185
ceding fiscal year, to the hospital’s total in-
patient days for such period, and (II) the
total number of inpatient days (as estab-
lished by the Secretary) for such period
which are attributable to services furnished
to individuals who are enrolled under a
risk sharing contract with an eligible orga-
nization under section 1876 and who are
entitled to benefits under part A or who
are enrolled with a Medicare+Choice orga-
nization under part C; to
‘‘(ii) the sum of the products deter-
mined under clause (i) for such cost re-
porting periods.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to portions of cost reporting pe-
riods occurring on or after January 1, 2001.
Subtitle C—Changes in Medicare
Coverage and Appeals Process
SEC. 521. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) CONDUCT OF RECONSIDERATIONS OF DETER-
MINATIONS
BY INDEPENDENT CONTRACTORS.—Section
1869 (42 U.S.C. 1395ff ) is amended to read as follows:
‘‘DETERMINATIONS; APPEALS
‘‘SEC. 1869. (a) INITIAL DETERMINATIONS.—
186
‘‘(1) PROMULGATIONS OF REGULATIONS.—The
Secretary shall promulgate regulations and make ini-
tial determinations with respect to benefits under
part A or part B in accordance with those regula-
tions for the following:
‘‘(A) The initial determination of whether
an individual is entitled to benefits under such
parts.
‘‘(B) The initial determination of the
amount of benefits available to the individual
under such parts.
‘‘(C) Any other initial determination with
respect to a claim for benefits under such parts,
including an initial determination by the Sec-
retary that payment may not be made, or may
no longer be made, for an item or service under
such parts, an initial determination made by a
utilization and quality control peer review orga-
nization under section 1154(a)(2), and an ini-
tial determination made by an entity pursuant
to a contract (other than a contract under sec-
tion 1852) with the Secretary to administer
provisions of this title or title XI.
‘‘(2) DEADLINES FOR MAKING INITIAL DETER-
MINATIONS.—
187
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in promulgating regulations under
paragraph (1), initial determinations shall be
concluded by not later than the 45-day period
beginning on the date the fiscal intermediary or
the carrier, as the case may be, receives a claim
for benefits from an individual as described in
paragraph (1). Notice of such determination
shall be mailed to the individual filing the claim
before the conclusion of such 45-day period.
‘‘(B) CLEAN CLAIMS.—Subparagraph (A)
shall not apply with respect to any claim that
is subject to the requirements of section
1816(c)(2) or 1842(c)(2).
‘‘(3) REDETERMINATIONS.—
‘‘(A) IN GENERAL.—In promulgating regu-
lations under paragraph (1) with respect to ini-
tial determinations, such regulations shall pro-
vide for a fiscal intermediary or a carrier to
make a redetermination with respect to a claim
for benefits that is denied in whole or in part.
‘‘(B) LIMITATIONS.—
‘‘(i) APPEAL RIGHTS.—No initial de-
termination may be reconsidered or ap-
pealed under subsection (b) unless the fis-
188
cal intermediary or carrier has made a re-
determination of that initial determination
under this paragraph.
‘‘(ii) DECISIONMAKER.—No redeter-
mination may be made by any individual
involved in the initial determination.
‘‘(C) DEADLINES.—
‘‘(i) 
FILING
FOR
REDETERMINA-
TION.—A redetermination under subpara-
graph (A) shall be available only if notice
is filed with the Secretary to request the
redetermination by not later than the end
of the 120-day period beginning on the
date the individual receives notice of the
initial determination under paragraph (2).
‘‘(ii) 
CONCLUDING
REDETERMINA-
TIONS.—Redeterminations shall be con-
cluded by not later than the 30-day period
beginning on the date the fiscal inter-
mediary or the carrier, as the case may be,
receives a request for a redetermination.
Notice of such determination shall be
mailed to the individual filing the claim be-
fore the conclusion of such 30-day period.
189
‘‘(D) CONSTRUCTION.—For purposes of
the succeeding provisions of this section a rede-
termination under this paragraph shall be con-
sidered to be part of the initial determination.
‘‘(b) APPEAL RIGHTS.—
‘‘(1) IN GENERAL.—
‘‘(A) RECONSIDERATION
OF
INITIAL
DE-
TERMINATION.—Subject to subparagraph (D),
any individual dissatisfied with any initial de-
termination under subsection (a)(1) shall be en-
titled to reconsideration of the determination,
and, subject to subparagraphs (D) and (E), a
hearing thereon by the Secretary to the same
extent as is provided in section 205(b) and to
judicial review of the Secretary’s final decision
after such hearing as is provided in section
205(g). For purposes of the preceding sentence,
any reference to the ‘Commissioner of Social
Security’ or the ‘Social Security Administration’
in subsection (g) or (l) of section 205 shall be
considered a reference to the ‘Secretary’ or the
‘Department of Health and Human Services’,
respectively.
‘‘(B) REPRESENTATION BY PROVIDER OR
SUPPLIER.—
190
‘‘(i) IN
GENERAL.—Sections 206(a),
1102, and 1871 shall not be construed as
authorizing the Secretary to prohibit an in-
dividual from being represented under this
section by a person that furnishes or sup-
plies the individual, directly or indirectly,
with services or items, solely on the basis
that the person furnishes or supplies the
individual with such a service or item.
‘‘(ii) MANDATORY WAIVER OF RIGHT
TO
PAYMENT
FROM
BENEFICIARY.—Any
person that furnishes services or items to
an individual may not represent an indi-
vidual under this section with respect to
the issue described in section 1879(a)(2)
unless the person has waived any rights for
payment from the beneficiary with respect
to the services or items involved in the ap-
peal.
‘‘(iii) PROHIBITION ON PAYMENT FOR
REPRESENTATION.—If a person furnishes
services or items to an individual and rep-
resents the individual under this section,
the person may not impose any financial li-
191
ability on such individual in connection
with such representation.
‘‘(iv) 
REQUIREMENTS
FOR
REP-
RESENTATIVES OF A BENEFICIARY.—The
provisions of section 205( j) and of section
206 (other than subsection (a)(4) of such
section) regarding representation of claim-
ants shall apply to representation of an in-
dividual with respect to appeals under this
section in the same manner as they apply
to representation of an individual under
those sections.
‘‘(C) SUCCESSION OF RIGHTS IN CASES OF
ASSIGNMENT.—The right of an individual to an
appeal under this section with respect to an
item or service may be assigned to the provider
of services or supplier of the item or service
upon the written consent of such individual
using a standard form established by the Sec-
retary for such an assignment.
‘‘(D) TIME LIMITS FOR FILING APPEALS.—
‘‘(i) RECONSIDERATIONS.—Reconsid-
eration under subparagraph (A) shall be
available only if the individual described in
subparagraph (A) files notice with the Sec-
192
retary to request reconsideration by not
later than the end of the 180-day period
beginning on the date the individual re-
ceives notice of the redetermination under
subsection (a)(3), or within such additional
time as the Secretary may allow.
‘‘(ii) HEARINGS CONDUCTED BY THE
SECRETARY.—The Secretary shall establish
in regulations time limits for the filing of
a request for a hearing by the Secretary in
accordance with provisions in sections 205
and 206.
‘‘(E) AMOUNTS IN CONTROVERSY.—
‘‘(i) IN GENERAL.—A hearing (by the
Secretary) shall not be available to an indi-
vidual under this section if the amount in
controversy is less than $100, and judicial
review shall not be available to the indi-
vidual if the amount in controversy is less
than $1,000.
‘‘(ii) AGGREGATION
OF
CLAIMS.—In
determining the amount in controversy, the
Secretary, under regulations, shall allow
two or more appeals to be aggregated if
the appeals involve—
193
‘‘(I) the delivery of similar or re-
lated services to the same individual
by one or more providers of services
or suppliers, or
‘‘(II) common issues of law and
fact arising from services furnished to
two or more individuals by one or
more providers of services or sup-
pliers.
‘‘(F) EXPEDITED PROCEEDINGS.—
‘‘(i) EXPEDITED
DETERMINATION.—
In the case of an individual who has re-
ceived notice from a provider of services
that such provider plans—
‘‘(I) to terminate services pro-
vided to an individual and a physician
certifies that failure to continue the
provision of such services is likely to
place the individual’s health at signifi-
cant risk, or
‘‘(II) to discharge the individual
from the provider of services,
the individual may request, in writing or
orally, an expedited determination or an
expedited reconsideration of an initial de-
194
termination made under subsection (a)(1),
as the case may be, and the Secretary shall
provide such expedited determination or
expedited reconsideration.
‘‘(ii) EXPEDITED
HEARING.—In a
hearing by the Secretary under this sec-
tion, in which the moving party alleges
that no material issues of fact are in dis-
pute, the Secretary shall make an expe-
dited determination as to whether any such
facts are in dispute and, if not, shall
render a decision expeditiously.
‘‘(G) REOPENING AND REVISION OF DE-
TERMINATIONS.—The Secretary may reopen or
revise any initial determination or reconsidered
determination described in this subsection
under guidelines established by the Secretary in
regulations.
‘‘(c) CONDUCT
OF RECONSIDERATIONS
BY INDE-
PENDENT CONTRACTORS.—
‘‘(1) IN GENERAL.—The Secretary shall enter
into contracts with qualified independent contractors
to conduct reconsiderations of initial determinations
made under subparagraphs (B) and (C) of sub-
section (a)(1). Contracts shall be for an initial term
195
of three years and shall be renewable on a triennial
basis thereafter.
‘‘(2) 
QUALIFIED
INDEPENDENT
CON-
TRACTOR.—For purposes of this subsection, the
term ‘qualified independent contractor’ means an en-
tity or organization that is independent of any orga-
nization under contract with the Secretary that
makes 
initial 
determinations 
under 
subsection
(a)(1), and that meets the requirements established
by the Secretary consistent with paragraph (3).
‘‘(3) REQUIREMENTS.—Any 
qualified 
inde-
pendent contractor entering into a contract with the
Secretary under this subsection shall meet all of the
following requirements:
‘‘(A) IN
GENERAL.—The qualified inde-
pendent contractor shall perform such duties
and functions and assume such responsibilities
as may be required by the Secretary to carry
out the provisions of this subsection, and shall
have sufficient training and expertise in medical
science and legal matters to make reconsider-
ations under this subsection.
‘‘(B) RECONSIDERATIONS.—
‘‘(i) 
IN
GENERAL.—The 
qualified
independent contractor shall review initial
196
determinations. Where an initial deter-
mination is made with respect to whether
an item or service is reasonable and nec-
essary for the diagnosis or treatment of ill-
ness 
or 
injury 
(under 
section
1862(a)(1)(A)), such review shall include
consideration 
of 
the 
facts 
and 
cir-
cumstances of the initial determination by
a panel of physicians or other appropriate
health care professionals and any decisions
with respect to the reconsideration shall be
based on applicable information, including
clinical experience and medical, technical,
and scientific evidence.
‘‘(ii) EFFECT
OF
NATIONAL
AND
LOCAL COVERAGE DETERMINATIONS.—
‘‘(I) NATIONAL
COVERAGE
DE-
TERMINATIONS.—If the Secretary has
made a national coverage determina-
tion pursuant to the requirements es-
tablished under the third sentence of
section 1862(a), such determination
shall be binding on the qualified inde-
pendent contractor in making a deci-
197
sion with respect to a reconsideration
under this section.
‘‘(II) LOCAL COVERAGE DETER-
MINATIONS.—If the Secretary has
made a local coverage determination,
such determination shall not be bind-
ing on the qualified independent con-
tractor in making a decision with re-
spect to a reconsideration under this
section. Notwithstanding the previous
sentence, the qualified independent
contractor shall consider the local cov-
erage determination in making such
decision.
‘‘(III) ABSENCE OF NATIONAL OR
LOCAL COVERAGE DETERMINATION.—
In the absence of such a national cov-
erage determination or local coverage
determination, 
the 
qualified 
inde-
pendent contractor shall make a deci-
sion with respect to the reconsider-
ation based on applicable information,
including clinical experience and med-
ical, technical, and scientific evidence.
‘‘(C) DEADLINES FOR DECISIONS.—
198
‘‘(i) RECONSIDERATIONS.—Except as
provided in clauses (iii) and (iv), the quali-
fied independent contractor shall conduct
and conclude a reconsideration under sub-
paragraph (B), and mail the notice of the
decision with respect to the reconsideration
by not later than the end of the 30-day pe-
riod beginning on the date a request for
reconsideration has been timely filed.
‘‘(ii) CONSEQUENCES OF FAILURE TO
MEET DEADLINE.—In the case of a failure
by the qualified independent contractor to
mail the notice of the decision by the end
of the period described in clause (i) or to
provide notice by the end of the period de-
scribed in clause (iii), as the case may be,
the party requesting the reconsideration or
appeal may request a hearing before the
Secretary, notwithstanding any require-
ments for a reconsidered determination for
purposes of the party’s right to such hear-
ing.
‘‘(iii) 
EXPEDITED
RECONSIDER-
ATIONS.—The qualified independent con-
tractor shall perform an expedited recon-
199
sideration under subsection (b)(1)(F) as
follows:
‘‘(I) DEADLINE FOR DECISION.—
Notwithstanding section 216( j) and
subject to clause (iv), not later than
the end of the 72-hour period begin-
ning on the date the qualified inde-
pendent contractor has received a re-
quest for such reconsideration and has
received such medical or other records
needed for such reconsideration, the
qualified independent contractor shall
provide notice (by telephone and in
writing) to the individual and the pro-
vider of services and attending physi-
cian of the individual of the results of
the reconsideration. Such reconsider-
ation shall be conducted regardless of
whether the provider of services or
supplier will charge the individual for
continued services or whether the indi-
vidual will be liable for payment for
such continued services.
‘‘(II) CONSULTATION WITH BEN-
EFICIARY.—In such reconsideration,
200
the qualified independent contractor
shall solicit the views of the individual
involved.
‘‘(III) SPECIAL RULE FOR HOS-
PITAL
DISCHARGES.—A reconsider-
ation of a discharge from a hospital
shall be conducted under this clause
in accordance with the provisions of
paragraphs (2), (3), and (4) of section
1154(e) as in effect on the date that
precedes the date of the enactment of
this subparagraph.
‘‘(iv) EXTENSION.—An individual re-
questing a reconsideration under this sub-
paragraph may be granted such additional
time as the individual specifies (not to ex-
ceed 14 days) for the qualified independent
contractor to conclude the reconsideration.
The individual may request such additional
time orally or in writing.
‘‘(D) LIMITATION ON INDIVIDUAL REVIEW-
ING DETERMINATIONS.—
‘‘(i) PHYSICIANS AND HEALTH CARE
PROFESSIONAL.—No physician or health
care professional under the employ of a
201
qualified 
independent 
contractor 
may
review—
‘‘(I) 
determinations 
regarding
health care services furnished to a pa-
tient if the physician or health care
professional was directly responsible
for furnishing such services; or
‘‘(II) determinations regarding
health care services provided in or by
an institution, organization, or agen-
cy, if the physician or any member of
the family of the physician or health
care professional has, directly or indi-
rectly, a significant financial interest
in such institution, organization, or
agency.
‘‘(ii) FAMILY DESCRIBED.—For pur-
poses of this paragraph, the family of a
physician or health care professional in-
cludes the spouse (other than a spouse who
is legally separated from the physician or
health care professional under a decree of
divorce or separate maintenance), children
(including stepchildren and legally adopted
children), 
grandchildren, 
parents, 
and
202
grandparents of the physician or health
care professional.
‘‘(E) EXPLANATION
OF
DECISION.—Any
decision with respect to a reconsideration of a
qualified independent contractor shall be in
writing, and shall include a detailed explanation
of the decision as well as a discussion of the
pertinent facts and applicable regulations ap-
plied in making such decision, and in the case
of a determination of whether an item or serv-
ice is reasonable and necessary for the diag-
nosis or treatment of illness or injury (under
section 1862(a)(1)(A)) an explanation of the
medical and scientific rationale for the decision.
‘‘(F) NOTICE REQUIREMENTS.—Whenever
a qualified independent contractor makes a de-
cision with respect to a reconsideration under
this subsection, the qualified independent con-
tractor shall promptly notify the entity respon-
sible for the payment of claims under part A or
part B of such decision.
‘‘(G) DISSEMINATION
OF
DECISIONS
ON
RECONSIDERATIONS.—Each 
qualified 
inde-
pendent contractor shall make available all deci-
sions with respect to reconsiderations of such
203
qualified independent contractors to fiscal inter-
mediaries (under section 1816), carriers (under
section 1842), peer review organizations (under
part B of title XI), Medicare+Choice organiza-
tions offering Medicare+Choice plans under
part C, other entities under contract with the
Secretary to make initial determinations under
part A or part B or title XI, and to the public.
The Secretary shall establish a methodology
under which qualified independent contractors
shall carry out this subparagraph.
‘‘(H) ENSURING
CONSISTENCY
IN
DECI-
SIONS.—Each qualified independent contractor
shall monitor its decisions with respect to re-
considerations to ensure the consistency of such
decisions with respect to requests for reconsid-
eration of similar or related matters.
‘‘(I) DATA COLLECTION.—
‘‘(i) IN
GENERAL.—Consistent with
the requirements of clause (ii), a qualified
independent contractor shall collect such
information relevant to its functions, and
keep and maintain such records in such
form and manner as the Secretary may re-
quire to carry out the purposes of this sec-
204
tion and shall permit access to and use of
any such information and records as the
Secretary may require for such purposes.
‘‘(ii) TYPE
OF
DATA
COLLECTED.—
Each 
qualified 
independent 
contractor
shall keep accurate records of each deci-
sion made, consistent with standards es-
tablished by the Secretary for such pur-
pose. Such records shall be maintained in
an electronic database in a manner that
provides for identification of the following:
‘‘(I) Specific claims that give rise
to appeals.
‘‘(II) Situations suggesting the
need for increased education for pro-
viders of services, physicians, or sup-
pliers.
‘‘(III) Situations suggesting the
need for changes in national or local
coverage policy.
‘‘(IV) Situations suggesting the
need for changes in local medical re-
view policies.
‘‘(iii) 
ANNUAL
REPORTING.—Each
qualified independent contractor shall sub-
205
mit annually to the Secretary (or otherwise
as the Secretary may request) records
maintained under this paragraph for the
previous year.
‘‘(J) HEARINGS BY THE SECRETARY.—The
qualified independent contractor shall (i) pre-
pare such information as is required for an ap-
peal of a decision of the contractor with respect
to a reconsideration to the Secretary for a hear-
ing, including as necessary, explanations of
issues involved in the decision and relevant poli-
cies, and (ii) participate in such hearings as re-
quired by the Secretary.
‘‘(4) NUMBER
OF
QUALIFIED
INDEPENDENT
CONTRACTORS.—The Secretary shall enter into con-
tracts with not fewer than 12 qualified independent
contractors under this subsection.
‘‘(5) LIMITATION ON QUALIFIED INDEPENDENT
CONTRACTOR LIABILITY.—No qualified independent
contractor having a contract with the Secretary
under this subsection and no person who is em-
ployed by, or who has a fiduciary relationship with,
any such qualified independent contractor or who
furnishes professional services to such qualified inde-
pendent contractor, shall be held by reason of the
206
performance of any duty, function, or activity re-
quired or authorized pursuant to this subsection or
to a valid contract entered into under this sub-
section, to have violated any criminal law, or to be
civilly liable under any law of the United States or
of any State (or political subdivision thereof ) pro-
vided due care was exercised in the performance of
such duty, function, or activity.
‘‘(d) DEADLINES
FOR HEARINGS
BY
THE SEC-
RETARY.—
‘‘(1) 
HEARING
BY
ADMINISTRATIVE
LAW
JUDGE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an administrative law judge
shall conduct and conclude a hearing on a deci-
sion of a qualified independent contractor under
subsection (c) and render a decision on such
hearing by not later than the end of the 90-day
period beginning on the date a request for hear-
ing has been timely filed.
‘‘(B) WAIVER
OF
DEADLINE
BY
PARTY
SEEKING HEARING.—The 90-day period under
subparagraph (A) shall not apply in the case of
a motion or stipulation by the party requesting
the hearing to waive such period.
207
‘‘(2) DEPARTMENTAL
APPEALS
BOARD
RE-
VIEW.—
‘‘(A) IN
GENERAL.—The Departmental
Appeals Board of the Department of Health
and Human Services shall conduct and conclude
a review of the decision on a hearing described
in paragraph (1) and make a decision or re-
mand the case to the administrative law judge
for reconsideration by not later than the end of
the 90-day period beginning on the date a re-
quest for review has been timely filed.
‘‘(B) DAB HEARING PROCEDURE.—In re-
viewing a decision on a hearing under this para-
graph, the Departmental Appeals Board shall
review the case de novo.
‘‘(3) CONSEQUENCES
OF
FAILURE
TO
MEET
DEADLINES.—
‘‘(A) HEARING BY ADMINISTRATIVE LAW
JUDGE.—In the case of a failure by an adminis-
trative law judge to render a decision by the
end of the period described in paragraph (1),
the party requesting the hearing may request a
review by the Departmental Appeals Board of
the Department of Health and Human Services,
notwithstanding any requirements for a hearing
208
for purposes of the party’s right to such a re-
view.
‘‘(B) DEPARTMENTAL APPEALS BOARD RE-
VIEW.—In the case of a failure by the Depart-
mental Appeals Board to render a decision by
the end of the period described in paragraph
(2), the party requesting the hearing may seek
judicial review, notwithstanding any require-
ments for a hearing for purposes of the party’s
right to such judicial review.
‘‘(e) ADMINISTRATIVE PROVISIONS.—
‘‘(1) LIMITATION ON REVIEW OF CERTAIN REG-
ULATIONS.—A regulation or instruction that relates
to a method for determining the amount of payment
under part B and that was initially issued before
January 1, 1981, shall not be subject to judicial re-
view.
‘‘(2) OUTREACH.—The Secretary shall perform
such outreach activities as are necessary to inform
individuals entitled to benefits under this title and
providers of services and suppliers with respect to
their rights of, and the process for, appeals made
under this section. The Secretary shall use the toll-
free telephone number maintained by the Secretary
under section 1804(b) to provide information re-
209
garding appeal rights and respond to inquiries re-
garding the status of appeals.
‘‘(3) CONTINUING
EDUCATION
REQUIREMENT
FOR QUALIFIED INDEPENDENT CONTRACTORS AND
ADMINISTRATIVE LAW JUDGES.—The Secretary shall
provide to each qualified independent contractor,
and, in consultation with the Commissioner of Social
Security, to administrative law judges that decide
appeals of reconsiderations of initial determinations
or other decisions or determinations under this sec-
tion, such continuing education with respect to cov-
erage of items and services under this title or poli-
cies of the Secretary with respect to part B of title
XI as is necessary for such qualified independent
contractors and administrative law judges to make
informed decisions with respect to appeals.
‘‘(4) REPORTS.—
‘‘(A) ANNUAL
REPORT
TO
CONGRESS.—
The Secretary shall submit to Congress an an-
nual report describing the number of appeals
for the previous year, identifying issues that re-
quire administrative or legislative actions, and
including any recommendations of the Secretary
with respect to such actions. The Secretary
shall include in such report an analysis of de-
210
terminations by qualified independent contrac-
tors with respect to inconsistent decisions and
an analysis of the causes of any such inconsist-
encies.
‘‘(B) SURVEY.—Not less frequently than
every 5 years, the Secretary shall conduct a
survey of a valid sample of individuals entitled
to benefits under this title who have filed ap-
peals of determinations under this section, pro-
viders of services, and suppliers to determine
the satisfaction of such individuals or entities
with the process for appeals of determinations
provided for under this section and education
and training provided by the Secretary with re-
spect to that process. The Secretary shall sub-
mit to Congress a report describing the results
of the survey, and shall include any rec-
ommendations for administrative or legislative
actions that the Secretary determines appro-
priate.’’.
(b) APPLICABILITY OF REQUIREMENTS AND LIMITA-
TIONS ON LIABILITY OF QUALIFIED INDEPENDENT CON-
TRACTORS
TO MEDICARE+CHOICE INDEPENDENT AP-
PEALS CONTRACTORS.—Section 1852(g)(4) (42 U.S.C.
1395w–22(g)(4)) is amended by adding at the end the fol-
211
lowing: ‘‘The provisions of section 1869(c)(5) shall apply
to independent outside entities under contract with the
Secretary under this paragraph.’’.
(c) CONFORMING
AMENDMENT.—Section 1154(e)
(42 U.S.C. 1320c–3(e)) is amended by striking para-
graphs (2), (3), and (4).
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to initial determina-
tions made on or after October 1, 2002.
SEC. 522. REVISIONS TO MEDICARE COVERAGE PROCESS.
(a) REVIEW
OF DETERMINATIONS.—Section 1869
(42 U.S.C. 1395ff ), as amended by section 521, is further
amended by adding at the end the following new sub-
section:
‘‘(f ) REVIEW OF COVERAGE DETERMINATIONS.—
‘‘(1) NATIONAL COVERAGE DETERMINATIONS.—
‘‘(A) IN
GENERAL.—Review of any na-
tional coverage determination shall be subject to
the following limitations:
‘‘(i) Such a determination shall not be
reviewed by any administrative law judge.
‘‘(ii) Such a determination shall not
be held unlawful or set aside on the ground
that a requirement of section 553 of title
5, United States Code, or section 1871(b)
212
of this title, relating to publication in the
Federal Register or opportunity for public
comment, was not satisfied.
‘‘(iii) Upon the filing of a complaint
by an aggrieved party, such a determina-
tion shall be reviewed by the Departmental
Appeals Board of the Department of
Health and Human Services. In con-
ducting such a review, the Departmental
Appeals Board—
‘‘(I) shall review the record and
shall permit discovery and the taking
of evidence to evaluate the reasonable-
ness of the determination, if the
Board determines that the record is
incomplete or lacks adequate informa-
tion to support the validity of the de-
termination;
‘‘(II) may, as appropriate, con-
sult with appropriate scientific and
clinical experts; and
‘‘(III) shall defer only to the rea-
sonable findings of fact, reasonable in-
terpretations of law, and reasonable
213
applications of fact to law by the Sec-
retary.
‘‘(iv) The Secretary shall implement a
decision of the Departmental Appeals
Board within 30 days of receipt of such
decision.
‘‘(v) A decision of the Departmental
Appeals Board constitutes a final agency
action and is subject to judicial review.
‘‘(B) DEFINITION OF NATIONAL COVERAGE
DETERMINATION.—For purposes of this section,
the term ‘national coverage determination’
means a determination by the Secretary with
respect to whether or not a particular item or
service is covered nationally under this title, but
does not include a determination of what code,
if any, is assigned to a particular item or serv-
ice covered under this title or a determination
with respect to the amount of payment made
for a particular item or service so covered.
‘‘(2) LOCAL COVERAGE DETERMINATION.—
‘‘(A) IN GENERAL.—Review of any local
coverage determination shall be subject to the
following limitations:
214
‘‘(i) Upon the filing of a complaint by
an aggrieved party, such a determination
shall be reviewed by an administrative law
judge of the Social Security Administra-
tion. The administrative law judge—
‘‘(I) shall review the record and
shall permit discovery and the taking
of evidence to evaluate the reasonable-
ness of the determination, if the ad-
ministrative law judge determines that
the record is incomplete or lacks ade-
quate information to support the va-
lidity of the determination;
‘‘(II) may, as appropriate, con-
sult with appropriate scientific and
clinical experts; and
‘‘(III) shall defer only to the rea-
sonable findings of fact, reasonable in-
terpretations of law, and reasonable
applications of fact to law by the Sec-
retary.
‘‘(ii) Upon the filing of a complaint by
an aggrieved party, a decision of an admin-
istrative law judge under clause (i) shall be
reviewed by the Departmental Appeals
215
Board of the Department of Health and
Human Services.
‘‘(iii) The Secretary shall implement a
decision of the administrative law judge or
the Departmental Appeals Board within 30
days of receipt of such decision.
‘‘(iv) A decision of the Departmental
Appeals Board constitutes a final agency
action and is subject to judicial review.
‘‘(B) DEFINITION
OF
LOCAL
COVERAGE
DETERMINATION.—For purposes of this section,
the term ‘local coverage determination’ means a
determination by a fiscal intermediary or a car-
rier under part A or part B, as applicable, re-
specting whether or not a particular item or
service is covered on an intermediary- or car-
rier-wide basis under such parts, in accordance
with section 1862(a)(1)(A).
‘‘(3) NO MATERIAL ISSUES OF FACT IN DIS-
PUTE.—In the case of a determination that may oth-
erwise be subject to review under paragraph
(1)(A)(iii) or paragraph (2)(A)(i), where the moving
party alleges that—
‘‘(A) there are no material issues of fact in
dispute, and
216
‘‘(B) the only issue of law is the constitu-
tionality of a provision of this title, or that a
regulation, determination, or ruling by the Sec-
retary is invalid,
the moving party may seek review by a court of com-
petent jurisdiction without filing a complaint under
such paragraph and without otherwise exhausting
other administrative remedies.
‘‘(4) PENDING
NATIONAL
COVERAGE
DETER-
MINATIONS.—
‘‘(A) IN GENERAL.—In the event the Sec-
retary has not issued a national coverage or
noncoverage determination with respect to a
particular type or class of items or services, an
aggrieved person (as described in paragraph
(5)) may submit to the Secretary a request to
make such a determination with respect to such
items or services. By not later than the end of
the 90-day period beginning on the date the
Secretary receives such a request (notwith-
standing the receipt by the Secretary of new
evidence (if any) during such 90-day period),
the Secretary shall take one of the following ac-
tions:
217
‘‘(i) Issue a national coverage deter-
mination, with or without limitations.
‘‘(ii) Issue a national noncoverage de-
termination.
‘‘(iii) Issue a determination that no
national coverage or noncoverage deter-
mination is appropriate as of the end of
such 90-day period with respect to national
coverage of such items or services.
‘‘(iv) Issue a notice that states that
the Secretary has not completed a review
of the request for a national coverage de-
termination and that includes an identi-
fication of the remaining steps in the Sec-
retary’s review process and a deadline by
which the Secretary will complete the re-
view and take an action described in sub-
clause (I), (II), or (III).
‘‘(B) DEEMED
ACTION
BY
THE
SEC-
RETARY.—In the case of an action described in
clause (i)(IV), if the Secretary fails to take an
action referred to in such clause by the deadline
specified by the Secretary under such clause,
then the Secretary is deemed to have taken an
218
action described in clause (i)(III) as of the
deadline.
‘‘(C) 
EXPLANATION
OF
DETERMINA-
TION.—When issuing a determination under
clause (i), the Secretary shall include an expla-
nation of the basis for the determination. An
action taken under clause (i) (other than sub-
clause (IV)) is deemed to be a national coverage
determination for purposes of review under sub-
paragraph (A).
‘‘(5) STANDING.—An action under this sub-
section seeking review of a national coverage deter-
mination or local coverage determination may be ini-
tiated only by individuals entitled to benefits under
part A, or enrolled under part B, or both, who are
in need of the items or services that are the subject
of the coverage determination.
‘‘(6) PUBLICATION ON THE INTERNET OF DECI-
SIONS OF HEARINGS OF THE SECRETARY.—Each de-
cision of a hearing by the Secretary with respect to
a national coverage determination shall be made
public, and the Secretary shall publish each decision
on the Medicare Internet site of the Department of
Health and Human Services. The Secretary shall re-
move from such decision any information that would
219
identify any individual, provider of services, or sup-
plier.
‘‘(7) ANNUAL REPORT ON NATIONAL COVERAGE
DETERMINATIONS.—
‘‘(A) IN
GENERAL.—Not later than De-
cember 1 of each year, beginning in 2001, the
Secretary shall submit to Congress a report
that sets forth a detailed compilation of the ac-
tual time periods that were necessary to com-
plete and fully implement national coverage de-
terminations that were made in the previous fis-
cal year for items, services, or medical devices
not previously covered as a benefit under this
title, including, with respect to each new item,
service, or medical device, a statement of the
time taken by the Secretary to make and imple-
ment the necessary coverage, coding, and pay-
ment determinations, including the time taken
to complete each significant step in the process
of making and implementing such determina-
tions.
‘‘(B) PUBLICATION OF REPORTS ON THE
INTERNET.—The Secretary shall publish each
report submitted under clause (i) on the medi-
220
care Internet site of the Department of Health
and Human Services.
‘‘(8) CONSTRUCTION.—Nothing in this sub-
section shall be construed as permitting administra-
tive or judicial review pursuant to this section inso-
far as such review is explicitly prohibited or re-
stricted under another provision of law.’’.
(b) ESTABLISHMENT OF A PROCESS FOR COVERAGE
DETERMINATIONS.—Section 
1862(a) 
(42 
U.S.C.
1395y(a)) is amended by adding at the end the following
new sentence: ‘‘In making a national coverage determina-
tion (as defined in paragraph (1)(B) of section 1869(f ))
the Secretary shall ensure that the public is afforded no-
tice and opportunity to comment prior to implementation
by the Secretary of the determination; meetings of advi-
sory committees established under section 1114(f ) with
respect to the determination are made on the record; in
making the determination, the Secretary has considered
applicable information (including clinical experience and
medical, technical, and scientific evidence) with respect to
the subject matter of the determination; and in the deter-
mination, provide a clear statement of the basis for the
determination (including responses to comments received
from the public), the assumptions underlying that basis,
221
and make available to the public the data (other than pro-
prietary data) considered in making the determination.’’.
(c) IMPROVEMENTS TO THE MEDICARE ADVISORY
COMMITTEE PROCESS.—Section 1114 (42 U.S.C. 1314)
is amended by adding at the end the following new sub-
section:
‘‘(i)(1) Any advisory committee appointed under sub-
section (f ) to advise the Secretary on matters relating to
the interpretation, application, or implementation of sec-
tion 1862(a)(1) shall assure the full participation of a
nonvoting member in the deliberations of the advisory
committee, and shall provide such nonvoting member ac-
cess to all information and data made available to voting
members of the advisory committee, other than informa-
tion that—
‘‘(A) is exempt from disclosure pursuant to sub-
section (a) of section 552 of title 5, United States
Code, by reason of subsection (b)(4) of such section
(relating to trade secrets); or
‘‘(B) the Secretary determines would present a
conflict of interest relating to such nonvoting mem-
ber.
‘‘(2) If an advisory committee described in paragraph
(1) organizes into panels of experts according to types of
items or services considered by the advisory committee,
222
any such panel of experts may report any recommendation
with respect to such items or services directly to the Sec-
retary without the prior approval of the advisory com-
mittee or an executive committee thereof.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to—
(1) a review of any national or local coverage
determination filed,
(2) a request to make such a determination
made, and
(3) a national coverage determination made,
on or after October 1, 2001.
Subtitle D—Improving Access to
New Technologies
SEC. 531. REIMBURSEMENT IMPROVEMENTS FOR NEW
CLINICAL LABORATORY TESTS AND DURA-
BLE MEDICAL EQUIPMENT.
(a) PAYMENT
RULE
FOR
NEW
LABORATORY
TESTS.—Section 
1833(h)(4)(B)(viii) 
(42 
U.S.C.
1395l(h)(4)(B)(viii)) is amended by inserting before the
period at the end the following: ‘‘(or 100 percent of such
median in the case of a clinical diagnostic laboratory test
performed on or after January 1, 2001, that the Secretary
determines is a new test for which no limitation amount
223
has previously been established under this subpara-
graph)’’.
(b) ESTABLISHMENT
OF CODING
AND PAYMENT
PROCEDURES FOR NEW CLINICAL DIAGNOSTIC LABORA-
TORY TESTS AND OTHER ITEMS ON A FEE SCHEDULE.—
Not later than 1 year after the date of the enactment of
this Act, the Secretary of Health and Human Services
shall establish procedures for coding and payment deter-
minations for the categories of new clinical diagnostic lab-
oratory tests and new durable medical equipment under
part B of title XVIII of the Social Security Act that per-
mit public consultation in a manner consistent with the
procedures established for implementing coding modifica-
tions for ICD–9–CM.
(c) REPORT ON PROCEDURES USED FOR ADVANCED,
IMPROVED TECHNOLOGIES.—Not later than 1 year after
the date of the enactment of this Act, the Secretary of
Health and Human Services shall submit to Congress a
report that identifies the specific procedures used by the
Secretary under part B of title XVIII of the Social Secu-
rity Act to adjust payments for clinical diagnostic labora-
tory tests and durable medical equipment which are classi-
fied to existing codes where, because of an advance in
technology with respect to the test or equipment, there has
been a significant increase or decrease in the resources
224
used in the test or in the manufacture of the equipment,
and there has been a significant improvement in the per-
formance of the test or equipment. The report shall in-
clude such recommendations for changes in law as may
be necessary to assure fair and appropriate payment levels
under such part for such improved tests and equipment
as reflects increased costs necessary to produce improved
results.
SEC. 532. RETENTION OF HCPCS LEVEL III CODES.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall maintain and continue the use of
level III codes of the HCPCS coding system (as such sys-
tem was in effect on August 16, 2000) through December
31, 2003, and shall make such codes available to the pub-
lic.
(b) DEFINITION.—For purposes of this section, the
term ‘‘HCPCS Level III codes’’ means the alphanumeric
codes for local use under the Health Care Financing Ad-
ministration 
Common 
Procedure 
Coding 
System
(HCPCS).
SEC. 533. RECOGNITION OF NEW MEDICAL TECHNOLOGIES
UNDER INPATIENT HOSPITAL PPS.
(a) EXPEDITING
RECOGNITION
OF
NEW
TECH-
NOLOGIES INTO INPATIENT PPS CODING SYSTEM.—
225
(1) REPORT.—Not later than April 1, 2001, the
Secretary of Health and Human Services shall sub-
mit to Congress a report on methods of expeditiously
incorporating new medical services and technologies
into the clinical coding system used with respect to
payment for inpatient hospital services furnished
under the medicare program under title XVIII of the
Social Security Act, together with a detailed descrip-
tion of the Secretary’s preferred methods to achieve
this purpose.
(2) IMPLEMENTATION.—Not later than October
1, 2001, the Secretary shall implement the preferred
methods described in the report transmitted pursu-
ant to paragraph (1).
(b) ENSURING APPROPRIATE PAYMENTS FOR HOS-
PITALS INCORPORATING NEW MEDICAL SERVICES AND
TECHNOLOGIES.—
(1) ESTABLISHMENT OF MECHANISM.—Section
1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended
by adding at the end the following new subpara-
graphs:
‘‘(K)(i) Effective for discharges beginning on or after
October 1, 2001, the Secretary shall establish a mecha-
nism to recognize the costs of new medical services and
technologies under the payment system established under
226
this subsection. Such mechanism shall be established after
notice and opportunity for public comment (in the publica-
tions required by subsection (e)(5) for a fiscal year or oth-
erwise).
‘‘(ii) The mechanism established pursuant to clause
(i) shall—
‘‘(I) apply to a new medical service or tech-
nology if, based on the estimated costs incurred with
respect to discharges involving such service or tech-
nology, the DRG prospective payment rate otherwise
applicable to such discharges under this subsection
is inadequate;
‘‘(II) provide for the collection of data with re-
spect to the costs of a new medical service or tech-
nology described in subclause (I) for a period of not
less than two years and not more than three years
beginning on the date on which an inpatient hospital
code is issued with respect to the service or tech-
nology;
‘‘(III) subject to paragraph (4)(C)(iii), provide
for additional payment to be made under this sub-
section with respect to discharges involving a new
medical service or technology described in subclause
(I) that occur during the period described in sub-
clause (II) in an amount that adequately reflects the
227
estimated average cost of such service or technology;
and
‘‘(IV) provide that discharges involving such a
service or technology that occur after the close of the
period described in subclause (II) will be classified
within a new or existing diagnosis-related group with
a weighting factor under paragraph (4)(B) that is
derived from cost data collected with respect to dis-
charges occurring during such period.
‘‘(iii) For purposes of clause (ii)(II), the term ‘inpa-
tient hospital code’ means any code that is used with re-
spect to inpatient hospital services for which payment may
be made under this subsection and includes an alpha-
numeric code issued under the International Classification
of Diseases, 9th Revision, Clinical Modification (‘ICD–9–
CM’) and its subsequent revisions.
‘‘(iv) For purposes of clause (ii)(III), the term ‘addi-
tional payment’ means, with respect to a discharge for a
new medical service or technology described in clause
(ii)(I), an amount that exceeds the prospective payment
rate otherwise applicable under this subsection to dis-
charges involving such service or technology that would
be made but for this subparagraph.
‘‘(v) The requirement under clause (ii)(III) for an ad-
ditional payment may be satisfied by means of a new-tech-
228
nology group (described in subparagraph (L)), an add-on
payment, a payment adjustment, or any other similar
mechanism for increasing the amount otherwise payable
with respect to a discharge under this subsection. The Sec-
retary may not establish a separate fee schedule for such
additional payment for such services and technologies, by
utilizing a methodology established under subsection (a)
or (h) of section 1834 to determine the amount of such
additional payment, or by other similar mechanisms or
methodologies.
‘‘(vi) For purposes of this subparagraph and sub-
paragraph (L), a medical service or technology will be con-
sidered a ‘new medical service or technology’ if the service
or technology meets criteria established by the Secretary
after notice and an opportunity for public comment.
‘‘(L)(i) In establishing the mechanism under sub-
paragraph (K), the Secretary may establish new-tech-
nology groups into which a new medical service or tech-
nology will be classified if, based on the estimated average
costs incurred with respect to discharges involving such
service or technology, the DRG prospective payment rate
otherwise applicable to such discharges under this sub-
section is inadequate.
‘‘(ii) Such groups—
229
‘‘(I) shall not be based on the costs associated
with a specific new medical service or technology;
but
‘‘(II) shall, in combination with the applicable
standardized amounts and the weighting factors as-
signed to such groups under paragraph (4)(B), re-
flect such cost cohorts as the Secretary determines
are appropriate for all new medical services and
technologies that are likely to be provided as inpa-
tient hospital services in a fiscal year.
‘‘(iii) The methodology for classifying specific hos-
pital discharges within a diagnosis-related group under
paragraph (4)(A) or a new-technology group shall provide
that a specific hospital discharge may not be classified
within both a diagnosis-related group and a new-tech-
nology group.’’.
(2) PRIOR CONSULTATION.—The Secretary of
Health and Human Services shall consult with
groups representing hospitals, physicians, and manu-
facturers of new medical technologies before pub-
lishing the notice of proposed rulemaking required
by section 1886(d)(5)(K)(i) of the Social Security
Act (as added by paragraph (1)).
(3) 
CONFORMING
AMENDMENT.—Section
1886(d)(4)(C)(i) (42 U.S.C. 1395ww(d)(4)(C)(i)) is
230
amended by striking ‘‘technology,’’ and inserting
‘‘technology (including a new medical service or
technology under paragraph (5)(K)),’’.
Subtitle E—Other Provisions
SEC. 541. INCREASE IN REIMBURSEMENT FOR BAD DEBT.
Section 1861(v)(1)(T) (42 U.S.C. 1395x(v)(1)(T)) is
amended—
(1) in clause (ii), by striking ‘‘and’’ at the end;
(2) in clause (iii)—
(A) by striking ‘‘during a subsequent fiscal
year’’ and inserting ‘‘during fiscal year 2000’’;
and
(B) by striking the period at the end and
inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(iv) for cost reporting periods beginning dur-
ing a subsequent fiscal year, by 30 percent of such
amount otherwise allowable.’’.
SEC. 542. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY
SERVICES UNDER MEDICARE.
(a) IN GENERAL.—When an independent laboratory
furnishes the technical component of a physician pathol-
ogy service to a fee-for-service medicare beneficiary who
is an inpatient or outpatient of a covered hospital, the Sec-
231
retary of Health and Human Services shall treat such
component as a service for which payment shall be made
to the laboratory under section 1848 of the Social Security
Act (42 U.S.C. 1395w–4) and not as an inpatient hospital
service for which payment is made to the hospital under
section 1886(d) of such Act (42 U.S.C. 1395ww(d)) or
as an outpatient hospital service for which payment is
made to the hospital under section 1833(t) of such Act
(42 U.S.C. 1395l(t)).
(b) DEFINITIONS.—For purposes of this section:
(1) COVERED HOSPITAL.—The term ‘‘covered
hospital’’ means, with respect to an inpatient or an
outpatient, a hospital that had an arrangement with
an independent laboratory that was in effect as of
July 22, 1999, under which a laboratory furnished
the technical component of physician pathology serv-
ices to fee-for-service medicare beneficiaries who
were hospital inpatients or outpatients, respectively,
and submitted claims for payment for such compo-
nent to a medicare carrier (that has a contract with
the Secretary under section 1842 of the Social Secu-
rity Act, 42 U.S.C. 1395u) and not to such hospital.
(2) 
FEE-FOR-SERVICE
MEDICARE
BENE-
FICIARY.—The term ‘‘fee-for-service medicare bene-
ficiary’’ means an individual who—
232
(A) is entitled to benefits under part A, or
enrolled under part B, or both, of such title;
and
(B) is not enrolled in any of the following:
(i) A Medicare+Choice plan under
part C of such title.
(ii) A plan offered by an eligible orga-
nization under section 1876 of such Act
(42 U.S.C. 1395mm).
(iii) A program of all-inclusive care
for the elderly (PACE) under section 1894
of such Act (42 U.S.C. 1395eee).
(iv) A social health maintenance orga-
nization (SHMO) demonstration project
established under section 4018(b) of the
Omnibus Budget Reconciliation Act of
1987 (Public Law 100–203).
(c) EFFECTIVE DATE.—This section shall apply to
services furnished during the 2-year period beginning on
January 1, 2001.
(d) GAO REPORT.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study of the effects of
the previous provisions of this section on hospitals
and laboratories and access of fee-for-service medi-
233
care beneficiaries to the technical component of phy-
sician pathology services.
(2) REPORT.—Not later than April 1, 2002, the
Comptroller General shall submit to Congress a re-
port on such study. The report shall include rec-
ommendations about whether such provisions should
be extended after the end of the period specified in
subsection (c) for either or both inpatient and out-
patient hospital services, and whether the provisions
should be extended to other hospitals.
SEC. 543. EXTENSION OF ADVISORY OPINION AUTHORITY.
Section 1128D(b)(6) (42 U.S.C. 1320a–7d(b)(6)) is
amended by striking ‘‘and before the date which is 4 years
after such date of enactment’’.
SEC. 544. CHANGE IN ANNUAL MEDPAC REPORTING.
(a) REVISION OF DEADLINES FOR SUBMISSION OF
REPORTS.—
(1) IN GENERAL.—Section 1805(b)(1)(D) (42
U.S.C. 1395b–6(b)(1)(D)) is amended by striking
‘‘June 1 of each year (beginning with 1998),’’ and
inserting ‘‘June 15 of each year,’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply beginning with 2001.
(b) REQUIREMENT FOR ON THE RECORD VOTES ON
RECOMMENDATIONS.—Section 
1805(b) 
(42 
U.S.C.
234
1395b–6(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(7) 
VOTING
AND
REPORTING
REQUIRE-
MENTS.—With respect to each recommendation con-
tained in a report submitted under paragraph (1),
each member of the Commission shall vote on the
recommendation, and the Commission shall include,
by member, the results of that vote in the report
containing the recommendation.’’.
SEC. 545. DEVELOPMENT OF PATIENT ASSESSMENT IN-
STRUMENTS.
(a) DEVELOPMENT.—
(1) IN GENERAL.—Not later than January 1,
2005, the Secretary of Health and Human Services
shall submit to the Committee on Ways and Means
and the Committee on Commerce of the House of
Representatives and the Committee on Finance of
the Senate a report on the development of standard
instruments for the assessment of the health and
functional status of patients, for whom items and
services described in subsection (b) are furnished,
and include in the report a recommendation on the
use of such standard instruments for payment pur-
poses.
235
(2) DESIGN FOR COMPARISON OF COMMON ELE-
MENTS.—The Secretary shall design such standard
instruments in a manner such that—
(A) elements that are common to the items
and services described in subsection (b) may be
readily comparable and are statistically compat-
ible;
(B) only elements necessary to meet pro-
gram objectives are collected; and
(C) the standard instruments supersede
any other assessment instrument used before
that date.
(3) CONSULTATION.—In developing an assess-
ment instrument under paragraph (1), the Secretary
shall consult with the Medicare Payment Advisory
Commission, the Agency for Healthcare Research
and Quality, and qualified organizations rep-
resenting providers of services and suppliers under
title XVIII.
(b) DESCRIPTION OF SERVICES.—For purposes of
subsection (a), items and services described in this sub-
section are those items and services furnished to individ-
uals entitled to benefits under part A, or enrolled under
part B, or both of title XVIII of the Social Security Act
236
for which payment is made under such title, and include
the following:
(1) Inpatient and outpatient hospital services.
(2) Inpatient and outpatient rehabilitation serv-
ices.
(3) Covered skilled nursing facility services.
(4) Home health services.
(5) Physical or occupational therapy or speech-
language pathology services.
(6) Items and services furnished to such indi-
viduals determined to have end stage renal disease.
(7) Partial hospitalization services and other
mental health services.
(8) Any other service for which payment is
made under such title as the Secretary determines to
be appropriate.
SEC. 546. GAO REPORT ON IMPACT OF THE EMERGENCY
MEDICAL TREATMENT AND ACTIVE LABOR
ACT (EMTALA) ON HOSPITAL EMERGENCY DE-
PARTMENTS.
(a) REPORT.—The Comptroller General of the
United States shall submit a report to the Committee on
Commerce and the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate by May 1, 2001, on the effect of the Emer-
237
gency Medical Treatment and Active Labor Act on hos-
pitals, emergency physicians, and physicians covering
emergency department call throughout the United States.
(b) REPORT REQUIREMENTS.—The report should
evaluate—
(1) the extent to which hospitals, emergency
physicians, and physicians covering emergency de-
partment call provide uncompensated services in re-
lation to the requirements of EMTALA;
(2) the extent to which the regulatory require-
ments and enforcement of EMTALA have expanded
beyond the legislation’s original intent;
(3) estimates for the total dollar amount of
EMTALA-related care uncompensated costs to
emergency physicians, physicians covering emer-
gency department call, hospital emergency depart-
ments, and other hospital services;
(4) the extent to which different portions of the
United States may be experiencing different levels of
uncompensated EMTALA-related care;
(5) the extent to which EMTALA would be
classified as an unfunded mandate if it were enacted
today;
238
(6) the extent to which States have programs to
provide financial support for such uncompensated
care;
(7) possible sources of funds, including medi-
care hospital bad debt accounts, that are available to
hospitals to assist with the cost of such uncompen-
sated care; and
(8) the financial strain that illegal immigration
populations, the uninsured, and the underinsured
place on hospital emergency departments, other hos-
pital services, emergency physicians, and physicians
covering emergency department call.
(c) DEFINITION.—In this section, the terms ‘‘Emer-
gency Medical Treatment and Active Labor Act’’ and
‘‘EMTALA’’ mean section 1867 of the Social Security Act
(42 U.S.C. 1395dd).
SEC. 547. CLARIFICATION OF APPLICATION OF TEMPORARY
PAYMENT INCREASES FOR 2001.
(a) INPATIENT HOSPITAL SERVICES.—The payment
increase provided under the following sections shall not
apply to discharges occurring after fiscal year 2001 and
shall not be taken into account in calculating the payment
amounts applicable for discharges occurring after such fis-
cal year:
239
(1) Section 301(b)(2)(A) (relating to acute care
hospital payment update).
(2) Section 302(b) (relating to IME percentage
adjustment).
(3) Section 303(b)(2) (relating to DSH pay-
ments).
(b) SKILLED NURSING FACILITY SERVICES.—The
payment increase provided under section 311(b)(2) (relat-
ing to covered skilled nursing facility services) shall not
apply to services furnished after fiscal year 2001 and shall
not be taken into account in calculating the payment
amounts applicable for services furnished after such fiscal
year.
(c) HOME HEALTH SERVICES.—
(1) TRANSITIONAL
ALLOWANCE
FOR
FULL
MARKETBASKET INCREASE.—The payment increase
provided under section 502(b)(1)(B) shall not apply
to episodes and visits ending after fiscal year 2001
and shall not be taken into account in calculating
the payment amounts applicable for subsequent epi-
sodes and visits.
(2) TEMPORARY INCREASE FOR RURAL HOME
HEALTH SERVICES.—The payment increase provided
under section 508(a) for the period beginning on
April 1, 2001, and ending on September 30, 2002,
240
shall not apply to episodes and visits ending after
such period, and shall not be taken into account in
calculating the payment amounts applicable for epi-
sodes and visits occurring after such period.
(d) CALENDAR YEAR 2001 PROVISIONS.—The pay-
ment increase provided under the following sections shall
not apply after calendar year 2001 and shall not be taken
into account in calculating the payment amounts applica-
ble for items and services furnished after such year:
(1) Section 401(c)(2) (relating to covered OPD
services).
(2) Section 422(e)(2) (relating to renal dialysis
services paid for on a composite rate basis).
(3) Section 423(a)(2)(B) (relating to ambulance
services).
(4) Section 425(b)(2) (relating to durable med-
ical equipment).
(5) Section 426(b)(2) (relating to prosthetic de-
vices and orthotics and prosthetics).
241
TITLE VI—PROVISIONS RELAT-
ING 
TO 
PART 
C
(MEDICARE+CHOICE 
PRO-
GRAM) 
AND 
OTHER 
MEDI-
CARE MANAGED CARE PROVI-
SIONS
Subtitle A—Medicare+Choice
Payment Reforms
SEC. 601. INCREASE IN MINIMUM PAYMENT AMOUNT.
(a) IN GENERAL.—Section 1853(c)(1)(B) (42 U.S.C.
1395w–23(c)(1)(B)) is amended—
(1) by redesignating clause (ii) as clause (iv);
(2) by inserting after clause (i) the following
new clauses:
‘‘(ii) For 1999 and 2000, the min-
imum amount determined under clause (i)
or this clause, respectively, for the pre-
ceding year, increased by the national per
capita Medicare+Choice growth percentage
described 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
242
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 Colum-
bia, the amount specified in this clause
shall not exceed 120 percent of the amount
determined under clause (ii) for such area
for 2000.’’; and
(3) in clause (iv), as so redesignated—
(A) by striking ‘‘a succeeding year’’ and
inserting ‘‘2002 and each succeeding year’’; and
(B) by striking ‘‘clause (i)’’ and inserting
‘‘clause (iii)’’.
(b) SPECIAL RULE FOR JANUARY AND FEBRUARY OF
2001.—
(1) IN GENERAL.—Notwithstanding the amend-
ments made by subsection (a), for purposes of mak-
ing payments under section 1853 of the Social Secu-
rity Act (42 U.S.C. 1395w–23) for January and
February 2001, the annual Medicare+Choice capita-
tion rate for a Medicare+Choice payment area shall
be calculated, and the excess amount under section
1854(f )(1)(B) of such Act (42 U.S.C. 1395w–
24(f )(1)(B)) shall be determined, as if such amend-
ments had not been enacted.
243
(2) CONSTRUCTION.—Paragraph (1) shall not
be taken into account in computing such capitation
rate for 2002 and subsequent years.
SEC. 602. INCREASE IN MINIMUM PERCENTAGE INCREASE.
(a) IN GENERAL.—Section 1853(c)(1)(C) (42 U.S.C.
1395w–23(c)(1)(C)) is amended—
(1) by redesignating clause (ii) as clause (iv);
(2) by inserting after clause (i) the following
new clauses:
‘‘(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
annual Medicare+Choice capitation rate
under this paragraph for the area for
2000.’’; and
(3) in clause (iv), as so redesignated, by strik-
ing ‘‘a subsequent year’’ and inserting ‘‘2002 and
each succeeding year’’.
(b) APPLICATION OF SPECIAL RULE FOR JANUARY
AND FEBRUARY
OF 2001.—The provisions of section
601(b) shall apply with respect to the amendments made
by subsection (a) in the same manner as they apply to
the amendments made by section 601(a).
244
SEC. 603. PHASE-IN OF RISK ADJUSTMENT.
Section 
1853(a)(3)(C) 
(42 
U.S.C. 
1395w–
23(a)(3)(C)) is amended—
(1) in clause (ii)—
(A) in subclause (I), by striking ‘‘and
2001’’ and inserting ‘‘and each succeeding year
through 2003’’ and by striking ‘‘and’’ at the
end; and
(B) by striking subclause (II) and insert-
ing the following new subclauses:
‘‘(II) 30 percent of such capita-
tion rate in 2004;
‘‘(III) 50 percent of such capita-
tion rate in 2005;
‘‘(IV) 75 percent of such capita-
tion rate in 2006; and
‘‘(V) 100 percent of such capita-
tion rate in 2007 and succeeding
years.’’; and
(2) by adding at the end the following new
clause:
‘‘(iii) DATA
FOR
RISK
ADJUSTMENT
METHODOLOGY.—Such 
risk 
adjustment
methodology for 2004 and each succeeding
year, shall be based on data from inpatient
hospital and ambulatory settings.’’.
245
SEC. 604. TRANSITION TO REVISED MEDICARE+CHOICE
PAYMENT RATES.
(a) 
ANNOUNCEMENT
OF
REVISED
MEDICARE+CHOICE PAYMENT RATES.—Within 2 weeks
after the date of the enactment of this Act, the Secretary
of Health and Human Services shall determine, and shall
announce (in a manner intended to provide notice to inter-
ested parties) Medicare+Choice capitation rates under
section 1853 of the Social Security Act (42 U.S.C.
1395w–23) for 2001, revised in accordance with the provi-
sions of this Act.
(b) REENTRY
INTO
PROGRAM
PERMITTED
FOR
MEDICARE+CHOICE
PROGRAMS.—A Medicare+Choice
organization that provided notice to the Secretary of
Health and Human Services before the date of the enact-
ment of this Act that it was terminating its contract under
part C of title XVIII of the Social Security Act or was
reducing the service area of a Medicare+Choice plan of-
fered under such part shall be permitted to continue par-
ticipation under such part, or to maintain the service area
of such plan, for 2001 if it submits the Secretary with
the information described in section 1854(a)(1) of the So-
cial Security Act (42 U.S.C. 1395w–24(a)(1)) within 2
weeks after the date revised rates are announced by the
Secretary under subsection (a).
246
(c) REVISED SUBMISSION OF PROPOSED PREMIUMS
AND RELATED INFORMATION.—If—
(1) a Medicare+Choice organization provided
notice to the Secretary of Health and Human Serv-
ices as of July 3, 2000, that it was renewing its con-
tract under part C of title XVIII of the Social Secu-
rity Act for all or part of the service area or areas
served under its current contract, and
(2) any part of the service area or areas ad-
dressed in such notice includes a payment area for
which the Medicare+Choice capitation rate under
section 1853(c) of such Act (42 U.S.C. 1395w–
23(c)) for 2001, as determined under subsection (a),
is higher than the rate previously determined for
such year,
such organization shall revise its submission of the infor-
mation described in section 1854(a)(1) of the Social Secu-
rity Act (42 U.S.C. 1395w–24(a)(1)), and shall submit
such revised information to the Secretary, within 2 weeks
after the date revised rates are announced by the Sec-
retary under subsection (a). In making such submission,
the organization may only reduce beneficiary premiums,
reduce beneficiary cost-sharing, enhance benefits, utilize
the stabilization fund described in section 1854(f )(2) of
such Act (42 U.S.C. 1395w–24(f )(2)), or stabilize or en-
247
hance beneficiary access to providers (so long as such sta-
bilization or enhancement does not result in increased ben-
eficiary premiums, increased beneficiary cost-sharing, or
reduced benefits).
(d) WAIVER OF LIMITS ON STABILIZATION FUND.—
Any regulatory provision that limits the proportion of the
excess amount that can be withheld in such stabilization
fund for a contract period shall not apply with respect to
submissions described in subsections (b) and (c).
(e) DISREGARD OF NEW RATE ANNOUNCEMENT IN
APPLYING PASS-THROUGH
FOR NEW NATIONAL COV-
ERAGE DETERMINATIONS.—For purposes of applying sec-
tion 1852(a)(5) of the Social Security Act (42 U.S.C.
1395w–22(a)(5)), the announcement of revised rates
under subsection (a) shall not be treated as an announce-
ment under section 1853(b) of such Act (42 U.S.C.
1395w–23(b)).
SEC. 605. REVISION OF PAYMENT RATES FOR ESRD PA-
TIENTS ENROLLED IN MEDICARE+CHOICE
PLANS.
(a) IN GENERAL.—Section 1853(a)(1)(B) (42 U.S.C.
1395w–23(a)(1)(B)) is amended by adding at the end the
following: ‘‘In establishing such rates, the Secretary shall
provide for appropriate adjustments to increase each rate
to reflect the demonstration rate (including the risk ad-
248
justment methodology associated with such rate) of the
social health maintenance organization end-stage renal
disease capitation demonstrations (established by section
2355 of the Deficit Reduction Act of 1984, as amended
by section 13567(b) of the Omnibus Budget Reconciliation
Act of 1993), and shall compute such rates by taking into
account such factors as renal treatment modality, age, and
the underlying cause of the end-stage renal disease.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to payments for months begin-
ning with January 2002.
(c) PUBLICATION.—Not later than 6 months after
the date of the enactment of this Act, the Secretary of
Health and Human Services shall publish for public com-
ment a description of the appropriate adjustments de-
scribed in the last sentence of section 1853(a)(1)(B) of
the Social Security Act (42 U.S.C. 1395w–23(a)(1)(B)),
as added by subsection (a). The Secretary shall publish
such adjustments in final form by not later than July 1,
2001, so that the amendment made by subsection (a) is
implemented on a timely basis consistent with subsection
(b).
249
SEC. 606. PERMITTING PREMIUM REDUCTIONS AS ADDI-
TIONAL 
BENEFITS 
UNDER
MEDICARE+CHOICE PLANS.
(a) IN GENERAL.—
(1) AUTHORIZATION OF PART B PREMIUM RE-
DUCTIONS.—Section 1854(f )(1) (42 U.S.C. 1395w–
24(f )(1)) is amended—
(A) by redesignating subparagraph (E) as
subparagraph (F); and
(B) by inserting after subparagraph (D)
the following new subparagraph:
‘‘(E) PREMIUM REDUCTIONS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), as part of providing any additional
benefits required under subparagraph (A),
a Medicare+Choice organization may elect
a reduction in its payments under section
1853(a)(1)(A) 
with 
respect 
to 
a
Medicare+Choice plan and the Secretary
shall apply such reduction to reduce the
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)
250
with 
respect 
to 
any 
enrollee 
in 
a
Medicare+Choice plan—
‘‘(I) may not exceed 125 percent
of the premium described under sec-
tion 1839(a)(3); and
‘‘(II) shall apply uniformly to
each enrollee of the Medicare+Choice
plan to which such reduction ap-
plies.’’.
(2) CONFORMING AMENDMENTS.—
(A) 
ADJUSTMENT
OF
PAYMENTS
TO
MEDICARE+CHOICE
ORGANIZATIONS.—Section
1853(a)(1)(A) (42 U.S.C. 1395w–23(a)(1)(A))
is amended by inserting ‘‘reduced by the
amount of any reduction elected under section
1854(f )(1)(E) and’’ after ‘‘for that area,’’.
(B) ADJUSTMENT AND PAYMENT OF PART
B PREMIUMS.—
(i) ADJUSTMENT
OF
PREMIUMS.—
Section 
1839(a)(2) 
(42 
U.S.C.
1395r(a)(2)) 
is 
amended 
by 
striking
‘‘shall’’ and all that follows and inserting
the following: ‘‘shall be the amount deter-
mined under paragraph (3), adjusted as
required in accordance with subsections
251
(b), (c), and (f ), and to reflect 80 percent
of any reduction elected under section
1854(f )(1)(E).’’.
(ii) PAYMENT OF PREMIUMS.—Section
1840 (42 U.S.C. 1395s) is amended by
adding at the end the following new sub-
section:
‘‘(i) In the case of an individual enrolled in a
Medicare+Choice plan, the Secretary shall provide for
necessary adjustments of the monthly beneficiary pre-
mium to reflect 80 percent of any reduction elected under
section 1854(f )(1)(E). To the extent to which the Sec-
retary determines that such an adjustment is appropriate,
with the concurrence of any agency responsible for the ad-
ministration of such benefits, such premium adjustment
may be provided directly, as an adjustment to any social
security, railroad retirement, or civil service retirement
benefits, or, in the case of an individual who receives med-
ical assistance under title XIX for medicare costs de-
scribed in section 1905(p)(3)(A)(ii), as an adjustment to
the amount otherwise owed by the State for such medical
assistance.’’.
(C) INFORMATION COMPARING PLAN PRE-
MIUMS UNDER PART C.—Section 1851(d)(4)(B)
(42 U.S.C. 1395w–21(d)(4)(B)) is amended—
252
(i) by striking ‘‘PREMIUMS.—The’’
and inserting ‘‘PREMIUMS.—
‘‘(i) IN GENERAL.—The’’; and
(ii) by adding at the end the following
new clause:
‘‘(ii) REDUCTIONS.—The reduction in
part B premiums, if any.’’.
(D) TREATMENT OF REDUCTION FOR PUR-
POSES
OF
DETERMINING
GOVERNMENT
CON-
TRIBUTION UNDER PART B.—Section 1844 (42
U.S.C. 1395w) is amended by adding at the
end the following new subsection:
‘‘(c) The Secretary shall determine the Government
contribution under subparagraphs (A) and (B) of sub-
section (a)(1) without regard to any premium reduction
resulting from an election under section 1854(f )(1)(E).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to years beginning with 2003.
SEC. 607. FULL IMPLEMENTATION OF RISK ADJUSTMENT
FOR CONGESTIVE HEART FAILURE ENROLL-
EES FOR 2001.
(a) IN GENERAL.—Section 1853(a)(3)(C) (42 U.S.C.
1395w–23(a)(3)(C)) is amended—
253
(1) in clause (ii), by striking ‘‘Such risk adjust-
ment’’ and inserting ‘‘Except as provided in clause
(iii), such risk adjustment’’; and
(2) by adding at the end the following new
clause:
‘‘(iii) FULL
IMPLEMENTATION
OF
RISK
ADJUSTMENT
FOR
CONGESTIVE
HEART FAILURE ENROLLEES FOR 2001.—
‘‘(I) EXEMPTION
FROM
PHASE-
IN.—Subject to subclause (II), the
Secretary shall fully implement the
risk 
adjustment 
methodology 
de-
scribed in clause (i) with respect to
each individual who has had a quali-
fying congestive heart failure inpa-
tient diagnosis (as determined by the
Secretary under such risk adjustment
methodology) during the period begin-
ning on July 1, 1999, and ending on
June 30, 2000, and who is enrolled in
a coordinated care plan that is the
only coordinated care plan offered on
January 1, 2001, in the service area
of the individual.
254
‘‘(II) PERIOD OF APPLICATION.—
Subclause (I) shall only apply during
the 1-year period beginning on Janu-
ary 1, 2001.’’.
(b) EXCLUSION FROM DETERMINATION
OF
THE
BUDGET NEUTRALITY FACTOR.—Section 1853(c)(5) (42
U.S.C. 1395w–23(c)(5)) is amended by striking ‘‘sub-
section (i)’’ and inserting ‘‘subsections (a)(3)(C)(iii) and
(i)’’.
SEC. 
608. 
EXPANSION 
OF 
APPLICATION 
OF
MEDICARE+CHOICE NEW ENTRY BONUS.
(a) IN GENERAL.—Section 1853(i)(1) (42 U.S.C.
1395w–23(i)(1)) is amended in the matter preceding sub-
paragraph (A) by inserting ‘‘, or filed notice with the Sec-
retary as of October 3, 2000, that they will not be offering
such a plan as of January 1, 2001’’ after ‘‘January 1,
2000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply as if included in the enactment
of BBRA.
255
SEC. 609. REPORT ON INCLUSION OF CERTAIN COSTS OF
THE DEPARTMENT OF VETERANS AFFAIRS
AND MILITARY FACILITY SERVICES IN CAL-
CULATING 
MEDICARE+CHOICE 
PAYMENT
RATES.
The Secretary of Health and Human Services shall
report to Congress by not later than January 1, 2003,
on a method to phase-in the costs of military facility serv-
ices furnished by the Department of Veterans Affairs, and
the costs of military facility services furnished by the De-
partment of Defense, to medicare-eligible beneficiaries in
the calculation of an area’s Medicare+Choice capitation
payment. Such report shall include on a county-by-county
basis—
(1) the actual or estimated cost of such services
to medicare-eligible beneficiaries;
(2) the change in Medicare+Choice capitation
payment rates if such costs are included in the cal-
culation of payment rates;
(3) one or more proposals for the implementa-
tion of payment adjustments to Medicare+Choice
plans in counties where the payment rate has been
affected due to the failure to calculate the cost of
such services to medicare-eligible beneficiaries; and
(4) 
a 
system 
to 
ensure 
that 
when 
a
Medicare+Choice enrollee receives covered services
256
through a facility of the Department of Veterans Af-
fairs or the Department of Defense there is an ap-
propriate payment recovery to the medicare program
under title XVIII of the Social Security Act.
Subtitle B—Other Medicare+Choice
Reforms
SEC. 611. PAYMENT OF ADDITIONAL AMOUNTS FOR NEW
BENEFITS COVERED DURING A CONTRACT
TERM.
(a) IN GENERAL.—Section 1853(c)(7) (42 U.S.C.
1395w–23(c)(7)) is amended to read as follows:
‘‘(7) ADJUSTMENT FOR NATIONAL COVERAGE
DETERMINATIONS
AND
LEGISLATIVE
CHANGES
IN
BENEFITS.—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
significant increase in the costs to Medicare+Choice
of providing benefits under contracts under this part
(for periods after any period described in section
1852(a)(5)), the Secretary shall adjust appropriately
the payments to such organizations under this part.
Such projection and adjustment shall be based on an
analysis by the Chief Actuary of the Health Care Fi-
257
nancing Administration of the actuarial costs associ-
ated with the new benefits.’’.
(b) CONFORMING AMENDMENT.—Section 1852(a)(5)
(42 U.S.C. 1395w–22(a)(5)) is amended—
(1) in the heading, by inserting ‘‘AND LEGISLA-
TIVE CHANGES IN BENEFITS’’ after ‘‘NATIONAL COV-
ERAGE DETERMINATIONS’’;
(2) by inserting ‘‘or legislative change in bene-
fits required to be provided under this part’’ after
‘‘national coverage determination’’;
(3) in subparagraph (A), by inserting ‘‘or legis-
lative change in benefits’’ after ‘‘such determina-
tion’’;
(4) in subparagraph (B), by inserting ‘‘or legis-
lative change’’ after ‘‘if such coverage determina-
tion’’; and
(5) by adding at the end the following:
‘‘The projection under the previous sentence shall be
based on an analysis by the Chief Actuary of the
Health Care Financing Administration of the actu-
arial costs associated with the coverage determina-
tion or legislative change in benefits.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section are effective on the date of the enactment of
this Act and shall apply to national coverage determina-
258
tions and legislative changes in benefits occurring on or
after such date.
SEC. 612. RESTRICTION ON IMPLEMENTATION OF SIGNIFI-
CANT 
NEW 
REGULATORY 
REQUIREMENTS
MIDYEAR.
(a) IN
GENERAL.—Section 1856(b) (42 U.S.C.
1395w–26(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(4) PROHIBITION OF MIDYEAR IMPLEMENTA-
TION OF SIGNIFICANT NEW REGULATORY REQUIRE-
MENTS.—The Secretary may not implement, other
than at the beginning of a calendar year, regulations
under this section that impose new, significant regu-
latory requirements on a Medicare+Choice organiza-
tion or plan.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) takes effect on the date of the enactment
of this Act.
SEC. 613. TIMELY APPROVAL OF MARKETING MATERIAL
THAT FOLLOWS MODEL MARKETING LAN-
GUAGE.
(a) IN
GENERAL.—Section 1851(h) (42 U.S.C.
1395w–21(h)) is amended—
259
(1) in paragraph (1)(A), by inserting ‘‘(or 10
days in the case described in paragraph (5))’’ after
‘‘45 days’’; and
(2) by adding at the end the following new
paragraph:
‘‘(5) SPECIAL TREATMENT OF MARKETING MA-
TERIAL
FOLLOWING
MODEL
MARKETING
LAN-
GUAGE.—In the case of marketing material of an or-
ganization that uses, without modification, proposed
model language specified by the Secretary, the pe-
riod specified in paragraph (1)(A) shall be reduced
from 45 days to 10 days.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to marketing material submitted
on or after January 1, 2001.
SEC. 614. AVOIDING DUPLICATIVE REGULATION.
(a) IN GENERAL.—Section 1856(b)(3)(B) (42 U.S.C.
1395w–26(b)(3)(B)) is amended—
(1) in clause (i), by inserting ‘‘(including cost-
sharing requirements)’’ after ‘‘Benefit require-
ments’’; and
(2) by adding at the end the following new
clause:
‘‘(iv) Requirements relating to mar-
keting materials and summaries and sched-
260
ules 
of 
benefits 
regarding 
a
Medicare+Choice plan.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect on the date of the enactment
of this Act.
SEC. 615. ELECTION OF UNIFORM LOCAL COVERAGE POL-
ICY FOR MEDICARE+CHOICE PLAN COVERING
MULTIPLE LOCALITIES.
Section 1852(a)(2) (42 U.S.C. 1395w–22(a)(2)) is
amended by adding at the end the following new subpara-
graph:
‘‘(C) ELECTION
OF
UNIFORM
COVERAGE
POLICY.—In the case of a Medicare+Choice or-
ganization that offers a Medicare+Choice plan
in an area in which more than one local cov-
erage policy is applied with respect to different
parts of the area, the organization may elect to
have the local coverage policy for the part of
the 
area 
that 
is 
most 
beneficial 
to
Medicare+Choice enrollees (as identified by the
Secretary) 
apply 
with 
respect 
to 
all
Medicare+Choice enrollees enrolled in the
plan.’’.
261
SEC. 
616. 
ELIMINATING 
HEALTH 
DISPARITIES 
IN
MEDICARE+CHOICE PROGRAM.
(a) QUALITY ASSURANCE PROGRAM FOCUS ON RA-
CIAL AND ETHNIC MINORITIES.—Subparagraphs (A) and
(B) of section 1852(e)(2) (42 U.S.C. 1395w–22(e)(2)) are
each amended by adding at the end the following:
‘‘Such program shall include a separate focus
(with respect to all the elements described in
this subparagraph) on racial and ethnic minori-
ties.’’.
(b) REPORT.—Section 1852(e) (42 U.S.C. 1395w–
22(e)) is amended by adding at the end the following new
paragraph:
‘‘(5) REPORT TO CONGRESS.—
‘‘(A) IN GENERAL.—Not later than 2 years
after the date of the enactment of this para-
graph, and biennially thereafter, the Secretary
shall submit to Congress a report regarding
how quality assurance programs conducted
under this subsection focus on racial and ethnic
minorities.
‘‘(B) CONTENTS OF REPORT.—Each such
report shall include the following:
‘‘(i) A description of the means by
which such programs focus on such racial
and ethnic minorities.
262
‘‘(ii) An evaluation of the impact of
such programs on eliminating health dis-
parities and on improving health outcomes,
continuity and coordination of care, man-
agement of chronic conditions, and con-
sumer satisfaction.
‘‘(iii) Recommendations on ways to re-
duce clinical outcome disparities among ra-
cial and ethnic minorities.’’.
SEC. 617. MEDICARE+CHOICE PROGRAM COMPATIBILITY
WITH EMPLOYER OR UNION GROUP HEALTH
PLANS.
(a) IN GENERAL.—Section 1857 (42 U.S.C. 1395w–
27) is amended by adding at the end the following new
subsection:
‘‘(i) MEDICARE+CHOICE PROGRAM COMPATIBILITY
WITH EMPLOYER OR UNION GROUP HEALTH PLANS.—
To facilitate the offering of Medicare+Choice plans under
contracts between Medicare+Choice organizations and
employers, labor organizations, or the trustees of a fund
established by one or more employers or labor organiza-
tions (or combination thereof ) to furnish benefits to the
entity’s employees, former employees (or combination
thereof ) or members or former members (or combination
thereof ) of the labor organizations, the Secretary may
263
waive or modify requirements that hinder the design of,
the 
offering 
of, 
or 
the 
enrollment 
in 
such
Medicare+Choice plans.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to years beginning
with 2001.
SEC. 618. SPECIAL MEDIGAP ENROLLMENT ANTIDISCRIMI-
NATION PROVISION FOR CERTAIN BENE-
FICIARIES.
(a) DISENROLLMENT
WINDOW
IN
ACCORDANCE
WITH
BENEFICIARY’S
CIRCUMSTANCE.—Section
1882(s)(3) (42 U.S.C. 1395ss(s)(3)) is amended—
(1) in subparagraph (A), in the matter fol-
lowing clause (iii), by striking ‘‘, subject to subpara-
graph (E), seeks to enroll under the policy not later
than 63 days after the date of the termination of en-
rollment described in such subparagraph’’ and in-
serting ‘‘seeks to enroll under the policy during the
period specified in subparagraph (E)’’; and
(2) by striking subparagraph (E) and inserting
the following new subparagraph:
‘‘(E) For purposes of subparagraph (A), the time pe-
riod specified in this subparagraph is—
‘‘(i) in the case of an individual described in
subparagraph (B)(i), the period beginning on the
264
date the individual receives a notice of termination
or cessation of all supplemental health benefits (or,
if no such notice is received, notice that a claim has
been denied because of such a termination or ces-
sation) and ending on the date that is 63 days after
the applicable notice;
‘‘(ii) in the case of an individual described in
clause (ii), (iii), (v), or (vi) of subparagraph (B)
whose enrollment is terminated involuntarily, the pe-
riod beginning on the date that the individual re-
ceives a notice of termination and ending on the
date that is 63 days after the date the applicable
coverage is terminated;
‘‘(iii) in the case of an individual described in
subparagraph (B)(iv)(I), the period beginning on the
earlier of (I) the date that the individual receives a
notice of termination, a notice of the issuer’s bank-
ruptcy or insolvency, or other such similar notice, if
any, and (II) the date that the applicable coverage
is terminated, and ending on the date that is 63
days after the date the coverage is terminated;
‘‘(iv) in the case of an individual described in
clause (ii), (iii), (iv)(II), (iv)(III), (v), or (vi) of sub-
paragraph (B) who disenrolls voluntarily, the period
beginning on the date that is 60 days before the ef-
265
fective date of the disenrollment and ending on the
date that is 63 days after such effective date; and
‘‘(v) in the case of an individual described in
subparagraph (B) but not described in the preceding
provisions of this subparagraph, the period begin-
ning on the effective date of the disenrollment and
ending on the date that is 63 days after such effec-
tive date.’’.
(b) EXTENDED MEDIGAP ACCESS FOR INTERRUPTED
TRIAL
PERIODS.—Section 
1882(s)(3) 
(42 
U.S.C.
1395ss(s)(3)), as amended by subsection (a), is further
amended by adding at the end the following new subpara-
graph:
‘‘(F)(i) Subject to clause (ii), for purposes of this
paragraph—
‘‘(I) in the case of an individual described in
subparagraph (B)(v) (or deemed to be so described,
pursuant to this subparagraph) whose enrollment
with an organization or provider described in sub-
clause (II) of such subparagraph is involuntarily ter-
minated within the first 12 months of such enroll-
ment, and who, without an intervening enrollment,
enrolls with another such organization or provider,
such subsequent enrollment shall be deemed to be an
266
initial enrollment described in such subparagraph;
and
‘‘(II) in the case of an individual described in
clause (vi) of subparagraph (B) (or deemed to be so
described, pursuant to this subparagraph) whose en-
rollment with a plan or in a program described in
such clause is involuntarily terminated within the
first 12 months of such enrollment, and who, with-
out an intervening enrollment, enrolls in another
such plan or program, such subsequent enrollment
shall be deemed to be an initial enrollment described
in such clause.
‘‘(ii) For purposes of clauses (v) and (vi) of subpara-
graph (B), no enrollment of an individual with an organi-
zation or provider described in clause (v)(II), or with a
plan or in a program described in clause (vi), may be
deemed to be an initial enrollment under this clause after
the 2-year period beginning on the date on which the indi-
vidual first enrolled with such an organization, provider,
plan, or program.’’.
SEC. 619. RESTORING EFFECTIVE DATE OF ELECTIONS AND
CHANGES 
OF 
ELECTIONS 
OF
MEDICARE+CHOICE PLANS.
(a) OPEN ENROLLMENT.—Section 1851(f )(2) (42
U.S.C. 1395w–21(f )(2)) is amended by striking ‘‘, except
267
that if such election or change is made after the 10th day
of any calendar month, then the election or change shall
not take effect until the first day of the second calendar
month following the date on which the election or change
is made’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to elections and changes of cov-
erage made on or after June 1, 2001.
SEC. 620. PERMITTING ESRD BENEFICIARIES TO ENROLL
IN ANOTHER MEDICARE+CHOICE PLAN IF
THE PLAN IN WHICH THEY ARE ENROLLED IS
TERMINATED.
(a) IN GENERAL.—Section 1851(a)(3)(B) (42 U.S.C.
1395w–21(a)(3)(B)) is amended by striking ‘‘except that’’
and all that follows and inserting the following: ‘‘except
that—
‘‘(i) an individual who develops end-
stage renal disease while enrolled in a
Medicare+Choice plan may continue to be
enrolled in that plan; and
‘‘(ii) in the case of such an individual
who is enrolled in a Medicare+Choice plan
under clause (i) (or subsequently under
this clause), if the enrollment is discon-
tinued under circumstances described in
268
section 1851(e)(4)(A), then the individual
will be treated as a ‘Medicare+Choice eli-
gible individual’ for purposes of electing to
continue 
enrollment 
in 
another
Medicare+Choice plan.’’.
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to terminations and
discontinuations occurring on or after the date of
the enactment of this Act.
(2) APPLICATION
TO
PRIOR
PLAN
TERMI-
NATIONS.—Clause (ii) of section 1851(a)(3)(B) of
the Social Security Act (as inserted by subsection
(a)) shall also apply to individuals whose enrollment
in a Medicare+Choice plan was terminated or dis-
continued after December 31, 1998, and before the
date of the enactment of this Act. In applying this
paragraph, such an individual shall be treated, for
purposes of part C of title XVIII of the Social Secu-
rity Act, as having discontinued enrollment in such
a plan as of the date of the enactment of this Act.
269
SEC. 621. PROVIDING CHOICE FOR SKILLED NURSING FA-
CILITY 
SERVICES 
UNDER 
THE
MEDICARE+CHOICE PROGRAM.
(a) IN GENERAL.—Section 1852 (42 U.S.C. 1395w–
22) is amended by adding at the end the following new
subsection:
‘‘(l) RETURN TO HOME SKILLED NURSING FACILI-
TIES FOR COVERED POST-HOSPITAL EXTENDED CARE
SERVICES.—
‘‘(1) ENSURING RETURN TO HOME SNF.—
‘‘(A) IN GENERAL.—In providing coverage
of post-hospital extended care services, a
Medicare+Choice 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 Medicare+Choice
organization for the provision of such serv-
ices, or the facility agrees to accept sub-
stantially similar payment under the same
terms and conditions that apply to simi-
larly situated skilled nursing facilities that
are 
under 
contract 
with 
the
270
Medicare+Choice organization for the pro-
vision 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
coverage provided under paragraph (1) (including
scope of services, cost-sharing, and other criteria of
coverage) shall be no less favorable to the enrollee
than the coverage that would be provided to the en-
rollee with respect to a skilled nursing facility the
post-hospital extended care services of which are
otherwise covered under the Medicare+Choice plan.
‘‘(3) RULE
OF
CONSTRUCTION.—Nothing in
this subsection shall be construed to do the fol-
lowing:
‘‘(A) To require coverage through a skilled
nursing facility that is not otherwise qualified
to provide benefits under part A for medicare
beneficiaries not enrolled in a Medicare+Choice
plan.
271
‘‘(B) To prevent a skilled nursing facility
from refusing to accept, or imposing conditions
upon the acceptance of, an enrollee for the re-
ceipt of post-hospital extended care services.
‘‘(4) DEFINITIONS.—In this subsection:
‘‘(A) HOME
SKILLED
NURSING
FACIL-
ITY.—The term ‘home skilled nursing facility’
means, with respect to an enrollee who is enti-
tled to receive post-hospital extended care serv-
ices under a Medicare+Choice plan, any of the
following skilled nursing facilities:
‘‘(i) SNF RESIDENCE AT TIME OF AD-
MISSION.—The skilled nursing facility in
which the enrollee resided at the time of
admission to the hospital preceding the re-
ceipt 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.
272
‘‘(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
COMMUNITY.—The term ‘continuing care retire-
ment community’ means, with respect to an en-
rollee in a Medicare+Choice plan, an arrange-
ment under which housing and health-related
services are provided (or arranged) through an
organization for the enrollee under an agree-
ment that is effective for the life of the enrollee
or for a specified period.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to contracts entered
into or renewed on or after the date of the enactment of
this Act.
(c) MEDPAC STUDY.—
(1) STUDY.—The Medicare Payment Advisory
Commission shall conduct a study analyzing the ef-
fects of the amendment made by subsection (a) on
Medicare+Choice organizations. In conducting such
study, the Commission shall examine the effects (if
any) such amendment has had—
273
(A) on the scope of additional benefits pro-
vided under the Medicare+Choice program;
(B) on the administrative and other costs
incurred by Medicare+Choice organizations;
and
(C) on the contractual relationships be-
tween such organizations and skilled nursing fa-
cilities.
(2) REPORT.—Not later than 2 years after the
date of the enactment of this Act, the Commission
shall submit to Congress a report on the study con-
ducted under paragraph (1).
SEC. 
622. 
PROVIDING 
FOR 
ACCOUNTABILITY 
OF
MEDICARE+CHOICE PLANS.
(a) MANDATORY REVIEW OF ACR SUBMISSIONS BY
THE CHIEF ACTUARY OF THE HEALTH CARE FINANCING
ADMINISTRATION.—Section 1854(a)(5)(A) (42 U.S.C.
1395w–24(a)(5)(A)) is amended—
(1) by striking ‘‘value’’ and inserting ‘‘values’’;
and
(2) by adding at the end the following: ‘‘The
Chief Actuary of the Health Care Financing Admin-
istration shall review the actuarial assumptions and
data used by the Medicare+Choice organization with
respect to such rates, amounts, and values so sub-
274
mitted to determine the appropriateness of such as-
sumptions and data.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to submissions made on or after
May 1, 2001.
SEC. 
623. 
INCREASED 
CIVIL 
MONEY 
PENALTY 
FOR
MEDICARE+CHOICE 
ORGANIZATIONS 
THAT
TERMINATE CONTRACTS MID-YEAR.
(a) IN GENERAL.—Section 1857(g)(3) (42 U.S.C.
1395w–27(g)(3)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(D) Civil monetary penalties of not more
than $100,000, or such higher amount as the
Secretary may establish by regulation, where
the finding under subsection (c)(2)(A) is based
on the organization’s termination of its contract
under this section other than at a time and in
a manner provided for under subsection (a).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to terminations occurring after
the date of the enactment of this Act.
275
Subtitle C—Other Managed Care
Reforms
SEC. 631. ONE-YEAR EXTENSION OF SOCIAL HEALTH MAIN-
TENANCE 
ORGANIZATION 
(SHMO) 
DEM-
ONSTRATION PROJECT.
Section 4018(b)(1) of the Omnibus Budget Reconcili-
ation Act of 1987, as amended by section 531(a)(1) of
BBRA (113 Stat. 1501A–388), is amended by striking
‘‘18 months’’ and inserting ‘‘30 months’’.
SEC. 632. REVISED TERMS AND CONDITIONS FOR EXTEN-
SION OF MEDICARE COMMUNITY NURSING
ORGANIZATION 
(CNO) 
DEMONSTRATION
PROJECT.
(a) IN GENERAL.—Section 532 of BBRA (113 Stat.
1501A–388) is amended—
(1) in subsection (a), by striking the second
sentence; and
(2) by striking subsection (b) and inserting the
following new subsection:
‘‘(b) TERMS AND CONDITIONS.—
‘‘(1) JANUARY THROUGH SEPTEMBER 2000.—
For the 9-month period beginning with January
2000, any such demonstration project shall be con-
ducted under the same terms and conditions as ap-
plied to such demonstration during 1999.
276
‘‘(2) OCTOBER
2000
THROUGH
DECEMBER
2001.—For the 15-month period beginning with Oc-
tober 2000, any such demonstration project shall be
conducted under the same terms and conditions as
applied to such demonstration during 1999, except
that the following modifications shall apply:
‘‘(A) BASIC CAPITATION RATE.—The basic
capitation rate paid for services covered under
the project (other than case management serv-
ices) per enrollee per month and furnished
during—
‘‘(i) the period beginning with October
1, 2000, and ending with December 31,
2000, shall be determined by actuarially
adjusting the actual capitation rate paid
for such services in 1999 for inflation, uti-
lization, and other changes to the CNO
service package, and by reducing such ad-
justed capitation rate by 10 percent in the
case of the demonstration sites located in
Arizona, Minnesota, and Illinois, and 15
percent for the demonstration site located
in New York; and
‘‘(ii) 2001 shall be determined by ac-
tuarially adjusting the capitation rate de-
277
termined under clause (i) for inflation, uti-
lization, and other changes to the CNO
service package.
‘‘(B) 
TARGETED
CASE
MANAGEMENT
FEE.—Effective October 1, 2000—
‘‘(i) the case management fee per en-
rollee per month for—
‘‘(I) the period described in sub-
paragraph (A)(i) shall be determined
by actuarially adjusting the case man-
agement fee for 1999 for inflation;
and
‘‘(II) 2001 shall be determined
by actuarially adjusting the amount
determined under subclause (I) for in-
flation; and
‘‘(ii) such case management fee shall
be paid only for enrollees who are classified
as moderately frail or frail pursuant to cri-
teria established by the Secretary.
‘‘(C) GREATER UNIFORMITY IN CLINICAL
FEATURES AMONG SITES.—Each project shall
implement for each site—
‘‘(i) protocols for periodic telephonic
contact with enrollees based on—
278
‘‘(I) the results of such standard-
ized written health assessment; and
‘‘(II) the application of appro-
priate care planning approaches;
‘‘(ii) disease management programs
for targeted diseases (such as congestive
heart failure, arthritis, diabetes, and hy-
pertension) that are highly prevalent in the
enrolled populations;
‘‘(iii) systems and protocols to track
enrollees through hospitalizations, includ-
ing pre-admission planning, concurrent
management 
during 
inpatient 
hospital
stays, and post-discharge assessment, plan-
ning, and follow-up; and
‘‘(iv) standardized patient educational
materials for specified diseases and health
conditions.
‘‘(D) 
QUALITY
IMPROVEMENT.—Each
project shall implement at each site once during
the 15-month period—
‘‘(i) enrollee satisfaction surveys; and
‘‘(ii) reporting on specified quality in-
dicators for the enrolled population.
‘‘(c) EVALUATION.—
279
‘‘(1) PRELIMINARY
REPORT.—Not later than
July 1, 2001, the Secretary of Health and Human
Services shall submit to the Committees on Ways
and Means and Commerce of the House of Rep-
resentatives and the Committee on Finance of the
Senate a preliminary report that—
‘‘(A) evaluates such demonstration projects
for the period beginning July 1, 1997, and end-
ing December 31, 1999, on a site-specific basis
with respect to the impact on per beneficiary
spending, specific health utilization measures,
and enrollee satisfaction; and
‘‘(B) includes a similar evaluation of such
projects for the portion of the extension period
that occurs after September 30, 2000.
‘‘(2) FINAL REPORT.—The Secretary shall sub-
mit a final report to such Committees on such dem-
onstration projects not later than July 1, 2002.
Such report shall include the same elements as the
preliminary report required by paragraph (1), but
for the period after December 31, 1999.
‘‘(3) METHODOLOGY FOR SPENDING COMPARI-
SONS.—Any evaluation of the impact of the dem-
onstration projects on per beneficiary spending in-
280
cluded in such reports shall include a comparison
of—
‘‘(A) data for all individuals who—
‘‘(i) were enrolled in such demonstra-
tion projects as of the first day of the pe-
riod under evaluation; and
‘‘(ii) were enrolled for a minimum of
6 months thereafter; with
‘‘(B) data for a matched sample of individ-
uals who are enrolled under part B of title
XVIII of the Social Security Act and are not
enrolled 
in 
such 
a 
project, 
or 
in 
a
Medicare+Choice plan under part C of such
title, a plan offered by an eligible organization
under section 1876 of such Act, or a health
care 
prepayment 
plan 
under 
section
1833(a)(1)(A) of such Act.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall be effective as if included in the enact-
ment of section 532 of BBRA (113 Stat. 1501A–388).
SEC. 633. EXTENSION OF MEDICARE MUNICIPAL HEALTH
SERVICES DEMONSTRATION PROJECTS.
Section 9215(a) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (42 U.S.C. 1395b–1 note), as
amended by section 6135 of the Omnibus Budget Rec-
281
onciliation Act of 1989, section 13557 of the Omnibus
Budget Reconciliation Act of 1993, section 4017 of BBA,
and section 534 of BBRA (113 Stat. 1501A–390), is
amended by striking ‘‘December 31, 2002’’ and inserting
‘‘December 31, 2004’’.
SEC. 634. SERVICE AREA EXPANSION FOR MEDICARE COST
CONTRACTS DURING TRANSITION PERIOD.
Section 1876(h)(5) (42 U.S.C. 1395mm(h)(5)) is
amended—
(1) by redesignating subparagraph (B) as sub-
paragraph (C); and
(2) by inserting after subparagraph (A), the fol-
lowing new subparagraph:
‘‘(B) Subject to subparagraph (C), the Secretary
shall approve an application for a modification to a rea-
sonable cost contract under this section in order to expand
the service area of such contract if—
‘‘(i) such application is submitted to the Sec-
retary on or before September 1, 2003; and
‘‘(ii) the Secretary determines that the organi-
zation with the contract continues to meet the re-
quirements applicable to such organizations and con-
tracts under this section.’’.
282
TITLE VII—MEDICAID
SEC. 701. DSH PAYMENTS.
(a) MODIFICATIONS TO DSH ALLOTMENTS.—
(1) INCREASED
ALLOTMENTS
FOR
FISCAL
YEARS 2001 AND 2002.—
(A) IN
GENERAL.—Section 1923(f ) (42
U.S.C. 1396r–4(f )) is amended—
(i) in paragraph (2), by striking ‘‘The
DSH allotment’’ and inserting ‘‘Subject to
paragraph (4), the DSH allotment’’;
(ii) by redesignating paragraph (4) as
paragraph (6); and
(iii) by inserting after paragraph (3)
the following new paragraph:
‘‘(4) SPECIAL RULE FOR FISCAL YEARS 2001
AND 2002.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (2), the DSH allotment for any State
for—
‘‘(i) fiscal year 2001, shall be the
DSH allotment determined under para-
graph (2) for fiscal year 2000 increased,
subject to subparagraph (B) and para-
graph (5), by the percentage change in the
consumer price index for all urban con-
283
sumers (all items; U.S. city average) for
fiscal year 2000; and
‘‘(ii) fiscal year 2002, shall be the
DSH allotment determined under clause
(i) increased, subject to subparagraph (B)
and paragraph (5), by the percentage
change in the consumer price index for all
urban consumers (all items; U.S. city aver-
age) for fiscal year 2001.
‘‘(B) LIMITATION.—Subparagraph (B) of
paragraph (3) shall apply to subparagraph (A)
of this paragraph in the same manner as that
subparagraph (B) applies to paragraph (3)(A).
‘‘(C) NO
APPLICATION
TO
ALLOTMENTS
AFTER FISCAL YEAR 2002.—The DSH allotment
for any State for fiscal year 2003 or any suc-
ceeding fiscal year shall be determined under
paragraph (3) without regard to the DSH allot-
ments determined under subparagraph (A) of
this paragraph.’’.
(2) SPECIAL RULE FOR MEDICAID DSH ALLOT-
MENT FOR EXTREMELY LOW DSH STATES.—
(A) IN
GENERAL.—Section 1923(f ) (42
U.S.C. 1396r–4(f )), as amended by paragraph
284
(1), is amended by inserting after paragraph
(4) the following new paragraph:
‘‘(5) SPECIAL RULE FOR EXTREMELY LOW DSH
STATES.—In the case of a State in which the total
expenditures under the State plan (including Federal
and State shares) for disproportionate share hospital
adjustments under this section for fiscal year 1999,
as reported to the Administrator of the Health Care
Financing Administration as of August 31, 2000, is
greater than 0 but less than 1 percent of the State’s
total amount of expenditures under the State plan
for medical assistance during the fiscal year, the
DSH allotment for fiscal year 2001 shall be in-
creased to 1 percent of the State’s total amount of
expenditures under such plan for such assistance
during such fiscal year. In subsequent fiscal years,
such increased allotment is subject to an increase for
inflation as provided in paragraph (3)(A).’’.
(B) CONFORMING
AMENDMENT.—Section
1923(f )(3)(A) (42 U.S.C. 1396r–4(f )(3)(A)) is
amended by inserting ‘‘and paragraph (5)’’
after ‘‘subparagraph (B)’’.
(3) EFFECTIVE DATE.—The amendments made
by paragraphs (1) and (2) take effect on the date
the final regulation required under section 705(a)
285
(relating to the application of an aggregate upper
payment limit test for State medicaid spending for
inpatient hospital services, outpatient hospital serv-
ices, nursing facility services, intermediate care facil-
ity services for the mentally retarded, and clinic
services provided by government facilities that are
not State-owned or operated facilities) is published
in the Federal Register.
(b) ASSURING IDENTIFICATION OF MEDICAID MAN-
AGED CARE PATIENTS.—
(1) IN
GENERAL.—Section 1932 (42 U.S.C.
1396u–2) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) IDENTIFICATION OF PATIENTS FOR PURPOSES
OF MAKING DSH PAYMENTS.—Each contract with a
managed care entity under section 1903(m) or under sec-
tion 1905(t)(3) shall require the entity either—
‘‘(1) to report to the State information nec-
essary to determine the hospital services provided
under the contract (and the identity of hospitals pro-
viding such services) for purposes of applying sec-
tions 1886(d)(5)(F) and 1923; or
‘‘(2) to include a sponsorship code in the identi-
fication card issued to individuals covered under this
286
title in order that a hospital may identify a patient
as being entitled to benefits under this title.’’.
(2) CLARIFICATION
OF
COUNTING
MANAGED
CARE
MEDICAID
PATIENTS.—Section 1923 (42
U.S.C. 1396r–4) is amended—
(A) in subsection (a)(2)(D), by inserting
after ‘‘the proportion of low-income and med-
icaid patients’’ the following: ‘‘(including such
patients who receive benefits through a man-
aged care entity)’’;
(B) in subsection (b)(2), by inserting after
‘‘a State plan approved under this title in a pe-
riod’’ the following: ‘‘(regardless of whether
such patients receive medical assistance on a
fee-for-service basis or through a managed care
entity)’’; and
(C) in subsection (b)(3)(A)(i), by inserting
after ‘‘under a State plan under this title’’ the
following: ‘‘(regardless of whether the services
were furnished on a fee-for-service basis or
through a managed care entity)’’.
(3) EFFECTIVE DATES.—
(A) The amendment made by paragraph
(1) shall apply to contracts as of January 1,
2001.
287
(B) The amendments made by paragraph
(2) shall apply to payments made on or after
January 1, 2001.
(c) APPLICATION OF MEDICAID DSH TRANSITION
RULE TO PUBLIC HOSPITALS IN ALL STATES.—
(1) IN GENERAL.—During the period described
in paragraph (3), with respect to a State, section
4721(e) of the Balanced Budget Act of 1997 (Public
Law 105–33; 111 Stat. 514), as amended by section
607 of BBRA (113 Stat. 1501A–396), shall be ap-
plied as though—
(A) ‘‘September 30, 2002’’ were sub-
stituted for ‘‘July 1, 1997’’ each place it ap-
pears;
(B) ‘‘hospitals owned or operated by a
State (as defined for purposes of title XIX of
such Act), or by an instrumentality or a unit of
government within a State (as so defined)’’
were substituted for ‘‘the State of California’’;
(C) paragraph (3) were redesignated as
paragraph (4);
(D) ‘‘and’’ were omitted from the end of
paragraph (2); and
(E) the following new paragraph were in-
serted after paragraph (2):
288
‘‘(3) ‘(as defined in subparagraph (B) but with-
out regard to clause (ii) of that subparagraph and
subject to subsection (d))’ were substituted for ‘(as
defined in subparagraph (B))’ in subparagraph (A)
of such section; and’’.
(2) SPECIAL RULE.—With respect to California,
section 4721(e) of the Balanced Budget Act of 1997
(Public Law 105–33; 111 Stat. 514), as so amend-
ed, shall be applied without regard to paragraph (1).
(3) PERIOD DESCRIBED.—The period described
in this paragraph is the period that begins, with re-
spect to a State, on the first day of the first State
fiscal year that begins after September 30, 2002,
and ends on the last day of the succeeding State fis-
cal year.
(4) APPLICATION TO WAIVERS.—With respect
to a State operating under a waiver of the require-
ments of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.) under section 1115 of such Act
(42 U.S.C. 1315), the amount by which any pay-
ment adjustment made by the State under title XIX
of such Act (42 U.S.C. 1396 et seq.), after the ap-
plication of section 4721(e) of the Balanced Budget
Act of 1997 under paragraph (1) to such State, ex-
ceeds the costs of furnishing hospital services pro-
289
vided by hospitals described in such section shall be
fully reflected as an increase in the baseline expendi-
ture limit for such waiver.
(d) ASSISTANCE
FOR
CERTAIN
PUBLIC
HOS-
PITALS.—
(1) IN GENERAL.—Beginning with fiscal year
2002, notwithstanding section 1923(f ) of the Social
Security Act (42 U.S.C. 1396r–4(f )) and subject to
paragraph (3), with respect to a State, payment ad-
justments made under title XIX of the Social Secu-
rity Act (42 U.S.C. 1396 et seq.) to a hospital de-
scribed in paragraph (2) shall be made without re-
gard to the DSH allotment limitation for the State
determined under section 1923(f ) of that Act (42
U.S.C. 1396r–4(f )).
(2) HOSPITAL DESCRIBED.—A hospital is de-
scribed in this paragraph if the hospital—
(A) is owned or operated by a State (as de-
fined for purposes of title XIX of the Social Se-
curity Act), or by an instrumentality or a unit
of government within a State (as so defined);
(B) as of October 1, 2000—
(i) is in existence and operating as a
hospital described in subparagraph (A);
and
290
(ii) is not receiving disproportionate
share hospital payments from the State in
which it is located under title XIX of such
Act; and
(C) has a low-income utilization rate (as
defined in section 1923(b)(3) of the Social Se-
curity Act (42 U.S.C. 1396r–4(b)(3))) in excess
of 65 percent.
(3) LIMITATION ON EXPENDITURES.—
(A) IN GENERAL.—With respect to any fis-
cal year, the aggregate amount of Federal fi-
nancial participation that may be provided for
payment adjustments described in paragraph
(1) for that fiscal year for all States may not
exceed the amount described in subparagraph
(B) for the fiscal year.
(B) AMOUNT
DESCRIBED.—The amount
described in this subparagraph for a fiscal year
is as follows:
(i) For fiscal year 2002, $15,000,000.
(ii) 
For 
fiscal 
year 
2003,
$176,000,000.
(iii) 
For 
fiscal 
year 
2004,
$269,000,000.
291
(iv) 
For 
fiscal 
year 
2005,
$330,000,000.
(v) For fiscal year 2006 and each fis-
cal year thereafter, $375,000,000.
(e) DSH PAYMENT ACCOUNTABILITY STANDARDS.—
Not later than September 30, 2002, the Secretary of
Health and Human Services shall implement account-
ability standards to ensure that Federal funds provided
with respect to disproportionate share hospital adjust-
ments made under section 1923 of the Social Security Act
(42 U.S.C. 1396r–4) are used to reimburse States and
hospitals eligible for such payment adjustments for pro-
viding uncompensated health care to low-income patients
and are otherwise made in accordance with the require-
ments of section 1923 of that Act.
SEC. 702. NEW PROSPECTIVE PAYMENT SYSTEM FOR FED-
ERALLY-QUALIFIED HEALTH CENTERS AND
RURAL HEALTH CLINICS.
(a) IN
GENERAL.—Section 1902(a) (42 U.S.C.
1396a(a)) is amended—
(1) in paragraph (13)—
(A) in subparagraph (A), by adding ‘‘and’’
at the end;
(B) in subparagraph (B), by striking
‘‘and’’ at the end; and
292
(C) by striking subparagraph (C); and
(2) by inserting after paragraph (14) the fol-
lowing new paragraph:
‘‘(15) provide for payment for services de-
scribed in clause (B) or (C) of section 1905(a)(2)
under the plan in accordance with subsection (aa);’’.
(b) NEW PROSPECTIVE PAYMENT SYSTEM.—Section
1902 (42 U.S.C. 1396a) is amended by adding at the end
the following:
‘‘(aa) PAYMENT FOR SERVICES PROVIDED BY FED-
ERALLY-QUALIFIED
HEALTH
CENTERS
AND
RURAL
HEALTH CLINICS.—
‘‘(1) IN GENERAL.—Beginning with fiscal year
2001 with respect to services furnished on or after
January 1, 2001, and each succeeding fiscal year,
the State plan shall provide for payment for services
described in section 1905(a)(2)(C) furnished by a
Federally-qualified health center and services de-
scribed in section 1905(a)(2)(B) furnished by a
rural health clinic in accordance with the provisions
of this subsection.
‘‘(2) FISCAL YEAR 2001.—Subject to paragraph
(4), for services furnished on and after January 1,
2001, during fiscal year 2001, the State plan shall
provide for payment for such services in an amount
293
(calculated on a per visit basis) that is equal to 100
percent of the average of the costs of the center or
clinic of furnishing such services during fiscal years
1999 and 2000 which are reasonable and related to
the cost of furnishing such services, or based on
such other tests of reasonableness as the Secretary
prescribes in regulations under section 1833(a)(3),
or, in the case of services to which such regulations
do not apply, the same methodology used under sec-
tion 1833(a)(3), adjusted to take into account any
increase or decrease in the scope of such services
furnished by the center or clinic during fiscal year
2001.
‘‘(3) FISCAL YEAR 2002 AND SUCCEEDING FIS-
CAL YEARS.—Subject to paragraph (4), for services
furnished during fiscal year 2002 or a succeeding
fiscal year, the State plan shall provide for payment
for such services in an amount (calculated on a per
visit basis) that is equal to the amount calculated for
such services under this subsection for the preceding
fiscal year—
‘‘(A) increased by the percentage increase
in the MEI (as defined in section 1842(i)(3))
applicable to primary care services (as defined
in section 1842(i)(4)) for that fiscal year; and
294
‘‘(B) adjusted to take into account any in-
crease or decrease in the scope of such services
furnished by the center or clinic during that fis-
cal year.
‘‘(4) ESTABLISHMENT OF INITIAL YEAR PAY-
MENT AMOUNT FOR NEW CENTERS OR CLINICS.—In
any case in which an entity first qualifies as a Fed-
erally-qualified health center or rural health clinic
after fiscal year 2000, the State plan shall provide
for payment for services described in section
1905(a)(2)(C) furnished by the center or services
described in section 1905(a)(2)(B) furnished by the
clinic in the first fiscal year in which the center or
clinic so qualifies in an amount (calculated on a per
visit basis) that is equal to 100 percent of the costs
of furnishing such services during such fiscal year
based on the rates established under this subsection
for the fiscal year for other such centers or clinics
located in the same or adjacent area with a similar
case load or, in the absence of such a center or clin-
ic, in accordance with the regulations and method-
ology referred to in paragraph (2) or based on such
other tests of reasonableness as the Secretary may
specify. For each fiscal year following the fiscal year
in which the entity first qualifies as a Federally-
295
qualified health center or rural health clinic, the
State plan shall provide for the payment amount to
be calculated in accordance with paragraph (3).
‘‘(5) ADMINISTRATION IN THE CASE OF MAN-
AGED CARE.—
‘‘(A) IN GENERAL.—In the case of services
furnished by a Federally-qualified health center
or rural health clinic pursuant to a contract be-
tween the center or clinic and a managed care
entity (as defined in section 1932(a)(1)(B)), the
State plan shall provide for payment to the cen-
ter or clinic by the State of a supplemental pay-
ment equal to the amount (if any) by which the
amount determined under paragraphs (2), (3),
and (4) of this subsection exceeds the amount
of the payments provided under the contract.
‘‘(B) PAYMENT SCHEDULE.—The supple-
mental payment required under subparagraph
(A) shall be made pursuant to a payment
schedule agreed to by the State and the Feder-
ally-qualified health center or rural health clin-
ic, but in no case less frequently than every 4
months.
‘‘(6) ALTERNATIVE
PAYMENT
METHODOLO-
GIES.—Notwithstanding any other provision of this
296
section, the State plan may provide for payment in
any fiscal year to a Federally-qualified health center
for services described in section 1905(a)(2)(C) or to
a rural health clinic for services described in section
1905(a)(2)(B) in an amount which is determined
under an alternative payment methodology that—
‘‘(A) is agreed to by the State and the cen-
ter or clinic; and
‘‘(B) results in payment to the center or
clinic of an amount which is at least equal to
the amount otherwise required to be paid to the
center or clinic under this section.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4712 of the BBA (Public Law 105–
33; 111 Stat. 508) is amended by striking sub-
section (c).
(2) Section 1915(b) (42 U.S.C. 1396n(b)) is
amended by striking ‘‘1902(a)(13)(C)’’ and inserting
‘‘1902(a)(15), 1902(aa),’’.
(d) GAO STUDY
OF
FUTURE
REBASING.—The
Comptroller General of the United States shall provide for
a study on the need for, and how to, rebase or refine costs
for making payment under the medicaid program for serv-
ices provided by Federally-qualified health centers and
rural health clinics (as provided under the amendments