I
107TH CONGRESS
1ST SESSION
H. R. 803
To amend title XVIII of the Social Security Act to make the Medicare
Program more competitive and efficient, to extend the solvency of the
Medicare Program, to provide for a prescription drug benefit under
the Medicare Program, to improve quality of care, to make medicare
supplemental insurance (Medigap) more affordable, and for other pur-
poses.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 28, 2001
Mr. STARK introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committee on Energy and
Commerce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to make
the Medicare Program more competitive and efficient,
to extend the solvency of the Medicare Program, to pro-
vide for a prescription drug benefit under the Medicare
Program, to improve quality of care, to make medicare
supplemental insurance (Medigap) more affordable, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES IN ACT; TABLE OF
CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Modernization and Solvency Act of 2001’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
Act an amendment is expressed in terms of an amendment
to or repeal of a section or other provision, the reference
shall be considered to be made to that section or other
provision of the Social Security Act.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; references in act; table of contents.
TITLE I—MAKING MEDICARE MORE COMPETITIVE AND
EFFICIENT
Subtitle A—Competitive Defined Benefit
Sec. 101. Competitive defined benefit.
Subtitle B—Medicare Fee for Service Quality Improvement
Sec. 111. Care coordination services.
Sec. 112. Establishment of medicare home health care case managers for long
term home health spells of illness.
Sec. 113. Additional payment amount to rural providers of services who furnish
preventive and case manager services.
Sec. 114. Disease management services.
Sec. 115. Provider and physician collaboration to furnish a bundled, coordi-
nated set of services.
Sec. 116. Demonstration projects to increase quality of information provided to
medicare beneficiaries with respect to treatment options.
Sec. 117. Administration of certain private sector purchasing and quality im-
provement programs.
Sec. 118. Reports to Congress on private sector purchasing and quality im-
provement programs.
Subtitle C—Immediate and Long-Term Payment Reforms for Medicare Fee
for Service
Sec. 121. Competitive acquisition of items and services.
Sec. 122. Preferred participants.
Sec. 123. Program to improve outcomes and reduce patient morbidity and mor-
tality.
Sec. 124. Authority to impose sustainable growth rate limitations on payment
for certain medicare items and services.
Sec. 125. Authority to negotiate payment rates in certain areas (most favored
customer authority) and expand inherent reasonableness au-
thority.
Sec. 126. Authorization of basing medicare payment for hospital outpatient de-
partment services on payment rates for similar services pro-
vided outside the hospital setting.
Sec. 127. Medicare single, unified prospective payment system for post-care
hospital services.
Sec. 128. Medicare payment adjustment to reflect deviations from generally ac-
cepted practice in overserving or underserving medicare bene-
ficiaries.
Sec. 129. Promoting the use of cost effective medicare noninstitutional services
through waiver of benefit limitations.
Sec. 130. Increased flexibility in contracting for medicare claims processing.
Sec. 131. Special provisions for funding of activities related to certain overpay-
ment recoveries and provider enrollment and reverification of
eligibility.
Sec. 132. Establishment of medicare administrative fee for submission of paper
claims.
Subtitle D—Long-Term Hospital Provisions
Sec. 141. Findings and purposes of subtitle.
Sec. 142. Reductions in medicare capital payments in case of excess bed supply
in hospitals without a plan of adjustment.
Sec. 143. Special payments to essential hospitals and development of economic
recovery plan.
Sec. 144. Uniform hospital cost reporting.
Sec. 145. Medicare payments for inpatient hospital services involving emergency
care; National Conference on Emergency Care.
TITLE II—MODERNIZING MEDICARE BENEFITS
SUBTITLE A—PRESCRIPTION DRUG BENEFIT
Sec. 201. Optional medicare outpatient prescription medicine program under
title XVIII.
‘‘PART D—PRESCRIPTION MEDICINE BENEFIT FOR THE AGED AND
DISABLED
‘‘Sec. 1859. Eligibility; optional enrollment; coverage.
‘‘Sec. 1859A. Benefits.
‘‘Sec. 1859B. Premiums.
‘‘Sec. 1859C. Federal Medicare Prescription Medicine Trust Fund.
‘‘Sec. 1859D. Administration; quality assurance.
‘‘Sec. 1859E. Compensation for employers covering retiree medicine costs.
‘‘Sec. 1859F. Promotion of pharmaceutical research on break-through
medicines while providing program cost containment.
‘‘Sec. 1859G. Coordination with comprehensive State prescription drug
programs.
Sec. 202. Provision of medicare outpatient prescription drug coverage under the
Medicare+Choice program.
Sec. 203. Transitional assistance for low income beneficiaries.
Sec. 204. Medigap revisions.
Sec. 205. Rate reduction for medicare eligible Federal annuitants.
Sec. 206. Part B payment for outpatient drugs based on actual acquisition
cost.
Sec. 207. Coverage of home infusion drug therapy services.
Sec. 208. Expansion of membership of MedPAC to 19.
Sec. 209. GAO ongoing studies and reports on program; miscellaneous reports.
Subtitle B—Improving Benefits and Preventive Services
Sec. 221. Authority to provide preventive services under part B of the medicare
program.
Sec. 222. Smoking cessation demonstration.
Sec. 223. Outreach to prevent blindness.
Sec. 224. Coverage of substitute adult day care services under medicare.
Subtitle C—Rationalizing Payments and Cost Sharing and Medigap
Sec. 231. Extension of buy-down of copayment on hospital outpatient services.
Sec. 232. Indexing deductible to inflation.
Sec. 233. Medicare direct supplemental insurance option.
Sec. 234. Increasing access to medigap for disabled and ESRD beneficiaries.
Subtitle D—Improved Assistance to Low-Income Beneficiaries
Sec. 241. Increase in slmb eligibility to 135 percent of poverty; presumptive en-
rollment.
Sec. 242. Mechanism promoting provision of medicare cost-sharing assistance
to individuals who become eligible for such assistance.
Subtitle E—Medicare Early Access and Tax Credits
PART I—ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65
YEARS OF AGE
Sec. 251. Access to medicare benefits for individuals 62-to-65 years of age.
‘‘PART E—PURCHASE OF MEDICARE BENEFITS BY CERTAIN INDIVIDUALS
AGE 62-TO-65 YEARS OF AGE
‘‘Sec. 1860. Program benefits; eligibility.
‘‘Sec. 1860A. Enrollment process; coverage.
‘‘Sec. 1860B. Premiums.
‘‘Sec. 1860C. Payment of premiums.
‘‘Sec. 1860D. Medicare early access trust fund.
‘‘Sec. 1860E. Oversight and accountability.
‘‘Sec. 1860F. Administration and miscellaneous.
PART II—ACCESS TO MEDICARE BENEFITS FOR DISPLACED WORKERS 55-
TO-62 YEARS OF AGE
Sec. 252. Access to medicare benefits for displaced workers 55-to-62 years of
age.
PART III—COBRA PROTECTION FOR EARLY RETIREES
SUBPART A—AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974
Sec. 253. Cobra continuation benefits for certain retired workers who lose re-
tiree health coverage.
SUBPART B—AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT
Sec. 254. Cobra continuation benefits for certain retired workers who lose re-
tiree health coverage.
SUBPART C—AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
Sec. 255. Cobra continuation benefits for certain retired workers who lose re-
tiree health coverage.
PART IV—50 PERCENT CREDIT AGAINST INCOME TAX FOR MEDICARE BUY-
IN PREMIUMS AND FOR CERTAIN COBRA CONTINUATION COVERAGE PRE-
MIUMS
Sec. 256. 50 percent credit for medicare buy-in premiums and for certain cobra
continuation coverage premiums.
TITLE III—PROTECTING AND EXTENDING MEDICARE SOLVENCY
Subtitle A—Dedication of 20 Percent of Projected Budget Surplus to
Medicare
Sec. 301. Transfers to extend medicare solvency.
Sec. 302. Medicare solvency debt reduction reserve.
Sec. 303. Protection of medicare solvency debt reduction reserve.
Subtitle B—Additional Revenues
Sec. 311. Increased Federal excise taxes on tobacco products.
Sec. 312. Tobacco settlement deposit.
Sec. 313. Excess profits from medicare tax.
Sec. 314. Medicare part B percent subsidy included in gross income.
Sec. 315. Dedication of Federal estate and gift tax receipts, tobacco tax re-
ceipts, and other revenues to Medicare.
TITLE 
I—MAKING 
MEDICARE
MORE COMPETITIVE AND EF-
FICIENT
Subtitle A—Competitive Defined
Benefit
SEC. 101. COMPETITIVE DEFINED BENEFIT.
(a) PAYMENTS TO MEDICARE+CHOICE ORGANIZA-
TIONS BASED ON RISK-ADJUSTED BIDS.—
(1) IN
GENERAL.—Section 1853(a)(1) (42
U.S.C. 1395w–23(a)(1)) is amended by striking ‘‘the
Secretary shall make’’ and all that follows and in-
serting 
‘‘the 
Secretary 
shall 
make, 
to 
each
Medicare+Choice organization, with respect to cov-
erage of an individual for a month under this part
in a Medicare+Choice payment area, separate
monthly payments with respect to benefits under
parts A and B combined, and (as applicable) with
respect to benefits under part D, as determined in
accordance with this section.’’.
(2) ANNUAL DETERMINATION AND ANNOUNCE-
MENT OF PAYMENT FACTORS.—
(A) IN
GENERAL.—Section 1853(b) (42
U.S.C. 1395w–23(b)) is amended—
(i) in paragraph (1), by striking ‘‘the
calendar year concerned’’ and all that fol-
lows and inserting ‘‘the calendar year con-
cerned, the following factors, as defined in
paragraph (4):
‘‘(A) national monthly per capita costs,
‘‘(B) the benchmark amount for each pay-
ment area, and
‘‘(C) the health status and demographic
adjustment factors to be used in making pay-
ment for individual enrollees.’’;
(ii) in paragraph (3), by striking
‘‘monthly adjusted’’ and all that follows
and inserting ‘‘such estimates, factors, and
amounts’’; and
(iii) by adding at the end the fol-
lowing new paragraphs:
‘‘(4) FACTORS USED IN ADJUSTING BIDS FOR
MEDICARE+CHOICE ORGANIZATIONS AND IN DETER-
MINING ENROLLEE PREMIUMS.—
‘‘(A) IN GENERAL.—Subject to paragraph
(5), the Secretary shall use, for purposes of ad-
justing plan bids and determining enrollee pre-
miums under this part, the factors specified in
this paragraph, which factors—
‘‘(i) shall be calculated separately for
benefits under parts A and B combined,
and under part D; and
‘‘(ii) shall be calculated separately
for—
‘‘(I) beneficiaries who are aged or
disabled; and
‘‘(II) beneficiaries who have end
stage renal disease until such time as
the Secretary establishes an inte-
grated risk adjustment system for the
groups specified in subclause (I) and
this subclause.
‘‘(B) NATIONAL
MONTHLY
PER
CAPITA
COSTS.—
‘‘(i) IN
GENERAL.—The term ‘na-
tional monthly per capita costs’ means
(subject to clause (ii)) the projected na-
tional, monthly, per capita costs of benefits
under this title and associated claims proc-
essing costs for individuals entitled to ben-
efits under part A and individuals enrolled
in the program under part B.
‘‘(ii) EXCLUSION
OF
DSH
AND
GME
COSTS.—The calculation of costs under
clause (i) shall not take into account any
amounts attributable to—
‘‘(I) payment adjustments under
section 1886(d)(5)(F) for hospitals
serving 
a 
significantly 
dispropor-
tionate number of low income pa-
tients;
‘‘(II) payments for costs of grad-
uate medical education under section
1886(h); or
‘‘(III) payments for indirect costs
of medical education under section
1886(d)(5)(B).
‘‘(C) BENCHMARK AMOUNT.—
‘‘(i) The term ‘benchmark amount’
means, for a payment area, an amount
equal to the greater of—
‘‘(I) except as provided in clause
(ii), 
1⁄12
of 
the 
annual
Medicare+Choice capitation rate that
would have applied in that payment
area under section 1853(c) (as in ef-
fect prior to the enactment of the
Medicare Modernization and Solvency
Act of 2001); or
‘‘(II) the product of 96 percent
of national monthly per capita costs
and the ratio, for a previous period,
of—
‘‘(aa) monthly per capita
costs of Medicare benefits for in-
dividuals 
entitled 
to 
benefits
under part A and individuals en-
rolled in the program under part
B in that payment area (adjusted
for relative risk due to health
status and demographic adjust-
ment factors) to—
‘‘(bb) the weighted average
for all payment areas of such
monthly per capita costs.
‘‘(ii) If the amount calculated under
clause (i)(I) for a year for all payment
areas is equal to either the minimum
amount or the blended capitation rate, for
all subsequent years the Secretary shall
not calculate the rates described in that
clause and the amount under such clause
instead shall be equal to the product of 96
percent of national monthly per capita
costs and the ratio of—
‘‘(I) the annual Medicare+Choice
capitation rate for the last year that
such rates were calculated under such
clause to—
‘‘(II) the weighted average of the
area-specific Medicare+Choice capita-
tion rates for that same year.
‘‘(D) HEALTH STATUS AND DEMOGRAPHIC
ADJUSTMENT FACTORS.—The term ‘health sta-
tus and demographic adjustment factors’ means
health status and such other risk factors as
age, disability status, gender, institutional sta-
tus, and such other factors as the Secretary de-
termines to be appropriate, so as to ensure ac-
tuarial equivalence. The Secretary may add to,
modify, or substitute for such factors, if such
changes will improve the determination of actu-
arial equivalence, and in that event will make
comparable adjustments to the benchmark
amounts.’’.
(B) CONFORMING
AMENDMENT.—Section
1853(c)(7) (42 U.S.C. 1395w–23(c)(7)) is relo-
cated and redesignated as section 1853(b)(5),
indented accordingly, and amended by striking
all that follows ‘‘shall adjust appropriately’’ and
inserting ‘‘national monthly per capita costs for
the following year’’.
(3) 
SUBMISSION
OF
BIDS
BY
MEDICARE+CHOICE ORGANIZATIONS.—
(A) IN
GENERAL.—Section 1853(c) (42
U.S.C. 1395w–23(c)) is amended to read as fol-
lows:
‘‘(c) SUBMISSION OF BIDS BY MEDICARE+CHOICE
ORGANIZATIONS.—
‘‘(1) IN GENERAL.—Each Medicare+Choice or-
ganization shall submit to the Secretary, in a form
and manner specified by the Secretary and for each
Medicare+Choice plan which it intends to offer in a
service area in the following year—
‘‘(A) by July 1, notice of such intent and
information on the service area and plan type
for each plan; and
‘‘(B) by August 1—
‘‘(i) the information described in para-
graph (2) for the type of plan involved;
and
‘‘(ii) the enrollment capacity (if any)
in relation to the plan and area.
‘‘(2) INFORMATION
REQUIRED
FOR
COMPETI-
TIVE
PLANS.—The information described in this
paragraph, which shall be submitted separately for
combined part A and part B benefits, and for part
D benefits, is as follows:
‘‘(A) The monthly plan bid for the provi-
sion of benefits.
‘‘(B) The actuarial value of the reduction
in cost-sharing for Medicare benefits included
in each plan bid (which value shall not exceed
15 percent of the value of the balance of the
bid).
‘‘(C) A description of the cost-sharing for
Medicare benefits that will apply and the actu-
arial value of such cost-sharing.
‘‘(D) For each supplemental benefits pack-
age offered (if any), the adjusted community
rate of the package, the monthly supplemental
premium, a description of cost-sharing and such
other information as the Secretary considers
necessary.
‘‘(E) The assumptions used with respect to
numbers, in each payment area, of—
‘‘(i) enrolled individuals who are aged
or disabled; and
‘‘(ii) enrolled individuals who have
end-stage renal disease.’’.
(B) CONFORMING AMENDMENTS.—
(i) Paragraphs (3) and (5) of section
1854(a) (42 U.S.C. 1395w–24(a)) are relo-
cated and redesignated as paragraphs (3)
and (4), respectively, of section 1853(c)
(42 U.S.C. 1395w–23(c)), as amended.
(ii) Section 1853(c)(3)(B) (42 U.S.C.
1395w–23(c)(3)(B)), as redesignated, is
amended by striking ‘‘beneficiary’’.
(iii) Section 1853(c)(4)(B) (42 U.S.C.
1395w–23(c)(3)(B)), as redesignated, is
amended by striking ‘‘or subparagraphs
(A)(ii) and (B) of paragraph (4)’’.
(4) SECRETARY’S
DETERMINATION
OF
PAY-
MENT AMOUNT.—Section 1853 (42 U.S.C. 1395w–
23) is further amended—
(A) 
by 
redesignating 
subsections 
(d)
through (h) as subsections (e) through (i), re-
spectively; and
(B) by inserting after subsection (c) the
following new subsection:
‘‘(d) SECRETARY’S DETERMINATION OF PAYMENT
AMOUNT.—
‘‘(1) CONVERSION TO NORMALIZED BIDS.—The
Secretary shall adjust each monthly plan bid sub-
mitted under subsection (c) for the relative risk of
enrollees in such plan based on health status and de-
mographic adjustment factors.
‘‘(2) 
COMPARISON
TO
PLAN
BENCHMARK
AMOUNT.—
‘‘(A) DETERMINATION
OF
PLAN
BENCH-
MARK.—The Secretary shall determine, using
the plan enrollment assumptions included in the
organization’s bid, a plan benchmark amount
for each plan equal to—
‘‘(i) (until such time as the Secretary
establishes an integrated risk adjustment
system for individuals who are aged or dis-
abled and for individuals who have end-
stage renal disease)—
‘‘(I) the product of the weighted
average of the benchmark amounts for
the payment areas included in the
plan’s service area for individuals who
are aged or disabled and the number
of such individuals in the plan, plus
‘‘(II) the product of the weighted
average of the benchmark amounts for
the payment areas included in the
plan’s service area for individuals who
have end-stage renal disease and the
number of such individuals in the
plan,
(divided by the total number of individuals
in subclauses (I) and (II); and
‘‘(ii) (after such time) the weighted
average of the benchmark amounts for the
payment areas included in the plan’s serv-
ice area.
‘‘(B) COMPARISON
TO
BENCHMARK; DE-
TERMINATION
OF
PAYMENT
AMOUNT.—The
monthly payment to a Medicare+Choice organi-
zation with respect to each individual enrolled
in a plan shall be set as follows:
‘‘(i) IF
BID
DOES
NOT
EXCEED
BENCHMARK.—If the normalized bid deter-
mined under paragraph (1) does not ex-
ceed the plan benchmark amount deter-
mined under subparagraph (A), the month-
ly payment shall be the normalized bid, ad-
justed to account for the health status and
demographic adjustment factors of the in-
dividual enrollee.
‘‘(ii) IF BID EXCEEDS BENCHMARK.—
If the normalized bid determined under
paragraph (1) exceeds the plan benchmark
amount determined under subparagraph
(B), the monthly payment shall be the nor-
malized bid, adjusted as described in
clause (i), minus the monthly excess pre-
mium determined under section 1854.’’.
(b) PREMIUMS.—
(1) DETERMINATION OF PREMIUM AMOUNT.—
Section 1854 (42 U.S.C. 1395–4) is amended—
(A) by striking subsection (a) and redesig-
nating subsections (b) and (c) as subsections
(a) and (b), respectively; and
(B) by adding after subsection (b) as re-
designated the following new subsection:
‘‘(c) DETERMINATION OF MEDICARE PREMIUM RE-
DUCTION AND EXCESS PREMIUM.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
the Secretary shall subtract the normalized bid (de-
termined under section 1853(d)(1)) from the plan’s
benchmark 
amount 
(determined 
under 
section
1853(d)(2)) to determine the Medicare premium re-
duction or monthly excess premium for plan enroll-
ees.
‘‘(2) ADJUSTMENT.—If the difference between
the normalized bid and the plan’s benchmark
amount—
‘‘(A) is a positive amount, 75 percent of
that amount shall be equal to—
‘‘(i) the monthly Medicare premium
reduction for individuals enrolled in the
plan (up to the entire amount of the pre-
mium for part B or part D, as applicable);
and
‘‘(ii) the remainder, if any, under
clause (i) shall be equal to the additional
reduction in the actuarial value of plan
cost-sharing for plan enrollees; or
‘‘(B) is a negative amount, the absolute
value of that amount shall equal the monthly
excess premium for individuals enrolled in the
plan.’’.
(2) LIMITATION ON ENROLLEE LIABILITY.—
(A) 
FOR
BASIC
BENEFITS.—Section
1854(e)(1) 
(42 
U.S.C. 
1395w-4(e)(1)) 
is
amended to read as follows:
‘‘(1) FOR BASIC BENEFITS.—The sum of—
‘‘(A) the actuarial value of the deductibles,
coinsurance, and copayments applicable on av-
erage to individuals enrolled under this part
with a Medicare+Choice plan described in sec-
tion 1851(a)(2)(A) or (C) of an organization
with respect to benefits described in section
1852(a)(1);
‘‘(B) the reduction in cost sharing included
in the plan bid;
‘‘(C) the portion, if any, of the monthly
supplemental premium that is in lieu of plan
cost-sharing for Medicare benefits; and
‘‘(D) any additional reduction in cost-shar-
ing under subsection (c)(2)(A) (determined sep-
arately with respect to benefits under parts A
and B, and benefits under part D) must equal
the actuarial value of the deductibles, coinsur-
ance, and copayments that would be applicable
on average to individuals entitled to such bene-
fits 
if 
they 
were 
not 
members 
of 
a
Medicare+Choice organization for the year (ad-
justed as determined appropriate by the Sec-
retary to account for geographic differences and
for plan cost and utilization differences).’’.
(B) FOR SUPPLEMENTAL BENEFITS.—Sec-
tion 1854(e)(2) (42 U.S.C. 1395w–4(e)(2)) is
amended—
(i) 
by 
striking 
‘‘section
1851(a)(2)(A)’’ and inserting ‘‘subpara-
graph (A) or (C) of section 1851(a)(2)’’;
(ii) by striking ‘‘(multiplied by 12)’’;
and
(iii) by striking ‘‘may not exceed’’ and
inserting ‘‘must equal’’.
(c) OTHER CHANGES IN PLAN DESIGN.—
(1) ALLOWING PLANS TO INCLUDE COST SHAR-
ING REDUCTION IN THEIR BASIC BENEFITS.—Sec-
tion 1852(a)(1)(B) (42 U.S.C. 1395w–22(a)(1)(B))
is amended to read as follows:
‘‘(B) at plan option, reduction in cost-shar-
ing for part A and part B benefits, or part D
benefits, that would otherwise be applicable (the
actuarial value of such reduction however shall
not exceed 15 percent of the value of the por-
tion of the bid related to combined part A and
part B benefits, or part D benefits, as applica-
ble).’’.
(2) ELIMINATION
OF
MANDATORY
SUPPLE-
MENTAL BENEFITS.—Section 1852(a)(3) (42 U.S.C.
1395w–22(a)(3)) is amended by striking subpara-
graph (A) and redesignating subparagraphs (B) and
(C) and subparagraphs (A) and (B), respectively.
(d) CONFORMING AMENDMENTS.—
(1) PREMIUM REDUCTIONS.—
(A) UNDER PART B.—
(i) Section 1839(a)(2) (42 U.S.C.
1395r(a)(2)) 
is 
amended 
by 
striking
‘‘shall’’ and all that follows and inserting
‘‘shall be the amount determined under
paragraph (3), adjusted as required in ac-
cordance with subsections (b), (c), and (f),
and thereafter further modified as required
to comply with section 1854(c)(2)(A).’’.
(ii) Section 1840 (42 U.S.C. 1395s) is
amended by adding at the end the fol-
lowing:
‘‘(i) The Secretary shall provide for necessary adjust-
ments of the Medicare premium for Medicare+Choice en-
rollees determined under section 1854(c)(2)(A). This pre-
mium adjustment may be provided directly or as an ad-
justment to Social Security, Railroad Retirement and Civil
Service Retirement benefits, as appropriate, as the Sec-
retary determines feasible with the concurrence of such
agencies.’’.
(B) UNDER PART D.—
(i) Section 1859D(a)(2)(B) is amend-
ed by inserting ‘‘thereafter further modi-
fied as required to comply with section
1854(c)(2)(A),’’ before ‘‘and rounded’’.
(ii) Section 1859D(b)(1) is amended
by adding at the end the following new
subparagraph:
‘‘(C) The Secretary shall provide for nec-
essary adjustments of the Medicare premium
for 
Medicare+Choice 
enrollees 
determined
under section 1854(c)(2)(A). This premium ad-
justment may be provided directly or as an ad-
justment to Social Security, Railroad Retire-
ment and Civil Service Retirement benefits, as
appropriate, as the Secretary determines fea-
sible with the concurrence of such agencies.’’.
(2) APPROPRIATIONS FOR GOVERNMENT CON-
TRIBUTION.—Section 
1844(a)(1) 
(42 
U.S.C.
1395w(a)(1)) is amended by adding after subpara-
graph (B) the following new subparagraph:
‘‘(C) an adjustment for the Government
contribution to reflect the savings to the Trust
Fund from enrollment in Medicare+Choice
plans by beneficiaries who receive monthly
Medicare premium reductions in accordance
with section 1854(c)(2)(A).’’.
(3) Section 1851(b)(1)(B) (42 U.S.C. 1395w–
21(b)(1)(B)) is amended by striking ‘‘section
1852(a)(1)(A)’’ and inserting ‘‘section 1852(a)(1)’’.
(4) Section 1851(d)(2)(A) (42 U.S.C. 1395w–
21(d)(2)(A)) is amended by striking ‘‘At least 15
days before’’ and inserting ‘‘Before’’.
(5) Part C is amended by striking ‘‘BENE-
FICIARY’’ each time it appears immediately before
‘‘PREMIUM’’ or ‘‘PREMIUMS’’, and by striking ‘‘bene-
ficiary’’ each time it appears immediately before
‘‘premium’’ or ‘‘premiums’’.
(6) Section 1851(d)(4)(B) (42 U.S.C. 1395w–
21(d)(4)(B)) is amended—
(A) by inserting ‘‘(i)’’ after ‘‘PREMI-
UMS.—’’; and
(B) by inserting before the period ‘‘; and
(ii) the reduction in the part B and part D pre-
miums, if any’’.
(7) Section 1851(d)(4)(E) (42 U.S.C. 1395w–
21(d)(4)(E)) is amended by striking ‘‘includes man-
datory supplemental benefits in its base benefit
package or’’.
(8) Section 1852(a)(5) (42 U.S.C. 1395w–
22(a)(5)) is amended by striking ‘‘the annual
Medicare+Choice capitation rate’’ and inserting
‘‘the national monthly per capita costs’’.
(9) Section 1852(c)(1)(F) (42 U.S.C. 1395w–
22(c)(1)(F)) is amended by striking clause (i) and
redesignating clauses (ii) and (iii) as clauses (i) and
(ii), respectively.
(10) Section 1853(a)(1)(B) (42 U.S.C. 1395w–
23(a)(1)(B)) is amended by striking the first and
second sentences.
(11) Section 1853(e)(3)(B) (42 U.S.C. 1395w–
23(e)(3)(B)), as redesignated, is amended—
(A) in the caption, by striking ‘‘BUDGET
NEUTRALITY’’; and
(B) by striking ‘‘adjust the payment rates’’
and all that follows through ‘‘that would have
been made’’ and inserting ‘‘adjust the bench-
mark amounts otherwise established under this
section for Medicare+Choice payment areas in
the State in a manner so that the weighted av-
erage of the benchmark amounts under this
section in the State equals the weighted average
of benchmark amounts that would have been
applicable’’.
(12) Section 1853(i)(2) (42 U.S.C. 1395w–
23(i)(2)), as redesignated, is amended—
(A) by inserting ‘‘and’’ at the end of sub-
paragraph (A);
(B) by striking ‘‘; and’’ at the end of sub-
paragraph (B) and inserting a period; and
(C) by striking subparagraph (C).
(13)(A) Section 1854(a)(2)(A) (42 U.S.C.
1395w–4(a)(2)(A)), as redesignated, is amended by
striking ‘‘the amount authorized to be charged’’ and
all that follows and inserting ‘‘the amount required
to be charged under subsection (c)(2)(B) for the
plan.’’.
(B) Section 1854(a)(2)(B) (42 U.S.C. 1395w–
4(a)(2)(B)), as redesignated, is amended—
(i) by striking ‘‘or Medicare+Choice fee-
for-service plan’’, and
(ii) by striking ‘‘or (4)(B)’’.
(14) Section 1854(e) (42 U.S.C. 1395w–4(e)) is
amended by striking paragraph (4).
(15)(A) Paragraphs (3) and (4) of section
1854(f) (42 U.S.C. 1395w–4(f)) are relocated and
redesignated as paragraphs (4) and (5) of subsection
(e).
(B) Section 1854(e)(4) (42 U.S.C. 1395w–
4(e)(4)), as so redesignated, is amended by striking
‘‘subject to paragraph (4)’’ and inserting ‘‘subject to
paragraph (5)’’.
(C) Section 1854 (42 U.S.C. 1395w–4) is
amended by striking subsection (f).
(16) Section 1858(c), as redesignated by section
201, is amended by striking paragraph (3) and re-
designating paragraph (4) as paragraph (3).
(e) EXTENDING MINIMUM MEDICARE+CHOICE CON-
TRACT PERIOD TO 2 YEARS.—
(1) IN
GENERAL.—Section 1857(c)(1) (42
U.S.C. 1395w–27(c)(1)) is amended by striking ‘‘1
year’’ and inserting ‘‘2 years’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to contracts entered
into on or after the date of the enactment of this
Act.
(f) MEDICARE+CHOICE PAYMENT AREAS.—
(1) IN
GENERAL.—Section 1853(d)(1) (42
U.S.C. 1395w–23(d)(1)) is amended to read as fol-
lows:
‘‘(1) IN GENERAL.—In this part, except as pro-
vided in paragraph (3), the term ‘Medicare+Choice
payment area’ means a contiguous area with similar
costs and patterns of medical practice, which may be
a multi-county, single country, metropolitan statis-
tical area, or other combination of geographic units,
as specified by the Secretary. The Secretary shall
specify such payment areas in a manner that is de-
signed to minimize payment variability from year to
year and payment discrepancies across similar geo-
graphic units.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on January 1,
2003.
(g) EFFECTIVE DATE.—The amendments made by
this section (other than subsections (e) and (f)) shall be
effective for 2005 and succeeding years.
Subtitle B—Medicare Fee for
Service Quality Improvement
SEC. 111. CARE COORDINATION SERVICES.
(a) PROGRAM AUTHORIZED.—Title XVIII (42 U.S.C.
1395 et seq.), as amended by section 412 of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protec-
tion Act of 2000, as enacted into law by section 1(a)(6)
of Public Law 106–554, is amended by adding after sec-
tion 1866B the following new section:
‘‘SEC. 1866C. CARE COORDINATION SERVICES.
‘‘(a) IN GENERAL.—
‘‘(1) PURPOSE.—The purpose of this section is
to provide assistance to a beneficiary with a non-
chronic serious illness or injury to obtain the appro-
priate level and mix of follow-up care.
‘‘(2) 
PROGRAM
AUTHORITY.—Beginning 
in
2004, the Secretary may implement a care coordina-
tion services program in accordance with the provi-
sions of this section under which, in appropriate cir-
cumstances, eligible individuals may elect to have
health care services covered under this title managed
and coordinated by a designated care coordinator.
‘‘(3) ADMINISTRATION BY CONTRACT.—Except
as otherwise specifically provided, the Secretary may
administer the program under this section in accord-
ance with section 1866F.
‘‘(b) ELIGIBILITY CRITERIA; IDENTIFICATION AND
NOTIFICATION OF ELIGIBLE INDIVIDUALS.—
‘‘(1) INDIVIDUAL ELIGIBILITY CRITERIA.—The
Secretary shall specify criteria to be used in making
a determination as to whether an individual with a
non-chronic spell of illness or injury may appro-
priately be enrolled in the care coordination services
program under this section, which shall include at
least a finding by the Secretary that for cohorts of
individuals with characteristics identified by the Sec-
retary, professional management and coordination of
care can reasonably be expected to improve proc-
esses or outcomes of health care. The Secretary shall
give priority attention to identifying those cohorts of
individuals who, if they receive care coordination
services under this section, such services are likely
to—
‘‘(A) reduce total expenditures under the
program with respect to the individual and ill-
ness or injury, or
‘‘(B) not increase such total expenditures
with respect to the individual and illness or in-
jury that the Secretary determines would have
been made without the provision of care coordi-
nation services under this section.
‘‘(2) PROCEDURES
TO
FACILITATE
ENROLL-
MENT.—The Secretary shall develop and implement
procedures designed to facilitate enrollment of eligi-
ble individuals in the program under this section.
‘‘(c) ENROLLMENT OF INDIVIDUALS.—
‘‘(1) SECRETARY’S DETERMINATION OF ELIGI-
BILITY.—The Secretary shall determine the eligi-
bility for services under this section of individuals
who are enrolled in the program under this section
and who make application for such services in such
form and manner as the Secretary may prescribe.
‘‘(2) ENROLLMENT PERIOD.—
‘‘(A) EFFECTIVE DATE AND DURATION.—
Enrollment of an individual in the program
under this section shall be effective as of the
first day of the month following the month in
which the Secretary approves the individual’s
application under paragraph (1), shall remain
in effect for one month (or such longer period
as the Secretary may specify), and shall be
automatically renewed for additional periods,
unless terminated in accordance with such pro-
cedures as the Secretary shall establish by regu-
lation.
‘‘(B) LIMITATION
ON
REENROLLMENT.—
The Secretary may establish limits on an indi-
vidual’s eligibility to reenroll in the program
under this section if the individual has
disenrolled from the program more than once
during a specified time period.
‘‘(d) PROGRAM.—The care coordination services pro-
gram under this section shall include the following ele-
ments:
‘‘(1) BASIC CARE COORDINATION SERVICES.—
‘‘(A) IN GENERAL.—Subject to the cost-ef-
fectiveness criteria specified in subsection
(b)(1), except as otherwise provided in this sec-
tion, enrolled individuals shall receive services
described in section 1905(t)(1) and may receive
additional items and services as described in
subparagraph (B).
‘‘(B) ADDITIONAL
BENEFITS.—The Sec-
retary may specify additional benefits for which
payment would not otherwise be made under
this title that may be available to individuals
enrolled in the program under this section (sub-
ject to an assessment by the care coordinator of
an individual’s circumstance and need for such
benefits) in order to encourage enrollment in, or
to improve the effectiveness of, such program.
‘‘(2) CARE
COORDINATION
REQUIREMENT.—
Notwithstanding any other provision of this title, the
Secretary may provide that an individual enrolled in
the program under this section may be entitled to
payment under this title for any specified health
care items or services only if the items or services
have been furnished by the care coordinator, or co-
ordinated through the care coordination services pro-
gram. Under such provision, the Secretary shall pre-
scribe exceptions for emergency medical services as
described in section 1852(d)(3), and other excep-
tions determined by the Secretary for the delivery of
timely and needed care.
‘‘(3) REDUCTION
OR
ELIMINATION
OF
COST
SHARING.—Notwithstanding any other provision of
law, subject to the cost-effectiveness criteria speci-
fied in subsection (b)(1), the Secretary may provide
for the reduction or elimination of beneficiary cost
sharing (such as deductibles, copayments, and coin-
surance) with respect to any of the items or services
furnished under this title and may limit such reduc-
tion or elimination to particular service areas.
‘‘(e) CARE COORDINATORS.—
‘‘(1) CONDITIONS OF PARTICIPATION.—In order
to be qualified to furnish care coordination services
under this section, an individual or entity shall—
‘‘(A) be a health care professional or entity
(which may include physicians, physician group
practices, or other health care professionals or
entities the Secretary may find appropriate)
meeting such conditions as the Secretary may
specify;
‘‘(B) have entered into a care coordination
agreement; and
‘‘(C) meet such criteria as the Secretary
may establish (which may include experience in
the provision of care coordination or primary
care physician’s services).
‘‘(2) AGREEMENT TERM; PAYMENT.—
‘‘(A) DURATION AND RENEWAL.—A care
coordination agreement under this subsection
shall be for one year and may be renewed if the
Secretary is satisfied that the care coordinator
continues to meet the conditions of participa-
tion specified in paragraph (1).
‘‘(B) PAYMENT FOR SERVICES.—The Sec-
retary may negotiate or otherwise establish pay-
ment terms and rates for services described in
subsection (d)(1).
‘‘(C) TERMS.—In addition to such other
terms as the Secretary may require, an agree-
ment under this section shall include the terms
specified in subparagraphs (A) through (C) of
section 1905(t)(3).’’.
(b) COVERAGE OF CARE COORDINATION SERVICES
AS A PART B MEDICAL SERVICE.—
(1) IN GENERAL.—Section 1861(s) (42 U.S.C.
1395x(s)) is amended—
(A) in the second sentence, by redesig-
nating paragraphs (16) and (17) as clauses (i)
and (ii); and
(B) in the first sentence—
(i) by striking ‘‘and’’ at the end of
paragraph (14);
(ii) by striking the period at the end
of paragraph (15) and inserting ‘‘; and’’;
and
(iii) by adding after paragraph (15)
the following new paragraph:
‘‘(16) care coordination services furnished in
accordance with section 1866C.’’.
(2) 
CONFORMING
AMENDMENTS.—Sections
1864(a) 1902(a)(9)(C), and 1915(a)(1)(B)(ii)(I) of
such Act (42 U.S.C. 1395aa(a), 1396a(a)(9)(C), and
1396n(a)(1)(B)(ii)(I)) are each amended by striking
‘‘paragraphs (16) and (17)’’ each place it appears
and inserting ‘‘clauses (i) and (ii) of the second sen-
tence’’.
(3) PART
B
COINSURANCE
AND
DEDUCTIBLE
NOT
APPLICABLE
TO
CARE
COORDINATION
SERV-
ICES.—
(A) COINSURANCE.—Section 1833(a)(1)
(42 U.S.C. 1395l(a)(1)), as amended by sec-
tions 105 and 223 of the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protec-
tion Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106–554, is amended—
(i) by striking ‘‘and’’ at the end of
subparagraph (T); and
(ii) by inserting before the final semi-
colon ‘‘, and (V) with respect to care co-
ordination services described in section
1861(s)(16), the amounts paid shall be
100 percent of the payment amount estab-
lished under section 1866C’’.
(B) DEDUCTIBLE.—Section 1833(b) (42
U.S.C. 1395l(b)) is amended—
(i) by striking ‘‘and’’ at the end of
paragraph (5); and
(ii) by inserting before the final period
‘‘, and (7) such deductible shall not apply
with respect to care coordination services
(as described in section 1861(s)(16))’’.
SEC. 112. ESTABLISHMENT OF MEDICARE HOME HEALTH
CARE CASE MANAGERS FOR LONG TERM
HOME HEALTH SPELLS OF ILLNESS.
(a) REQUIREMENT FOR CASE MANAGEMENT PLAN
FOR
BENEFICIARIES
REQUIRING
EXTENDED
HOME
HEALTH SERVICES.—
(1) IN GENERAL.—Section 1861(m) (42 U.S.C.
1395x(m)) is amended, in the matter preceding
paragraph (1), by inserting after ‘‘under a plan (for
furnishing such items and services to such indi-
vidual) established and periodically reviewed by a
physician’’ the following: ‘‘and, in the case of such
services furnished (or likely to be required to be fur-
nished) for an extended period (as defined by the
Secretary in regulations), under a home health case
management plan (as defined in subsection (ww)(2))
established by a home health case manager (as de-
fined in subsection (ww)(1)) in consultation with the
physician and, if available, the family of the indi-
vidual for an individual who is not participating in
a case or disease management program under any
other provision of this Act’’.
(2) DEFINITIONS.—Section 1861 (42 U.S.C.
1395x), as amended by sections 102 and 105 of the
Medicare, Medicaid, and SCHIP Benefits Improve-
ment and Protection Act of 2000, as enacted into
law by section 1(a)(6) of Public Law 106–554, is
amended by adding at the end the following new
subsection:
‘‘Home Health Case Manager
‘‘(ww)(1) The term ‘home health case manager’
means a public agency or private organization (or a sub-
division thereof) that—
‘‘(A) develops, coordinates, and monitors the
delivery of home health services by home health
agencies to an individual;
‘‘(B) has experience and expertise in the fur-
nishing of home health services; and
‘‘(C) meets such other standards as the Sec-
retary finds necessary for the effective and efficient
development and oversight of home health case man-
agement plans and to ensure the health and safety
of individuals furnished services under such a plan.
‘‘(2) The term ‘home health case management plan’
means a structured plan for the delivery of home health
services that is developed by a home health case manager,
after consultation with the physician and, if available, the
family of the individual involved.
‘‘(3) The term ‘home health case manager services’
means the development, coordination, and monitoring of
a home health case management plan for an individual
furnished (or likely to be required to be furnished) home
health services for an extended period (as defined by the
Secretary in regulations under subsection (m)) and in-
cludes the periodic review of such a plan.’’.
(3) GUIDANCE ON INITIATION OF CASE MAN-
AGER
SERVICES.—The Secretary of Health and
Human Services shall provide guidance on the proc-
ess or processes that may be used to identify Medi-
care beneficiaries requiring home health services for
extended periods and to develop home health case
management plans on a timely basis.
(4) LIMITATION ON REFERRALS.—Section 1877
of the Social Security Act (42 U.S.C. 1395nn) shall
apply to a referral by a home health case manager
to a home health agency in the same manner as
such section applies to a referral by a physician to
an entity described in section 1877(a)(2) of such
Act.
(b) COVERAGE
OF
AND
PAYMENT
FOR
HOME
HEALTH CASE MANAGER SERVICES.—
(1) PART A.—
(A) COVERAGE.—Section 1812(a)(3) (42
U.S.C. 1395d(a)(3)) is amended by inserting
before the semicolon ‘‘, and home health case
manager 
services 
(as 
defined 
in 
section
1861(ww)(3))’’.
(B) ELIGIBILITY.—Section 1814(a)(2)(C)
(42 U.S.C. 1395f(a)(2)(C)) is amended by in-
serting ‘‘and, in the case of such services fur-
nished (or likely to be required to be furnished)
for an extended period (as defined by the Sec-
retary under section 1861(m)), under a home
health case management plan that has been es-
tablished and periodically reviewed by a home
health case manager’’ after ‘‘is periodically re-
viewed by a physician’’.
(C) PAYMENT.—Section 1812 (42 U.S.C.
1395d) is amended by adding at the end the
following new subsection:
‘‘(h)(1) Payment under this part for home health
case manager services (as defined in section 1861(ww)(3))
shall be made pursuant to the fee schedule established by
the Secretary under section 1834(n).
‘‘(2) Payment may be made under this title for home
health case manager services with respect to an individual
only—
‘‘(A) for the initial development of the home
health case management plan for the individual, and
‘‘(B) for the subsequent review and modifica-
tion of such plan, as provided by the Secretary in
regulations.’’.
(2) PART B.—
(A) COVERAGE.—Section 1832(a)(2)(A)
(42 U.S.C. 1395k(a)(2)(A)) is amended by in-
serting before the semicolon ‘‘, and home health
case manager services (as defined in section
1861(ww)(3))’’.
(B) ELIGIBILITY.—Section 1835(a)(2) (42
U.S.C. 1395n(a)(2)) is amended by inserting
‘‘and, in the case of such services furnished (or
likely to be required to be furnished) for an ex-
tended period (as defined by the Secretary
under section 1861(m)), under a home health
case management plan that has been estab-
lished and periodically reviewed by a home
health case manager’’ after ‘‘is periodically re-
viewed by a physician’’.
(C) PAYMENT.—Section 1833 (42 U.S.C.
1395l) is amended—
(i) in subsection (a)(2)—
(I) by striking ‘‘and’’ at the end
of subparagraph (F);
(II) by adding ‘‘and’’ at the end
of subparagraph (G); and
(III) by adding after subpara-
graph (G) the following new subpara-
graph:
‘‘(H) subject to subsection (u), with re-
spect to home health case manager services (as
defined in section 1861(ww)(3), the amount de-
termined under the fee schedule established
under section 1834(n);’’, and
(ii) by adding at the end the following
new subsection:
‘‘(u) Payment may be made under this title for home
health case manager services with respect to an individual
only—
‘‘(1) for the initial development of the home
health case management plan for the individual, and
‘‘(2) for the subsequent review and modification
of such plan, as provided by the Secretary in regula-
tions.’’.
(3) ESTABLISHMENT OF FEE SCHEDULE.—Sec-
tion 1834 (42 U.S.C. 1395m), as amended by sec-
tion 223 of the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000,
as enacted into law by section 1(a)(6) of Public Law
106–554, is amended by adding at the end the fol-
lowing new section:
‘‘(n) ESTABLISHMENT
OF
FEE
SCHEDULE
FOR
HOME HEALTH CASE MANAGER SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a fee schedule for payment for home health case
manager services. Such schedule may provide for
rates that differ for such services that comprise the
establishment of a home health case management
plan and that comprise review and modification of
such a plan.
‘‘(2) CONSIDERATIONS.—In establishing such
fee schedule, the Secretary shall consider appro-
priate regional and operational differences and ad-
justments to payment rates to account for inflation
and other relevant factors.
‘‘(3) CONSULTATION.—In establishing the fee
schedule for home health case manager services
under this subsection, the Secretary shall consult
with appropriate organizations representing individ-
uals and entities who furnish referral services for
home health services and share with such organiza-
tions relevant data in establishing such schedule.
‘‘(4) ALTERNATIVE PAYMENT UNDER COMPETI-
TIVE BIDDING.—
‘‘(A) IN
GENERAL.—Notwithstanding the
preceding provisions of this subsection, the Sec-
retary may, by region, use a competitive process
to contract with home health case managers for
furnishing home health case manager services.
‘‘(B) 
PAYMENT.—Payment 
under 
this
paragraph shall be made on the basis of nego-
tiated all-inclusive rates. The amount of pay-
ment made by the Secretary to a home health
case manager for home health case manager
services under this title for services covered
under a contract shall be less than the aggre-
gate amount of the payments that the Secretary
would have otherwise made for the services.
‘‘(C) CONTRACT PERIOD.—A contract pe-
riod shall be three years (subject to renewal), as
long as the entity continues to meet quality and
other contractual standards.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section apply with respect to home health services fur-
nished on or after October 1, 2004.
SEC. 113. ADDITIONAL PAYMENT AMOUNT TO RURAL PRO-
VIDERS OF SERVICES WHO FURNISH PRE-
VENTIVE AND CASE MANAGER SERVICES.
(a) AUTHORITY TO PROVIDE ADDITIONAL PAYMENT
FOR RURAL CASE MANAGER SERVICES.—
(1) FINDINGS.—The Congress finds as follows:
(A) Medicare beneficiaries who live in rural
and frontier areas receive fewer preventive care
services.
(B) Medicare+Choice plans that offer pre-
ventive care services and other additional bene-
fits are not likely to be established in rural or
frontier areas.
(C) Long travel distances and times create
special problems for providers of services and
physicians to follow up on courses of treatment
for medicare beneficiaries residing in rural
areas who require additional case management
and other services.
(2) AUTHORITY.—In the case of a provider of
services or a physician that furnishes services to
Medicare beneficiaries in a rural area, the Secretary
of Health and Human Services may provide for an
additional payment under the Medicare Program for
rural case manager services furnished by such pro-
vider or physician to Medicare beneficiaries.
(b) REQUIREMENT FOR RURAL CASE MANAGEMENT
PLAN.—No payment may be made under subsection (a)
for rural case manager services furnished to a Medicare
beneficiary unless such provider or physician establishes,
and periodically reviews, a rural case management plan
for furnishing preventive services and items and services
for the treatment of the illness or injury of the Medicare
beneficiary. The Secretary shall establish such standards
as the Secretary finds necessary for the effective and effi-
cient development and oversight of rural case manager
services and rural case management plans to ensure the
health and safety of Medicare beneficiaries furnished serv-
ices under such a plan.
(c) PAYMENT.—
(1) IN
GENERAL.—Payment may be made
under this section for rural case manager services
with respect to a Medicare beneficiary only—
(A) for the initial development of the rural
case management plan for the individual, and
(B) for the subsequent review and modi-
fication of such plan, as provided by the Sec-
retary in regulations.
(2) PAYMENT
UNDER
FEE
SCHEDULE.—Pay-
ment under this section for rural case manager serv-
ices shall be made pursuant to the fee schedule es-
tablished by the Secretary.
(3) ESTABLISHMENT OF FEE SCHEDULE.—
(A) IN GENERAL.—The Secretary shall es-
tablish a fee schedule for payment for rural
case manager services. Such schedule may pro-
vide for rates that differ for such services that
comprise the establishment of a rural case man-
agement plan and that comprise review and
modification of such a plan.
(B) 
CONSIDERATIONS.—In 
establishing
such fee schedule, the Secretary shall consider
appropriate regional and operational differences
and adjustments to payment rates to account
for travel and transportation of the provider
and beneficiary, inflation, and other relevant
factors.
(C) CONSULTATION.—In establishing the
fee schedule for rural case manager services
under this subsection, the Secretary shall con-
sult with appropriate organizations representing
individuals and entities who furnish referral
services in rural areas for health care items and
services furnished and share with such organi-
zations relevant data in establishing such sched-
ule.
(d) GUIDANCE ON INITIATION OF CASE MANAGER
SERVICES.—The Secretary of Health and Human Services
shall provide guidance on the process or processes that
may be used to develop rural case management plans on
a timely basis.
(e) LIMITATION ON REFERRALS.—Section 1877 of
the Social Security Act (42 U.S.C. 1395nn) shall apply
to a referral by a rural case manager to a rural agency
in the same manner as such section applies to a referral
by a physician to an entity described in section 1877(a)(2)
of such Act.
(f) DEFINITIONS.—In this section:
(1) The term ‘‘rural case manager services’’
means the development, coordination, and moni-
toring of a rural case management plan for an indi-
vidual furnished items and services for the preven-
tion of illness and for the diagnosis and treatment
of an illness or injury, and includes such home visits
as are medically necessary and the periodic review of
such a plan.
(2) The term ‘‘rural case management plan’’
means a structured plan for the delivery of items
and services that is developed by a rural case man-
ager, after consultation with the physician and, if
available, the family of the individual involved.
(3) The term ‘‘provider of service’’ has the
meaning given that term in section 1861(u) of the
Social Security Act (42 U.S.C. 1395x(u)).
(4) The term ‘‘physician’’ has the meaning
given that term in section 1861(r) of such Act (42
U.S.C. 1395x(r)).
(5) The term ‘‘rural area’’ means an area des-
ignated as a rural area under section 1886(d)(2)(D)
of such Act (42 U.S.C. 1395ww(d)(2)(D)).
(6) The term ‘‘Medicare beneficiary’’ means an
individual entitled to benefits under part A of title
XVIII of such Act, or enrolled under part B of such
title, or both.
(7) The term ‘‘Medicare Program’’ means the
insurance program established under title XVIII of
the Social Security Act.
(g) EFFECTIVE DATE.—This section shall take effect
on January 1, 2004, and apply with respect to rural serv-
ices furnished on or after January 1, 2004.
SEC. 114. DISEASE MANAGEMENT SERVICES.
(a) PROGRAM AUTHORIZED.—Title XVIII (42 U.S.C.
1395 et seq.), as previously amended by this subtitle, is
further amended by adding after section 1866C the fol-
lowing new section:
‘‘SEC. 1866D. DISEASE MANAGEMENT SERVICES.
‘‘(a) IN GENERAL.—
‘‘(1) PURPOSE.—The purpose of this section is
to assist beneficiaries with a chronic or advanced ill-
ness or injury to obtain the appropriate level and
mix of follow-up care.
‘‘(2) 
PROGRAM
AUTHORITY.—Beginning 
in
2004, the Secretary may implement a program in
accordance with the provisions of this section under
which certain eligible individuals may, in appropriate
circumstances, receive disease management services
for chronic and advanced illness from entities des-
ignated by the Secretary with respect to diagnoses
that the Secretary determines are amenable to such
management.
‘‘(3) ADMINISTRATION BY CONTRACT.—Except
as otherwise specifically provided, the Secretary may
administer the program under this section in accord-
ance with section 1866F.
‘‘(b) INDIVIDUALS WHO MAY RECEIVE DISEASE
MANAGEMENT SERVICES.—No individual shall be eligible
for enrollment in a disease management program under
this section unless the Secretary finds the following with
respect to the individual:
‘‘(1) DIAGNOSIS AND RELATED CHARACTERIS-
TICS.—
‘‘(A) IN
GENERAL.—The individual has
been diagnosed with congestive heart failure,
chronic obstructive pulmonary disease, diabetes,
schizophrenia, or any other diagnosis (physical
or mental), if the Secretary has determined
with respect to such diagnoses that there is evi-
dence that the provision of disease management
services, over clinically relevant time-periods, to
cohorts of individuals with such diagnoses can
reasonably be expected to improve processes or
outcomes of health care for the Medicare popu-
lation and to reduce aggregate costs to the pro-
grams under this title.
‘‘(B) ADDITIONAL
FACTORS.—Where re-
quired by the Secretary, the individual also has
certain clinical characteristics or conditions, ex-
hibits certain patterns of utilization, or mani-
fests other factors indicating the need for and
potential effectiveness of disease management.
‘‘(2) REFERRAL BY QUALIFIED INDIVIDUAL OR
ENTITY.—The individual has been referred for con-
sideration for such services by an individual or entity
furnishing health care items or services, or by an en-
tity administering benefits under this title.
‘‘(c) PROCEDURES TO FACILITATE ENROLLMENT.—
The Secretary shall develop and implement procedures de-
signed to facilitate enrollment of eligible individuals in the
program under this section.
‘‘(d) ENROLLMENT OF INDIVIDUALS WITH DISEASE
MANAGEMENT ORGANIZATIONS.—
‘‘(1) EFFECTIVE
DATE
AND
DURATION.—En-
rollment of an individual in the program under this
section shall remain in effect for one month (or such
longer period as the Secretary may specify), and
shall be automatically renewed for additional peri-
ods, unless terminated in accordance with such pro-
cedures as the Secretary shall establish by regula-
tion.
‘‘(2) LIMITATION
ON
REENROLLMENT.—The
Secretary may establish limits on an individual’s eli-
gibility to reenroll in the program under this section
if the individual has disenrolled from the program
more than once during a specified time period.
‘‘(e) DISEASE MANAGEMENT REQUIREMENT.—Not-
withstanding any other provision of this title, the Sec-
retary may provide that an individual enrolled in the pro-
gram under this section may be entitled to payment under
this title for any specified health care items or services
only if the items or services have been furnished by the
disease management organization, or coordinated through
the disease management services program. Under such
provision, the Secretary shall prescribe exceptions for
emergency medical services as described in section
1852(d)(3), and other exceptions determined by the Sec-
retary for the delivery of timely and needed care.
‘‘(f) DISEASE MANAGEMENT SERVICES.—
‘‘(1) IN GENERAL.—Subject to the cost-effec-
tiveness criteria specified in subsection (b)(1), dis-
ease management services provided to an individual
under this section may include—
‘‘(A) initial and periodic health screening
and assessment;
‘‘(B) management (including coordination
with other providers) of, and referral for, med-
ical and other health services related to the
managed diagnosis (which may include referral
for provision of such services by the disease
management organization);
‘‘(C) monitoring and control of medications
(including coordination with the entity man-
aging benefits for the individual under part D);
‘‘(D) patient education and counseling, in-
cluding advanced illness counseling (as defined
in subsection (j));
‘‘(E) nursing or other health professional
home visits, as appropriate;
‘‘(F) providing access for consultations by
telephone with physicians or other appropriate
medical professionals, including 24-hour avail-
ability for emergency consultations;
‘‘(G) managing and facilitating the transi-
tion to other care arrangements in preparation
for termination of the disease management en-
rollment; and
‘‘(H) such other services for which pay-
ment would not otherwise be made under this
title as the Secretary shall determine to be ap-
propriate.
‘‘(2) VARIATIONS IN SERVICE PACKAGES.—The
types and combinations of disease management serv-
ices furnished under agreements under this section
may vary (as permitted or required by the Sec-
retary) according to the types of diagnoses, condi-
tions, patient profiles being managed, expertise of
the disease management organization, and other fac-
tors the Secretary finds appropriate.
‘‘(3) REDUCTION
OR
ELIMINATION
OF
COST
SHARING.—Notwithstanding any other provision of
law, subject to the cost-effectiveness criteria speci-
fied in subsection (b)(1), the Secretary may provide
for the reduction or elimination of beneficiary cost
sharing (such as deductibles, copayments, and coin-
surance) with respect to any of the items or services
furnished under this title (other than those fur-
nished under a service package developed under
paragraph (2)), and may limit such reduction or
elimination to particular service areas.
‘‘(g) AGREEMENTS WITH DISEASE MANAGEMENT
ORGANIZATIONS.—
‘‘(1) ENTITIES ELIGIBLE.—Entities qualified to
enter into agreements with the Secretary for the
provision of disease management services under this
section include entities that have demonstrated the
ability to meet the performance standards and other
criteria established by the Secretary with respect
to—
‘‘(A) the management of each diagnosis
and condition with respect to which the entity,
if designated, would furnish disease manage-
ment services under this section; and
‘‘(B) the implementation of each disease
management approach that the entity, if des-
ignated, would implement under this section.
‘‘(2) CONDITIONS OF PARTICIPATION.—In order
to be eligible to provide disease management services
under this section, an entity shall—
‘‘(A) have in effect an agreement with the
Secretary setting forth such obligations of the
entity as a disease management organization
under this section as the Secretary shall pre-
scribe;
‘‘(B) meet the standards established by the
Secretary under subsection (h); and
standards as the Secretary may find appro-
priate.
‘‘(2) COST MANAGEMENT.—The Secretary shall
establish a performance standard with respect to
management or reduction of the aggregate costs of
health care items and services related to managed
health conditions furnished to enrolled individuals,
including procedures for establishing a baseline and
measuring changes in costs for such items and serv-
ices.
‘‘(i) PAYMENT.—
‘‘(1) TERMS OF PAYMENT.—The Secretary may
negotiate or otherwise establish payment terms and
rates for service packages developed under sub-
section (f)(2).
‘‘(2) WITHHOLDING OF PAYMENTS.—An agree-
ment under subsection (g) may provide that the Sec-
retary may withhold up to ten percent of the amount
due a disease management organization under the
basis of payment established under paragraph (1)
until such time as such organization meets a stand-
ard or standards specified in such agreement.
‘‘(j) ADVANCED ILLNESS COUNSELING DEFINED.—
For purposes of this section, the term ‘advanced illness
counseling’ means counseling to individuals (and a spouse
or principal caregiver of such an individual) with ad-
vanced, chronic, or terminal illnesses about treatment op-
tions available from various providers, including (where
appropriate) hospice programs.’’.
(b) COVERAGE OF DISEASE MANAGEMENT SERVICES
AS A PART B MEDICAL SERVICE.—
(1) IN GENERAL.—Section 1861(s), as amended
by section 111, is further amended—
(A) by striking ‘‘and’’ at the end of para-
graph (15);
(B) by striking the period at the end of
paragraph (16) and inserting ‘‘and’’; and
(C) by adding after paragraph (16) the fol-
lowing new paragraph:
‘‘(17) disease management services furnished in
accordance with section 1866D.’’.
(2) PART
B
COINSURANCE
AND
DEDUCTIBLE
NOT APPLICABLE TO DISEASE MANAGEMENT SERV-
ICES.—
(A) 
COINSURANCE.—Section
1833(a)(1)(T) (42 U.S.C. 1395l(a)(1)(T)), as
added by section 111(b)(2)(A), is amended to
read as follows: ‘‘(T) with respect to care co-
ordination 
services 
described 
in 
section
1861(s)(16) and disease management services
described in section 1861(s)(17), the amounts
paid shall be 100 percent of the payment
amounts established under sections 1866C and
1866D, respectively;’’.
(B) DEDUCTIBLE.—Section 1833(b) (42
U.S.C. 1395l(b)), as amended by section
111(b)(2)(A), is further amended by inserting
before the final period ‘‘or to disease manage-
ment 
services 
(as 
described 
in 
section
1861(s)(17))’’.
SEC. 115. PROVIDER AND PHYSICIAN COLLABORATION TO
FURNISH A BUNDLED, COORDINATED SET OF
SERVICES.
Title XVIII (42 U.S.C. 1395 et seq.), as previously
amended by this subtitle, is further amended by adding
after section 1866D the following new section:
‘‘SEC. 1866E. PROVIDER AND PHYSICIAN COLLABORATIONS.
‘‘(a) IN GENERAL.—
‘‘(1) PURPOSE.—The purpose of this section is
to assist a beneficiary with a complex or sophisti-
cated illness or injury to obtain a coordinated, high
quality bundled package of items and services under
this title.
‘‘(2) 
PROGRAM
AUTHORITY.—Beginning 
in
2004, the Secretary may enter into agreements with
specific quality providers, suppliers, or other individ-
uals or entities for the furnishing of bundled items
and services in selected sites of service or related to
specific medical conditions or needs for an episode of
care. The services may include any items or services
covered under this title that the Secretary deter-
mines to be appropriate, including post-hospital
services.
‘‘(3) ADMINISTRATION BY CONTRACT.—Except
as otherwise specifically provided, the Secretary may
administer the program under this section in accord-
ance with section 1866F.
‘‘(b) BASIS OF SELECTION.—The Secretary shall se-
lect entities for agreements under this section on the basis
of ability to provide services more efficiently, to provide
improved coordination of care, to offer additional benefits,
and to meet quality and other standards and beneficiary
protections and other requirements set by the Secretary.
‘‘(c) PAYMENT.—Payment under this section shall be
made on the basis of all-inclusive rates. The all-inclusive
rate paid to an entity for bundled items and services fur-
nished during an episode of care under this section shall
be less than the estimated amount of the payments that
the Secretary would have otherwise made for the items
and services.
‘‘(d) TERM OF AGREEMENT.—Agreements under this
section shall be for periods that the Secretary may deter-
mine.
‘‘(e) INCENTIVES TO BENEFICIARIES FOR USE OF
CONTRACTING
ENTITIES.—Notwithstanding any other
provision of law, entities under a contract under this sec-
tion may furnish additional services or waive part or all
beneficiary cost sharing (such as deductibles, copayments,
and coinsurance) with respect to any of the items or serv-
ices furnished under this section.
‘‘(f) BENEFICIARY ELECTION.—An individual enti-
tled to benefits under this title who elects to obtain serv-
ices under an agreement under this section shall agree to
receive under such agreement all benefits related to the
episode of care covered by the agreement (subject to such
exceptions for emergency services and as the Secretary
otherwise may specify).’’.
SEC. 116. DEMONSTRATION PROJECTS TO INCREASE QUAL-
ITY OF INFORMATION PROVIDED TO MEDI-
CARE BENEFICIARIES WITH RESPECT TO
TREATMENT OPTIONS.
(a) ESTABLISHMENT OF PROJECT.—
(1) IN GENERAL.—Not later than January 1,
2003, the Secretary of Health and Human Services
shall establish demonstration projects (in this sec-
tion referred to as the ‘‘projects’’) under which the
Secretary shall furnish to providers of services and
physicians participating in the Medicare Program
under title XVIII of the Social Security Act informa-
tional videotapes (as described in subsection (b)) to
present to a Medicare beneficiary diagnosed with a
particular disease, injury, or advanced illness (as
identified by the Secretary pursuant to subsection
(c)) before the beneficiary elects a course of treat-
ment for that disease, injury, or advanced illness.
The Secretary shall furnish such informational vid-
eotapes at no cost to such providers and physicians.
(2) PROJECT
AREAS.—The projects shall be
conducted in five separate counties of which 3 shall
be in urban areas and 2 shall be in rural areas.
(b) INFORMATIONAL VIDEOTAPE DESCRIBED.—
(1) IN GENERAL.—The Institute of Medicine, in
consultation with the National Institutes of Health
and other medical experts (as determined by the
Secretary), shall develop a videotape presentation to
provide a Medicare beneficiary diagnosed as having
the disease, injury, or advanced illness identified
under subsection (c) with the following information:
(A) A description of the disease, injury, or
advanced illness.