I 
108TH CONGRESS 
1ST SESSION 
H. R. 983
To amend part C of title XVIII of the Social Security Act to consolidate 
and restate the Federal laws relating to the social health maintenance 
organization projects, to make such projects permanent, to require the 
Medicare Payment Advisory Commission to conduct a study on ways 
to expand such projects, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 27, 2003
Mr. GALLEGLY (for himself, Mr. ISSA, Ms. MILLENDER-MCDONALD, Mr. COX, 
Mr. DREIER, and Mr. ROHRABACHER) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Energy and Commerce, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of 
such provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend part C of title XVIII of the Social Security Act 
to consolidate and restate the Federal laws relating to 
the social health maintenance organization projects, to 
make such projects permanent, to require the Medicare 
Payment Advisory Commission to conduct a study on 
ways to expand such projects, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Seniors Health and Independence Preservation Act of 
2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
Sec. 2. Making the social health maintenance organization (SHMO) projects 
permanent. 
Sec. 3. Expansion of SHMO projects into noncontiguous service areas within a 
State. 
Sec. 4. Permanence of SHMO planning grant sites. 
Sec. 5. Procedures for SHMO benefit and payment mechanism changes. 
Sec. 6. Comprehensive MedPAC study on SHMO I and SHMO II cost-effective-
ness and potential expansion. 
Sec. 7. SHMO Beneficiary satisfaction survey. 
Sec. 8. Conforming cross-references. 
Sec. 9. Legislative purpose and construction. 
Sec. 10. Repeals.
SEC. 2. MAKING THE SOCIAL HEALTH MAINTENANCE ORGA-
NIZATION (SHMO) PROJECTS PERMANENT. 
Part C of title XVIII of the Social Security Act (42 
U.S.C. 1395w–21 et seq.) is amended by inserting after 
section 1857 the following new section: 
‘‘WAIVERS FOR SOCIAL HEALTH MAINTENANCE 
ORGANIZATIONS 
‘‘SEC. 1858. (a) ESTABLISHMENT
OF
SHMO 
PROJECTS.—In the case of a project described in sub-
section (b), the Secretary shall approve, with appropriate 
terms and conditions as defined by the Secretary, applica-
tions or protocols submitted for waivers described in sub-
section (c), and the evaluation of such protocols, in order
to carry out such project. Such approval shall be effected 
not later than 30 days after the date on which the applica-
tion or protocol for a waiver is submitted or not later than 
30 days after the date of enactment of the Deficit Reduc-
tion Act of 1984 (Public Law 98–369; 98 Stat. 494) in 
the case of an application or protocol submitted before the 
date of enactment of such Act. Not later than 36 months 
after the date of enactment of the Omnibus Budget Rec-
onciliation Act of 1990 (Public Law 101–508; 104 Stat. 
1388), the Secretary shall approve applications or proto-
cols described in paragraph (1) for not more than 4 addi-
tional projects described in subsection (b). 
‘‘(b) PROJECTS DESCRIBED.—A project referred to 
in subsection (a) is a project—
‘‘(1) to demonstrate—
‘‘(A) the concept of a social health mainte-
nance organization with the organizations as 
described in Project No. 18–P–9 7604/1–04 of 
the University Health Policy Consortium of 
Brandeis University; or 
‘‘(B) in the case of a project conducted as 
a result of the amendments made by section 
4207(b)(4)(B)(i) of the Omnibus Budget Rec-
onciliation Act of 1990 (Public Law 101–508; 
104 Stat. 1388–118), the effectiveness and fea-
commencement and management of health 
care service delivery; 
‘‘(2) which provides for the integration of 
health and social services under the direct financial 
management of a provider of services; 
‘‘(3) under which all services under this title 
will be provided by or under arrangements made by 
the organization at a fixed annual prepaid capitation 
rate for medicare of 100 percent of the adjusted av-
erage per capita cost; and 
‘‘(4) under which services under title XIX will 
be provided at a rate approved by the Secretary. 
‘‘(c) WAIVERS.—The waivers referred to in sub-
section (a) are appropriate waivers of—
‘‘(1) certain requirements of this title, pursuant 
to section 402(a) of the Social Security Amendments 
of 1967 (Public Law 90–248; 81 Stat. 930), as 
amended by section 222 of the Social Security 
Amendments of 1972 (Public Law 92–603; 86 Stat. 
1390); 
‘‘(2) certain requirements of title XIX, pursu-
ant to section 1115; and 
‘‘(3) in the case of a project conducted as a re-
sult 
of 
the 
amendments 
made 
by 
section 
4207(b)(4)(B)(i) of the Omnibus Budget Reconcili-
ation Act of 1990 (Public Law 101–508; 104 Stat. 
1388–118), any requirements of title XVIII or XIX 
that, if imposed, would prohibit such project from 
being conducted.
‘‘(d) AGGREGATE LIMIT
ON NUMBER
OF MEM-
BERS.—The Secretary may not impose a limit on the num-
ber of individuals that may participate in a project con-
ducted under this section, other than an aggregate limit 
of not less than 324,000 for all sites. 
‘‘(e) REPORTS.—
‘‘(1) PRELIMINARY
REPORT.—The Secretary 
shall submit a preliminary report to Congress on the 
status of the projects and waivers referred to in sub-
section (a) 45 days after the date of enactment of 
the Deficit Reduction Act of 1984 (Public Law 98–
369; 98 Stat. 494). 
‘‘(2) INTERIM
REPORT.—The Secretary shall 
submit an interim report to Congress on the projects 
referred to in subsection (a) not later than 42 
months after the date of enactment of the Deficit 
Reduction Act of 1984 (Public Law 98–369; 98 
Stat. 494). 
‘‘(3) SECOND
INTERIM
REPORT.—The Sec-
retary shall submit a second interim report to Con-
gress on the project referred to in paragraph (1) not 
later than March 31, 1993. 
‘‘(4) REPORT ON INTEGRATION AND TRANSI-
TION.—
‘‘(A) IN
GENERAL.—The Secretary shall 
submit to Congress, by not later than January 
1, 1999, a plan for the integration of health 
plans offered by social health maintenance or-
ganizations (including SHMO I and SHMO II 
sites developed under this section and similar 
plans) as an option under the Medicare+Choice 
program under this title. 
‘‘(B) PROVISION
FOR
TRANSITION.—The 
plan submitted under subparagraph (A) shall 
include a transition for social health mainte-
nance organizations operating under the project 
authority under this section. 
‘‘(C) PAYMENT POLICY.—The report shall 
also include recommendations on appropriate 
payment levels for plans offered by such organi-
zations, including an analysis of the application 
of risk adjustment factors appropriate to the 
population served by such organizations. 
‘‘(5) HHS REPORT.—The Secretary shall sub-
mit a report on the projects conducted under this
section not later than the date that is 21 months 
after the date on which the Secretary submits to 
Congress the report described in paragraph (4). 
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 
are authorized to be appropriated $3,500,000 for the costs 
of technical assistance and evaluation related to projects 
conducted as a result of the amendments made by section 
4207(b)(4)(B) of the Omnibus Budget Reconciliation Act 
of 1990 (Public Law 101–508; 104 Stat. 1388–118).’’. 
SEC. 3. EXPANSION OF SHMO PROJECTS INTO NONCONTIG-
UOUS SERVICE AREAS WITHIN A STATE. 
Not later than the date that is 90 days after the date 
of enactment of this Act, the Secretary shall promulgate 
a regulation that permits each social health maintenance 
organization participating in a project conducted under 
section 1858 of the Social Security Act (as added by sec-
tion 2) to expand the service area of such organization 
to include areas within the State served by the organiza-
tion that are not contiguous to any other service area of 
the organization. 
SEC. 4. PERMANENCE OF SHMO PLANNING GRANT SITES. 
(a) ORIGINAL SHMO II DEMONSTRATIONS.—The 5 
organizations authorized by section 4207(b)(4)(B) of the 
Omnibus Budget Reconciliation Act of 1990 (Public Law 
101–508; 104 Stat. 1388–118) to demonstrate the con-
cept of social health maintenance organizations that were 
approved by the Secretary of Health and Human Services 
in 1995 shall be permitted to participate in the program 
under section 1858 of the Social Security Act (as added 
by section 2). 
(b) SHMO II DUAL-ELIGIBLE PLANNING GRANTS.—
Each entity that received a planning grant in 1998 under 
the 1997 Grants Program for Reforming Service Delivery 
for Dual Eligible Beneficiaries to develop a Second Gen-
eration Social HMO Demonstration Program shall be per-
mitted to participate in the program under section 1858 
of the Social Security Act (as added by section 2). 
SEC. 5. PROCEDURES FOR SHMO BENEFIT AND PAYMENT 
MECHANISM CHANGES. 
(a) CONGRESSIONAL NOTIFICATION
OF BENEFIT 
CHANGES.—The Secretary of Health and Human Services 
shall notify the appropriate committees of Congress prior 
to making any change to the benefits available under a 
project under section 1858 of the Social Security Act (as 
added by section 2). 
(b) RULEMAKING
REQUIREMENT
FOR
PAYMENT 
MECHANISM CHANGES.—The Secretary may not change 
the payment mechanism applicable with respect to any so-
cial health maintenance organization project under section
1858 of the Social Security Act (as added by section 2), 
except by regulation. 
SEC. 6. COMPREHENSIVE MEDPAC STUDY ON SHMO I AND 
SHMO II COST-EFFECTIVENESS AND POTEN-
TIAL EXPANSION. 
(a) STUDY.—
(1) IN GENERAL.—The Medicare Payment Ad-
visory Commission established under section 1805 of 
the Social Security Act (42 U.S.C. 1395b–6) (in this 
section referred to as the ‘‘Commission’’) shall con-
duct a study on the cost-effectiveness of the projects 
and the potential expansion of such projects. 
(2) COST-EFFECTIVENESS.—
(A) IN
GENERAL.—In determining the 
cost-effectiveness of the projects under the 
study conducted under paragraph (1), the Com-
mission shall take into account—
(i) the extent to which the per bene-
ficiary costs to the medicare program for 
enrollees in a social health maintenance or-
ganization do not exceed the average per 
beneficiary costs to the medicare program 
for a comparable case mix of beneficiaries 
who are enrolled in the original medicare 
fee-for-service program;
(ii) the actuarial value of items and 
services available to beneficiaries enrolled 
in a social health maintenance organization 
but not available to beneficiaries enrolled 
in the original medicare fee-for-service pro-
gram; and 
(iii) the extent to which social health 
maintenance organizations reduced expend-
itures under the medicaid program under 
title XIX of the Social Security Act by—
(I) preventing individuals from 
being eligible for medical assistance 
under such program as medically 
needy individuals through the applica-
tion of spend-down requirements for 
income and resources; or 
(II) reducing the number of nurs-
ing home bed days associated with 
stays of 60 days or longer for med-
icaid beneficiaries. 
(B) COMPARABLE
CASE
MIX.—In evalu-
ating a comparable case mix of beneficiaries for 
purposes of clause (i)(I), the Commission shall 
take into account the following factors: 
(i) Age.
(ii) Gender. 
(iii) Diagnoses. 
(iv) Functional status. 
(v) Any other available demographic 
or illness factor deemed appropriate by the 
Commission. 
(C) DATA.—In determining the cost-effec-
tiveness of social health maintenance organiza-
tions under this subsection, the Commission 
shall evaluate data from social health mainte-
nance organizations for the period beginning on 
January 1, 1997, and ending on the first De-
cember 31 occurring after the date of enact-
ment of this Act. 
(b) REPORT.—
(1) IN GENERAL.—Not later than the date that 
is 24 months after the date of enactment of this Act, 
the Commission shall submit to the Secretary of 
Health and Human Services and to the appropriate 
committees of Congress a report on the study con-
ducted under subsection (a)(1). 
(2) CONTENTS.—The report submitted under 
paragraph (1) shall contain—
(A) a statement regarding whether the 
Commission finds social health maintenance or-
ganizations to be cost-effective; 
(B) recommendations regarding whether 
the projects should be expanded to include addi-
tional sites and whether additional social health 
maintenance organizations should be permitted 
to participate in the projects; 
(C) recommendations on whether to modify 
or eliminate the aggregate limit on number of 
members under section 1858(d) of the Social 
Security Act (as added by section 2); and 
(D) if the Commission recommends expan-
sion or replication of the projects, recommenda-
tions on the appropriate implementation of such 
expansion. 
(c) DEFINITIONS.—In this section: 
(1) PROJECT.—The term ‘‘project’’ means a 
project conducted under section 1858 of the Social 
Security Act (as added by section 2) other than a 
project described in subsection (b)(1)(B)(iv) of such 
section. 
(2) MEDICARE PROGRAM.—The term ‘‘medicare 
program’’ means the health benefits program under 
title XVIII of the Social Security Act.
(3) ORIGINAL
MEDICARE
FEE-FOR-SERVICE 
PROGRAM.—The term ‘‘original medicare fee-for-
service program’’ means the program under parts A 
and B of the medicare program. 
(4) SOCIAL HEALTH MAINTENANCE ORGANIZA-
TION.—The term ‘‘social health maintenance organi-
zation’’ means an organization participating in a 
SHMO I project described in subparagraph (A) of 
section 1858(b)(1) of the Social Security Act (as 
added by section 2) or a SHMO II project described 
in subparagraph (B) of such section (other than a 
project described in clause (iv) of such subpara-
graph). 
SEC. 7. SHMO BENEFICIARY SATISFACTION SURVEY. 
(a) SURVEY.—
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall conduct a comparative quali-
tative survey of the satisfaction of medicare bene-
ficiaries enrolled in—
(A) the original medicare fee-for-service 
program under parts A and B of title XVIII of 
the Social Security Act; 
(B) a Medicare+Choice plan under part C 
of title XVIII of such Act; and
(C) a social health maintenance organiza-
tion under section 1858 of such Act (as added 
by section 2). 
(2) CONSIDERATIONS.—In determining bene-
ficiary satisfaction, the Secretary of Health and 
Human Services shall take into account—
(A) the differences in the program or plan 
benefit structure; 
(B) the extent to which the program or 
plan benefit structure enables beneficiaries to 
avoid or delay institutionalization; 
(C) the amount of out-of-pocket costs 
saved by beneficiaries under the program or 
plan for traditional and expanded care services; 
(D) the access to services by beneficiaries 
under the program or plan; and 
(E) the satisfaction level of family mem-
bers and caregivers of beneficiaries enrolled in 
the program or plan. 
(b) PUBLICATION OF RESULTS AND SUBMISSION TO 
CONGRESS.—Not later than the date that is 24 months 
after the date of enactment of this Act, the Secretary of 
Health and Human Services shall post the results of the 
survey conducted under subsection (a)(1) on an Internet
website and shall submit such results to the appropriate 
committees of Congress. 
SEC. 8. CONFORMING CROSS-REFERENCES. 
(a) SOCIAL SECURITY ACT.—
(1) The last sentence of section 1853(a)(1)(B) 
of the Social Security Act (42 U.S.C. 1395w–
23(a)(1)(B)), as added by section 605(a) of the 
Medicare, Medicaid, and SCHIP Benefits Improve-
ment and Protection Act of 2000 (114 Stat. 2763A–
556), is amended by striking ‘‘(established by sec-
tion 2355 of the Deficit Reduction Act of 1984, as 
amended by section 13567(b) of the Omnibus Budg-
et Reconciliation Act of 1993)’’ and inserting ‘‘(es-
tablished by section 1858)’’. 
(2) Section 1882(g)(1) of the Social Security 
Act (42 U.S.C. 1395ss(g)(1)) is amended by striking 
‘‘section 2355 of the Deficit Reduction Act of 1984’’ 
and inserting ‘‘section 1858’’. 
(b) MEDICARE, MEDICAID, AND SCHIP BENEFITS 
IMPROVEMENT AND PROTECTION ACT OF 2000.—Section 
542(b)(2)(B)(iv) of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (114 
Stat. 2763A–551), as enacted into law by section 1(a)(6) 
of Public Law 106–554, is amended by striking ‘‘section 
4018(b) of the Omnibus Budget Reconciliation Act of
1987 (Public Law 100–203)’’ and inserting ‘‘section 1858 
of the Social Security Act’’. 
SEC. 9. LEGISLATIVE PURPOSE AND CONSTRUCTION. 
(a) PRINCIPAL SUBSTANTIVE CHANGES TO MAKE 
SHMO PROJECTS PERMANENT.—
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), section 2—
(A) restates, without substantive change, 
laws enacted before January 24, 2002, that 
were replaced by that section; 
(B) may not be construed as making a 
substantive change in the laws replaced; and 
(C) is superseded by any law that is en-
acted after January 24, 2002, that is incon-
sistent with such section or that supersedes 
that section to the extent of the inconsistency. 
(2) PERMANENCY.—Section 2 extends the so-
cial health maintenance organization projects for an 
indefinite time period (beyond the date that is 30 
months after the date that the Secretary submits to 
Congress the report described in section 1858(e)(4) 
of the Social Security Act, as added by section 2). 
(3) MODIFICATION OF CERTAIN REPORTING RE-
QUIREMENTS.—
(A) The report required to be submitted by 
the Secretary of Health and Human Services 
under section 1858(e)(5) of the Social Security 
Act (as added by section 2) is the same report 
as is required under the first sentence of sec-
tion 4018 of the Omnibus Budget Reconcili-
ation Act of 1987 (Public Law 100–203; 101 
Stat. 1330–65), except that such report is no 
longer characterized as a final report. 
(B) The Medicare Payment Advisory Com-
mission established under section 1805 of the 
Social Security Act (42 U.S.C. 1395b–6) shall 
not be required to submit the report described 
in the second sentence of section 4018 of the 
Omnibus Budget Reconciliation Act of 1987 
(Public Law 100–203; 101 Stat. 1330–65). 
(b) REFERENCES.—A reference to a law replaced by 
section 2, including a reference in a regulation, order, or 
other law, is deemed to refer to the corresponding provi-
sion enacted by this Act. 
(c) CONTINUING EFFECT.—An order, rule, or regula-
tion in effect under a law replaced by section 2 shall con-
tinue in effect under the corresponding provision enacted 
by this Act until repealed, amended, or superseded.
(d) ACTIONS UNDER PRIOR LAW.—An action taken 
under a law replaced by section 2 is deemed to have been 
taken under the corresponding provision enacted by this 
Act. 
(e) INFERENCES.—No inference of legislative con-
struction may be drawn by reason of a heading of a provi-
sion. 
(f ) SEVERABILITY.—If a provision enacted by this 
Act is— 
(1) held invalid, each valid provision that is sev-
erable from the invalid provision shall remain in ef-
fect; and 
(2) held invalid with respect to any application, 
the provision shall remain valid with respect to each 
valid application that is severable from the invalid 
application. 
SEC. 10. REPEALS. 
(a) INFERENCES OF REPEAL.—The repeal of a law 
by this Act may not be construed as a legislative inference 
that the provision was or was not in effect before its re-
peal. 
(b) LAWS REPEALED.—Except for rights and duties 
that matured, penalties that were incurred, and pro-
ceedings that were begun before the date of enactment of
this Act, the following provisions (and amendments made 
by such provisions) are repealed: 
(1) Section 2355 of the Deficit Reduction Act 
of 1984 (Public Law 98–369; 98 Stat. 1103). 
(2) Section 4018(b) of the Omnibus Budget 
Reconciliation Act of 1987 (Public Law 100–203; 
101 Stat. 1330–65). 
(3) Section 4207(b)(4) of the Omnibus Budget 
Reconciliation Act of 1990 (Public Law 101–508; 
104 Stat. 1388–118). 
(4) Section 13567 of the Omnibus Budget Rec-
onciliation Act of 1993 (Public Law 103–66; 107 
Stat. 607). 
(5) Paragraphs (6) through (8) of section 
160(d) of the Social Security Act Amendments of 
1994 (Public Law 103–432; 108 Stat. 4443). 
(6) Section 4014 of the Balanced Budget Act 
of 1997 (Public Law 105–33; 111 Stat. 336). 
(7) Section 531 of the Medicare, Medicaid, and 
SCHIP Balanced Budget Refinement Act of 1999 
(Appendix F of Public Law 106–113; 113 Stat. 
1501A–388). 
(8) Section 631 of the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of
2000 (Appendix F of Public Law 106–554; 114 
Stat. 2763A–566).
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