434
Subtitle H, Part 3
under this subparagraph and subparagraph (C)
shall be based on the best data available at the
time of such determinations.
‘‘(C) FINAL
DETERMINATION.—Not later
than September 1 preceding the beginning of
each fiscal year (beginning with fiscal year
1998), the Secretary shall publish in the Fed-
eral Register a final determination, for each
sector of medicare services, concerning the mat-
ters described in subparagraph (B) and an ex-
planation of the reasons for any differences be-
tween such determination and the preliminary
determination for such fiscal year published
under subparagraph (B).
‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDI-
CIAL REVIEW.—There shall be no administrative or
judicial review under section 1878 or otherwise of—
‘‘(A) the classification of items and serv-
ices among the sectors of medicare services
under subsection (b),
‘‘(B) the determination of the amounts of
allotments for the different sectors of medicare
services under subsection (c),
435
Subtitle H, Part 3
‘‘(C) the determination of the amount (or
method of application) of any payment adjust-
ment under subsection (d), or
‘‘(D) any adjustment in an allotment ef-
fected under subsection (h).
‘‘(f) FEE-FOR-SERVICE EXPENDITURES DEFINED.—
In this section, the term ‘fee-for-service expenditures’, for
items and services within a sector of medicare services in
a fiscal year, means amounts payable for such items and
services which are furnished during the fiscal year, and—
‘‘(1) includes types of expenses otherwise reim-
bursable under parts A and B (including administra-
tive costs incurred by organizations described in sec-
tions 1816 and 1842) with respect to such items and
services, and
‘‘(2) does not include amounts paid under part
C.
‘‘(g) EXPEDITED PROCESS
FOR ADJUSTMENT
OF
SECTOR GROWTH RATES.—
‘‘(1) OPTIONAL
INCLUSION
OF
LEGISLATIVE
PROPOSAL.—The President may include in rec-
ommendations under subsection (e)(2)(B) submitted
with respect to a fiscal year a specific legislative pro-
posal that provides only for the substitution of per-
centages specified in the proposal for one or more of
436
Subtitle H, Part 3
the baseline annual growth rates (specified in the
table in subsection (c)(3)(C) or in a previous legisla-
tive proposal under this subsection) for that fiscal
year or any subsequent fiscal year.
‘‘(2) CONGRESSIONAL CONSIDERATION.—
‘‘(A) IN GENERAL.—The percentages con-
tained in a legislative proposal submitted under
paragraph (1) shall apply under this section if
a joint resolution (described in subparagraph
(B)) approving such proposal is enacted, in ac-
cordance with the provisions of subparagraph
(C), before the end of the 60-day period begin-
ning on the date on which such proposal was
submitted. For purposes of applying the preced-
ing sentence and subparagraphs (B) and (C),
the days on which either House of Congress is
not in session because of an adjournment of
more than three days to a day certain shall be
excluded in the computation of a period.
‘‘(B) JOINT RESOLUTION OF APPROVAL.—
A joint resolution described in this subpara-
graph means only a joint resolution which is in-
troduced within the 10-day period beginning on
the date on which the President submits a pro-
posal under paragraph (1) and—
437
Subtitle H, Part 3
‘‘(i) which does not have a preamble;
‘‘(ii) the matter after the resolving
clause of which is as follows: ‘That Con-
gress approves the proposal of the Presi-
dent providing for substitution of percent-
ages for certain baseline annual growth
rates under section 1895 of the Social Se-
curity Act, as submitted by the President
on lllllll.’, the blank space
being filled in with the appropriate date;
and
‘‘(iii) the title of which is as follows:
‘Joint resolution approving Presidential
proposal to substitute certain specified per-
centages for baseline annual growth rates
under section 1895 of the Social Security
Act, as submitted by the President on
lllllll.’, the blank space being
filled in with the appropriate date.
‘‘(C) PROCEDURES
FOR
CONSIDERATION
OF
RESOLUTION
OF
APPROVAL.—Subject to
subparagraph (D), the provisions of section
2908 (other than subsection (a)) of the Defense
Base Closure and Realignment Act of 1990
shall apply to the consideration of a joint reso-
438
Subtitle H, Part 3
lution described in subparagraph (B) in the
same manner as such provisions apply to a joint
resolution described in section 2908(a) of such
Act.
‘‘(D) SPECIAL
RULES.—For purposes of
applying subparagraph (C) with respect to such
provisions—
‘‘(i) any reference to the Committee
on Armed Services of the House of Rep-
resentatives shall be deemed a reference to
an appropriate Committee of the House of
Representatives (specified by the Speaker
of the House of Representatives at the
time of submission of a legislative proposal
under paragraph (1)) and any reference to
the Committee on Armed Services of the
Senate shall be deemed a reference to the
Committee on Finance of the Senate;
‘‘(ii) any reference to a resolution of
which a committee shall be discharged
from further consideration shall be deemed
to be a reference to the first such resolu-
tion introduced; and
‘‘(iii) any reference to the date on
which the President transmits a report
439
Subtitle H, Part 3
shall be deemed a reference to the date on
which the President submits the legislative
proposal under paragraph (1).
‘‘(h) LOOK-BACK ADJUSTMENT IN ALLOTMENTS TO
REFLECT ACTUAL EXPENDITURES.—
‘‘(1) IN GENERAL.—If the Secretary determines
under subsection (e)(3)(B) with respect to a particu-
lar fiscal year (beginning with fiscal year 1999) that
the fee-for-service expenditures for a sector of medi-
care services for the second preceding fiscal year—
‘‘(A) exceeded the adjusted allotment for
such sector for such year (as defined in para-
graph (2)), then the allotment for the sector for
the particular fiscal year shall be reduced by
1331⁄3 percent of the amount of such excess, or
‘‘(B) was less than the adjusted allotment
for such sector for such year, then the allot-
ment for the sector for the particular fiscal year
shall be increased by the amount of such defi-
cit.
‘‘(2) ADJUSTED ALLOTMENT.—The adjusted al-
lotment under this paragraph for a sector for a fis-
cal year is—
‘‘(A) the amount that would be computed
as the allotment under subsection (c) for the
440
Subtitle H, Part 3
sector for the fiscal year if the actual amount
of payments made in the fiscal year under the
MedicarePlus program under part C in the fis-
cal year were substituted for the amount de-
scribed in subsection (c)(2)(A)(ii) for that fiscal
year,
‘‘(B) adjusted to take into account the
amount of any adjustment under paragraph (1)
for that fiscal year (based on expenditures in
the second previous fiscal year).
‘‘(i) PROSPECTIVE APPLICATION OF CERTAIN NA-
TIONAL COVERAGE DETERMINATIONS.—In the case of a
national coverage determination that the Secretary
projects will result in significant additional expenditures
under this title (taking into account any substitution for
existing procedures or technologies), such determination
shall not become effective before the beginning of the fiscal
year that begins after the date of such determination and
shall apply to contracts under part C entered into (or re-
newed) after the date of such determination.’’.
(b) REPORT OF TRUSTEES ON GROWTH RATE IN
PART
A EXPENDITURES.—Section 1817 (42 U.S.C.
1395i) is amended by adding at the end the following new
subsection:
441
Subtitle H, Part 4
‘‘(k) Each annual report provided in subsection (b)(2)
shall include information regarding the annual rate of
growth in program expenditures that would be required
to maintain the financial solvency of the Trust Fund and
the extent to which the provisions of section 1895 restrain
the rate of growth of expenditures under this part in order
to achieve such solvency.’’.
PART 4—ADMINISTRATIVE SIMPLIFICATION
SEC. 15731. STANDARDS FOR MEDICARE INFORMATION
TRANSACTIONS AND DATA ELEMENTS.
Title XVIII, as amended by section 15031, is amend-
ed by inserting after section 1806 the following new sec-
tion:
‘‘STANDARDS FOR MEDICARE INFORMATION
TRANSACTIONS AND DATA ELEMENTS
‘‘SEC. 1807. (a) ADOPTION
OF STANDARDS
FOR
DATA ELEMENTS.—
‘‘(1) IN GENERAL.—Pursuant to subsection (b),
the Secretary shall adopt standards for information
transactions and data elements of medicare informa-
tion and modifications to the standards under this
section that are—
‘‘(A) consistent with the objective of reduc-
ing the administrative costs of providing and
paying for health care; and
442
Subtitle H, Part 4
‘‘(B) developed or modified by a standard
setting organization (as defined in subsection
(h)(8)).
‘‘(2) SPECIAL RULE RELATING TO DATA ELE-
MENTS.—The Secretary may adopt or modify a
standard relating to data elements that is different
from the standard developed by a standard setting
organization, if—
‘‘(A) the different standard or modification
will substantially reduce administrative costs to
health care providers and health plans com-
pared to the alternative; and
‘‘(B) the standard or modification is pro-
mulgated in accordance with the rulemaking
procedures of subchapter III of chapter 5 of
title 5, United States Code.
‘‘(3) SECURITY STANDARDS FOR HEALTH IN-
FORMATION NETWORK.—
‘‘(A) IN
GENERAL.—Each person, who
maintains or transmits medicare information or
data elements of medicare information and is
subject to this section, shall maintain reason-
able and appropriate administrative, technical,
and physical safeguards—
443
Subtitle H, Part 4
‘‘(i) to ensure the integrity and con-
fidentiality of the information;
‘‘(ii) to protect against any reasonably
anticipated—
‘‘(I) threats or hazards to the se-
curity or integrity of the information;
and
‘‘(II) unauthorized uses or disclo-
sures of the information; and
‘‘(iii) to otherwise ensure compliance
with this section by the officers and em-
ployees of such person.
‘‘(B) SECURITY
STANDARDS.—The Sec-
retary shall establish security standards and
modifications to such standards with respect to
medicare information network services, health
plans, and health care providers that—
‘‘(i) take into account—
‘‘(I) the technical capabilities of
record systems used to maintain medi-
care information;
‘‘(II) the costs of security meas-
ures;
444
Subtitle H, Part 4
‘‘(III) the need for training per-
sons who have access to medicare in-
formation; and
‘‘(IV) the value of audit trails in
computerized record systems; and
‘‘(ii) ensure that a medicare informa-
tion network service, if it is part of a larg-
er organization, has policies and security
procedures which isolate the activities of
such service with respect to processing in-
formation in a manner that prevents unau-
thorized access to such information by
such larger organization.
The security standards established by the Sec-
retary shall be based on the standards devel-
oped or modified by standard setting organiza-
tions. If such standards do not exist, the Sec-
retary shall rely on the recommendations of the
Medicare Information Advisory Committee (es-
tablished under subsection (g)) and shall con-
sult with appropriate government agencies and
private organizations in accordance with para-
graph (5).
‘‘(4) IMPLEMENTATION SPECIFICATIONS.—The
Secretary shall establish specifications for imple-
445
Subtitle H, Part 4
menting each of the standards and the modifications
to the standards adopted pursuant to paragraph (1)
or (3).
‘‘(5) ASSISTANCE
TO
THE
SECRETARY.—In
complying with the requirements of this section, the
Secretary shall rely on recommendations of the Med-
icare Information Advisory Committee established
under subsection (g) and shall consult with appro-
priate Federal and State agencies and private orga-
nizations. The Secretary shall publish in the Federal
Register the recommendations of the Medicare Infor-
mation Advisory Committee regarding the adoption
of a standard under this section.
‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS
AND DATA ELEMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall adopt
standards for transactions and data elements to
make medicare information uniformly available to be
exchanged electronically, that is—
‘‘(A) appropriate for the following financial
and administrative transactions: claims (includ-
ing coordination of benefits) or equivalent en-
counter 
information, 
enrollment 
and
disenrollment, eligibility, premium payments,
and referral certification and authorization; and
446
Subtitle H, Part 4
‘‘(B) related to other financial and admin-
istrative transactions determined appropriate by
the Secretary consistent with the goals of im-
proving the operation of the health care system
and reducing administrative costs.
‘‘(2) UNIQUE HEALTH IDENTIFIERS.—
‘‘(A) ADOPTION
OF
STANDARDS.—The
Secretary shall adopt standards providing for a
standard unique health identifier for each indi-
vidual, employer, health plan, and health care
provider for use in the medicare information
system. In developing unique health identifiers
for each health plan and health care provider,
the Secretary shall take into account multiple
uses for identifiers and multiple locations and
specialty classifications for health care provid-
ers.
‘‘(B) PENALTY
FOR
IMPROPER
DISCLO-
SURE.—A person who knowingly uses or causes
to be used a unique health identifier under sub-
paragraph (A) for a purpose that is not author-
ized by the Secretary shall—
‘‘(i) be fined not more than $50,000,
imprisoned not more than 1 year, or both;
or
447
Subtitle H, Part 4
‘‘(ii) if the offense is committed under
false pretenses, be fined not more than
$100,000, imprisoned not more than 5
years, or both.
‘‘(3) CODE SETS.—
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Medicare Information Advi-
sory Committee, experts from the private sec-
tor, and Federal and State agencies, shall—
‘‘(i) select code sets for appropriate
data elements from among the code sets
that have been developed by private and
public entities; or
‘‘(ii) establish code sets for such data
elements if no code sets for the data ele-
ments have been developed.
‘‘(B) DISTRIBUTION.—The Secretary shall
establish efficient and low-cost procedures for
distribution (including electronic distribution) of
code sets and modifications made to such code
sets under subsection (c)(2).
‘‘(4) ELECTRONIC SIGNATURE.—
‘‘(A) IN GENERAL.—The Secretary, after
consultation with the Medicare Information Ad-
visory Committee, shall promulgate regulations
448
Subtitle H, Part 4
specifying procedures for the electronic trans-
mission and authentication of signatures, com-
pliance with which will be deemed to satisfy
Federal and State statutory requirements for
written signatures with respect to information
transactions required by this section and writ-
ten signatures on enrollment and disenrollment
forms.
‘‘(B) PAYMENTS FOR SERVICES AND PRE-
MIUMS.—Nothing in this section shall be con-
strued to prohibit the payment of health care
services or health plan premiums by debit, cred-
it, payment card or numbers, or other electronic
means.
‘‘(5) TRANSFER
OF
INFORMATION
BETWEEN
HEALTH PLANS.—The Secretary shall develop rules
and procedures—
‘‘(A) for determining the financial liability
of health plans when health care benefits are
payable under two or more health plans; and
‘‘(B) for transferring among health plans
appropriate standard data elements needed for
the coordination of benefits, the sequential
processing of claims, and other data elements
449
Subtitle H, Part 4
for individuals who have more than one health
plan.
‘‘(6) COORDINATION OF BENEFITS.—If, at the
end of the 5-year period beginning on the date of the
enactment of this section, the Secretary determines
that additional transaction standards for coordinat-
ing benefits are necessary to reduce administrative
costs or duplicative (or inappropriate) payment of
claims, the Secretary shall establish further trans-
action standards for the coordination of benefits be-
tween health plans.
‘‘(7) PROTECTION
OF
TRADE
SECRETS.—Ex-
cept as otherwise required by law, the standards
adopted under this section shall not require disclo-
sure of trade secrets or confidential commercial in-
formation by an entity operating a medicare infor-
mation network.
‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—
‘‘(1) INITIAL STANDARDS.—Not later than 18
months after the date of the enactment of this sec-
tion, the Secretary shall adopt standards relating to
the information transactions, data elements of medi-
care information and security described in sub-
sections (a) and (b).
450
Subtitle H, Part 4
‘‘(2) 
ADDITIONS
AND
MODIFICATIONS
TO
STANDARDS.—
‘‘(A) IN
GENERAL.—The Secretary shall
review the standards adopted under this section
and shall adopt additional or modified stand-
ards, that have been developed or modified by
a standard setting organization, as determined
appropriate, but not more frequently than once
every 12 months. Any addition or modification
to such standards shall be completed in a man-
ner which minimizes the disruption and cost of
compliance.
‘‘(B) ADDITIONS AND MODIFICATIONS TO
CODE SETS.—
‘‘(i) IN
GENERAL.—The Secretary
shall ensure that procedures exist for the
routine maintenance, testing, enhancement,
and expansion of code sets.
‘‘(ii) ADDITIONAL RULES.—If a code
set is modified under this paragraph, the
modified code set shall include instructions
on how data elements of medicare informa-
tion that were encoded prior to the modi-
fication may be converted or translated so
as to preserve the informational value of
451
Subtitle H, Part 4
the data elements that existed before the
modification. Any modification to a code
set under this paragraph shall be imple-
mented in a manner that minimizes the
disruption and cost of complying with such
modification.
‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—
‘‘(1) IN GENERAL.—If a person desires to con-
duct any of the information transactions described
in subsection (b)(1) with a health plan as a standard
transaction, the health plan shall conduct such
standard transaction in a timely manner and the in-
formation transmitted or received in connection with
such transaction shall be in the form of standard
data elements of medicare information.
‘‘(2) SATISFACTION
OF
REQUIREMENTS.—A
health plan may satisfy the requirement imposed on
such plan under paragraph (1) by directly transmit-
ting standard data elements of medicare information
or submitting nonstandard data elements to a medi-
care information network service for processing into
standard data elements and transmission.
‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE-
QUIREMENTS.—Not later than 24 months after the
date on which standards are adopted under sub-
452
Subtitle H, Part 4
sections (a) and (b) with respect to any type of in-
formation transaction or data element of medicare
information or with respect to security, a health plan
shall comply with the requirements of this section
with respect to such transaction or data element.
‘‘(4) COMPLIANCE
WITH
MODIFIED
STAND-
ARDS.—If the Secretary adopts a modified standard
under subsection (a) or (b), a health plan shall be
required to comply with the modified standard at
such time as the Secretary determines appropriate
taking into account the time needed to comply due
to the nature and extent of the modification. How-
ever, the time determined appropriate under the pre-
ceding sentence shall be not earlier than the last day
of the 180-day period beginning on the date such
modified standard is adopted. The Secretary may ex-
tend the time for compliance for small health plans,
if the Secretary determines such extension is appro-
priate.
‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY
WITH REQUIREMENTS AND STANDARDS.—
‘‘(1) GENERAL PENALTY.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), the Secretary shall impose on
454
Subtitle H, Part 4
standard for medicare information relating to
that item or service.
‘‘(2) LIMITATIONS.—
‘‘(A) 
NONCOMPLIANCE
NOT
DISCOV-
ERED.—A penalty may not be imposed under
paragraph (1) if it is established to the satisfac-
tion of the Secretary that the person liable for
the penalty did not know, and by exercising rea-
sonable diligence would not have known, that
such person failed to comply with the require-
ment or standard described in paragraph (1).
‘‘(B) FAILURES
DUE
TO
REASONABLE
CAUSE.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), a penalty may not be
imposed under paragraph (1) if—
‘‘(I) the failure to comply was
due to reasonable cause and not to
willful neglect; and
‘‘(II) the failure to comply is cor-
rected during the 30-day period begin-
ning on the first date the person liable
for the penalty knew, or by exercising
reasonable 
diligence 
would 
have
455
Subtitle H, Part 4
known, that the failure to comply oc-
curred.
‘‘(ii) EXTENSION OF PERIOD.—
‘‘(I) NO
PENALTY.—The period
referred to in clause (i)(II) may be ex-
tended as determined appropriate by
the Secretary based on the nature and
extent of the failure to comply.
‘‘(II) ASSISTANCE.—If the Sec-
retary determines that a health plan
failed to comply because such plan
was unable to comply, the Secretary
may provide technical assistance to
such plan during the period described
in clause (i)(II). Such assistance shall
be provided in any manner determined
appropriate by the Secretary.
‘‘(C) REDUCTION.—In the case of a failure
to comply which is due to reasonable cause and
not to willful neglect, any penalty under para-
graph (1) that is not entirely waived under sub-
paragraph (B) may be waived to the extent that
the payment of such penalty would be excessive
relative to the compliance failure involved.
‘‘(f) EFFECT ON STATE LAW.—
456
Subtitle H, Part 4
‘‘(1) GENERAL EFFECT.—
‘‘(A) GENERAL RULE.—Except as provided
in subparagraph (B), a provision, requirement,
or standard under this section shall supersede
any contrary provision of State law, including a
provision of State law that requires medical or
health plan records (including billing informa-
tion) to be maintained or transmitted in written
rather than electronic form.
‘‘(B) EXCEPTIONS.—A provision, require-
ment, or standard under this section shall not
supersede a contrary provision of State law if
the Secretary determines that the provision of
State law should be continued for any reason,
including for reasons relating to prevention of
fraud and abuse or regulation of controlled sub-
stances.
‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in
this section shall be construed to invalidate or limit
the authority, power, or procedures established
under any law providing for the reporting of disease
or injury, child abuse, birth, or death, public health
surveillance, or public health investigation or inter-
vention.
457
Subtitle H, Part 4
‘‘(g) MEDICARE INFORMATION ADVISORY COMMIT-
TEE.—
‘‘(1) ESTABLISHMENT.—There is established a
committee to be known as the Medicare Information
Advisory Committee (in this subsection referred to
as the ‘committee’).
‘‘(2) DUTIES.—The committee shall—
‘‘(A) advise the Secretary in the develop-
ment of standards under this section; and
‘‘(B) be generally responsible for advising
the Secretary and the Congress on the status
and the future of the medicare information net-
work.
‘‘(3) MEMBERSHIP.—
‘‘(A) IN GENERAL.—The committee shall
consist of 9 members of whom—
‘‘(i) 3 shall be appointed by the Presi-
dent;
‘‘(ii) 3 shall be appointed by the
Speaker of the House of Representatives
after consultation with the minority leader
of the House of Representatives; and
‘‘(iii) 3 shall be appointed by the
President pro tempore of the Senate after
458
Subtitle H, Part 4
consultation with the minority leader of
the Senate.
The appointments of the members shall be
made not later than 60 days after the date of
the enactment of this section. The President
shall designate 1 member as the Chair.
‘‘(B) EXPERTISE.—The membership of the
committee shall consist of individuals who are
of recognized standing and distinction in the
areas of information systems, information
networking and integration, consumer health,
or health care financial management, and who
possess the demonstrated capacity to discharge
the duties imposed on the committee.
‘‘(C) TERMS.—Each member of the com-
mittee shall be appointed for a term of 5 years,
except that the members first appointed shall
serve staggered terms such that the terms of
not more than 3 members expire at one time.
‘‘(D) INITIAL
MEETING.—Not later than
30 days after the date on which a majority of
the members have been appointed, the commit-
tee shall hold its first meeting.
‘‘(4) REPORTS.—Not later than 1 year after the
date of the enactment of this section, and annually
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Subtitle H, Part 4
thereafter, the committee shall submit to Congress
and the Secretary a report regarding—
‘‘(A) the extent to which entities using the
medicare information network are meeting the
standards adopted under this section and work-
ing together to form an integrated network that
meets the needs of its users;
‘‘(B) the extent to which such entities are
meeting the security standards established pur-
suant to this section and the types of penalties
assessed for noncompliance with such stand-
ards;
‘‘(C) any problems that exist with respect
to implementation of the medicare information
network; and
‘‘(D) the extent to which timetables under
this section are being met.
Reports made under this subsection shall be made
available to health care providers, health plans, and
other entities that use the medicare information net-
work to exchange medicare information.
‘‘(h) DEFINITIONS.—For purposes of this section:
‘‘(1) CODE SET.—The term ‘code set’ means
any set of codes used for encoding data elements,