(A) by striking paragraph (1); 
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and 
(B); 
(ii) in subparagraph (C), by striking 
‘‘carriers’’ and inserting ‘‘medicare admin-
istrative contractors’’; and 
(iii) by striking subparagraphs (D) 
and (E); 
(C) in paragraph (3)—
(i) in the matter before subparagraph 
(A), by striking ‘‘Each such contract shall 
provide that the carrier’’ and inserting 
‘‘The Secretary’’; 
(ii) by striking ‘‘will’’ the first place it 
appears in each of subparagraphs (A), (B), 
(F), (G), (H), and (L) and inserting 
‘‘shall’’; 
(iii) in subparagraph (B), in the mat-
ter before clause (i), by striking ‘‘to the 
policyholders and subscribers of the car-
rier’’ and inserting ‘‘to the policyholders 
and subscribers of the medicare adminis-
trative contractor’’;
(iv) by striking subparagraphs (C), 
(D), and (E); 
(v) in subparagraph (H)—
(I) by striking ‘‘if it makes deter-
minations or payments with respect to 
physicians’ services,’’ in the matter 
preceding clause (i); and 
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’ in clause (i); 
(vi) by striking subparagraph (I); 
(vii) in subparagraph (L), by striking 
the semicolon and inserting a period; 
(viii) in the first sentence, after sub-
paragraph (L), by striking ‘‘and shall con-
tain’’ and all that follows through the pe-
riod; and 
(ix) in the seventh sentence, by insert-
ing ‘‘medicare administrative contractor,’’ 
after ‘‘carrier,’’; and 
(D) by striking paragraph (5); 
(E) in paragraph (6)(D)(iv), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and
(F) in paragraph (7), by striking ‘‘the car-
rier’’ and inserting ‘‘the Secretary’’ each place 
it appears. 
(4) Subsection (c) is amended—
(A) by striking paragraph (1); 
(B) in paragraph (2)(A), by striking ‘‘con-
tract under this section which provides for the 
disbursement of funds, as described in sub-
section (a)(1)(B),’’ and inserting ‘‘contract 
under section 1874A that provides for making 
payments under this part’’; 
(C) in paragraph (3)(A), by striking ‘‘sub-
section 
(a)(1)(B)’’ 
and 
inserting 
‘‘section 
1874A(a)(3)(B)’’; 
(D) in paragraph (4), in the matter pre-
ceding subparagraph (A), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’; and 
(E) by striking paragraphs (5) and (6). 
(5) Subsections (d), (e), and (f) are repealed. 
(6) Subsection (g) is amended by striking ‘‘car-
rier or carriers’’ and inserting ‘‘medicare administra-
tive contractor or contractors’’. 
(7) Subsection (h) is amended—
(A) in paragraph (2)—
(i) by striking ‘‘Each carrier having 
an agreement with the Secretary under 
subsection (a)’’ and inserting ‘‘The Sec-
retary’’; and 
(ii) by striking ‘‘Each such carrier’’ 
and inserting ‘‘The Secretary’’; 
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an 
agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘medicare ad-
ministrative contractor having a contract 
under section 1874A that provides for 
making payments under this part’’; and
(ii) by striking ‘‘such carrier’’ and in-
serting ‘‘such contractor’’; 
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and insert-
ing ‘‘a medicare administrative contractor’’ 
each place it appears; and 
(ii) by striking ‘‘the carrier’’ and in-
serting ‘‘the contractor’’ each place it ap-
pears; and 
(D) in paragraphs (5)(A) and (5)(B)(iii), 
by striking ‘‘carriers’’ and inserting ‘‘medicare
administrative contractors’’ each place it ap-
pears. 
(8) Subsection (l) is amended—
(A) in paragraph (1)(A)(iii), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and 
(B) in paragraph (2), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’. 
(9) Subsection (p)(3)(A) is amended by striking 
‘‘carrier’’ and inserting ‘‘medicare administrative 
contractor’’. 
(10) Subsection (q)(1)(A) is amended by strik-
ing ‘‘carrier’’. 
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN
GENERAL.—Except as otherwise 
provided in this subsection, the amendments 
made by this section shall take effect on Octo-
ber 1, 2005, and the Secretary is authorized to 
take such steps before such date as may be nec-
essary to implement such amendments on a 
timely basis. 
(B) CONSTRUCTION
FOR
CURRENT
CON-
TRACTS.—Such amendments shall not apply to
contracts in effect before the date specified 
under subparagraph (A) that continue to retain 
the terms and conditions in effect on such date 
(except as otherwise provided under this Act, 
other than under this section) until such date 
as the contract is let out for competitive bid-
ding under such amendments. 
(C) DEADLINE
FOR
COMPETITIVE
BID-
DING.—The Secretary shall provide for the let-
ting by competitive bidding of all contracts for 
functions of medicare administrative contrac-
tors for annual contract periods that begin on 
or after October 1, 2010. 
(D) WAIVER
OF
PROVIDER
NOMINATION 
PROVISIONS DURING TRANSITION.—During the 
period beginning on the date of the enactment 
of this Act and before the date specified under 
subparagraph (A), the Secretary may enter into 
new agreements under section 1816 of the So-
cial Security Act (42 U.S.C. 1395h) without re-
gard to any of the provider nomination provi-
sions of such section. 
(2) GENERAL
TRANSITION
RULES.—The Sec-
retary shall take such steps, consistent with para-
graph (1)(B) and (1)(C), as are necessary to provide
for an appropriate transition from contracts under 
section 1816 and section 1842 of the Social Security 
Act (42 U.S.C. 1395h, 1395u) to contracts under 
section 1874A, as added by subsection (a)(1). 
(3) AUTHORIZING
CONTINUATION
OF
MIP 
FUNCTIONS
UNDER
CURRENT
CONTRACTS
AND 
AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—
The provisions contained in the exception in section 
1893(d)(2) of the Social Security Act (42 U.S.C. 
1395ddd(d)(2)) shall continue to apply notwith-
standing the amendments made by this section, and 
any reference in such provisions to an agreement or 
contract shall be deemed to include a contract under 
section 1874A of such Act, as inserted by subsection 
(a)(1), that continues the activities referred to in 
such provisions. 
(e) REFERENCES.—On and after the effective date 
provided under subsection (d)(1), any reference to a fiscal 
intermediary or carrier under title XI or XVIII of the So-
cial Security Act (or any regulation, manual instruction, 
interpretative rule, statement of policy, or guideline issued 
to carry out such titles) shall be deemed a reference to 
an appropriate medicare administrative contractor (as 
provided under section 1874A of the Social Security Act). 
(f) REPORTS ON IMPLEMENTATION.—
(1) PLAN FOR IMPLEMENTATION.—By not later 
than October 1, 2004, the Secretary shall submit a 
report to Congress and the Comptroller General of 
the United States that describes the plan for imple-
mentation of the amendments made by this section. 
The Comptroller General shall conduct an evaluation 
of such plan and shall submit to Congress, not later 
than 6 months after the date the report is received, 
a report on such evaluation and shall include in such 
report such recommendations as the Comptroller 
General deems appropriate. 
(2) STATUS OF IMPLEMENTATION.—The Sec-
retary shall submit a report to Congress not later 
than October 1, 2008, that describes the status of 
implementation of such amendments and that in-
cludes a description of the following: 
(A) The number of contracts that have 
been competitively bid as of such date. 
(B) The distribution of functions among 
contracts and contractors. 
(C) A timeline for complete transition to 
full competition. 
(D) A detailed description of how the Sec-
retary has modified oversight and management
of medicare contractors to adapt to full com-
petition. 
SEC. 202. REQUIREMENTS FOR INFORMATION SECURITY 
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS. 
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 201(a)(1), is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) REQUIREMENTS
FOR
INFORMATION
SECU-
RITY.—
‘‘(1) DEVELOPMENT
OF
INFORMATION
SECU-
RITY
PROGRAM.—A medicare administrative con-
tractor that performs the functions referred to in 
subparagraphs (A) and (B) of subsection (a)(4) (re-
lating to determining and making payments) shall 
implement a contractor-wide information security 
program to provide information security for the op-
eration and assets of the contractor with respect to 
such functions under this title. An information secu-
rity program under this paragraph shall meet the 
requirements for information security programs im-
posed on Federal agencies under section 3534(b)(2) 
of title 44, United States Code (other than require-
ments under subparagraphs (B)(ii), (F)(iii), and 
(F)(iv) of such section).
‘‘(2) INDEPENDENT AUDITS.—
‘‘(A) PERFORMANCE OF ANNUAL EVALUA-
TIONS.—Each year a medicare administrative 
contractor that performs the functions referred 
to in subparagraphs (A) and (B) of subsection 
(a)(4) (relating to determining and making pay-
ments) shall undergo an evaluation of the infor-
mation security of the contractor with respect 
to such functions under this title. The evalua-
tion shall—
‘‘(i) be performed by an entity that 
meets such requirements for independence 
as the Inspector General of the Depart-
ment of Health and Human Services may 
establish; and 
‘‘(ii) test the effectiveness of informa-
tion security control techniques for an ap-
propriate subset of the contractor’s infor-
mation systems (as defined in section 
3502(8) of title 44, United States Code) 
relating to such functions under this title 
and an assessment of compliance with the 
requirements of this subsection and related 
information security policies, procedures, 
standards and guidelines.
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case 
of a medicare administrative contractor 
covered by this subsection that has not 
previously performed the functions referred 
to in subparagraphs (A) and (B) of sub-
section (a)(4) (relating to determining and 
making payments) as a fiscal intermediary 
or carrier under section 1816 or 1842, the 
first independent evaluation conducted 
pursuant subparagraph (A) shall be com-
pleted prior to commencing such functions. 
‘‘(ii) OTHER
CONTRACTORS.—In the 
case of a medicare administrative con-
tractor covered by this subsection that is 
not described in clause (i), the first inde-
pendent evaluation conducted pursuant 
subparagraph (A) shall be completed with-
in 1 year after the date the contractor 
commences functions referred to in clause 
(i) under this section. 
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE INSPECTOR GENERAL.—
The results of independent evaluations
under subparagraph (A) shall be submitted 
promptly to the Inspector General of the 
Department of Health and Human Serv-
ices. 
‘‘(ii) TO
CONGRESS.—The Inspector 
General of Department of Health and 
Human Services shall submit to Congress 
annual reports on the results of such eval-
uations.’’. 
(b) APPLICATION
OF REQUIREMENTS
TO FISCAL 
INTERMEDIARIES AND CARRIERS.—
(1) IN
GENERAL.—The provisions of section 
1874A(e)(2) of the Social Security Act (other than 
subparagraph (B)), as added by subsection (a), shall 
apply to each fiscal intermediary under section 1816 
of the Social Security Act (42 U.S.C. 1395h) and 
each carrier under section 1842 of such Act (42 
U.S.C. 1395u) in the same manner as they apply to 
medicare administrative contractors under such pro-
visions. 
(2) DEADLINE FOR INITIAL EVALUATION.—In 
the case of such a fiscal intermediary or carrier with 
an agreement or contract under such respective sec-
tion in effect as of the date of the enactment of this 
Act, 
the 
first 
evaluation 
under 
section
1874A(e)(2)(A) of the Social Security Act (as added 
by subsection (a)), pursuant to paragraph (1), shall 
be completed (and a report on the evaluation sub-
mitted to the Secretary) by not later than 1 year 
after such date. 
TITLE III—EDUCATION AND 
OUTREACH 
SEC. 301. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE. 
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—The Social Security Act is 
amended by inserting after section 1888 the fol-
lowing new section: 
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE 
‘‘SEC. 1889. (a) COORDINATION
OF EDUCATION 
FUNDING.—The Secretary shall coordinate the edu-
cational activities provided through medicare contractors 
(as defined in subsection (g), including under section 
1893) in order to maximize the effectiveness of Federal 
education efforts for providers of services and suppliers.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. 
(3) REPORT.—Not later than October 1, 2004, 
the Secretary shall submit to Congress a report that 
includes a description and evaluation of the steps
taken to coordinate the funding of provider edu-
cation under section 1889(a) of the Social Security 
Act, as added by paragraph (1). 
(b) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE.—
(1) IN GENERAL.—Section 1874A, as added by 
section 201(a)(1) and as amended by section 202(a), 
is amended by adding at the end the following new 
subsection: 
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—
In order to give medicare administrative contractors an 
incentive to implement effective education and outreach 
programs for providers of services and suppliers, the Sec-
retary shall develop and implement a methodology to 
measure the specific claims payment error rates of such 
contractors in the processing or reviewing of medicare 
claims.’’. 
(2) APPLICATION TO FISCAL INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(f) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under 
section 1816 of the Social Security Act (42 U.S.C. 
1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they
apply to medicare administrative contractors under 
such provisions. 
(3) GAO REPORT ON ADEQUACY OF METHOD-
OLOGY.—Not later than October 1, 2004, the Comp-
troller General of the United States shall submit to 
Congress and to the Secretary a report on the ade-
quacy of the methodology under section 1874A(f) of 
the Social Security Act, as added by paragraph (1), 
and shall include in the report such recommenda-
tions as the Comptroller General determines appro-
priate with respect to the methodology. 
(4) REPORT ON USE OF METHODOLOGY IN AS-
SESSING
CONTRACTOR
PERFORMANCE.—Not later 
than October 1, 2004, the Secretary shall submit to 
Congress a report that describes how the Secretary 
intends to use such methodology in assessing medi-
care contractor performance in implementing effec-
tive education and outreach programs, including 
whether to use such methodology as a basis for per-
formance bonuses. The report shall include an anal-
ysis of the sources of identified errors and potential 
changes in systems of contractors and rules of the 
Secretary that could reduce claims error rates.
(c) PROVISION OF ACCESS TO AND PROMPT RE-
SPONSES FROM MEDICARE ADMINISTRATIVE CONTRAC-
TORS.—
(1) IN GENERAL.—Section 1874A, as added by 
section 201(a)(1) and as amended by section 202(a) 
and subsection (b), is further amended by adding at 
the end the following new subsection:
‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PRO-
VIDERS OF SERVICES AND SUPPLIERS.—
‘‘(1) COMMUNICATION
STRATEGY.—The Sec-
retary shall develop a strategy for communications 
with individuals entitled to benefits under part A or 
enrolled under part B, or both, and with providers 
of services and suppliers under this title. 
‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 
medicare administrative contractor shall, for those 
providers of services and suppliers which submit 
claims to the contractor for claims processing and 
for those individuals entitled to benefits under part 
A or enrolled under part B, or both, with respect to 
whom claims are submitted for claims processing, 
provide general written responses (which may be 
through electronic transmission) in a clear, concise, 
and accurate manner to inquiries of providers of 
services, suppliers and individuals entitled to bene-
fits under part A or enrolled under part B, or both, 
concerning the programs under this title within 45 
business days of the date of receipt of such inquiries. 
‘‘(3) RESPONSE
TO
TOLL-FREE
LINES.—The 
Secretary shall ensure that each medicare adminis-
trative contractor shall provide, for those providers 
of services and suppliers which submit claims to the 
contractor for claims processing and for those indi-
viduals entitled to benefits under part A or enrolled 
under part B, or both, with respect to whom claims 
are submitted for claims processing, a toll-free tele-
phone number at which such individuals, providers 
of services and suppliers may obtain information re-
garding billing, coding, claims, coverage, and other 
appropriate information under this title. 
‘‘(4) 
MONITORING
OF
CONTRACTOR
RE-
SPONSES.—
‘‘(A) IN GENERAL.—Each medicare admin-
istrative contractor shall, consistent with stand-
ards developed by the Secretary under subpara-
graph (B)—
‘‘(i) maintain a system for identifying 
who provides the information referred to in 
paragraphs (2) and (3); and
‘‘(ii) monitor the accuracy, consist-
ency, and timeliness of the information so 
provided. 
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN
GENERAL.—The Secretary 
shall establish and make public standards 
to monitor the accuracy, consistency, and 
timeliness of the information provided in 
response to written and telephone inquiries 
under this subsection. Such standards shall 
be consistent with the performance require-
ments established under subsection (b)(3). 
‘‘(ii) 
EVALUATION.—In 
conducting 
evaluations of individual medicare adminis-
trative contractors, the Secretary shall 
take into account the results of the moni-
toring conducted under subparagraph (A) 
taking into account as performance re-
quirements 
the 
standards 
established 
under clause (i). The Secretary shall, in 
consultation 
with 
organizations 
rep-
resenting providers of services, suppliers, 
and individuals entitled to benefits under 
part A or enrolled under part B, or both, 
establish standards relating to the accu-
racy, consistency, and timeliness of the in-
formation so provided. 
‘‘(C) DIRECT
MONITORING.—Nothing in 
this paragraph shall be construed as preventing 
the Secretary from directly monitoring the ac-
curacy, consistency, and timeliness of the infor-
mation so provided.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect October 1, 2004. 
(3) APPLICATION TO FISCAL INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(g) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under 
section 1816 of the Social Security Act (42 U.S.C. 
1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they 
apply to medicare administrative contractors under 
such provisions. 
(d) IMPROVED PROVIDER EDUCATION AND TRAIN-
ING.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a), is amended by adding at the end the 
following new subsections: 
‘‘(b) ENHANCED EDUCATION AND TRAINING.—
‘‘(1) ADDITIONAL RESOURCES.—There are au-
thorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund) $25,000,000 for each of fis-
cal years 2005 and 2006 and such sums as may be 
necessary for succeeding fiscal years. 
‘‘(2) USE.—The funds made available under 
paragraph (1) shall be used to increase the conduct 
by medicare contractors of education and training of 
providers of services and suppliers regarding billing, 
coding, and other appropriate items and may also be 
used to improve the accuracy, consistency, and time-
liness of contractor responses. 
‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI-
TIES FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare con-
tractor conducts education and training activities, it 
shall tailor such activities to meet the special needs 
of small providers of services or suppliers (as defined 
in paragraph (2)). 
‘‘(2) SMALL PROVIDER OF SERVICES OR SUP-
PLIER.—In this subsection, the term ‘small provider 
of services or supplier’ means—
‘‘(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
‘‘(B) a supplier with fewer than 10 full-
time-equivalent employees.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2004. 
(e) 
REQUIREMENT
TO
MAINTAIN
INTERNET 
SITES.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsection (d), is 
further amended by adding at the end the following 
new subsection: 
‘‘(d) INTERNET SITES; FAQS.—The Secretary, and 
each medicare contractor insofar as it provides services 
(including claims processing) for providers of services or 
suppliers, shall maintain an Internet site which—
‘‘(1) provides answers in an easily accessible 
format to frequently asked questions, and 
‘‘(2) includes other published materials of the 
contractor, 
that relate to providers of services and suppliers under the 
programs under this title (and title XI insofar as it relates 
to such programs).’’.
114
agement physician services under the title XVIII of the 
Social Security Act on or after the date of the enactment 
of this Act unless the Secretary—
(1) has developed the guidelines in collaboration 
with practicing physicians (including both generalists 
and specialists) and provided for an assessment of 
the proposed guidelines by the physician community; 
(2) has established a plan that contains specific 
goals, including a schedule, for improving the use of 
such guidelines; 
(3) has conducted appropriate and representa-
tive pilot projects under subsection (b) to test modi-
fications to the evaluation and management docu-
mentation guidelines; 
(4) finds that the objectives described in sub-
section (c) will be met in the implementation of such 
guidelines; and 
(5) has established, and is implementing, a pro-
gram to educate physicians on the use of such guide-
lines and that includes appropriate outreach. 
The Secretary shall make changes to the manner in which 
existing evaluation and management documentation guide-
lines are implemented to reduce paperwork burdens on 
physicians.