131
‘‘(2) OTHER CRITERIA.—The Secretary may es-
tablish additional criteria for inclusion of bene-
ficiaries within a demonstration under this section,
which may include frequency of contact with physi-
cians in the group or other factors or criteria that
the Secretary finds to be appropriate.
‘‘(3) NOTICE REQUIREMENTS.—In the case of
each beneficiary determined to be within the scope
of a demonstration under this section with respect to
a specific health care group, the Secretary shall en-
sure that such beneficiary is notified of the incen-
tives, and of any waivers of coverage or payment
rules, applicable to such group under such dem-
onstration.
‘‘(d) INCENTIVES.—
‘‘(1) PERFORMANCE
TARGET.—The Secretary
shall establish for each health care group partici-
pating in a demonstration under this section—
‘‘(A) a base expenditure amount, equal to
the average total payments under parts A and
B for patients served by the health care group
on a fee-for-service basis in a base period deter-
mined by the Secretary; and
‘‘(B) an annual per capita expenditure tar-
get for patients determined to be within the
132
scope of the demonstration, reflecting the base
expenditure amount adjusted for risk and ex-
pected growth rates.
‘‘(2) INCENTIVE BONUS.—The Secretary shall
pay to each participating health care group (subject
to paragraph (4)) a bonus for each year under the
demonstration equal to a portion of the medicare
savings realized for such year relative to the per-
formance target.
‘‘(3) ADDITIONAL
BONUS
FOR
PROCESS
AND
OUTCOME
IMPROVEMENTS.—At such time as the
Secretary has established appropriate criteria based
on evidence the Secretary determines to be suffi-
cient, the Secretary shall also pay to a participating
health care group (subject to paragraph (4)) an ad-
ditional bonus for a year, equal to such portion as
the Secretary may designate of the saving to the
program under this title resulting from process im-
provements made by and patient outcome improve-
ments attributable to activities of the group.
‘‘(4) LIMITATION.—The Secretary shall limit
bonus payments under this section as necessary to
ensure that the aggregate expenditures under this
title (inclusive of bonus payments) with respect to
patients within the scope of the demonstration do
133
not exceed the amount which the Secretary esti-
mates would be expended if the demonstration
projects under this section were not implemented.
‘‘PROVISIONS FOR ADMINISTRATION OF DEMONSTRATION
PROGRAM
‘‘SEC. 1866B. (a) GENERAL ADMINISTRATIVE AU-
THORITY.—
‘‘(1) BENEFICIARY
ELIGIBILITY.—Except as
otherwise provided by the Secretary, an individual
shall only be eligible to receive benefits under the
program under section 1866A (in this section re-
ferred to as the ‘demonstration program’) if such
individual—
‘‘(A) is enrolled in under the program
under part B and entitled to benefits under
part A; and
‘‘(B) is not enrolled in a Medicare+Choice
plan under part C, an eligible organization
under a contract under section 1876 (or a simi-
lar organization operating under a demonstra-
tion project authority), an organization with an
agreement under section 1833(a)(1)(A), or a
PACE program under section 1894.
‘‘(2) SECRETARY’S DISCRETION AS TO SCOPE
OF PROGRAM.—The Secretary may limit the imple-
mentation of the demonstration program to—
134
‘‘(A) a geographic area (or areas) that the
Secretary designates for purposes of the pro-
gram, based upon such criteria as the Secretary
finds appropriate;
‘‘(B) a subgroup (or subgroups) of bene-
ficiaries or individuals and entities furnishing
items or services (otherwise eligible to partici-
pate in the program), selected on the basis of
the number of such participants that the Sec-
retary finds consistent with the effective and ef-
ficient implementation of the program;
‘‘(C) an element (or elements) of the pro-
gram that the Secretary determines to be suit-
able for implementation; or
‘‘(D) any combination of any of the limits
described in subparagraphs (A) through (C).
‘‘(3) VOLUNTARY
RECEIPT
OF
ITEMS
AND
SERVICES.—Items and services shall be furnished to
an individual under the demonstration program only
at the individual’s election.
‘‘(4) AGREEMENTS.—The Secretary is author-
ized to enter into agreements with individuals and
entities to furnish health care items and services to
beneficiaries under the demonstration program.
135
‘‘(5) PROGRAM
STANDARDS
AND
CRITERIA.—
The Secretary shall establish performance standards
for the demonstration program including, as applica-
ble, standards for quality of health care items and
services, cost-effectiveness, beneficiary satisfaction,
and such other factors as the Secretary finds appro-
priate. The eligibility of individuals or entities for
the initial award, continuation, and renewal of
agreements to provide health care items and services
under the program shall be conditioned, at a min-
imum, on performance that meets or exceeds such
standards.
‘‘(6) ADMINISTRATIVE REVIEW OF DECISIONS
AFFECTING
INDIVIDUALS
AND
ENTITIES
FUR-
NISHING
SERVICES.—An individual or entity fur-
nishing services under the demonstration program
shall be entitled to a review by the program adminis-
trator (or, if the Secretary has not contracted with
a program administrator, by the Secretary) of a de-
cision not to enter into, or to terminate, or not to
renew, an agreement with the entity to provide
health care items or services under the program.
‘‘(7) SECRETARY’S REVIEW OF MARKETING MA-
TERIALS.—An agreement with an individual or enti-
ty furnishing services under the demonstration pro-
136
gram shall require the individual or entity to guar-
antee that it will not distribute materials that mar-
ket items or services under the program without the
Secretary’s prior review and approval.
‘‘(8) PAYMENT IN FULL.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an individual or entity re-
ceiving payment from the Secretary under a
contract or agreement under the demonstration
program shall agree to accept such payment as
payment in full, and such payment shall be in
lieu of any payments to which the individual or
entity would otherwise be entitled under this
title.
‘‘(B) COLLECTION OF DEDUCTIBLES AND
COINSURANCE.—Such individual or entity may
collect any applicable deductible or coinsurance
amount from a beneficiary.
‘‘(b) CONTRACTS FOR PROGRAM ADMINISTRATION.—
‘‘(1) IN GENERAL.—The Secretary may admin-
ister the demonstration program through a contract
with a program administrator in accordance with the
provisions of this subsection.
‘‘(2) SCOPE OF PROGRAM ADMINISTRATOR CON-
TRACTS.—The Secretary may enter into such con-
137
tracts for a limited geographic area, or on a regional
or national basis.
‘‘(3) ELIGIBLE CONTRACTORS.—The Secretary
may contract for the administration of the program
with—
‘‘(A) an entity that, under a contract
under section 1816 or 1842, determines the
amount of and makes payments for health care
items and services furnished under this title; or
‘‘(B) any other entity with substantial ex-
perience in managing the type of program con-
cerned.
‘‘(4) CONTRACT AWARD, DURATION, AND RE-
NEWAL.—
‘‘(A) IN GENERAL.—A contract under this
subsection shall be for an initial term of up to
three years, renewable for additional terms of
up to three years.
‘‘(B) NONCOMPETITIVE
AWARD
AND
RE-
NEWAL FOR ENTITIES ADMINISTERING PART A
OR
PART
B
PAYMENTS.—The Secretary may
enter or renew a contract under this subsection
with an entity described in paragraph (3)(A)
without regard to the requirements of section 5
of title 41, United States Code.
138
‘‘(5) APPLICABILITY OF FEDERAL ACQUISITION
REGULATION.—The Federal Acquisition Regulation
shall apply to program administration contracts
under this subsection.
‘‘(6) PERFORMANCE
STANDARDS.—The Sec-
retary shall establish performance standards for the
program administrator including, as applicable,
standards for the quality and cost-effectiveness of
the program administered, and such other factors as
the Secretary finds appropriate. The eligibility of en-
tities for the initial award, continuation, and renewal
of program administration contracts shall be condi-
tioned, at a minimum, on performance that meets or
exceeds such standards.
‘‘(7) 
FUNCTIONS
OF
PROGRAM
ADMINIS-
TRATOR.—A program administrator shall perform
any or all of the following functions, as specified by
the Secretary:
‘‘(A) AGREEMENTS WITH ENTITIES FUR-
NISHING
HEALTH
CARE
ITEMS
AND
SERV-
ICES.—Determine the qualifications of entities
seeking to enter or renew agreements to provide
services under the demonstration program, and
as appropriate enter or renew (or refuse to
139
enter or renew) such agreements on behalf of
the Secretary.
‘‘(B) 
ESTABLISHMENT
OF
PAYMENT
RATES.—Negotiate or otherwise establish, sub-
ject to the Secretary’s approval, payment rates
for covered health care items and services.
‘‘(C) PAYMENT OF CLAIMS OR FEES.—Ad-
minister payments for health care items or serv-
ices furnished under the program.
‘‘(D) PAYMENT OF BONUSES.—Using such
guidelines as the Secretary shall establish, and
subject to the approval of the Secretary, make
bonus payments as described in subsection
(c)(2)(A)(ii) to entities furnishing items or serv-
ices for which payment may be made under the
program.
‘‘(E) OVERSIGHT.—Monitor the compli-
ance of individuals and entities with agreements
under the program with the conditions of par-
ticipation.
‘‘(F) ADMINISTRATIVE REVIEW.—Conduct
reviews of adverse determinations specified in
subsection (a)(6).
‘‘(G) REVIEW
OF
MARKETING
MATE-
RIALS.—Conduct a review of marketing mate-
140
rials proposed by an entity furnishing services
under the program.
‘‘(H) ADDITIONAL
FUNCTIONS.—Perform
such other functions as the Secretary may
specify.
‘‘(8) LIMITATION
OF
LIABILITY.—The provi-
sions of section 1157(b) shall apply with respect to
activities of contractors and their officers, employ-
ees, and agents under a contract under this sub-
section.
‘‘(9) INFORMATION SHARING.—Notwithstanding
section 1106 and section 552a of title 5, United
States Code, the Secretary is authorized to disclose
to an entity with a program administration contract
under this subsection such information (including
medical information) on individuals receiving health
care items and services under the program as the
entity may require to carry out its responsibilities
under the contract.
‘‘(c) RULES
APPLICABLE
TO
BOTH
PROGRAM
AGREEMENTS
AND
PROGRAM
ADMINISTRATION
CON-
TRACTS.—
‘‘(1) RECORDS, REPORTS, AND AUDITS.—The
Secretary is authorized to require entities with
agreements to provide health care items or services
141
under the demonstration program, and entities with
program administration contracts under subsection
(b), to maintain adequate records, to afford the Sec-
retary access to such records (including for audit
purposes), and to furnish such reports and other
materials (including audited financial statements
and performance data) as the Secretary may require
for purposes of implementation, oversight, and eval-
uation of the program and of individuals’ and enti-
ties’ effectiveness in performance of such agreements
or contracts.
‘‘(2) BONUSES.—Notwithstanding any other
provision of law, but subject to subparagraph
(B)(ii), the Secretary may make bonus payments
under the demonstration program from the Federal
Health Insurance Trust Fund and the Federal Sup-
plementary Medical Insurance Trust Fund in
amounts that do not exceed the amounts authorized
under the program in accordance with the following:
‘‘(A) PAYMENTS
TO
PROGRAM
ADMINIS-
TRATORS.—The Secretary may make bonus
payments under the program to program ad-
ministrators.
‘‘(B) PAYMENTS TO ENTITIES FURNISHING
SERVICES.—
142
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make bonus pay-
ments to individuals or entities furnishing
items or services for which payment may
be made under the demonstration pro-
gram, or may authorize the program ad-
ministrator to make such bonus payments
in accordance with such guidelines as the
Secretary shall establish and subject to the
Secretary’s approval.
‘‘(ii) LIMITATIONS.—The Secretary
may condition such payments on the
achievement of such standards related to
efficiency, improvement in processes or
outcomes of care, or such other factors as
the Secretary determines to be appropriate.
‘‘(3) ANTIDISCRIMINATION
LIMITATION.—The
Secretary shall not enter into an agreement with an
entity to provide health care items or services under
the demonstration program, or with an entity to ad-
minister the program, unless such entity guarantees
that it will not deny, limit, or condition the coverage
or provision of benefits under the program, for indi-
viduals eligible to be enrolled under such program,
based on any health status-related factor described
143
in section 2702(a)(1) of the Public Health Service
Act.
‘‘(d) LIMITATIONS ON JUDICIAL REVIEW.—The fol-
lowing actions and determinations with respect to the
demonstration program shall not be subject to review by
a judicial or administrative tribunal:
‘‘(1) Limiting the implementation of the pro-
gram under subsection (a)(2).
‘‘(2) Establishment of program participation
standards under subsection (a)(5) or the denial or
termination of, or refusal to renew, an agreement
with an entity to provide health care items and serv-
ices under the program.
‘‘(3) Establishment of program administration
contract performance standards under subsection
(b)(6), the refusal to renew a program administra-
tion contract, or the noncompetitive award or re-
newal of a program administration contract under
subsection (b)(4)(B).
‘‘(5) Establishment of payment rates, through
negotiation or otherwise, under a program agree-
ment or a program administration contract.
‘‘(6) A determination with respect to the pro-
gram (where specifically authorized by the program
authority or by subsection (c)(2))—
144
‘‘(A) as to whether cost savings have been
achieved, and the amount of savings; or
‘‘(B) as to whether, to whom, and in what
amounts bonuses will be paid.
‘‘(e) APPLICATION LIMITED TO PARTS A AND B.—
None of the provisions of this section or of the demonstra-
tion program shall apply to the programs under part C.
‘‘(f) REPORTS TO CONGRESS.—Not later than two
years after the date of the enactment of this section, and
biennially thereafter for six years, the Secretary shall re-
port to Congress on the use of authorities under the dem-
onstration program. Each report shall address the impact
of the use of those authorities on expenditures, access, and
quality under the programs under this title.’’.
(b) GAO REPORT.—Not later than 2 years after the
date on which the demonstration project under section
1866A of the Social Security Act, as added by subsection
(a), is implemented, the Comptroller General of the United
States shall submit to Congress a report on such dem-
onstration project. The report shall include such rec-
ommendations with respect to changes to the demonstra-
tion project that the Comptroller General determines ap-
propriate.
145
SEC. 413. STUDY ON ENROLLMENT PROCEDURES FOR
GROUPS THAT RETAIN INDEPENDENT CON-
TRACTOR PHYSICIANS.
(a) IN GENERAL.—The Comptroller General of the
United States shall conduct a study of the current medi-
care enrollment process for groups that retain independent
contractor physicians with particular emphasis on hos-
pital-based physicians, such as emergency department
staffing groups. In conducting the evaluation, the Comp-
troller General shall consult with groups that retain inde-
pendent contractor physicians and shall—
(1) review the issuance of individual medicare
provider numbers and the possible medicare program
integrity vulnerabilities of the current process;
(2) review direct and indirect costs associated
with the current process incurred by the medicare
program and groups that retain independent con-
tractor physicians;
(3) assess the effect on program integrity by
the enrollment of groups that retain independent
contractor hospital-based physicians; and
(4) develop suggested procedures for the enroll-
ment of these groups.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Comptroller General shall
146
submit to Congress a report on the study conducted under
subsection (a).
Subtitle C—Other Services
SEC. 421. 1-YEAR EXTENSION OF MORATORIUM ON THER-
APY CAPS; REPORT ON STANDARDS FOR SU-
PERVISION OF PHYSICAL THERAPY ASSIST-
ANTS.
(a) IN GENERAL.—Section 1833(g)(4) (42 U.S.C.
1395l(g)(4)) is amended by striking ‘‘2000 and 2001.’’
and inserting ‘‘2000, 2001, and 2002.’’.
(b) CONFORMING AMENDMENT TO CONTINUE FO-
CUSED MEDICAL REVIEWS OF CLAIMS DURING MORATO-
RIUM PERIOD.—Section 221(a)(2) of BBRA (113 Stat.
1501A–351) is amended by striking ‘‘(under the amend-
ment made by paragraph (1)(B))’’.
(c) STUDY ON STANDARDS FOR SUPERVISION OF
PHYSICAL THERAPIST ASSISTANTS.—
(1) STUDY.—The Secretary of Health and
Human Services shall conduct a study of the
implications—
(A) of eliminating the ‘‘in the room’’ su-
pervision requirement for medicare payment for
services of physical therapy assistants who are
supervised by physical therapists; and
147
(B) of such requirement on the cap im-
posed under section 1833(g) of the Social Secu-
rity Act (42 U.S.C. 1395l(g)) on physical ther-
apy services.
(2) REPORT.—Not later than 18 months after
the date of the enactment of this Act, the Secretary
shall submit to Congress a report on the study con-
ducted under paragraph (1).
SEC. 422. UPDATE IN RENAL DIALYSIS COMPOSITE RATE.
(a) UPDATE.—
(1) IN GENERAL.—The last sentence of section
1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by
striking ‘‘for such services furnished on or after
January 1, 2001, by 1.2 percent’’ and inserting ‘‘for
such services furnished on or after January 1, 2001,
by 2.4 percent’’.
(2) PROHIBITION ON EXEMPTIONS.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary of Health and Human
Services may not provide for an exception under
section 1881(b)(7) of the Social Security Act
(42 U.S.C. 1395rr(b)(7)) on or after December
31, 2000.
(B) SPECIAL RULES FOR 2000.—
148
(i) IN GENERAL.—Any exemption rate
under such section 1881(b)(7) in effect on
December 31, 2000, shall continue in ef-
fect so long as such rate is greater than
the composite rate as updated by the
amendment made by paragraph (1).
(ii) RESUBMISSION
OF
CERTAIN
AP-
PLICATIONS.—In the case of an application
for an exemption rate under such section
that was filed by a facility during 2000
that was not approved by the Secretary of
Health and Human Services, the facility
may submit an application for an exemp-
tion rate for that year by not later than
July 1, 2001.
(b) DEVELOPMENT OF ESRD MARKET BASKET.—
(1) DEVELOPMENT.—The Secretary of Health
and Human Services shall collect data and develop
an ESRD market basket whereby the Secretary can
estimate, before the beginning of a year, the percent-
age by which the costs for the year of the mix of
labor and nonlabor goods and services included in
the ESRD composite rate under section 1881(b)(7)
of the Social Security Act (42 U.S.C. 1395rr(b)(7))
will exceed the costs of such mix of goods and serv-
149
ices for the preceding year. In developing such index,
the Secretary may take into account measures of
changes in—
(A) technology used in furnishing dialysis
services;
(B) the manner or method of furnishing
dialysis services; and
(C) the amounts by which the payments
under such section for all services billed by a
facility for a year exceed the aggregate allow-
able audited costs of such services for such fa-
cility for such year.
(2) REPORT.—The Secretary of Health and
Human Services shall submit to Congress a report
on the index developed under paragraph (1) no later
than July 1, 2002, and shall include in the report
recommendations on the appropriateness of an an-
nual or periodic update mechanism for renal dialysis
services under the medicare program under title
XVIII of the Social Security Act based on such
index.
(c) INCLUSION OF ADDITIONAL SERVICES IN COM-
POSITE RATE.—
(1) DEVELOPMENT.—The Secretary of Health
and Human Services shall develop a system which
150
includes, to the maximum extent feasible, in the
composite rate used for payment under section
1881(b)(7) of the Social Security Act (42 U.S.C.
1395rr(b)(7)), payment for clinical diagnostic lab-
oratory tests and drugs (including drugs paid under
section 1881(b)(11)(B) of such Act (42 U.S.C.
1395rr(b)(11)(B)) that are routinely used in fur-
nishing dialysis services to medicare beneficiaries but
which are currently separately billable by renal dialy-
sis facilities.
(2) REPORT.—The Secretary shall include, as
part of the report submitted under subsection (b)(2),
a report on the system developed under paragraph
(1) and recommendations on the appropriateness of
incorporating the system into medicare payment for
renal dialysis services.
(d) GAO STUDY ON ACCESS TO SERVICES.—
(1) STUDY.—The Comptroller General of the
United States shall study access of medicare bene-
ficiaries to renal dialysis services. Such study shall
include whether there is a sufficient supply of facili-
ties to furnish needed renal dialysis services, whether
medicare payment levels are appropriate, taking into
account audited costs of facilities for all services fur-
nished, to ensure continued access to such services,
151
and improvements in access (and quality of care)
that may result in the increased use of long nightly
and short daily hemodialysis modalities.
(2) REPORT.—Not later than January 1, 2003,
the Comptroller General shall submit to Congress a
report on the study conducted under paragraph (1).
SEC. 423. PAYMENT FOR AMBULANCE SERVICES.
(a) RESTORATION
OF FULL CPI INCREASE
FOR
2001.—Section 1834(l)(3) (42 U.S.C. 1395m(l)(3)) is
amended by striking ‘‘reduced in the case of 2001 and
2002’’ each place it appears and inserting ‘‘reduced in the
case of 2002’’.
(b) MILEAGE
PAYMENTS.—Section 1834(l)(2)(E)
(42 U.S.C. 1395m(l)(2)(E)) is amended by inserting be-
fore the period at the end the following: ‘‘, except that,
beginning on the date on which the Secretary implements
such fee schedule, such phase-in shall provide for full pay-
ment of any national mileage rate for ambulance services
provided by suppliers that are paid by carriers in any of
the 50 States where payment by a carrier for such services
for all such suppliers in such State did not, prior to the
implementation of the fee schedule, include a separate
amount for all mileage within the county from which the
beneficiary is transported’’.
152
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after the
date on which the Secretary of Health and Human Serv-
ices implements the fee schedule under section 1834(l) of
the Social Security Act (42 U.S.C. 1395m(l)).
SEC. 424. AMBULATORY SURGICAL CENTERS.
(a) DELAY IN IMPLEMENTATION OF PROSPECTIVE
PAYMENT SYSTEM.—The Secretary of Health and Human
Services may not implement a revised prospective payment
system for services of ambulatory surgical facilities under
section 1833(i) of the Social Security Act (42 U.S.C.
1395l(i)) before January 1, 2002.
(b) EXTENDING PHASE-IN TO 4 YEARS.—Section
226 of the BBRA (113 Stat. 1501A–354) is amended by
striking paragraphs (1) and (2) and inserting the fol-
lowing:
‘‘(1) in the first year of its implementation,
only a proportion (specified by the Secretary and not
to exceed 1⁄4) of the payment for such services shall
be made in accordance with such system and the re-
mainder shall be made in accordance with current
regulations; and
‘‘(2) in each of the following 2 years a propor-
tion (specified by the Secretary and not to exceed
1⁄2, and 3⁄4, respectively) of the payment for such
153
services shall be made under such system and the
remainder shall be made in accordance with current
regulations.’’.
(c) DEADLINE FOR USE OF 1999 OR LATER COST
SURVEYS.—Section 226 of BBRA (113 Stat. 1501A–354)
is amended by adding at the end the following:
‘‘By not later than January 1, 2003, the Secretary shall
incorporate data from a 1999 medicare cost survey or a
subsequent cost survey for purposes of implementing or
revising such system.’’.
SEC. 425. FULL UPDATE FOR DURABLE MEDICAL EQUIP-
MENT.
(a) IN GENERAL.—Section 1834(a)(14) (42 U.S.C.
1395m(a)(14)) is amended—
(1) by redesignating subparagraph (D) as sub-
paragraph (F);
(2) in subparagraph (C)—
(A) by striking ‘‘through 2002’’ and insert-
ing ‘‘through 2000’’; and
(B) by striking ‘‘and’’ at the end; and
(3) by inserting after subparagraph (C) the fol-
lowing new subparagraphs:
‘‘(D) for 2001, the percentage increase in
the Consumer Price Index for all urban con-
154
sumers (U.S. city average) for the 12-month
period ending with June 2000;
‘‘(E) for 2002, 0 percentage points; and’’.
(b) CONFORMING AMENDMENTS TO BBRA.—Sub-
section (a) of section 228 of BBRA (113 Stat. 1501A–
356) is amended—
(1) in the matter preceding paragraph (1), by
striking ‘‘for such items’’;
(2) in paragraph (1), by inserting ‘‘oxygen and
oxygen equipment for’’ after ‘‘(1)’’; and
(3) in paragraph (2), by inserting ‘‘all such cov-
ered items for’’ after ‘‘(2)’’.
(c) EFFECTIVE DATE.—The amendments made by
subsection (b) shall take effect as if included in the enact-
ment of BBRA.
SEC. 426. FULL UPDATE FOR ORTHOTICS AND PROS-
THETICS.
Section 1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A))
is amended—
(1) by redesignating clause (vi) as clause (viii);
(2) in clause (v)—
(A) by striking ‘‘through 2002’’ and insert-
ing ‘‘through 2000’’; and
(B) by striking ‘‘and’’ at the end; and
155
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) for 2001, the percentage in-
crease in the consumer price index for all
urban consumers (U.S. city average) for
the 12-month period ending with June
2000;
‘‘(vii) for 2002, 1 percent; and’’.
SEC. 427. ESTABLISHMENT OF SPECIAL PAYMENT PROVI-
SIONS 
AND 
REQUIREMENTS 
FOR 
PROS-
THETICS AND CERTAIN CUSTOM FABRICATED
ORTHOTIC ITEMS.
(a) IN GENERAL.—Section 1834(h)(1) (42 U.S.C.
1395m(h)(1)) is amended by adding at the end the fol-
lowing:
‘‘(F) SPECIAL PAYMENT RULES FOR CER-
TAIN PROSTHETICS AND CUSTOM FABRICATED
ORTHOTICS.—
‘‘(i) IN GENERAL.—No payment shall
be made under this subsection for an item
of custom fabricated orthotics described in
clause (ii) or for an item of prosthetics un-
less such item is—
‘‘(I) furnished by a qualified
practitioner; and
156
‘‘(II) fabricated by a qualified
practitioner or a qualified supplier at
a facility that meets such criteria as
the Secretary determines appropriate.
‘‘(ii) DESCRIPTION OF CUSTOM FAB-
RICATED ITEM.—
‘‘(I) IN GENERAL.—An item de-
scribed in this clause is an item of
custom fabricated orthotics that re-
quires education, training, and experi-
ence to custom fabricate and that is
included in a list established by the
Secretary in subclause (II). Such an
item does not include shoes and shoe
inserts.
‘‘(II) LIST OF ITEMS.—The Sec-
retary, in consultation with appro-
priate experts in orthotics (including
national organizations representing
manufacturers of orthotics), shall es-
tablish and update as appropriate a
list of items to which this subpara-
graph applies. No item may be in-
cluded in such list unless the item is
157
individually fabricated for the patient
over a positive model of the patient.
‘‘(iii) QUALIFIED PRACTITIONER DE-
FINED.—In this subparagraph, the term
‘qualified practitioner’ means a physician
or other individual who—
‘‘(I) is a qualified physical thera-
pist or a qualified occupational thera-
pist;
‘‘(II) in the case of a State that
provides for the licensing of orthotics
and 
prosthetics, 
is 
licensed 
in
orthotics or prosthetics by the State
in which the item is supplied; or
‘‘(III) in the case of a State that
does not provide for the licensing of
orthotics and prosthetics, is specifi-
cally trained and educated to provide
or manage the provision of prosthetics
and custom-designed or fabricated
orthotics, and is certified by the
American Board for Certification in
Orthotics and Prosthetics, Inc. or by
the Board for Orthotist/Prosthetist
Certification, or is credentialed and
158
approved by a program that the Sec-
retary determines, in consultation
with appropriate experts in orthotics
and prosthetics, has training and edu-
cation standards that are necessary to
provide such prosthetics and orthotics.
‘‘(iv) 
QUALIFIED
SUPPLIER
DE-
FINED.—In this subparagraph, the term
‘qualified supplier’ means any entity that
is accredited by the American Board for
Certification in Orthotics and Prosthetics,
Inc. or by the Board for Orthotist/Pros-
thetist Certification, or accredited and ap-
proved by a program that the Secretary
determines has accreditation and approval
standards that are essentially equivalent to
those of such Board.’’.
(b) EFFECTIVE DATE.—Not later than 1 year after
the date of the enactment of this Act, the Secretary of
Health and Human Services shall promulgate revised reg-
ulations to carry out the amendment made by subsection
(a) using a negotiated rulemaking process under sub-
chapter III of chapter 5 of title 5, United States Code.
(c) GAO STUDY AND REPORT.—
159
(1) STUDY.—The Comptroller General of the
United States shall conduct a study on HCFA Rul-
ing 96–1, issued on September 1, 1996, with respect
to distinguishing orthotics from durable medical
equipment under the medicare program under title
XVIII of the Social Security Act. The study shall as-
sess the following matters:
(A) The compliance of the Secretary of
Health and Human Services with the Adminis-
trative Procedures Act (under chapter 5 of title
5, United States Code) in making such ruling.
(B) The potential impact of such ruling on
the health care furnished to medicare bene-
ficiaries under the medicare program, especially
those beneficiaries with degenerative musculo-
skeletal conditions.
(C) The potential for fraud and abuse
under the medicare program if payment were
provided for orthotics used as a component of
durable medical equipment only when made
under the special payment provision for certain
prosthetics and custom fabricated orthotics
under section 1834(h)(1)(F) of the Social Secu-
rity Act, as added by subsection (a) and fur-
160
nished by qualified practitioners under that sec-
tion.
(D) The impact on payments under titles
XVIII and XIX of the Social Security Act if
such ruling were overturned.
(2) REPORT.—Not later than 6 months after
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report on
the study conducted under paragraph (1).
SEC. 428. REPLACEMENT OF PROSTHETIC DEVICES AND
PARTS.
(a) IN GENERAL.—Section 1834(h)(1) (42 U.S.C.
1395m(h)(1)), as amended by section 427(a), is further
amended by adding at the end the following new subpara-
graph:
‘‘(G) REPLACEMENT OF PROSTHETIC DE-
VICES AND PARTS.—
‘‘(i) IN GENERAL.—Payment shall be
made for the replacement of prosthetic de-
vices which are artificial limbs, or for the
replacement of any part of such devices,
without regard to continuous use or useful
lifetime restrictions if an ordering physi-
cian determines that the provision of a re-
placement device, or a replacement part of
161
such a device, is necessary because of any
of the following:
‘‘(I) A change in the physio-
logical condition of the patient.
‘‘(II) An irreparable change in
the condition of the device, or in a
part of the device.
‘‘(III) The condition of the de-
vice, or the part of the device, re-
quires repairs and the cost of such re-
pairs would be more than 60 percent
of the cost of a replacement device, or,
as the case may be, of the part being
replaced.
‘‘(ii) CONFIRMATION
MAY
BE
RE-
QUIRED
IF
REPLACEMENT
DEVICE
OR
PART IS LESS THAN 3 YEARS OLD.—If a
physician determines that a replacement
device, or a replacement part, is necessary
pursuant to clause (i)—
‘‘(I) such determination shall be
controlling; and
‘‘(II) such replacement device or
part shall be deemed to be reasonable
and necessary for purposes of section
162
1862(a)(1)(A); except that if the de-
vice, or part, being replaced is less
than 3 years old (calculated from the
date on which the beneficiary began to
use the device or part), the Secretary
may also require confirmation of ne-
cessity of the replacement device, or,
as the case may be, the replacement
part.’’.
(b) PREEMPTION OF RULE.—The provisions of sec-
tion 1834(h)(1)(G) as added by subsection (a) shall super-
sede any rule that as of the date of the enactment of this
Act may have applied a 5-year replacement rule with re-
gard to prosthetic devices.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to items replaced on or after
April 1, 2001.
SEC. 429. REVISED PART B PAYMENT FOR DRUGS AND
BIOLOGICALS AND RELATED SERVICES.
(a) RECOMMENDATIONS
FOR REVISED PAYMENT
METHODOLOGY FOR DRUGS AND BIOLOGICALS.—
(1) STUDY.—
(A) IN GENERAL.—The Comptroller Gen-
eral of the United States shall conduct a study
on the reimbursement for drugs and biologicals
163
under the current medicare payment method-
ology (provided under section 1842(o) of the
Social Security Act (42 U.S.C. 1395u(o)) and
for related services under part B of title XVIII
of such Act. In the study, the Comptroller Gen-
eral shall—
(i) identify the average prices at
which such drugs and biologicals are ac-
quired by physicians and other suppliers;
(ii) quantify the difference between
such average prices and the reimbursement
amount under such section; and
(iii) determine the extent to which (if
any) payment under such part is adequate
to compensate physicians, providers of
services, or other suppliers of such drugs
and biologicals for costs incurred in the ad-
ministration, handling, or storage of such
drugs or biologicals.
(B) CONSULTATION.—In conducting the
study under subparagraph (A), the Comptroller
General shall consult with physicians, providers
of services, and suppliers of drugs and
biologicals under the medicare program under
title XVIII of such Act, as well as other organi-
164
zations involved in the distribution of such
drugs and biologicals to such physicians, pro-
viders of services, and suppliers.
(2) REPORT.—Not later than 9 months after
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress and to the
Secretary of Health and Human Services a report
on the study conducted under this subsection, and
shall include in such report recommendations for re-
vised payment methodologies described in paragraph
(3).
(3) RECOMMENDATIONS
FOR
REVISED
PAY-
MENT METHODOLOGIES.—
(A) IN GENERAL.—The Comptroller Gen-
eral shall provide specific recommendations for
revised payment methodologies for reimburse-
ment for drugs and biologicals and for related
services under the medicare program. The
Comptroller General may include in the
recommendations—
(i) proposals to make adjustments
under subsection (c) of section 1848 of the
Social Security Act (42 U.S.C. 1395w–4)
for the practice expense component of the
physician fee schedule under such section
165
for the costs incurred in the administra-
tion, handling, or storage of certain cat-
egories of such drugs and biologicals, if ap-
propriate; and
(ii) proposals for new payments to
providers of services or suppliers for such
costs, if appropriate.
(B) 
ENSURING
PATIENT
ACCESS
TO
CARE.—In making recommendations under this
paragraph, the Comptroller General shall en-
sure that any proposed revised payment meth-
odology is designed to ensure that medicare
beneficiaries continue to have appropriate ac-
cess to health care services under the medicare
program.
(C) MATTERS
CONSIDERED.—In making
recommendations under this paragraph, the
Comptroller General shall consider—
(i) the method and amount of reim-
bursement for similar drugs and biologicals
made by large group health plans;
(ii) as a result of any revised payment
methodology, the potential for patients to
receive inpatient or outpatient hospital
166
services in lieu of services in a physician’s
office; and
(iii) the effect of any revised payment
methodology on the delivery of drug thera-
pies by hospital outpatient departments.
(D) COORDINATION WITH BBRA STUDY.—
In making recommendations under this para-
graph, the Comptroller General shall conclude
and take into account the results of the study
provided for under section 213(a) of BBRA
(113 Stat. 1501A–350).
(b) IMPLEMENTATION OF NEW PAYMENT METHOD-
OLOGY.—
(1) IN GENERAL.—Notwithstanding any other
provision of law, based on the recommendations con-
tained in the report under subsection (a), the Sec-
retary of Health and Human Services, subject to
paragraph (2), shall revise the payment methodology
under section 1842(o) of the Social Security Act (42
U.S.C. 1395u(o)) for drugs and biologicals furnished
under part B of the medicare program. To the ex-
tent the Secretary determines appropriate, the Sec-
retary may provide for the adjustments to payments
amounts referred to in subsection (a)(3)(A)(i) or ad-
167
ditional 
payments 
referred 
to 
in 
subsection
(a)(2)(A)(ii).
(2) LIMITATION.—In revising the payment
methodology under paragraph (1), in no case may
the estimated aggregate payments for drugs and
biologicals under the revised system (including addi-
tional 
payments 
referred 
to 
in 
subsection
(a)(3)(A)(ii)) exceed the aggregate amount of pay-
ment for such drugs and biologicals, as projected by
the Secretary, that would have been made under the
payment methodology in effect under such section
1842(o).
(c) TEMPORARY INJUNCTION AGAINST REDUCTIONS
IN PAYMENT RATES.—Notwithstanding any other provi-
sion of law, the Administrator of the Health Care Financ-
ing Administration may not directly or indirectly increase
or decrease the rates of reimbursement (in effect on Octo-
ber 1, 2000) for drugs and biologicals under the current
medicare payment methodology (provided under section
1842(o) of such Act (42 U.S.C. 1395u(o)) until such time
as the Secretary has reviewed the report submitted under
subsection (a)(2).
168
SEC. 430. CONTRAST ENHANCED DIAGNOSTIC PROCE-
DURES UNDER HOSPITAL PROSPECTIVE PAY-
MENT SYSTEM.
(a) SEPARATE CLASSIFICATION.—Section 1833(t)(2)
(42 U.S.C. 1395l(t)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’; and
(3) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G) the Secretary shall create additional
groups of covered OPD services that classify
separately those procedures that utilize contrast
media from those that do not.’’.
(b) CONFORMING AMENDMENT.—Section 1861(t)(1)
(42 U.S.C. 1395x(t)(1)) is amended by inserting ‘‘(includ-
ing contrast agents)’’ after ‘‘only such drugs’’.
(c) EFFECTIVE DATE.—The amendments made by
this section apply to items and services furnished on or
after January 1, 2001.
SEC. 431. QUALIFICATIONS FOR COMMUNITY MENTAL
HEALTH CENTERS.
(a) MEDICARE PROGRAM.—Section 1861(ff)(3)(B)
(42 U.S.C. 1395x(ff)(3)(B)) is amended by striking ‘‘enti-
169
ty’’ and all that follows and inserting the following: ‘‘entity
that—
‘‘(i)(I) provides the mental health services de-
scribed in section 1913(c)(1) of the Public Health
Service Act; or
‘‘(II) in the case of an entity operating in a
State that by law precludes the entity from pro-
viding itself the service described in subparagraph
(E) of such section, provides for such service by con-
tract with an approved organization or entity (as de-
termined by the Secretary);
‘‘(ii) meets applicable licensing or certification
requirements for community mental health centers
in the State in which it is located; and
‘‘(iii) meets such additional conditions as the
Secretary shall specify to ensure (I) the health and
safety of individuals being furnished such services,
(II) the effective and efficient furnishing of such
services, and (III) the compliance of such entity with
the criteria described in section 1931(c)(1) of the
Public Health Service Act.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies with respect to community mental
health centers with respect to services furnished on or
170
after the first day of the third month beginning after the
date of the enactment of this Act.
SEC. 432. MODIFICATION OF MEDICARE BILLING REQUIRE-
MENTS FOR CERTAIN INDIAN PROVIDERS.
(a) IN
GENERAL.—Section 1880(a) (42 U.S.C.
1395qq(a)) is amended by adding at the end the following
new sentence: ‘‘A hospital or a free-standing ambulatory
care clinic (as defined by the Secretary), whether operated
by the Indian Health Service or by an Indian tribe or trib-
al organization (as those terms are defined in section 4
of the Indian Health Care Improvement Act), shall be eli-
gible for payments for services for which payment is made
pursuant to section 1848, notwithstanding sections
1814(c) and 1835(d), if and for so long as it meets all
of the requirements which are applicable generally to such
payments, services, hospitals, and clinics.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to services furnished on or after
January 1, 2001.
SEC. 433. GAO STUDY ON COVERAGE OF SURGICAL FIRST
ASSISTING SERVICES OF CERTIFIED REG-
ISTERED NURSE FIRST ASSISTANTS.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study on the effect on the medicare
program under title XVIII of the Social Security Act and
171
on medicare beneficiaries of coverage under the program
of surgical first assisting services of certified registered
nurse first assistants. The Comptroller General shall con-
sider the following when conducting the study:
(1) Any impact on the quality of care furnished
to medicare beneficiaries by reason of such coverage.
(2) Appropriate education and training require-
ments for certified registered nurse first assistants
who furnish such first assisting services.
(3) Appropriate rates of payment under the
program to such certified registered nurse first as-
sistants for furnishing such services, taking into ac-
count the costs of compensation, overhead, and su-
pervision attributable to certified registered nurse
first assistants.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Comptroller General shall
submit to Congress a report on the study conducted under
subsection (a).
SEC. 434. MEDPAC STUDY AND REPORT ON MEDICARE RE-
IMBURSEMENT FOR SERVICES PROVIDED BY
CERTAIN PROVIDERS.
(a) STUDY.—The Medicare Payment Advisory Com-
mission shall conduct a study on the appropriateness of
the current payment rates under the medicare program
172
under title XVIII of the Social Security Act for services
provided by a—
(1) certified nurse-midwife (as defined in sub-
section (gg)(2) of section 1861 of such Act (42
U.S.C. 1395x);
(2) physician assistant (as defined in subsection
(aa)(5)(A) of such section);
(3) nurse practitioner (as defined in such sub-
section); and
(4) clinical nurse specialist (as defined in sub-
section (aa)(5)(B) of such section).
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Commission shall
submit to Congress a report on the study conducted under
subsection (a), together with any recommendations for leg-
islation that the Commission determines to be appropriate
as a result of such study.
SEC. 435. MEDPAC STUDY AND REPORT ON MEDICARE COV-
ERAGE OF SERVICES PROVIDED BY CERTAIN
NONPHYSICIAN PROVIDERS.
(a) STUDY.—
(1) IN GENERAL.—The Medicare Payment Ad-
visory Commission shall conduct a study to deter-
mine the appropriateness of providing coverage
173
under the medicare program under title XVIII of the
Social Security Act for services provided by a—
(A) surgical technologist;
(B) marriage counselor;
(C) marriage and family therapist;
(D) pastoral care counselor; and
(E) licensed professional counselor of men-
tal health.
(2) COSTS TO PROGRAM.—The study shall con-
sider the short-term and long-term benefits, and
costs to the medicare program, of providing the cov-
erage described in paragraph (1).
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Commission shall
submit to Congress a report on the study conducted under
subsection (a), together with any recommendations for leg-
islation that the Commission determines to be appropriate
as a result of such study.
SEC. 436. GAO STUDY AND REPORT ON THE COSTS OF
EMERGENCY 
AND 
MEDICAL 
TRANSPOR-
TATION SERVICES.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study on the costs of providing
emergency and medical transportation services across the
174
range of acuity levels of conditions for which such trans-
portation services are provided.
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Comptroller General
shall submit to Congress a report on the study conducted
under subsection (a), together with recommendations for
any changes in methodology or payment level necessary
to fairly compensate suppliers of emergency and medical
transportation services and to ensure the access of bene-
ficiaries under the medicare program under title XVIII of
the Social Security Act.
SEC. 437. GAO STUDIES AND REPORTS ON MEDICARE PAY-
MENTS.
(a) GAO STUDY ON HCFA POST-PAYMENT AUDIT
PROCESS.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study on the post-pay-
ment audit process under the medicare program
under title XVIII of the Social Security Act as such
process applies to physicians, including the proper
level of resources that the Health Care Financing
Administration should devote to educating physi-
cians regarding—
(A) coding and billing;
(B) documentation requirements; and
175
(C) the calculation of overpayments.
(2) REPORT.—Not later than 18 months after
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report on
the study conducted under paragraph (1) together
with specific recommendations for changes or im-
provements in the post-payment audit process de-
scribed in such paragraph.
(b) GAO STUDY ON ADMINISTRATION AND OVER-
SIGHT.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study on the aggre-
gate effects of regulatory, audit, oversight, and pa-
perwork burdens on physicians and other health care
providers participating in the medicare program
under title XVIII of the Social Security Act.
(2) REPORT.—Not later than 18 months after
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report on
the study conducted under paragraph (1) together
with recommendations regarding any area in
which—
(A) a reduction in paperwork, an ease of
administration, or an appropriate change in
oversight and review may be accomplished; or
176
(B) additional payments or education are
needed to assist physicians and other health
care providers in understanding and complying
with any legal or regulatory requirements.
SEC. 438. MEDPAC STUDY ON ACCESS TO OUTPATIENT PAIN
MANAGEMENT SERVICES.
(a) STUDY.—The Medicare Payment Advisory Com-
mission shall conduct a study on the barriers to coverage
and payment for outpatient interventional pain medicine
procedures under the medicare program under title XVIII
of the Social Security Act. Such study shall examine—
(1) the specific barriers imposed under the
medicare program on the provision of pain manage-
ment procedures in hospital outpatient departments,
ambulatory surgery centers, and physicians’ offices;
and
(2) the consistency of medicare payment poli-
cies for pain management procedures in those dif-
ferent settings.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Commission shall submit
to Congress a report on the study.
177
TITLE V—PROVISIONS
RELATING TO PARTS A AND B
Subtitle A—Home Health Services
SEC. 501. 2-YEAR ADDITIONAL DELAY IN APPLICATION OF
15 PERCENT REDUCTION ON PAYMENT LIM-
ITS FOR HOME HEALTH SERVICES.
(a) IN
GENERAL.—Section 1895(b)(3)(A)(i) (42
U.S.C. 1395fff(b)(3)(A)(i)) is amended—
(1) by redesignating subclause (II) as subclause
(III);
(2) in subclause (III), as redesignated, by strik-
ing ‘‘described in subclause (I)’’ and inserting ‘‘de-
scribed in subclause (II)’’; and
(3) by inserting after subclause (I) the fol-
lowing new subclause:
‘‘(II) For each of the two 12-
month periods beginning after the pe-
riod described in subclause (I), such
amount (or amounts) shall be equal to
the amount (or amounts) determined
under subclause (I), updated under
subparagraph (B).’’.
(b) CHANGE IN REPORT.—Section 302(c) of BBRA
(113 Stat. 1501A–360) is amended—
178
(1) by striking ‘‘Not later than’’ and all that
follows through ‘‘(42 U.S.C. 1395fff)’’ and inserting
‘‘Not later than April 1, 2002’’; and
(2) by striking ‘‘Secretary’’ and inserting
‘‘Comptroller General of the United States’’.
(c) CASE MIX ADJUSTMENT CORRECTIONS.—
(1) IN GENERAL.—Section 1895(b)(3)(B) (42
U.S.C. 1395fff(b)(3)(B)) is amended by adding at
the end the following new clause:
‘‘(iv) ADJUSTMENT
FOR
CASE
MIX
CHANGES.—Insofar as the Secretary deter-
mines that the adjustments under para-
graph (4)(A)(i) for a previous fiscal year
(or estimates that such adjustments for a
future fiscal year) did (or are likely to) re-
sult in a change in aggregate payments
under this subsection during the fiscal year
that are a result of changes in the coding
or classification of different units of serv-
ices that do not reflect real changes in case
mix, the Secretary may adjust the stand-
ard 
prospective 
payment 
amount 
(or
amounts) under paragraph (3) for subse-
quent fiscal years so as to eliminate the ef-
179
fect of such coding or classification
changes.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies to episodes concluding on
or after October 1, 2001.
SEC. 502. RESTORATION OF FULL HOME HEALTH MARKET
BASKET UPDATE FOR HOME HEALTH SERV-
ICES FOR FISCAL YEAR 2001.
(a) IN GENERAL.—Section 1861(v)(1)(L)(x) (42
U.S.C. 1395x(v)(1)(L)(x)) is amended—
(1) by striking ‘‘2001,’’; and
(2) by adding at the end the following: ‘‘With
respect to cost reporting periods beginning during
fiscal year 2001, the update to any limit under this
subparagraph shall be the home health market bas-
ket index.’’.
(b) SPECIAL RULE FOR PAYMENT FOR FISCAL YEAR
2001 BASED
ON ADJUSTED PROSPECTIVE PAYMENT
AMOUNTS.—
(1) IN GENERAL.—Notwithstanding the amend-
ments made by subsection (a), for purposes of mak-
ing payments under section 1895(b) of the Social
Security Act (42 U.S.C. 1395fff(b)) for home health
services for fiscal year 2001, the Secretary of Health
and Human Services shall—
180
(A) with respect to episodes and visits end-
ing on or after October 1, 2000, and before
April 1, 2001, use the final standardized and
budget neutral prospective payment amounts
for 60 day episodes and standardized average
per visit amounts for fiscal year 2001 as pub-
lished by the Secretary in the Federal Register
of July 3, 2000 (65 Federal Register 41128–
41214); and
(B) with respect to episodes and visits end-
ing on or after April 1, 2001, and before Octo-
ber 1, 2001, use such amounts increased by 2.2
percent.
(2) NO EFFECT ON OTHER PAYMENTS OR DE-
TERMINATIONS.—The Secretary shall not take the
provisions of paragraph (1) into account for pur-
poses of payments, determinations, or budget neu-
trality adjustments under section 1895 of the Social
Security Act.
SEC. 503. TEMPORARY TWO-MONTH EXTENSION OF PERI-
ODIC INTERIM PAYMENTS.
(a) TEMPORARY EXTENSION.—Notwithstanding sub-
section (d) of section 4603 of BBA (42 U.S.C. 1395fff
note), as amended by section 5101(c)(2) of the Tax and
Trade Relief Extension Act of 1998 (contained in division
181
J of Public Law 105–277), the amendments made by sub-
section (b) of such section 4603 shall not take effect until
December 1, 2000, in the case of a home health agency
that was receiving periodic interim payments under sec-
tion 1815(e)(2) as of September 30, 2000.
(b) PAYMENT RULE.—The amount of such periodic
interim payment made to a home health agency by reason
of subsection (a) during each of November and December,
2000, shall be equal to the amount of such payment made
to the agency in their last full monthly periodic interim
payment. Such amount of payment shall be included in
the tentative settlement of the last cost report for the
home health agency under the payment system in effect
prior to the implementation of the prospective payment
system under section 1895(b) of the Social Security Act
(42 U.S.C. 1395fff(b)).
SEC. 504. USE OF TELEHEALTH IN DELIVERY OF HOME
HEALTH SERVICES.
Section 1895 (42 U.S.C. 1395fff) is amended by add-
ing at the end the following new subsection:
‘‘(e) CONSTRUCTION RELATED TO HOME HEALTH
SERVICES.—
‘‘(1) TELECOMMUNICATIONS.—Nothing in this
section shall be construed as preventing a home
health agency furnishing a home health unit of serv-
182
ice for which payment is made under the prospective
payment system established by this section for such
units of service from furnishing services via a tele-
communication system if such services—
‘‘(A) do not substitute for in-person home
health services ordered as part of a plan of care
certified by a physician pursuant to section
1814(a)(2)(C) or section 1835(a)(2)(A); and
‘‘(B) are not considered a home health
visit for purposes of eligibility or payment
under this title.
‘‘(2) PHYSICIAN
CERTIFICATION.—Nothing in
this section shall be construed as waiving the re-
quirement for a physician certification under section
1814(a)(2)(C) or section 1835(a)(2)(A) of such Act
(42 U.S.C. 1395f(a)(2)(C), 1395n(a)(2)(A)) for the
payment for home health services, whether or not
furnished via a telecommunications system.’’.
SEC. 505. STUDY ON COSTS TO HOME HEALTH AGENCIES
OF 
PURCHASING 
NONROUTINE 
MEDICAL
SUPPLIES.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study on variations in prices paid
by home health agencies furnishing home health services
under the medicare program under title XVIII of the So-
183
cial Security Act in purchasing nonroutine medical sup-
plies, including ostomy supplies, and volumes if such sup-
plies used, shall determine the effect (if any) of variations
on prices and volumes in the provision of such services.
(b) REPORT.—Not later than October 1, 2001, the
Comptroller General shall submit to Congress a report on
the study conducted under subsection (a), and shall in-
clude in the report recommendations respecting whether
payment for nonroutine medical supplies furnished in con-
nection with home health services should be made sepa-
rately from the prospective payment system for such serv-
ices.
SEC. 506. TREATMENT OF BRANCH OFFICES; GAO STUDY
ON SUPERVISION OF HOME HEALTH CARE
PROVIDED IN ISOLATED RURAL AREAS.
(a) TREATMENT OF BRANCH OFFICES.—
(1) IN GENERAL.—Notwithstanding any other
provision of law, in determining for purposes of title
XVIII of the Social Security Act whether an office
of a home health agency constitutes a branch office
or a separate home health agency, neither the time
nor distance between a parent office of the home
health agency and a branch office shall be the sole
determinant of a home health agency’s branch office
status.
184
(2) CONSIDERATION
OF
FORMS
OF
TECH-
NOLOGY IN DEFINITION OF SUPERVISION.—The Sec-
retary of Health and Human Services may include
forms of technology in determining what constitutes
‘‘supervision’’ for purposes of determining a home
health agency’s branch office status under para-
graph (1).
(b) GAO STUDY.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study of the provision
of adequate supervision to maintain quality of home
health services delivered under the medicare pro-
gram under title XVIII of the Social Security Act in
isolated rural areas. The study shall evaluate the
methods that home health agency branches and
subunits use to maintain adequate supervision in the
delivery of services to clients residing in those areas,
how these methods of supervision compare to re-
quirements that subunits independently meet medi-
care conditions of participation, and the resources
utilized by subunits to meet such conditions.
(2) REPORT.—Not later than January 1, 2002,
the Comptroller General shall submit to Congress a
report on the study conducted under paragraph (1).
The report shall include recommendations on wheth-
185
er exceptions are needed for subunits and branches
of home health agencies under the medicare program
to maintain access to the home health benefit or
whether alternative policies should be developed to
assure adequate supervision and access and rec-
ommendations on whether a national standard for
supervision is appropriate.
SEC. 507. CLARIFICATION OF THE HOMEBOUND DEFINI-
TION UNDER THE MEDICARE HOME HEALTH
BENEFIT.
(a) CLARIFICATION.—
(1) 
IN
GENERAL.—Sections 
1814(a) 
and
1835(a) (42 U.S.C. 1395f(a) and 1395n(a)) are
each amended—
(A) in the last sentence, by striking ‘‘, and
that absences of the individual from home are
infrequent or of relatively short duration, or are
attributable to the need to receive medical
treatment’’; and
(B) by adding at the end the following new
sentences: ‘‘Any absence of an individual from
the home attributable to the need to receive
health care treatment, including regular ab-
sences for the purpose of participating in thera-
peutic, psychosocial, or medical treatment in an
186
adult day-care program that is licensed or cer-
tified by a State, or accredited, to furnish adult
day-care services in the State shall not dis-
qualify an individual from being considered to
be ‘confined to his home’. Any other absence of
an individual from the home shall not so dis-
qualify an individual if the absence is of infre-
quent or of relatively short duration. For pur-
poses of the preceding sentence, any absence for
the purpose of attending a religious service
shall be deemed to be an absence of infrequent
or short duration.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to items and services
provided on or after the date of enactment of this
Act.
(b) STUDY.—
(1) IN GENERAL.—The Comptroller General of
the United States shall conduct an evaluation of the
effect of the amendment on the cost of and access
to home health services under the medicare program
under title XVIII of the Social Security Act.
(2) REPORT.—Not later than 1 year after the
date of the enactment of this Act, the Comptroller
187
General shall submit to Congress a report on the
study conducted under paragraph (1).
SEC. 508. BONUS PAYMENTS FOR RURAL HOME HEALTH
AGENCIES IN 2001 AND 2002.
(a) INCREASE
IN PAYMENT RATES
FOR RURAL
AGENCIES
IN 2001 AND 2002.—Section 1895(b) (42
U.S.C. 1395fff(b)) is amended by adding at the end the
following new paragraph:
‘‘(7) ADDITIONAL
PAYMENT
AMOUNT
FOR
SERVICES FURNISHED IN RURAL AREAS IN 2001 AND
2002.—In the case of home health services furnished
in a rural area (as defined in section 1886(d)(2)(D))
during April 1, 2001 through December 31, 2001,
or 2002, the Secretary shall provide for an addition
or adjustment to the payment amount otherwise
made under this section for services furnished in a
rural area in an amount equal to 10 percent of the
amount otherwise determined under this sub-
section.’’.
(b) 
WAIVING
BUDGET
NEUTRALITY.—Section
1895(b)(3) (42 U.S.C. 1395fff(b)(3)) is amended by add-
ing at the end the following new subparagraph:
‘‘(D) NO
ADJUSTMENT
FOR
ADDITIONAL
PAYMENTS
FOR
RURAL
SERVICES.—The Sec-
retary shall not reduce the standard prospective
188
payment amount (or amounts) under this para-
graph applicable to home health services fur-
nished during a period to offset the increase in
payments resulting from the application of
paragraph (7) (relating to services furnished in
rural areas).’’.
Subtitle B—Direct Graduate
Medical Education
SEC. 511. INCREASE IN FLOOR FOR DIRECT GRADUATE
MEDICAL EDUCATION PAYMENTS.
Section 
1886(h)(2)(D)(iii) 
(42 
U.S.C.
1395ww(h)(2)(D)(iii)) is amended—
(1) in the heading, by striking ‘‘IN FISCAL YEAR
2001 AT 70 PERCENT OF’’ and inserting ‘‘FOR’’; and
(2) by inserting after ‘‘70 percent’’ the fol-
lowing: ‘‘, and for the cost reporting period begin-
ning during fiscal year 2002 shall not be less than
85 percent,’’.
SEC. 
512. 
CHANGE 
IN 
DISTRIBUTION 
FORMULA 
FOR
MEDICARE+CHOICE-RELATED NURSING AND
ALLIED HEALTH EDUCATION COSTS.
(a) IN GENERAL.—Section 1886(l)(2)(C) (42 U.S.C.
1395ww(l)(2)(C)) is amended by striking all that follows
‘‘multiplied by’’ and inserting the following: ‘‘the ratio
of—
189
‘‘(i) the product of (I) the Secretary’s
estimate of the ratio of the amount of pay-
ments made under section 1861(v) to the
hospital for nursing and allied health edu-
cation activities for the hospital’s cost re-
porting period ending in the second pre-
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) applies to portions of cost reporting periods
occurring on or after January 1, 2001.
190
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.—
‘‘(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
191
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.—
‘‘(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
does not meet the requirements of section
1816(c)(2) or section 1842(c)(2).
‘‘(3) REDETERMINATIONS.—
‘‘(A) IN GENERAL.—In promulgating regu-
lations under paragraph (1) with respect to ini-
192
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) APPEALS RIGHTS.—No initial de-
termination may be reconsidered or ap-
pealed under subsection (b) unless the fis-
cal intermediary or carrier has made a re-
determination of that initial determination
under this paragraph.
‘‘(ii) DECISION MAKER.—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.—Except as provided in subsections
193
(d) through (f), redeterminations shall be
made in accordance with the medical needs
of the individual, but no later than 30 days
after the fiscal intermediary or the carrier,
as the case may be, receives a request for
a redetermination. Notice of such deter-
mination shall be mailed to the individual
filing the claim before the conclusion of
such 30-day period.
‘‘(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.—(i) Subject to subparagraph
(D), any individual dissatisfied with any initial
determination under subsection (a)(1) shall be
entitled 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
194
205(g). For purposes of the preceding sentence,
any reference to the Commissioner of Social Se-
curity or the Social Security Administration in
subsection (g) or (l) of section 205 shall be con-
sidered a reference to the Secretary or the De-
partment of Health and Human Services, re-
spectively.
‘‘(ii) In making determinations under
this subsection, local and national coverage
determinations that involve the consider-
ation of medical facts of application of
medical judgment shall not be binding on
qualified independent contractors, adminis-
trative law judges or the Departmental Ap-
peals Board when determining whether a
particular item or service is covered with
respect to an individual making a claim for
benefit or the amount, duration or scope of
an item or service to which an individual
making a claim for benefits is eligible.
‘‘(B) REPRESENTATION BY PROVIDER OR
SUPPLIER.—
‘‘(i) IN
GENERAL.—Sections 206(a),
1102 and 1871 shall not be construed as
authorizing the Secretary to prohibit an in-
195
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-
ability on such individual in connection
with such representation.
‘‘(iv) 
REQUIREMENTS
FOR
REP-
RESENTATIVES OF A BENEFICIARY.—The
196
provisions of section 205(j) and 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-
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
197
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—
‘‘(I) the delivery of similar or re-
lated services to the same individual
by one or more providers of services
or suppliers, or
198
‘‘(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 by a provider of services that
the provider of services 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 indi-
vidual may request, in writing or oral-
ly, an expedited determination or an
expedited reconsideration of an initial
determination made under subsection
(a)(1), as the case may be, and the
Secretary shall provide such expedited
199
determination or expedited reconsider-
ation.
‘‘(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), if such determinations involve either
whether a particular item or service is covered with
respect to an individual making a claim for benefit
200
or the amount, duration or scope of an item or serv-
ice to which an individual making a claim for bene-
fits is eligible. Contracts shall be for an initial term
of three years and shall be renewable on a triennial
basis thereafter. This subsection shall not apply to
claims for persons that involve only the amount of
payment or the type of payment available with re-
spect to an item or service.
‘‘(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 the 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
201
have sufficient training and expertise in medical
science and legal matters to make reconsider-
ations under this subsection.
‘‘(B) RECONSIDERATIONS.—
‘‘(i) IN
GENERAL.—Subject to sub-
section (b)(1)(A)(ii), the qualified inde-
pendent contractor shall review initial de-
terminations. In the case an initial deter-
mination made with respect to whether an
item or service is reasonable and necessary
for the diagnosis or treatment of illness or
injury (under section 1862(a)(1)(A)), such
review shall include consideration of the
facts and circumstances of the initial de-
termination by a panel of physicians or
other appropriate health care professionals
and any decisions with respect to the re-
consideration shall be based on applicable
information, including clinical experience
and medical, technical, and scientific evi-
dence.
‘‘(C) DEADLINES FOR DECISIONS.—
‘‘(i) RECONSIDERATIONS.—Except as
provided in clauses (iii) and (iv), and in ac-
cordance with subsections (d), (e), and (f),
202
the qualified independent contractor shall
conduct and conclude a reconsideration
under subparagraph (B), and mail the no-
tice of the decision with respect to the re-
consideration in accordance with the med-
ical needs of the individual but not later
than the end of the 30-day period begin-
ning on the date a request for reconsider-
ation 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 by
the end of the applicable period described
in subsections (d) through (f), or to pro-
vide 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.
203
‘‘(iii) 
EXPEDITED
RECONSIDER-
ATIONS.—The qualified independent con-
tractor shall perform an expedited recon-
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-
204
vidual will be liable for payment for
such continued services.
‘‘(II) CONSULTATION WITH BEN-
EFICIARY.—In such reconsideration,
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 sub-
paragraph.
‘‘(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.
205
‘‘(D) LIMITATION ON INDIVIDUAL REVIEW-
ING DETERMINATIONS.—
‘‘(i) PHYSICIANS AND HEALTH CARE
PROFESSIONAL.—No physician or health
care professional under the employ of a
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
206
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
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-
207
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
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.—
208
‘‘(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-
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.
209
‘‘(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-
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
required by the Secretary.
‘‘(4) NUMBER
OF
QUALIFIED
INDEPENDENT
CONTRACTORS.—The Secretary shall enter into con-
210
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
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) MEDICAL EXIGENT PROCESS FOR CONTRAC-
TORS.—
‘‘(1) IN GENERAL.—An individual may request,
either orally or in writing, a medically exigent review
under subsection (b). Such request shall be made to
the contractor who made the initial determination.
211
‘‘(2) CONDITIONS FOR GRANTING A MEDICAL
EXIGENT REVIEW.—
‘‘(A) the contractor determines that the
application of the standard time frame for con-
ducting a redetermination under subsection
(a)(3) could seriously jeopardize the life or
health of the individual or such individual’s
ability to attain, maintain, or regain maximum
function, or
‘‘(B) the individual submits a certification
from a physician that the jeopardy could occur.
‘‘(3) DEADLINE
FOR
MEDICAL
EXIGENT
RE-
VIEWS.—If an individual is granted a medical exi-
gent review under this subsection, the review shall
be conducted and notice of the review shall be made,
in accordance with the individual’s medical needs,
but no later than 72 hours after the request was
made.
‘‘(4) FAILURE TO MEET TIME FRAMES.—In the
event the contractor who made the initial determina-
tion to meet the time frame in paragraph (3), the
individual may proceed to the next level of review.
‘‘(e) MEDICAL EXIGENT PROCESS FOR QUALIFIED
INDEPENDENT CONTRACTORS.—
212
‘‘(1) IN GENERAL.—An individual may request,
either orally or in writing, a medically exigent recon-
sideration of a determination made under subsection
(d). Such request shall be made to the qualified
independent contractor.
‘‘(2) CONDITIONS FOR GRANTING A MEDICAL
EXIGENT REVIEW.—
‘‘(A) the qualified independent contractor
determines that the application of the standard
time frame for conducting a review could seri-
ously jeopardize the life or health of the indi-
vidual or such individual’s ability to attain,
maintain, or regain maximum function, or
‘‘(B) the individual submits a certification
from a physician that the jeopardy could occur.
‘‘(3) DEADLINE
FOR
MEDICAL
EXIGENT
RE-
VIEWS.—If an individual is granted a medical exi-
gent reconsideration under this paragraph, the re-
view shall be conducted and notice of the review
shall be made, in accordance with the individuals
medical needs, but no later than 72 hours after the
request was made.
‘‘(4) FAILURE TO MEET TIME FRAMES.—In the
event the qualified independent contractor or the
Secretary fails to meet the time frame in paragraph
213
(3), the individual may proceed to the next level of
review.
‘‘(f) TIME FRAME FOR REVIEW BY SECRETARY.—
The Secretary shall conduct all reviews in a time frame
that is in accordance with the medical exigencies of the
case.
‘‘(g) 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-
garding appeal rights and respond to inquiries re-
garding the status of appeals.
‘‘(3) CONTINUING
EDUCATION
REQUIREMENT
FOR QUALIFIED INDEPENDENT CONTRACTORS AND
214
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-
terminations by qualified independent contrac-
tors with respect to inconsistent decisions and
an analysis of the causes of any such inconsist-
encies.
215
‘‘(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 LIMI-
TATIONS
ON LIABILITY
OF QUALIFIED INDEPENDENT
CONTRACTORS
TO MEDICARE+CHOICE INDEPENDENT
APPEALS CONTRACTORS.—Section 1852(g)(4) (42 U.S.C.
1395w 22(g)(4)) is amended by adding at the end the fol-
lowing: The provisions of section 1869(c)(5) shall apply
to independent outside entities under contract with the
Secretary under this paragraph.
216
‘‘(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 apply with respect to initial determinations
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:
‘‘(h) 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)
of this title, relating to publication in the
Federal Register or opportunity for public
comment, was not satisfied.
217
‘‘(iii) Upon the filing of a complaint
by an aggrieved party, the Secretary shall
provide for the review of a national cov-
erage determination by the advisory panel
established pursuant to paragraph (3)
(hereinafter referred to as the ‘‘Panel’’). In
conducting such a review, the Panel shall
review the record to evaluate whether the
determination is in accord with sound med-
ical practice, taking into account medical,
technological, or clinical advancements,
and any other medical, scientific, or other
relevant information that the Panel deems
reliable and may consider information that
was not available or was not considered at
the time of the determination. The Panel
shall make a recommendation to the Sec-
retary as to whether the determination
should be upheld, modified, or set aside,
and the Secretary shall have 30 days from
the receipt of such recommendation to
issue a decision.
‘‘(iv) A decision of the Secretary
under (h)(1)(A)(iii) constitutes a final
218
agency action and is subject to judicial re-
view.
‘‘(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) Upon the filing of a complaint by an
aggrieved party (except in the cases of issues
regarding the coding or supporting documenta-
tion), the Secretary shall provide for the review
of a local coverage determination by the Panel
as provided in (h)(3) except that for purposes
of a review under this subclause, the Panel
shall also consider any special circumstances
that may be relevant to the practice of medicine
in the locality. The Panel shall make a rec-
ommendation to the Secretary as to whether
219
the determination should be upheld, modified,
or set aside, and the Secretary shall have 30
days from the receipt of such recommendation
to issue a decision to uphold the determination
or to remand it to the fiscal intermediary or
carrier for revision. A fiscal intermediary or
carrier shall have 30 days from the receipt of
any remand instructions from the Secretary in
which to complete such revision. The decision of
the Secretary shall have effect only with respect
to the local coverage determination. Such a de-
cision 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) ESTABLISHMENT OF MEDICAL ADVISORY
PANEL.—For the purposes of providing expert clin-
ical and scientific advice and recommendations to
220
the Secretary regarding reconsiderations of national
or local coverage determinations under paragraphs
(1) and (2), the Secretary shall establish panels of
experts or use panels of experts (or members of such
panels) established before the date of enactment [in-
sert name of Act] or both. The Secretary shall ap-
point as members of any such panel persons the Sec-
retary determines to have an appropriate level of ex-
pertise in the subject matter, but shall not appoint
any individual who is in the regular full-time employ
of the Health Care Financing Administration or nay
individual who participated in the initial coverage
determination that is the subject of a reconsider-
ation request.
‘‘(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
221
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:
‘‘(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) In the case of an action described in
clause (i)(IV), if the Secretary fails to take an
222
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
action described in clause (i)(III) as of the
deadline.
‘‘(C) 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
223
Health and Human Services. The Secretary shall re-
move from such decision any information that would
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
224
report submitted under clause (i) on the medi-
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 re-
spect 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,
225
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 q(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,
226
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 apply with respect to—
(1) a review of any national or local coverage
determination filed,
(2) a request to make such a determination
made,
(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
227
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 the title XVIII of the Social Security Act that
permit 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
228
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.—
229
(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
230
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
231
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-
232
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—
233
‘‘(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
234
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-
235
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—
236
(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 applies to serv-
ices furnished during the 2-year period beginning on Jan-
uary 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-
237
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) applies beginning with 2001.
(b) REQUIREMENT FOR ON THE RECORD VOTES ON
RECOMMENDATIONS.—Section 
1805(b) 
(42 
U.S.C.
238
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.
239
(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
240
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-
241
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;
242
(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. APPLICATION OF BLOODBORNE PATHOGEN
STANDARD TO CERTAIN HOSPITALS.
(a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc)
is amended—
(1) in subsection (a)(1)—
(A) in subparagraph (R), by striking
‘‘and’’ at the end;
(B) in subparagraph (S), by striking the
period at the end and inserting ‘‘, and’’; and
243
(C) by inserting after subparagraph (S)
the following new subparagraph:
‘‘(T) in the case of hospitals that are not other-
wise subject to regulation by the Occupational Safe-
ty and Health Administration, to comply with the
Bloodborne 
Pathogens 
standard 
under 
section
1910.1030 of title 29 of the Code of Federal Regula-
tions (or as subsequently redesignated).’’; and
(2) by adding at the end of subsection (b) the
following new paragraph:
‘‘(4) With respect to a failure to comply with the re-
quirement of subsection (a)(1)(T), the Secretary shall not
terminate an agreement under this section but shall im-
pose a monetary fine in an amount similar to the amount
of civil penalties that may be imposed under section 17
of the Occupational Safety and Health Act of 1970 for
a violation of the standard referred to in such subsection
by a hospital subject to regulation by the Occupational
Safety and Health Administration. Such penalty shall be
imposed and collected in the same manner as civil money
penalties under subsection (a) of section 1128A are im-
posed and collected under that section.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section apply to hospitals as of January 1, 2002.
244
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. 
INCREASED 
PAYMENT 
FOR 
ACCOUNTABLE
MEDICARE+CHOICE PLANS.
Section 1853 (42 U.S.C. 1395w–23) is amended—
(1) in subsection (a)(1)(A), by striking ‘‘and
(i)’’ and inserting ‘‘(i), and (j)’’; and
(2) by adding at the end the following new sub-
section:
‘‘(j) INCREASED
PAYMENT
FOR
ACCOUNTABLE
MEDICARE+CHOICE COORDINATED CARE PLANS.—
‘‘(1) 
IN
GENERAL.—In 
the 
case 
of 
a
Medicare+Choice coordinated care plan that enters
into a 3-year contract for the period of 2001
through 2003, the amount of the monthly payment
otherwise made under this section (taking into ac-
count, if applicable, subsection (i)), shall be in-
creased for each year of the contract period by the
amount necessary to ensure that the total monthly
245
payment is equal to the greater of the adjusted min-
imum amount specified in paragraph (2) or an
amount equal to the otherwise applicable rate in-
creased by 1⁄3 of 1 percent.
‘‘(2) ADJUSTED MINIMUM AMOUNT.—For pur-
poses of this subsection, the adjusted minimum
amount shall equal—
‘‘(A) in 2001—
‘‘(i) for any payment area in a Metro-
politan Statistical Area or a Primary Met-
ropolitan Statistical Area, $525 per month;
and
‘‘(ii) for any other payment area,
$475;
however, in the case of a payment area outside
the 50 States and the District of Columbia,
such amount shall not exceed 110 percent of
the minimum amount for such area for 2000.
‘‘(B) in 2002 and 2003, the adjusted min-
imum amount for months during the previous
year increased by the national per capita
Medicare+Choice growth percentage, described
in subsection (c)(6)(A) for that succeeding year.
‘‘(3) PENALTY FOR CONTRACT TERMINATION.—
In the case of a Medicare+Choice coordinated care
246
plan described in paragraph (1) whose contract is
terminated prior to the end of the 3-year contract
period, the Medicare+Choice organizations that of-
fered such plan shall return to the Secretary an
amount equal to twice the total of the increased pay-
ments provided under this section. Such moneys
shall be deposited in the Federal Hospital Insurance
Trust Funds and the Federal Supplementary Med-
ical Insurance Trust Funds in such proportion as
the Secretary deems to be fair and equitable.’’.
SEC. 602. INCREASE IN MINIMUM PERCENTAGE INCREASE.
Section 
1853(c)(1)(C)(ii) 
(42 
U.S.C. 
1395w–
23(c)(1)(C)(ii)) is amended by inserting ‘‘(or 103 percent
in the case of 2001)’’ after ‘‘102 percent’’.
SEC. 603. 10-YEAR PHASE-IN OF RISK ADJUSTMENT.
Section 
1853(a)(3)(C)(ii) 
(42 
U.S.C. 
1395w–
23(a)(3)(C)(ii)) is amended—
(1) in subclause (I), by striking ‘‘and 2001’’
and inserting ‘‘and each succeeding year through the
first year in which risk adjustment is based on data
from inpatient hospital and ambulatory settings’’;
and
(2) by amending subclause (II) to read as fol-
lows:
247
‘‘(II) beginning after such first
year, insofar as such risk adjustment
is based on data from inpatient hos-
pital and ambulatory settings, the
methodology shall be phased in equal
increments over a 10-year period that
begins with such first year.’’.
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
IN
2000.—A
Medicare+Choice organization that provided notice to the
Secretary of Health and Human Services before the date
of the enactment 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
248
Medicare+Choice plan offered under such part shall be
permitted to continue participation under such part, or to
maintain the service area of such plan, for 2001 if it pro-
vides the Secretary with the information described in sec-
tion 1854(a)(1) of the Social 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).
(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-
249
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).
(d) 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-
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
250
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).
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—
251
(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)
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
252
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
(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:
253
‘‘(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). This premium adjustment may be
provided directly or as an adjustment to any social secu-
rity, railroad retirement, and civil service retirement bene-
fits, to the extent which the Secretary determines that
such an adjustment is appropriate with the concurrence
of the agencies responsible for the administration of such
benefits.’’.
(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—
(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
254
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 2002.
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—
(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-
255
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.
‘‘(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-
256
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.
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;
257
(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
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
258
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-
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
259
(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 apply to national coverage determinations
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.’’.
260
(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—
(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) apply to marketing material submitted on
or after January 1, 2001.
261
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-
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
262
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.’’.
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
263
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.
‘‘(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.—
264
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 1 or more employers or labor organizations
(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 waive or mod-
ify 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) applies 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-
265
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
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-
266
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-
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,
267
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
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-
268
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
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 January 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
269
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
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)) also shall 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
270
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.
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-
271
stantially similar payment under the same
terms and conditions that apply to simi-
larly situated skilled nursing facilities that
are 
under 
contract 
with 
the
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:
272
‘‘(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.
‘‘(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
273
through a continuing care retirement com-
munity (as defined in subparagraph (B))
which provided residence to the enrollee at
the time of such admission.
‘‘(iii) SNF RESIDENCE OF SPOUSE AT
TIME OF DISCHARGE.—The skilled nursing
facility in which the spouse of the enrollee
is residing at the time of discharge from
such hospital.
‘‘(B) 
CONTINUING
CARE
RETIREMENT
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) applies 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-
274
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 on—
(A) the scope of additional benefits pro-
vided under the Medicare+Choice program;
(B) the administrative and other costs in-
curred by Medicare+Choice organizations;
(C) the contractual relationships between
such organizations and skilled nursing facilities.
(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
275
data used by the Medicare+Choice organization with
respect to such rates, amounts, and values so sub-
mitted to determine the appropriateness of such as-
sumptions and data.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to submissions made on or after
January 1, 2001.
SEC. 623. CIVIL MONETARY PENALTIES FOR CONTRACT DE-
FAULT BY A MEDICARE+CHOICE ORGANIZA-
TION.
(a) IN GENERAL.—Section 1857(g)(3) is amended by
adding at the end the following new subparagraph:
‘‘(D) Civil monetary penalties of up to
$25,000 per enrollee or $100,000 per organiza-
tion, whichever is greater, where the finding
under subsection (c)(2)(A) is based on the orga-
nization’s defaulting on its contract.’’.
Subtitle C—Other Managed Care
Reforms
SEC. 631. 1-YEAR EXTENSION OF SOCIAL HEALTH MAINTE-
NANCE ORGANIZATION (SHMO) DEMONSTRA-
TION PROJECT.
Section 4018(b)(1) of the Omnibus Budget Reconcili-
ation Act of 1987, as amended by section 531(a)(1) of
276
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.
‘‘(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:
277
‘‘(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-
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—
278
‘‘(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—
‘‘(I) the results of such standard-
ized written health assessment; and
‘‘(II) the application of appro-
priate care planning approaches;
279
‘‘(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.—
‘‘(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-
280
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-
cluded in such reports shall include a comparison
of—
‘‘(A) data for all individuals who—
281
‘‘(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-
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
282
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.’’.
TITLE VII—MEDICAID
SEC. 701. DSH PAYMENTS.
(a) CONTINUATION OF MEDICAID DSH ALLOTMENTS
AT FISCAL YEAR 2000 LEVELS FOR FISCAL YEARS 2001
AND 2002.—Section 1923(f) (42 U.S.C. 1396r–4(f)), as
283
amended by section 601 of the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999 (as en-
acted into law by section 1000(a)(6) of Public Law 106–
113), is amended—
(1) in paragraph (2)—
(A) by striking ‘‘2002’’ in the heading and
inserting ‘‘2000’’;
(B) in the matter preceding the table, by
striking ‘‘2002’’ and inserting ‘‘2000’’; and
(C) in the table in such paragraph, by
striking the columns labeled ‘‘FY 01’’ and ‘‘FY
02’’ relating to fiscal years 2001 and 2002; and
(2) in paragraph (3)—
(A) by striking ‘‘2003’’ in the heading and
inserting ‘‘2001’’; and
(B) by striking ‘‘2003’’ and inserting
‘‘2001’’.
(b) SPECIAL RULE FOR MEDICAID DSH ALLOTMENT
FOR
EXTREMELY
LOW
DSH 
STATES.—Section
1923(f)(3) (42 U.S.C. 1396r–4(f)(3)) is amended—
(1) in subparagraph (A), by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B) and
(C)’’; and
(2) by adding at the end the following new sub-
paragraph:
284
‘‘(C) SPECIAL RULE FOR EXTREMELY LOW
DSH STATES.—In the case of a State in which
the total expenditures under the State plan (in-
cluding Federal and State shares) for dis-
proportionate 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 great-
er 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 increased 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 allot-
ment is subject to an increase for inflation as
provided in subparagraph (A).’’.
(c) DISTRICT
OF COLUMBIA.—Effective beginning
with fiscal year 2001, the item in the table in section
1923(f) (42 U.S.C. 1396r–4(f)) relating to District of Co-
lumbia for FY 2000, is amended by striking ‘‘32’’ and
inserting ‘‘49’’.
(d) CONTINGENT ALLOTMENT FOR TENNESSEE.—
Section 1923(f) (42 U.S.C. 1396r–4(f)) is amended—
285
(1) in paragraph (3)(A), by striking ‘‘or this
paragraph’’ and inserting ‘‘, this paragraph, or para-
graph (4)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(4) CONTINGENT
ALLOTMENT
ADJUSTMENT
FOR
TENNESSEE.—If the State-wide waiver ap-
proved under section 1115 for the State of Ten-
nessee with respect to requirements under this title
as in effect on the date of the enactment of this sub-
section is revoked or terminated, the DSH allotment
for Tennessee for fiscal year 2001 is deemed to be
equal to $286,442,437.’’.
(e) 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-
286
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
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)’’.
287
(3) EFFECTIVE DATES.—
(A) The amendment made by paragraph
(1) applies to contracts as of January 1, 2001.
(B) The amendments made by paragraph
(2) apply to payments made on or after Janu-
ary 1, 2001.
(f) 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–321) 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);
288
(D) ‘‘and’’ were omitted from the end of
paragraph (2); and
(E) the following new paragraph were in-
serted after paragraph (2):
‘‘(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) 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
289
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-
vided by hospitals described in such section shall be
fully reflected as an increase in the baseline expendi-
ture limit for such waiver.
(g) 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);
290
(B) as of October 1, 2000—
(i) is in existence and operating as a
hospital described in subparagraph (A);
and
(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.
291
(ii) 
For 
fiscal 
year 
2003,
$176,000,000.
(iii) 
For 
fiscal 
year 
2004,
$269,000,000.
(iv) 
For 
fiscal 
year 
2005,
$330,000,000.
(v) For fiscal year 2006 and each fis-
cal year thereafter, $375,000,000.
(h) 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)—
292
(A) in subparagraph (A), by adding ‘‘and’’
at the end;
(B) in subparagraph (B), by striking
‘‘and’’ at the end; and
(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 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 described in sec-
tion 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 during fiscal year 2001,
293
the State plan shall provide for payment for such
services in an amount (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 reason-
ableness 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 section 1833(a)(3), ad-
justed 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))
294
applicable to primary care services (as defined
in section 1842(i)(4)) for that fiscal year; and
‘‘(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
295
specify. For each fiscal year following the fiscal year
in which the entity first qualifies as a Federally-
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.
296
‘‘(6) ALTERNATIVE
PAYMENT
METHODOLO-
GIES.—Notwithstanding any other provision of this
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-
297
ices provided by Federally-qualified health centers and
rural health clinics (as provided under the amendments
made by this section). The Comptroller General shall pro-
vide for submittal of a report on such study to Congress
by not later than 4 years after the date of the enactment
of this Act.
(e) EFFECTIVE DATE.—The amendments made by
this section take effect on October 1, 2000, and apply to
services furnished on or after such date.
SEC. 703. STREAMLINED APPROVAL OF CONTINUED STATE-
WIDE SECTION 1115 MEDICAID WAIVERS.
(a) IN GENERAL.—Section 1115 (42 U.S.C. 1315)
is amended by adding at the end the following new sub-
section:
‘‘(f) An application by the chief executive officer of
a State for an extension of a waiver project the State is
operating under an extension under subsection (e) (in this
subsection referred to as the ‘waiver project’) shall be sub-
mitted and approved or disapproved in accordance with
the following:
‘‘(1) The application for an extension of the
waiver project shall be submitted to the Secretary at
least 120 days prior to the expiration of the current
period of the waiver project.
298
‘‘(2) Not later than 45 days after the date such
application is received by the Secretary, the Sec-
retary shall notify the State if the Secretary intends
to review the terms and conditions of the waiver
project. A failure to provide such notification shall
be deemed to be an approval of the application.
‘‘(3) Not later than 45 days after the date a no-
tification is made in accordance with paragraph (2),
the Secretary shall inform the State of proposed
changes in the terms and conditions of the waiver
project. A failure to provide such information shall
be deemed to be an approval of the application.
‘‘(4) During the 30-day period that begins on
the date information described in paragraph (3) is
provided to a State, the Secretary shall negotiate re-
vised terms and conditions of the waiver project with
the State.
‘‘(5)(A) Not later than 120 days after the date
an application for an extension of the waiver project
is submitted to the Secretary (or such later date
agreed to by the chief executive officer of the State),
the Secretary shall—
‘‘(i) approve the application subject to such
modifications in the terms and conditions—
299
‘‘(I) as have been agreed to by the
Secretary and the State; or
‘‘(II) in the absence of such agree-
ment, as are determined by the Secretary
to be reasonable, consistent with the over-
all objectives of the waiver project, and not
in violation of applicable law; or
‘‘(ii) disapprove the application.
‘‘(B) A failure by the Secretary to approve or
disapprove an application submitted under this sub-
section in accordance with the requirements of sub-
paragraph (A) shall be deemed to be an approval of
the application subject to such modifications in the
terms and conditions as have been agreed to (if any)
by the Secretary and the State.
‘‘(6) An approval of an application for an exten-
sion of a waiver project under this subsection shall
be for a period not to exceed 3 years.
‘‘(7) An extension of a waiver project under this
subsection shall be subject to the final reporting and
evaluation requirements of paragraphs (4) and (5)
of subsection (e) (taking into account the extension
under this subsection with respect to any timing re-
quirements imposed under those paragraphs).’’.
300
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to requests for extensions of dem-
onstration projects pending or submitted on or after the
date of the enactment of this Act.
SEC. 704. MEDICAID COUNTY-ORGANIZED HEALTH SYS-
TEMS.
(a) IN GENERAL.—Section 9517(c)(3)(C) of the
Comprehensive Omnibus Budget Reconciliation Act of
1985 is amended by striking ‘‘10 percent’’ and inserting
‘‘14 percent’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) takes effect on the date of the enactment
of this Act.
SEC. 705. DEADLINE FOR ISSUANCE OF FINAL REGULATION
RELATING TO MEDICAID UPPER PAYMENT
LIMITS.
(a) IN GENERAL.—Not later than December 31,
2000, the Secretary of Health and Human Services (in
this section referred to as the ‘‘Secretary’’), notwith-
standing any requirement of the Administrative Proce-
dures Act under chapter 5 of title 5, United States Code,
or any other provision of law, shall issue under sections
447.272, 447.304, and 447.321 of title 42, Code of Fed-
eral Regulations (and any other section of part 447 of title
42, Code of Federal Regulations that the Secretary deter-
301
mines is appropriate), a final regulation based on the pro-
posed rule announced on October 5, 2000, that—
(1) modifies the upper payment limit test ap-
plied to State medicaid spending for inpatient hos-
pital services, outpatient hospital services, nursing
facility services, intermediate care facility services
for the mentally retarded, and clinic services by ap-
plying an aggregate upper payment limit to pay-
ments made to government facilities that are not
State-owned or operated facilities; and
(2) provides for a transition period in accord-
ance with subsection (b).
(b) TRANSITION PERIOD.—
(1) IN GENERAL.—The final regulation required
under subsection (a) shall provide that, with respect
to a State described in paragraph (3), the State
shall be considered to be in compliance with the final
regulation required under subsection (a) so long as,
for each State fiscal year during the period de-
scribed in paragraph (4), the State reduces pay-
ments under a State medicaid plan payment provi-
sion or methodology described in paragraph (3), or
reduces the actual dollar payment levels described in
paragraph (3)(B), so that the amount of the pay-
ments that would otherwise have been made under
302
such provision, methodology, or payment levels by
the State for any State fiscal year during such pe-
riod is reduced by 15 percent in the first such State
fiscal year, and by an additional 15 percent in each
of next 5 State fiscal years.
(2) 
REQUIREMENT.—Notwithstanding 
para-
graph (1), the final regulation required under sub-
section (a) shall provide that, for any period (or por-
tion of a period) that occurs on or after October 1,
2008, medicaid payments made by a State described
in paragraph (3) shall comply with such final regula-
tion.
(3) STATE DESCRIBED.—A State described in
this paragraph is a State with a State medicaid plan
payment provision or methodology which—
(A) was approved, deemed to have been ap-
proved, or was in effect on or before October 1,
1992 (including any subsequent amendments or
successor provisions or methodologies and
whether or not a State plan amendment was
made to carry out such provision or method-
ology after such date) or under which claims for
Federal financial participation were filed and
paid on or before such date; and
303
(B) provides for payments that are in ex-
cess of the upper payment limit test established
under the final regulation required under sub-
section (a) (or which would be noncompliant
with such final regulation if the actual dollar
payment levels made under the payment provi-
sion or methodology in the State fiscal year
which begins during 1999 were continued).
(4) PERIOD DESCRIBED.—The period described
in this paragraph is the period that begins on the
first State fiscal year that begins after September
30, 2002, and ends on September 30, 2008.
SEC. 706. ALASKA FMAP.
Notwithstanding the first sentence of section 1905(b)
of the Social Security Act (42 U.S.C. 1396d(b)), only with
respect to each of fiscal years 2001 through 2005, for pur-
poses of titles XIX and XXI of the Social Security Act,
the State percentage used to determine the Federal med-
ical assistance percentage for Alaska shall be that percent-
age which bears the same ratio to 45 percent as the square
of the adjusted per capita income of Alaska (determined
by dividing the State’s 3-year average per capita income
by 1.05) bears to the square of the per capita income of
the 50 States.
304
SEC. 707. OPTIONAL COVERAGE OF LEGAL IMMIGRANTS
UNDER THE MEDICAID PROGRAM.
(a) IN
GENERAL.—Section 1903(v) (42 U.S.C.
1396b(v)) is amended—
(1) in paragraph (1), by striking ‘‘paragraph
(2)’’ and inserting ‘‘paragraphs (2) and (4)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(4)(A) A State may elect (in a plan amendment
under this title) to provide medical assistance under this
title, notwithstanding sections 401(a), 402(b), 403, and
421 of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, for aliens who are lawfully re-
siding in the United States (including battered aliens de-
scribed in section 431(c) of such Act) and who are other-
wise eligible for such assistance, within either or both of
the following eligibility categories, but only if they have
lawfully resided in the United States for 2 years:
‘‘(i) PREGNANT WOMEN.—Women during preg-
nancy (and during the 60-day period beginning on
the last day of the pregnancy).
‘‘(ii) CHILDREN.—Children (as defined under
such plan), including optional targeted low-income
children described in section 1905(u)(2)(B).
‘‘(B) In the case of a State that has elected to provide
medical assistance to a category of aliens under subpara-
305
graph (A), no debt shall accrue under an affidavit of sup-
port against any sponsor of such an alien who has lawfully
resided in the United States for 2 years on the basis of
provision of assistance to such category.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect on October 1, 2000, and apply
to medical assistance and child health assistance furnished
on or after such date.
SEC. 708. ADDITIONAL ENTITIES QUALIFIED TO DETER-
MINE MEDICAID PRESUMPTIVE ELIGIBILITY
FOR LOW-INCOME CHILDREN.
(a) IN GENERAL.—Section 1920A(b)(3)(A)(i) (42
U.S.C. 1396r–1a(b)(3)(A)(i)) is amended—
(1) by striking ‘‘or (II)’’ and inserting ‘‘, (II)’’;
and
(2) by inserting ‘‘eligibility of a child for med-
ical assistance under the State plan under this title,
or eligibility of a child for child health assistance
under the program funded under title XXI, (III) is
an elementary school or secondary school, as such
terms are defined in section 14101 of the Elemen-
tary and Secondary Education Act of 1965 (20
U.S.C. 8801), an elementary or secondary school op-
erated or supported by the Bureau of Indian Affairs,
a State or tribal child support enforcement agency,
306
a child care resource and referral agency, an organi-
zation that is providing emergency food and shelter
under a grant under the Stewart B. McKinney
Homeless Assistance Act, or a State or tribal office
or entity involved in enrollment in the program
under this title, under part A of title IV, under title
XXI, or that determines eligibility for any assistance
or benefits provided under any program of public or
assisted housing that receives Federal funds, includ-
ing the program under section 8 or any other section
of the United States Housing Act of 1937 (42
U.S.C. 1437 et seq.) or under the Native American
Housing Assistance and Self-Determination Act of
1996 (25 U.S.C. 4101 et seq.), or (IV) any other en-
tity the State so deems, as approved by the Sec-
retary’’ before the semicolon.
(b) TECHNICAL AMENDMENTS.—Section 1920A (42
U.S.C. 1396r–1a) is amended—
(1) in subsection (b)(3)(A)(i), by striking ‘‘42
U.S.C. 9821’’ and inserting ‘‘42 U.S.C. 9831’’;
(2) in subsection (b)(3)(A)(ii), by striking
‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph (2)’’;
and
307
(3) in subsection (c)(2), in the matter preceding
subparagraph 
(A), 
by 
striking 
‘‘subsection
(b)(1)(A)’’ and inserting ‘‘subsection (b)(2)’’.
(c) APPLICATION TO PRESUMPTIVE ELIGIBILITY FOR
PREGNANT WOMEN UNDER MEDICAID.—Section 1920(b)
(42 U.S.C. 1396r–1(b)) is amended by adding at the end
after and below paragraph (2) the following flush sen-
tence:
‘‘The term ‘qualified provider’ includes a qualified entity
as defined in section 1920A(b)(3).’’.
(d) APPLICATION
UNDER
TITLE
XXI.—Section
2107(e)(1) (42 U.S.C. 1397gg(e)(1)) is amended by add-
ing at the end the following new subparagraph:
‘‘(D) Section 1920A (relating to presump-
tive eligibility).’’.
SEC. 709. IMPROVING WELFARE-TO-WORK TRANSITION.
(a) 1 YEAR
EXTENSION.—Section 1925(f) (42
U.S.C. 1396r–6(f)) is amended by striking ‘‘2001’’ and
inserting ‘‘2002’’.
(b) SIMPLIFICATION OPTIONS.—
(1) STATE OPTION TO WAIVE REPORTING RE-
QUIREMENTS.—Section 1925(b)(2) of such Act (42
U.S.C. 1396r–6(b)(2)) is amended by adding at the
end the following new subparagraph:
308
‘‘(C) STATE OPTION TO WAIVE REPORTING
REQUIREMENTS.—A State may elect to waive
the reporting requirements under subparagraph
(B) and, in the case of such a waiver for pur-
poses of notices required under subparagraph
(A), to exclude from such notices any reference
to any requirement under subparagraph (B).’’.
(2) EXEMPTION FOR STATES COVERING NEEDY
FAMILIES UP TO 185 PERCENT OF POVERTY.—Sec-
tion 1925 (42 U.S.C. 1396r–6) is amended—
(A) in each of subsections (a)(1) and
(b)(1), by inserting ‘‘but subject to subsection
(g),’’ after ‘‘Notwithstanding any other provi-
sion of this title,’’; and
(B) by adding at the end the following new
subsection:
‘‘(g) EXEMPTION
FOR STATE COVERING NEEDY
FAMILIES UP TO 185 PERCENT OF POVERTY.—
‘‘(1) IN GENERAL.—At State option, the provi-
sions of this section shall not apply to a State that
uses the authority under section 1931(b)(2)(C) to
make medical assistance available under the State
plan under this title, at a minimum, to all individ-
uals described in section 1931(b)(1) in families with
gross incomes (determined without regard to work-
309
related child care expenses of such individuals) at or
below 185 percent of the income official poverty line
(as defined by the Office of Management and Budg-
et, and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of
1981) applicable to a family of the size involved.
‘‘(2) APPLICATION TO OTHER PROVISIONS OF
THIS TITLE.—The State plan of a State described in
paragraph (1) shall be deemed to meet the require-
ments 
of 
sections 
1902(a)(10)(A)(i)(I) 
and
1902(e)(1).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection take effect on October 1, 2000.
TITLE VIII—STATE CHILDREN’S
HEALTH INSURANCE PROGRAM
SEC. 801. SPECIAL RULE FOR REDISTRIBUTION AND AVAIL-
ABILITY OF UNUSED FISCAL YEAR 1998 AND
1999 SCHIP ALLOTMENTS.
(a) CHANGE IN RULES FOR REDISTRIBUTION AND
RETENTION OF UNUSED SCHIP ALLOTMENTS FOR FIS-
CAL YEARS 1998 AND 1999.—Section 2104 (42 U.S.C.
1397dd) is amended by adding at the end the following
new subsection:
310
‘‘(g) RULE FOR REDISTRIBUTION AND EXTENDED
AVAILABILITY OF FISCAL YEARS 1998 AND 1999 ALLOT-
MENTS.—
‘‘(1) AMOUNT REDISTRIBUTED.—
‘‘(A) IN GENERAL.—In the case of a State
that expends all of its allotment under sub-
section (b) or (c) for fiscal year 1998 by the
end of fiscal year 2000, or for fiscal year 1999
by the end of fiscal year 2001, the Secretary
shall redistribute to the State under subsection
(f) (from the fiscal year 1998 or 1999 allot-
ments of other States, respectively, as deter-
mined by the application of paragraphs (2) and
(3) with respect to the respective fiscal year))
the following amount:
‘‘(i) STATE.—In the case of 1 of the
50 States or the District of Columbia, with
respect to—
‘‘(I) the fiscal year 1998 allot-
ment, the amount by which the
State’s expenditures under this title in
fiscal years 1998, 1999, and 2000 ex-
ceed the State’s allotment for fiscal
year 1998 under subsection (b); or
311
‘‘(II) the fiscal year 1999 allot-
ment, the amount by which the
State’s expenditures under this title in
fiscal years 1999, 2000, and 2001 ex-
ceed the State’s allotment for fiscal
year 1999 under subsection (b).
‘‘(ii) TERRITORY.—In the case of a
commonwealth or territory described in
subsection (c)(3), an amount that bears
the same ratio to 1.05 percent of the total
amount described in paragraph (2)(B)(i)(I)
as the ratio of the commonwealth’s or ter-
ritory’s fiscal year 1998 or 1999 allotment
under subsection (c) (as the case may be)
bears to the total of all such allotments for
such fiscal year under such subsection.
‘‘(B) EXPENDITURE RULES.—An amount
redistributed to a State under this paragraph
with respect to fiscal year 1998 or 1999—
‘‘(i) shall not be included in the deter-
mination of the State’s allotment for any
fiscal year under this section;
‘‘(ii) notwithstanding subsection (e),
shall remain available for expenditure by
312
the State through the end of fiscal year
2002; and
‘‘(iii) shall be counted as being ex-
pended with respect to a fiscal year allot-
ment in accordance with applicable regula-
tions of the Secretary.
‘‘(2) EXTENSION OF AVAILABILITY OF PORTION
OF UNEXPENDED FISCAL YEARS 1998 AND 1999 AL-
LOTMENTS.—
‘‘(A) IN GENERAL.—Notwithstanding sub-
section (e):
‘‘(i) FISCAL YEAR 1998 ALLOTMENT.—
Of the amounts allotted to a State pursu-
ant to this section for fiscal year 1998 that
were not expended by the State by the end
of fiscal year 2000, the amount specified in
subparagraph (B) for fiscal year 1998 for
such State shall remain available for ex-
penditure by the State through the end of
fiscal year 2002.
‘‘(ii) 
FISCAL
YEAR
1999
ALLOT-
MENT.—Of the amounts allotted to a State
pursuant to this subsection for fiscal year
1999 that were not expended by the State
by the end of fiscal year 2001, the amount
313
specified in subparagraph (B) for fiscal
year 1999 for such State shall remain
available for expenditure by the State
through the end of fiscal year 2002.
‘‘(B) AMOUNT REMAINING AVAILABLE FOR
EXPENDITURE.—The amount specified in this
subparagraph for a State for a fiscal year is
equal to—
‘‘(i) the amount by which (I) the total
amount available for redistribution under
subsection (f) from the allotments for that
fiscal year, exceeds (II) the total amounts
redistributed under paragraph (1) for that
fiscal year; multiplied by
‘‘(ii) the ratio of the amount of such
State’s unexpended allotment for that fis-
cal year to the total amount described in
clause (i)(I) for that fiscal year.
‘‘(C) USE
OF
UP
TO
PERCENT
OF
RETAINED
1998
ALLOTMENTS
FOR
OUTREACH
ACTIVITIES.—Notwithstanding 
section
2105(c)(2)(A), with respect to any State de-
scribed in subparagraph (A)(i), the State may
use up to 10 percent of the amount specified in
subparagraph (B) for fiscal year 1998 for ex-
314
penditures for outreach activities approved by
the Secretary.
‘‘(3) DETERMINATION OF AMOUNTS.—For pur-
poses of calculating the amounts described in para-
graphs (1) and (2) relating to the allotment for fis-
cal year 1998 or fiscal year 1999, the Secretary
shall use the amounts reported by the States not
later than November 30, 2000, or November 30,
2001, respectively, on HCFA Form 64 or HCFA
Form 21, as approved by the Secretary.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the enact-
ment of section 4901 of BBA (111 Stat. 552).
SEC. 802. AUTHORITY TO PAY MEDICAID EXPANSION SCHIP
COSTS FROM TITLE XXI APPROPRIATION.
(a) AUTHORITY TO PAY MEDICAID EXPANSION
SCHIP COSTS FROM TITLE XXI APPROPRIATION.—Sec-
tion 2105(a) (42 U.S.C. 1397ee(a)) is amended—
(1) by redesignating subparagraphs (A) through
(D) of paragraph (2) as clauses (i) through (iv), re-
spectively, and indenting appropriately;
(2) by redesignating paragraph (1) as subpara-
graph (C), and indenting appropriately;
(3) by redesignating paragraph (2) as subpara-
graph (D), and indenting appropriately;
315
(4) by striking ‘‘(a) IN GENERAL.—’’ and the
remainder of the text that precedes subparagraph
(C), as so redesignated, and inserting the following:
‘‘(a) PAYMENTS.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this section, the Secretary shall pay to
each State with a plan approved under this title,
from its allotment under section 2104, an amount
for each quarter equal to the enhanced FMAP (or,
in the case of expenditures described in subpara-
graph (B), the Federal medical assistance percent-
age (as defined in the first sentence of section
1905(b))) of expenditures in the quarter—
‘‘(A) for child health assistance under the
plan for targeted low-income children in the
form of providing medical assistance for which
payment is made on the basis of an enhanced
FMAP under the fourth sentence of section
1905(b);
‘‘(B) for the provision of medical assist-
ance on behalf of a child during a presumptive
eligibility period under section 1920A;’’; and
(5) by adding after subparagraph (D), as so re-
designated, the following new paragraph:
316
‘‘(2) ORDER OF PAYMENTS.—Payments under
paragraph (1) from a State’s allotment shall be
made in the following order:
‘‘(A) First, for expenditures for items de-
scribed in paragraph (1)(A).
‘‘(B) Second, for expenditures for items
described in paragraph (1)(B).
‘‘(C) Third, for expenditures for items de-
scribed in paragraph (1)(C).
‘‘(D) Fourth, for expenditures for items
described in paragraph (1)(D).’’.
(b) ELIMINATION
OF REQUIREMENT TO REDUCE
TITLE
XXI ALLOTMENT
BY
MEDICAID
EXPANSION
SCHIP COSTS.—Section 2104 (42 U.S.C. 1397dd) is
amended by striking subsection (d).
(c) AUTHORITY TO TRANSFER TITLE XXI APPRO-
PRIATIONS TO TITLE XIX APPROPRIATION ACCOUNT AS
REIMBURSEMENT
FOR MEDICAID EXPENDITURES
FOR
MEDICAID
EXPANSION
SCHIP SERVICES.—Notwith-
standing any other provision of law, all amounts appro-
priated under title XXI and allotted to a State pursuant
to subsection (b) or (c) of section 2104 of the Social Secu-
rity Act (42 U.S.C. 1397dd) for fiscal years 1998 through
2000 (including any amounts that, but for this provision,
would be considered to have expired) and not expended
317
in providing child health assistance or related services for
which payment may be made pursuant to subparagraph
(C) or (D) of section 2105(a)(1) of such Act (42 U.S.C.
1397ee(a)(1)) (as amended by subsection (a)), shall be
available to reimburse the Grants to States for Medicaid
account in an amount equal to the total payments made
to such State under section 1903(a) of such Act (42
U.S.C. 1396b(a)) for expenditures in such years for med-
ical assistance described in subparagraphs (A) and (B) of
section 2105(a)(1) of such Act (42 U.S.C. 1397ee(a)(1)
(as so amended).
(d) CONFORMING AMENDMENTS.—
(1) Section 1905(b) (42 U.S.C. 1396d(b)) is
amended in the fourth sentence by striking ‘‘the
State’s allotment under section 2104 (not taking
into account reductions under section 2104(d)(2))
for the fiscal year reduced by the amount of any
payments made under section 2105 to the State
from such allotment for such fiscal year’’ and insert-
ing ‘‘the State’s available allotment under section
2104’’.
(2) 
Section 
1905(u)(1)(B) 
(42 
U.S.C.
1396d(u)(1)(B)) is amended by striking ‘‘and sec-
tion 2104(d)’’.
318
(3) Section 2104 (42 U.S.C. 1397dd), as
amended by subsection (b), is further amended—
(A) in subsection (b)(1), by striking ‘‘and
subsection (d)’’; and
(B) in subsection (c)(1), by striking ‘‘sub-
ject to subsection (d),’’.
(4) Section 2105(c) (42 U.S.C. 1397ee(c)) is
amended—
(A) in paragraph (2)(A), by striking all
that follows ‘‘Except as provided in this para-
graph,’’ and inserting ‘‘the amount of payment
that may be made under subsection (a) for a
fiscal year for expenditures for items described
in paragraph (1)(D) of such subsection shall
not exceed 10 percent of the total amount of ex-
penditures for which payment is made under
subparagraphs (A), (C), and (D) of paragraph
(1) of such subsection.’’;
(B) in paragraph (2)(B), by striking ‘‘de-
scribed in subsection (a)(2)’’ and inserting ‘‘de-
scribed in subsection (a)(1)(D)’’; and
(C) in paragraph (6)(B), by striking ‘‘Ex-
cept as otherwise provided by law,’’ and insert-
ing ‘‘Except as provided in subparagraph (A) or
319
(B) of subsection (a)(1) or any other provision
of law,’’.
(5) Section 2110(a) (42 U.S.C. 1397jj(a)) is
amended by striking ‘‘section 2105(a)(2)(A)’’ and
inserting ‘‘section 2105(a)(1)(D)(i)’’.
(e) 
TECHNICAL
AMENDMENT.—Section
2105(d)(2)(B)(ii) (42 U.S.C. 1397ee(d)(2)(B)(ii)) is
amended by striking ‘‘enhanced FMAP under section
1905(u)’’ and inserting ‘‘enhanced FMAP under the
fourth sentence of section 1905(b)’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall be effective as if included in the enact-
ment of section 4901 of the BBA (111 Stat. 552).
SEC. 803. OPTIONAL COVERAGE OF CERTAIN LEGAL IMMI-
GRANTS UNDER SCHIP.
(a) IN GENERAL.—Section 2107(e)(1) (42 U.S.C.
1397gg(e)(1)) as amended in section 707(d), is further
amended by adding at the end the following new subpara-
graph:
‘‘(E) Section 1903(v)(4) (relating to op-
tional coverage of categories of lawfully residing
alien children) but only if the State has elected
to apply such section to the category of children
under title XIX.’’.
320
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) takes effect October 1, 2000, and applies
to medical assistance and child health assistance furnished
on or after such date.
TITLE IX—OTHER PROVISIONS
Subtitle A—PACE Program
SEC. 901. EXTENSION OF TRANSITION FOR CURRENT WAIV-
ERS.
Section 4803(d)(2) of BBA is amended—
(1) in subparagraph (A), by striking ‘‘24
months’’ and inserting ‘‘36 months’’;
(2) in subparagraph (A), by striking ‘‘the initial
effective date of regulations described in subsection
(a)’’ and inserting ‘‘July 1, 2000’’; and
(3) in subparagraph (B), by striking ‘‘3 years’’
and inserting ‘‘4 years’’.
SEC. 902. CONTINUING OF CERTAIN OPERATING ARRANGE-
MENTS PERMITTED.
(a) IN GENERAL.—Section 1894(f)(2) (42 U.S.C.
1395eee(f)(2)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(C) CONTINUATION
OF
MODIFICATIONS
OR WAIVERS OF OPERATIONAL REQUIREMENTS
UNDER DEMONSTRATION STATUS.—If a PACE
program operating under demonstration author-