absences from the home to qualify for home
health services without incurring additional unrea-
sonable costs to the medicare program.
(g) WAIVER AUTHORITY.—The Secretary shall waive
compliance with the requirements of title XVIII of the So-
cial Security Act (42 U.S.C. 1395 et seq.) to such extent
and for such period as the Secretary determines is necessary
to conduct demonstration projects.
(h) CONSTRUCTION.—Nothing in this section shall be
construed as waiving any applicable civil monetary pen-
alty, criminal penalty, or other remedy available to the Sec-
retary under title XI or title XVIII of the Social Security
Act for acts prohibited under such titles, including penalties
for false certifications for purposes of receipt of items or
services under the medicare program.
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(i) AUTHORIZATION OF APPROPRIATIONS.—Payments
for the costs of carrying out the demonstration project under
this section shall be made from the Federal Supplementary
Insurance Trust Fund under section 1841 of such Act (42
U.S.C. 1395t).
(j) DEFINITIONS.—In this section:
(1) MEDICARE BENEFICIARY.—The term ‘‘medi-
care beneficiary’’ means an individual who is enrolled
under part B of title XVIII of the Social Security
Act.
(2) HOME HEALTH SERVICES.—The term ‘‘home
health services’’ has the meaning given such term in
section 1861(m) of the Social Security Act (42 U.S.C.
1395x(m)).
(3) ACTIVITIES OF DAILY LIVING DEFINED.—The
term ‘‘activities of daily living’’ means eating,
toileting, transferring, bathing, and dressing.
(4) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
SEC. 450A. DEMONSTRATION PROJECT FOR EXCLUSION OF
BRACHYTHERAPY DEVICES FROM PROSPEC-
TIVE PAYMENT SYSTEM FOR OUTPATIENT
HOSPITAL SERVICES.
(a) DEMONSTRATION PROJECT.—The Secretary shall
conduct a demonstration project under part B of title XVIII
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of the Social Security Act under which brachytherapy de-
vices shall be excluded from the prospective payment system
for outpatient hospital services under the medicare program
and, notwithstanding section 1833(t) of the Social Security
Act (42 U.S.C. 1395l(t)), the amount of payment for a de-
vice of brachytherapy furnished under the demonstration
project shall be equal to the hospital’s charges for each de-
vice furnished, adjusted to cost.
(b) SPECIFICATION OF GROUPS FOR BRACHYTHERAPY
DEVICES.—The Secretary shall create additional groups of
covered OPD services that classify devices of brachytherapy
furnished under the demonstration project separately from
the other services (or group of services) paid for under sec-
tion 1833(t) of the Social Security Act (42 U.S.C. 1395l(t))
in a manner reflecting the number, isotope, and radioactive
intensity of such devices furnished, including separate
groups for palladium–103 and iodine–125 devices.
(c) DURATION.—The Secretary shall conduct the dem-
onstration project under this section for the 3-year period
beginning on the date that is 90 days after the date of enact-
ment of this Act.
(d) REPORT.—Not later than January 1, 2007, the
Secretary shall submit to Congress a report on the dem-
onstration project conducted under this section. The report
shall include an evaluation of patient outcomes under the
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demonstration project, as well as an analysis of the cost
effectiveness of the demonstration project.
(e) WAIVER AUTHORITY.—The Secretary shall waive
compliance with the requirements of title XVIII of the So-
cial Security Act to such extent and for such period as the
Secretary determines is necessary to conduct the demonstra-
tion project under this section.
(f) FUNDING.—
(1) IN GENERAL.—The Secretary shall provide
for the transfer from the Federal Supplementary In-
surance Trust Fund established under section 1841 of
the Social Security Act (42 U.S.C. 1395t) of such
funds as are necessary for the costs of carrying out
the demonstration project under this section.
(2) BUDGET
NEUTRALITY.—In conducting the
demonstration project under this section, the Sec-
retary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration
project under this section was not implemented.
SEC. 450B. REIMBURSEMENT FOR TOTAL BODY ORTHOTIC
MANAGEMENT FOR CERTAIN NURSING HOME
PATIENTS.
(a) IN GENERAL.—Not later than 60 days after the
date of the enactment of this Act, the Secretary shall issue
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product codes that qualified practioners and suppliers may
use to receive reimbursement under section 1834(h) of the
Social Security Act (42 U.S.C. 1395m(h)) for qualified
total body orthotic management devices used for the treat-
ment of nonambulatory individuals with severe musculo-
skeletal conditions who are in the full-time care of skilled
nursing facilities (as defined in section 1861(j) of such Act
(42 U.S.C. 1395x(j))). In issuing such codes, the Secretary
shall take all steps necessary to prevent fraud and abuse.
(b) QUALIFIED TOTAL BODY ORTHOTIC MANAGEMENT
DEVICE.—For purposes of this section, the term ‘‘qualified
total body orthotic management device’’ means a medically-
prescribed device which—
(1) consists of custom fitted individual braces
with adjustable points at the hips, knee, ankle, elbow,
and wrist, but only if—
(A) the individually adjustable braces are
attached to a frame which is an integral compo-
nent of the device and cannot function or be used
apart from the frame; and
(B) the frame is designed such that it serves
no purpose without the braces; and
(2) is designed to—
(A) improve function;
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(B) retard progression of musculoskeletal
deformity; or
(C) restrict, eliminate, or assist in the func-
tioning of lower and upper extremities and pel-
vic, spinal, and cervical regions of the body af-
fected by injury, weakness, or deformity,
of an individual for whom stabilization of affected
areas of the body, or relief of pressure points, is re-
quired for medical reasons.
SEC. 450C. AUTHORIZATION OF REIMBURSEMENT FOR ALL
MEDICARE PART B SERVICES FURNISHED BY
CERTAIN INDIAN HOSPITALS AND CLINICS.
(a) IN
GENERAL.—Section 1880(e) (42 U.S.C.
1395qq(e)) is amended—
(1) in paragraph (1)(A), by striking ‘‘for services
described in paragraph (2)’’ and inserting ‘‘for all
items and services for which payment may be made
under such part’’;
(2) by striking paragraph (2); and
(3) by redesignating paragraph (3) as para-
graph (2).
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to items and services furnished on or
after October 1, 2004.
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SEC. 450D. COVERAGE OF CARDIOVASCULAR SCREENING
TESTS.
(a) COVERAGE.—Section 1861(s)(2) of the Social Secu-
rity Act (42 U.S.C. 1395x(s)(2)) is amended—
(1) in subparagraph (U), by striking ‘‘and’’ at
the end;
(2) in subparagraph (V)(iii), by inserting ‘‘and’’
at the end; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(W) cardiovascular screening tests (as de-
fined in subsection (ww)(1));’’.
(b) SERVICES DESCRIBED.—Section 1861 of the Social
Security Act (42 U.S.C. 1395x) is amended by adding at
the end the following new subsection:
‘‘Cardiovascular Screening Tests
‘‘(ww)(1) The term ‘cardiovascular screening tests’
means the following diagnostic tests for the early detection
of cardiovascular disease:
‘‘(A) Tests for the determination of cholesterol
levels.
‘‘(B) Tests for the determination of lipid levels of
the blood.
‘‘(C) Such other tests for cardiovascular disease
as the Secretary may approve.
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‘‘(2)(A) Subject to subparagraph (B), the Secretary
shall establish standards, in consultation with appropriate
organizations, regarding the frequency and type of cardio-
vascular screening tests.
‘‘(B) With respect to the frequency of cardiovascular
screening tests approved by the Secretary under subpara-
graph (A), in no case may the frequency of such tests be
more often than once every 2 years.’’.
(c) FREQUENCY.—Section 1862(a)(1) of the Social Se-
curity Act (42 U.S.C. 1395y(a)(1)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (H);
(2) by striking the semicolon at the end of sub-
paragraph (I) and inserting ‘‘, and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(J) in the case of a cardiovascular screening
test (as defined in section 1861(ww)(1)), which is per-
formed more frequently than is covered under section
1861(ww)(2).’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to tests furnished on or after January
1, 2005.
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SEC. 
450E. 
MEDICARE 
COVERAGE 
OF 
SELF-INJECTED
BIOLOGICALS.
(a) COVERAGE.—
(1) IN GENERAL.—Section 1861(s)(2) (42 U.S.C.
1395x(s)(2)) is amended—
(A) in subparagraph (U), by striking ‘‘and’’
at the end;
(B) in subparagraph (V), by inserting
‘‘and’’ at the end; and
(C) by adding at the end the following new
subparagraph:
‘‘(W)(i) a self-injected biological (which is ap-
proved by the Food and Drug Administration) that is
prescribed as a complete replacement for a drug or bi-
ological (including the same biological for which pay-
ment is made under this title when it is furnished in-
cident to a physicians’ service) that would otherwise
be described in subparagraph (A) or (B) and that is
furnished during 2004 or 2005; and
‘‘(ii) a self-injected drug that is used to treat
multiple sclerosis;’’.
(2) CONFORMING AMENDMENT.—Subparagraphs
(A) and (B) of section 1861(s)(2) of the Social Secu-
rity Act (42 U.S.C. 1395x(s)(2)) are each amended by
inserting ‘‘, except for any drug or biological de-
scribed in subparagraph (W),’’ after ‘‘which’’.
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(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to drugs and biologicals furnished
on or after January 1, 2004 and before January 1, 2006.
SEC. 450F. EXTENSION OF MEDICARE SECONDARY PAYER
RULES FOR INDIVIDUALS WITH END-STAGE
RENAL DISEASE.
Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is
amended—
(1) in the last sentence, by inserting ‘‘, and be-
fore January 1, 2004’’ after ‘‘prior to such date)’’;
and
(2) by adding at the end the following new sen-
tence: ‘‘Effective for items and services furnished on
or after January 1, 2004 (with respect to periods be-
ginning on or after June 1, 2002), clauses (i) and (ii)
shall be applied by substituting ‘36-month’ for ‘12-
month’ each place it appears in the first sentence.
SEC. 450G. REQUIRING THE INTERNAL REVENUE SERVICE
TO DEPOSIT INSTALLMENT AGREEMENT AND
OTHER FEES IN THE TREASURY AS MISCELLA-
NEOUS RECEIPTS.
Notwithstanding any other provision of law, the Sec-
retary of the Treasury is required to deposit in the Treasury
as miscellaneous receipts any fee receipts, including fees
from installment agreements and restructured installment
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agreements, collected under the authority provided by Sec-
tion 3 of the Administrative Provisions of the Internal Rev-
enue Service of Public Law 103–329, the Treasury, Postal
Service and General Government Appropriations Act, 1995.
Fees collected under this section shall be available for use
by the Internal Revenue Service only to the extent that such
authority is provided in advance in an appropriations Act.
SEC. 450H INCREASING TYPES OF ORIGINATING TELE-
HEALTH SITES AND FACILITATING THE PRO-
VISION OF TELEHEALTH SERVICES ACROSS
STATE LINES.
(a) INCREASING TYPES OF ORIGINATING SITES.—Sec-
tion 1834(m)(4)(C)(ii) (42 U.S.C. 1395m(m)(4)(C)(ii)) is
amended by adding at the end the following new subclauses:
‘‘(VI) A skilled nursing facility
(as defined in section 1819(a)).
‘‘(VII) An assisted-living facility
(as defined by the Secretary).
‘‘(VIII) A board-and-care home
(as defined by the Secretary).
‘‘(IX) A county of community
health clinic (as defined by the Sec-
retary).
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‘‘(X) A community mental health
center 
(as 
described 
in 
section
1861(ff)(2)(B)).
‘‘(XI) A long-term care facility
(as defined by the Secretary).
‘‘(XII) A facility operated by the
Indian Health Service or by an Indian
tribe, tribal organization, or an urban
Indian organization (as such terms are
defined in section 4 of the Indian
Health Care Improvement Act (25
U.S.C. 1603)) directly, or under con-
tract or other arrangement.’’.
(b) FACILITATING THE PROVISION OF TELEHEALTH
SERVICES ACROSS STATE LINES.—
(1) IN GENERAL.—For purposes of expediting the
provision of telehealth services for which payment is
made under the medicare program under section
1834(m) of the Social Security Act (42 U.S.C.
1395m(m)), across State lines, the Secretary shall, in
consultation with representatives of States, physi-
cians, health care practitioners, and patient advo-
cates, encourage and facilitate the adoption of State
provisions allowing for multistate practitioner licen-
sure across State lines.
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(2) DEFINITIONS.—In this subsection:
(A) 
TELEHEALTH
SERVICE.—The 
term
‘‘telehealth service’’ has the meaning given that
term 
in 
subparagraph 
(F)(i) 
of 
section
1834(m)(4) of the Social Security Act (42 U.S.C.
1395m(m)(4)).
(B) PHYSICIAN, PRACTITIONER.—The terms
‘‘physician’’ and ‘‘practitioner’’ have the mean-
ing given those terms in subparagraphs (D) and
(E), respectively, of such section.
(C) 
MEDICARE
PROGRAM.—The 
term
‘‘medicare program’’ means the program of
health insurance administered by the Secretary
under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.).
SEC. 450I. DEMONSTRATION PROJECT FOR COVERAGE OF
SURGICAL FIRST ASSISTING SERVICES OF
CERTIFIED REGISTERED NURSE FIRST AS-
SISTANTS.
(a) DEMONSTRATION PROJECT.—The Secretary shall
conduct a demonstration project under part B of title XVIII
of the Social Security Act under which payment is made
for surgical first assisting services furnished by a certified
registered nurse first assistant to medicare beneficiaries.
(b) DEFINITIONS.—In this section:
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(1) SURGICAL FIRST ASSISTING SERVICES.—The
term ‘‘surgical first assisting services’’ means services
consisting of first assisting a physician with surgery
and related preoperative, intraoperative, and post-
operative care (as determined by the Secretary) fur-
nished by a certified registered nurse first assistant
(as defined in paragraph (2)) which the certified reg-
istered nurse first assistant is legally authorized to
perform by the State in which the services are per-
formed.
(2) CERTIFIED REGISTERED NURSE FIRST AS-
SISTANT.—The term ‘‘certified registered nurse first
assistant’’ means an individual who—
(A) is a registered nurse and is licensed to prac-
tice nursing in the State in which the surgical first
assisting services are performed;
(B) has completed a minimum of 2,000 hours of
first assisting a physician with surgery and related
preoperative, intraoperative, and postoperative care;
and
(C) is certified as a registered nurse first assist-
ant by an organization recognized by the Secretary.
(c) PAYMENT RATES.—Payment under the demonstra-
tion project for surgical first assisting services furnished by
a certified registered nurse first assistant shall be made at
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the rate of 80 percent of the lesser of the actual charge for
the services or 85 percent of the amount determined under
the fee schedule established under section 1848(b) of the So-
cial Security Act (42 U.S.C. 1395w–4(b)) for the same serv-
ices if furnished by a physician.
(d) DEMONSTRATION PROJECT SITES.—The project es-
tablished under this section shall be conducted in 5 States
selected by the Secretary.
(e) DURATION.—The Secretary shall conduct the dem-
onstration project for the 3-year period beginning on the
date that is 90 days after the date of the enactment of this
Act.
(f) REPORT.—Not later than January 1, 2007, the Sec-
retary shall submit to Congress a report on the project. The
report shall include an evaluation of patient outcomes
under the project, as well as an analysis of the cost effective-
ness of the project.
(g) FUNDING.—
(1) IN GENERAL.—The Secretary shall provide
for the transfer from the Federal Supplementary In-
surance Trust Fund established under section 1841 of
the Social Security Act (42 U.S.C. 1395t) of such
funds as are necessary for the costs of carrying out
the project under this section.
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(1) IN GENERAL.—Beginning with fiscal year
2004, notwithstanding section 1923(f) of the Social
Security Act (42 U.S.C. 1396r–4(f)) and subject to
paragraph (3), with respect to a State, payment ad-
justments made under title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) to a hospital described
in paragraph (2) shall be made without regard to the
DSH allotment limitation for the State determined
under section 1923(f) of that Act (42 U.S.C. 1396r–
4(f)).
(2) HOSPITAL
DESCRIBED.—A hospital is de-
scribed in this paragraph if the hospital—
(A) is owned or operated by a State (as de-
fined for purposes of title XIX of the Social Se-
curity Act), or by an instrumentality or a mu-
nicipal governmental unit within a State (as so
defined) as of January 1, 2003; and
(B) is located in Marion County, Indiana.
(3) LIMITATION.—The payment adjustment de-
scribed in paragraph (1) for fiscal year 2004 and
each fiscal year thereafter shall not exceed 175 percent
of the costs of furnishing hospital services described in
section 1923(g)(1)(A) of the Social Security Act (42
U.S.C. 1396r–4(g)(1)(A)).
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‘‘(B) For purposes of subparagraph (A),
monitoring and oversight activities may include
(but are not limited to) the following:
‘‘(i) Follow-up telephone calls to the
medicare beneficiary.
‘‘(ii) Unannounced visits to the medi-
care beneficiary’s home while the provi-
sional employee is serving the medicare ben-
eficiary.
‘‘(iii) To the extent practicable, lim-
iting the provisional employee’s duties to
serving only those medicare beneficiaries in
a home or setting where another family
member or resident of the home or setting of
the medicare beneficiary is present.
‘‘(C) In promulgating such regulations, the
Secretary shall take into account the staffing and
geographic issues faced by small rural entities
(as defined by the Secretary) that provide home
health services, hospice care (including routine
home care and other services included in hospice
care under this title), or other long-term care
services. Such regulations should encourage the
provision of monitoring and oversight activities
whenever practicable with respect to such an en-