SEC. 2. COVERAGE OF SUBSTITUTE ADULT DAY CARE SERV-
ICES UNDER MEDICARE.
(a) SUBSTITUTE ADULT DAY CARE SERVICES BENE-
FIT.—
(1) IN GENERAL.—Section 1861(m) of the So-
cial 
Security 
Act 
(42 
U.S.C. 
1395x(m)) 
is
amended—
(A) in the matter preceding paragraph (1),
by inserting ‘‘or paragraph (8)’’ after ‘‘para-
graph (7)’’;
(B) in paragraph (6), by striking ‘‘and’’ at
the end;
(C) in paragraph (7), by adding ‘‘and’’ at
the end; and
(D) by inserting after paragraph (7), the
following new paragraph:
‘‘(8) substitute adult day care services (as de-
fined in subsection (uu));’’.
(2) SUBSTITUTE ADULT DAY CARE SERVICES
DEFINED.—Section 1861 of such Act (42 U.S.C.
1395x) is amended by adding at the end the follow-
ing new subsection:
‘‘Substitute Adult Day Care Services; Adult Day Care
Facility
‘‘(uu)(1)(A) The term ‘substitute adult day care serv-
ices’ means the items and services described in subpara-
graph (B) furnished to an individual by an adult day care
facility as a part of a plan under subsection (m) substitut-
ing such services for a portion of the items and services
described in subparagraph (B)(i) furnished by a home
health agency under the plan, as determined by the physi-
cian establishing the plan.
‘‘(B) The items and services described in this sub-
paragraph are the following items and services:
‘‘(i) Items and services described in paragraphs
(1) through (7) of subsection (m).
‘‘(ii) Transportation of the individual to and
from the adult day care facility in connection with
any such item or service.
‘‘(iii) Meals.
‘‘(iv) A program of supervised activities de-
signed to promote physical and mental health and
furnished to the individual by the adult day care fa-
cility in a group setting for a period of not fewer
than four and not greater than twelve hours per day.
‘‘(2)(A) Except as provided in subparagraph (B), the
term ‘adult day care facility’ means a public agency or
private organization, or a subdivision of such an agency
or organization, that—
‘‘(i) is engaged in providing skilled nursing
services and other therapeutic services;
‘‘(ii) meets such standards established by the
Secretary to assure quality of care and such other
requirements as the Secretary finds necessary in the
interest of the health and safety of individuals who
are furnished services in the facility; and
‘‘(iii) meets the requirements of paragraphs (2)
through (8) of subsection (o).
‘‘(B) The Secretary may waive the requirement of a
surety bond under paragraph (7) of subsection (o) in the
case of an agency or organization that provides a com-
parable surety bond under State law.
‘‘(C) For purposes of payment for home health serv-
ices consisting of substitute adult day care services fur-
nished under this title, any reference to a home health
agency is deemed to be a reference to an adult day care
facility.’’.
(3) 
CONFORMING
AMENDMENTS.—Sections
1814(a)(2)(C) and 1835(a)(2)(A)(i) of such Act (42
U.S.C. 
1395f(a)(2)(C) 
and 
U.S.C.
1395f(a)(2)(C)) are each amended by striking ‘‘sec-
tion 1861(m)(7)’’ and inserting ‘‘paragraph (7) or
(8) of section 1861(m)’’.
(b) PAYMENT FOR SUBSTITUTE ADULT DAY CARE
SERVICES.—
(1) REASONABLE COST.—Section 1861(v)(1)(L)
of such Act (42 U.S.C. 1395x(v)(1)(L)) is amended
by adding at the end the following new clause:
‘‘(x) In the case home health services consisting of
substitute adult day care services, the following rules
apply:
‘‘(I) The Secretary shall determine each compo-
nent (as defined by the Secretary) of substitute
adult 
day 
care 
services 
(under 
subsection
(uu)(1)(B)(i)) furnished to an individual under the
plan of care established under subsection (m) with
respect to such services.
‘‘(II) The Secretary shall estimate the amount
that would otherwise be payable under this subpara-
graph for all home health services under that plan
of care other than substitute adult day care services
for a week or other period specified by the Sec-
retary.
‘‘(III) The total amount payable for home
health services consisting of substitute adult day
care services may not exceed 95 percent of the
amount estimated to be payable under subclause (II)
furnished under the plan by a home health agency.
‘‘(IV) No payment may be made under this title
for home health services consisting of substitute
adult day care services described in clauses (ii), (iii),
and (iv) of subsection (uu)(1)(B).’’.
(2) PROSPECTIVE PAYMENT SYSTEM.—Section
1895 of such Act (42 U.S.C. 1395fff) is amended by
adding at the end the following new subsection:
‘‘(e) PAYMENT RATE FOR SUBSTITUTE ADULT DAY
CARE SERVICES.—In the case home health services con-
sisting of substitute adult day care services, the following
rules apply:
‘‘(1) The Secretary shall determine each compo-
nent (as defined by the Secretary) of substitute
adult 
day 
care 
services 
(under 
section
1861(uu)(1)(B)(i)) furnished to an individual under
the plan of care established under section 1861(m)
with respect to such services.
‘‘(2) The Secretary shall estimate the amount
that would otherwise be payable under this section
for all home health services under that plan of care
other than substitute adult day care services for a
week or other period specified by the Secretary.
‘‘(3) The total amount payable for home health
services consisting of substitute adult day care serv-
ices may not exceed 95 percent of the amount esti-
mated to be payable under paragraph (2) furnished
under the plan by a home health agency.
‘‘(4) No payment may be made under this title
for home health services consisting of substitute
adult day care services described in clauses (ii), (iii),
and (iv) of section 1861(uu)(1)(B).’’.
(c) ADJUSTMENT IN CASE OF OVERUTILIZATION OF
SUBSTITUTE ADULT DAY CARE SERVICES.—
(1) MONITORING
EXPENDITURES.—The Sec-
retary of Health and Human Services shall monitor
the expenditures made under the Medicare Program
under title XVIII of the Social Security Act for
home health services furnished under section
1861(m) of such Act for a fiscal year beginning with
fiscal year 2002, including substitute adult day care
services under paragraph (8) of such section (as
added by subsection (a)), and compare such expendi-
tures to expenditures that the Secretary estimates
would have been made for home health services for
that fiscal year if subsection (a) had not been en-
acted.
(2) 
REQUIRED
REDUCTION
IN
PAYMENT
RATE.—If the Secretary determines, after making
the comparison under paragraph (1) and making
such adjustments for changes in demographics and
age of the Medicare beneficiary population as the
Secretary determines appropriate, that expenditures
for home health services including such substitute
adult day care services exceed expenditures that
would have been made for home health services fur-
nished under section 1861(m) of such Act for a year
if subsection (a) had not been enacted, then the Sec-
retary shall adjust the rate of payment to adult day
care facilities so that total expenditures for home
health services furnished under such section in a fis-
cal year does not exceed the Secretary’s estimate of
such expenditures if subsection (a) had not been en-
acted.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after the date that is the earlier of—
(1) January 1, 2001, or
(2) the date on which the prospective payment
system, for home health services furnished under the
medicare program, under section 1895 of the Social
Security Act (42 U.S.C. 1395fff) is established and
implemented.
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