(A) in subsection (b)(1)(C)(i), as added by
section 211(b)(1)(A), by striking ‘‘(i) REQUIRE-
MENT.—If’’ and inserting ‘‘(i) REQUIREMENT
FOR
NON-COMPETITIVE-DEMONSTRATION
AREAS.—In the case of a Medicare+Choice
payment area that is not a competitive-dem-
onstration 
area 
designated 
under 
section
1853(k)(1), if’’;
(B) in subsection (b)(1)(C), as so added,
by inserting after clause (i) the following new
clause:
‘‘(ii) REQUIREMENT
FOR
COMPETI-
TIVE-DEMONSTRATION
AREAS.—In 
the
case of a Medicare+Choice payment area
that is designated as a competitive-dem-
onstration area under section 1853(k)(1),
if there are average per capita monthly
savings described in paragraph (4) for a
Medicare+Choice plan and year, the
Medicare+Choice plan shall provide to the
enrollee a monthly rebate equal to 75 per-
cent of such savings.’’;
(C) by adding at the end of subsection (b),
as amended by section 211(b)(1), the following
new paragraph:
‘‘(4) COMPUTATION OF AVERAGE PER CAPITA
MONTHLY SAVINGS FOR COMPETITIVE-DEMONSTRA-
TION AREAS.—For purposes of paragraph (1)(C)(ii),
the average per capita monthly savings referred to
in such paragraph for a Medicare+Choice plan and
year shall be computed in the same manner as the
average per capita monthly savings is computed
under paragraph (3) except that the reference to the
fee-for-service area-specific non-drug benchmark in
paragraph (3)(B)(i) (or to the benchmark amount as
adjusted under paragraph (3)(C)(i)) is deemed to be
a reference to the choice non-drug benchmark
amount (or such amount as adjusted in the manner
described in paragraph (3)(B)(i)).’’; and
(D) in subsection (d), as amended by sec-
tion 211(d)(4), by inserting ‘‘and subsection
(b)(1)(D)’’ after ‘‘subsection (b)(1)(C),’’.
(2) CONFORMING AMENDMENTS.—
(A) 
PAYMENT
OF
PLANS.—Section
1853(a)(1)(A)(ii), 
as 
amended 
by 
section
211(c)(1), is amended—
(i) in subclause (I), by inserting ‘‘(or,
in the case of a competitive-demonstration
area, the choice non-drug benchmark
amount)’’ after ‘‘benchmark amount’’; and
(ii) in subclauses (I) and (II), by in-
serting ‘‘(or, in the case of a competitive-
demonstration area, described in section
1854(b)(4))’’ 
after 
‘‘section
1854(b)(1)(C)’’.
(B) DEFINITION OF MONTHLY BASIC PRE-
MIUM.—Section 1854(b)(2)(A)(ii), as amended
by section 211(d)(2), is amended by inserting
‘‘(or, in the case of a competitive-demonstration
area, the choice non-drug benchmark amount)’’
after ‘‘benchmark amount’’.
(c) PREMIUM
ADJUSTMENT.—Section 1839 (42
U.S.C. 1395r) is amended by adding at the end the fol-
lowing new subsection:
‘‘(h)(1) In the case of an individual who resides in
a competitive-demonstration area designated under section
1851(k)(1) and who is not enrolled in a Medicare+Choice
plan under part C, the monthly premium otherwise applied
under this part (determined without regard to subsections
(b) and (f) or any adjustment under this subsection) shall
be adjusted as follows: If the fee-for-service area-specific
non-drug bid (as defined in section 1853(k)(6)) for the
Medicare+Choice area in which the individual resides for
a month—
‘‘(A) does not exceed the choice non-drug
benchmark 
(as 
determined 
under 
section
1853(k)(2)) for such area, the amount of the pre-
mium for the individual for the month shall be re-
duced by an amount equal to 75 percent of the
amount by which such benchmark exceeds such fee-
for-service bid; or
‘‘(B) exceeds such choice non-drug benchmark,
the amount of the premium for the individual for the
month shall be adjusted to ensure that—
‘‘(i) the sum of the amount of the adjusted
premium and the choice non-drug benchmark
for the area, is equal to
‘‘(ii) the sum of the unadjusted premium
plus amount of the fee-for-service area-specific
non-drug bid for the area.
‘‘(2) Nothing in this subsection shall be construed as
preventing a reduction under paragraph (1)(A) in the pre-
mium otherwise applicable under this part to zero or from
requiring the provision of a rebate to the extent such pre-
mium would otherwise be required to be less than zero.
‘‘(3) The adjustment in the premium under this sub-
section shall be effected in such manner as the Medicare
Benefits Administrator determines appropriate.
‘‘(4) In order to carry out this subsection (insofar as
it is effected through the manner of collection of premiums
under 1840(a)), the Medicare Benefits Administrator shall
transmit to the Commissioner of Social Security—
‘‘(A) at the beginning of each year, the name,
social security account number, and the amount of
the adjustment (if any) under this subsection for
each individual enrolled under this part for each
month during the year; and
‘‘(B) periodically throughout the year, informa-
tion to update the information previously trans-
mitted under this paragraph for the year.’’.
(d) CONFORMING AMENDMENT.—Section 1844(c)
(42 U.S.C. 1395w(c)) is amended by inserting ‘‘and with-
out regard to any premium adjustment effected under sec-
tion 1839(h)’’ before the period at the end.
(e) REPORT ON DEMONSTRATION PROGRAM.—Not
later than 6 months after the date on which the designa-
tion of the 4th competitive-demonstration area under sec-
tion 1851(k)(1) of the Social Security Act ends, the Medi-
care Payment Advisory Commission shall submit to Con-
gress a report on the impact of the demonstration pro-
gram under the amendments made by this section, includ-
ing such impact on premiums of medicare beneficiaries,
savings to the medicare program, and on adverse selection.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and premiums for pe-
riods beginning on or after January 1, 2005.
SEC. 213. CONFORMING AMENDMENTS.
(a) CONFORMING
AMENDMENTS
RELATING
TO
BIDS.—
(1) Section 1854 (42 U.S.C. 1395w–24) is
amended—
(A) in the heading by inserting ‘‘AND BID
AMOUNTS’’ after ‘‘PREMIUMS’’;
(B) in the heading of subsection (a), by in-
serting ‘‘AND
BID
AMOUNTS’’ after ‘‘PRE-
MIUMS’’; and
(C) in subsection (a)(5)(A), by inserting
‘‘paragraphs (2), (3), and (4) of’’ after ‘‘filed
under’’.
(b) ADDITIONAL CONFORMING AMENDMENTS.—
(1) ANNUAL DETERMINATION AND ANNOUNCE-
MENT OF CERTAIN FACTORS.—Section 1853(b) (42
U.S.C. 1395w–23(b)) is amended—
(A) in paragraph (1), by striking ‘‘the cal-
endar year concerned’’ and all that follows and
inserting the following: ‘‘the calendar year con-
cerned with respect to each Medicare+Choice
payment area, the following:
‘‘(A) PRE-COMPETITION
INFORMATION.—
For years before 2005, the following:
‘‘(i) MEDICARE+CHOICE
CAPITATION
RATES.—The 
annual 
Medicare+Choice
capitation rate for each Medicare+Choice
payment area for the year.
‘‘(ii) ADJUSTMENT
FACTORS.—The
risk and other factors to be used in adjust-
ing such rates under subsection (a)(1)(A)
for payments for months in that year.
‘‘(B) COMPETITION
INFORMATION.—For
years beginning with 2005, the following:
‘‘(i) BENCHMARKS.—The fee-for-serv-
ice 
area-specific 
non-drug 
benchmark
under section 1853(j) and, if applicable,
the choice non-drug benchmark under sec-
tion 1853(k)(2), for the year involved and,
if applicable, the national fee-for-service
market share percentage.
‘‘(ii) ADJUSTMENT
FACTORS.—The
adjustment factors applied under section
1853(a)(1)(A)(iii) (relating to demographic
adjustment), section 1853(a)(1)(B) (relat-
ing to adjustment for end-stage renal dis-
ease), and section 1853(a)(3) (relating to
health status adjustment).
‘‘(iii) PROJECTED
FEE-FOR-SERVICE
BID.—In the case of a competitive area,
the projected fee-for-service area-specific
non-drug bid (as determined under sub-
section (k)(6)) for the area.
‘‘(iv) INDIVIDUALS.—The number of
individuals 
counted 
under 
subsection
(k)(4)(B) 
and 
enrolled 
in 
each
Medicare+Choice plan in the area.’’; and
(B) in paragraph (3), by striking ‘‘in suffi-
cient detail’’ and all that follows up to the pe-
riod at the end.
(2) REPEAL OF PROVISIONS RELATING TO AD-
JUSTED COMMUNITY RATE (ACR).—
(A) IN GENERAL.—Subsections (e) and (f)
of section 1854 (42 U.S.C. 1395w–24) are re-
pealed.
(B) CONFORMING
AMENDMENT.—Section
1839(a)(2) (42 U.S.C. 1395r(a)(2)) is amended
by striking ‘‘, and to reflect’’ and all that fol-
lows and inserting a period.
(3) PROSPECTIVE
IMPLEMENTATION
OF
NA-
TIONAL
COVERAGE
DETERMINATIONS.—Section
1852(a)(5) (42 U.S.C. 1395w–22(a)(5)) is amended
to read as follows:
‘‘(5) PROSPECTIVE
IMPLEMENTATION
OF
NA-
TIONAL
COVERAGE
DETERMINATIONS.—The Sec-
retary shall only implement a national coverage de-
termination that will result in a significant change
in the costs to a Medicare+Choice organization in a
prospective manner that applies to announcements
made under section 1853(b) after the date of the
implementation of the determination.’’.
(4) PERMITTING GEOGRAPHIC ADJUSTMENT TO
CONSOLIDATE
MULTIPLE
MEDICARE+CHOICE
PAY-
MENT AREAS IN A STATE INTO A SINGLE STATEWIDE
MEDICARE+CHOICE
PAYMENT
AREA.—Section
1853(d)(3) 
(42 
U.S.C. 
1395w–23(e)(3)) 
is
amended—
(A) by amending clause (i) of subpara-
graph (A) to read as follows:
‘‘(i) 
to 
a 
single 
statewide
Medicare+Choice payment area,’’; and
(B) by amending subparagraph (B) to read
as follows:
‘‘(B) 
BUDGET
NEUTRALITY
ADJUST-
MENT.—In the case of a State requesting an
adjustment under this paragraph, the Medicare
Benefits Administrator shall initially (and an-
nually thereafter) adjust the payment rates oth-
erwise established under this section for
Medicare+Choice payment areas in the State in
a manner so that the aggregate of the pay-
ments under this section in the State shall not
exceed the aggregate payments that would have
been 
made 
under 
this 
section 
for
Medicare+Choice payment areas in the State in
the absence of the adjustment under this para-
graph.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and premiums for pe-
riods beginning on or after January 1, 2005.
TITLE IV—PROVISIONS
RELATING TO PART A
Subtitle A—Inpatient Hospital
Services
SEC. 401. REVISION OF ACUTE CARE HOSPITAL PAYMENT
UPDATES.
Subclause (XVIII) of section 1886(b)(3)(B)(i) (42
U.S.C. 1395ww(b)(3)(B)(i)) is amended to read as fol-
lows:
‘‘(XVIII) for fiscal year 2003, the market bas-
ket percentage increase for sole community hospitals
and such increase minus 0.25 percentage points for
other hospitals, and’’.
SEC. 402. 2-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR
INDIRECT COSTS OF MEDICAL EDUCATION
(IME).
Section 
1886(d)(5)(B)(ii) 
(42 
U.S.C.
1395ww(d)(5)(B)(ii)) is amended—
(1) in subclause (VI) by striking ‘‘and’’ at the
end;
(2) by redesignating subclause (VII) as sub-
clause (IX);
(3) in subclause (VIII) as so redesignated, by
striking ‘‘2002’’ and inserting ‘‘2004’’; and
(4) by inserting after subclause (VI) the fol-
lowing new subclause:
‘‘(VII) during fiscal year 2003, ‘c’ is equal
to 1.47;
‘‘(VIII) during fiscal year 2004, ‘c’ is
equal to 1.45; and’’.
SEC. 403. RECOGNITION OF NEW MEDICAL TECHNOLOGIES
UNDER INPATIENT HOSPITAL PPS.
(a) IMPROVING TIMELINESS
OF DATA COLLEC-
TION.—Section 
1886(d)(5)(K) 
(42 
U.S.C.
1395ww(d)(5)(K)) is amended by adding at the end the
following new clause:
‘‘(vii) Under the mechanism under this subpara-
graph, the Secretary shall provide for the addition of new
diagnosis and procedure codes in April 1 of each year, but
the addition of such codes shall not require the Secretary
to adjust the payment (or diagnosis-related group classi-
fication) under this subsection until the fiscal year that
begins after such date.’’.
(b) ELIGIBILITY STANDARD.—
(1) MINIMUM
PERIOD
FOR
RECOGNITION
OF
NEW
TECHNOLOGIES.—Section 
1886(d)(5)(K)(vi)
(42 U.S.C. 1395ww(d)(5)(K)(vi)) is amended—
(A) by inserting ‘‘(I)’’ after ‘‘(vi)’’; and
(B) by adding at the end the following new
subclause:
‘‘(II) Under such criteria, a service or technology
shall not be denied treatment as a new service or tech-
nology on the basis of the period of time in which the serv-
ice or technology has been in use if such period ends before
the end of the 2-to-3-year period that begins on the effec-
tive date of implementation of a code under ICD–9–CM
(or a successor coding methodology) that enables the iden-
tification of a significant sample of specific discharges in
which the service or technology has been used.’’.
(2) ADJUSTMENT
OF
THRESHOLD.—Section
1886(d)(5)(K)(ii)(I) 
(42 
U.S.C.
1395ww(d)(5)(K)(ii)(I)) is amended by inserting
‘‘(applying a threshold specified by the Secretary
that is the lesser of 50 percent of the national aver-
age standardized amount for operating costs of inpa-
tient hospital services for all hospitals and all diag-
nosis-related groups or one standard deviation for
the diagnosis-related group involved)’’ after ‘‘is inad-
equate’’.
(3) CRITERION
FOR
SUBSTANTIAL
IMPROVE-
MENT.—Section 
1886(d)(5)(K)(vi) 
(42 
U.S.C.
1395ww(d)(5)(K)(vi)), as amended by paragraph
(1), is further amended by adding at the end the fol-
lowing subclause:
‘‘(III) The Secretary shall by regulation provide for
further clarification of the criteria applied to determine
whether a new service or technology represents an advance
in medical technology that substantially improves the diag-
nosis or treatment of beneficiaries. Under such criteria,
in determining whether a new service or technology rep-
resents an advance in medical technology that substan-
tially improves the diagnosis or treatment of beneficiaries,
the Secretary shall deem a service or technology as meet-
ing such requirement if the service or technology is a drug
or biological that is designated under section 506 or 526
of the Federal Food, Drug, and Cosmetic Act, approved
under section 314.510 or 601.41 of title 21, Code of Fed-
eral Regulations, or designated for priority review when
the marketing application for such drug or biological was
filed or is a medical device for which an exemption has
been granted under section 520(m) of such Act, for which
priority review has been provided under section 515(d)(5)
of such Act, or is a substantially equivalent device for
which an expedited review is provided under section 513(f)
of such Act.’’.
(4) PROCESS
FOR
PUBLIC
INPUT.—Section
1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as
amended by paragraph (1), is amended—
(A) in clause (i), by adding at the end the
following: ‘‘Such mechanism shall be modified
to meet the requirements of clause (viii).’’; and
(B) by adding at the end the following new
clause:
‘‘(viii) The mechanism established pursuant to clause
(i) shall be adjusted to provide, before publication of a
proposed rule, for public input regarding whether a new
service or technology not described in the second sentence
of clause (vi)(III) represents an advance in medical tech-
nology that substantially improves the diagnosis or treat-
ment of beneficiaries as follows:
‘‘(I) The Secretary shall make public and peri-
odically update a list of all the services and tech-
nologies for which an application for additional pay-
ment under this subparagraph is pending.
‘‘(II) The Secretary shall accept comments, rec-
ommendations, and data from the public regarding
whether the service or technology represents a sub-
stantial improvement.
‘‘(III) The Secretary shall provide for a meeting
at which organizations representing hospitals, physi-
cians, medicare beneficiaries, manufacturers, and
any other interested party may present comments,
recommendations, and data to the clinical staff of
the Centers for Medicare & Medicaid Services before
publication of a notice of proposed rulemaking re-
garding whether service or technology represents a
substantial improvement.’’.
(c) PREFERENCE FOR USE OF DRG ADJUSTMENT.—
Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is
further amended by adding at the end the following new
clause:
‘‘(ix) Before establishing any add-on payment under
this subparagraph with respect to a new technology, the
Secretary shall seek to identify one or more diagnosis-re-
lated groups associated with such technology, based on
similar clinical or anatomical characteristics and the cost
of the technology. Within such groups the Secretary shall
assign an eligible new technology into a diagnosis-related
group where the average costs of care most closely approx-
imate the costs of care of using the new technology. In
such case, no add-on payment under this subparagraph
shall be made with respect to such new technology and
this clause shall not affect the application of paragraph
(4)(C)(iii).’’.
(d) IMPROVEMENT IN PAYMENT FOR NEW TECH-
NOLOGY.—Section 
1886(d)(5)(K)(ii)(III) 
(42 
U.S.C.
1395ww(d)(5)(K)(ii)(III)) is amended by inserting after
‘‘the estimated average cost of such service or technology’’
the following: ‘‘(based on the marginal rate applied to
costs under subparagraph (A))’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—The Secretary shall imple-
ment the amendments made by this section so that
they apply to classification for fiscal years beginning
with fiscal year 2004.
(2) RECONSIDERATIONS OF APPLICATIONS FOR
FISCAL YEAR 2003 THAT ARE DENIED.—In the case
of an application for a classification of a medical
service or technology as a new medical service or
technology under section 1886(d)(5)(K) of the Social
Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was
filed for fiscal year 2003 and that is denied—
(A) the Secretary shall automatically re-
consider the application as an application for
fiscal year 2004 under the amendments made
by this section; and
(B) the maximum time period otherwise
permitted for such classification of the service
or technology shall be extended by 12 months.
SEC. 404. PHASE-IN 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 dis-
charges 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 per-
centage (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
discharges between October 1, 1987, and Sep-
tember 30, 1997, 25 percent)’’ and inserting
‘‘the applicable Federal percentage (specified in
subparagraph (E))’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(E) For purposes of subparagraph (A), for dis-
charges occurring—
‘‘(i) between October 1, 1987, and September
30, 1997, the applicable Puerto Rico percentage is
75 percent and the applicable Federal percentage is
25 percent;
‘‘(ii) on or after October 1, 1997, and before
October 1, 2003, the applicable Puerto Rico percent-
age is 50 percent and the applicable Federal per-
centage is 50 percent;
‘‘(iii) during fiscal year 2004, the applicable
Puerto Rico percentage is 45 percent and the appli-
cable Federal percentage is 55 percent;
‘‘(iv) during fiscal year 2005, the applicable
Puerto Rico percentage is 40 percent and the appli-
cable Federal percentage is 60 percent;
‘‘(v) during fiscal year 2006, the applicable
Puerto Rico percentage is 35 percent and the appli-
cable Federal percentage is 65 percent;
‘‘(vi) during fiscal year 2007, the applicable
Puerto Rico percentage is 30 percent and the appli-
cable Federal percentage is 70 percent; and
‘‘(vii) on or after October 1, 2007, the applica-
ble Puerto Rico percentage is 25 percent and the ap-
plicable Federal percentage is 75 percent.’’.
SEC. 405. REFERENCE TO PROVISION RELATING TO EN-
HANCED DISPROPORTIONATE SHARE HOS-
PITAL (DSH) PAYMENTS FOR RURAL HOS-
PITALS AND URBAN HOSPITALS WITH FEWER
THAN 100 BEDS.
For provision enhancing disproportionate share hos-
pital (DSH) treatment for rural hospitals and urban hos-
pitals with fewer than 100 beds, see section 302.
SEC. 406. REFERENCE TO PROVISION RELATING TO 2-YEAR
PHASED-IN INCREASE IN THE STANDARDIZED
AMOUNT 
IN 
RURAL 
AND 
SMALL 
URBAN
AREAS TO ACHIEVE A SINGLE, UNIFORM
STANDARDIZED AMOUNT.
For provision phasing in over a 2-year period an in-
crease in the standardized amount for rural and small
urban areas to achieve a single, uniform, standardized
amount, see section 303.
SEC. 407. REFERENCE TO PROVISION FOR MORE FRE-
QUENT UPDATES IN THE WEIGHTS USED IN
HOSPITAL MARKET BASKET.
For provision providing for more frequent updates in
the weights used in hospital market basket, see section
304.
SEC. 408. REFERENCE TO PROVISION MAKING IMPROVE-
MENTS TO CRITICAL ACCESS HOSPITAL PRO-
GRAM.
For provision providing making improvements to crit-
ical access hospital program, see section 305.
Subtitle B—Skilled Nursing
Facility Services
SEC. 411. PAYMENT FOR COVERED SKILLED NURSING FA-
CILITY SERVICES.
(a) TEMPORARY INCREASE IN NURSING COMPONENT
OF PPS FEDERAL RATE.—Section 312(a) of BIPA is
amended by adding at the end the following new sentence:
‘‘The Secretary of Health and Human Services shall in-
crease by 8 percent the nursing component of the case-
mix adjusted Federal prospective payment rate specified
in Tables 3 and 4 of the final rule published in the Federal
Register by the Health Care Financing Administration on
July 31, 2000 (65 Fed. Reg. 46770) and as subsequently
updated under section 1888(e)(4)(E)(ii) of the Social Se-
curity Act (42 U.S.C. 1395yy(e)(4)(E)(ii)), effective for
services furnished on or after October 1, 2002, and before
October 1, 2005.’’.
(b) ADJUSTMENT
TO
RUGS
FOR
AIDS RESI-
DENTS.—
(1) IN GENERAL.—Paragraph (12) of section
1888(e) (42 U.S.C. 1395yy(e)) is amended to read
as follows:
‘‘(12) ADJUSTMENT
FOR
RESIDENTS
WITH
AIDS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of a resident of a skilled
nursing facility who is afflicted with acquired
immune deficiency syndrome (AIDS), the per
diem amount of payment otherwise applicable
shall be increased by 128 percent to reflect in-
creased costs associated with such residents.
‘‘(B) SUNSET.—Subparagraph (A) shall
not apply on and after such date as the Sec-
retary certifies that there is an appropriate ad-
justment in the case mix under paragraph
(4)(G)(i) to compensate for the increased costs
associated with residents described in such sub-
paragraph.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to services furnished on
or after October 1, 2003.
Subtitle C—Hospice
SEC. 421. COVERAGE OF HOSPICE CONSULTATION SERV-
ICES.
(a) COVERAGE OF HOSPICE CONSULTATION SERV-
ICES.—Section 
1812(a) 
(42 
U.S.C. 
1395d(a)) 
is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(3);
(2) by striking the period at the end of para-
graph (4) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) for individuals who are terminally ill, have
not made an election under subsection (d)(1), and
have not have previously received services under this
paragraph, services that are furnished by a physi-
cian who is the medical director or an employee of
a hospice program and that consist of—
‘‘(A) an evaluation of the individual’s need
for pain and symptom management;
‘‘(B) counseling the individual with respect
to end-of-life issues and care options; and
‘‘(C) advising the individual regarding ad-
vanced care planning.’’.
(b) PAYMENT.—Section 1814(i) (42 U.S.C. l395f(i))
is amended by adding at the end the following new para-
graph:
‘‘(4) The amount paid to a hospice program with re-
spect to the services under section 1812(a)(5) for which
payment may be made under this part shall be equal to
an amount equivalent to the amount established for an
office or other outpatient visit for evaluation and manage-
ment associated with presenting problems of moderate se-
verity under the fee schedule established under section
1848(b), other than the portion of such amount attrib-
utable to the practice expense component.’’.
(c) 
CONFORMING
AMENDMENT.—Section
1861(dd)(2)(A)(i) (42 U.S.C. 1395x(dd)(2)(A)(i)) is
amended by inserting before the comma at the end the
following: ‘‘and services described in section 1812(a)(5)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to services provided by a hospice
program on or after January 1, 2004.
SEC. 422. 10 PERCENT INCREASE IN PAYMENT FOR HOS-
PICE CARE FURNISHED IN A FRONTIER AREA.
(a) IN GENERAL.—Section 1814(i)(1) (42 U.S.C.
1395f(i)(1)) is amended by adding at the end the following
new subparagraph:
‘‘(D) With respect to hospice care furnished in a fron-
tier area on or after January 1, 2003, and before January
1, 2008, the payment rates otherwise established for such
care shall be increased by 10 percent. For purposes of this
subparagraph, the term ‘frontier area’ means a county in
which the population density is less than 7 persons per
square mile.’’.
(b) REPORT ON COSTS.—Not later than January 1,
2007, the Comptroller General of the United States shall
submit to Congress a report on the costs of furnishing
hospice care in frontier areas. Such report shall include
recommendations regarding the appropriateness of extend-
ing, and modifying, the payment increase provided under
the amendment made by subsection (a).
SEC. 423. RURAL HOSPICE DEMONSTRATION PROJECT.
(a) IN GENERAL.—The Secretary shall conduct a
demonstration project for the delivery of hospice care to
medicare beneficiaries in rural areas. Under the project
medicare beneficiaries who are unable to receive hospice
care in the home for lack of an appropriate caregiver are
provided such care in a facility of 20 or fewer beds which
offers, within its walls, the full range of services provided
by hospice programs under section 1861(dd) of the Social
Security Act (42 U.S.C. 1395x(dd)).
(b) SCOPE OF PROJECT.—The Secretary shall con-
duct the project under this section with respect to no more
than 3 hospice programs over a period of not longer than
5 years each.
(c) COMPLIANCE WITH CONDITIONS.—Under the
demonstration project—
(1) the hospice program shall comply with oth-
erwise applicable requirements, except that it shall
not be required to offer services outside of the home
or 
to 
meet 
the 
requirements 
of 
section
1861(dd)(2)(A)(iii) of the Social Security Act; and
(2) payments for hospice care shall be made at
the rates otherwise applicable to such care under
title XVIII of such Act.
The Secretary may require the program to comply with
such additional quality assurance standards for its provi-
sion of services in its facility as the Secretary deems ap-
propriate.
(d) REPORT.—Upon completion of the project, the
Secretary shall submit a report to Congress on the project
and shall include in the report recommendations regarding
extension of such project to hospice programs serving
rural areas.
Subtitle D—Other Provisions
SEC. 431. DEMONSTRATION PROJECT FOR USE OF RECOV-
ERY AUDIT CONTRACTORS.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall conduct a demonstration project
under this section (in this section referred to as the
‘‘project’’) to demonstrate the use of recovery audit con-
tractors under the Medicare Integrity Program in identi-
fying and recouping overpayments under the medicare
program for services for which payment is made under
part A of title XVIII of the Social Security Act. Under
the project—
(1) payment may be made to such a contractor
on a contingent basis;
(2) a percentage of the amount recovered may
be retained by the Secretary and shall be available
to the program management account of the Centers
for Medicare & Medicaid Services; and
(3) the Secretary shall examine the efficacy of
such use with respect to duplicative payments, accu-
racy of coding, and other payment policies in which
overpayments arise.
(b) SCOPE AND DURATION.—The project shall cover
at least 2 States and at least 3 contractors and shall last
for not longer than 3 years.
(c) WAIVER.—The Secretary of Health and Human
Services shall waive such provisions of title XVIII of the
Social Security Act as may be necessary to provide for
payment for services under the project in accordance with
subsection (a).
(d) QUALIFICATIONS OF CONTRACTORS.—
(1) IN
GENERAL.—The Secretary shall enter
into a recovery audit contract under this section
with an entity only if the entity has staff that has
knowledge of and experience with the payment rules
and regulations under the medicare program or the
entity has or will contract with another entity that
has such knowledgeable and experienced staff.
(2) INELIGIBILITY
OF
CERTAIN
CONTRAC-
TORS.—The Secretary may not enter into a recovery
audit contract under this section with an entity to
the extent that the entity is a fiscal intermediary
under section 1816 of the Social Security Act (42
U.S.C. 1395h), a carrier under section 1842 of such
Act (42 U.S.C. 1395u), or a Medicare Administra-
tive Contractor under section 1874A of such Act, or
any other entity that carries out the type of activi-
ties with respect to providers of services under part
A that would constitute a conflict of interest, as de-
termined by the Secretary.
(3) PREFERENCE
FOR
ENTITIES
WITH
DEM-
ONSTRATED
PROFICIENCY
WITH
PRIVATE
INSUR-
ERS.—In awarding contracts to recovery audit con-
tractors under this section, the Secretary shall give
preference to those entities that the Secretary deter-
mines have demonstrated proficiency in recovery au-
dits with private insurers or under the medicaid pro-
gram under title XIX of such Act.
(e) REPORT.—The Secretary of Health and Human
Services shall submit to Congress a report on the project
not later than 6 months after the date of its completion.
Such reports shall include information on the impact of
the project on savings to the medicare program and rec-
ommendations on the cost-effectiveness of extending or ex-
panding the project.
Union Calendar No. 331
107TH CONGRESS
2D SESSION
H. R. 4985
[Report No. 107–550, Part 1]
A BILL
To amend title XVIII of the Social Security Act to
revitalize the Medicare+Choice program, estab-
lish a Medicare+Choice competition program,
and to improve payments to hospitals and other
providers under part A of the medicare program.
JUNE 28, 2002
Committee on Ways and Means discharged; committed to
the Committee of the Whole House on the State of the
Union and ordered to be printed