SEC. 2. MEDICARE SMART CARD PILOT PROGRAM. 
Part E of title XVIII of the Social Security Act is 
amended by inserting after section 1866E the following 
new section: 
‘‘SEC. 1866F. SMART CARD PILOT PROGRAM. 
‘‘(a) IMPLEMENTATION.— 
‘‘(1) IN GENERAL.—Not later than 36 months 
after the date of the enactment of this section, the 
Secretary shall establish a pilot program (in this sec-
tion referred to as the ‘pilot program’) to dem-
onstrate the feasibility of using smart card tech-
nology under this title. 
‘‘(2) SMART CARD TECHNOLOGY DEFINED.—In 
this section, the term ‘smart card technology’ means 
the following: 
‘‘(A) BENEFICIARY SMART CARD.—A ma-
chine readable, fraud- and tamper-resistant 
card (in this section referred to as a ‘smart 
card’) that includes an embedded integrated cir-
cuit chip with a secure micro-controller that en-
ables the verification and secure, electronic au-
thentication of the identity of a Medicare bene-
ficiary at the point of service through a com-
bination of the smart card and a personal iden-
tification number known by or associated with 
such beneficiary. 
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‘‘(B) CARD READER TECHNOLOGY.—Infor-
mation technology that enables a supplier and 
provider to authenticate the identity of a Medi-
care beneficiary through presentation of such a 
smart card and such components, with such au-
thentication to be reflected through the use of 
a modifier or in another appropriate manner, as 
determined by the Secretary, in the claims ad-
judication process. 
‘‘(3) PROGRAM DESIGN ELEMENTS.—The pilot 
program shall be conducted for a period of 3 years 
consistent with the following: 
‘‘(A) SELECTION OF AREA.—In consulta-
tion with the Inspector General of the Depart-
ment of Health and Human Services, the Sec-
retary shall select at least 3 geographic areas in 
which the pilot program will operate. 
‘‘(B) SELECTION OF SUPPLIER AND PRO-
VIDER TYPES.—In consultation with the Inspec-
tor General of the Department of Health and 
Human Services, the Secretary shall select sup-
plier and provider types that will be required to 
participate in the pilot program (referred to in 
this section as ‘participating suppliers and pro-
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viders’). In selecting such supplier and provider 
types, the Secretary shall— 
‘‘(i) take into account the risk of 
fraud, waste, and abuse (as described in 
section 1886(j)(2)(B) with respect to the 
category of provider or supplier) and other 
factors as determined appropriate by the 
Secretary; and 
‘‘(ii) limit the pilot program to no 
more than 2,000 suppliers and providers. 
‘‘(C) SUPPLIER AND PROVIDER HARDSHIP 
EXEMPTIONS.—The Secretary shall exempt 
from participation in the pilot program a sup-
plier or provider that either— 
‘‘(i) does not have access to card read-
er technology (as described in paragraph 
(2)(B)); 
‘‘(ii) does not have sufficient internet 
access; or 
‘‘(iii) has a low volume (as determined 
by the Secretary) of Medicare claims for 
which payment is made under this title. 
‘‘(D) 
BENEFICIARY
SMART
CARD 
ISSUANCE.—The Secretary shall provide for the 
issuance of beneficiary smart cards described in 
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paragraph (2)(A) to all Medicare beneficiaries 
residing in a geographic area in which the pilot 
program is conducted under subparagraph (A). 
Information that appears on Medicare cards 
used outside the pilot program may appear on 
the face of the beneficiary smart card. 
‘‘(E) INFORMATION
ON
OPERATION
OF 
PILOT PROGRAM.—The Secretary shall provide 
participating suppliers and providers and Medi-
care beneficiaries who are furnished items and 
services by such suppliers and providers, with 
information on the operation of the pilot pro-
gram, including privacy protections described in 
subparagraph (H). 
‘‘(F) ACCESS TO SERVICES OUTSIDE THE 
PILOT PROGRAM.— 
‘‘(i) BENEFICIARIES.—Medicare bene-
ficiaries who receive beneficiary smart 
cards may receive items and services care 
from suppliers and providers not partici-
pating in the pilot program. 
‘‘(ii) SUPPLIERS
AND
PROVIDERS.— 
Suppliers and providers not participating 
in the pilot program may submit claims 
under this title for items and services fur-
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nished without use of smart card tech-
nology to Medicare beneficiaries who re-
ceive beneficiary smart cards. 
‘‘(G) 
PRIVATE
SECTOR
IMPLEMENTA-
TION.—The Secretary shall select, by using a 
competitive procurement, a private sector con-
tractor to implement and operate the pilot pro-
gram. 
‘‘(H) PRIVACY
PROTECTIONS.—The Sec-
retary shall ensure that the pilot program com-
plies with applicable Federal laws, including 
regulations, concerning individually identifiable 
health information, including the Privacy Act of 
1974 and regulations promulgated under sec-
tion 264(c) of the Health Insurance Portability 
and Accountability Act of 1996 and such indi-
vidually identifiable information shall be exempt 
from disclosure under section 552(b)(3) of title 
5, United States Code. 
‘‘(I) MANDATORY
PARTICIPATION.—Sub-
ject to subparagraph (C), in the case of services 
furnished by a provider or supplier included in 
a supplier or provider type selected under sub-
paragraph (B) in a geographic area selected 
under subparagraph (A), payment may only be 
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made under this title for such services during 
the period of the pilot program if the provider 
or supplier is participating in the pilot program. 
‘‘(4) DEFINITIONS.—In this section: 
‘‘(A) The terms ‘supplier’ and ‘provider’ 
have the meanings given the terms ‘supplier’ 
and ‘provider of services’ in subsections (d) and 
(u), respectively, of section 1861. 
‘‘(B) The term ‘Medicare beneficiary’ 
means an individual who is enrolled in the origi-
nal Medicare fee-for-service program under 
parts A and B and is not enrolled in an MA 
plan under part C, an eligible organization 
under section 1876, or a PACE program under 
section 1894. 
‘‘(C) The term ‘Medicare claim’ means a 
claim for an item or service for which payment 
is made under this title. 
‘‘(b) REPORTS TO CONGRESS.— 
‘‘(1) IN GENERAL.—The Secretary shall submit 
to Congress the following reports: 
‘‘(A) INITIAL DESIGN REPORT.—Not later 
than 2 years after the date of the enactment of 
this section, a report that outlines the plan for 
implementation of the pilot program. 
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‘‘(B) IMPLEMENTATION
REPORT.—After 
implementation of the pilot program, a report 
on the initial implementation of the pilot pro-
gram, including parameters for operation of 
such program. 
‘‘(C) INTERIM
PERFORMANCE
REPORT.— 
Not later than 2 years after the date the pilot 
program is implemented, an interim report on 
the performance of such program. 
‘‘(D) FINAL PERFORMANCE REPORT.—Not 
later than 18 months after the date of the com-
pletion of the pilot program, a final report on 
the performance of such program. 
‘‘(2) CONTENTS
OF
CERTAIN
REPORTS.—The 
reports under subparagraphs (C) and (D) of para-
graph (1) shall include information on the perform-
ance of the pilot program in achieving its objectives 
and such recommendations regarding expanding the 
duration and scope of such program as the Secretary 
determines appropriate. 
‘‘(c) FUNDING.—For purposes of conducting the pilot 
program, the Secretary shall provide for the transfer, from 
the Supplemental Medical Insurance Trust Fund under 
section 1841, to the Centers for Medicare & Medicaid Pro-
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gram Management Account, of $150,000,000, to be avail-
able until expended.’’. 
Æ 
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