†
304
HR 1 EAS
take into account the number of physi-
cians placed at such substantial finan-
cial risk in the group or under the
plan and the number of individuals
enrolled with the organization who re-
ceive services from the physician or
group; and
‘‘(II) conducts periodic surveys of
both individuals enrolled and individ-
uals previously enrolled with the orga-
nization to determine the degree of ac-
cess of such individuals to services pro-
vided by the organization and satisfac-
tion with the quality of such services.
‘‘(iii) The organization provides the
Secretary with descriptive information re-
garding the plan, sufficient to permit the
Secretary to determine whether the plan is
in compliance with the requirements of this
subparagraph.
‘‘(B) PHYSICIAN
INCENTIVE
PLAN
DE-
FINED.—In this paragraph, the term ‘physician
incentive plan’ means any compensation ar-
rangement between a MedicareAdvantage organi-
zation and a physician or physician group that
†
305
HR 1 EAS
may directly or indirectly have the effect of re-
ducing or limiting services provided with respect
to individuals enrolled with the organization
under this part.
‘‘(5) LIMITATION
ON
PROVIDER
INDEMNIFICA-
TION.—A MedicareAdvantage organization may not
provide (directly or indirectly) for a health care pro-
fessional, provider of services, or other entity pro-
viding health care services (or group of such profes-
sionals, providers, or entities) to indemnify the orga-
nization against any liability resulting from a civil
action brought for any damage caused to an enrollee
with a MedicareAdvantage plan of the organization
under this part by the organization’s denial of medi-
cally necessary care.
‘‘(6) SPECIAL RULES FOR MEDICAREADVANTAGE
PRIVATE FEE-FOR-SERVICE PLANS.—For purposes of
applying this part (including subsection (k)(1)) and
section 1866(a)(1)(O), a hospital (or other provider of
services), a physician or other health care profes-
sional, or other entity furnishing health care services
is treated as having an agreement or contract in effect
with a MedicareAdvantage organization (with respect
to an individual enrolled in a MedicareAdvantage
private fee-for-service plan it offers), if—
†
306
HR 1 EAS
‘‘(A) the provider, professional, or other en-
tity furnishes services that are covered under the
plan to such an enrollee; and
‘‘(B) before providing such services, the pro-
vider, professional, or other entity —
‘‘(i) has been informed of the individ-
ual’s enrollment under the plan; and
‘‘(ii) either—
‘‘(I) has been informed of the
terms and conditions of payment for
such services under the plan; or
‘‘(II) is given a reasonable oppor-
tunity to obtain information con-
cerning such terms and conditions,
in a manner reasonably designed to effect
informed agreement by a provider.
The previous sentence shall only apply in the absence
of an explicit agreement between such a provider, pro-
fessional, or other entity and the MedicareAdvantage
organization.
‘‘(k) TREATMENT OF SERVICES FURNISHED BY CER-
TAIN PROVIDERS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), a physician or other entity (other than a
provider of services) that does not have a contract es-
†
307
HR 1 EAS
tablishing payment amounts for services furnished to
an individual enrolled under this part with a
MedicareAdvantage organization described in section
1851(a)(2)(A) shall accept as payment in full for cov-
ered services under this title that are furnished to
such an individual the amounts that the physician or
other entity could collect if the individual were not so
enrolled. Any penalty or other provision of law that
applies to such a payment with respect to an indi-
vidual entitled to benefits under this title (but not en-
rolled with a MedicareAdvantage organization under
this part) also applies with respect to an individual
so enrolled.
‘‘(2) APPLICATION TO MEDICAREADVANTAGE PRI-
VATE FEE-FOR-SERVICE PLANS.—
‘‘(A) BALANCE
BILLING
LIMITS
UNDER
MEDICAREADVANTAGE PRIVATE FEE-FOR-SERVICE
PLANS IN CASE OF CONTRACT PROVIDERS.—
‘‘(i) IN GENERAL.—In the case of an
individual enrolled in a MedicareAdvantage
private fee-for-service plan under this part,
a physician, provider of services, or other
entity that has a contract (including
through the operation of subsection (j)(6))
establishing a payment rate for services fur-
†
308
HR 1 EAS
nished to the enrollee shall accept as pay-
ment in full for covered services under this
title that are furnished to such an indi-
vidual an amount not to exceed (including
any deductibles, coinsurance, copayments,
or balance billing otherwise permitted under
the plan) an amount equal to 115 percent
of such payment rate.
‘‘(ii) PROCEDURES TO ENFORCE LIM-
ITS.—The MedicareAdvantage organization
that offers such a plan shall establish proce-
dures, similar to the procedures described in
section 1848(g)(1)(A), in order to carry out
clause (i).
‘‘(iii) ASSURING
ENFORCEMENT.—If
the MedicareAdvantage organization fails to
establish and enforce procedures required
under clause (ii), the organization is subject
to intermediate sanctions under section
1857(g).
‘‘(B) ENROLLEE
LIABILITY
FOR
NONCON-
TRACT PROVIDERS.—For provisions—
‘‘(i) establishing a minimum payment
rate in the case of noncontract providers
†
309
HR 1 EAS
under a MedicareAdvantage private fee-for-
service plan, see section 1852(a)(2); or
‘‘(ii) limiting enrollee liability in the
case of covered services furnished by such
providers, see paragraph (1) and section
1866(a)(1)(O).
‘‘(C) INFORMATION ON BENEFICIARY LIABIL-
ITY.—
‘‘(i) 
IN
GENERAL.—Each
MedicareAdvantage organization that offers
a MedicareAdvantage private fee-for-service
plan shall provide that enrollees under the
plan who are furnished services for which
payment is sought under the plan are pro-
vided an appropriate explanation of bene-
fits (consistent with that provided under
parts A, B, and D, and, if applicable,
under medicare supplemental policies) that
includes a clear statement of the amount of
the enrollee’s liability (including any liabil-
ity for balance billing consistent with this
subsection) with respect to payments for
such services.
‘‘(ii) ADVANCE
NOTICE
BEFORE
RE-
CEIPT
OF
INPATIENT
HOSPITAL
SERVICES
†
310
HR 1 EAS
AND CERTAIN OTHER SERVICES.—In addi-
tion, such organization shall, in its terms
and conditions of payments to hospitals for
inpatient hospital services and for other
services identified by the Secretary for
which the amount of the balance billing
under subparagraph (A) could be substan-
tial, require the hospital to provide to the
enrollee, before furnishing such services and
if the hospital imposes balance billing under
subparagraph (A)—
‘‘(I) notice of the fact that balance
billing is permitted under such sub-
paragraph for such services; and
‘‘(II) a good faith estimate of the
likely amount of such balance billing
(if any), with respect to such services,
based upon the presenting condition of
the enrollee.
‘‘(l) RETURN TO HOME SKILLED NURSING FACILITIES
FOR COVERED POST-HOSPITAL EXTENDED CARE SERV-
ICES.—
‘‘(1) ENSURING RETURN TO HOME SNF.—
‘‘(A) IN GENERAL.—In providing coverage
of 
post-hospital 
extended 
care 
services, 
a
†
311
HR 1 EAS
MedicareAdvantage plan shall provide for such
coverage through a home skilled nursing facility
if the following conditions are met:
‘‘(i) ENROLLEE
ELECTION.—The en-
rollee elects to receive such coverage through
such facility.
‘‘(ii) SNF AGREEMENT.—The facility
has a contract with the MedicareAdvantage
organization for the provision of such serv-
ices, or the facility agrees to accept substan-
tially similar payment under the same
terms and conditions that apply to simi-
larly situated skilled nursing facilities that
are 
under 
contract 
with 
the
MedicareAdvantage organization for the
provision of such services and through
which the enrollee would otherwise receive
such services.
‘‘(B) MANNER
OF
PAYMENT
TO
HOME
SNF.—The organization shall provide payment
to the home skilled nursing facility consistent
with the contract or the agreement described in
subparagraph (A)(ii), as the case may be.
‘‘(2) NO LESS FAVORABLE COVERAGE.—The cov-
erage provided under paragraph (1) (including scope
†
312
HR 1 EAS
of services, cost-sharing, and other criteria of cov-
erage) shall be no less favorable to the enrollee than
the coverage that would be provided to the enrollee
with respect to a skilled nursing facility the post-hos-
pital extended care services of which are otherwise
covered under the MedicareAdvantage plan.
‘‘(3) RULE OF CONSTRUCTION.—Nothing in this
subsection shall be construed to do the following:
‘‘(A) To require coverage through a skilled
nursing facility that is not otherwise qualified to
provide benefits under part A for medicare bene-
ficiaries not enrolled in a MedicareAdvantage
plan.
‘‘(B) To prevent a skilled nursing facility
from refusing to accept, or imposing conditions
upon the acceptance of, an enrollee for the receipt
of post-hospital extended care services.
‘‘(4) DEFINITIONS.—In this subsection:
‘‘(A) HOME SKILLED NURSING FACILITY.—
The term ‘home skilled nursing facility’ means,
with respect to an enrollee who is entitled to re-
ceive post-hospital extended care services under a
MedicareAdvantage plan, any of the following
skilled nursing facilities:
†
313
HR 1 EAS
‘‘(i) SNF RESIDENCE AT TIME OF AD-
MISSION.—The skilled nursing facility in
which the enrollee resided at the time of ad-
mission to the hospital preceding the receipt
of such post-hospital extended care services.
‘‘(ii) SNF IN CONTINUING CARE RE-
TIREMENT COMMUNITY.—A skilled nursing
facility that is providing such services
through a continuing care retirement com-
munity (as defined in subparagraph (B))
which provided residence to the enrollee at
the time of such admission.
‘‘(iii) SNF RESIDENCE OF SPOUSE AT
TIME OF DISCHARGE.—The skilled nursing
facility in which the spouse of the enrollee
is residing at the time of discharge from
such hospital.
‘‘(B) CONTINUING CARE RETIREMENT COM-
MUNITY.—The term ‘continuing care retirement
community’ means, with respect to an enrollee in
a MedicareAdvantage plan, an arrangement
under which housing and health-related services
are provided (or arranged) through an organiza-
tion for the enrollee under an agreement that is
†
314
HR 1 EAS
effective for the life of the enrollee or for a speci-
fied period.’’.
SEC. 203. PAYMENTS TO MEDICAREADVANTAGE ORGANIZA-
TIONS.
Section 1853 (42 U.S.C. 1395w–23) is amended to
read as follows:
‘‘PAYMENTS TO MEDICAREADVANTAGE ORGANIZATIONS
‘‘SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.—
‘‘(1) MONTHLY PAYMENTS.—
‘‘(A) IN GENERAL.—Under a contract under
section 1857 and subject to subsections (f), (h),
and (j) and section 1859(e)(4), the Secretary
shall make, to each MedicareAdvantage organiza-
tion, with respect to coverage of an individual
for 
a 
month 
under 
this 
part 
in 
a
MedicareAdvantage 
payment 
area, 
separate
monthly payments with respect to—
‘‘(i) benefits under the original medi-
care fee-for-service program under parts A
and B in accordance with subsection (d);
and
‘‘(ii) benefits under the voluntary pre-
scription drug program under part D in
accordance with section 1858A and the
other provisions of this part.
†
315
HR 1 EAS
‘‘(B) SPECIAL RULE FOR END-STAGE RENAL
DISEASE.—The Secretary shall establish separate
rates of payment to a MedicareAdvantage orga-
nization with respect to classes of individuals de-
termined to have end-stage renal disease and en-
rolled in a MedicareAdvantage plan of the orga-
nization. Such rates of payment shall be actuari-
ally equivalent to rates paid to other enrollees in
the MedicareAdvantage payment area (or such
other area as specified by the Secretary). In ac-
cordance with regulations, the Secretary shall
provide for the application of the seventh sen-
tence of section 1881(b)(7) to payments under
this section covering the provision of renal dialy-
sis treatment in the same manner as such sen-
tence applies to composite rate payments de-
scribed in such sentence. In establishing such
rates, the Secretary shall provide for appropriate
adjustments to increase each rate to reflect the
demonstration rate (including the risk adjust-
ment methodology associated with such rate) of
the social health maintenance organization end-
stage renal disease capitation demonstrations
(established by section 2355 of the Deficit Reduc-
tion Act of 1984, as amended by section 13567(b)
†
316
HR 1 EAS
of the Omnibus Budget Reconciliation Act of
1993), and shall compute such rates by taking
into account such factors as renal treatment mo-
dality, age, and the underlying cause of the end-
stage renal disease.
‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF EN-
ROLLEES.—
‘‘(A) IN
GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween the actual number of individuals enrolled
with an organization under this part and the
number of such individuals estimated to be so
enrolled in determining the amount of the ad-
vance payment.
‘‘(B) SPECIAL RULE FOR CERTAIN ENROLL-
EES.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), the Secretary may make retroactive ad-
justments under subparagraph (A) to take
into account individuals enrolled during the
period beginning on the date on which the
individual 
enrolls 
with 
a
MedicareAdvantage organization under a
plan operated, sponsored, or contributed to
†
317
HR 1 EAS
by the individual’s employer or former em-
ployer (or the employer or former employer
of the individual’s spouse) and ending on
the date on which the individual is enrolled
in the organization under this part, except
that for purposes of making such retroactive
adjustments under this subparagraph, such
period may not exceed 90 days.
‘‘(ii) EXCEPTION.—No adjustment may
be made under clause (i) with respect to
any individual who does not certify that the
organization provided the individual with
the disclosure statement described in section
1852(c) at the time the individual enrolled
with the organization.
‘‘(C) EQUALIZATION
OF
FEDERAL
CON-
TRIBUTION.—In applying subparagraph (A), the
Secretary shall ensure that the payment to the
MedicareAdvantage organization for each indi-
vidual enrolled with the organization shall equal
the MedicareAdvantage benchmark amount for
the payment area in which that individual re-
sides (as determined under paragraph (4)), as
adjusted—
†
318
HR 1 EAS
‘‘(i) by multiplying the benchmark
amount for that payment area by the ratio
of—
‘‘(I) the payment amount deter-
mined under subsection (d)(4); to
‘‘(II) the weighted service area
benchmark amount determined under
subsection (d)(2); and
‘‘(ii) using such risk adjustment factor
as specified by the Secretary under sub-
section (b)(1)(B).
‘‘(3) COMPREHENSIVE RISK ADJUSTMENT METH-
ODOLOGY.—
‘‘(A) APPLICATION OF METHODOLOGY.—The
Secretary shall apply the comprehensive risk ad-
justment methodology described in subparagraph
(B) to 100 percent of the amount of payments to
plans under subsection (d)(4)(B).
‘‘(B) COMPREHENSIVE
RISK
ADJUSTMENT
METHODOLOGY DESCRIBED.—The comprehensive
risk adjustment methodology described in this
subparagraph is the risk adjustment methodology
that 
would 
apply 
with 
respect 
to
MedicareAdvantage 
plans 
offered 
by
MedicareAdvantage organizations in 2005, ex-
†
319
HR 1 EAS
cept that if such methodology does not apply to
groups of beneficiaries who are aged or disabled
and groups of beneficiaries who have end-stage
renal disease, the Secretary shall revise such
methodology to apply to such groups.
‘‘(C) UNIFORM APPLICATION TO ALL TYPES
OF
PLANS.—Subject to section 1859(e)(4), the
comprehensive risk adjustment methodology es-
tablished under this paragraph shall be applied
uniformly without regard to the type of plan.
‘‘(D) DATA COLLECTION.—In order to carry
out this paragraph, the Secretary shall require
MedicareAdvantage organizations to submit such
data and other information as the Secretary
deems necessary.
‘‘(E) IMPROVEMENT
OF
PAYMENT
ACCU-
RACY.—Notwithstanding any other provision of
this paragraph, the Secretary may revise the
comprehensive risk adjustment methodology de-
scribed in subparagraph (B) from time to time
to improve payment accuracy.
‘‘(4) ANNUAL
CALCULATION
OF
BENCHMARK
AMOUNTS.—For each year, the Secretary shall cal-
culate 
a 
benchmark 
amount 
for 
each
MedicareAdvantage payment area for each month for
†
320
HR 1 EAS
such year with respect to coverage of the benefits
available under the original medicare fee-for-service
program option equal to the greater of the following
amounts (adjusted as appropriate for the application
of the risk adjustment methodology under paragraph
(3)):
‘‘(A) MINIMUM AMOUNT.—1⁄12 of the annual
Medicare+Choice capitation rate determined
under subsection (c)(1)(B) for the payment area
for the year.
‘‘(B) LOCAL FEE-FOR-SERVICE RATE.—The
local fee-for-service rate for such area for the
year (as calculated under paragraph (5)).
‘‘(5) ANNUAL CALCULATION OF LOCAL FEE-FOR-
SERVICE RATES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘local fee-for-service rate’
means the amount of payment for a month in a
MedicareAdvantage payment area for benefits
under this title and associated claims processing
costs for an individual who has elected to receive
benefits under the original medicare fee-for-serv-
ice program option and not enrolled in a
MedicareAdvantage plan under this part. The
Secretary shall annually calculate such amount
†
321
HR 1 EAS
in a manner similar to the manner in which the
Secretary calculated the adjusted average per
capita cost under section 1876.
‘‘(B) REMOVAL
OF
MEDICAL
EDUCATION
COSTS FROM CALCULATION OF LOCAL FEE-FOR-
SERVICE RATE.—
‘‘(i) IN GENERAL.—In calculating the
local fee-for-service rate under subparagraph
(A) for a year, the amount of payment de-
scribed in such subparagraph shall be ad-
justed to exclude from such payment the
payment adjustments described in clause
(ii).
‘‘(ii) 
PAYMENT
ADJUSTMENTS
DE-
SCRIBED.—
‘‘(I) IN
GENERAL.—Subject to
subclause (II), the payment adjust-
ments described in this subparagraph
are payment adjustments which the
Secretary estimates are payable during
the year—
‘‘(aa) for the indirect costs of
medical education under section
1886(d)(5)(B); and
†
322
HR 1 EAS
‘‘(bb) for direct graduate
medical education costs under sec-
tion 1886(h).
‘‘(II) TREATMENT
OF
PAYMENTS
COVERED UNDER STATE HOSPITAL RE-
IMBURSEMENT SYSTEM.—To the extent
that the Secretary estimates that the
amount of the local fee-for-service rates
reflects payments to hospitals reim-
bursed under section 1814(b)(3), the
Secretary shall estimate a payment ad-
justment that is comparable to the
payment adjustment that would have
been made under clause (i) if the hos-
pitals had not been reimbursed under
such section.
‘‘(b) ANNUAL ANNOUNCEMENT
OF PAYMENT FAC-
TORS.—
‘‘(1) ANNUAL
ANNOUNCEMENT.—Beginning in
2005, at the same time as the Secretary publishes the
risk adjusters under section 1860D–11, the Secretary
shall annually announce (in a manner intended to
provide notice to interested parties) the following pay-
ment factors:
†
323
HR 1 EAS
‘‘(A) The benchmark amount for each
MedicareAdvantage payment area (as calculated
under subsection (a)(4)) for the year.
‘‘(B) The factors to be used for adjusting
payments under the comprehensive risk adjust-
ment 
methodology 
described 
in 
subsection
(a)(3)(B) 
with 
respect 
to 
each
MedicareAdvantage payment area for the year.
‘‘(2) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (1) for a year, the Sec-
retary shall—
‘‘(A) 
provide 
for 
notice 
to
MedicareAdvantage organizations of proposed
changes to be made in the methodology from the
methodology and assumptions used in the pre-
vious announcement; and
‘‘(B) provide such organizations with an
opportunity to comment on such proposed
changes.
‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (1), the Sec-
retary shall include an explanation of the assump-
tions and changes in methodology used in the an-
nouncement 
in 
sufficient 
detail 
so 
that
†
324
HR 1 EAS
MedicareAdvantage organizations can compute each
payment factor described in paragraph (1).
‘‘(c) CALCULATION OF ANNUAL MEDICARE+CHOICE
CAPITATION RATES.—
‘‘(1) IN GENERAL.—For purposes of making pay-
ments under this part for years before 2006 and for
purposes of calculating the annual Medicare+Choice
capitation rates under paragraph (7) beginning with
such year, subject to paragraph (6)(C), each annual
Medicare+Choice 
capitation 
rate, 
for 
a
Medicare+Choice payment area before 2006 or a
MedicareAdvantage payment area beginning with
such year for a contract year consisting of a calendar
year, is equal to the largest of the amounts specified
in the following subparagraph (A), (B), or (C):
‘‘(A) BLENDED
CAPITATION
RATE.—The
sum of—
‘‘(i) the area-specific percentage (as
specified under paragraph (2) for the year)
of 
the 
annual 
area-specific
Medicare+Choice capitation rate for the
MedicareAdvantage payment area, as deter-
mined under paragraph (3) for the year;
and
†
325
HR 1 EAS
‘‘(ii) the national percentage (as speci-
fied under paragraph (2) for the year) of
the input-price-adjusted annual national
Medicare+Choice capitation rate, as deter-
mined under paragraph (4) for the year,
multiplied by the budget neutrality adjustment
factor determined under paragraph (5).
‘‘(B) MINIMUM AMOUNT.—12 multiplied by
the following amount:
‘‘(i) For 1998, $367 (but not to exceed,
in the case of an area outside the 50 States
and the District of Columbia, 150 percent of
the annual per capita rate of payment for
1997 
determined 
under 
section
1876(a)(1)(C) for the area).
‘‘(ii) For 1999 and 2000, the min-
imum amount determined under clause (i)
or this clause, respectively, for the preceding
year, increased by the national per capita
Medicare+Choice growth percentage de-
scribed in paragraph (6)(A) applicable to
1999 or 2000, respectively.
‘‘(iii)(I) Subject to subclause (II), for
2001, for any area in a Metropolitan Sta-
tistical Area with a population of more
†
326
HR 1 EAS
than 250,000, $525, and for any other area
$475.
‘‘(II) In the case of an area outside the
50 States and the District of Columbia, the
amount specified in this clause shall not ex-
ceed 120 percent of the amount determined
under clause (ii) for such area for 2000.
‘‘(iv) For 2002 through 2013, the min-
imum amount specified in this clause (or
clause (iii)) for the preceding year increased
by 
the 
national 
per 
capita
Medicare+Choice growth percentage, de-
scribed in paragraph (6)(A) for that suc-
ceeding year.
‘‘(v) For 2014 and each succeeding
year, the minimum amount specified in this
clause (or clause (iv)) for the preceding year
increased by the percentage increase in the
Consumer Price Index for all urban con-
sumers (U.S. urban average) for the 12-
month period ending with June of the pre-
vious year.
‘‘(C) MINIMUM PERCENTAGE INCREASE.—
‘‘(i) For 1998, 102 percent of the an-
nual per capita rate of payment for 1997
†
327
HR 1 EAS
determined under section 1876(a)(1)(C) for
the Medicare+Choice payment area.
‘‘(ii) For 1999 and 2000, 102 percent
of the annual Medicare+Choice capitation
rate under this paragraph for the area for
the previous year.
‘‘(iii) For 2001, 103 percent of the an-
nual 
Medicare+Choice 
capitation 
rate
under this paragraph for the area for 2000.
‘‘(iv) For 2002, 2003, and 2004, 102
percent of the annual Medicare+Choice
capitation rate under this paragraph for
the area for the previous year.
‘‘(v) For 2005, 103 percent of the an-
nual 
Medicare+Choice 
capitation 
rate
under this paragraph for the area for 2003.
‘‘(vi) For 2006 and each succeeding
year, 
102 
percent 
of 
the 
annual
Medicare+Choice capitation rate under this
paragraph for the area for the previous
year, except that such rate shall be deter-
mined by substituting ‘102’ for ‘103’ in
clause (v).
‘‘(2) AREA-SPECIFIC
AND
NATIONAL
PERCENT-
AGES.—For purposes of paragraph (1)(A)—
†
328
HR 1 EAS
‘‘(A) for 1998, the ‘area-specific percentage’
is 90 percent and the ‘national percentage’ is 10
percent;
‘‘(B) for 1999, the ‘area-specific percentage’
is 82 percent and the ‘national percentage’ is 18
percent;
‘‘(C) for 2000, the ‘area-specific percentage’
is 74 percent and the ‘national percentage’ is 26
percent;
‘‘(D) for 2001, the ‘area-specific percentage’
is 66 percent and the ‘national percentage’ is 34
percent;
‘‘(E) for 2002, the ‘area-specific percentage’
is 58 percent and the ‘national percentage’ is 42
percent; and
‘‘(F) for a year after 2002, the ‘area-specific
percentage’ is 50 percent and the ‘national per-
centage’ is 50 percent.
‘‘(3) ANNUAL AREA-SPECIFIC MEDICARE+CHOICE
CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), subject to subparagraph (B), the
annual area-specific Medicare+Choice capita-
tion rate for a Medicare+Choice payment
area—
†
329
HR 1 EAS
‘‘(i) for 1998 is, subject to subpara-
graph (D), the annual per capita rate of
payment for 1997 determined under section
1876(a)(1)(C) for the area, increased by the
national 
per 
capita 
Medicare+Choice
growth percentage for 1998 (described in
paragraph (6)(A)); or
‘‘(ii) for a subsequent year is the an-
nual area-specific Medicare+Choice capita-
tion rate for the previous year determined
under this paragraph for the area, increased
by 
the 
national 
per 
capita
Medicare+Choice growth percentage for
such subsequent year.
‘‘(B) REMOVAL
OF
MEDICAL
EDUCATION
FROM CALCULATION OF ADJUSTED AVERAGE PER
CAPITA COST.—
‘‘(i) IN GENERAL.—In determining the
area-specific Medicare+Choice capitation
rate under subparagraph (A) for a year (be-
ginning with 1998), the annual per capita
rate of payment for 1997 determined under
section 1876(a)(1)(C) shall be adjusted to
exclude from the rate the applicable percent
†
330
HR 1 EAS
(specified in clause (ii)) of the payment ad-
justments described in subparagraph (C).
‘‘(ii) APPLICABLE PERCENT.—For pur-
poses of clause (i), the applicable percent
for—
‘‘(I) 1998 is 20 percent;
‘‘(II) 1999 is 40 percent;
‘‘(III) 2000 is 60 percent;
‘‘(IV) 2001 is 80 percent; and
‘‘(V) a succeeding year is 100 per-
cent.
‘‘(C) PAYMENT ADJUSTMENT.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), the payment adjustments described in
this subparagraph are payment adjustments
which the Secretary estimates were payable
during 1997—
‘‘(I) for the indirect costs of med-
ical 
education 
under 
section
1886(d)(5)(B); and
‘‘(II) for direct graduate medical
education costs under section 1886(h).
‘‘(ii) TREATMENT OF PAYMENTS COV-
ERED UNDER STATE HOSPITAL REIMBURSE-
MENT SYSTEM.—To the extent that the Sec-
†
332
HR 1 EAS
equal to the sum, for all the types of medicare
services (as classified by the Secretary), of the
product (for each such type of service) of—
‘‘(i) the national standardized annual
Medicare+Choice capitation rate (deter-
mined under subparagraph (B)) for the
year;
‘‘(ii) the proportion of such rate for the
year which is attributable to such type of
services; and
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area com-
pared to the national average input price of
such services.
In applying clause (iii), the Secretary may, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or up-
dating) national payment rates for specific areas
and localities.
‘‘(B) NATIONAL
STANDARDIZED
ANNUAL
MEDICARE+CHOICE CAPITATION RATE.—In sub-
paragraph (A)(i), the ‘national standardized an-
nual Medicare+Choice capitation rate’ for a
year is equal to—
†
333
HR 1 EAS
‘‘(i) the sum (for all Medicare+Choice
payment areas) of the product of—
‘‘(I) 
the 
annual 
area-specific
Medicare+Choice capitation rate for
that year for the area under paragraph
(3); and
‘‘(II) the average number of medi-
care beneficiaries residing in that area
in the year, multiplied by the average
of the risk factor weights used to adjust
payments under subsection (a)(1)(A)
for such beneficiaries in such area; di-
vided by
‘‘(ii) the sum of the products described
in clause (i)(II) for all areas for that year.
‘‘(5) PAYMENT
ADJUSTMENT
BUDGET
NEU-
TRALITY FACTOR.—For purposes of paragraph (1)(A),
for each year, the Secretary shall determine a budget
neutrality adjustment factor so that the aggregate of
the payments under this part (other than those attrib-
utable to subsections (a)(3)(C)(iii) and (i)) shall
equal the aggregate payments that would have been
made under this part if payment were based entirely
on area-specific capitation rates.
†
334
HR 1 EAS
‘‘(6) NATIONAL PER CAPITA MEDICARE+CHOICE
GROWTH PERCENTAGE DEFINED.—
‘‘(A) IN GENERAL.—In this part, the ‘na-
tional per capita Medicare+Choice growth per-
centage’ for a year is the percentage determined
by the Secretary, by March 1st before the begin-
ning of the year involved, to reflect the Sec-
retary’s estimate of the projected per capita rate
of growth in expenditures under this title for an
individual entitled to (or enrolled for) benefits
under part A and enrolled under part B, reduced
by the number of percentage points specified in
subparagraph (B) for the year. Separate deter-
minations may be made for aged enrollees, dis-
abled enrollees, and enrollees with end-stage
renal disease.
‘‘(B) ADJUSTMENT.—The number of per-
centage points specified in this subparagraph
is—
‘‘(i) for 1998, 0.8 percentage points;
‘‘(ii) for 1999, 0.5 percentage points;
‘‘(iii) for 2000, 0.5 percentage points;
‘‘(iv) for 2001, 0.5 percentage points;
‘‘(v) for 2002, 0.3 percentage points;
and
†
335
HR 1 EAS
‘‘(vi) for a year after 2002, 0 percent-
age points.
‘‘(C) ADJUSTMENT
FOR
OVER
OR
UNDER
PROJECTION
OF
NATIONAL
PER
CAPITA
MEDICARE+CHOICE GROWTH PERCENTAGE.—Be-
ginning with rates calculated for 1999, before
computing rates for a year as described in para-
graph (1), the Secretary shall adjust all area-
specific and national Medicare+Choice capita-
tion rates (and beginning in 2000, the minimum
amount) for the previous year for the differences
between the projections of the national per capita
Medicare+Choice growth percentage for that
year and previous years and the current estimate
of such percentage for such years.
‘‘(7) TRANSITION TO MEDICAREADVANTAGE COM-
PETITION.—
‘‘(A) IN GENERAL.—For each year (begin-
ning with 2006) payments to MedicareAdvantage
plans shall not be computed under this sub-
section, but instead shall be based on the pay-
ment amount determined under subsection (d).
‘‘(B) CONTINUED CALCULATION OF CAPITA-
TION
RATES.—For each year (beginning with
2006) the Secretary shall calculate and publish
†
336
HR 1 EAS
the annual Medicare+Choice capitation rates
under this subsection and shall use the annual
Medicare+Choice capitation rate determined
under subsection (c)(1) for purposes of deter-
mining the benchmark amount under subsection
(a)(4).
‘‘(d) SECRETARY’S
DETERMINATION
OF
PAYMENT
AMOUNT.—
‘‘(1) REVIEW
OF
PLAN
BIDS.—The Secretary
shall review each plan bid submitted under section
1854(a) for the coverage of benefits under the original
medicare fee-for-service program option to ensure that
such bids are consistent with the requirements under
this part an are based on the assumptions described
in section 1854(a)(2)(A)(iii).
‘‘(2) DETERMINATION
OF
WEIGHTED
SERVICE
AREA
BENCHMARK
AMOUNTS.—The Secretary shall
calculate a weighted service area benchmark amount
for the benefits under the original medicare fee-for-
service program option for each plan equal to the
weighted average of the benchmark amounts for bene-
fits under such original medicare fee-for-service pro-
gram option for the payment areas included in the
service area of the plan using the assumptions de-
scribed in section 1854(a)(2)(A)(iii).
†
337
HR 1 EAS
‘‘(3) COMPARISON
TO
BENCHMARK.—The Sec-
retary shall determine the difference between each
plan bid (as adjusted under paragraph (1)) and the
weighted service area benchmark amount (as deter-
mined under paragraph (2)) for purposes of
determining—
‘‘(A) the payment amount under paragraph
(4); and
‘‘(B) the additional benefits required and
MedicareAdvantage monthly basic beneficiary
premiums.
‘‘(4) DETERMINATION OF PAYMENT AMOUNT FOR
ORIGINAL MEDICARE FEE-FOR-SERVICE BENEFITS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary shall determine the
payment amount for MedicareAdvantage plans
for the benefits under the original medicare fee-
for-service program option as follows:
‘‘(i) BIDS
THAT
EQUAL
OR
EXCEED
THE BENCHMARK.—In the case of a plan
bid that equals or exceeds the weighted serv-
ice area benchmark amount, the amount of
each 
monthly 
payment 
to 
a
MedicareAdvantage organization with re-
spect to each individual enrolled in a plan
†
338
HR 1 EAS
shall be the weighted service area benchmark
amount.
‘‘(ii) BIDS BELOW THE BENCHMARK.—
In the case of a plan bid that is less than
the 
weighted 
service 
area 
benchmark
amount, the amount of each monthly pay-
ment to a MedicareAdvantage organization
with respect to each individual enrolled in
a plan shall be the weighted service area
benchmark amount reduced by the amount
of any premium reduction elected by the
plan under section 1854(d)(1)(A)(i).
‘‘(B) APPLICATION
OF
COMPREHENSIVE
RISK
ADJUSTMENT
METHODOLOGY.—The Sec-
retary shall adjust the amounts determined
under subparagraph (A) using the comprehensive
risk adjustment methodology applicable under
subsection (a)(3).
‘‘(6) ADJUSTMENT FOR NATIONAL COVERAGE DE-
TERMINATIONS AND LEGISLATIVE CHANGES IN BENE-
FITS.—If the Secretary makes a determination with
respect to coverage under this title or there is a
change in benefits required to be provided under this
part that the Secretary projects will result in a sig-
nificant increase in the costs to MedicareAdvantage
†
339
HR 1 EAS
organizations of providing benefits under contracts
under this part (for periods after any period de-
scribed in section 1852(a)(5)), the Secretary shall ap-
propriately adjust the benchmark amounts or pay-
ment amounts (as determined by the Secretary). Such
projection and adjustment shall be based on an anal-
ysis by the Secretary of the actuarial costs associated
with the new benefits.
‘‘(7) BENEFITS UNDER THE ORIGINAL MEDICARE
FEE-FOR-SERVICE PROGRAM OPTION DEFINED.—For
purposes of this part, the term ‘benefits under the
original medicare fee-for-service program option’
means those items and services (other than hospice
care) for which benefits are available under parts A
and B to individuals entitled to, or enrolled for, bene-
fits under part A and enrolled under part B, with
cost-sharing for those services as required under parts
A and B or an actuarially equivalent level of cost-
sharing as determined in this part.
‘‘(e) MEDICAREADVANTAGE
PAYMENT
AREA
DE-
FINED.—
‘‘(1) IN GENERAL.—In this part, except as pro-
vided in paragraph (3), the term ‘MedicareAdvantage
payment area’ means a county, or equivalent area
specified by the Secretary.
†
340
HR 1 EAS
‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the
case of individuals who are determined to have end
stage renal disease, the MedicareAdvantage payment
area shall be a State or such other payment area as
the Secretary specifies.
‘‘(3) GEOGRAPHIC ADJUSTMENT.—
‘‘(A) IN GENERAL.—Upon written request of
the chief executive officer of a State for a con-
tract year (beginning after 2005) made by not
later than February 1 of the previous year, the
Secretary shall make a geographic adjustment to
a MedicareAdvantage payment area in the State
otherwise determined under paragraph (1)—
‘‘(i) 
to 
a 
single 
statewide
MedicareAdvantage payment area;
‘‘(ii) to the metropolitan based system
described in subparagraph (C); or
‘‘(iii) to consolidating into a single
MedicareAdvantage payment area non-
contiguous counties (or equivalent areas de-
scribed in paragraph (1)) within a State.
Such adjustment shall be effective for payments
for months beginning with January of the year
following the year in which the request is re-
ceived.
†
341
HR 1 EAS
‘‘(B) BUDGET NEUTRALITY ADJUSTMENT.—
In the case of a State requesting an adjustment
under this paragraph, the Secretary shall ini-
tially (and annually thereafter) adjust the pay-
ment rates otherwise established under this sec-
tion for MedicareAdvantage payment areas in
the State in a manner so that the aggregate of
the payments under this section in the State
shall not exceed the aggregate payments that
would have been made under this section for
MedicareAdvantage payment areas in the State
in the absence of the adjustment under this para-
graph.
‘‘(C) METROPOLITAN BASED SYSTEM.—The
metropolitan based system described in this sub-
paragraph is one in which—
‘‘(i) all the portions of each metropoli-
tan statistical area in the State or in the
case of a consolidated metropolitan statis-
tical area, all of the portions of each pri-
mary metropolitan statistical area within
the consolidated area within the State, are
treated as a single MedicareAdvantage pay-
ment area; and
†
342
HR 1 EAS
‘‘(ii) all areas in the State that do not
fall within a metropolitan statistical area
are treated as a single MedicareAdvantage
payment area.
‘‘(D) AREAS.—In subparagraph (C), the
terms ‘metropolitan statistical area’, ‘consoli-
dated metropolitan statistical area’, and ‘pri-
mary metropolitan statistical area’ mean any
area designated as such by the Secretary of Com-
merce.
‘‘(f) SPECIAL RULES
FOR INDIVIDUALS ELECTING
MSA PLANS.—
‘‘(1) IN
GENERAL.—If the amount of the
MedicareAdvantage monthly MSA premium (as de-
fined in section 1854(b)(2)(D)) for an MSA plan for
a 
year 
is 
less 
than 
1⁄12
of 
the 
annual
Medicare+Choice capitation rate applied under this
section for the area and year involved, the Secretary
shall deposit an amount equal to 100 percent of such
difference in a MedicareAdvantage MSA established
(and, if applicable, designated) by the individual
under paragraph (2).
‘‘(2) ESTABLISHMENT
AND
DESIGNATION
OF
MEDICAREADVANTAGE MEDICAL SAVINGS ACCOUNT AS
REQUIREMENT FOR PAYMENT OF CONTRIBUTION.—In
†
343
HR 1 EAS
the case of an individual who has elected coverage
under an MSA plan, no payment shall be made under
paragraph (1) on behalf of an individual for a month
unless the individual—
‘‘(A) has established before the beginning of
the month (or by such other deadline as the Sec-
retary may specify) a MedicareAdvantage MSA
(as defined in section 138(b)(2) of the Internal
Revenue Code of 1986); and
‘‘(B) if the individual has established more
than 1 such MedicareAdvantage MSA, has des-
ignated 1 of such accounts as the individual’s
MedicareAdvantage MSA for purposes of this
part.
Under rules under this section, such an individual
may change the designation of such account under
subparagraph (B) for purposes of this part.
‘‘(3) LUMP-SUM DEPOSIT OF MEDICAL SAVINGS
ACCOUNT
CONTRIBUTION.—In the case of an indi-
vidual electing an MSA plan effective beginning with
a month in a year, the amount of the contribution to
the MedicareAdvantage MSA on behalf of the indi-
vidual for that month and all successive months in
the year shall be deposited during that first month. In
the case of a termination of such an election as of a
†
344
HR 1 EAS
month before the end of a year, the Secretary shall
provide for a procedure for the recovery of deposits at-
tributable to the remaining months in the year.
‘‘(g) PAYMENTS FROM TRUST FUNDS.—Except as pro-
vided in section 1858A(c) (relating to payments for quali-
fied prescription drug coverage), the payment to a
MedicareAdvantage organization under this section for in-
dividuals enrolled under this part with the organization
and payments to a MedicareAdvantage MSA under sub-
section (e)(1) shall be made from the Federal Hospital In-
surance Trust Fund and the Federal Supplementary Med-
ical Insurance Trust Fund in such proportion as the Sec-
retary determines reflects the relative weight that benefits
under part A and under part B represents of the actuarial
value of the total benefits under this title. Monthly pay-
ments otherwise payable under this section for October 2000
shall be paid on the first business day of such month.
Monthly payments otherwise payable under this section for
October 2001 shall be paid on the last business day of Sep-
tember 2001. Monthly payments otherwise payable under
this section for October 2006 shall be paid on the first busi-
ness day of October 2006.
‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
†
345
HR 1 EAS
pital (as defined in section 1886(d)(1)(B)) as of the effective
date of the individual’s—
‘‘(1) 
election 
under 
this 
part 
of 
a
MedicareAdvantage 
plan 
offered 
by 
a
MedicareAdvantage organization—
‘‘(A) payment for such services until the
date of the individual’s discharge shall be made
under this title through the MedicareAdvantage
plan or the original medicare fee-for-service pro-
gram option (as the case may be) elected before
the election with such organization,
‘‘(B) the elected organization shall not be fi-
nancially responsible for payment for such serv-
ices until the date after the date of the individ-
ual’s discharge; and
‘‘(C) the organization shall nonetheless be
paid the full amount otherwise payable to the or-
ganization under this part; or
‘‘(2) termination of election with respect to a
MedicareAdvantage organization under this part—
‘‘(A) the organization shall be financially
responsible for payment for such services after
such date and until the date of the individual’s
discharge;
†
346
HR 1 EAS
‘‘(B) payment for such services during the
stay shall not be made under section 1886(d) or
by any succeeding MedicareAdvantage organiza-
tion; and
‘‘(C) the terminated organization shall not
receive any payment with respect to the indi-
vidual under this part during the period the in-
dividual is not enrolled.
‘‘(i) SPECIAL RULE FOR HOSPICE CARE.—
‘‘(1) INFORMATION.—A contract under this part
shall require the MedicareAdvantage organization to
inform each individual enrolled under this part with
a MedicareAdvantage plan offered by the organization
about the availability of hospice care if—
‘‘(A) a hospice program participating under
this title is located within the organization’s
service area; or
‘‘(B) it is common practice to refer patients
to hospice programs outside such service area.
‘‘(2) PAYMENT.—If an individual who is enrolled
with a MedicareAdvantage organization under this
part makes an election under section 1812(d)(1) to re-
ceive 
hospice 
care 
from 
a 
particular 
hospice
program—
†
347
HR 1 EAS
‘‘(A) payment for the hospice care furnished
to the individual shall be made to the hospice
program elected by the individual by the Sec-
retary;
‘‘(B) payment for other services for which
the individual is eligible notwithstanding the in-
dividual’s election of hospice care under section
1812(d)(1), including services not related to the
individual’s terminal illness, shall be made by
the Secretary to the MedicareAdvantage organi-
zation or the provider or supplier of the service
instead of payments calculated under subsection
(a); and
‘‘(C) the Secretary shall continue to make
monthly payments to the MedicareAdvantage or-
ganization in an amount equal to the value of
the additional benefits required under section
1854(f)(1)(A).’’.
SEC. 204. SUBMISSION OF BIDS; PREMIUMS.
Section 1854 (42 U.S.C. 1395w–24) is amended to
read as follows:
‘‘SUBMISSION OF BIDS; PREMIUMS
‘‘SEC. 
1854. 
(a) 
SUBMISSION
OF
BIDS
BY
MEDICAREADVANTAGE ORGANIZATIONS.—
‘‘(1) IN GENERAL.—Not later than the second
Monday in September and except as provided in
†
348
HR 1 EAS
paragraph (3), each MedicareAdvantage organization
shall submit to the Secretary, in such form and man-
ner 
as 
the 
Secretary 
may 
specify, 
for 
each
MedicareAdvantage plan that the organization in-
tends to offer in a service area in the following
year—
‘‘(A) notice of such intent and information
on the service area of the plan;
‘‘(B) the plan type for each plan;
‘‘(C) if the MedicareAdvantage plan is a co-
ordinated care plan (as described in section
1851(a)(2)(A)) or a private fee-for-service plan
(as described in section 1851(a)(2)(C)), the infor-
mation described in paragraph (2) with respect
to each payment area;
‘‘(D) the enrollment capacity (if any) in re-
lation to the plan and each payment area;
‘‘(E) the expected mix, by health status, of
enrolled individuals; and
‘‘(F) such other information as the Sec-
retary may specify.
‘‘(2) INFORMATION REQUIRED FOR COORDINATED
CARE
PLANS
AND
PRIVATE
FEE-FOR-SERVICE
PLANS.—For a MedicareAdvantage plan that is a co-
ordinated 
care 
plan 
(as 
described 
in 
section
†
349
HR 1 EAS
1851(a)(2)(A)) or a private fee-for-service plan (as
described in section 1851(a)(2)(C)), the information
described in this paragraph is as follows:
‘‘(A) INFORMATION
REQUIRED
WITH
RE-
SPECT
TO
BENEFITS
UNDER
THE
ORIGINAL
MEDICARE
FEE-FOR-SERVICE
PROGRAM
OP-
TION.—Information relating to the coverage of
benefits under the original medicare fee-for-serv-
ice program option as follows:
‘‘(i) The plan bid, which shall consist
of a dollar amount that represents the total
amount that the plan is willing to accept
(not taking into account the application of
the comprehensive risk adjustment method-
ology under section 1853(a)(3)) for pro-
viding coverage of the benefits under the
original medicare fee-for-service program
option to an individual enrolled in the plan
that resides in the service area of the plan
for a month.
‘‘(ii) For the enhanced medical benefits
package offered—
‘‘(I) the adjusted community rate
(as defined in subsection (g)(3)) of the
package;
†
350
HR 1 EAS
‘‘(II) the portion of the actuarial
value of such benefits package (if any)
that will be applied toward satisfying
the requirement for additional benefits
under subsection (g);
‘‘(III) 
the 
MedicareAdvantage
monthly beneficiary premium for en-
hanced medical benefits (as defined in
subsection (b)(2)(C));
‘‘(IV) a description of any cost-
sharing;
‘‘(V) a description of whether the
amount of the unified deductible has
been lowered or the maximum limita-
tions on out-of-pocket expenses have
been decreased (relative to the levels
used in calculating the plan bid);
‘‘(VI) such other information as
the Secretary considers necessary.
‘‘(iii) 
The 
assumptions 
that 
the
MedicareAdvantage organization used in
preparing the plan bid with respect to num-
bers, in each payment area, of enrolled in-
dividuals and the mix, by health status, of
such individuals.
†
351
HR 1 EAS
‘‘(B) INFORMATION
REQUIRED
WITH
RE-
SPECT TO PART D.—The information required to
be submitted by an eligible entity under section
1860D–12, including the monthly premiums for
standard coverage and any other qualified pre-
scription drug coverage available to individuals
enrolled under part D.
‘‘(C) DETERMINING PLAN COSTS INCLUDED
IN PLAN BID.—For purposes of submitting its
plan 
bid 
under 
subparagraph 
(A)(i) 
a
MedicareAdvantage 
plan 
offered 
by 
a
MedicareAdvantage organization satisfies sub-
paragraphs (A) and (C) of section 1852(a)(1) if
the actuarial value of the deductibles, coinsur-
ance, and copayments applicable on average to
individuals enrolled in such plan under this part
with respect to benefits under the original medi-
care fee-for-service program option on which that
bid is based (ignoring any reduction in cost-
sharing offered by such plan as enhanced med-
ical benefits under paragraph (2)(A)(ii) or re-
quired under clause (ii) or (iii) of subsection
(g)(1)(C)) equals the amount specified in sub-
section (f)(1)(B).
†
352
HR 1 EAS
‘‘(3) REQUIREMENTS FOR MSA PLANS.—For an
MSA plan described in section 1851(a)(2)(B), the in-
formation described in this paragraph is the informa-
tion that such a plan would have been required to
submit under this part if the Prescription Drug and
Medicare Improvements Act of 2003 had not been en-
acted.
‘‘(4) REVIEW.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary shall review the ad-
justed community rates (as defined in section
1854(g)(3)), 
the 
amounts 
of 
the
MedicareAdvantage monthly basic premium and
the MedicareAdvantage monthly beneficiary pre-
mium for enhanced medical benefits filed under
this subsection and shall approve or disapprove
such rates and amounts so submitted. The Sec-
retary shall review the actuarial assumptions
and data used by the MedicareAdvantage organi-
zation with respect to such rates and amounts so
submitted to determine the appropriateness of
such assumptions and data.
‘‘(B) EXCEPTION.—The Secretary shall not
review, approve, or disapprove the amounts sub-
mitted under paragraph (3), or, with respect to
†
353
HR 1 EAS
a private fee-for-service plan (as described in sec-
tion 1851(a)(2)(C)) under subparagraph (A)(i),
(A)(ii)(III), or (B) of paragraph (2).
‘‘(C) CLARIFICATION
OF
AUTHORITY
RE-
GARDING DISAPPROVAL OF UNREASONABLE BEN-
EFICIARY COST-SHARING.—Under the authority
under subparagraph (A), the Secretary may dis-
approve the bid if the Secretary determines that
the deductibles, coinsurance, or copayments ap-
plicable under the plan discourage access to cov-
ered services or are likely to result in favorable
selection of MedicareAdvantage eligible individ-
uals.
‘‘(5) APPLICATION OF FEHBP STANDARD; PROHI-
BITION ON PRICE GOUGING.—Each bid amount sub-
mitted under paragraph (1) for a MedicareAdvantage
plan must reasonably and equitably reflect the cost of
benefits provided under that plan.
‘‘(b) MONTHLY PREMIUMS CHARGED.—
‘‘(1) IN GENERAL.—
‘‘(A) COORDINATED
CARE
AND
PRIVATE
FEE-FOR-SERVICE PLANS.—The monthly amount
of the premium charged to an individual en-
rolled in a MedicareAdvantage plan (other than
an MSA plan) offered by a MedicareAdvantage
†
354
HR 1 EAS
organization shall be equal to the sum of the fol-
lowing:
‘‘(i) The MedicareAdvantage monthly
basic beneficiary premium (if any).
‘‘(ii) The MedicareAdvantage monthly
beneficiary premium for enhanced medical
benefits (if any).
‘‘(iii) The MedicareAdvantage monthly
obligation for qualified prescription drug
coverage (if any).
‘‘(B) MSA PLANS.—The rules under this
section that would have applied with respect to
an MSA plan if the Prescription Drug and
Medicare Improvements Act of 2003 had not
been enacted shall continue to apply to MSA
plans after the date of enactment of such Act.
‘‘(2) PREMIUM TERMINOLOGY.—For purposes of
this part:
‘‘(A) MEDICAREADVANTAGE MONTHLY BASIC
BENEFICIARY
PREMIUM.—The 
term
‘MedicareAdvantage monthly basic beneficiary
premium’ 
means, 
with 
respect 
to 
a
MedicareAdvantage plan, the amount required to
be charged under subsection (d)(2) for the plan.
†
355
HR 1 EAS
‘‘(B) MEDICAREADVANTAGE MONTHLY BEN-
EFICIARY OBLIGATION FOR QUALIFIED PRESCRIP-
TION
DRUG
COVERAGE.—The 
term
‘MedicareAdvantage monthly beneficiary obliga-
tion for qualified prescription drug coverage’
means, with respect to a MedicareAdvantage
plan, the amount determined under section
1858A(d).
‘‘(C) MEDICAREADVANTAGE MONTHLY BEN-
EFICIARY
PREMIUM
FOR
ENHANCED
MEDICAL
BENEFITS.—The 
term 
‘MedicareAdvantage
monthly beneficiary premium for enhanced med-
ical 
benefits’ 
means, 
with 
respect 
to 
a
MedicareAdvantage plan, the amount required to
be charged under subsection (f)(2) for the plan,
or, in the case of an MSA plan, the amount filed
under subsection (a)(3).
‘‘(D) MEDICAREADVANTAGE MONTHLY MSA
PREMIUM.—The 
term 
‘MedicareAdvantage
monthly MSA premium’ means, with respect to
a MedicareAdvantage plan, the amount of such
premium filed under subsection (a)(3) for the
plan.
‘‘(c) UNIFORM PREMIUM.—The MedicareAdvantage
monthly basic beneficiary premium, the MedicareAdvantage
†
356
HR 1 EAS
monthly beneficiary obligation for qualified prescription
drug coverage, the MedicareAdvantage monthly beneficiary
premium 
for 
enhanced 
medical 
benefits, 
and 
the
MedicareAdvantage monthly MSA premium charged under
subsection (b) of a MedicareAdvantage organization under
this part may not vary among individuals enrolled in the
plan. Subject to the provisions of section 1858(h), such re-
quirement 
shall 
not 
apply 
to 
enrollees 
of 
a
MedicareAdvantage plan who are enrolled in the plan pur-
suant to a contractual agreement between the plan and an
employer or other group health plan that provides employ-
ment-based retiree health coverage (as defined in section
1860D–20(d)(4)(B)) if the premium amount is the same for
all such enrollees under such agreement.
‘‘(d) DETERMINATION OF PREMIUM REDUCTIONS, RE-
DUCED COST-SHARING, ADDITIONAL BENEFITS, AND BENE-
FICIARY PREMIUMS.—
‘‘(1) BIDS BELOW THE BENCHMARK.—If the Sec-
retary determines under section 1853(d)(3) that the
weighted service area benchmark amount exceeds the
plan bid, the Secretary shall require the plan to pro-
vide additional benefits in accordance with subsection
(g).
‘‘(2) BIDS ABOVE THE BENCHMARK.—If the Sec-
retary determines under section 1853(d)(3) that the
†
357
HR 1 EAS
plan bid exceeds the weighted service area benchmark
amount (determined under section 1853(d)(2)), the
amount of such excess shall be the MedicareAdvantage
monthly basic beneficiary premium (as defined in
section 1854(b)(2)(A)).
‘‘(e) TERMS
AND CONDITIONS
OF IMPOSING PRE-
MIUMS.—Each MedicareAdvantage organization shall per-
mit the payment of any MedicareAdvantage monthly basic
premium, the MedicareAdvantage monthly beneficiary obli-
gation for qualified prescription drug coverage, and the
MedicareAdvantage monthly beneficiary premium for en-
hanced medical benefits on a monthly basis, may terminate
election of individuals for a MedicareAdvantage plan for
failure to make premium payments only in accordance with
section 1851(g)(3)(B)(i), and may not provide for cash or
other monetary rebates as an inducement for enrollment or
otherwise (other than as an additional benefit described in
subsection (g)(1)(C)(i)).
‘‘(f) LIMITATION ON ENROLLEE LIABILITY.—
‘‘(1) FOR BENEFITS UNDER THE ORIGINAL MEDI-
CARE FEE-FOR-SERVICE PROGRAM OPTION.—The sum
of—
‘‘(A) the MedicareAdvantage monthly basic
beneficiary premium (multiplied by 12) and the
actuarial value of the deductibles, coinsurance,
†
358
HR 1 EAS
and copayments (determined on the same basis
as used in determining the plan’s bid under
paragraph (2)(C)) applicable on average to indi-
viduals enrolled under this part with a
MedicareAdvantage plan described in subpara-
graph (A) of section 1851(a)(2) of an organiza-
tion with respect to required benefits described in
section 1852(a)(1)(A); must equal
‘‘(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be ap-
plicable on average to individuals who have
elected to receive benefits under the original
medicare fee-for-service program option if such
individuals 
were 
not 
members 
of 
a
MedicareAdvantage organization for the year
(adjusted as determined appropriate by the Sec-
retary to account for geographic differences and
for plan cost and utilization differences).
‘‘(2) FOR ENHANCED MEDICAL BENEFITS.—If the
MedicareAdvantage organization provides to its mem-
bers enrolled under this part in a MedicareAdvantage
plan described in subparagraph (A) of section
1851(a)(2) with respect to enhanced medical benefits
relating to benefits under the original medicare fee-
for-service 
program 
option, 
the 
sum 
of 
the
†
359
HR 1 EAS
MedicareAdvantage monthly beneficiary premium for
enhanced medical benefits (multiplied by 12) charged
and the actuarial value of its deductibles, coinsur-
ance, and copayments charged with respect to such
benefits for a year must equal the adjusted commu-
nity rate (as defined in subsection (g)(3)) for such
benefits for the year minus the actuarial value of any
additional benefits pursuant to clause (ii), (iii), or
(iv) of subsection (g)(2)(C) that the plan specified
under subsection (a)(2)(i)(II).
‘‘(3) DETERMINATION ON OTHER BASIS.—If the
Secretary determines that adequate data are not
available to determine the actuarial value under
paragraph (1)(A) or (2), the Secretary may determine
such amount with respect to all individuals in the
same geographic area, the State, or in the United
States, eligible to enroll in the MedicareAdvantage
plan involved under this part or on the basis of other
appropriate data.
‘‘(4) SPECIAL RULE FOR PRIVATE FEE-FOR-SERV-
ICE
PLANS.—With respect to a MedicareAdvantage
private fee-for-service plan (other than a plan that is
an MSA plan), in no event may—
‘‘(A) the actuarial value of the deductibles,
coinsurance, and copayments applicable on aver-
†
360
HR 1 EAS
age to individuals enrolled under this part with
such a plan of an organization with respect to
required benefits described in subparagraphs (A),
(C), and (D) of section 1852(a)(1); exceed
‘‘(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be ap-
plicable on average to individuals entitled to (or
enrolled for) benefits under part A and enrolled
under part B if they were not members of a
MedicareAdvantage organization for the year.
‘‘(g) REQUIREMENT FOR ADDITIONAL BENEFITS.—
‘‘(1) REQUIREMENT.—
‘‘(A) 
IN
GENERAL.—Each
MedicareAdvantage organization (in relation to
a MedicareAdvantage plan, other than an MSA
plan, it offers) shall provide that if there is an
excess amount (as defined in subparagraph (B))
for the plan for a contract year, subject to the
succeeding provisions of this subsection, the orga-
nization shall provide to individuals such addi-
tional benefits described in subparagraph (C) as
the organization may specify in a value which
the Secretary determines is at least equal to the
adjusted excess amount (as defined in subpara-
graph (D)).
†
361
HR 1 EAS
‘‘(B) EXCESS
AMOUNT.—For purposes of
this paragraph, the term ‘excess amount’ means,
for an organization for a plan, is 100 percent of
the amount (if any) by which the weighted serv-
ice area benchmark amount (determined under
section 1853(d)(2)) exceeds the plan bid (as ad-
justed under section 1853(d)(1)).
‘‘(C) ADDITIONAL BENEFITS DESCRIBED.—
The additional benefits described in this sub-
paragraph are as follows:
‘‘(i) Subject to subparagraph (F), a
monthly part B premium reduction for in-
dividuals enrolled in the plan.
‘‘(ii) Lowering the amount of the uni-
fied deductible and decreasing the max-
imum limitations on out-of-pocket expenses
for individuals enrolled in the plan.
‘‘(iii) A reduction in the actuarial
value of plan cost-sharing for plan enrollees.
‘‘(iv) Subject to subparagraph (E),
such additional benefits as the organization
may specify.
‘‘(v) Contributing to the stabilization
fund under paragraph (2).
†
362
HR 1 EAS
‘‘(vi) Any combination of the reduc-
tions and benefits described in clauses (i)
through (v).
‘‘(D) ADJUSTED
EXCESS
AMOUNT.—For
purposes of this paragraph, the term ‘adjusted
excess amount’ means, for an organization for a
plan, is the excess amount reduced to reflect any
amount withheld and reserved for the organiza-
tion for the year under paragraph (2).
‘‘(E) RULE FOR APPROVAL OF MEDICAL AND
PRESCRIPTION DRUG BENEFITS.—An organiza-
tion may not specify any additional benefit that
provides for the coverage of any prescription
drug (other than that relating to prescription
drugs covered under the original medicare fee-
for-service program option).
‘‘(F) PREMIUM REDUCTIONS.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), as part of providing any additional
benefits required under subparagraph (A), a
MedicareAdvantage organization may elect
a reduction in its payments under section
1853(a)(1)(A)(i) 
with 
respect 
to 
a
MedicareAdvantage plan and the Secretary
shall apply such reduction to reduce the
†
363
HR 1 EAS
premium under section 1839 of each en-
rollee in such plan as provided in section
1840(i).
‘‘(ii) AMOUNT
OF
REDUCTION.—The
amount of the reduction under clause (i)
with 
respect 
to 
any 
enrollee 
in 
a
MedicareAdvantage plan—
‘‘(I) may not exceed 125 percent
of the premium described under section
1839(a)(3); and
‘‘(II) shall apply uniformly to
each enrollee of the MedicareAdvantage
plan to which such reduction applies.
‘‘(G) UNIFORM
APPLICATION.—This para-
graph shall be applied uniformly for all enrollees
for a plan.
‘‘(H) CONSTRUCTION.—Nothing in this sub-
section shall be construed as preventing a
MedicareAdvantage organization from providing
enhanced medical benefits (described in section
1852(a)(3)) that are in addition to the health
care benefits otherwise required to be provided
under this paragraph and from imposing a pre-
mium for such enhanced medical benefits.
†
364
HR 1 EAS
‘‘(2) 
STABILIZATION
FUND.—A
MedicareAdvantage organization may provide that a
part of the value of an excess amount described in
paragraph (1) be withheld and reserved in the Fed-
eral Hospital Insurance Trust Fund and in the Fed-
eral Supplementary Medical Insurance Trust Fund
(in such proportions as the Secretary determines to be
appropriate) by the Secretary for subsequent annual
contract periods, to the extent required to prevent
undue fluctuations in the additional benefits offered
in those subsequent periods by the organization in ac-
cordance with such paragraph. Any of such value of
the amount reserved which is not provided as addi-
tional benefits described in paragraph (1)(A) to indi-
viduals electing the MedicareAdvantage plan of the
organization in accordance with such paragraph
prior to the end of such periods, shall revert for the
use of such Trust Funds.
‘‘(3) ADJUSTED
COMMUNITY
RATE.—For pur-
poses of this subsection, subject to paragraph (4), the
term ‘adjusted community rate’ for a service or serv-
ices means, at the election of a MedicareAdvantage or-
ganization, either—
‘‘(A) the rate of payment for that service or
services which the Secretary annually determines
†
365
HR 1 EAS
would apply to an individual electing a
MedicareAdvantage plan under this part if the
rate of payment were determined under a ‘com-
munity rating system’ (as defined in section
1302(8) of the Public Health Service Act, other
than subparagraph (C)); or
‘‘(B) such portion of the weighted aggregate
premium, which the Secretary annually esti-
mates would apply to such an individual, as the
Secretary annually estimates is attributable to
that service or services,
but adjusted for differences between the utilization
characteristics of the individuals electing coverage
under this part and the utilization characteristics of
the other enrollees with the plan (or, if the Secretary
finds that adequate data are not available to adjust
for those differences, the differences between the utili-
zation characteristics of individuals selecting other
MedicareAdvantage coverage, or MedicareAdvantage
eligible individuals in the area, in the State, or in the
United States, eligible to elect MedicareAdvantage
coverage under this part and the utilization charac-
teristics of the rest of the population in the area, in
the State, or in the United States, respectively).
†
366
HR 1 EAS
‘‘(4) DETERMINATION BASED ON INSUFFICIENT
DATA.—For purposes of this subsection, if the Sec-
retary finds that there is insufficient enrollment expe-
rience to determine the average amount of payments
to be made under this part at the beginning of a con-
tract period or to determine (in the case of a newly
operated provider-sponsored organization or other
new organization) the adjusted community rate for
the organization, the Secretary may determine such
an average based on the enrollment experience of other
contracts entered into under this part and may deter-
mine such a rate using data in the general commer-
cial marketplace.
‘‘(h) PROHIBITION OF STATE IMPOSITION OF PREMIUM
TAXES.—No State may impose a premium tax or similar
tax with respect to payments to MedicareAdvantage organi-
zations under section 1853.
‘‘(i) PERMITTING USE
OF SEGMENTS
OF SERVICE
AREAS.—The Secretary shall permit a MedicareAdvantage
organization to elect to apply the provisions of this section
uniformly to separate segments of a service area (rather
than uniformly to an entire service area) as long as such
segments are composed of 1 or more MedicareAdvantage
payment areas.’’.
†
367
HR 1 EAS
(b) STUDY AND REPORT ON CLARIFICATION OF AU-
THORITY REGARDING DISAPPROVAL
OF UNREASONABLE
BENEFICIARY COST-SHARING.—
(1) STUDY.—The Secretary, in consultation with
beneficiaries, 
consumer 
groups, 
employers, 
and
Medicare+Choice organizations, shall conduct a study
to determine the extent to which the cost-sharing
structures under Medicare+Choice plans under part
C of title XVIII of the Social Security Act discourage
access to covered services or discriminate based on the
health status of Medicare+Choice eligible individuals
(as defined in section 1851(a)(3) of the Social Secu-
rity Act (42 U.S.C. 1395w–21(a)(3))).
(2) REPORT.—Not later than December 31, 2004,
the Secretary shall submit a report to Congress on the
study conducted under paragraph (1) together with
recommendations for such legislation and administra-
tive actions as the Secretary considers appropriate.
SEC. 205. SPECIAL RULES FOR PRESCRIPTION DRUG BENE-
FITS.
Part C of title XVIII (42 U.S.C. 1395w–21 et seq.)
is amended by inserting after section 1857 the following
new section:
‘‘SPECIAL RULES FOR PRESCRIPTION DRUG BENEFITS
‘‘SEC. 1858A. (a) AVAILABILITY.—
†
368
HR 1 EAS
‘‘(1) PLANS REQUIRED TO PROVIDE QUALIFIED
PRESCRIPTION DRUG COVERAGE TO ENROLLEES.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), on and after January 1,
2006, a MedicareAdvantage organization offering
a MedicareAdvantage plan (except for an MSA
plan) shall make available qualified prescription
drug coverage that meets the requirements for
such coverage under this part and part D to each
enrollee of the plan.
‘‘(B) PRIVATE
FEE-FOR-SERVICE
PLANS
MAY, BUT
ARE
NOT
REQUIRED
TO, PROVIDE
QUALIFIED
PRESCRIPTION
DRUG
COVERAGE.—
Pursuant to section 1852(a)(2)(D), a private fee-
for-service plan may elect not to provide quali-
fied prescription drug coverage under part D to
individuals residing in the area served by the
plan.
‘‘(2) REFERENCE TO PROVISION PERMITTING AD-
DITIONAL PRESCRIPTION DRUG COVERAGE.—For the
provisions of part D, made applicable to this part
pursuant to paragraph (1), that permit a plan to
make available qualified prescription drug coverage
that includes coverage of covered drugs that exceeds
the coverage required under paragraph (1) of section
†
369
HR 1 EAS
1860D–6 
in 
an 
area, 
but 
only 
if 
the
MedicareAdvantage organization offering the plan
also offers a MedicareAdvantage plan in the area that
only provides the coverage that is required under such
paragraph (1), see paragraph (2) of such section.
‘‘(3) RULE FOR APPROVAL OF MEDICAL AND PRE-
SCRIPTION
DRUG
BENEFITS.—Pursuant to sections
1854(g)(1)(F) 
and 
1852(a)(3)(D), 
a
MedicareAdvantage 
organization 
offering 
a
MedicareAdvantage plan that provides qualified pre-
scription drug coverage may not make available cov-
erage of any prescription drugs (other than that relat-
ing to prescription drugs covered under the original
medicare fee-for-service program option) to an en-
rollee as an additional benefit or as an enhanced
medical benefit.
‘‘(b) COMPLIANCE WITH ADDITIONAL BENEFICIARY
PROTECTIONS.—With respect to the offering of qualified
prescription drug coverage by a MedicareAdvantage organi-
zation under a MedicareAdvantage plan, the organization
and plan shall meet the requirements of section 1860D–5,
including requirements relating to information dissemina-
tion and grievance and appeals, and such other require-
ments under part D that the Secretary determines appro-
priate in the same manner as such requirements apply to
†
370
HR 1 EAS
an eligible entity and a Medicare Prescription Drug plan
under part D. The Secretary shall waive such requirements
to the extent the Secretary determines that such require-
ments duplicate requirements otherwise applicable to the or-
ganization or the plan under this part.
‘‘(c) PAYMENTS FOR PRESCRIPTION DRUGS.—
‘‘(1) PAYMENT OF FULL AMOUNT OF PREMIUM TO
ORGANIZATIONS FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.—
‘‘(A) IN GENERAL.—For each year (begin-
ning with 2006), the Secretary shall pay to each
MedicareAdvantage 
organization 
offering 
a
MedicareAdvantage plan that provides qualified
prescription drug coverage, an amount equal to
the full amount of the monthly premium sub-
mitted under section 1854(a)(2)(B) for the year,
as adjusted using the risk adjusters that apply to
the standard prescription drug coverage pub-
lished under section 1860D–11.
‘‘(B) APPLICATION OF PART D RISK COR-
RIDOR, STABILIZATION RESERVE FUND, AND AD-
MINISTRATIVE EXPENSES PROVISIONS.—The pro-
visions of subsections (b), (c), and (d) of section
1860D–16 shall apply to a MedicareAdvantage
organization offering a MedicareAdvantage plan
†
371
HR 1 EAS
that provides qualified prescription drug cov-
erage and payments made to such organization
under subparagraph (A) in the same manner as
such provisions apply to an eligible entity offer-
ing a Medicare Prescription Drug plan and pay-
ments made to such entity under subsection (a)
of section 1860D–16.
‘‘(2) PAYMENT FROM PRESCRIPTION DRUG AC-
COUNT.—Payment made to MedicareAdvantage orga-
nizations under this subsection shall be made from the
Prescription Drug Account in the Federal Supple-
mentary Medical Insurance Trust Fund under section
1841.
‘‘(d) COMPUTATION OF MEDICAREADVANTAGE MONTH-
LY BENEFICIARY OBLIGATION FOR QUALIFIED PRESCRIP-
TION
DRUG
COVERAGE.—In 
the 
case 
of 
a
MedicareAdvantage eligible individual receiving qualified
prescription drug coverage under a MedicareAdvantage
plan during a year after 2005, the MedicareAdvantage
monthly beneficiary obligation for qualified prescription
drug coverage of such individual in the year shall be deter-
mined in the same manner as the monthly beneficiary obli-
gation is determined under section 1860D–17 for eligible
beneficiaries enrolled in a Medicare Prescription Drug
plan, except that, for purposes of this subparagraph, any
†
372
HR 1 EAS
reference to the monthly plan premium approved by the
Secretary under section 1860D–13 shall be treated as a ref-
erence to the monthly premium for qualified prescription
drug coverage submitted by the MedicareAdvantage organi-
zation offering the plan under section 1854(a)(2)(A) and
approved by the Secretary.
‘‘(e) COLLECTION OF MEDICAREADVANTAGE MONTHLY
BENEFICIARY OBLIGATION FOR QUALIFIED PRESCRIPTION
DRUG COVERAGE.—The provisions of section 1860D–18,
including subsection (b) of such section, shall apply to the
amount of the MedicareAdvantage monthly beneficiary obli-
gation for qualified prescription drug coverage (as deter-
mined under subsection (d)) required to be paid by a
MedicareAdvantage eligible individual enrolled in a
MedicareAdvantage plan in the same manner as such provi-
sions apply to the amount of the monthly beneficiary obli-
gation required to be paid by an eligible beneficiary en-
rolled in a Medicare Prescription Drug plan under part
D.
‘‘(f) AVAILABILITY OF PREMIUM SUBSIDY AND COST-
SHARING REDUCTIONS FOR LOW-INCOME ENROLLEES AND
REINSURANCE PAYMENTS.—For provisions—
‘‘(1) providing premium subsidies and cost-shar-
ing reductions for low-income individuals receiving
†
373
HR 1 EAS
qualified prescription drug coverage through a
MedicareAdvantage plan, see section 1860D–19; and
‘‘(2) providing a MedicareAdvantage organiza-
tion with reinsurance payments for certain expenses
incurred in providing qualified prescription drug cov-
erage through a MedicareAdvantage plan, see section
1860D–20.’’.
(b) TREATMENT OF REDUCTION FOR PURPOSES OF
DETERMINING GOVERNMENT CONTRIBUTION UNDER PART
B.—Section 1844(c) (42 U.S.C. 1395w) is amended by
striking ‘‘section 1854(f)(1)(E)’’ and inserting ‘‘section
1854(d)(1)(A)(i)’’.
SEC. 206. FACILITATING EMPLOYER PARTICIPATION.
Section 1858(h) (as added by section 211) is
amended—
(1) by inserting ‘‘(including subsection (i) of
such section)’’ after ‘‘section 1857’’; and
(2) by adding at the end the following new sen-
tence: ‘‘In applying the authority under section
1857(i) pursuant to this subsection, the Adminis-
trator may permit MedicareAdvantage plans to estab-
lish separate premium amounts for enrollees in an
employer or other group health plan that provides
employment-based retiree health coverage (as defined
in section 1860D–20(d)(4)(B)).’’
†
374
HR 1 EAS
SEC. 207. ADMINISTRATION BY THE CENTER FOR MEDICARE
CHOICES.
On and after January 1, 2006, the MedicareAdvantage
program under part C of title XVIII of the Social Security
Act shall be administered by the Center for Medicare
Choices established under section 1808 such title (as added
by section 301), and each reference to the Secretary made
in such part shall be deemed to be a reference to the Admin-
istrator of the Center for Medicare Choices.
SEC. 208. CONFORMING AMENDMENTS.
(a) ORGANIZATIONAL AND FINANCIAL REQUIREMENTS
FOR MEDICAREADVANTAGE ORGANIZATIONS; PROVIDER-
SPONSORED ORGANIZATIONS.—Section 1855 (42 U.S.C.
1395w–25) is amended—
(1) in subsection (b), in the matter preceding
paragraph (1), by inserting ‘‘subparagraphs (A), (B),
and (D) of’’ before ‘‘section 1852(A)(1)’’; and
(2) by striking ‘‘Medicare+Choice’’ and insert-
ing ‘‘MedicareAdvantage’’ each place it appears.
(b) ESTABLISHMENT OF PSO STANDARDS.—Section
1856 (42 U.S.C. 1395w–26) is amended by striking
‘‘Medicare+Choice’’ and inserting ‘‘MedicareAdvantage’’
each place it appears.
(c) CONTRACTS WITH MEDICAREADVANTAGE ORGANI-
ZATIONS.—Section 
1857 
(42 
U.S.C. 
1395w–27) 
is
amended—
†
375
HR 1 EAS
(1) in subsection (g)(1)—
(A) in subparagraph (B), by striking
‘‘amount of the Medicare+Choice monthly basic
and supplemental beneficiary premiums’’ and
inserting ‘‘amounts of the MedicareAdvantage
monthly basic premium and MedicareAdvantage
monthly beneficiary premium for enhanced med-
ical benefits’’;
(B) in subparagraph (F), by striking ‘‘or’’
after the semicolon at the end;
(C) in subparagraph (G), by adding ‘‘or’’
after the semicolon at the end; and
(D) by inserting after subparagraph (G) the
following new subparagraph:
‘‘(H)(i) charges any individual an amount
in excess of the MedicareAdvantage monthly ben-
eficiary obligation for qualified prescription
drug coverage under section 1858A(d);
‘‘(ii) provides coverage for prescription
drugs that is not qualified prescription drug cov-
erage;
‘‘(iii) offers prescription drug coverage, but
does not make standard prescription drug cov-
erage available; or
†
376
HR 1 EAS
‘‘(iv) provides coverage for prescription
drugs (other than that relating to prescription
drugs covered under the original medicare fee-
for-service program option described in section
1851(a)(1)(A)(i)) as an enhanced medical benefit
under section 1852(a)(3)(D) or as an additional
benefit under section 1854(g)(1)(F),’’; and
(2) by striking ‘‘Medicare+Choice’’ and insert-
ing ‘‘MedicareAdvantage’’ each place it appears.
(d) DEFINITIONS; MISCELLANEOUS PROVISIONS.—Sec-
tion 1859 (42 U.S.C. 1395w–28) is amended—
(1) by striking subsection (c) and inserting the
following new subsection:
‘‘(c) OTHER REFERENCES TO OTHER TERMS.—
‘‘(1) ENHANCED MEDICAL BENEFITS.—The term
‘enhanced medical benefits’ is defined in section
1852(a)(3)(E).
‘‘(2) 
MEDICAREADVANTAGE
ELIGIBLE
INDI-
VIDUAL.—The term ‘MedicareAdvantage eligible indi-
vidual’ is defined in section 1851(a)(3).
‘‘(3) MEDICAREADVANTAGE
PAYMENT
AREA.—
The term ‘MedicareAdvantage payment area’ is de-
fined in section 1853(d).
‘‘(4) NATIONAL PER CAPITA MEDICARE+CHOICE
GROWTH
PERCENTAGE.—The ‘national per capita
†
377
HR 1 EAS
Medicare+Choice growth percentage’ is defined in sec-
tion 1853(c)(6).
‘‘(5) MEDICAREADVANTAGE MONTHLY BASIC BEN-
EFICIARY PREMIUM; MEDICAREADVANTAGE MONTHLY
BENEFICIARY OBLIGATION FOR QUALIFIED PRESCRIP-
TION DRUG COVERAGE; MEDICAREADVANTAGE MONTH-
LY BENEFICIARY PREMIUM FOR ENHANCED MEDICAL
BENEFITS.—The terms ‘MedicareAdvantage monthly
basic 
beneficiary 
premium’, 
‘MedicareAdvantage
monthly beneficiary obligation for qualified prescrip-
tion drug coverage’, and ‘MedicareAdvantage monthly
beneficiary premium for enhanced medical benefits’
are defined in section 1854(b)(2).
‘‘(6) QUALIFIED
PRESCRIPTION
DRUG
COV-
ERAGE.—The term ‘qualified prescription drug cov-
erage’ has the meaning given such term in section
1860D(9).
‘‘(7) 
STANDARD
PRESCRIPTION
DRUG
COV-
ERAGE.—The term ‘standard prescription drug cov-
erage’ has the meaning given such term in section
1860D(10).’’; and
(2) by striking ‘‘Medicare+Choice’’ and insert-
ing ‘‘MedicareAdvantage’’ each place it appears.
(e) CONFORMING AMENDMENTS EFFECTIVE BEFORE
2006.—
†
378
HR 1 EAS
(1) EXTENSION OF MSAS.—Section 1851(b)(4)
(42 U.S.C. 1395w–21(b)(4)) is amended by striking
‘‘January 1, 2003’’ and inserting ‘‘January 1, 2004’’.
(2) 
CONTINUOUS
OPEN
ENROLLMENT
AND
DISENROLLMENT THROUGH 2005.—Section 1851(e) of
the Social Security Act (42 U.S.C. 1395w–21(e)) is
amended—
(A) in paragraph (2)(A), by striking
‘‘THROUGH 2004’’ and ‘‘December 31,2004’’ and
inserting ‘‘THROUGH 2005’’ and ‘‘December 31,
2005’’, respectively;
(B) in the heading of paragraph (2)(B), by
striking ‘‘DURING 2005’’ and inserting ‘‘DURING
2006’’;
(C) in paragraphs (2)(B)(i) and (2)(C)(i),
by striking ‘‘2005’’ and inserting ‘‘2006’’ each
place it appears;
(D) in paragraph (2)(D), by striking
‘‘2004’’ and inserting ‘‘2005’’; and
(E) in paragraph (4), by striking ‘‘2005’’
and inserting ‘‘2006’’ each place it appears.
(3) UPDATE
IN
MINIMUM
PERCENTAGE
IN-
CREASE.—Section 1853(c)(1)(C) (42 U.S.C. 1395w–
23(c)(1)(C)) is amended by striking clause (iv) and
inserting the following new clauses:
†
379
HR 1 EAS
‘‘(iv) For 2002, 2003, and 2004, 102
percent of the annual Medicare+Choice
capitation rate under this paragraph for
the area for the previous year.
‘‘(v) For 2005, 103 percent of the an-
nual 
Medicare+Choice 
capitation 
rate
under this paragraph for the area for 2003.
‘‘(vi) For 2006 and each succeeding
year, 
102 
percent 
of 
the 
annual
Medicare+Choice capitation rate under this
paragraph for the area for the previous
year, except that such rate shall be deter-
mined by substituting ‘102’ for ‘103’ in
clause (v).’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the date of en-
actment of this Act.
(e) OTHER CONFORMING AMENDMENTS.—
(1) 
CONFORMING
MEDICARE
CROSS-REF-
ERENCES.—
(A) 
Section 
1839(a)(2) 
(42 
U.S.C.
1395r(a)(2)) is amended by striking ‘‘section
1854(f)(1)(E)’’ 
and 
inserting 
‘‘section
1854(g)(1)(C)(i)’’.
†
380
HR 1 EAS
(B) Section 1840(i) (42 U.S.C. 1395s(i)) is
amended by striking ‘‘section 1854(f)(1)(E)’’ and
inserting ‘‘section 1854(g)(1)(C)(i)’’.
(C) Section 1844(c) (42 U.S.C. 1395w(c)) is
amended by striking ‘‘section 1854(f)(1)(E)’’ and
inserting ‘‘section 1854(g)(1)(C)(i)’’.
(D) Section 1876(k)(3)(A) (42 U.S.C.
1395mm(k)(3)(A)) is amended by inserting ‘‘(as
in effect immediately before the enactment of the
Prescription Drug and Medicare Improvements
Act of 2003)’’ after section 1853(a).
(F) 
Section 
1876(k)(4) 
(42 
U.S.C.
1395mm(k)(4)(A)) is amended—
(i) in subparagraph (A), by striking
‘‘section 1853(a)(3)(B)’’ and inserting ‘‘sec-
tion 1853(a)(3)(D)’’; and
(ii) in subparagraph (B), by striking
‘‘section 1854(g)’’ and inserting ‘‘section
1854(h)’’.
(G) 
Section 
1876(k)(4)(C) 
(42 
U.S.C.
1395mm(k)(4)(C)) in amended by inserting ‘‘(as
in effect immediately before the enactment of the
Prescription Drug and Medicare Improvements
Act of 2003)’’ after ‘‘section 1851(e)(6)’’.
†
381
HR 1 EAS
(H) Section 1894(d) (42 U.S.C. 1395eee(d))
is amended by adding at the end the following
new paragraph:
‘‘(3) APPLICATION
OF
PROVISIONS.—For pur-
poses of paragraphs (1) and (2), the references to sec-
tion 1853 and subsection (a)(2) of such section in
such paragraphs shall be deemed to be references to
those provisions as in effect immediately before the
enactment of the Prescription Drug and Medicare Im-
provements Act of 2003.’’.
(2) CONFORMING
MEDICARE
TERMINOLOGY.—
Title XVIII (42 U.S.C. 1395 et seq.), except for part
C of such title (42 U.S.C. 1395w–21 et seq.), and title
XIX (42 U.S.C. 1396 et seq.) are each amended by
striking 
‘‘Medicare+Choice’’ 
and 
inserting
‘‘MedicareAdvantage’’ each place it appears.
SEC. 209. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in section
208(d)(3) and subsection (b), the amendments made by this
title shall apply with respect to plan years beginning on
and after January 1, 2006.
(b) MEDICAREADVANTAGE MSA PLANS.—Notwith-
standing any provision of this title, the Secretary shall
apply the payment and other rules that apply with respect
to an MSA plan described in section 1851(a)(2)(B) of the
†
382
HR 1 EAS
Social Security Act (42 U.S.C. 1395w–21(a)(2)(B)) as if
this title had not been enacted.
SEC. 
210. 
IMPROVEMENTS 
IN 
MEDICAREADVANTAGE
BENCHMARK DETERMINATIONS.
(a) INCLUSION OF COSTS OF DOD AND VA MILITARY
FACILITY
SERVICES
TO
MEDICARE-ELIGIBLE
BENE-
FICIARIES IN CALCULATION OF MEDICAREADVANTAGE PAY-
MENT RATES.—
(1) 
FOR
PURPOSES
OF
CALCULATING
MEDICARE+CHOICE
PAYMENT
RATES.—Section
1853(c)(3) (42 U.S.C. 1395w–23(c)(3)), as amended
by section 203, is amended—
(A) in subparagraph (A), by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs
(B) and (E)’’; and
(B) by adding at the end the following new
subparagraph:
‘‘(E) INCLUSION OF COSTS OF DOD AND VA
MILITARY FACILITY SERVICES TO MEDICARE-ELI-
GIBLE
BENEFICIARIES.—In 
determining 
the
area-specific Medicare+Choice capitation rate
under subparagraph (A) for a year (beginning
with 2006), the annual per capita rate of pay-
ment 
for 
1997 
determined 
under 
section
1876(a)(1)(C) shall be adjusted to include in the
†
383
HR 1 EAS
rate the Secretary’s estimate, on a per capita
basis, of the amount of additional payments that
would have been made in the area involved
under this title if individuals entitled to benefits
under this title had not received services from fa-
cilities of the Department of Defense or the De-
partment of Veterans Affairs.’’.
(2) FOR PURPOSES OF CALCULATING LOCAL FEE-
FOR-SERVICE RATES.—Section 1853(d)(5) (42 U.S.C.
1395w–23(d)(5)), as amended by section 203, is
amended—
(A) in subparagraph (A), by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs
(B) and (C)’’; and
(B) by adding at the end the following new
subparagraph:
‘‘(C) INCLUSION OF COSTS OF DOD AND VA
MILITARY FACILITY SERVICES TO MEDICARE-ELI-
GIBLE BENEFICIARIES.—In determining the local
fee-for-service rate under subparagraph (A) for a
year (beginning with 2006), the annual per cap-
ita rate of payment for 1997 determined under
section 1876(a)(1)(C) shall be adjusted to include
in the rate the Secretary’s estimate, on a per
capita basis, of the amount of additional pay-
†
384
HR 1 EAS
ments that would have been made in the area in-
volved under this title if individuals entitled to
benefits under this title had not received services
from facilities of the Department of Defense or
the Department of Veterans Affairs.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to plan years beginning on
and after January 1, 2006.
Subtitle B—Preferred Provider
Organizations
SEC. 211. ESTABLISHMENT OF MEDICAREADVANTAGE PRE-
FERRED PROVIDER PROGRAM OPTION.
(a) ESTABLISHMENT OF PREFERRED PROVIDER PRO-
GRAM OPTION.—Section 1851(a)(2) is amended by adding
at the end the following new subparagraph:
‘‘(D) PREFERRED PROVIDER ORGANIZATION
PLANS.—A MedicareAdvantage preferred pro-
vider organization plan under the program es-
tablished under section 1858.’’.
(b) PROGRAM SPECIFICATIONS.—Part C of title XVIII
(42 U.S.C. 1395w–21 et seq.) is amended by inserting after
section 1857 the following new section:
‘‘PREFERRED PROVIDER ORGANIZATIONS
‘‘SEC. 1858. (a) ESTABLISHMENT OF PROGRAM.—
‘‘(1) IN GENERAL.—Beginning on January 1,
2006, there is established a preferred provider pro-
†
385
HR 1 EAS
gram under which preferred provider organization
plans offered by preferred provider organizations are
offered to MedicareAdvantage eligible individuals in
preferred provider regions.
‘‘(2) DEFINITIONS.—
‘‘(A) PREFERRED
PROVIDER
ORGANIZA-
TION.—The term ‘preferred provider organiza-
tion’ means an entity with a contract under sec-
tion 1857 that meets the requirements of this sec-
tion applicable with respect to preferred provider
organizations.
‘‘(B) PREFERRED PROVIDER ORGANIZATION
PLAN.—The term ‘preferred provider organiza-
tion plan’ means a MedicareAdvantage plan
that—
‘‘(i) has a network of providers that
have agreed to a contractually specified re-
imbursement for covered benefits with the
organization offering the plan;
‘‘(ii) provides for reimbursement for all
covered benefits regardless of whether such
benefits are provided within such network of
providers; and
‘‘(iii) is offered by a preferred provider
organization.
†
386
HR 1 EAS
‘‘(C) PREFERRED PROVIDER REGION.—The
term ‘preferred provider region’ means—
‘‘(i) a region established under para-
graph (3); and
‘‘(ii) a region that consists of the entire
United States.
‘‘(3) PREFERRED PROVIDER REGIONS.—For pur-
poses of this part the Secretary shall establish pre-
ferred provider regions as follows:
‘‘(A) There shall be at least 10 regions.
‘‘(B) Each region must include at least 1
State.
‘‘(C) The Secretary may not divide States
so that portions of the State are in different re-
gions.
‘‘(D) To the extent possible, the Secretary
shall include multistate metropolitan statistical
areas in a single region. The Secretary may di-
vide metropolitan statistical areas where it is
necessary to establish regions of such size and ge-
ography as to maximize the participation of pre-
ferred provider organization plans.
‘‘(E) The Secretary may conform the pre-
ferred provider regions to the service areas estab-
lished under section 1860D–10.
†
387
HR 1 EAS
‘‘(b) ELIGIBILITY, ELECTION, AND ENROLLMENT; BEN-
EFITS AND BENEFICIARY PROTECTIONS.—
‘‘(1) IN GENERAL.—Except as provided in the
succeeding provisions of this subsection, the provisions
of sections 1851 and 1852 that apply with respect to
coordinated care plans shall apply to preferred pro-
vider organization plans offered by a preferred pro-
vider organization.
‘‘(2) SERVICE AREA.—The service area of a pre-
ferred provider organization plan shall be a preferred
provider region.
‘‘(3) AVAILABILITY.—Each preferred provider or-
ganization 
plan 
must 
be 
offered 
to 
each
MedicareAdvantage eligible individual who resides in
the service area of the plan.
‘‘(4) AUTHORITY
TO
PROHIBIT
RISK
SELEC-
TION.—The provisions of section 1852(a)(6) shall
apply to preferred provider organization plans.
‘‘(5) ASSURING ACCESS TO SERVICES IN PRE-
FERRED PROVIDER ORGANIZATION PLANS.—
‘‘(A) IN
GENERAL.—In addition to any
other requirements under this section, in the case
of a preferred provider organization plan, the or-
ganization offering the plan must demonstrate to
the Secretary that the organization has sufficient
†
388
HR 1 EAS
number and range of health care professionals
and providers willing to provide services under
the terms of the plan.
‘‘(B) DETERMINATION OF SUFFICIENT AC-
CESS.—The Secretary shall find that an organi-
zation has met the requirement under subpara-
graph (A) with respect to any category of health
care professional or provider if, with respect to
that category of provider the plan has contracts
or agreements with a sufficient number and
range of providers within such category to pro-
vide covered services under the terms of the plan.
‘‘(C) CONSTRUCTION.—Subparagraph (B)
shall not be construed as restricting—
‘‘(i) the persons from whom enrollees
under such plan may obtain covered bene-
fits; or
‘‘(ii) the categories of licensed health
professionals or providers from whom en-
rollees under such a plan may obtain cov-
ered benefits if the covered services are pro-
vided to enrollees in a State where 25 per-
cent or more of the population resides in
health professional shortage areas des-
†
389
HR 1 EAS
ignated pursuant to section 332 of the Pub-
lic Health Service Act.
‘‘(c) PAYMENTS TO PREFERRED PROVIDER ORGANIZA-
TIONS.—
‘‘(1) PAYMENTS TO ORGANIZATIONS.—
‘‘(A) MONTHLY PAYMENTS.—
‘‘(i) IN GENERAL.—Under a contract
under section 1857 and subject to para-
graph (5), subsection (e), and section
1859(e)(4), the Secretary shall make, to
each preferred provider organization, with
respect to coverage of an individual for a
month under this part in a preferred pro-
vider region, separate monthly payments
with respect to—
‘‘(I) benefits under the original
medicare fee-for-service program under
parts A and B in accordance with
paragraph (4); and
‘‘(II) benefits under the voluntary
prescription drug program under part
D in accordance with section 1858A
and the other provisions of this part.
‘‘(ii) SPECIAL RULE FOR END-STAGE
RENAL
DISEASE.—The Secretary shall es-
†
390
HR 1 EAS
tablish separate rates of payment applicable
with respect to classes of individuals deter-
mined to have end-stage renal disease and
enrolled in a preferred provider organiza-
tion plan under this clause that are similar
to the separate rates of payment described
in section 1853(a)(1)(B).
‘‘(B) ADJUSTMENT TO REFLECT NUMBER OF
ENROLLEES.—The Secretary may retroactively
adjust the amount of payment under this para-
graph in a manner that is similar to the manner
in which payment amounts may be retroactively
adjusted under section 1853(a)(2).
‘‘(C) COMPREHENSIVE
RISK
ADJUSTMENT
METHODOLOGY.—The Secretary shall apply the
comprehensive risk adjustment methodology de-
scribed in section 1853(a)(3)(B) to 100 percent
of the amount of payments to plans under para-
graph (4)(D)(ii).
‘‘(D) ADJUSTMENT
FOR
SPENDING
VARI-
ATIONS WITHIN A REGION.—The Secretary shall
establish a methodology for adjusting the amount
of payments to plans under paragraph (4)(D)(ii)
that achieves the same objective as the adjust-
ment described in paragraph 1853(a)(2)(C).
†
391
HR 1 EAS
‘‘(2) ANNUAL
CALCULATION
OF
BENCHMARK
AMOUNTS FOR PREFERRED PROVIDER REGIONS.—For
each year (beginning in 2006), the Secretary shall
calculate a benchmark amount for each preferred pro-
vider region for each month for such year with respect
to coverage of the benefits available under the original
medicare fee-for-service program option equal to the
average of each benchmark amount calculated under
section 1853(a)(4) for each MedicareAdvantage pay-
ment area for the year within such region, weighted
by the number of MedicareAdvantage eligible individ-
uals residing in each such payment area for the year.
‘‘(3) ANNUAL ANNOUNCEMENT OF PAYMENT FAC-
TORS.—
‘‘(A) ANNUAL ANNOUNCEMENT.—Beginning
in 2005, at the same time as the Secretary pub-
lishes the risk adjusters under section 1860D–11,
the Secretary shall annually announce (in a
manner intended to provide notice to interested
parties) the following payment factors:
‘‘(i) The benchmark amount for each
preferred provider region (as calculated
under paragraph (2)(A)) for the year.
‘‘(ii) The factors to be used for adjust-
ing payments described under—
†
392
HR 1 EAS
‘‘(I) the comprehensive risk ad-
justment 
methodology 
described 
in
paragraph (1)(C) with respect to each
preferred provider region for the year;
and
‘‘(II) the methodology used for ad-
justment for geographic variations
within such region established under
paragraph (1)(D).
‘‘(B) 
ADVANCE
NOTICE
OF
METHODO-
LOGICAL
CHANGES.—At least 45 days before
making the announcement under subparagraph
(A) for a year, the Secretary shall—
‘‘(i) provide for notice to preferred pro-
vider organizations of proposed changes to
be made in the methodology from the meth-
odology and assumptions used in the pre-
vious announcement; and
‘‘(ii) provide such organizations with
an opportunity to comment on such pro-
posed changes.
‘‘(C) EXPLANATION
OF
ASSUMPTIONS.—In
each announcement made under subparagraph
(A), the Secretary shall include an explanation
of the assumptions and changes in methodology
†
393
HR 1 EAS
used in the announcement in sufficient detail so
that preferred provider organizations can com-
pute each payment factor described in such sub-
paragraph.
‘‘(4) SECRETARY’S DETERMINATION OF PAYMENT
AMOUNT FOR BENEFITS UNDER THE ORIGINAL MEDI-
CARE
FEE-FOR-SERVICE
PROGRAM.—The Secretary
shall determine the payment amount for plans as fol-
lows:
‘‘(A) REVIEW
OF
PLAN
BIDS.—The Sec-
retary shall review each plan bid submitted
under subsection (d)(1) for the coverage of bene-
fits under the original medicare fee-for-service
program option to ensure that such bids are con-
sistent with the requirements under this part
and are based on the assumptions described in
section 1854(a)(2)(A)(iii) that the plan used
with respect to numbers of enrolled individuals.
‘‘(B) DETERMINATION OF PREFERRED PRO-
VIDER
REGIONAL
BENCHMARK
AMOUNTS.—The
Secretary shall calculate a preferred provider re-
gional benchmark amount for that plan for the
benefits under the original medicare fee-for-serv-
ice program option for each plan equal to the re-
gional benchmark adjusted by using the assump-
†
394
HR 1 EAS
tions described in section 1854(a)(2)(A)(iii) that
the plan used with respect to numbers of enrolled
individuals.
‘‘(C) COMPARISON
TO
BENCHMARK.—The
Secretary shall determine the difference between
each plan bid (as adjusted under subparagraph
(A)) and the preferred provider regional bench-
mark amount (as determined under subpara-
graph (B)) for purposes of determining—
‘‘(i) the payment amount under sub-
paragraph (D); and
‘‘(ii) the additional benefits required
and MedicareAdvantage monthly basic ben-
eficiary premiums.
‘‘(D) 
DETERMINATION
OF
PAYMENT
AMOUNT.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), the Secretary shall determine the pay-
ment amount to a preferred provider orga-
nization for a preferred provider organiza-
tion plan as follows:
‘‘(I) BIDS
THAT
EQUAL
OR
EX-
CEED THE BENCHMARK.—In the case
of a plan bid that equals or exceeds the
preferred provider regional benchmark
†
395
HR 1 EAS
amount, the amount of each monthly
payment to the organization with re-
spect to each individual enrolled in a
plan shall be the preferred provider re-
gional benchmark amount.
‘‘(II) BIDS
BELOW
THE
BENCH-
MARK.—In the case of a plan bid that
is less than the preferred provider re-
gional benchmark amount, the amount
of each monthly payment to the orga-
nization with respect to each indi-
vidual enrolled in a plan shall be the
preferred provider regional benchmark
amount reduced by the amount of any
premium reduction elected by the plan
under section 1854(d)(1)(A)(i).
‘‘(ii) APPLICATION
OF
ADJUSTMENT
METHODOLOGIES.—The Secretary shall ad-
just the amounts determined under subpara-
graph (A) using the factors described in
paragraph (3)(A)(ii).
‘‘(E) FACTORS
USED
IN
ADJUSTING
BIDS
AND BENCHMARKS FOR PREFERRED PROVIDER
ORGANIZATIONS AND IN DETERMINING ENROLLEE
PREMIUMS.—Subject to subparagraph (F), in
†
396
HR 1 EAS
addition to the factors used to adjust payments
to plans described in section 1853(d)(6), the Sec-
retary shall use the adjustment for geographic
variation within the region established under
paragraph (1)(D).
‘‘(F) ADJUSTMENT
FOR
NATIONAL
COV-
ERAGE
DETERMINATIONS
AND
LEGISLATIVE
CHANGES
IN
BENEFITS.—The Secretary shall
provide for adjustments for national coverage de-
terminations and legislative changes in benefits
applicable with respect to preferred provider or-
ganizations in the same manner as the Secretary
provides 
for 
adjustments 
under 
section
1853(d)(7).
‘‘(5) PAYMENTS FROM TRUST FUND.—The pay-
ment to a preferred provider organization under this
section shall be made from the Federal Hospital In-
surance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund in a manner similar
to the manner described in section 1853(g).
‘‘(6) SPECIAL
RULE
FOR
CERTAIN
INPATIENT
HOSPITAL STAYS.—Rules similar to the rules applica-
ble under section 1853(h) shall apply with respect
preferred provider organizations.
†
397
HR 1 EAS
‘‘(7) SPECIAL RULE FOR HOSPICE CARE.—Rules
similar to the rules applicable under section 1853(i)
shall apply with respect to preferred provider organi-
zations.
‘‘(d) SUBMISSION OF BIDS BY PPOS; PREMIUMS.—
‘‘(1) SUBMISSION OF BIDS BY PREFERRED PRO-
VIDER ORGANIZATIONS.—
‘‘(A) IN
GENERAL.—For the requirements
on submissions by MedicareAdvantage preferred
provider 
organization 
plans, 
see 
section
1854(a)(1).
‘‘(B) 
UNIFORM
PREMIUMS.—Each 
bid
amount submitted under subparagraph (A) for a
preferred provider organization plan in a pre-
ferred provider region may not vary among
MedicareAdvantage eligible individuals residing
in such preferred provider region.
‘‘(C) APPLICATION
OF
FEHBP
STANDARD;
PROHIBITION
ON
PRICE
GOUGING.—Each bid
amount submitted under subparagraph (A) for a
preferred provider organization plan must rea-
sonably and equitably reflect the cost of benefits
provided under that plan.
‘‘(D) REVIEW.—The Secretary shall review
the adjusted community rates (as defined in sec-
†
398
HR 1 EAS
tion 
1854(g)(3)), 
the 
amounts 
of 
the
MedicareAdvantage monthly basic premium and
the MedicareAdvantage monthly beneficiary pre-
mium for enhanced medical benefits filed under
this paragraph and shall approve or disapprove
such rates and amounts so submitted. The Sec-
retary shall review the actuarial assumptions
and data used by the preferred provider organi-
zation with respect to such rates and amounts so
submitted to determine the appropriateness of
such assumptions and data.
‘‘(E) AUTHORITY
TO
LIMIT
NUMBER
OF
PLANS IN A REGION.—If there are bids for more
than 3 preferred provider organization plans in
a preferred provider region, the Secretary shall
accept only the 3 lowest-cost credible bids for
that region that meet or exceed the quality and
minimum standards applicable under this sec-
tion.
‘‘(2) 
MONTHLY
PREMIUMS
CHARGED.—The
amount of the monthly premium charged to an indi-
vidual enrolled in a preferred provider organization
plan offered by a preferred provider organization
shall be equal to the sum of the following:
†
399
HR 1 EAS
‘‘(A) The MedicareAdvantage monthly basic
beneficiary premium, as defined in section
1854(b)(2)(A) (if any).
‘‘(B) The MedicareAdvantage monthly bene-
ficiary premium for enhanced medical benefits,
as defined in section 1854(b)(2)(C) (if any).
‘‘(C) The MedicareAdvantage monthly obli-
gation for qualified prescription drug coverage,
as defined in section 1854(b)(2)(B) (if any).
‘‘(3) DETERMINATION OF PREMIUM REDUCTIONS,
REDUCED COST-SHARING, ADDITIONAL BENEFITS, AND
BENEFICIARY PREMIUMS.—The rules for determining
premium reductions, reduced cost-sharing, additional
benefits, and beneficiary premiums under section
1854(d) shall apply with respect to preferred provider
organizations.
‘‘(4) PROHIBITION OF SEGMENTING PREFERRED
PROVIDER REGIONS.—The Secretary may not permit
a preferred provider organization to elect to apply the
provisions of this section uniformly to separate seg-
ments of a preferred provider region (rather than uni-
formly to an entire preferred provider region).
‘‘(e) PORTION OF TOTAL PAYMENTS TO AN ORGANIZA-
TION SUBJECT TO RISK FOR 2 YEARS.—
†
400
HR 1 EAS
‘‘(1) NOTIFICATION
OF
SPENDING
UNDER
THE
PLAN.—
‘‘(A) IN GENERAL.—For 2007 and 2008, the
preferred provider organization offering a pre-
ferred provider organization plan shall notify the
Secretary of the total amount of costs that the or-
ganization incurred in providing benefits covered
under parts A and B of the original medicare
fee-for-service program for all enrollees under the
plan in the previous year.
‘‘(B) CERTAIN EXPENSES NOT INCLUDED.—
The total amount of costs specified in subpara-
graph (A) may not include—
‘‘(i) subject to subparagraph (C), ad-
ministrative expenses incurred in providing
the benefits described in such subparagraph;
or
‘‘(ii) amounts expended on providing
enhanced medical benefits under section
1852(a)(3)(D).
‘‘(C) ESTABLISHMENT OF ALLOWABLE AD-
MINISTRATIVE EXPENSES.—For purposes of ap-
plying subparagraph (B)(i), the administrative
expenses incurred in providing benefits described
in subparagraph (A) under a preferred provider
†
401
HR 1 EAS
organization plan may not exceed an amount de-
termined appropriate by the Administrator.
‘‘(2) ADJUSTMENT OF PAYMENT.—
‘‘(A) NO
ADJUSTMENT
IF
COSTS
WITHIN
RISK CORRIDOR.—If the total amount of costs
specified in paragraph (1)(A) for the plan for
the year are not more than the first threshold
upper limit of the risk corridor (specified in
paragraph (3)(A)(iii)) and are not less than the
first threshold lower limit of the risk corridor
(specified in paragraph (3)(A)(i)) for the plan
for the year, then no additional payments shall
be made by the Secretary and no reduced pay-
ments shall be made to the preferred provider or-
ganization offering the plan.
‘‘(B) INCREASE
IN
PAYMENT
IF
COSTS
ABOVE UPPER LIMIT OF RISK CORRIDOR.—
‘‘(i) IN GENERAL.—If the total amount
of costs specified in paragraph (1)(A) for
the plan for the year are more than the first
threshold upper limit of the risk corridor for
the plan for the year, then the Secretary
shall increase the total of the monthly pay-
ments made to the preferred provider orga-
nization offering the plan for the year
†
402
HR 1 EAS
under subsection (c)(1)(A) by an amount
equal to the sum of—
‘‘(I) 50 percent of the amount of
such total costs which are more than
such first threshold upper limit of the
risk corridor and not more than the
second threshold upper limit of the risk
corridor for the plan for the year (as
specified under paragraph (3)(A)(iv));
and
‘‘(II) 90 percent of the amount of
such total costs which are more than
such second threshold upper limit of
the risk corridor.
‘‘(C) REDUCTION
IN
PAYMENT
IF
COSTS
BELOW LOWER LIMIT OF RISK CORRIDOR.—If the
total amount of costs specified in paragraph
(1)(A) for the plan for the year are less than the
first threshold lower limit of the risk corridor for
the plan for the year, then the Secretary shall re-
duce the total of the monthly payments made to
the preferred provider organization offering the
plan for the year under subsection (c)(1)(A) by
an amount (or otherwise recover from the plan
an amount) equal to—
†
403
HR 1 EAS
‘‘(i) 50 percent of the amount of such
total costs which are less than such first
threshold lower limit of the risk corridor
and not less than the second threshold lower
limit of the risk corridor for the plan for the
year 
(as 
specified 
under 
paragraph
(3)(A)(ii)); and
‘‘(ii) 90 percent of the amount of such
total costs which are less than such second
threshold lower limit of the risk corridor.
‘‘(3) ESTABLISHMENT OF RISK CORRIDORS.—
‘‘(A) IN GENERAL.—For 2006 and 2007, the
Secretary shall establish a risk corridor for each
preferred provider organization plan. The risk
corridor for a plan for a year shall be equal to
a range as follows:
‘‘(i) 
FIRST
THRESHOLD
LOWER
LIMIT.—The first threshold lower limit of
such corridor shall be equal to—
‘‘(I) the target amount described
in subparagraph (B) for the plan;
minus
‘‘(II) an amount equal to 5 per-
cent of such target amount.
†
404
HR 1 EAS
‘‘(ii) 
SECOND
THRESHOLD
LOWER
LIMIT.—The second threshold lower limit of
such corridor shall be equal to—
‘‘(I) the target amount described
in subparagraph (B) for the plan;
minus
‘‘(II) an amount equal to 10 per-
cent of such target amount.
‘‘(iii) 
FIRST
THRESHOLD
UPPER
LIMIT.—The first threshold upper limit of
such corridor shall be equal to the sum of—
‘‘(I) such target amount; and
‘‘(II) the amount described in
clause (i)(II).
‘‘(iv) 
SECOND
THRESHOLD
UPPER
LIMIT.—The second threshold upper limit of
such corridor shall be equal to the sum of—
‘‘(I) such target amount; and
‘‘(II) the amount described in
clause (ii)(II).
‘‘(B) TARGET
AMOUNT
DESCRIBED.—The
target amount described in this paragraph is,
with respect to a preferred provider organization
plan offered by a preferred provider organization
in a year, an amount equal to the sum of—
†
405
HR 1 EAS
‘‘(i) the total monthly payments made
to the organization for enrollees in the plan
for the year under subsection (c)(1)(A); and
‘‘(ii) the total MedicareAdvantage basic
beneficiary premiums collected for such en-
rollees for the year under subsection
(d)(2)(A).
‘‘(4) PLANS AT RISK FOR ENTIRE AMOUNT OF
ENHANCED MEDICAL BENEFITS.—A preferred provider
organization that offers a preferred provider organi-
zation plan that provides enhanced medial benefits
under section 1852(a)(3)(D) shall be at full financial
risk for the provision of such benefits.
‘‘(5) NO EFFECT ON ELIGIBLE BENEFICIARIES.—
No change in payments made by reason of this sub-
section 
shall 
affect 
the 
amount 
of 
the
MedicareAdvantage basic beneficiary premium that a
beneficiary is otherwise required to pay under the
plan for the year under subsection (d)(2)(A).
‘‘(6) DISCLOSURE OF INFORMATION.—The provi-
sions of section 1860D–16(b)(7), including subpara-
graph (B) of such section, shall apply to a preferred
provider organization and a preferred provider orga-
nization plan in the same manner as such provisions
†
406
HR 1 EAS
apply to an eligible entity and a Medicare Prescrip-
tion Drug plan under part D.
‘‘(f) ORGANIZATIONAL AND FINANCIAL REQUIREMENTS
FOR PREFERRED PROVIDER ORGANIZATIONS.—A preferred
provider organization shall be organized and licensed under
State law as a risk-bearing entity eligible to offer health
insurance or health benefits coverage in each State within
the preferred provider region in which it offers a preferred
provider organization plan.
‘‘(g) INAPPLICABILITY OF PROVIDER-SPONSORED OR-
GANIZATION SOLVENCY STANDARDS.—The requirements of
section 1856 shall not apply with respect to preferred pro-
vider organizations.
‘‘(h) CONTRACTS WITH PREFERRED PROVIDER ORGA-
NIZATIONS.—The provisions of section 1857 shall apply to
a preferred provider organization plan offered by a pre-
ferred provider organization under this section.’’.
(c) 
PREFERRED
PROVIDER
TERMINOLOGY
DE-
FINED.—Section 1859(a) is amended by adding at the end
the following new paragraph:
‘‘(3) PREFERRED PROVIDER ORGANIZATION; PRE-
FERRED PROVIDER ORGANIZATION PLAN; PREFERRED
PROVIDER REGION.—The terms ‘preferred provider or-
ganization’, ‘preferred provider organization plan’,
†
407
HR 1 EAS
and ‘preferred provider region’ have the meaning
given such terms in section 1858(a)(2).’’.
Subtitle C—Other Managed Care
Reforms
SEC. 221. EXTENSION OF REASONABLE COST CONTRACTS.
(a) FIVE-YEAR EXTENSION.—Section 1876(h)(5)(C)
(42 U.S.C. 1395mm(h)(5)(C)) is amended by striking
‘‘2004’’ and inserting ‘‘2009’’.
(b) APPLICATION
OF CERTAIN MEDICARE+CHOICE
REQUIREMENTS TO COST CONTRACTS EXTENDED OR RE-
NEWED
AFTER
2003.—Section 
1876(h) 
(42 
U.S.C.
1395mm(h)(5)), as amended by subsection (a), is
amended—
(1) by redesignating paragraph (5) as para-
graph (6); and
(2) by inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) Any reasonable cost reimbursement contract with
an eligible organization under this subsection that is ex-
tended or renewed on or after the date of enactment of the
Prescription Drug and Medicare Improvements Act of 2003
for plan years beginning on or after January 1, 2004, shall
provide 
that 
the 
following 
provisions 
of 
the
Medicare+Choice program under part C (and, on and after
January 1, 2006, the provisions of the MedicareAdvantage
†
408
HR 1 EAS
program under such part) shall apply to such organization
and such contract in a substantially similar manner as
such provisions apply to Medicare+Choice organizations
and Medicare+Choice plans (or, on and after January 1,
2006, 
MedicareAdvantage 
organizations 
and
MedicareAdvantage plans, respectively) under such part:
‘‘(A) Paragraph (1) of section 1852(e) (relating
to the requirement of having an ongoing quality as-
surance program) and paragraph (2)(B) of such sec-
tion (relating to the required elements for such a pro-
gram).
‘‘(B) Section 1852(j)(4) (relating to limitations
on physician incentive plans).
‘‘(C) Section 1854(c) (relating to the requirement
of uniform premiums among individuals enrolled in
the plan).
‘‘(D) Section 1854(g), or, on and after January
1, 2006, section 1854(h) (relating to restrictions on
imposition of premium taxes with respect to pay-
ments to organizations).
‘‘(E) Section 1856(b) (regarding compliance
with the standards established by regulation pursuant
to such section, including the provisions of paragraph
(3) of such section relating to relation to State laws).
†
409
HR 1 EAS
‘‘(F) Section 1852(a)(3)(A) (regarding the au-
thority of organizations to include supplemental
health care benefits and, on and after January 1,
2006, enhanced medical benefits under the plan sub-
ject to the approval of the Secretary).
‘‘(G) The provisions of part C relating to
timelines for benefit filings, contract renewal, and
beneficiary notification.
‘‘(H) Section 1854(e), or, on and after January
1, 2006, section 1854(f) (relating to proposed cost-
sharing under the contract being subject to review by
the Secretary).’’.
(c) 
PERMITTING
DEDICATED
GROUP
PRACTICE
HEALTH MAINTENANCE ORGANIZATIONS TO PARTICIPATE
IN THE MEDICARE COST CONTRACT PROGRAM.—Section
1876(h)(6) of the Social Security Act (42 U.S.C.
1395mm(h)(6)), as redesignated and amended by sub-
sections (a) and (b), is amended—
(1) in subparagraph (A), by striking ‘‘After the
date of the enactment’’ and inserting ‘‘Except as pro-
vided in subparagraph (C), after the date of the en-
actment’’;
(2) in subparagraph (B), by striking ‘‘subpara-
graph (C)’’ and inserting ‘‘subparagraph (D)’’;
†
410
HR 1 EAS
(3) by redesignating subparagraph (C) as sub-
paragraph (D); and
(4) by inserting after subparagraph (B), the fol-
lowing new subparagraph:
‘‘(C) Subject to paragraph (5) and subparagraph (D),
the Secretary shall approve an application to enter into a
reasonable cost contract under this section if—
‘‘(i) the application is submitted to the Secretary
by a health maintenance organization (as defined in
section 1301(a) of the Public Health Service Act)
that, as of January 1, 2004, and except as provided
in section 1301(b)(3)(B) of such Act, provides at least
85 percent of the services of a physician which are
provided as basic health services through a medical
group (or groups), as defined in section 1302(4) of
such Act; and
‘‘(ii) the Secretary determines that the organiza-
tion meets the requirements applicable to such organi-
zations and contracts under this section.’’.
SEC. 222. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPE-
CIAL NEEDS BENEFICIARIES.
(a) TREATMENT AS COORDINATED CARE PLAN.—Sec-
tion 1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is
amended by adding at the end the following new sentence:
‘‘Specialized Medicare+Choice plans for special needs bene-
†
411
HR 1 EAS
ficiaries (as defined in section 1859(b)(4)) may be any type
of coordinated care plan.’’.
(b) SPECIALIZED MEDICARE+CHOICE PLAN FOR SPE-
CIAL NEEDS BENEFICIARIES DEFINED.—Section 1859(b)
(42 U.S.C. 1395w–28(b)) is amended by adding at the end
the following new paragraph:
‘‘(4) SPECIALIZED
MEDICARE+CHOICE
PLANS
FOR SPECIAL NEEDS BENEFICIARIES.—
‘‘(A) IN GENERAL.—The term ‘specialized
Medicare+Choice plans for special needs bene-
ficiaries’ means a Medicare+Choice plan that—
‘‘(i) exclusively serves special needs
beneficiaries (as defined in subparagraph
(B)), or
‘‘(ii) to the extent provided in regula-
tions prescribed by the Secretary, dispropor-
tionately serves such special needs bene-
ficiaries, 
frail 
elderly 
medicare 
bene-
ficiaries, or both.
‘‘(B) SPECIAL
NEEDS
BENEFICIARY.—The
term 
‘special 
needs 
beneficiary’ 
means 
a
Medicare+Choice eligible individual who—
‘‘(i) is institutionalized (as defined by
the Secretary);
†
412
HR 1 EAS
‘‘(ii) is entitled to medical assistance
under a State plan under title XIX; or
‘‘(iii) meets such requirements as the
Secretary may determine would benefit
from enrollment in such a specialized
Medicare+Choice plan described in sub-
paragraph (A) for individuals with severe
or disabling chronic conditions.’’.
(c) RESTRICTION ON ENROLLMENT PERMITTED.—Sec-
tion 1859 (42 U.S.C. 1395w–28) is amended by adding at
the end the following new subsection:
‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIALIZED
MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS BENE-
FICIARIES.—In the case of a specialized Medicare+Choice
plan (as defined in subsection (b)(4)), notwithstanding any
other provision of this part and in accordance with regula-
tions of the Secretary and for periods before January 1,
2008, the plan may restrict the enrollment of individuals
under the plan to individuals who are within 1 or more
classes of special needs beneficiaries.’’.
(d) REPORT TO CONGRESS.—Not later than December
31, 2006, the Secretary shall submit to Congress a report
that assesses the impact of specialized Medicare+Choice
plans for special needs beneficiaries on the cost and quality
of services provided to enrollees. Such report shall include
†
413
HR 1 EAS
an assessment of the costs and savings to the medicare pro-
gram as a result of amendments made by subsections (a),
(b), and (c).
(e) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
subsections (a), (b), and (c) shall take effect on the
date of enactment of this Act.
(2) DEADLINE FOR ISSUANCE OF REQUIREMENTS
FOR SPECIAL NEEDS BENEFICIARIES; TRANSITION.—
No later than 1 year after the date of enactment of
this Act, the Secretary shall issue final regulations to
establish requirements for special needs beneficiaries
under section 1859(b)(4)(B)(iii) of the Social Secu-
rity Act, as added by subsection (b).
SEC. 223. PAYMENT BY PACE PROVIDERS FOR MEDICARE
AND MEDICAID SERVICES FURNISHED BY
NONCONTRACT PROVIDERS.
(a) MEDICARE SERVICES.—
(1) MEDICARE SERVICES FURNISHED BY PRO-
VIDERS
OF
SERVICES.—Section 1866(a)(1)(O) (42
U.S.C. 1395cc(a)(1)(O)) is amended—
(A) by striking ‘‘part C or’’ and inserting
‘‘part C, with a PACE provider under section
1894 or 1934, or’’;
(B) by striking ‘‘(i)’’;
†
414
HR 1 EAS
(C) by striking ‘‘and (ii)’’; and
(D) by striking ‘‘members of the organiza-
tion’’ and inserting ‘‘members of the organiza-
tion or PACE program eligible individuals en-
rolled with the PACE provider,’’.
(2) MEDICARE SERVICES FURNISHED BY PHYSI-
CIANS AND OTHER ENTITIES.—Section 1894(b) (42
U.S.C. 1395eee(b)) is amended by adding at the end
the following new paragraphs:
‘‘(3) TREATMENT OF MEDICARE SERVICES FUR-
NISHED
BY
NONCONTRACT
PHYSICIANS
AND
OTHER
ENTITIES.—
‘‘(A) APPLICATION OF MEDICARE+CHOICE
REQUIREMENT
WITH
RESPECT
TO
MEDICARE
SERVICES FURNISHED BY NONCONTRACT PHYSI-
CIANS
AND
OTHER
ENTITIES.—Section
1852(k)(1) (relating to limitations on balance
billing against Medicare+Choice organizations
for noncontract physicians and other entities
with respect to services covered under this title)
shall apply to PACE providers, PACE program
eligible individuals enrolled with such PACE
providers, and physicians and other entities that
do not have a contract establishing payment
amounts for services furnished to such an indi-
†
415
HR 1 EAS
vidual in the same manner as such section ap-
plies to Medicare+Choice organizations, individ-
uals enrolled with such organizations, and physi-
cians and other entities referred to in such sec-
tion.
‘‘(B) REFERENCE TO RELATED PROVISION
FOR NONCONTRACT PROVIDERS OF SERVICES.—
For the provision relating to limitations on bal-
ance billing against PACE providers for services
covered under this title furnished by noncontract
providers of services, see section 1866(a)(1)(O).
‘‘(4) REFERENCE TO RELATED PROVISION
FOR SERVICES COVERED UNDER TITLE XIX BUT
NOT UNDER THIS TITLE.—For provisions relat-
ing to limitations on payments to providers par-
ticipating under the State plan under title XIX
that do not have a contract with a PACE pro-
vider establishing payment amounts for services
covered under such plan (but not under this
title) when such services are furnished to enroll-
ees 
of 
that 
PACE 
provider, 
see 
section
1902(a)(66).’’.
(b) MEDICAID SERVICES.—
(1) REQUIREMENT UNDER STATE PLAN.—Section
1902(a) (42 U.S.C. 1396a(a)) is amended—
†
416
HR 1 EAS
(A) in paragraph (64), by striking ‘‘and’’
at the end;
(B) in paragraph (65), by striking the pe-
riod at the end and inserting ‘‘; and’’; and
(C) by inserting after paragraph (65) the
following new paragraph:
‘‘(66) provide, with respect to services cov-
ered under the State plan (but not under title
XVIII) that are furnished to a PACE program
eligible individual enrolled with a PACE pro-
vider by a provider participating under the
State plan that does not have a contract with the
PACE 
provider 
that 
establishes 
payment
amounts for such services, that such partici-
pating provider may not require the PACE pro-
vider to pay the participating provider an
amount greater than the amount that would oth-
erwise be payable for the service to the partici-
pating provider under the State plan for the
State where the PACE provider is located (in ac-
cordance with regulations issued by the Sec-
retary).’’.
(2) REFERENCE IN MEDICAID STATUTE.—Section
1934(b) (42 U.S.C. 1396u–4(b)) is amended by add-
ing at the end the following new paragraphs:
†
417
HR 1 EAS
‘‘(3) TREATMENT OF MEDICARE SERVICES FUR-
NISHED
BY
NONCONTRACT
PHYSICIANS
AND
OTHER
ENTITIES.—
‘‘(A) APPLICATION OF MEDICARE+CHOICE
REQUIREMENT
WITH
RESPECT
TO
MEDICARE
SERVICES FURNISHED BY NONCONTRACT PHYSI-
CIANS
AND
OTHER
ENTITIES.—Section
1852(k)(1) (relating to limitations on balance
billing against Medicare+Choice organizations
for noncontract physicians and other entities
with respect to services covered under title
XVIII) shall apply to PACE providers, PACE
program eligible individuals enrolled with such
PACE providers, and physicians and other enti-
ties that do not have a contract establishing pay-
ment amounts for services furnished to such an
individual in the same manner as such section
applies to Medicare+Choice organizations, indi-
viduals enrolled with such organizations, and
physicians and other entities referred to in such
section.
‘‘(B) REFERENCE TO RELATED PROVISION
FOR NONCONTRACT PROVIDERS OF SERVICES.—
For the provision relating to limitations on bal-
ance billing against PACE providers for services
†
418
HR 1 EAS
covered under title XVIII furnished by noncon-
tract 
providers 
of 
services, 
see 
section
1866(a)(1)(O).
‘‘(4) REFERENCE TO RELATED PROVISION
FOR SERVICES COVERED UNDER THIS TITLE BUT
NOT UNDER TITLE XVIII.—For provisions relat-
ing to limitations on payments to providers par-
ticipating under the State plan under this title
that do not have a contract with a PACE pro-
vider establishing payment amounts for services
covered under such plan (but not under title
XVIII) when such services are furnished to en-
rollees of that PACE provider, see section
1902(a)(66).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished on or after January
1, 2004.
SEC. 224. INSTITUTE OF MEDICINE EVALUATION AND RE-
PORT 
ON 
HEALTH 
CARE 
PERFORMANCE
MEASURES.
(a) EVALUATION.—
(1) IN GENERAL.—Not later than the date that
is 2 months after the date of enactment of this Act,
the Secretary of Health and Human Services shall
enter into an arrangement under which the Institute
†
420
HR 1 EAS
(iii) the key implementation issues
(such as data and information technology
requirements) that must be addressed.
(3) SCOPE
OF
HEALTH
CARE
PERFORMANCE
MEASURES.—The health care performance measures
described in paragraph (2)(A) shall encompass a va-
riety of perspectives, including physicians, hospitals,
health plans, purchasers, and consumers.
(4) CONSULTATION
WITH
MEDPAC.—In evalu-
ating the matters described in paragraph (2)(C), the
Institute shall consult with the Medicare Payment
Advisory Commission established under section 1805
of the Social Security Act (42 U.S.C. 1395b–6).
(b) REPORT.—Not later than the date that is 18
months after the date of enactment of this Act, the Institute
shall submit to the Secretary of Health and Human Serv-
ices, the Committees on Ways and Means and Energy and
Commerce of the House of Representatives, and the Com-
mittee on Finance of the Senate a report on the evaluation
conducted under subsection (a)(1) describing the findings
of such evaluation and recommendations for an overall
strategy and approach for aligning payment with perform-
ance in the original medicare fee-for-service program under
parts A and B of title XVIII of the Social Security Act,
†
421
HR 1 EAS
the Medicare+Choice program under part C of such title,
and any other programs under such title XVIII.
(c) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated $1,000,000 for purposes of
conducting the evaluation and preparing the report re-
quired by this section.
SEC. 225. EXPANDING THE WORK OF MEDICARE QUALITY
IMPROVEMENT ORGANIZATIONS TO INCLUDE
PARTS C AND D.
(a) APPLICATION TO MEDICARE MANAGED CARE AND
PRESCRIPTION DRUG COVERAGE.—Section 1154(a)(1) (42
U.S.C. 1320c–3(a)(1)) is amended by inserting ‘‘,
Medicare+Choice organizations and MedicareAdvantage
organizations under part C, and prescription drug card
sponsors and eligible entities under part D’’ after ‘‘under
section 1876’’.
(b) PRESCRIPTION DRUG THERAPY QUALITY IM-
PROVEMENT.—Section 1154(a) (42 U.S.C. 1320c–3(a)) is
amended by adding at the end the following new paragraph:
‘‘(17) The organization shall execute its respon-
sibilities under subparagraphs (A) and (B) of para-
graph (1) by offering to providers, practitioners, pre-
scription drug card sponsors and eligible entities
under 
part 
D, 
and 
Medicare+Choice 
and
MedicareAdvantage plans under part C quality im-
†
422
HR 1 EAS
provement assistance pertaining to prescription drug
therapy. For purposes of this part and title XVIII,
the functions described in this paragraph shall be
treated as a review function.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply on and after January 1, 2004.
SEC. 226. EXTENSION OF DEMONSTRATION FOR ESRD MAN-
AGED CARE.
The Secretary shall extend without interruption,
through December 31, 2007, the approval of the demonstra-
tion project, Contract No. H1021, under the authority of
section 2355(b)(1)(B)(iv) of the Deficit Reduction Act of
1984, as amended by section 13567 of the Omnibus Rec-
onciliation Act of 1993. Such approval shall be subject to
the terms and conditions in effect for the 2002 project year
with respect to eligible participants and covered benefits.
The Secretary shall set the monthly capitation rate for en-
rollees on the basis of the reasonable medical and direct ad-
ministrative costs of providing those benefits to such par-
ticipants.
†
423
HR 1 EAS
Subtitle D—Evaluation of Alter-
native Payment and Delivery
Systems
SEC. 231. ESTABLISHMENT OF ALTERNATIVE PAYMENT SYS-
TEM FOR PREFERRED PROVIDER ORGANIZA-
TIONS IN HIGHLY COMPETITIVE REGIONS.
(a) ESTABLISHMENT OF ALTERNATIVE PAYMENT SYS-
TEM FOR PREFERRED PROVIDER ORGANIZATIONS IN HIGH-
LY COMPETITIVE REGIONS.—Section 1858 (as added by sec-
tion 211(b)) is amended by adding at the end the following
new subsection:
‘‘(i) ALTERNATIVE
PAYMENT
METHODOLOGY
FOR
HIGHLY COMPETITIVE REGIONS.—
‘‘(1) ANNUAL
DETERMINATION
AND
DESIGNA-
TION.—
‘‘(A) IN 2008.—In 2008, prior to the date on
which the Secretary expects to publish the risk
adjusters under section 1860D–11, the Secretary
shall designate a limited number (but in no case
fewer than 1) of preferred provider regions (other
than 
the 
region 
described 
in 
subsection
(a)(2)(C)(ii)) as highly competitive regions.
‘‘(B) SUBSEQUENT YEARS.—For each year
(beginning with 2009) the Secretary may des-
ignate a limited number of preferred provider re-
†
424
HR 1 EAS
gions (other than the region described in sub-
section (a)(2)(C)(ii)) as highly competitive re-
gions in addition to any region designated as a
highly competitive region under subparagraph
(A).
‘‘(C) 
CONSIDERATIONS.—In 
determining
which preferred provider regions to designate as
highly competitive regions under subparagraph
(A) or (B), the Secretary shall consider the fol-
lowing:
‘‘(i) Whether the application of this
subsection to the preferred provider region
would enhance the participation of pre-
ferred provider organization plans in that
region.
‘‘(ii) Whether the Secretary anticipates
that there is likely to be at least 3 bids sub-
mitted under subsection (d)(1) with respect
to the preferred provider region if the Sec-
retary designates such region as a highly
competitive region under subparagraph (A)
or (B).
‘‘(iii) Whether the Secretary expects
that MedicareAdvantage eligible individuals
will elect preferred provider organization
†
425
HR 1 EAS
plans in the preferred provider region if the
region is designated as a highly competitive
region under subparagraph (A) or (B).
‘‘(iv) Whether the designation of the
preferred provider region as a highly com-
petitive region will permit compliance with
the limitation described in paragraph (5).
In considering the matters described in clauses
(i) through (iv), the Secretary shall give special
consideration to preferred provider regions where
no bids were submitted under subsection (d)(1)
for the previous year.
‘‘(2) EFFECT OF DESIGNATION.—If a preferred
provider region is designated as a highly competitive
region under subparagraph (A) or (B) of paragraph
(1)—
‘‘(A) the provisions of this subsection shall
apply to such region and shall supersede the pro-
visions of this part relating to benchmarks for
preferred provider regions; and
‘‘(B) such region shall continue to be a
highly competitive region until such designation
is rescinded pursuant to paragraph (5)(B)(ii).
‘‘(3) SUBMISSION OF BIDS.—
†
426
HR 1 EAS
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (d)(1), for purposes of applying section
1854(a)(2)(A)(i), the plan bid for a highly com-
petitive region shall consist of a dollar amount
that represents the total amount that the plan is
willing to accept (not taking into account the
application of the comprehensive risk adjustment
methodology under section 1853(a)(3)) for pro-
viding coverage of only the benefits described in
section 1852(a)(1)(A) to an individual enrolled
in the plan that resides in the service area of the
plan for a month.
‘‘(B) CONSTRUCTION.—Nothing in subpara-
graph (A) shall be construed as permitting a
preferred provider organization plan not to pro-
vide coverage for the benefits described in section
1852(a)(1)(C).
‘‘(4) PAYMENTS TO PREFERRED PROVIDER ORGA-
NIZATIONS IN HIGHLY COMPETITIVE AREAS.—With re-
spect to highly competitive regions, the following rules
shall apply:
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (c), of the plans described in subsection
(d)(1)(E), the Secretary shall substitute the sec-
†
427
HR 1 EAS
ond lowest bid for the benchmark applicable
under subsection (c)(4).
‘‘(B) IF THERE ARE FEWER THAN THREE
BIDS.—Notwithstanding subsection (c), if there
are fewer than 3 bids in a highly competitive re-
gion for a year, the Secretary shall substitute the
lowest bid for the benchmark applicable under
subsection (c)(4).
‘‘(5) FUNDING LIMITATION.—
‘‘(A) IN GENERAL.—
‘‘(i) IN GENERAL.—The total amount
expended as a result of the application of
this subsection during the period or year, as
applicable, may not exceed the applicable
amount (as defined in clause (ii)).
‘‘(ii) APPLICABLE AMOUNT DEFINED.—
In this paragraph, the term ‘applicable
amount’ means—
‘‘(I) for the period beginning on
January 1, 2009, and ending on Sep-
tember 30, 2013, the total amount that
would have been expended under this
title during the period if this sub-
section had not been enacted plus
$6,000,000,000; and
†
428
HR 1 EAS
‘‘(II) for fiscal year 2014 and any
subsequent 
fiscal 
year, 
the 
total
amount that would have been expended
under this title during the year if this
subsection had not been enacted.
‘‘(B) APPLICATION OF LIMITATION.—If the
Secretary determines that the application of this
subsection will cause expenditures to exceed the
applicable amount, the Secretary shall—
‘‘(i) take appropriate steps to stay
within the applicable amount, including
through providing limitations on enroll-
ment; or
‘‘(ii) rescind the designation under
subparagraph (A) or (B) of paragraph (1)
of 1 or more preferred provider regions as
highly competitive regions.
‘‘(C) TRANSITION.—If the Secretary re-
scinds a designation under subparagraph (A) or
(B) of paragraph (1) pursuant to subparagraph
(B)(ii) with respect to a preferred provider re-
gion, the Secretary shall provide for an appro-
priate transition from the payment system ap-
plicable under this subsection to the payment
system described in the other provisions of this
†
429
HR 1 EAS
section in that region. Any amount expended by
reason of the preceding sentence shall be consid-
ered to be part of the total amount expended as
a result of the application of this subsection for
purposes of applying the limitation under sub-
paragraph (A).
‘‘(D) 
APPLICATION.—Notwithstanding
paragraph (1)(B), on or after January 1 of the
year in which the fiscal year described in sub-
paragraph (A)(ii)(II) begins, the Secretary may
designate appropriate regions under such para-
graph.
‘‘(6) LIMITATION OF JUDICIAL REVIEW.—There
shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of designa-
tions made under subparagraph (A) or (B) of para-
graph (1).
‘‘(7) SECRETARY
REPORTS.—Not later than
April 1 of each year (beginning in 2010), the Sec-
retary shall submit a report to Congress and the
Comptroller General of the United States that
includes—
‘‘(A) a detailed description of—
‘‘(i) the total amount expended as a re-
sult of the application of this subsection in
†
430
HR 1 EAS
the previous year compared to the total
amount that would have been expended
under this title in the year if this subsection
had not been enacted;
‘‘(ii) the projections of the total
amount that will be expended as a result of
the application of this subsection in the
year in which the report is submitted com-
pared to the total amount that would have
been expended under this title in the year if
this subsection had not been enacted;
‘‘(iii) amounts remaining within the
funding limitation specified in paragraph
(5); and
‘‘(iv) the steps that the Secretary will
take under clauses (i) and (ii) of paragraph
(5)(B) to ensure that the application of this
subsection will not cause expenditures to ex-
ceed the applicable amount described in
paragraph (5)(A); and
‘‘(B) a certification from the Chief Actuary
of the Centers for Medicare & Medicaid Services
that the descriptions under clauses (i), (ii), (iii),
and (iv) of subparagraph (A) are reasonable, ac-
†
431
HR 1 EAS
curate, and based on generally accepted actu-
arial principles and methodologies.
‘‘(8) BIENNIAL GAO REPORTS.—Not later than
January 1, 2011, and biennially thereafter, the
Comptroller General of the United States shall submit
to the Secretary and Congress a report on the des-
ignation of highly competitive regions under this sub-
section and the application of the payment system
under this subsection within such regions. Each re-
port shall include—
‘‘(A) an evaluation of—
‘‘(i) the quality of care provided to
beneficiaries 
enrolled 
in 
a
MedicareAdvantage preferred provider plan
in a highly competitive region;
‘‘(ii) the satisfaction of beneficiaries
with benefits under such a plan;
‘‘(iii) the costs to the medicare pro-
gram for payments made to such plans; and
‘‘(iv) any improvements in the delivery
of health care services under such a plan;
‘‘(B) a comparative analysis of the bench-
mark system applicable under the other provi-
sions of this section and the payment system ap-
†
432
HR 1 EAS
plicable in highly competitive regions under this
subsection; and
‘‘(C) recommendations for such legislation
or administrative action as the Comptroller Gen-
eral determines to be appropriate.
‘‘(9) REPORT ON BUDGET NEUTRALITY FOR FIS-
CAL YEARS AFTER 2013.—
‘‘(A) IN GENERAL.—If the Secretary intends
to designate 1 or more regions as highly competi-
tive regions with respect to calendar 2014 or any
subsequent calendar year, the Secretary shall
submit a report to Congress indicating such in-
tent no later than April 1 of the calendar year
prior to the calendar year in which the applica-
ble designation year begins.
‘‘(B) REQUIREMENTS.—A report submitted
under subparagraph (A) shall—
‘‘(i) specify the steps (if any) that the
Secretary will take pursuant to paragraph
(5)(B) to ensure that the total amount ex-
pended as a result of the application of this
subsection during the year will not exceed
the applicable amount for the year (as de-
fined in paragraph (5)(A)(ii)(II)); and
†
433
HR 1 EAS
‘‘(ii) contain a certification from the
Chief Actuary of the Centers for Medicare
and Medicaid Services that such steps will
meet the requirements of paragraph (5)(A)
based on an analysis using generally ac-
cepted actuarial principles and methodolo-
gies.’’.
(b) 
CONFORMING
AMENDMENT.—Section
1858(c)(3)(A)(i) (as added by section 211(b)) is amended
to read as follows:
‘‘(i) Whether each preferred provider
region has been designated as a highly com-
petitive region under subparagraph (A) or
(B) of subsection (i)(1) and the benchmark
amount for any preferred provider region
(as calculated under paragraph (2)(A)) for
the year that has not been designated as a
highly competitive region.’’.
SEC. 232. FEE-FOR-SERVICE MODERNIZATION PROJECTS.
(a) ESTABLISHMENT.—
(1) REVIEW AND REPORT ON RESULTS OF EXIST-
ING DEMONSTRATIONS.—
(A) REVIEW.—The Secretary shall conduct
an empirical review of the results of the dem-
onstrations under sections 442, 443, and 444.
†
434
HR 1 EAS
(B) REPORT.—Not later than January 1,
2008, the Secretary shall submit a report to Con-
gress on the empirical review conducted under
subparagraph (A) which shall include estimates
of the total costs of the demonstrations, including
expenditures as a result of the provision of serv-
ices provided to beneficiaries under the dem-
onstrations that are incidental to the services
provided under the demonstrations, and all other
expenditures under title XVIII of the Social Se-
curity Act. The report shall also include a cer-
tification from the Chief Actuary of the Centers
for Medicare & Medicaid Services that such esti-
mates are reasonable, accurate, and based on
generally accepted actuarial principles and
methodologies.
(2) PROJECTS.—Beginning in 2009, the Sec-
retary, based on the empirical review conducted under
paragraph (1), shall establish projects under which
medicare beneficiaries receiving benefits under the
medicare fee-for-service program under parts A and B
of title XVIII of the Social Security Act are provided
with coverage of enhanced benefits or services under
such program. The purpose of such projects is to
†
435
HR 1 EAS
evaluate whether the provision of such enhanced bene-
fits or services to such beneficiaries—
(A) improves the quality of care provided to
such beneficiaries under the medicare program;
(B) improves the health care delivery system
under the medicare program; and
(C) results in reduced expenditures under
the medicare program.
(2) ENHANCED
BENEFITS
OR
SERVICES.—For
purposes of this section, enhanced benefits or services
shall include—
(A) preventive services not otherwise covered
under title XVIII of the Social Security Act;
(B) chronic care coordination services;
(C) disease management services; or
(D) other benefits or services that the Sec-
retary determines will improve preventive health
care for medicare beneficiaries, result in im-
proved chronic disease management, and man-
agement of complex, life-threatening, or high-cost
conditions and are consistent with the goals de-
scribed in subparagraphs (A), (B), and (C) of
paragraph (1).
(b) PROJECT SITES AND DURATION.—
†
436
HR 1 EAS
(1) IN GENERAL.—Subject to subsection (e)(2),
the projects under this section shall be conducted—
(A) in a region or regions that are com-
parable (as determined by the Secretary) to the
region or regions that are designated as a highly
competitive region under subparagraph (A) or
(B) of section 1858(i)(1) of the Social Security
Act, as added by section 231 of this Act; and
(B) during the years that a region or re-
gions are designated as such a highly competitive
region.
(2) RULE OF CONSTRUCTION.—For purposes of
paragraph (1), a comparable region does not nec-
essarily mean the identical region.
(c) WAIVER AUTHORITY.—The Secretary shall waive
compliance with the requirements of title XVIII of the So-
cial Security Act (42 U.S.C. 1395 et seq.) only to the extent
and for such period as the Secretary determines is necessary
to provide for enhanced benefits or services consistent with
the projects under this section.
(d) BIENNIAL GAO REPORTS.—Not later than Janu-
ary 1, 2011, and biennially thereafter for as long as the
projects under this section are being conducted, the Comp-
troller General of the United States shall submit to the Sec-
†
437
HR 1 EAS
retary and Congress a report that evaluates the projects.
Each report shall include—
(1) an evaluation of—
(A) the quality of care provided to bene-
ficiaries receiving benefits or services under the
projects;
(B) the satisfaction of beneficiaries receiv-
ing benefits or services under the projects;
(C) the costs to the medicare program under
the projects; and
(D) any improvements in the delivery of
health care services under the projects; and
(2) recommendations for such legislation or ad-
ministrative action as the Comptroller General deter-
mines to be appropriate.
(e) FUNDING.—
(1) IN GENERAL.—Payments for the costs of car-
rying out the projects under this section shall be made
from the Federal Hospital Insurance Trust Fund
under section 1817 of the Social Security Act (42
U.S.C. 1395i) and the Federal Supplementary Insur-
ance Trust Fund under section 1841 of such Act (42
U.S.C. 1395t), as determined appropriate by the Sec-
retary.
†
438
HR 1 EAS
(2) LIMITATION.—The total amount expended
under the medicare fee-for-service program under
parts A and B of title XVIII of the Social Security
Act (including all amounts expended as a result of the
projects under this section) during the period or year,
as applicable, may not exceed—
(A) for the period beginning on January 1,
2009, and ending on September 30, 2013, an
amount equal to the total amount that would
have been expended under the medicare fee-for-
service program under parts A and B of title
XVIII of the Social Security Act during the pe-
riod if the projects had not been conducted plus
$6,000,000,000; and
(B) for fiscal year 2014 and any subsequent
fiscal year, an amount equal to the total amount
that would have been expended under the medi-
care fee-for-service program under parts A and B
of such title during the year if the projects had
not been conducted.
(3) MONITORING AND REPORTS.—
(A) ONGOING
MONITORING
BY
THE
SEC-
RETARY TO ENSURE FUNDING LIMITATION IS NOT
VIOLATED.—The Secretary shall continually
monitor expenditures made under title XVIII of
†
439
HR 1 EAS
the Social Security Act by reason of the projects
under this section to ensure that the limitations
described in subparagraphs (A) and (B) of para-
graph (2) are not violated.
(B) REPORTS.—Not later than April 1 of
each year (beginning in 2010), the Secretary
shall submit a report to Congress and the Comp-
troller General of the United States that
includes—
(i) a detailed description of—
(I) the total amount expended
under the medicare fee-for-service pro-
gram under parts A and B of title
XVIII of the Social Security Act (in-
cluding all amounts expended as a re-
sult of the projects under this section)
during the previous year compared to
the total amount that would have been
expended under the original medicare
fee-for-service program in the year if
the projects had not been conducted;
(II) the projections of the total
amount expended under the medicare
fee-for-service program under parts A
and B of title XVIII of the Social Se-
†
440
HR 1 EAS
curity Act (including all amounts ex-
pended as a result of the projects under
this section) during the year in which
the report is submitted compared to the
total amount that would have been ex-
pended under the original medicare
fee-for-service program in the year if
the projects had not been conducted;
(III) amounts remaining within
the funding limitation specified in
paragraph (2); and
(IV) 
how 
the 
Secretary 
will
change the scope, site, and duration of
the projects in subsequent years in
order to ensure that the limitations de-
scribed in subparagraphs (A) and (B)
of paragraph (2) are not violated; and
(ii) a certification from the Chief Actu-
ary of the Centers for Medicare & Medicaid
Services that the descriptions under sub-
clauses (I), (II), (III), and (IV) of clause (i)
are reasonable, accurate, and based on gen-
erally accepted actuarial principles and
methodologies.
†
441
HR 1 EAS
(C) REPORT ON BUDGET NEUTRALITY FOR
FISCAL YEARS AFTER 2013.—
(i) IN GENERAL.—If the Secretary in-
tends to continue the projects under this sec-
tion for fiscal year 2014 or any subsequent
fiscal year, the Secretary shall submit a re-
port to Congress indicating such intent no
later than April 1 of the year prior to the
year in which the fiscal year begins.
(ii) REQUIREMENTS.—A report sub-
mitted under clause (i) shall—
(I) specify the steps (if any) that
the Secretary will take pursuant to
paragraph (4) to ensure that the limi-
tations described in paragraph (2)(B)
will not be violated for the year; and
(II) contain a certification from
the Chief Actuary of the Centers for
Medicare and Medicaid Services that
such steps will meet the requirements
of paragraph (2) based on an analysis
using 
generally 
accepted 
actuarial
principles and methodologies.
(4) APPLICATION OF LIMITATION.—If the Sec-
retary determines that the projects under this section
†
442
HR 1 EAS
will cause the limitations described in subparagraphs
(A) and (B) of paragraph (2) to be violated, the Sec-
retary shall take appropriate steps to reduce spending
under the projects, including through reducing the
scope, site, and duration of the projects.
(5) AUTHORITY.—Beginning in 2014, the Sec-
retary shall make necessary spending adjustments
(including pro rata reductions in payments to health
care providers under the medicare program) to recoup
amounts so that the limitations described in subpara-
graphs (A) and (B) of paragraph (2) are not violated.
Subtitle E—National Bipartisan
Commission on Medicare Reform
SEC. 241. MEDICAREADVANTAGE GOAL; ESTABLISHMENT OF
COMMISSION.
(a) ENROLLMENT GOAL.—It is the goal of this title
that, not later than January 1, 2010, at least 15 percent
of individuals entitled to, or enrolled for, benefits under
part A of title XVIII of the Social Security Act and enrolled
under part B of such title should be enrolled in a
MedicareAdvantage plan, as determined by the Center for
Medicare Choices.
(b) FAILURE TO ACHIEVE GOAL.—If the goal described
in subsection (a) is not met by January 1, 2012, as deter-
†
443
HR 1 EAS
mined by the Center for Medicare Choices, there shall be
established a commission as described in section 2.
SEC. 242. NATIONAL BIPARTISAN COMMISSION ON MEDI-
CARE REFORM.
(a) ESTABLISHMENT.—Upon a determination under
section 241(b) that the enrollment goal has not been met,
there shall be established a commission to be known as the
National Bipartisan Commission on Medicare Reform (in
this section referred to as the ‘‘Commission’’).
(b) DUTIES OF THE COMMISSION.—The Commission
shall—
(1) review and analyze the long-term financial
condition of the medicare program under title XVIII
of the Social Security Act (42 U.S.C. 1395 et seq.);
(2) identify problems that threaten the financial
integrity of the Federal Hospital Insurance Trust
Fund and the Federal Supplementary Medical Insur-
ance Trust Fund established under sections 1817 and
1841 of such Act (42 U.S.C. 1395i and 1395t),
including—
(A) the financial impact on the medicare
program of the significant increase in the num-
ber of medicare eligible individuals; and
(B) the ability of the Federal Government to
sustain the program into the future;
†
444
HR 1 EAS
(3) analyze potential solutions to the problems
identified under paragraph (2) that will ensure both
the financial integrity of the medicare program and
the provision of appropriate benefits under such pro-
gram, including methods used by other nations to re-
spond to comparable demographic patterns in eligi-
bility for health care benefits for elderly and disabled
individuals and trends in employment-related health
care for retirees;
(4) make recommendations to restore the solvency
of the Federal Hospital Insurance Trust Fund and
the financial integrity of the Federal Supplementary
Medical Insurance Trust Fund;
(5) make recommendations for establishing the
appropriate financial structure of the medicare pro-
gram as a whole;
(6) make recommendations for establishing the
appropriate balance of benefits covered under, and
beneficiary contributions to, the medicare program;
(7) make recommendations for the time periods
during which the recommendations described in para-
graphs (4), (5) and (6) should be implemented;
(8) make recommendations on the impact of
chronic disease and disability trends on future costs
and quality of services under the current benefit, fi-
†
445
HR 1 EAS
nancing, and delivery system structure of the medi-
care program;
(9) make recommendations regarding a com-
prehensive approach to preserve the medicare pro-
gram, including ways to increase the effectiveness of
the MedicareAdvantage program and to increase
MedicareAdvantage enrollment rates; and
(10) review and analyze such other matters as
the Commission determines appropriate.
(c) MEMBERSHIP.—
(1) NUMBER AND APPOINTMENT.—The Commis-
sion shall be composed of 17 members, of whom—
(A) four shall be appointed by the Presi-
dent;
(B) six shall be appointed by the Majority
Leader of the Senate, in consultation with the
Minority Leader of the Senate, of whom not
more than 4 shall be of the same political party;
(C) six shall be appointed by the Speaker of
the House of Representatives, in consultation
with the Minority Leader of the House of Rep-
resentatives, of whom not more than 4 shall be
of the same political party; and
(D) one, who shall serve as Chairperson of
the Commission, shall be appointed jointly by
†
446
HR 1 EAS
the President, Majority Leader of the Senate,
and the Speaker of the House of Representatives.
(2) DEADLINE FOR APPOINTMENT.—Members of
the Commission shall be appointed by not later than
October 1, 2012.
(3) TERMS OF APPOINTMENT.—The term of any
member appointed under paragraph (1) shall be for
the life of the Commission.
(4) MEETINGS.—The Commission shall meet at
the call of the Chairperson or a majority of its mem-
bers.
(5) QUORUM.—A quorum for purposes of con-
ducting the business of the Commission shall consist
of 8 members of the Commission, except that 4 mem-
bers may conduct a hearing under subsection (e).
(6) VACANCIES.—A vacancy in the membership
of the Commission shall be filled, not later than 30
days after the Commission is given notice of the va-
cancy, in the same manner in which the original ap-
pointment was made. Such a vacancy shall not affect
the power of the remaining members to carry out the
duties of the Commission.
(7) COMPENSATION.—Members of the Commis-
sion shall receive no additional pay, allowances, or
benefits by reason of their service on the Commission.
†
447
HR 1 EAS
(8) EXPENSES.—Each member of the Commis-
sion shall receive travel expenses and per diem in lieu
of subsistence in accordance with sections 5702 and
5703 of title 5, United States Code.
(d) STAFF AND SUPPORT SERVICES.—
(1) EXECUTIVE DIRECTOR.—
(A) APPOINTMENT.—The Chairperson shall
appoint an executive director of the Commission.
(B) COMPENSATION.—The executive director
shall be paid the rate of basic pay for level V of
the Executive Schedule under title 5, United
States Code.
(2) STAFF.—With the approval of the Commis-
sion, the executive director may appoint such per-
sonnel as the executive director considers appropriate.
(3) APPLICABILITY OF CIVIL SERVICE LAWS.—
The staff of the Commission shall be appointed with-
out regard to the provisions of title 5, United States
Code, governing appointments in the competitive serv-
ice, and shall be paid without regard to the provisions
of chapter 51 and subchapter III of chapter 53 of such
title (relating to classification and General Schedule
pay rates).
(4) EXPERTS AND CONSULTANTS.—With the ap-
proval of the Commission, the executive director may
†
448
HR 1 EAS
procure temporary and intermittent services under
section 3109(b) of title 5, United States Code.
(5) PHYSICAL
FACILITIES.—The Administrator
of the General Services Administration shall locate
suitable office space for the operation of the Commis-
sion. The facilities shall serve as the headquarters of
the Commission and shall include all necessary equip-
ment and incidentals required for the proper func-
tioning of the Commission.
(e) POWERS OF COMMISSION.—
(1) HEARINGS
AND
OTHER
ACTIVITIES.—The
Commission may hold such hearings and undertake
such other activities as the Commission determines to
be necessary to carry out its duties under this section.
(2) STUDIES BY GAO.—Upon the request of the
Commission, the Comptroller General shall conduct
such studies or investigations as the Commission de-
termines to be necessary to carry out its duties under
this section.
(3) COST ESTIMATES BY CONGRESSIONAL BUDG-
ET OFFICE AND OFFICE OF THE CHIEF ACTUARY OF
THE CENTERS FOR MEDICARE & MEDICAID.—
(A) IN GENERAL.—The Director of the Con-
gressional Budget Office or the Chief Actuary of
the Center for Medicare & Medicaid Services, or
†
449
HR 1 EAS
both, shall provide to the Commission, upon the
request of the Commission, such cost estimates as
the Commission determines to be necessary to
carry out its duties under this section.
(B) REIMBURSEMENTS.—The Commission
shall reimburse the Director of the Congressional
Budget Office for expenses relating to the em-
ployment in the office of the Director of such ad-
ditional staff as may be necessary for the Direc-
tor to comply with requests by the Commission
under subparagraph (A).
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon the
request of the Commission, the head of any Federal
agency is authorized to detail, without reimburse-
ment, any of the personnel of such agency to the Com-
mission to assist the Commission in carrying out its
duties under this section. Any such detail shall not
interrupt or otherwise affect the civil service status or
privileges of the Federal employee.
(5) TECHNICAL ASSISTANCE.—Upon the request
of the Commission, the head of a Federal agency shall
provide such technical assistance to the Commission
as the Commission determines to be necessary to
carry out its duties under this section.
†
450
HR 1 EAS
(6) USE OF MAILS.—The Commission may use
the United States mails in the same manner and
under the same conditions as Federal agencies and
shall, for purposes of the frank, be considered a com-
mission of Congress as described in section 3215 of
title 39, United States Code.
(7) OBTAINING INFORMATION.—The Commission
may secure directly from any Federal agency infor-
mation necessary to enable it to carry out its duties
under this section, if the information may be disclosed
under section 552 of title 5, United States Code.
Upon request of the Chairperson of the Commission,
the head of each such agency shall furnish such infor-
mation to the Commission.
(8) ADMINISTRATIVE SUPPORT SERVICES.—Upon
the request of the Commission, the Administrator of
General Services shall provide to the Commission on
a reimbursable basis such administrative support
services as the Commission may request.
(9) PRINTING.—For purposes of costs relating to
printing and binding, including the cost of personnel
detailed from the Government Printing Office, the
Commission shall be deemed to be a committee of
Congress.
†
451
HR 1 EAS
(f) REPORT.—Not later than April 1, 2014, the Com-
mission shall submit to the President and Congress a report
and an implementation bill that shall contain a detailed
statement of only those recommendations, findings, and
conclusions of the Commission that receive the approval of
at least 11 members of the Commission.
(g) TERMINATION.—The Commission shall terminate
on the date that is 30 days after the date on which the re-
port and implementation bill is submitted under subsection
(f).
SEC. 243. CONGRESSIONAL CONSIDERATION OF REFORM
PROPOSALS.
(a) DEFINITIONS.—In this section:
(1) IMPLEMENTATION BILL.—The term ‘‘imple-
mentation bill’’ means only a bill that is introduced
as provided under subsection (b), and contains the
proposed legislation included in the report submitted
to Congress under section 242(f), without modifica-
tion.
(2) CALENDAR DAY.—The term ‘‘calendar day’’
means a calendar day other than 1 on which either
House is not in session because of an adjournment of
more than 3 days to a date certain.
(b) INTRODUCTION; REFERRAL; AND REPORT OR DIS-
CHARGE.—
†
452
HR 1 EAS
(1) INTRODUCTION.—On the first calendar day
on which both Houses are in session immediately fol-
lowing the date on which the report is submitted to
Congress under section 242(f), a single implementa-
tion bill shall be introduced (by request)—
(A) in the Senate by the Majority Leader of
the Senate, for himself and the Minority Leader
of the Senate, or by Members of the Senate des-
ignated by the Majority Leader and Minority
Leader of the Senate; and
(B) in the House of Representatives by the
Speaker of the House of Representatives, for him-
self and the Minority Leader of the House of
Representatives, or by Members of the House of
Representatives designated by the Speaker and
Minority Leader of the House of Representatives.
(2) REFERRAL.—The implementation bills intro-
duced under paragraph (1) shall be referred to any
appropriate committee of jurisdiction in the Senate
and any appropriate committee of jurisdiction in the
House of Representatives. A committee to which an
implementation bill is referred under this paragraph
may report such bill to the respective House without
amendment.
†
453
HR 1 EAS
(3) REPORT OR DISCHARGE.—If a committee to
which an implementation bill is referred has not re-
ported such bill by the end of the 15th calendar day
after the date of the introduction of such bill, such
committee shall be immediately discharged from fur-
ther consideration of such bill, and upon being re-
ported or discharged from the committee, such bill
shall be placed on the appropriate calendar.
(c) FLOOR CONSIDERATION.—
(1) IN GENERAL.—When the committee to which
an implementation bill is referred has reported, or
has been discharged under subsection (b)(3), it is at
any time thereafter in order (even though a previous
motion to the same effect has been disagreed to) for
any Member of the respective House to move to pro-
ceed to the consideration of the implementation bill,
and all points of order against the implementation
bill (and against consideration of the implementation
bill) are waived. The motion is highly privileged in
the House of Representatives and is privileged in the
Senate. The motion is not subject to amendment, or
to a motion to postpone, or to a motion to proceed to
the consideration of other business. A motion to recon-
sider the vote by which the motion is agreed to or dis-
agreed to shall not be in order. If a motion to proceed
†
455
HR 1 EAS
(5) RULINGS OF THE CHAIR ON PROCEDURE.—
Appeals from the decisions of the Chair relating to the
application of the rules of the Senate or the House of
Representatives, as the case may be, to the procedure
relating to an implementation bill shall be decided
without debate.
(d) 
COORDINATION
WITH
ACTION
BY
OTHER
HOUSE.—If, before the passage by 1 House of an implemen-
tation bill of that House, that House receives from the other
House an implementation bill, then the following proce-
dures shall apply:
(1) NONREFERRAL.—The implementation bill of
the other House shall not be referred to a committee.
(2) VOTE ON BILL OF OTHER HOUSE.—With re-
spect to an implementation bill of the House receiving
the implementation bill—
(A) the procedure in that House shall be the
same as if no implementation bill had been re-
ceived from the other House; but
(B) the vote on final passage shall be on the
implementation bill of the other House.
(e) RULES OF SENATE AND HOUSE OF REPRESENTA-
TIVES.—This section is enacted by Congress—
(1) as an exercise of the rulemaking power of the
Senate and House of Representatives, respectively,
†
456
HR 1 EAS
and as such it is deemed a part of the rules of each
House, respectively, but applicable only with respect
to the procedure to be followed in that House in the
case of an implementation bill described in subsection
(a), and it supersedes other rules only to the extent
that it is inconsistent with such rules; and
(2) with full recognition of the constitutional
right of either House to change the rules (so far as re-
lating to the procedure of that House) at any time,
in the same manner, and to the same extent as in the
case of any other rule of that House.
SEC. 244. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated such sums as
may be necessary to carry out this subtitle for each of fiscal
years 2012 through 2013.
TITLE III—CENTER FOR
MEDICARE CHOICES
SEC. 301. ESTABLISHMENT OF THE CENTER FOR MEDICARE
CHOICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 111, is amended by inserting
after 1806 the following new section:
‘‘ESTABLISHMENT OF THE CENTER FOR MEDICARE
CHOICES
‘‘SEC. 1808. (a) ESTABLISHMENT.—By not later than
March 1, 2004, the Secretary shall establish within the De-
†
457
HR 1 EAS
partment of Health and Human Services the Center for
Medicare Choices, which shall be separate from the Centers
for Medicare & Medicaid Services.
‘‘(b) 
ADMINISTRATOR
AND
DEPUTY
ADMINIS-
TRATOR.—
‘‘(1) ADMINISTRATOR.—
‘‘(A) IN GENERAL.—The Center for Medi-
care Choices shall be headed by an Adminis-
trator (in this section referred to as the ‘Admin-
istrator’) who shall be appointed by the Presi-
dent, by and with the advice and consent of the
Senate. The Administrator shall report directly
to the Secretary.
‘‘(B) COMPENSATION.—The Administrator
shall be paid at the rate of basic pay payable for
level III of the Executive Schedule under section
5314 of title 5, United States Code.
‘‘(C) TERM OF OFFICE.—The Administrator
shall be appointed for a term of 5 years. In any
case in which a successor does not take office at
the end of an Administrator’s term of office, that
Administrator may continue in office until the
entry upon office of such a successor. An Admin-
istrator appointed to a term of office after the
commencement of such term may serve under
†
458
HR 1 EAS
such appointment only for the remainder of such
term.
‘‘(D) GENERAL AUTHORITY.—The Adminis-
trator shall be responsible for the exercise of all
powers and the discharge of all duties of the Cen-
ter for Medicare Choices, and shall have author-
ity and control over all personnel and activities
thereof.
‘‘(E) RULEMAKING
AUTHORITY.—The Ad-
ministrator may prescribe such rules and regula-
tions as the Administrator determines necessary
or appropriate to carry out the functions of the
Center for Medicare Choices. The regulations pre-
scribed by the Administrator shall be subject to
the rulemaking procedures established under sec-
tion 553 of title 5, United States Code.
‘‘(F) AUTHORITY TO ESTABLISH ORGANIZA-
TIONAL UNITS.—The Administrator may estab-
lish, alter, consolidate, or discontinue such orga-
nizational units or components within the Cen-
ter for Medicare Choices as the Administrator
considers necessary or appropriate, except that
this subparagraph shall not apply with respect
to any unit, component, or provision provided
for by this section.
†
459
HR 1 EAS
‘‘(G) AUTHORITY TO DELEGATE.—The Ad-
ministrator may assign duties, and delegate, or
authorize successive redelegations of, authority to
act and to render decisions, to such officers and
employees of the Center for Medicare Choices as
the Administrator may find necessary. Within
the limitations of such delegations, redelegations,
or assignments, all official acts and decisions of
such officers and employees shall have the same
force and effect as though performed or rendered
by the Administrator.
‘‘(2) DEPUTY ADMINISTRATOR.—
‘‘(A) IN GENERAL.—There shall be a Dep-
uty Administrator of the Center for Medicare
Choices who shall be appointed by the Adminis-
trator.
‘‘(B) COMPENSATION.—The Deputy Admin-
istrator shall be paid at the rate of basic pay
payable for level IV of the Executive Schedule
under section 5315 of title 5, United States Code.
‘‘(C) TERM OF OFFICE.—The Deputy Ad-
ministrator shall be appointed for a term of 5
years. In any case in which a successor does not
take office at the end of a Deputy Administra-
tor’s term of office, such Deputy Administrator
†
460
HR 1 EAS
may continue in office until the entry upon of-
fice of such a successor. A Deputy Administrator
appointed to a term of office after the commence-
ment of such term may serve under such ap-
pointment only for the remainder of such term.
‘‘(D) DUTIES.—The Deputy Administrator
shall perform such duties and exercise such pow-
ers as the Administrator shall from time to time
assign or delegate. The Deputy Administrator
shall be the Acting Administrator of the Center
for Medicare Choices during the absence or dis-
ability of the Administrator and, unless the
President designates another officer of the Gov-
ernment as Acting Administrator, in the event of
a vacancy in the office of the Administrator.
‘‘(3) SECRETARIAL COORDINATION OF PROGRAM
ADMINISTRATION.—The Secretary shall ensure appro-
priate coordination between the Administrator and
the Administrator of the Centers for Medicare & Med-
icaid Services in carrying out the programs under
this title.
‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—
‘‘(1) DUTIES.—
†
461
HR 1 EAS
‘‘(A) GENERAL
DUTIES.—The Adminis-
trator shall carry out parts C and D,
including—
‘‘(i) negotiating, entering into, and en-
forcing, contracts with plans for the offering
of MedicareAdvantage plans under part C,
including the offering of qualified prescrip-
tion drug coverage under such plans; and
‘‘(ii) negotiating, entering into, and
enforcing, contracts with eligible entities for
the offering of Medicare Prescription Drug
plans under part D.
‘‘(B) OTHER DUTIES.—The Administrator
shall carry out any duty provided for under part
C or D, including duties relating to—
‘‘(i) reasonable cost contracts with eli-
gible organizations under section 1876(h);
and
‘‘(ii) demonstration projects carried
out in part or in whole under such parts,
including the demonstration project carried
out through a MedicareAdvantage (formerly
Medicare+Choice) project that demonstrates
the application of capitation payment rates
for frail elderly medicare beneficiaries
†
462
HR 1 EAS
through the use of an interdisciplinary
team and through the provision of primary
care services to such beneficiaries by means
of such a team at the nursing facility in-
volved.
‘‘(C) NONINTERFERENCE.—In order to pro-
mote competition under parts C and D, the Ad-
ministrator, in carrying out the duties required
under this section, may not, to the extent pos-
sible, interfere in any way with negotiations be-
tween eligible entities, MedicareAdvantage orga-
nizations, hospitals, physicians, other entities or
individuals furnishing items and services under
this title (including contractors for such items
and services), and drug manufacturers, whole-
salers, or other suppliers of covered drugs
‘‘(D) ANNUAL
REPORTS.—Not later than
March 31 of each year, the Administrator shall
submit to Congress and the President a report on
the administration of the voluntary prescription
drug delivery program under this part during
the previous fiscal year.
‘‘(2) MANAGEMENT STAFF.—
‘‘(A) IN
GENERAL.—The Administrator,
with the approval of the Secretary, may employ,
†
463
HR 1 EAS
such management staff as determined appro-
priate. Any such manager shall be required to
have demonstrated, by their education and expe-
rience (either in the public or private sector), su-
perior expertise in the following areas:
‘‘(i) The review, negotiation, and ad-
ministration of health care contracts.
‘‘(ii) The design of health care benefit
plans.
‘‘(iii) Actuarial sciences.
‘‘(iv) Compliance with health plan con-
tracts.
‘‘(v) Consumer education and decision
making.
‘‘(B) COMPENSATION.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), the Administrator shall establish the
rate of pay for an individual employed
under subparagraph (A).
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the highest rate of
basic pay for the Senior Executive Service
under section 5382(b) of title 5, United
States Code.
†
464
HR 1 EAS
‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS OF
THE
CENTERS
FOR
MEDICARE
&
MEDICAID
SERV-
ICES.—
‘‘(A) IN GENERAL.—The Secretary, the Ad-
ministrator of the Center for Medicare Choices,
and the Administrator of the Centers for Medi-
care & Medicaid Services shall establish an ap-
propriate transition of responsibility in order to
redelegate the administration of part C from the
Secretary and the Administrator of the Centers
for Medicare & Medicaid Services to the Admin-
istrator of the Center for Medicare Choices as is
appropriate to carry out the purposes of this sec-
tion.
‘‘(B) TRANSFER
OF
DATA
AND
INFORMA-
TION.—The Secretary shall ensure that the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services transfers to the Administrator
such information and data in the possession of
the Administrator of the Centers for Medicare &
Medicaid Services as the Administrator requires
to carry out the duties described in paragraph
(1).
‘‘(C) CONSTRUCTION.—Insofar as a respon-
sibility of the Secretary or the Administrator of
†
466
HR 1 EAS
free telephone number provided for under section
1804(b), information with respect to the fol-
lowing:
‘‘(i) Benefits, and limitations on pay-
ment (including cost-sharing, stop-loss pro-
visions, and formulary restrictions) under
parts C and D.
‘‘(ii) Benefits, and limitations on pay-
ment under parts A, and B, including in-
formation on medicare supplemental poli-
cies under section 1882.
‘‘(iii) Other areas determined to be ap-
propriate by the Administrator.
Such information shall be presented in a manner
so that medicare beneficiaries may compare ben-
efits under parts A, B, and D, and medicare
supplemental 
policies 
with 
benefits 
under
MedicareAdvantage plans under part C.
‘‘(B) DISSEMINATION OF APPEALS RIGHTS
INFORMATION.—The Office of Beneficiary Assist-
ance shall disseminate to medicare beneficiaries
in the manner provided under subparagraph (A)
a description of procedural rights (including
grievance and appeals procedures) of bene-
ficiaries under the original medicare fee-for-serv-
†
467
HR 1 EAS
ice program under parts A and B, the
MedicareAdvantage program under part C, and
the voluntary prescription drug delivery pro-
gram under part D.
‘‘(3) MEDICARE OMBUDSMAN.—
‘‘(A) IN
GENERAL.—Within the Office of
Beneficiary Assistance, there shall be a Medicare
Ombudsman, appointed by the Secretary from
among individuals with expertise and experience
in the fields of health care and advocacy, to
carry out the duties described in subparagraph
(B).
‘‘(B) DUTIES.—The Medicare Ombudsman
shall—
‘‘(i) receive complaints, grievances, and
requests for information submitted by a
medicare beneficiary, with respect to any
aspect of the medicare program;
‘‘(ii) provide assistance with respect to
complaints, grievances, and requests re-
ferred to in clause (i), including—
‘‘(I) assistance in collecting rel-
evant information for such bene-
ficiaries, to seek an appeal of a deci-
sion or determination made by a fiscal
†
468
HR 1 EAS
intermediary, 
carrier,
MedicareAdvantage organization, an
eligible entity under part D, or the
Secretary; and
‘‘(II) assistance to such bene-
ficiaries with any problems arising
from 
disenrollment 
from 
a
MedicareAdvantage plan under part C
or a prescription drug plan under part
D; and
‘‘(iii) submit annual reports to Con-
gress, the Secretary, and the Medicare Com-
petitive Policy Advisory Board describing
the activities of the Office, and including
such recommendations for improvement in
the administration of this title as the Om-
budsman determines appropriate.
‘‘(C) COORDINATION WITH STATE OMBUDS-
MAN
PROGRAMS
AND
CONSUMER
ORGANIZA-
TIONS.—The Medicare Ombudsman shall, to the
extent appropriate, coordinate with State med-
ical Ombudsman programs, and with State- and
community-based consumer organizations, to—
‘‘(i) provide information about the
medicare program; and
†
469
HR 1 EAS
‘‘(ii) conduct outreach to educate medi-
care beneficiaries with respect to manners
in which problems under the medicare pro-
gram may be resolved or avoided.
‘‘(e) MEDICARE
COMPETITIVE
POLICY
ADVISORY
BOARD.—
‘‘(1) 
ESTABLISHMENT.—There 
is 
established
within the Center for Medicare Choices the Medicare
Competitive Policy Advisory Board (in this section
referred to as the ‘Board’). The Board shall advise,
consult with, and make recommendations to the Ad-
ministrator with respect to the administration of
parts C and D, including the review of payment poli-
cies under such parts.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—With respect to matters
of the administration of parts C and D, the
Board shall submit to Congress and to the Ad-
ministrator such reports as the Board determines
appropriate. Each such report may contain such
recommendations as the Board determines ap-
propriate 
for 
legislative 
or 
administrative
changes to improve the administration of such
parts, including the stability and solvency of the
programs under such parts and the topics de-
†
470
HR 1 EAS
scribed in subparagraph (B). Each such report
shall be published in the Federal Register.
‘‘(B) TOPICS DESCRIBED.—Reports required
under subparagraph (A) may include the fol-
lowing topics:
‘‘(i) FOSTERING
COMPETITION.—Rec-
ommendations or proposals to increase com-
petition under parts C and D for services
furnished to medicare beneficiaries.
‘‘(ii) EDUCATION AND ENROLLMENT.—
Recommendations for the improvement of
efforts to provide medicare beneficiaries in-
formation and education on the program
under this title, and specifically parts C
and D, and the program for enrollment
under the title.
‘‘(iii) QUALITY.—Recommendations on
ways to improve the quality of benefits pro-
vided under plans under parts C and D.
‘‘(iv) 
DISEASE
MANAGEMENT
PRO-
GRAMS.—Recommendations on the incorpo-
ration of disease management programs
under parts C and D.
†
471
HR 1 EAS
‘‘(v) RURAL
ACCESS.—Recommenda-
tions to improve competition and access to
plans under parts C and D in rural areas.
‘‘(C) 
MAINTAINING
INDEPENDENCE
OF
BOARD.—The Board shall directly submit to
Congress reports required under subparagraph
(A). No officer or agency of the United States
may require the Board to submit to any officer
or agency of the United States for approval,
comments, or review, prior to the submission to
Congress of such reports.
‘‘(3) DUTY OF ADMINISTRATOR.—With respect to
any report submitted by the Board under paragraph
(2)(A), not later than 90 days after the report is sub-
mitted, the Administrator shall submit to Congress
and the President an analysis of recommendations
made by the Board in such report. Each such anal-
ysis shall be published in the Federal Register.
‘‘(4) MEMBERSHIP.—
‘‘(A) APPOINTMENT.—Subject to the suc-
ceeding provisions of this paragraph, the Board
shall consist of 7 members to be appointed as fol-
lows:
‘‘(i) Three members shall be appointed
by the President.
†
472
HR 1 EAS
‘‘(ii) Two members shall be appointed
by the Speaker of the House of Representa-
tives, with the advice of the chairman and
the ranking minority member of the Com-
mittees on Ways and Means and on Energy
and Commerce of the House of Representa-
tives.
‘‘(iii) Two members shall be appointed
by the President pro tempore of the Senate
with the advice of the chairman and the
ranking minority member of the Committee
on Finance of the Senate.
‘‘(B) QUALIFICATIONS.—The members shall
be chosen on the basis of their integrity, impar-
tiality, and good judgment, and shall be individ-
uals who are, by reason of their education and
experience in health care benefits management,
exceptionally qualified to perform the duties of
members of the Board.
‘‘(C) PROHIBITION ON INCLUSION OF FED-
ERAL EMPLOYEES.—No officer or employee of the
United States may serve as a member of the
Board.
‘‘(5) COMPENSATION.—Members of the Board
shall receive, for each day (including travel time) they
†
473
HR 1 EAS
are engaged in the performance of the functions of the
Board, compensation at rates not to exceed the daily
equivalent to the annual rate in effect for level IV of
the Executive Schedule under section 5315 of title 5,
United States Code.
‘‘(6) TERMS OF OFFICE.—
‘‘(A) IN GENERAL.—The term of office of
members of the Board shall be 3 years.
‘‘(B) TERMS OF INITIAL APPOINTEES.—As
designated by the President at the time of ap-
pointment, of the members first appointed—
‘‘(i) one shall be appointed for a term
of 1 year;
‘‘(ii) three shall be appointed for terms
of 2 years; and
‘‘(iii) three shall be appointed for
terms of 3 years.
‘‘(C) REAPPOINTMENTS.—Any person ap-
pointed as a member of the Board may not serve
for more than 8 years.
‘‘(D) VACANCY.—Any member appointed to
fill a vacancy occurring before the expiration of
the term for which the member’s predecessor was
appointed shall be appointed only for the re-
mainder of that term. A member may serve after
†
474
HR 1 EAS
the expiration of that member’s term until a suc-
cessor has taken office. A vacancy in the Board
shall be filled in the manner in which the origi-
nal appointment was made.
‘‘(7) CHAIR.—The Chair of the Board shall be
elected by the members. The term of office of the Chair
shall be 3 years.
‘‘(8) MEETINGS.—The Board shall meet at the
call of the Chair, but in no event less than 3 times
during each fiscal year.
‘‘(9) DIRECTOR AND STAFF.—
‘‘(A) APPOINTMENT
OF
DIRECTOR.—The
Board shall have a Director who shall be ap-
pointed by the Chair.
‘‘(B) IN GENERAL.—With the approval of
the Board, the Director may appoint such addi-
tional personnel as the Director considers appro-
priate.
‘‘(C) ASSISTANCE
FROM
THE
ADMINIS-
TRATOR.—The Administrator shall make avail-
able to the Board such information and other as-
sistance as it may require to carry out its func-
tions.
‘‘(10) CONTRACT AUTHORITY.—The Board may
contract with and compensate government and pri-
†
475
HR 1 EAS
vate agencies or persons to carry out its duties under
this subsection, without regard to section 3709 of the
Revised Statutes (41 U.S.C. 5).
‘‘(f) FUNDING.—There is authorized to be appro-
priated, in appropriate part from the Federal Hospital In-
surance Trust Fund and from the Federal Supplementary
Medical Insurance Trust Fund (including the Prescription
Drug Account), such sums as are necessary to carry out
this section.’’.
(b) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–
MEDICARE).—Section 1804(b) (42 U.S.C. 1395b–2(b)) is
amended by adding at the end the following: ‘‘By not later
than 1 year after the date of the enactment of the Prescrip-
tion Drug and Medicare Improvement Act of 2003, the Sec-
retary shall provide, through the toll-free number 1–800–
MEDICARE, for a means by which individuals seeking in-
formation about, or assistance with, such programs who
phone such toll-free number are transferred (without
charge) to appropriate entities for the provision of such in-
formation or assistance. Such toll-free number shall be the
toll-free number listed for general information and assist-
ance in the annual notice under subsection (a) instead of
the listing of numbers of individual contractors.’’.
†
476
HR 1 EAS
SEC. 302. MISCELLANEOUS ADMINISTRATIVE PROVISIONS.
(a) ADMINISTRATOR AS MEMBER AND CO-SECRETARY
OF THE BOARD OF TRUSTEES OF THE MEDICARE TRUST
FUNDS.—The fifth sentence of sections 1817(b) and 1841(b)
(42 U.S.C. 1395i(b), 1395t(b)) are each amended by strik-
ing ‘‘shall serve as the Secretary’’ and inserting ‘‘and the
Administrator of the Center for Medicare Choices shall serve
as the Co-Secretaries’’.
(b) INCREASE IN GRADE TO EXECUTIVE LEVEL III
FOR THE ADMINISTRATOR OF THE CENTERS FOR MEDI-
CARE & MEDICAID SERVICES.—
(1) IN
GENERAL.—Section 5314 of title 5,
United States Code, is amended by adding at the end
the following:
‘‘Administrator of the Centers for Medicare &
Medicaid Services.’’.
(2) CONFORMING AMENDMENT.—Section 5315 of
such title is amended by striking ‘‘Administrator of
the Health Care Financing Administration.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection take effect on March 1, 2004.
†
477
HR 1 EAS
TITLE IV—MEDICARE FEE-FOR-
SERVICE IMPROVEMENTS
Subtitle A—Provisions Relating to
Part A
SEC. 401. EQUALIZING URBAN AND RURAL STANDARDIZED
PAYMENT AMOUNTS UNDER THE MEDICARE
INPATIENT 
HOSPITAL 
PROSPECTIVE 
PAY-
MENT SYSTEM.
(a) IN
GENERAL.—Section 1886(d)(3)(A)(iv) (42
U.S.C. 1395ww(d)(3)(A)(iv)) is amended—
(1) by striking ‘‘(iv) For discharges’’ and insert-
ing ‘‘(iv)(I) Subject to subclause (II), for discharges’’;
and
(2) by adding at the end the following new sub-
clause:
‘‘(II) For discharges occurring in a fiscal year
(beginning with fiscal year 2004), the Secretary shall
compute a standardized amount for hospitals located
in any area within the United States and within
each region equal to the standardized amount com-
puted for the previous fiscal year under this subpara-
graph for hospitals located in a large urban area (or,
beginning with fiscal year 2005, for applicable for all
hospitals in the previous fiscal year) increased by the
†
478
HR 1 EAS
applicable percentage increase under subsection
(b)(3)(B)(i) for the fiscal year involved.’’.
(b) APPLICATION TO SUBSECTION (D) PUERTO RICO
HOSPITALS.—Section 
1886(d)(9) 
(42 
U.S.C.
1395ww(d)(9)) is amended—
(1) in subparagraph (A)—
(A) in clause (i), by striking ‘‘and’’ after
the comma at the end;
(B) in clause (ii)—
(i) in the matter preceding subclause
(I), by inserting ‘‘and before October 1,
2003’’ after ‘‘October 1, 1997’’; and
(ii) in the matter following clause
(III), by striking the period at the end and
inserting ‘‘, and’’; and
(iii) by adding at the end the following
new clause:
‘‘(iii) for discharges in a fiscal year beginning
on or after October 1, 2003, 50 percent of the national
standardized rate (determined under paragraph
(3)(D)(iii)) for hospitals located in any area.’’;
(2) in subparagraph (C)—
(A) in clause (i)—
(i) by striking ‘‘(i) The Secretary’’ and
inserting ‘‘(i)(I) For discharges in a fiscal
†
479
HR 1 EAS
year after fiscal year 1988 and before fiscal
year 2004, the Secretary; and
(ii) by adding at the end the following:
‘‘(II) For discharges in fiscal year 2004, the Sec-
retary shall compute an average standardized amount
for hospitals located in any area of Puerto Rico that
is equal to the average standardized amount com-
puted under subclause (I) for fiscal year 2003 for hos-
pitals in an urban area, increased by the applicable
percentage increase under subsection (b)(3)(B) for fis-
cal year 2004.
‘‘(III) For discharges in a fiscal year after fiscal
year 2004, the Secretary shall compute an average
standardized amount for hospitals located in any are
of Puerto Rico that is equal to the average standard-
ized amount computed under subclause (II) or this
subclause for the previous fiscal year, increased by the
applicable percentage increase under subsection
(b)(3)(B), adjusted to reflect the most recent case mix
data.’’;
(B) in clause (ii), by inserting ‘‘(or for fis-
cal year 2004 and thereafter, the standardized
amount)’’ after ‘‘each of the average standardized
amounts’’; and
†
480
HR 1 EAS
(C) in clause (iii)(I), by striking ‘‘for hos-
pitals located in an urban or rural area, respec-
tively’’.
(c) CONFORMING AMENDMENTS.—
(1) COMPUTING DRG-SPECIFIC RATES.—Section
1886(d)(3)(D) 
(42 
U.S.C. 
1395ww(d)(3)(D)) 
is
amended—
(A) in the heading, by striking ‘‘IN DIF-
FERENT AREAS’’;
(B) in the matter preceding clause (i), by
striking ‘‘, each of’’;
(C) in clause (i)—
(i) in the matter preceding subclause
(I), by inserting ‘‘for fiscal years before fis-
cal year 2004,’’ before ‘‘for hospitals’’; and
(ii) in subclause (II), by striking
‘‘and’’ after the semicolon at the end;
(D) in clause (ii)—
(i) in the matter preceding subclause
(I), by inserting ‘‘for fiscal years before fis-
cal year 2004,’’ before ‘‘for hospitals’’; and
(ii) in subclause (II), by striking the
period at the end and inserting ‘‘; and’’;
and
†
481
HR 1 EAS
(E) by adding at the end the following new
clause:
‘‘(iii) for a fiscal year beginning after fiscal
year 2003, for hospitals located in all areas, to
the product of—
‘‘(I) 
the 
applicable 
standardized
amount (computed under subparagraph
(A)), reduced under subparagraph (B), and
adjusted or reduced under subparagraph (C)
for the fiscal year; and
‘‘(II) the weighting factor (determined
under paragraph (4)(B)) for that diagnosis-
related group.’’.
(2) TECHNICAL CONFORMING SUNSET.—Section
1886(d)(3) (42 U.S.C. 1395ww(d)(3)) is amended—
(A) in the matter preceding subparagraph
(A), by inserting ‘‘, for fiscal years before fiscal
year 1997,’’ before ‘‘a regional adjusted DRG
prospective payment rate’’; and
(B) in subparagraph (D), in the matter
preceding clause (i), by inserting ‘‘, for fiscal
years before fiscal year 1997,’’ before ‘‘a regional
DRG prospective payment rate for each region,’’.
†
482
HR 1 EAS
SEC. 402. ADJUSTMENT TO THE MEDICARE INPATIENT HOS-
PITAL PPS WAGE INDEX TO REVISE THE
LABOR-RELATED SHARE OF SUCH INDEX.
(a) IN GENERAL.—Section 1886(d)(3)(E) (42 U.S.C.
1395ww(d)(3)(E)) is amended—
(1) by striking ‘‘WAGE LEVELS.—The Secretary’’
and inserting ‘‘WAGE LEVELS.—
‘‘(i) IN GENERAL.—Except as provided in
clause (ii), the Secretary’’; and
(2) by adding at the end the following new
clause:
‘‘(ii) ALTERNATIVE PROPORTION TO BE AD-
JUSTED BEGINNING IN FISCAL YEAR 2005.—
‘‘(I) IN GENERAL.—Except as provided
in subclause (II), for discharges occurring
on or after October 1, 2004, the Secretary
shall substitute ‘62 percent’ for the propor-
tion described in the first sentence of clause
(i).
‘‘(II) HOLD HARMLESS FOR CERTAIN
HOSPITALS.—If the application of subclause
(I) would result in lower payments to a hos-
pital than would otherwise be made, then
this subparagraph shall be applied as if this
clause had not been enacted.’’.
†
483
HR 1 EAS
(b) 
WAIVING
BUDGET
NEUTRALITY.—Section
1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)), as amended
by subsection (a), is amended by adding at the end of clause
(i) the following new sentence: ‘‘The Secretary shall apply
the previous sentence for any period as if the amendments
made by section 402(a) of the Prescription Drug and Medi-
care Improvement Act of 2003 had not been enacted.’’.
SEC. 403. MEDICARE INPATIENT HOSPITAL PAYMENT AD-
JUSTMENT FOR LOW-VOLUME HOSPITALS.
Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by
adding at the end the following new paragraph:
‘‘(12) PAYMENT ADJUSTMENT FOR LOW-VOLUME
HOSPITALS.—
‘‘(A) PAYMENT ADJUSTMENT.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of this section, for each
cost reporting period (beginning with the
cost reporting period that begins in fiscal
year 2005), the Secretary shall provide for
an additional payment amount to each low-
volume hospital (as defined in clause (iii))
for discharges occurring during that cost re-
porting period which is equal to the appli-
cable percentage increase (determined under
†
484
HR 1 EAS
clause (ii)) in the amount paid to such hos-
pital under this section for such discharges.
‘‘(ii) APPLICABLE
PERCENTAGE
IN-
CREASE.—The Secretary shall determine a
percentage increase applicable under this
paragraph that ensures that—
‘‘(I) no percentage increase in
payments under this paragraph ex-
ceeds 25 percent of the amount of pay-
ment that would (but for this para-
graph) otherwise be made to a low-vol-
ume hospital under this section for
each discharge;
‘‘(II) low-volume hospitals that
have the lowest number of discharges
during a cost reporting period receive
the highest percentage increases in
payments due to the application of this
paragraph; and
‘‘(III) the percentage increase in
payments to any low-volume hospital
due to the application of this para-
graph is reduced as the number of dis-
charges per cost reporting period in-
creases.
†
485
HR 1 EAS
‘‘(iii) LOW-VOLUME
HOSPITAL
DE-
FINED.—For purposes of this paragraph,
the term ‘low-volume hospital’ means, for a
cost reporting period, a subsection (d) hos-
pital (as defined in paragraph (1)(B)) other
than a critical access hospital (as defined in
section 1861(mm)(1)) that—
‘‘(I) the Secretary determines had
an average of less than 2,000 dis-
charges (determined with respect to all
patients and not just individuals re-
ceiving benefits under this title) during
the 3 most recent cost reporting periods
for which data are available that pre-
cede the cost reporting period to which
this paragraph applies; and
‘‘(II) is located at least 15 miles
from a like hospital (or is deemed by
the Secretary to be so located by reason
of such factors as the Secretary deter-
mines appropriate, including the time
required for an individual to travel to
the nearest alternative source of appro-
priate inpatient care (after taking into
account the location of such alternative
†
486
HR 1 EAS
source of inpatient care and any
weather or travel conditions that may
affect such travel time).
‘‘(B) PROHIBITING CERTAIN REDUCTIONS.—
Notwithstanding subsection (e), the Secretary
shall not reduce the payment amounts under this
section to offset the increase in payments result-
ing from the application of subparagraph (A).’’.
SEC. 404. FAIRNESS IN THE MEDICARE DISPROPORTIONATE
SHARE HOSPITAL (DSH) ADJUSTMENT FOR
RURAL HOSPITALS.
(a) EQUALIZING DSH PAYMENT AMOUNTS.—
(1) IN
GENERAL.—Section 1886(d)(5)(F)(vii)
(42 U.S.C. 1395ww(d)(5)(F)(vii)) is amended by in-
serting ‘‘, and, after October 1, 2004, for any other
hospital described in clause (iv),’’ after ‘‘clause
(iv)(I)’’ in the matter preceding subclause (I).
(2) 
CONFORMING
AMENDMENTS.—Section
1886(d)(5)(F) 
(42 
U.S.C. 
1395ww(d)(5)(F)) 
is
amended—
(A) in clause (iv)—
(i) in subclause (II)—
(I) by inserting ‘‘and before Octo-
ber 1, 2004,’’ after ‘‘April 1, 2001,’’;
and
†
487
HR 1 EAS
(II) by inserting ‘‘or, for dis-
charges occurring on or after October
1, 2004, is equal to the percent deter-
mined in accordance with the applica-
ble formula described in clause (vii)’’
after ‘‘clause (xiii)’’;
(ii) in subclause (III)—
(I) by inserting ‘‘and before Octo-
ber 1, 2004,’’ after ‘‘April 1, 2001,’’;
and
(II) by inserting ‘‘or, for dis-
charges occurring on or after October
1, 2004, is equal to the percent deter-
mined in accordance with the applica-
ble formula described in clause (vii)’’
after ‘‘clause (xii)’’;
(iii) in subclause (IV)—
(I) by inserting ‘‘and before Octo-
ber 1, 2004,’’ after ‘‘April 1, 2001,’’;
and
(II) by inserting ‘‘or, for dis-
charges occurring on or after October
1, 2004, is equal to the percent deter-
mined in accordance with the applica-
†
488
HR 1 EAS
ble formula described in clause (vii)’’
after ‘‘clause (x) or (xi)’’;
(iv) in subclause (V)—
(I) by inserting ‘‘and before Octo-
ber 1, 2004,’’ after ‘‘April 1, 2001,’’;
and
(II) by inserting ‘‘or, for dis-
charges occurring on or after October
1, 2004, is equal to the percent deter-
mined in accordance with the applica-
ble formula described in clause (vii)’’
after ‘‘clause (xi)’’; and
(v) in subclause (VI)—
(I) by inserting ‘‘and before Octo-
ber 1, 2004,’’ after ‘‘April 1, 2001,’’;
and
(II) by inserting ‘‘or, for dis-
charges occurring on or after October
1, 2004, is equal to the percent deter-
mined in accordance with the applica-
ble formula described in clause (vii)’’
after ‘‘clause (x)’’;
(B) in clause (viii), by striking ‘‘The for-
mula’’ and inserting ‘‘For discharges occurring
before October 1, 2004, the formula’’; and
†
489
HR 1 EAS
(C) in each of clauses (x), (xi), (xii), and
(xiii), by striking ‘‘For purposes’’ and inserting
‘‘With respect to discharges occurring before Oc-
tober 1, 2004, for purposes’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to discharges occurring on or after Octo-
ber 1, 2004.
SEC. 404A. MEDPAC STUDY AND REPORT REGARDING MEDI-
CARE DISPROPORTIONATE SHARE HOSPITAL
(DSH) ADJUSTMENT PAYMENTS.
(a) STUDY.—The Medicare Payment Advisory Com-
mission established under section 1805 of the Social Secu-
rity Act (42 U.S.C. 1395b–6) (in this section referred to
as ‘‘MedPAC’’) shall conduct a study to determine, with re-
spect to additional payment amounts paid to subsection (d)
hospitals under section 1886(d)(5)(F) of the Social Security
Act (42 U.S.C. 1395ww(d)(5)(F))—
(1) whether such payments should be made in the
same manner as payments are made with respect to
graduate medical education under title XVIII and
with respect to hospitals that serve a disproportionate
share of low-income patients under the medicaid pro-
gram; and
†
490
HR 1 EAS
(2) whether to add costs attributable to uncom-
pensated care to the formula for determining such
payment amounts.
(b) REPORT.—Not later than 1 year after the date of
enactment of this Act, MedPAC shall submit a report to
Congress on the study conducted under subsection (a), to-
gether with such recommendations for legislation as
MedPAC determines are appropriate.
SEC. 405. CRITICAL ACCESS HOSPITAL (CAH) IMPROVE-
MENTS.
(a) PERMITTING CAHS TO ALLOCATE SWING BEDS
AND ACUTE CARE INPATIENT BEDS SUBJECT TO A TOTAL
LIMIT OF 25 BEDS.—
(1) IN GENERAL.—Section 1820(c)(2)(B)(iii) (42
U.S.C. 1395i–4(c)(2)(B)(iii)) is amended to read as
follows:
‘‘(iii) provides not more than a total of
25 extended care service beds (pursuant to
an agreement under subsection (f)) and
acute care inpatient beds (meeting such
standards as the Secretary may establish)
for providing inpatient care for a period
that does not exceed, as determined on an
annual, average basis, 96 hours per pa-
tient;’’.
†
491
HR 1 EAS
(2) CONFORMING AMENDMENT.—Section 1820(f)
(42 U.S.C. 1395i–4(f)) is amended by striking ‘‘and
the number of beds used at any time for acute care
inpatient services does not exceed 15 beds’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall with respect to designations
made on or after October 1, 2004.
(b) ELIMINATION OF THE ISOLATION TEST FOR COST-
BASED CAH AMBULANCE SERVICES.—
(1) ELIMINATION.—
(A) IN GENERAL.—Section 1834(l)(8) (42
U.S.C. 1395m(l)(8)), as added by section 205(a)
of BIPA (114 Stat. 2763A–482), is amended by
striking the comma at the end of subparagraph
(B) and all that follows and inserting a period.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall apply to serv-
ices furnished on or after January 1, 2005.
(2) TECHNICAL
CORRECTION.—Section 1834(l)
(42 U.S.C. 1395m(l)) is amended by redesignating
paragraph (8), as added by section 221(a) of BIPA
(114 Stat. 2763A–486), as paragraph (9).
(c) COVERAGE OF COSTS FOR CERTAIN EMERGENCY
ROOM ON-CALL PROVIDERS.—
†
492
HR 1 EAS
(1) IN GENERAL.—Section 1834(g)(5) (42 U.S.C.
1395m(g)(5)) is amended—
(A) in the heading—
(i) by inserting ‘‘CERTAIN’’ before
‘‘EMERGENCY’’; and
(ii) by striking ‘‘PHYSICIANS’’ and in-
serting ‘‘PROVIDERS’’;
(B) by striking ‘‘emergency room physicians
who are on-call (as defined by the Secretary)’’
and inserting ‘‘physicians, physician assistants,
nurse practitioners, and clinical nurse specialists
who are on-call (as defined by the Secretary) to
provide emergency services’’; and
(C) by striking ‘‘physicians’ services’’ and
inserting ‘‘services covered under this title’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to costs incurred for
services provided on or after January 1, 2005.
(d) AUTHORIZATION OF PERIODIC INTERIM PAYMENT
(PIP).—
(1) IN GENERAL.—Section 1815(e)(2) (42 U.S.C.
1395g(e)(2)) is amended—
(A) in subparagraph (C), by striking ‘‘and’’
after the semicolon at the end;
†
493
HR 1 EAS
(B) in subparagraph (D), by adding ‘‘and’’
after the semicolon at the end; and
(C) by inserting after subparagraph (D) the
following new subparagraph:
‘‘(E) inpatient critical access hospital services;’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to payments for inpa-
tient critical access facility services furnished on or
after January 1, 2005.
(e) EXCLUSION OF NEW CAHS FROM PPS HOSPITAL
WAGE INDEX CALCULATION.—Section 1886(d)(3)(E)(i) (42
U.S.C. 1395ww(d)(3)(E)(i)), as amended by section 402, is
amended by inserting after the first sentence the following
new sentence: ‘‘In calculating the hospital wage levels under
the preceding sentence applicable with respect to cost report-
ing periods beginning on or after January 1, 2004, the Sec-
retary shall exclude the wage levels of any facility that be-
came a critical access hospital prior to the cost reporting
period for which such hospital wage levels are calculated.’’.
(f) PROVISIONS
RELATED
TO
CERTAIN
RURAL
GRANTS.—
(1) SMALL RURAL HOSPITAL IMPROVEMENT PRO-
GRAM.—Section 1820(g) (42 U.S.C. 1395i–4(g)) is
amended—
†
494
HR 1 EAS
(A) by redesignating paragraph (3)(F) as
paragraph (5) and redesignating and indenting
appropriately; and
(B) by inserting after paragraph (3) the fol-
lowing new paragraph:
‘‘(4) SMALL
RURAL
HOSPITAL
IMPROVEMENT
PROGRAM.—
‘‘(A) GRANTS
TO
HOSPITALS.—The Sec-
retary may award grants to hospitals that have
submitted applications in accordance with sub-
paragraph (B) to assist eligible small rural hos-
pitals (as defined in paragraph (3)(B)) in meet-
ing the costs of reducing medical errors, increas-
ing patient safety, protecting patient privacy,
and improving hospital quality and perform-
ance.
‘‘(B) APPLICATION.—A hospital seeking a
grant under this paragraph shall submit an ap-
plication to the Secretary on or before such date
and in such form and manner as the Secretary
specifies.
‘‘(C) AMOUNT
OF
GRANT.—A grant to a
hospital under this paragraph may not exceed
$50,000.
†
495
HR 1 EAS
‘‘(D) USE OF FUNDS.—A hospital receiving
a grant under this paragraph may use the funds
for the purchase of computer software and hard-
ware, the education and training of hospital
staff, and obtaining technical assistance.’’.
(2) AUTHORIZATION
FOR
APPROPRIATIONS.—
Section 1820(j) (42 U.S.C. 1395i–4(j)) is amended to
read as follows:
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) HI TRUST FUND.—There are authorized to
be appropriated from the Federal Hospital Insurance
Trust Fund for making grants to all States under—
‘‘(A) subsection (g), $25,000,000 in each of
the fiscal years 1998 through 2002; and
‘‘(B) paragraphs (1) and (2) of subsection
(g), $40,000,000 in each of the fiscal years 2004
through 2008.
‘‘(2) GENERAL REVENUES.—There are authorized
to be appropriated from amounts in the Treasury not
otherwise appropriated for making grants to all
States under subsection (g)(4), $25,000,000 in each of
the fiscal years 2004 through 2008.’’.
(3) REQUIREMENT
THAT
STATES
AWARDED
GRANTS CONSULT WITH THE STATE HOSPITAL ASSO-
†
496
HR 1 EAS
CIATION AND RURAL HOSPITALS ON THE MOST APPRO-
PRIATE WAYS TO USE SUCH GRANTS.—
(A) IN
GENERAL.—Section 1820(g) (42
U.S.C. 1395i–4(g)), as amended by paragraph
(1), is amended by adding at the end the fol-
lowing new paragraph:
‘‘(6) REQUIRED
CONSULTATION
FOR
STATES
AWARDED GRANTS.—A State awarded a grant under
paragraph (1) or (2) shall consult with the hospital
association of such State and rural hospitals located
in such State on the most appropriate ways to use the
funds under such grant.’’.
(B) EFFECTIVE DATE AND APPLICATION.—
The amendment made by subparagraph (A) shall
take effect on the date of enactment of this Act
and shall apply to grants awarded on or after
such date and to grants awarded prior to such
date to the extent that funds under such grants
have not been obligated as of such date.
(g) EXCLUSION OF CERTAIN BEDS FROM BED COUNT
AND REMOVAL OF BARRIERS TO ESTABLISHMENT OF DIS-
TINCT PART UNITS.—
(1) EXCLUSION
OF
CERTAIN
BEDS
FROM
BED
COUNT.—Section 
1820(c)(2) 
(42 
U.S.C. 
1395i–
†
497
HR 1 EAS
4(c)(2)) is amended by adding at the end the fol-
lowing:
‘‘(E) EXCLUSION OF CERTAIN BEDS FROM
BED COUNT.—In determining the number of beds
of a facility for purposes of applying the bed
limitations referred to in subparagraph (B)(iii)
and subsection (f), the Secretary shall not take
into account any bed of a distinct part psy-
chiatric or rehabilitation unit (described in the
matter 
following 
clause 
(v) 
of 
section
1886(d)(1)(B)) of the facility, except that the
total number of beds that are not taken into ac-
count pursuant to this subparagraph with re-
spect to a facility shall not exceed 25.’’.
(2) REMOVING BARRIERS TO ESTABLISHMENT OF
DISTINCT
PART
UNITS
BY
CRITICAL
ACCESS
HOS-
PITALS.—Section 
1886(d)(1)(B) 
(42 
U.S.C.
195ww(d)(1)(B)) is amended by striking ‘‘a distinct
part of the hospital (as defined by the Secretary)’’ in
the matter following cause (v) and inserting ‘‘a dis-
tinct part (as defined by the Secretary) of the hospital
or of a critical access hospital’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to determinations with
respect to distinct part unit status, and with respect
†
498
HR 1 EAS
to designations, that are made on or after October 1,
2003.
SEC. 406. AUTHORIZING USE OF ARRANGEMENTS TO PRO-
VIDE CORE HOSPICE SERVICES IN CERTAIN
CIRCUMSTANCES.
(a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C.
1395x(dd)(5)) is amended by adding at the end the fol-
lowing:
‘‘(D) In extraordinary, exigent, or other non-routine
circumstances, such as unanticipated periods of high pa-
tient loads, staffing shortages due to illness or other events,
or temporary travel of a patient outside a hospice pro-
gram’s service area, a hospice program may enter into ar-
rangements with another hospice program for the provision
by that other program of services described in paragraph
(2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II)
shall apply with respect to the services provided under such
arrangements.
‘‘(E) A hospice program may provide services de-
scribed in paragraph (1)(A) other than directly by the pro-
gram if the services are highly specialized services of a reg-
istered professional nurse and are provided non-routinely
and so infrequently so that the provision of such services
directly would be impracticable and prohibitively expen-
sive.’’.