351
Centers for Medicare & Medicaid Services before pub-
lication of a notice of proposed rulemaking regarding 
whether service or technology represents a substantial 
improvement.’’. 
(c) PREFERENCE FOR USE OF DRG ADJUSTMENT.—
Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is fur-
ther amended by adding at the end the following new clause: 
‘‘(ix) Before establishing any add-on payment under 
this subparagraph with respect to a new technology, the 
Secretary shall seek to identify one or more diagnosis-re-
lated groups associated with such technology, based on simi-
lar clinical or anatomical characteristics and the cost of 
the technology. Within such groups the Secretary shall as-
sign an eligible new technology into a diagnosis-related 
group where the average costs of care most closely approxi-
mate the costs of care of using the new technology. In such 
case, the new technology would no longer meet the threshold 
of exceeding 75 percent of the standard deviation for the 
diagnosis-related group involved under clause (ii)(I). No 
add-on payment under this subparagraph shall be made 
with respect to such new technology and this clause shall 
not affect the application of paragraph (4)(C)(iii).’’. 
(d) IMPROVEMENT
IN PAYMENT
FOR NEW TECH-
NOLOGY.—Section 
1886(d)(5)(K)(ii)(III) 
(42 
U.S.C. 
1395ww(d)(5)(K)(ii)(III)) is amended by inserting after
352
‘‘the estimated average cost of such service or technology’’ 
the following: ‘‘(based on the marginal rate applied to costs 
under subparagraph (A))’’. 
(e) ESTABLISHMENT OF NEW FUNDING FOR HOSPITAL 
INPATIENT TECHNOLOGY.—Section 1886(d)(5)(K)(ii)(III) 
(42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) is amended by strik-
ing ‘‘subject to paragraph (4)(C)(iii),’’. 
(f) EFFECTIVE DATE.—
(1) IN
GENERAL.—The Secretary shall imple-
ment the amendments made by this section so that 
they apply to classification for fiscal years beginning 
with fiscal year 2005. 
(2) RECONSIDERATIONS OF APPLICATIONS FOR 
FISCAL YEAR 2003 THAT ARE DENIED.—In the case of 
an application for a classification of a medical serv-
ice or technology as a new medical service or tech-
nology under section 1886(d)(5)(K) of the Social Se-
curity Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
filed for fiscal year 2004 and that is denied—
(A) the Secretary shall automatically recon-
sider the application as an application for fiscal 
year 2005 under the amendments made by this 
section; and
353
(B) the maximum time period otherwise 
permitted for such classification of the service or 
technology shall be extended by 12 months. 
SEC. 503. INCREASE IN FEDERAL RATE FOR HOSPITALS IN 
PUERTO RICO. 
Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is 
amended—
(1) in subparagraph (A)—
(A) in clause (i), by striking ‘‘for discharges 
beginning on or after October 1, 1997, 50 percent 
(and for discharges between October 1, 1987, and 
September 30, 1997, 75 percent)’’ and inserting 
‘‘the applicable Puerto Rico percentage (specified 
in subparagraph (E))’’; and 
(B) in clause (ii), by striking ‘‘for dis-
charges beginning in a fiscal year beginning on 
or after October 1, 1997, 50 percent (and for dis-
charges between October 1, 1987, and September 
30, 1997, 25 percent)’’ and inserting ‘‘the appli-
cable Federal percentage (specified in subpara-
graph (E))’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(E) For purposes of subparagraph (A), for discharges 
occurring—
354
‘‘(i) on or after October 1, 1987, and before Octo-
ber 1, 1997, the applicable Puerto Rico percentage is 
75 percent and the applicable Federal percentage is 
25 percent; 
‘‘(ii) on or after October 1, 1997, and before Oc-
tober 1, 2003, the applicable Puerto Rico percentage 
is 50 percent and the applicable Federal percentage is 
50 percent; 
‘‘(iii) during fiscal year 2004, the applicable 
Puerto Rico percentage is 41 percent and the applica-
ble Federal percentage is 59 percent; 
‘‘(iv) during fiscal year 2005, the applicable 
Puerto Rico percentage is 33 percent and the applica-
ble Federal percentage is 67 percent; and 
‘‘(v) on or after October 1, 2005, the applicable 
Puerto Rico percentage is 25 percent and the applica-
ble Federal percentage is 75 percent.’’. 
SEC. 504. WAGE INDEX ADJUSTMENT RECLASSIFICATION 
REFORM . 
(a) IN
GENERAL.—Section 1886(d) (42 U.S.C. 
1395ww(d)) is amended by adding at the end the following: 
‘‘(11)(A) In order to recognize commuting patterns 
among Metropolitan Statistical Areas and between such 
Areas and rural areas, the Secretary shall establish a proc-
ess, upon application of a subsection (d) hospital that estab-
355
lishes that it is a qualifying hospital described in subpara-
graph (B), for an increase of the wage index applied under 
paragraph (3)(E) for the hospital in the amount computed 
under subparagraph (D). 
‘‘(B) A qualifying hospital described in this subpara-
graph is a subsection (d) hospital—
‘‘(i) the average wages of which exceed the aver-
age wages for the area in which the hospital is lo-
cated; and 
‘‘(ii) which has at least 10 percent of its employ-
ees who reside in one or more higher wage index 
areas. 
‘‘(C) For purposes of this paragraph, the term ‘higher 
wage index area’ means, with respect to a hospital, an area 
with a wage index that exceeds that of the area in which 
the hospital is located. 
‘‘(D) The increase in the wage index under subpara-
graph (A) for a hospital shall be equal to the percentage 
of the employees of the hospital that resides in any higher 
wage index area multiplied by the sum of the products, for 
each higher wage index area of—
‘‘(i) the difference between (I) the wage index for 
such area, and (II) the wage index of the area in 
which the hospital is located (before the application of 
this paragraph); and
356
‘‘(ii) the number of employees of the hospital that 
reside in such higher wage index area divided by the 
total number of such employees that reside in all high 
wage index areas. 
‘‘(E) The process under this paragraph shall be based 
upon the process used by the Medicare Geographic Classi-
fication Review Board under paragraph (10) with respect 
to data submitted by hospitals to the Board on the location 
of residence of hospital employees and wages under the ap-
plicable schedule established for geographic reclassification. 
‘‘(F) A reclassification under this paragraph shall be 
effective for a period of 3 fiscal years, except that the Sec-
retary shall establish procedures under which a subsection 
(d) hospital may elect to terminate such reclassification be-
fore the end of such period. 
‘‘(G) A hospital that is reclassified under this para-
graph for a period is not eligible for reclassification under 
paragraphs (8) or (10) during that period. 
‘‘(H) Any increase in a wage index under this para-
graph for a hospital shall not be taken into account for pur-
poses of—
‘‘(i) computing the wage index for the area in 
which the hospital is located or any other area; or 
‘‘(ii) applying any budget neutrality adjustment 
with respect to such index under paragraph (8)(D).’’.
357
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall first apply to the wage index for cost re-
porting period beginning on or after October 1, 2004. 
SEC. 505. MEDPAC REPORT ON SPECIALTY HOSPITALS. 
(a) MEDPAC STUDY.—The Medicare Payment Advi-
sory Commission shall conduct a study of specialty hos-
pitals compared with other similar general acute care hos-
pitals under the medicare program. Such study shall exam-
ine—
(1) whether there are excessive self-referrals; 
(2) quality of care furnished; 
(3) the impact of specialty hospitals on such gen-
eral acute care hospitals; and 
(4) differences in the scope of services, medicaid 
utilization, and uncompensated care furnished. 
(b) REPORT.—Not later than 1 year after the date of 
the enactment of this Act, the Secretary shall submit to Con-
gress a report on the study conducted under subsection (a), 
and shall include any recommendations for legislation or 
administrative change as the Secretary determines appro-
priate.
358
Subtitle B—Other Provisions 
SEC. 511. PAYMENT FOR COVERED SKILLED NURSING FA-
CILITY SERVICES. 
(a) ADJUSTMENT TO RUGS FOR AIDS RESIDENTS.—
Paragraph (12) of section 1888(e) (42 U.S.C. 1395yy(e)) 
is amended to read as follows: 
‘‘(12) 
ADJUSTMENT
FOR
RESIDENTS
WITH 
AIDS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of a resident of a skilled 
nursing facility who is afflicted with acquired 
immune deficiency syndrome (AIDS), the per 
diem amount of payment otherwise applicable 
shall be increased by 128 percent to reflect in-
creased costs associated with such residents. 
‘‘(B) SUNSET.—Subparagraph (A) shall not 
apply on and after such date as the Secretary 
certifies that there is an appropriate adjustment 
in the case mix under paragraph (4)(G)(i) to 
compensate for the increased costs associated 
with residents described in such subparagraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall apply to services furnished on or after 
October 1, 2003.
359
SEC. 512. COVERAGE OF HOSPICE CONSULTATION SERV-
ICES. 
(a) COVERAGE
OF HOSPICE CONSULTATION SERV-
ICES.—Section 1812(a) (42 U.S.C. 1395d(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph 
(3); 
(2) by striking the period at the end of para-
graph (4) and inserting ‘‘; and’’; and 
(3) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) for individuals who are terminally ill, have 
not made an election under subsection (d)(1), and 
have not previously received services under this para-
graph, services that are furnished by a physician who 
is either the medical director or an employee of a hos-
pice program and that consist of—
‘‘(A) an evaluation of the individual’s need 
for pain and symptom management; 
‘‘(B) counseling the individual with respect 
to end-of-life issues and care options; and 
‘‘(C) advising the individual regarding ad-
vanced care planning.’’. 
(b) PAYMENT.—Section 1814(i) (42 U.S.C. l395f(i)) is 
amended by adding at the end the following new paragraph: 
‘‘(4) The amount paid to a hospice program with re-
spect to the services under section 1812(a)(5) for which pay-
360
ment may be made under this part shall be equal to an 
amount equivalent to the amount established for an office 
or other outpatient visit for evaluation and management 
associated with presenting problems of moderate severity 
under the fee schedule established under section 1848(b), 
other than the portion of such amount attributable to the 
practice expense component.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
1861(dd)(2)(A)(i) 
(42 
U.S.C. 
1395x(dd)(2)(A)(i)) 
is 
amended by inserting before the comma at the end the fol-
lowing: ‘‘and services described in section 1812(a)(5)’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to services provided by a hospice pro-
gram on or after January 1, 2004.
TITLE VI—PROVISIONS 
RELATING TO PART B 
Subtitle A—Physicians’ Services
SEC. 601. REVISION OF UPDATES FOR PHYSICIANS’ SERV-
ICES. 
(a) UPDATE FOR 2004 AND 2005.—
(1) IN GENERAL.—Section 1848(d) (42 U.S.C. 
1395w–4(d)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(5) UPDATE FOR 2004 AND 2005.—The update to 
the single conversion factor established in paragraph
361
(1)(C) for each of 2004 and 2005 shall be not less 
than 1.5 percent.’’. 
(2) 
CONFORMING
AMENDMENT.—Paragraph 
(4)(B) of such section is amended, in the matter be-
fore clause (i), by inserting ‘‘and paragraph (5)’’ 
after ‘‘subparagraph (D)’’. 
(3) NOT TREATED AS CHANGE IN LAW AND REG-
ULATION IN SUSTAINABLE GROWTH RATE DETERMINA-
TION.—The amendments made by this subsection shall 
not be treated as a change in law for purposes of ap-
plying section 1848(f)(2)(D) of the Social Security 
Act (42 U.S.C. 1395w–4(f)(2)(D)). 
(b) USE OF 10-YEAR ROLLING AVERAGE IN COM-
PUTING GROSS DOMESTIC PRODUCT.—
(1) IN
GENERAL.—Section 1848(f)(2)(C) (42 
U.S.C. 1395w–4(f)(2)(C)) is amended—
(A) by striking ‘‘projected’’ and inserting 
‘‘annual average’’; and 
(B) by striking ‘‘from the previous applica-
ble period to the applicable period involved’’ and 
inserting ‘‘during the 10-year period ending with 
the applicable period involved’’.
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall apply to computations of the sus-
tainable growth rate for years beginning with 2003.
362
SEC. 602. STUDIES ON ACCESS TO PHYSICIANS’ SERVICES. 
(a) GAO STUDY ON BENEFICIARY ACCESS TO PHYSI-
CIANS’ SERVICES.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study on access of 
medicare beneficiaries to physicians’ services under 
the medicare program. The study shall include—
(A) an assessment of the use by beneficiaries 
of such services through an analysis of claims 
submitted by physicians for such services under 
part B of the medicare program; 
(B) an examination of changes in the use 
by beneficiaries of physicians’ services over time; 
(C) an examination of the extent to which 
physicians are not accepting new medicare bene-
ficiaries as patients. 
(2) 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 paragraph (1). The report 
shall include a determination whether—
(A) data from claims submitted by physi-
cians under part B of the medicare program in-
dicate potential access problems for medicare 
beneficiaries in certain geographic areas; and
363
(B) access by medicare beneficiaries to phy-
sicians’ services may have improved, remained 
constant, or deteriorated over time.
(b) STUDY AND REPORT ON SUPPLY OF PHYSICIANS.—
(1) STUDY.—The Secretary shall request the In-
stitute of Medicine of the National Academy of 
Sciences to conduct a study on the adequacy of the 
supply of physicians (including specialists) in the 
United States and the factors that affect such supply. 
(2) REPORT TO CONGRESS.—Not later than 2 
years after the date of enactment of this section, the 
Secretary shall submit to Congress a report on the re-
sults of the study described in paragraph (1), includ-
ing any recommendations for legislation. 
(c) GAO STUDY OF MEDICARE PAYMENT FOR INHALA-
TION THERAPY.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study to examine the 
adequacy of current reimbursements for inhalation 
therapy under the medicare program. 
(2) REPORT.—Not later than May 1, 2004, the 
Comptroller General shall submit to Congress a report 
on the study conducted under paragraph (1).
364
SEC. 603. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS’ 
SERVICES. 
(a) PRACTICE EXPENSE COMPONENT.—Not later than 
1 year after the date of the enactment of this Act, the Medi-
care Payment Advisory Commission shall submit to Con-
gress a report on the effect of refinements to the practice 
expense component of payments for physicians’ services, 
after the transition to a full resource-based payment system 
in 2002, under section 1848 of the Social Security Act (42 
U.S.C. 1395w–4). Such report shall examine the following 
matters by physician specialty: 
(1) The effect of such refinements on payment for 
physicians’ services. 
(2) The interaction of the practice expense com-
ponent with other components of and adjustments to 
payment for physicians’ services under such section. 
(3) The appropriateness of the amount of com-
pensation by reason of such refinements. 
(4) The effect of such refinements on access to 
care by medicare beneficiaries to physicians’ services. 
(5) The effect of such refinements on physician 
participation under the medicare program. 
(b) VOLUME OF PHYSICIAN SERVICES.—The Medicare 
Payment Advisory Commission shall submit to Congress a 
report on the extent to which increases in the volume of 
physicians’ services under part B of the medicare program
365
are a result of care that improves the health and well-being 
of medicare beneficiaries. The study shall include the fol-
lowing: 
(1) An analysis of recent and historic growth in 
the components that the Secretary includes under the 
sustainable growth rate (under section 1848(f) of the 
Social Security Act). 
(2) An examination of the relative growth of vol-
ume in physician services between medicare bene-
ficiaries and other populations. 
(3) An analysis of the degree to which new tech-
nology, including coverage determinations of the Cen-
ters for Medicare & Medicaid Services, has affected 
the volume of physicians’ services. 
(4) An examination of the impact on volume of 
demographic changes. 
(5) An examination of shifts in the site of service 
of services that influence the number and intensity of 
services furnished in physicians’ offices and the extent 
to which changes in reimbursement rates to other pro-
viders have affected these changes. 
(6) An evaluation of the extent to which the Cen-
ters for Medicare & Medicaid Services takes into ac-
count the impact of law and regulations on the sus-
tainable growth rate.
366
SEC. 604. INCLUSION OF PODIATRISTS AND DENTISTS 
UNDER PRIVATE CONTRACTING AUTHORITY. 
Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(B)) is 
amended by striking ‘‘section 1861(r)(1)’’ and inserting 
‘‘paragraphs (1), (2), and (3) of section 1861(r)’’. 
SEC. 605. ESTABLISHMENT OF FLOOR ON WORK GEO-
GRAPHIC ADJUSTMENT. 
(a) MINIMUM INDEX.—
(1) IN GENERAL.—Section 1848(e)(1) (42 U.S.C. 
1395w–4(e)(1)) is amended by adding at the end the 
following new subparagraph: 
‘‘(E) FLOOR AT 1.0 ON WORK GEOGRAPHIC 
INDICES.—Subject to section 605(a)(2) of the 
Medicare Prescription Drug and Modernization 
Act of 2003, after calculating the work geo-
graphic indices in subparagraph (A)(iii), for 
purposes of payment for services furnished on or 
after January 1, 2004, and before January 1, 
2006, the Secretary shall increase the work geo-
graphic index to 1.00 for any locality for which 
such geographic index is less than 1.00.’’. 
(2) 
SECRETARIAL
DISCRETION.—Section 
1848(e)(1)(E), as added by paragraph (1) shall have 
no force or effect in law if the Secretary determines, 
taking into account the report of the Comptroller Gen-
eral under subsection (b)(2), that there is no sound
367
economic rationale for the implementation of that sec-
tion. 
(b) GAO REPORT.—
(1) EVALUATION.—As part of the study on geo-
graphic differences in payments for physicians’ serv-
ices conducted under section 412, the Comptroller 
General of the United States shall evaluate the fol-
lowing: 
(A) Whether there is a sound economic basis 
for the implementation of the amendment to sec-
tion 1848(e)(1) under subsection (a)(1) in those 
areas in which the adjustment applies. 
(B) The effect of such adjustment on physi-
cian location and retention in areas affected by 
such adjustment, taking into account—
(i) differences in recruitment costs and 
retention rates for physicians, including 
specialists, between large urban areas and 
other areas; and 
(ii) the mobility of physicians, includ-
ing specialists, over the last decade. 
(C) The appropriateness of establishing a 
floor of 1.0 for the work geographic index. 
(2) REPORT.—By not later than September 1, 
2004, the Comptroller General shall submit to Con-
368
gress and to the Secretary a report on the evaluation 
conducted under paragraph (1). 
Subtitle B—Preventive Services
SEC. 611. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL 
EXAMINATION. 
(a) 
COVERAGE.—Section 
1861(s)(2) 
(42 
U.S.C. 
1395x(s)(2)) is amended—
(1) in subparagraph (U), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (V), by inserting ‘‘and’’ at 
the end; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(W) an initial preventive physical examination 
(as defined in subsection (ww));’’. 
(b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 
1395x) is amended by adding at the end the following new 
subsection: 
‘‘Initial Preventive Physical Examination 
‘‘(ww) The term ‘initial preventive physical examina-
tion’ means physicians’ services consisting of a physical ex-
amination with the goal of health promotion and disease 
detection and includes items and services (excluding clinical 
laboratory tests), as determined by the Secretary, consistent
369
with the recommendations of the United States Preventive 
Services Task Force.’’. 
(c) WAIVER OF DEDUCTIBLE AND COINSURANCE.—
(1) DEDUCTIBLE.—The first sentence of section 
1833(b) (42 U.S.C. 1395l(b)) is amended—
(A) by striking ‘‘and’’ before ‘‘(6)’’, and 
(B) by inserting before the period at the end 
the following: ‘‘, and (7) such deductible shall not 
apply with respect to an initial preventive phys-
ical 
examination 
(as 
defined 
in 
section 
1861(ww))’’. 
(2) 
COINSURANCE.—Section 
1833(a)(1) 
(42 
U.S.C. 1395l(a)(1)) is amended—
(A) in clause (N), by inserting ‘‘(or 100 
percent in the case of an initial preventive phys-
ical 
examination, 
as 
defined 
in 
section 
1861(ww))’’ after ‘‘80 percent’’; and 
(B) in clause (O), by inserting ‘‘(or 100 
percent in the case of an initial preventive phys-
ical 
examination, 
as 
defined 
in 
section 
1861(ww))’’ after ‘‘80 percent’’. 
(d) PAYMENT
AS PHYSICIANS’ SERVICES.—Section 
1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by insert-
ing ‘‘(2)(W),’’ after ‘‘(2)(S),’’.
370
(e) OTHER
CONFORMING
AMENDMENTS.—Section 
1862(a) (42 U.S.C. 1395y(a)) is amended—
(1) in paragraph (1)—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (H); 
(B) by striking the semicolon at the end of 
subparagraph (I) and inserting ‘‘, and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(J) in the case of an initial preventive physical 
examination, which is performed not later than 6 
months after the date the individual’s first coverage 
period begins under part B;’’; and 
(2) in paragraph (7), by striking ‘‘or (H)’’ and 
inserting ‘‘(H), or (J)’’. 
(f) EFFECTIVE DATE.—The amendments made by this 
section shall apply to services furnished on or after January 
1, 2004, but only for individuals whose coverage period be-
gins on or after such date. 
SEC. 612. COVERAGE OF CHOLESTEROL AND BLOOD LIPID 
SCREENING. 
(a) 
COVERAGE.—Section 
1861(s)(2) 
(42 
U.S.C. 
1395x(s)(2)), as amended by section 611(a), is amended—
(1) in subparagraph (V), by striking ‘‘and’’ at 
the end;
371
(2) in subparagraph (W), by inserting ‘‘and’’ at 
the end; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(X) cholesterol and other blood lipid 
screening tests (as defined in subsection (XX));’’. 
(b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 
1395x), as amended by section 611(b), is amended by add-
ing at the end the following new subsection: 
‘‘Cholesterol and Other Blood Lipid Screening Test 
‘‘(xx)(1) The term ‘cholesterol and other blood lipid 
screening test’ means diagnostic testing of cholesterol and 
other lipid levels of the blood for the purpose of early detec-
tion of abnormal cholesterol and other lipid levels. 
‘‘(2) The Secretary shall establish standards, in con-
sultation with appropriate organizations, regarding the fre-
quency and type of cholesterol and other blood lipid screen-
ing tests, except that such frequency may not be more often 
than once every 2 years.’’. 
(c) FREQUENCY.—Section 1862(a)(1) (42 U.S.C. 
1395y(a)(1)), as amended by section 611(e), is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (I); 
(2) by striking the semicolon at the end of sub-
paragraph (J) and inserting ‘‘; and’’; and
372
(3) by adding at the end the following new sub-
paragraph: 
‘‘(K) in the case of a cholesterol and other blood 
lipid 
screening 
test 
(as 
defined 
in 
section 
1861(xx)(1)), which is performed more frequently 
than is covered under section 1861(xx)(2).’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to tests furnished on or after January 
1, 2005. 
SEC. 613. WAIVER OF DEDUCTIBLE FOR COLORECTAL CAN-
CER SCREENING TESTS. 
(a) IN GENERAL.—The first sentence of section 1833(b) 
(42 U.S.C. 1395l(b)), as amended by section 611(c)(1), is 
amended—
(1) by striking ‘‘and’’ before ‘‘(7)’’; and 
(2) by inserting before the period at the end the 
following: ‘‘, and (8) such deductible shall not apply 
with respect to colorectal cancer screening tests (as de-
scribed in section 1861(pp)(1))’’. 
(b) 
CONFORMING
AMENDMENTS.—Paragraphs 
(2)(C)(ii) and (3)(C)(ii) of section 1834(d) (42 U.S.C. 
1395m(d)) are each amended—
(1) by striking ‘‘DEDUCTIBLE AND’’ in the head-
ing; and
373
(2) in subclause (I), by striking ‘‘deductible or’’ 
each place it appears. 
(c) EFFECTIVE DATE.—The amendment made by this 
section shall apply to items and services furnished on or 
after January 1, 2004.
SEC. 614. IMPROVED PAYMENT FOR CERTAIN MAMMOG-
RAPHY SERVICES. 
(a) EXCLUSION FROM OPD FEE SCHEDULE.—Section 
1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is amend-
ed by inserting before the period at the end the following: 
‘‘and does not include screening mammography (as defined 
in section 1861(jj)) and unilateral and bilateral diagnostic 
mammography’’. 
(b) ADJUSTMENT TO TECHNICAL COMPONENT.—For 
diagnostic mammography performed on or after January 
1, 2004, for which payment is made under the physician 
fee schedule under section 1848 of the Social Security Act 
(42 U.S.C. 1395w–4), the Secretary, based on the most re-
cent cost data available, shall provide for an appropriate 
adjustment in the payment amount for the technical compo-
nent of the diagnostic mammography. 
(c) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to mammography performed on or 
after January 1, 2004.
374
SEC. 615. MEDICARE COVERAGE OF DIABETES LABORATORY 
DIAGNOSTIC TESTS. 
(a) 
COVERAGE.—Section 
1861(s)(2) 
(42 
U.S.C. 
1395x(s)(2)), as amended by sections 611 and 612, is 
amended—
(1) in subparagraph (W), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (X), by adding ‘‘and’’ at 
the end; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(Y) diabetes screening tests and services (as de-
fined in subsection (yy));’’. 
(b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 
1395x), as amended by sections 611 and 612, is further 
amended by adding at the end the following new subsection: 
‘‘Diabetes Screening Tests and Services 
‘‘(yy)(1) The term ‘diabetes screening tests’ means di-
agnostic testing furnished to an individual at risk for dia-
betes (as defined in paragraph (2)) for the purpose of early 
detection of diabetes, including—
‘‘(A) a fasting plasma glucose test; and 
‘‘(B) such other tests, and modifications to tests, 
as the Secretary determines appropriate, in consulta-
tion with appropriate organizations.
375
‘‘(2) For purposes of paragraph (1), the term ‘indi-
vidual at risk for diabetes’ means an individual who has 
any, a combination of, or all of the following risk factors 
for diabetes: 
‘‘(A) A family history of diabetes. 
‘‘(B) Overweight defined as a body mass index 
greater than or equal to 25 kg/m2. 
‘‘(C) Habitual physical inactivity. 
‘‘(D) Belonging to a high-risk ethnic or racial 
group. 
‘‘(E) Previous identification of an elevated im-
paired fasting glucose. 
‘‘(F) Identification of impaired glucose tolerance. 
‘‘(G) Hypertension. 
‘‘(H) Dyslipidemia. 
‘‘(I) History of gestational diabetes mellitus or 
delivery of a baby weighing greater than 9 pounds. 
‘‘(J) Polycystic ovary syndrome. 
‘‘(3) The Secretary shall establish standards, in con-
sultation with appropriate organizations, regarding the fre-
quency of diabetes screening tests, except that such fre-
quency may not be more often than twice within the 12-
month period following the date of the most recent diabetes 
screening test of that individual.’’.
376
(c) FREQUENCY.—Section 1862(a)(1) (42 U.S.C. 
1395y(a)(1)), as amended by sections 611 and 612, is 
amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (J); 
(2) by striking the semicolon at the end of sub-
paragraph (K) and inserting ‘‘; and’’; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(L) in the case of a diabetes screening tests or 
service (as defined in section 1861(yy)(1)), which is 
performed more frequently than is covered under sec-
tion 1861(yy)(3).’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to tests furnished on or after the date 
that is 90 days after the date of enactment of this Act.
Subtitle C—Other Services 
SEC. 621. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) 
PAYMENT REFORM. 
(a) PAYMENT FOR DRUGS.—
(1) MODIFICATION
OF
AMBULATORY
PAYMENT 
CLASSIFICATION (APC) GROUPS.—Section 1833(t) (42 
U.S.C. 1395l(t)) is amended—
(A) by redesignating paragraph (13) as 
paragraph (14); and
377
(B) by inserting after paragraph (12) the 
following new paragraph: 
‘‘(13) DRUG APC PAYMENT RATES.—
‘‘(A) IN GENERAL.—With respect to pay-
ment for covered OPD services that includes a 
specified covered outpatient drug (defined in sub-
paragraph (B)), the amount provided for pay-
ment for such drug under the payment system 
under this subsection for services furnished in—
‘‘(i) 2004, 2005, or 2006, shall in no 
case—
‘‘(I) exceed 95 percent of the aver-
age wholesale price for the drug; or 
‘‘(II) be less than the transition 
percentage (under subparagraph (C)) 
of the average wholesale price for the 
drug; or 
‘‘(ii) a subsequent year, shall be equal 
to the average price for the drug for that 
area and year established under the com-
petitive acquisition program under section 
1847A as calculated and applied by the Sec-
retary for purposes of this paragraph. 
‘‘(B) SPECIFIED
COVERED
OUTPATIENT 
DRUG DEFINED.—
378
‘‘(i) IN GENERAL.—In this paragraph, 
the term ‘specified covered outpatient drug’ 
means, subject to clause (ii), a covered out-
patient drug (as defined in 1927(k)(2), that 
is—
‘‘(I) a radiopharmaceutical; or 
‘‘(II) a drug or biological for 
which payment was made under para-
graph (6) (relating to pass-through 
payments) on or before December 31, 
2002. 
‘‘(ii) EXCEPTION.—Such term does not 
include—
‘‘(I) a drug for which payment is 
first made on or after January 1, 
2003, under paragraph (6); or 
‘‘(II) a drug for a which a tem-
porary HCPCS code has not been as-
signed. 
‘‘(C) TRANSITION TOWARDS HISTORICAL AV-
ERAGE ACQUISITION COST.—The transition per-
centage under this subparagraph for drugs fur-
nished in a year is determined in accordance 
with the following table:
379
For the year—
The transition percentage for—
Single source 
drugs are—
Innovator mul-
tiple source 
drugs are—
Generic drugs 
are—
2004 ......................................
83% 
81.5%
46%
2005 ......................................
77%
75%
46%
2006 ......................................
71%
68%
46%
‘‘(D) PAYMENT
FOR
NEW
DRUGS
UNTIL 
TEMPORARY HCPCS CODE ASSIGNED.—With re-
spect to payment for covered OPD services that 
includes a covered outpatient drug (as defined in 
1927(k)) for a which a temporary HCPCS code 
has not been assigned, the amount provided for 
payment for such drug under the payment sys-
tem under this subsection shall be equal to 95 
percent of the average wholesale price for the 
drug. 
‘‘(E) CLASSES OF DRUGS.—For purposes of 
this paragraph, each of the following shall be 
treated as a separate class of drugs: 
‘‘(i) SOLE
SOURCE
DRUGS.—A sole 
source drug which for purposes of this para-
graph means a drug or biological that is 
not a multiple source drug (as defined in 
subclauses 
(I) 
and 
(II) 
of 
section 
1927(k)(7)(A)(i)) and is not a drug ap-
proved under an abbreviated new drug ap-
380
plication under section 355(j) of the Federal 
Food, Drug, and Cosmetic Act. 
‘‘(ii) INNOVATOR
MULTIPLE
SOURCE 
DRUGS.—Innovator multiple source drugs 
(as defined in section 1927(k)(7)(A)(ii)). 
‘‘(iii) 
NONINNOVATOR
MULTIPLE 
SOURCE
DRUGS.—Noninnovator multiple 
source 
drugs 
(as 
defined 
in 
section 
1927(k)(7)(A)(iii)). 
‘‘(F) INAPPLICABILITY
OF
EXPENDITURES 
IN DETERMINING CONVERSION FACTORS.—Addi-
tional expenditures resulting from this para-
graph and paragraph (14)(C) in a year shall not 
be taken into account in establishing the conver-
sion factor for that year.’’. 
(2) REDUCTION IN THRESHOLD FOR SEPARATE 
APCS FOR DRUGS.—Section 1833(t)(14), as redesig-
nated by paragraph (1)(A), is amended by adding at 
the end the following new subparagraph: 
‘‘(B) THRESHOLD FOR ESTABLISHMENT OF 
SEPARATE
APCS
FOR
DRUGS.—The Secretary 
shall reduce the threshold for the establishment of 
separate ambulatory procedure classification 
groups (APCs) with respect to drugs to $50 per 
administration.’’.
381
(3) EXCLUSION OF SEPARATE DRUG APCS FROM 
OUTLIER PAYMENTS.—Section 1833(t)(5) is amended 
by adding at the end the following new subparagraph: 
‘‘(E) EXCLUSION OF SEPARATE DRUG APCS 
FROM OUTLIER PAYMENTS.—No additional pay-
ment shall be made under subparagraph (A) in 
the case of ambulatory procedure codes estab-
lished separately for drugs.’’. 
(4) PAYMENT
FOR
PASS
THROUGH
DRUGS.—
Clause (i) of section 1833(t)(6)(D) (42 U.S.C. 
1395l(t)(6)(D)) is amended by inserting after ‘‘under 
section 1842(o)’’ the following: ‘‘(or if the drug is cov-
ered under a competitive acquisition contract under 
section 1847A for an area, an amount determined by 
the Secretary equal to the average price for the drug 
for that area and year established under such section 
as calculated and applied by the Secretary for pur-
poses of this paragraph)’’. 
(5) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to services furnished on 
or after January 1, 2004. 
(b) SPECIAL PAYMENT FOR BRACHYTHERAPY.—
(1) IN GENERAL.—Section 1833(t)(14), as so re-
designated and amended by subsection (a)(2), is
382
amended by adding at the end the following new sub-
paragraph: 
‘‘(C) 
PAYMENT
FOR
DEVICES
OF 
BRACHYTHERAPY
AT
CHARGES
ADJUSTED
TO 
COST.—Notwithstanding the preceding provi-
sions of this subsection, for a device of 
brachytherapy furnished on or after January 1, 
2004, and before January 1, 2007, the payment 
basis for the device under this subsection shall be 
equal to the hospital’s charges for each device 
furnished, adjusted to cost.’’. 
(2) 
SPECIFICATION
OF
GROUPS
FOR 
BRACHYTHERAPY
DEVICES.—Section 1833(t)(2) (42 
U.S.C. 1395l(t)(2) is amended—
(A) in subparagraph (F), by striking ‘‘and’’ 
at the end; 
(B) in subparagraph (G), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(H) 
with 
respect 
to 
devices 
of 
brachytherapy, the Secretary shall create addi-
tional groups of covered OPD services that clas-
sify such devices separately from the other serv-
ices (or group of services) paid for under this
383
subsection in a manner reflecting the number, 
isotope, and radioactive intensity of such devices 
furnished, including separate groups for palla-
dium-103 and iodine-125 devices.’’. 
(3) GAO REPORT.—The Comptroller General of 
the United States shall conduct a study to determine 
appropriate 
payment 
amounts 
under 
section 
1833(t)(13)(B) of the Social Security Act, as added 
by paragraph (1), for devices of brachytherapy. Not 
later than January 1, 2005, the Comptroller General 
shall submit to Congress and the Secretary a report 
on the study conducted under this paragraph, and 
shall include specific recommendations for appro-
priate payments for such devices. 
(c) APPLICATION
OF
FUNCTIONAL
EQUIVALENCE 
TEST.—
(1) IN GENERAL.—Section 1833(t)(6) (42 U.S.C. 
1395l(t)(6)) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(F) LIMITATION ON APPLICATION OF FUNC-
TIONAL EQUIVALENCE STANDARD.—
‘‘(i) IN GENERAL.—The Secretary may 
not apply a ‘functional equivalence’ or 
similar standard to a drug or biological 
under this paragraph.
384
‘‘(ii) LIMITED
APPLICATION.—Clause 
(i) shall apply to the application of a ‘func-
tional equivalent’ or similar standard to a 
drug or biological on or after the date of the 
enactment of this subparagraph, unless—
‘‘(I) such application was being 
made to such drug or biological before 
such date; and 
‘‘(II) the Secretary applies, or has 
applied, such ‘functional equivalent’ or 
similar standard to such drug or bio-
logical only for the purpose of deter-
mining the eligibility of such drug or 
biological for additional payments 
under this paragraph and not for the 
purpose of any other payments under 
this title. 
‘‘(iii) RULE OF CONSTRUCTION.—Noth-
ing in this subparagraph shall be construed 
as affecting the Secretary’s authority to 
deem a particular drug or biological to be 
identical to another drug or biological if the 
two drugs or biologicals are pharmaceuti-
cally equivalent and bioequivalent, as deter-
385
mined by the Commissioner of Food and 
Drugs.’’. 
(d) HOSPITAL ACQUISITION COST STUDY.—
(1) IN GENERAL.—The Secretary shall conduct a 
study on the costs incurred by hospitals in acquiring 
covered outpatient drugs for which payment is made 
under section 1833(t) of the Social Security Act (42 
U.S.C. 1395l(t)). 
(2) DRUGS COVERED.—The study in paragraph 
(1) shall not include those drugs for which the acqui-
sition costs is less than $50 per administration. 
(3) REPRESENTATIVE SAMPLE OF HOSPITALS.—
In conducting the study under paragraph (1), the 
Secretary shall collect data from a statistically valid 
sample of hospitals with an urban/rural stratifica-
tion. 
(4) REPORT.—Not later than January 1, 2006, 
the Secretary shall submit to Congress a report on the 
study conducted under paragraph (1), and shall in-
clude recommendations with respect to the following: 
(A) Whether the study should be repeated, 
and if so, how frequently. 
(B) Whether the study produced useful data 
on hospital acquisition cost.
386
(C) Whether data produced in the study is 
appropriate for use in making adjustments to 
payments for drugs and biologicals under section 
1847A of the Social Security Act. 
(D) Whether separate estimates can made of 
overhead costs, including handing and admin-
istering costs for drugs.
SEC. 622. PAYMENT FOR AMBULANCE SERVICES. 
(a) PHASE-IN PROVIDING FLOOR USING BLEND OF 
FEE SCHEDULE AND REGIONAL FEE SCHEDULES.—Sec-
tion 1834(l) (42 U.S.C. 1395m(l)), as amended by section 
410(a), is amended—
(1) in paragraph (2)(E), by inserting ‘‘consistent 
with paragraph (11)’’ after ‘‘in an efficient and fair 
manner’’; and 
(2) by adding at the end the following new para-
graph: 
‘‘(11) PHASE-IN PROVIDING FLOOR USING BLEND 
OF
FEE
SCHEDULE
AND
REGIONAL
FEE
SCHED-
ULES.—In carrying out the phase-in under para-
graph (2)(E) for each level of service furnished in a 
year, the portion of the payment amount that is based 
on the fee schedule shall be the greater of the amount 
determined under such fee schedule (without regard to 
this paragraph) or the following blended rate of the
387
fee schedule under paragraph (1) and of a regional fee 
schedule for the region involved: 
‘‘(A) For 2004, the blended rate shall be 
based 20 percent on the fee schedule under para-
graph (1) and 80 percent on the regional fee 
schedule. 
‘‘(B) For 2005, the blended rate shall be 
based 40 percent on the fee schedule under para-
graph (1) and 60 percent on the regional fee 
schedule. 
‘‘(C) For 2006, the blended rate shall be 
based 60 percent on the fee schedule under para-
graph (1) and 40 percent on the regional fee 
schedule. 
‘‘(D) For 2007, 2008, and 2009, the blended 
rate shall be based 80 percent on the fee schedule 
under paragraph (1) and 20 percent on the re-
gional fee schedule. 
‘‘(E) For 2010 and each succeeding year, 
the blended rate shall be based 100 percent on the 
fee schedule under paragraph (1). 
For purposes of this paragraph, the Secretary shall 
establish a regional fee schedule for each of the 9 Cen-
sus divisions using the methodology (used in estab-
lishing the fee schedule under paragraph (1)) to cal-
388
culate a regional conversion factor and a regional 
mileage payment rate and using the same payment 
adjustments and the same relative value units as used 
in the fee schedule under such paragraph.’’. 
(b) ADJUSTMENT IN PAYMENT FOR CERTAIN LONG 
TRIPS.—Section 1834(l), as amended by subsection (a), is 
further amended by adding at the end the following new 
paragraph: 
‘‘(12) ADJUSTMENT IN PAYMENT FOR CERTAIN 
LONG TRIPS.—In the case of ground ambulance serv-
ices furnished on or after January 1, 2004, and before 
January 1, 2009, regardless of where the transpor-
tation originates, the fee schedule established under 
this subsection shall provide that, with respect to the 
payment rate for mileage for a trip above 50 miles 
the per mile rate otherwise established shall be in-
creased by 1⁄4 of the payment per mile otherwise ap-
plicable to such miles.’’. 
(c) GAO REPORT ON COSTS AND ACCESS.—Not later 
than December 31, 2005, the Comptroller General of the 
United States shall submit to Congress an initial report 
on how costs differ among the types of ambulance providers 
and on access, supply, and quality of ambulance services 
in those regions and States that have a reduction in pay-
ment under the medicare ambulance fee schedule (under sec-
389
tion 1834(l) of the Social Security Act, as amended by this 
section). Not later than December 31, 2007, the Comptroller 
General shall submit to Congress a final report on such ac-
cess and supply. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to ambulance services furnished on or 
after January 1, 2004.
SEC. 623. RENAL DIALYSIS SERVICES. 
(a) DEMONSTRATION
OF
ALTERNATIVE
DELIVERY 
MODELS.—
(1) USE OF ADVISORY BOARD.—In carrying out 
the demonstration project relating to improving care 
for people with end-stage renal disease through alter-
native delivery models (as published in the Federal 
Register of June 4, 2003), the Secretary shall estab-
lish an advisory board comprised of representatives 
described in paragraph (2) to provide advice and rec-
ommendations with respect to the establishment and 
operation of such demonstration project. 
(2) 
REPRESENTATIVES.—Representatives 
re-
ferred to in paragraph (1) include representatives of 
the following: 
(A) Patient organizations. 
(B) Clinicians.
390
(C) The medicare payment advisory com-
mission, established under section 1805 of the 
Social Security Act (42 U.S.C. 1395b–6). 
(D) The National Kidney Foundation. 
(E) The National Institute of Diabetes and 
Digestive and Kidney Diseases of National Insti-
tutes of Health. 
(F) End-stage renal disease networks. 
(G) Medicare contractors to monitor quality 
of care. 
(I) providers of services and renal dialysis 
facilities furnishing end-stage renal disease serv-
ices. 
(J) Economists. 
(K) Researchers. 
(b) RESTORING COMPOSITE RATE EXCEPTIONS FOR 
PEDIATRIC FACILITIES.—
(1) IN GENERAL.—Section 422(a)(2) of BIPA is 
amended—
(A) in subparagraph (A), by striking ‘‘and 
(C)’’ and inserting ‘‘, (C), and (D)’’; 
(B) in subparagraph (B), by striking ‘‘In 
the case’’ and inserting ‘‘Subject to subpara-
graph (D), in the case’’; and
391
(C) by adding at the end the following new 
subparagraph: 
‘‘(D) INAPPLICABILITY
TO
PEDIATRIC
FA-
CILITIES.—Subparagraphs (A) and (B) shall not 
apply, as of October 1, 2002, to pediatric facili-
ties that do not have an exception rate described 
in subparagraph (C) in effect on such date. For 
purposes of this subparagraph, the term ‘pedi-
atric facility’ means a renal facility at least 50 
percent of whose patients are individuals under 
18 years of age.’’. 
(2) CONFORMING AMENDMENT.—The fourth sen-
tence of section 1881(b)(7) (42 U.S.C. 1395rr(b)(7)), 
as amended by subsection (b), is further amended by 
striking ‘‘Until’’ and inserting ‘‘Subject to section 
422(a)(2) of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000, 
and until’’. 
(c) INCREASE IN RENAL DIALYSIS COMPOSITE RATE 
FOR SERVICES FURNISHED IN 2004.—Notwithstanding any 
other provision of law, with respect to payment under part 
B of title XVIII of the Social Security Act for renal dialysis 
services furnished in 2004, the composite payment rate oth-
erwise established under section 1881(b)(7) of such Act (42 
U.S.C. 1395rr(b)(7)) shall be increased by 1.6 percent.
392
SEC. 624. ONE-YEAR MORATORIUM ON THERAPY CAPS; PRO-
VISIONS RELATING TO REPORTS. 
(a) 1-YEAR MORATORIUM ON THERAPY CAPS.—Sec-
tion 1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by 
striking ‘‘and 2002’’ and inserting ‘‘2002, and 2004’’. 
(b) PROMPT SUBMISSION OF OVERDUE REPORTS ON 
PAYMENT
AND UTILIZATION
OF OUTPATIENT THERAPY 
SERVICES.—Not later than December 31, 2003, the Sec-
retary shall submit to Congress the reports required under 
section 4541(d)(2) of the Balanced Budget Act of 1997 (re-
lating to alternatives to a single annual dollar cap on out-
patient therapy) and under section 221(d) of the Medicare, 
Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (relating to utilization patterns for outpatient ther-
apy).
(c) IDENTIFICATION OF CONDITIONS AND DISEASES 
JUSTIFYING WAIVER OF THERAPY CAP.—
(1) STUDY.—The Secretary shall request the In-
stitute of Medicine of the National Academy of 
Sciences to identify conditions or diseases that should 
justify conducting an assessment of the need to waive 
the therapy caps under section 1833(g)(4) of the So-
cial Security Act (42 U.S.C. 1395l(g)(4)). 
(2) REPORTS TO CONGRESS.—
(A) PRELIMINARY REPORT.—Not later than 
July 1, 2004, the Secretary shall submit to Con-
393
gress a preliminary report on the conditions and 
diseases identified under paragraph (1). 
(B) FINAL REPORT.—Not later than Sep-
tember 1, 2004, the Secretary shall submit to 
Congress a final report on such conditions and 
diseases. 
(C) RECOMMENDATIONS.—Not later than 
October 1, 2004, the Secretary shall submit to 
Congress a recommendation of criteria, with re-
spect to such conditions and disease, under 
which a waiver of the therapy caps would apply. 
(d) GAO STUDY OF PATIENT ACCESS TO PHYSICAL 
THERAPIST SERVICES.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study on access to phys-
ical therapist services in States authorizing such serv-
ices without a physician referral and in States that 
require such a physician referral. The study shall—
(A) examine the use of and referral patterns 
for physical therapist services for patients age 50 
and older in States that authorize such services 
without a physician referral and in States that 
require such a physician referral;
394
(B) examine the use of and referral patterns 
for physical therapist services for patients who 
are medicare beneficiaries; 
(C) examine the potential effect of prohib-
iting a physician from referring patients to 
physical therapy services owned by the physician 
and provided in the physician’s office; 
(D) examine the delivery of physical thera-
pists’ services within the facilities of Department 
of Defense; and 
(E) analyze the potential impact on medi-
care beneficiaries and on expenditures under the 
medicare program of eliminating the need for a 
physician referral and physician certification for 
physical therapist services under the medicare 
program. 
(2) REPORT.—The Comptroller General shall 
submit to Congress a report on the study conducted 
under paragraph (1) by not later than 1 year after 
the date of the enactment of this Act. 
SEC. 625. ADJUSTMENT TO PAYMENTS FOR SERVICES FUR-
NISHED IN AMBULATORY SURGICAL CEN-
TERS. 
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is 
amended in the last sentence by inserting ‘‘and each of fis-
395
cal years 2004 through 2008’’ after ‘‘In each of the fiscal 
years 1998 through 2002’’. 
SEC. 626. PAYMENT FOR CERTAIN SHOES AND INSERTS 
UNDER THE FEE SCHEDULE FOR ORTHOTICS 
AND PROSTHETICS. 
(a) IN
GENERAL.—Section 1833(o) (42 U.S.C. 
1395l(o)) is amended—
(1) in paragraph (1), by striking ‘‘no more than 
the limits established under paragraph (2)’’ and in-
serting ‘‘no more than the amount of payment appli-
cable under paragraph (2)’’; and 
(2) in paragraph (2), to read as follows: 
‘‘(2)(A) Except as provided by the Secretary under 
subparagraphs (B) and (C), the amount of payment under 
this paragraph for custom molded shoes, extra depth shoes, 
and inserts shall be the amount determined for such items 
by the Secretary under section 1834(h). 
‘‘(B) The Secretary or a carrier may establish pay-
ment amounts for shoes and inserts that are lower than the 
amount established under section 1834(h) if the Secretary 
finds that shoes and inserts of an appropriate quality are 
readily available at or below the amount established under 
such section. 
‘‘(C) In accordance with procedures established by the 
Secretary, an individual entitled to benefits with respect
396
to shoes described in section 1861(s)(12) may substitute 
modification of such shoes instead of obtaining one (or 
more, as specified by the Secretary) pair of inserts (other 
than the original pair of inserts with respect to such shoes). 
In such case, the Secretary shall substitute, for the payment 
amount established under section 1834(h), a payment 
amount that the Secretary estimates will assure that there 
is no net increase in expenditures under this subsection as 
a result of this subparagraph.’’. 
(b) 
CONFORMING
AMENDMENTS.—(1) 
Section 
1834(h)(4)(C) (42 U.S.C. 1395m(h)(4)(C)) is amended by 
inserting ‘‘(and includes shoes described in section 
1861(s)(12))’’ after ‘‘in section 1861(s)(9)’’. 
(2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is 
amended by striking subparagraph (C). 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to items furnished on or after January 
1, 2004.
SEC. 627. WAIVER OF PART B LATE ENROLLMENT PENALTY 
FOR CERTAIN MILITARY RETIREES; SPECIAL 
ENROLLMENT PERIOD. 
(a) WAIVER OF PENALTY.—
(1) IN GENERAL.—Section 1839(b) (42 U.S.C. 
1395r(b)) is amended by adding at the end the fol-
lowing new sentence: ‘‘No increase in the premium
397
shall be effected for a month in the case of an indi-
vidual who is 65 years of age or older, who enrolls 
under this part during 2001, 2002, 2003, or 2004 and 
who demonstrates to the Secretary before December 
31, 2004, that the individual is a covered beneficiary 
(as defined in section 1072(5) of title 10, United 
States Code). The Secretary of Health and Human 
Services shall consult with the Secretary of Defense in 
identifying individuals described in the previous sen-
tence.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall apply to premiums for months 
beginning with January 2003. The Secretary of 
Health and Human Services shall establish a method 
for providing rebates of premium penalties paid for 
months on or after January 2004 for which a penalty 
does not apply under such amendment but for which 
a penalty was previously collected. 
(b) MEDICARE PART B SPECIAL ENROLLMENT PE-
RIOD.—
(1) IN GENERAL.—In the case of any individual 
who, as of the date of the enactment of this Act, is 
65 years of age or older, is eligible to enroll but is not 
enrolled under part B of title XVIII of the Social Se-
curity Act, and is a covered beneficiary (as defined
398
in section 1072(5) of title 10, United States Code), the 
Secretary of Health and Human Services shall pro-
vide for a special enrollment period during which the 
individual may enroll under such part. Such period 
shall begin as soon as possible after the date of the en-
actment of this Act and shall end on December 31, 
2004. 
(2) COVERAGE PERIOD.—In the case of an indi-
vidual who enrolls during the special enrollment pe-
riod provided under paragraph (1), the coverage pe-
riod under part B of title XVIII of the Social Secu-
rity Act shall begin on the first day of the month fol-
lowing the month in which the individual enrolls. 
SEC. 628. PART B DEDUCTIBLE. 
Section 1833(b) (42 U.S.C. 1395l(b)) is amended—
(1) by striking ‘‘1991 and’’ and inserting 
‘‘1991,’’; and 
(2) by striking ‘‘and subsequent years’’ and in-
serting ‘‘and each subsequent year through 2003, and 
for a subsequent year after 2003 the amount of such 
deductible for the previous year increased by the an-
nual percentage increase in the monthly actuarial 
rate under section 1839(a)(1) ending with such subse-
quent year (rounded to the nearest $1)’’.
399
SEC. 629. DEMONSTRATION PROJECT FOR COVERAGE OF 
SELF-INJECTED 
BIOLOGICS 
FOR 
RHEU-
MATOID ARTHRITIS. 
(a) DEMONSTRATION PROJECT.—The Secretary shall 
conduct a demonstration project under part B of title XVIII 
of the Social Security Act under which payment is made 
for self-injected biologics (approved by the Food and Drug 
Administration) prescribed for the treatment of rheumatoid 
arthritis that are prescribed as replacements for drugs and 
biologicals described in section 1861(s)(2)(A) of such Act 
(42 U.S.C. 1395x(s)(2)(A)) for which payment is made 
under such part. 
(b) DEMONSTRATION PROJECT SITES.—The project es-
tablished under this section shall be conducted in 3 States 
selected by the Secretary. 
(c) DURATION.—The Secretary shall conduct the dem-
onstration project for the 2-year period beginning on the 
date that is 90 days after the date of the enactment of this 
Act. 
(d) REPORT.—(1) Not later than January 1, 2006, the 
Secretary shall submit to Congress a report on the project. 
The report shall include an evaluation of patient access to 
care and patient outcomes under the project, as well as an 
analysis of the cost effectiveness of the project, including an 
evaluation of the costs savings (if any) to the medicare pro-
gram attributable to reduced physicians’ services and hos-
400
pital outpatient departments services for administration of 
the biological. 
(2) The Secretary may use findings from the report 
under paragraph (1) in determining appropriate settings 
for the administration of biologics (approved by the Food 
and Drug Administration) prescribed for medicare bene-
ficiaries for the treatment of rheumatoid arthritis.
TITLE VII—PROVISIONS 
RELATING TO PARTS A AND B 
Subtitle A—Home Health Services 
SEC. 701. UPDATE IN HOME HEALTH SERVICES. 
(a) CHANGE TO CALENDER YEAR UPDATE.—
(1) IN GENERAL.—Section 1895(b) (42 U.S.C. 
1395fff(b)(3)) is amended—
(A) in paragraph (3)(B)(i)—
(i) by striking ‘‘each fiscal year (begin-
ning with fiscal year 2002)’’ and inserting 
‘‘fiscal year 2002 and for fiscal year 2003 
and for each subsequent year (beginning 
with 2004)’’; and 
(ii) by inserting ‘‘or year’’ after ‘‘the 
fiscal year’’; 
(B) in paragraph (3)(B)(ii)(II), by striking 
‘‘any subsequent fiscal year’’ and inserting 
‘‘2004 and any subsequent year’’;
401
(C) in paragraph (3)(B)(iii), by inserting 
‘‘or year’’ after ‘‘fiscal year’’ each place it ap-
pears; 
(D) in paragraph (3)(B)(iv)—
(i) by inserting ‘‘or year’’ after ‘‘fiscal 
year’’ each place it appears; and 
(ii) by inserting ‘‘or years’’ after ‘‘fis-
cal years’’; and 
(E) in paragraph (5), by inserting ‘‘or 
year’’ after ‘‘fiscal year’’. 
(2) TRANSITION RULE.—The standard prospec-
tive payment amount (or amounts) under section 
1895(b)(3) of the Social Security Act for the calendar 
quarter beginning on October 1, 2003, shall be such 
amount (or amounts) for the previous calendar quar-
ter. 
(b) CHANGES
IN UPDATES
FOR 2004, 2005, AND 
2006.—Section 
1895(b)(3)(B)(ii) 
(42 
U.S.C. 
1395fff(b)(3)(B)(ii)), as amended by subsection (a)(1)(B), 
is amended—
(1) by striking ‘‘or’’ at the end of subclause (I); 
(2) by redesignating subclause (II) as subclause 
(III); 
(3) in subclause (III), as so redesignated, by 
striking ‘‘2004’’ and inserting ‘‘2007’’; and
402
(4) by inserting after subclause (I) the following 
new subclause: 
‘‘(II) each of 2004, 2005, and 
2006 the home health market basket 
percentage increase minus 0.4 percent-
age points; or’’. 
SEC. 702. MEDPAC STUDY ON MEDICARE MARGINS OF HOME 
HEALTH AGENCIES. 
(a) STUDY.—The Medicare Payment Advisory Com-
mission shall conduct a study of payment margins of home 
health agencies under the home health prospective payment 
system under section 1895 of the Social Security Act (42 
U.S.C. 1395fff). Such study shall examine whether system-
atic differences in payment margins are related to dif-
ferences in case mix (as measured by home health resource 
groups (HHRGs)) among such agencies. The study shall use 
the partial or full-year cost reports filed by home health 
agencies. 
(b) 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 under subsection (a). 
SEC. 703. DEMONSTRATION PROJECT TO CLARIFY THE DEF-
INITION OF HOMEBOUND. 
(a) DEMONSTRATION PROJECT.—Not later than 180 
days after the date of the enactment of this Act, the Sec-
403
retary shall conduct a two-year demonstration project 
under part B of title XVIII of the Social Security Act under 
which medicare beneficiaries with chronic conditions de-
scribed in subsection (b) are deemed to be homebound for 
purposes of receiving home health services under the medi-
care program. 
(b) MEDICARE BENEFICIARY DESCRIBED.—For pur-
poses of subsection (a), a medicare beneficiary is eligible 
to be deemed to be homebound, without regard to the pur-
pose, frequency, or duration of absences from the home, if 
the beneficiary—
(1) has been certified by one physician as an in-
dividual who has a permanent and severe condition 
that will not improve; 
(2) requires the individual to receive assistance 
from another individual with at least 3 out of the 5 
activities of daily living for the rest of the individ-
ual’s life; 
(3) requires 1 or more home health services to 
achieve a functional condition that gives the indi-
vidual the ability to leave home; and 
(4) requires technological assistance or the assist-
ance of another person to leave the home. 
(c) DEMONSTRATION
PROJECT
SITES.—The dem-
onstration project established under this section shall be
404
conducted in 3 States selected by the Secretary to represent 
the Northeast, Midwest, and Western regions of the United 
States. 
(d) LIMITATION ON NUMBER OF PARTICIPANTS.—The 
aggregate number of such beneficiaries that may participate 
in the project may not exceed 15,000. 
(e) DATA.—The Secretary shall collect such data on 
the demonstration project with respect to the provision of 
home health services to medicare beneficiaries that relates 
to quality of care, patient outcomes, and additional costs, 
if any, to the medicare program. 
(f) REPORT TO CONGRESS.—Not later than 1 year 
after the date of the completion of the demonstration project 
under this section, the Secretary shall submit to Congress 
a report on the project using the data collected under sub-
section (e) and shall include—
(1) an examination of whether the provision of 
home health services to medicare beneficiaries under 
the project—
(A) adversely effects the provision of home 
health services under the medicare program; or 
(B) directly causes an unreasonable increase 
of expenditures under the medicare program for 
the provision of such services that is directly at-
tributable to such clarification;
405
(2) the specific data evidencing the amount of 
any increase in expenditures that is a directly attrib-
utable to the demonstration project (expressed both in 
absolute dollar terms and as a percentage) above ex-
penditures that would otherwise have been incurred 
for home health services under the medicare program; 
and 
(3) specific recommendations to exempt perma-
nently and severely disabled homebound beneficiaries 
from restrictions on the length, frequency and purpose 
of their absences from the home to qualify for home 
health services without incurring additional unrea-
sonable costs to the medicare program. 
(g) WAIVER AUTHORITY.—The Secretary shall waive 
compliance with the requirements of title XVIII of the So-
cial Security Act (42 U.S.C. 1395 et seq.) to such extent 
and for such period as the Secretary determines is necessary 
to conduct demonstration projects. 
(h) CONSTRUCTION.—Nothing in this section shall be 
construed as waiving any applicable civil monetary pen-
alty, criminal penalty, or other remedy available to the Sec-
retary under title XI or title XVIII of the Social Security 
Act for acts prohibited under such titles, including penalties 
for false certifications for purposes of receipt of items or 
services under the medicare program.
406
(i) AUTHORIZATION OF APPROPRIATIONS.—Payments 
for the costs of carrying out the demonstration project under 
this section shall be made from the Federal Supplementary 
Insurance Trust Fund under section 1841 of such Act (42 
U.S.C. 1395t). 
(j) DEFINITIONS.—In this section: 
(1) MEDICARE BENEFICIARY.—The term ‘‘medi-
care beneficiary’’ means an individual who is enrolled 
under part B of title XVIII of the Social Security 
Act. 
(2) HOME HEALTH SERVICES.—The term ‘‘home 
health services’’ has the meaning given such term in 
section 1861(m) of the Social Security Act (42 U.S.C. 
1395x(m)). 
(3) ACTIVITIES OF DAILY LIVING DEFINED.—The 
term ‘‘activities of daily living’’ means eating, 
toileting, transferring, bathing, and dressing. 
(4) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services.
Subtitle B—Direct Graduate 
Medical Education 
SEC. 711. EXTENSION OF UPDATE LIMITATION ON HIGH 
COST PROGRAMS. 
Section 
1886(h)(2)(D)(iv) 
(42 
U.S.C. 
1395ww(h)(2)(D)(iv)) is amended—
407
(1) in subclause (I)—
(A) by inserting ‘‘AND 2004 THROUGH 2013’’ 
after ‘‘AND 2002’’; and 
(B) by inserting ‘‘or during the period be-
ginning with fiscal year 2004 and ending with 
fiscal year 2013’’ after ‘‘during fiscal year 2001 
or fiscal year 2002’’; and 
(2) in subclause (II)—
(A) by striking ‘‘fiscal year 2004, or fiscal 
year 2005,’’ and 
(B) by striking ‘‘For a’’ and inserting ‘‘For 
the’’.
Subtitle C—Chronic Care 
Improvement 
SEC. 721. VOLUNTARY CHRONIC CARE IMPROVEMENT 
UNDER TRADITIONAL FEE-FOR-SERVICE. 
Title XVIII, as amended by section 105(a), is amended 
by inserting after section 1807 the following new section: 
‘‘CHRONIC CARE IMPROVEMENT 
‘‘SEC. 1808. (a) IN GENERAL.—
‘‘(1) IN GENERAL.—The Secretary shall establish 
a process for providing chronic care improvement 
programs in each CCIA region for medicare bene-
ficiaries who are not enrolled under part C or E and 
who have certain chronic conditions, such as conges-
tive heart failure, diabetes, chronic obstructive pul-
408
monary disease (COPD), stroke, prostate and colon 
cancer, hypertension, or other disease as identified by 
the Secretary as appropriate for chronic care im-
provement. Such a process shall begin to be imple-
mented no later than 1 year after the date of the en-
actment of this section. 
‘‘(2) TERMINOLOGY.—For purposes of this sec-
tion: 
‘‘(A) CCIA REGION.—The term ‘CCIA re-
gion’ means a chronic care improvement admin-
istrative region delineated under subsection 
(b)(2). 
‘‘(B) CHRONIC
CARE
IMPROVEMENT
PRO-
GRAM.—The terms ‘chronic care improvement 
program’ and ‘program’ means such a program 
provided by a contractor under this section. 
‘‘(C) CONTRACTOR.—The term ‘contractor’ 
means an entity with a contract to provide a 
chronic care improvement program in a CCIA 
region under this section. 
‘‘(D) INDIVIDUAL
PLAN.—The term ‘indi-
vidual plan’ means a chronic care improvement 
plan established under subsection (c)(5) for an 
individual.
409
‘‘(3) CONSTRUCTION.—Nothing in this section 
shall be construed as expanding the amount, dura-
tion, or scope of benefits under this title. 
‘‘(b) COMPETITIVE BIDDING PROCESS.—
‘‘(1) IN GENERAL.—Under this section the Sec-
retary shall award contracts to qualified entities for 
chronic care improvement programs for each CCIA 
region under this section through a competitive bid-
ding process. 
‘‘(2) PROCESS.—Under such process—
‘‘(A) the Secretary shall delineate the 
United States into multiple chronic care im-
provement administrative regions; and 
‘‘(B) the Secretary shall select at least 2 
winning bidders in each CCIA region on the 
basis of the ability of each bidder to carry out 
a chronic care improvement program in accord-
ance with this section, in order to achieve im-
proved health and financial outcomes. 
‘‘(3) ELIGIBLE CONTRACTOR.—A contractor may 
be a disease improvement organization, health in-
surer, provider organization, a group of physicians, 
or any other legal entity that the Secretary deter-
mines appropriate. 
‘‘(c) CHRONIC CARE IMPROVEMENT PROGRAMS.—
410
‘‘(1) IN
GENERAL.—Each contract under this 
section shall provide for the operation of a chronic 
care improvement program by a contractor in a 
CCIA region consistent with this subsection. 
‘‘(2) IDENTIFICATION OF PROSPECTIVE PROGRAM 
PARTICIPANTS.—Each contractor shall have a method 
for identifying medicare beneficiaries in the region to 
whom it will offer services under its program. The 
contractor shall identify such beneficiaries through 
claims or other data and other means permitted con-
sistent with applicable disclosure provisions. 
‘‘(3) INITIAL CONTACT BY SECRETARY.—The Sec-
retary shall communicate with each beneficiary iden-
tified under paragraph (2) as a prospective partici-
pant in one or more programs concerning participa-
tion in a program. Such communication may be 
made by the Secretary (or on behalf of the Secretary) 
and shall include information on the following: 
‘‘(A) A description of the advantages to the 
beneficiary in participating in a program. 
‘‘(B) Notification that the contractor offer-
ing a program may contact the beneficiary di-
rectly concerning such participation. 
‘‘(C) Notification that participation in a 
program is voluntary.
411
‘‘(D) A description of the method for the 
beneficiary to select the single program in which 
the beneficiary wishes to participate and for de-
clining to participate and a method for obtain-
ing additional information concerning such par-
ticipation. 
‘‘(4) PARTICIPATION.—A medicare beneficiary 
may participate in only one program under this sec-
tion and may terminate participation at any time in 
a manner specified by the Secretary. 
‘‘(5) INDIVIDUAL CHRONIC CARE IMPROVEMENT 
PLANS.—
‘‘(A) IN
GENERAL.—For each beneficiary 
participating in a program of a contractor 
under this section, the contractor shall develop 
with the beneficiary an individualized, goal-ori-
ented chronic care improvement plan. 
‘‘(B) ELEMENTS
OF
INDIVIDUAL
PLAN.—
Each individual plan developed under subpara-
graph (A) shall include a single point of contact 
to coordinate care and the following, as appro-
priate: 
‘‘(i) Self-improvement education for 
the beneficiary (such as education for dis-
ease management through medical nutrition
412
therapy) and support education for health 
care providers, primary caregivers, and 
family members. 
‘‘(ii) Coordination of health care serv-
ices, such as application of a prescription 
drug regimen and home health services. 
‘‘(iii) Collaboration with physicians 
and other providers to enhance communica-
tion of relevant clinical information. 
‘‘(iv) The use of monitoring tech-
nologies 
that 
enable 
patient 
guidance 
through the exchange of pertinent clinical 
information, such as vital signs, sympto-
matic information, and health self-assess-
ment. 
‘‘(v) The provision of information 
about hospice care, pain and palliative 
care, and end-of-life care. 
‘‘(C) CONTRACTOR
RESPONSIBILITIES.—In 
establishing and carrying out individual plans 
under a program, a contractor shall, directly or 
through subcontractors—
‘‘(i) guide participants in managing 
their 
health, 
including 
all 
their 
co-
413
morbidities, and in performing activities as 
specified under the elements of the plan; 
‘‘(ii) use decision support tools such as 
evidence-based practice guidelines or other 
criteria as determined by the Secretary; and 
‘‘(iii) develop a clinical information 
database to track and monitor each partici-
pant across settings and to evaluate out-
comes. 
‘‘(6) ADDITIONAL
REQUIREMENTS.—The Sec-
retary may establish additional requirements for pro-
grams and contractors under this section. 
‘‘(7) ACCREDITATION.—The Secretary may pro-
vide that programs that are accredited by qualified 
organizations may be deemed to meet such require-
ments under this section as the Secretary may speci-
fy. 
‘‘(c) CONTRACT TERMS.—
‘‘(1) IN GENERAL.—A contract under this section 
shall contain such terms and conditions as the Sec-
retary may specify consistent with this section. The 
Secretary may not enter into a contract with an enti-
ty under this section unless the entity meets such clin-
ical, quality improvement, financial, and other re-
414
quirements as the Secretary deems to be appropriate 
for the population to be served. 
‘‘(2) USE OF SUBCONTRACTORS PERMITTED.—A 
contractor may carry out a program directly or 
through contracts with subcontractors. 
‘‘(3) BUDGET NEUTRAL PAYMENT CONDITION.—
In entering into a contract with an entity under this 
subsection, the Secretary shall establish payment rates 
that assure that there will be no net aggregate in-
crease in payments under this title over any period 
of 3 years or longer, as agreed to by the Secretary. 
Under this section, the Secretary shall assure that 
medicare program outlays plus administrative ex-
penses (that would not have been paid under this title 
without implementation of this section), including 
contractor fees, shall not exceed the expenditures that 
would have been incurred under this title for a com-
parable population in the absence of the program 
under this section for the 3-year contract period. 
‘‘(4) AT RISK RELATIONSHIP.—For purposes of 
section 1128B(b)(3)(F), a contract under this section 
shall be treated as a risk-sharing arrangement re-
ferred to in such section. 
‘‘(5) PERFORMANCE
STANDARDS.—Payment to 
contractors under this section shall be subject to the
415
contractor’s meeting of clinical and financial per-
formance standards set by the Secretary. 
‘‘(6) CONTRACTOR
OUTCOMES
REPORT.—Each 
contractor offering a program shall monitor and re-
port to the Secretary, in a manner specified by the 
Secretary, the quality of care and efficacy of such 
program in terms of—
‘‘(A) process measures, such as reductions 
in errors of treatment and rehospitalization 
rates; 
‘‘(B) beneficiary and provider satisfaction; 
‘‘(C) health outcomes; and 
‘‘(D) financial outcomes. 
‘‘(7) PHASED IN IMPLEMENTATION.—Nothing in 
this section shall be construed as preventing the Sec-
retary from phasing in the implementation of pro-
grams. 
‘‘(d) BIANNUAL OUTCOMES REPORTS.—The Secretary 
shall submit to the Congress biannual reports on the imple-
mentation of this section. Each such report shall include 
information on—
‘‘(1) the scope of implementation (in terms of 
both regions and chronic conditions); 
‘‘(2) program design; and
416
‘‘(3) improvements in health outcomes and fi-
nancial efficiencies that result from such implementa-
tion. 
‘‘(e) CLINICAL TRIALS.—The Secretary shall conduct 
randomized clinical trials, that compare program partici-
pants with medicare beneficiaries who are offered, but de-
cline, to participate, in order to assess the potential of pro-
grams to—
‘‘(1) reduce costs under this title; and 
‘‘(2) improve health outcomes under this title. 
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There are 
authorized to be appropriated to the Secretary, in appro-
priate part from the Hospital Insurance Trust Fund and 
the Supplementary Medical Insurance Trust Fund, such 
sums as may be necessary to provide for contracts with 
chronic care improvement programs under this section. 
‘‘(g) LIMITATION ON FUNDING.—In no case shall the 
funding under this section exceed $100,000,000 over a pe-
riod of 3 years.’’. 
SEC. 722. CHRONIC CARE IMPROVEMENT UNDER MEDICARE 
ADVANTAGE AND ENHANCED FEE-FOR-SERV-
ICE PROGRAMS. 
(a) UNDER MEDICARE ADVANTAGE PROGRAM.—Sec-
tion 1852 (42 U.S.C. 1395w–22) is amended—
417
(1) by amending subsection (e) to read as fol-
lows: 
‘‘(e) IMPLEMENTATION OF CHRONIC CARE IMPROVE-
MENT PROGRAMS FOR BENEFICIARIES WITH MULTIPLE OR 
SUFFICIENTLY SEVERE CHRONIC CONDITIONS.—
‘‘(1) IN
GENERAL.—Each Medicare Advantage 
organization with respect to each Medicare Advantage 
plan it offers shall have in effect, for enrollees with 
multiple or sufficiently severe chronic conditions, a 
chronic care improvement program that is designed to 
manage the needs of such enrollees and that meets the 
requirements of this subsection. 
‘‘(2) ENROLLEE
WITH
MULTIPLE
OR
SUFFI-
CIENTLY
SEVERE
CHRONIC
CONDITIONS.—For pur-
poses of this subsection, the term ‘enrollee with mul-
tiple or sufficiently severe chronic conditions’ means, 
with respect to an enrollee in a Medicare Advantage 
plan of a Medicare Advantage organization, an en-
rollee in the plan who has one or more chronic condi-
tions, such as congestive heart failure, diabetes, 
COPD, stroke, prostate and colon cancer, hyper-
tension, or other disease as identified by the organiza-
tion as appropriate for chronic care improvement. 
‘‘(3) GENERAL REQUIREMENTS.—
418
‘‘(A) IN GENERAL.—Each chronic care im-
provement program under this subsection shall 
be conducted consistent with this subsection. 
‘‘(B) IDENTIFICATION
OF
ENROLLEES.—
Each such program shall have a method for 
monitoring and identifying enrollees with mul-
tiple or sufficiently severe chronic conditions 
that meet the organization’s criteria for partici-
pation under the program. 
‘‘(C) DEVELOPMENT OF PLANS.—For an en-
rollee identified under subparagraph (B) for par-
ticipation in a program, the program shall de-
velop, with the enrollee’s consent, an individual-
ized, goal-oriented chronic care improvement 
plan for chronic care improvement. 
‘‘(D) ELEMENTS OF PLANS.—Each chronic 
care improvement plan developed under subpara-
graph (C) shall include a single point of contact 
to coordinate care and the following, as appro-
priate: 
‘‘(i) Self-improvement education for 
the enrollee (such as education for disease 
management through medical nutrition 
therapy) and support education for health
419
care providers, primary caregivers, and 
family members. 
‘‘(ii) Coordination of health care serv-
ices, such as application of a prescription 
drug regimen and home health services. 
‘‘(iii) Collaboration with physicians 
and other providers to enhance communica-
tion of relevant clinical information. 
‘‘(iv) The use of monitoring tech-
nologies 
that 
enable 
patient 
guidance 
through the exchange of pertinent clinical 
information, such as vital signs, sympto-
matic information, and health self-assess-
ment. 
‘‘(v) The provision of information 
about hospice care, pain and palliative 
care, and end-of-life care. 
‘‘(E) ORGANIZATION
RESPONSIBILITIES.—
In establishing and carrying out chronic care 
improvement plans for participants under this 
paragraph, a Medicare Advantage organization 
shall, directly or through subcontractors—
‘‘(i) guide participants in managing 
their 
health, 
including 
all 
their 
co-
morbidities, and in performing the activi-
420
ties as specified under the elements of the 
plan; 
‘‘(ii) use decision support tools such as 
evidence-based practice guidelines or other 
criteria as determined by the Secretary; and 
‘‘(iii) develop a clinical information 
database to track and monitor each partici-
pant across settings and to evaluate out-
comes. 
‘‘(3) ADDITIONAL
REQUIREMENTS.—The Sec-
retary may establish additional requirements for 
chronic care improvement programs under this sec-
tion. 
‘‘(4) ACCREDITATION.—The Secretary may pro-
vide that chronic care improvement programs that 
are accredited by qualified organizations may be 
deemed to meet such requirements under this sub-
section as the Secretary may specify. 
‘‘(5) OUTCOMES REPORT.—Each Medicare Ad-
vantage organization with respect to its chronic care 
improvement program under this subsection shall 
monitor and report to the Secretary information on 
the quality of care and efficacy of such program as 
the Secretary may require.’’; and
421
(2) by amending subparagraph (I) of subsection 
(c)(1) to read as follows: 
‘‘(I) CHRONIC
CARE
IMPROVEMENT
PRO-
GRAM.—A description of the organization’s 
chronic care improvement program under sub-
section (e).’’. 
(b) APPLICATION UNDER ENHANCED FEE-FOR-SERV-
ICE PROGRAM.—Section 1860E–2(c)(3), as inserted by sec-
tion 201(a), is amended by inserting ‘‘, including subsection 
(e) (relating to implementation of chronic care improve-
ment programs)’’ after ‘‘The provisions of section 1852’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply for contract years beginning on or after 
1 year after the date of the enactment of this Act. 
SEC. 723. INSTITUTE OF MEDICINE REPORT. 
(a) STUDY.—
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall contract with the Institute of 
Medicine of the National Academy of Sciences to con-
duct a study of the barriers to effective integrated care 
improvement for medicare beneficiaries with multiple 
or severe chronic conditions across settings and over 
time and to submit a report under subsection (b). 
(2) SPECIFIC ITEMS.—The study shall examine 
the statutory and regulatory barriers to coordinating
422
care across settings for medicare beneficiaries in tran-
sition from one setting to another (such as between 
hospital, nursing facility, home health, hospice, and 
home). The study shall specifically identify the fol-
lowing: 
(A) Clinical, financial, or administrative 
requirements in the medicare program that 
present barriers to effective, seamless transitions 
across care settings. 
(B) Policies that impede the establishment 
of administrative and clinical information sys-
tems to track health status, utilization, cost, and 
quality data across settings. 
(C) State-level requirements that may 
present barriers to better care for medicare bene-
ficiaries. 
(3) CONSULTATION.—The study under this sub-
section shall be conducted in consultation with experts 
in the field of chronic care, consumers, and family 
caregivers, working to integrate care delivery and cre-
ate more seamless transitions across settings and over 
time. 
(b) REPORT.—The report under this subsection shall 
be submitted to the Secretary and Congress not later than 
18 months after the date of the enactment of this Act.
423
SEC. 724. MEDPAC REPORT. 
(a) EVALUATION.—shall conduct an evaluation that 
includes a description of the status of the implementation 
of chronic care improvement programs under section 1808 
of the Social Security Act, the quality of health care services 
provided to individuals in such program, the health status 
of the participants of such program, and the cost savings 
attributed to implementation of such program. 
(b) REPORT.—Not later than 2 years after the date 
of implementation of such chronic care improvement pro-
grams, the Commission shall submit a report on such eval-
uation.
Subtitle D—Other Provisions 
SEC. 731. MODIFICATIONS TO MEDICARE PAYMENT ADVI-
SORY COMMISSION (MEDPAC). 
(a) EXAMINATION OF BUDGET CONSEQUENCES.—Sec-
tion 1805(b) (42 U.S.C. 1395b–6(b)) is amended by adding 
at the end the following new paragraph: 
‘‘(8) 
EXAMINATION
OF
BUDGET
CON-
SEQUENCES.—Before making any recommendations, 
the Commission shall examine the budget con-
sequences of such recommendations, directly or 
through consultation with appropriate expert enti-
ties.’’. 
(b) CONSIDERATION
OF EFFICIENT PROVISION
OF 
SERVICES.—Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b–
424
6(b)(2)(B)(i)) is amended by inserting ‘‘the efficient provi-
sion of’’ after ‘‘expenditures for’’. 
(c) APPLICATION OF DISCLOSURE REQUIREMENTS.—
(1) IN
GENERAL.—Section 1805(c)(2)(D) (42 
U.S.C. 1395b–6(c)(2)(D)) is amended by adding at 
the end the following: ‘‘Members of the Commission 
shall be treated as employees of the Congress for pur-
poses of applying title I of the Ethics in Government 
Act of 1978 (Public Law 95-521).’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on January 1, 2004. 
(d) ADDITIONAL REPORTS.—
(1) DATA NEEDS AND SOURCES.—The Medicare 
Payment Advisory Commission shall conduct a study, 
and submit a report to Congress by not later than 
June 1, 2004, on the need for current data, and 
sources of current data available, to determine the sol-
vency and financial circumstances of hospitals and 
other medicare providers of services. The Commission 
shall examine data on uncompensated care, as well as 
the share of uncompensated care accounted for by the 
expenses for treating illegal aliens. 
(2) USE OF TAX-RELATED RETURNS.—Using re-
turn information provided under Form 990 of the In-
ternal Revenue Service, the Commission shall submit
425
to Congress, by not later than June 1, 2004, a report 
on the following: 
(A) Investments, endowments, and fund-
raising of hospitals participating under the 
medicare program and related foundations. 
(B) Access to capital financing for private 
and for not-for-profit hospitals. 
SEC. 732. DEMONSTRATION PROJECT FOR MEDICAL ADULT 
DAY CARE SERVICES. 
(a) ESTABLISHMENT.—Subject to the succeeding provi-
sions of this section, the Secretary of Health and Human 
Services shall establish a demonstration project (in this sec-
tion referred to as the ‘‘demonstration project’’) under 
which the Secretary shall, as part of a plan of an episode 
of care for home health services established for a medicare 
beneficiary, permit a home health agency, directly or under 
arrangements with a medical adult day care facility, to 
provide medical adult day care services as a substitute for 
a portion of home health services that would otherwise be 
provided in the beneficiary’s home. 
(b) PAYMENT.—
(1) IN GENERAL.—The amount of payment for 
an episode of care for home health services, a portion 
of which consists of substitute medical adult day care 
services, under the demonstration project shall be
426
made at a rate equal to 95 percent of the amount that 
would otherwise apply for such home health services 
under section 1895 of the Social Security Act (42 
u.s.c. 1395fff). In no case may a home health agency, 
or a medical adult day care facility under arrange-
ments with a home health agency, separately charge 
a beneficiary for medical adult day care services fur-
nished under the plan of care. 
(2) BUDGET NEUTRALITY FOR DEMONSTRATION 
PROJECT.—Notwithstanding any other provision of 
law, the Secretary shall provide for an appropriate 
reduction in the aggregate amount of additional pay-
ments made under section 1895 of the Social Security 
Act (42 U.S.C. 1395fff) to reflect any increase in 
amounts expended from the Trust Funds as a result 
of the demonstration project conducted under this sec-
tion. 
(c) DEMONSTRATION PROJECT SITES.—The project es-
tablished under this section shall be conducted in not more 
than 5 States selected by the Secretary that license or certify 
providers of services that furnish medical adult day care 
services. 
(d) DURATION.—The Secretary shall conduct the dem-
onstration project for a period of 3 years.
427
(e) VOLUNTARY
PARTICIPATION.—Participation of 
medicare beneficiaries in the demonstration project shall be 
voluntary. The total number of such beneficiaries that may 
participate in the project at any given time may not exceed 
15,000. 
(f) PREFERENCE IN SELECTING AGENCIES.—In select-
ing home health agencies to participate under the dem-
onstration project, the Secretary shall give preference to 
those agencies that are currently licensed or certified 
through common ownership and control to furnish medical 
adult day care services. 
(g) WAIVER AUTHORITY.—The Secretary may waive 
such requirements of title XVIII of the Social Security Act 
as may be necessary for the purposes of carrying out the 
demonstration project, other than waiving the requirement 
that an individual be homebound in order to be eligible for 
benefits for home health services. 
(h) EVALUATION AND REPORT.—The Secretary shall 
conduct an evaluation of the clinical and cost effectiveness 
of the demonstration project. Not later 30 months after the 
commencement of the project, the Secretary shall submit to 
Congress a report on the evaluation, and shall include in 
the report the following: 
(1) An analysis of the patient outcomes and costs 
of furnishing care to the medicare beneficiaries par-
428
ticipating in the project as compared to such out-
comes and costs to beneficiaries receiving only home 
health services for the same health conditions. 
(2) Such recommendations regarding the exten-
sion, expansion, or termination of the project as the 
Secretary determines appropriate. 
(i) DEFINITIONS.—In this section: 
(1) HOME HEALTH AGENCY.—The term ‘‘home 
health agency’’ has the meaning given such term in 
section 1861(o) of the Social Security Act (42 U.S.C. 
1395x(o)). 
(2) MEDICAL ADULT DAY CARE FACILITY.—The 
term ‘‘medical adult day care facility’’ means a facil-
ity that—
(A) has been licensed or certified by a State 
to furnish medical adult day care services in the 
State for a continuous 2-year period; 
(B) is engaged in providing skilled nursing 
services and other therapeutic services directly or 
under arrangement with a home health agency; 
(C) meets such standards established by the 
Secretary to assure quality of care and such 
other requirements as the Secretary finds nec-
essary in the interest of the health and safety of
429
individuals who are furnished services in the fa-
cility; and 
(D) provides medical adult day care serv-
ices. 
(3) MEDICAL ADULT DAY CARE SERVICES.—The 
term ‘‘medical adult day care services’’ means—
(A) home health service items and services 
described in paragraphs (1) through (7) of sec-
tion 1861(m) furnished in a medical adult day 
care facility; 
(B) a program of supervised activities fur-
nished in a group setting in the facility that—
(i) meet such criteria as the Secretary 
determines appropriate; and 
(ii) is designed to promote physical 
and mental health of the individuals; and 
(C) such other services as the Secretary may 
specify. 
(4) MEDICARE BENEFICIARY.—The term ‘‘medi-
care beneficiary’’ means an individual entitled to 
benefits under part A of this title, enrolled under part 
B of this title, or both.
430
SEC. 733. IMPROVEMENTS IN NATIONAL AND LOCAL COV-
ERAGE DETERMINATION PROCESS TO RE-
SPOND TO CHANGES IN TECHNOLOGY. 
(a) NATIONAL AND LOCAL COVERAGE DETERMINATION 
PROCESS.—
(1) IN
GENERAL.—Section 1862 (42 U.S.C. 
1395y) is amended—
(A) in the third sentence of subsection (a) 
by inserting ‘‘consistent with subsection (k)’’ 
after ‘‘the Secretary shall ensure’’; and 
(B) by adding at the end the following new 
subsection: 
‘‘(k) NATIONAL AND LOCAL COVERAGE DETERMINA-
TION PROCESS.—
‘‘(1) CRITERIA AND EVIDENCE USED IN MAKING 
NATIONAL
COVERAGE
DETERMINATIONS.—The Sec-
retary shall make available to the public the criteria 
the Secretary uses in making national coverage deter-
minations, including how evidence to demonstrate 
that a procedure or device is reasonable and necessary 
is considered. 
‘‘(2) TIMEFRAME FOR DECISIONS ON REQUESTS 
FOR NATIONAL COVERAGE DETERMINATIONS.—In the 
case of a request for a national coverage determina-
tion that—
431
‘‘(A) does not require a technology assess-
ment from an outside entity or deliberation from 
the Medicare Coverage Advisory Committee, the 
decision on the request shall be made not later 
than 6 months after the date of the request; or 
‘‘(B) requires such an assessment or delib-
eration and in which a clinical trial is not re-
quested, the decision on the request shall be made 
not later than 12 months after the date of the re-
quest. 
‘‘(3) PROCESS
FOR
PUBLIC
COMMENT
IN
NA-
TIONAL COVERAGE DETERMINATIONS.—At the end of 
the 6-month period that begins on the date a request 
for a national coverage determination is made, the 
Secretary shall—
‘‘(A) make a draft of proposed decision on 
the request available to the public through the 
Medicare Internet site of the Department of 
Health and Human Services or other appro-
priate means; 
‘‘(B) provide a 30-day period for public 
comment on such draft; 
‘‘(C) make a final decision on the request 
within 60 days of the conclusion of the 30-day 
period referred to under subparagraph (B);
432
‘‘(D) include in such final decision sum-
maries of the public comments received and re-
sponses thereto; 
‘‘(E) make available to the public the clin-
ical evidence and other data used in making 
such a decision when the decision differs from 
the recommendations of the Medicare Coverage 
Advisory Committee; and 
‘‘(F) in the case of a decision to grant the 
coverage determination, assign a temporary or 
permanent code during the 60-day period re-
ferred to in subparagraph (C). 
‘‘(4) CONSULTATION WITH OUTSIDE EXPERTS IN 
CERTAIN
NATIONAL
COVERAGE
DETERMINATIONS.—
With respect to a request for a national coverage de-
termination for which there is not a review by the 
Medicare Coverage Advisory Committee, the Secretary 
shall consult with appropriate outside clinical ex-
perts. 
‘‘(5) LOCAL
COVERAGE
DETERMINATION
PROC-
ESS.—With respect to local coverage determinations 
made on or after January 1, 2004—
‘‘(A) PLAN TO PROMOTE CONSISTENCY OF 
COVERAGE
DETERMINATIONS.—The 
Secretary 
shall develop a plan to evaluate new local cov-
433
erage determinations to determine which deter-
minations should be adopted nationally and to 
what extent greater consistency can be achieved 
among local coverage determinations. 
‘‘(B) CONSULTATION.—The Secretary shall 
require the fiscal intermediaries or carriers pro-
viding services within the same area to consult 
on all new local coverage determinations within 
the area. 
‘‘(C) DISSEMINATION
OF
INFORMATION.—
The Secretary should serve as a center to dis-
seminate information on local coverage deter-
minations among fiscal intermediaries and car-
riers to reduce duplication of effort. 
‘‘(6) NATIONAL AND LOCAL COVERAGE DETER-
MINATION DEFINED.—For purposes of this subsection, 
the terms ‘national coverage determination’ and ‘local 
coverage determination’ have the meaning given such 
terms in paragraphs (1)(B) and (2)(B), respectively, 
of section 1869(f).’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to national and local 
coverage determinations as of January 1, 2004. 
(b) MEDICARE COVERAGE OF ROUTINE COSTS ASSOCI-
ATED WITH CERTAIN CLINICAL TRIALS.—
434
(1) IN GENERAL.—With respect to the coverage of 
routine costs of care for beneficiaries participating in 
a qualifying clinical trial, as set forth on the date of 
the enactment of this Act in National Coverage Deter-
mination 30-1 of the Medicare Coverage Issues Man-
ual, the Secretary shall deem clinical trials conducted 
in accordance with an investigational device exemp-
tion approved under section 520(g) of the Federal 
Food, Drug, and Cosmetic Act (42 U.S.C. 360j(g)) to 
be automatically qualified for such coverage. 
(2) RULE OF CONSTRUCTION.—Nothing in this 
subsection shall be construed as authorizing or requir-
ing the Secretary to modify the regulations set forth 
on the date of the enactment of this Act at subpart 
B of part 405 of title 42, Code of Federal Regulations, 
or subpart A of part 411 of such title, relating to cov-
erage of, and payment for, a medical device that is 
the subject of an investigational device exemption by 
the Food and Drug Administration (except as may be 
necessary to implement paragraph (1)). 
(3) EFFECTIVE
DATE.—This subsection shall 
apply to clinical trials begun before, on, or after the 
date of the enactment of this Act and to items and 
services furnished on or after such date.
435
(c) ISSUANCE OF TEMPORARY NATIONAL CODES.—Not 
later than January 1, 2004, the Secretary shall implement 
revised procedures for the issuance of temporary national 
HCPCS codes under part B of title XVIII of the Social Se-
curity Act. 
SEC. 734. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY 
SERVICES. 
(a) IN GENERAL.—Section 1848(i) (42 U.S.C. 1395w–
4(i)) is amended by adding at the end the following new 
paragraph: 
‘‘(4) TREATMENT OF CERTAIN INPATIENT PHYSI-
CIAN PATHOLOGY SERVICES.—
‘‘(A) IN GENERAL.—With respect to services 
furnished on or after January 1, 2001, if an 
independent laboratory furnishes the technical 
component of a physician pathology service to a 
fee-for-service medicare beneficiary who is an in-
patient of a covered hospital, the Secretary shall 
treat such component as a service for which pay-
ment shall be made to the laboratory under this 
section and not as an inpatient hospital service 
for which payment is made to the hospital under 
section 1886(d). 
‘‘(B) DEFINITIONS.—In this paragraph: 
‘‘(i) COVERED HOSPITAL.—
436
‘‘(I) IN GENERAL.—The term ‘cov-
ered hospital’ means, with respect to 
an inpatient or outpatient, a hospital 
that had an arrangement with an 
independent laboratory that was in ef-
fect as of July 22, 1999, under which 
a laboratory furnished the technical 
component of physician pathology serv-
ices to fee-for-service medicare bene-
ficiaries who were hospital inpatients 
or outpatients, respectively, and sub-
mitted claims for payment for such 
component to a carrier with a contract 
under section 1842 and not to the hos-
pital. 
‘‘(II) CHANGE
IN
OWNERSHIP 
DOES NOT AFFECT DETERMINATION.—
A change in ownership with respect to 
a hospital on or after the date referred 
to in subclause (I) shall not affect the 
determination of whether such hospital 
is a covered hospital for purposes of 
such subclause. 
‘‘(ii) 
FEE-FOR-SERVICE
MEDICARE 
BENEFICIARY.—The 
term 
‘fee-for-service
437
medicare beneficiary’ means an individual 
who is entitled to benefits under part A, or 
enrolled under this part, or both, but is not 
enrolled in any of the following: 
‘‘(I) A Medicare+Choice plan 
under part C. 
‘‘(II) A plan offered by an eligible 
organization under section 1876. 
‘‘(III) A program of all-inclusive 
care for the elderly (PACE) under sec-
tion 1894. 
‘‘(IV) A social health maintenance 
organization (SHMO) demonstration 
project 
established 
under 
section 
4018(b) of the Omnibus Budget Rec-
onciliation Act of 1987 (Public Law 
100–203).’’. 
(b) CONFORMING AMENDMENT.—Section 542 of the 
Medicare, Medicaid, and SCHIP Benefits Improvement 
and Protection Act of 2000 (114 Stat. 2763A–550), as en-
acted into law by section 1(a)(6) of Public Law 106–554, 
is repealed. 
(c) EFFECTIVE DATES.—The amendments made by 
this section shall take effect as if included in the enactment 
of the Medicare, Medicaid, and SCHIP Benefits Improve-
438
ment and Protection Act of 2000 (Appendix F, 114 Stat. 
2763A–463), as enacted into law by section 1(a)(6) of Pub-
lic Law 106–554. 
SEC. 735. MEDICARE PANCREATIC ISLET CELL TRANSPLANT 
DEMONSTRATION PROJECT. 
(a) ESTABLISHMENT.—In order to test the appro-
priateness of pancreatic islet cell transplantation, not later 
than 120 days after the date of the enactment of this Act, 
the Secretary shall establish a demonstration project which 
the Secretary, provides for payment under the medicare 
program under title XVIII of the Social Security Act for 
pancreatic islet cell transplantation and related items and 
services in the case of medicare beneficiaries who have type 
I (juvenile) diabetes and have end stage renal disease. 
(b) DURATION OF PROJECT.—The authority of the Sec-
retary to conduct the demonstration project under this sec-
tion shall terminate on the date that is 5 years after the 
date of the establishment of the project. 
(c) EVALUATION AND REPORT.—The Secretary shall 
conduct an evaluation of the outcomes of the demonstration 
project. Not later than 120 days after the date of the termi-
nation of the demonstration project under subsection (b), 
the Secretary shall submit to Congress a report on the 
project, including recommendations for such legislative and 
administrative action as the Secretary deems appropriate.
439
(d) PAYMENT METHODOLOGY.—The Secretary shall es-
tablish an appropriate payment methodology for the provi-
sion of items and services under the demonstration project, 
which may include a payment methodology that bundles, 
to the maximum extent feasible, payment for all such items 
and services. 
(e) WAIVER AUTHORITY.—The Secretary may waive 
compliance with the requirements of title XVIII of the So-
cial Security Act to such extent and for such period as the 
Secretary determines is necessary to conduct the demonstra-
tion project. 
SEC. 736. DEMONSTRATION PROJECT FOR CONSUMER-DI-
RECTED CHRONIC OUTPATIENT SERVICES. 
(a) ESTABLISHMENT.—
(1) IN GENERAL.—Subject to the succeeding pro-
visions of this section, the Secretary shall establish 
demonstration projects (in this section referred to as 
‘‘demonstration projects’’) under which the Secretary 
shall evaluate methods that improve the quality of 
care provided to medicare beneficiaries with chronic 
conditions and that reduce expenditures that would 
otherwise be made under the medicare program on be-
half of such individuals for such chronic conditions, 
such methods to include permitting those beneficiaries 
to direct their own health care needs and services.
440
(2) MEDICARE
BENEFICIARIES
WITH
CHRONIC 
CONDITIONS
DEFINED.—In this section, the term 
‘‘medicare beneficiaries with chronic conditions’’ 
means an individual entitled to benefits under part 
A of title XVIII of the Social Security Act, and en-
rolled under part B of such title, but who is not en-
rolled under part C of such title who is diagnosed as 
having one or more chronic conditions (as defined by 
the Secretary), such as diabetes. 
(b) DESIGN OF PROJECTS.—
(1) IN GENERAL.—In establishing the demonstra-
tion projects under this section, the Secretary shall 
evaluate practices employed by group health plans 
and practices under State plans for medical assist-
ance under the medicaid program under title XIX of 
the Social Security Act that permit patients to self-
direct the provision of personal care services. 
(2) SCOPE OF SERVICES.—The Secretary shall 
determine the appropriate scope of personal care serv-
ices that would apply under the demonstration 
projects. 
(c) VOLUNTARY
PARTICIPATION.—Participation of 
medicare beneficiaries in the demonstration projects shall 
be voluntary.
441
(d) DEMONSTRATION PROJECTS SITES.—Not later 
than 2 years after the date of the enactment of this Act, 
the Secretary shall conduct no fewer than 3 demonstration 
projects established under this section. Of those demonstra-
tion projects, the Secretary shall conduct at least one in 
each of the following areas: 
(1) An urban area. 
(2) A rural area. 
(3) An area that the Secretary determines has a 
medicare population with rate of incidence of diabetes 
that significantly exceeds the national average rate of 
all areas. 
(e) EVALUATION AND REPORT.—
(1) EVALUATIONS.—The Secretary shall conduct 
evaluations of the clinical and cost effectiveness of the 
demonstration projects. 
(2) REPORTS.—Not later than 2 years after the 
commencement of the demonstration projects, and bi-
annually thereafter, the Secretary shall submit to 
Congress a report on the evaluation, and shall include 
in the report the following: 
(A) An analysis of the patient outcomes and 
costs of furnishing care to the medicare bene-
ficiaries participating in the projects as com-
442
pared to such outcomes and costs to other bene-
ficiaries for the same health conditions. 
(B) Evaluation of patient satisfaction 
under the demonstration projects. 
(C) Such recommendations regarding the 
extension, expansion, or termination of the 
projects as the Secretary determines appropriate.
TITLE VIII—MEDICARE 
BENEFITS ADMINISTRATION
SEC. 801. ESTABLISHMENT OF MEDICARE BENEFITS ADMIN-
ISTRATION. 
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et 
seq.), as amended by sections 105 and 721, is amended by 
inserting after 1808 the following new section: 
‘‘MEDICARE BENEFITS ADMINISTRATION 
‘‘SEC. 1809. (a) ESTABLISHMENT.—There is estab-
lished within the Department of Health and Human Serv-
ices an agency to be known as the Medicare Benefits Admin-
istration. 
‘‘(b) 
ADMINISTRATOR; 
DEPUTY
ADMINISTRATOR; 
CHIEF ACTUARY.—
‘‘(1) ADMINISTRATOR.—
‘‘(A) IN GENERAL.—The Medicare Benefits 
Administration shall be headed by an adminis-
trator to be known as the ‘Medicare Benefits Ad-
ministrator’ (in this section referred to as the
443
‘Administrator’) who shall be appointed by the 
President, by and with the advice and consent of 
the Senate. The Administrator shall be in direct 
line of authority to the Secretary. 
‘‘(B) COMPENSATION.—The Administrator 
shall be paid at the rate of basic pay payable for 
level III of the Executive Schedule under section 
5314 of title 5, United States Code. 
‘‘(C) TERM OF OFFICE.—The Administrator 
shall be appointed for a term of 4 years. In any 
case in which a successor does not take office at 
the end of an Administrator’s term of office, that 
Administrator may continue in office until the 
entry upon office of such a successor. An Admin-
istrator appointed to a term of office after the 
commencement of such term may serve under 
such appointment only for the remainder of such 
term. 
‘‘(D) GENERAL AUTHORITY.—The Adminis-
trator shall be responsible for the exercise of all 
powers and the discharge of all duties of the Ad-
ministration, and shall have authority and con-
trol over all personnel and activities thereof. 
‘‘(E) RULEMAKING
AUTHORITY.—The Ad-
ministrator may prescribe such rules and regula-
444
tions as the Administrator determines necessary 
or appropriate to carry out the functions of the 
Administration. The regulations prescribed by 
the Administrator shall be subject to the rule-
making procedures established under section 553 
of title 5, United States Code. The Administrator 
shall provide for the issuance of new regulations 
to carry out parts C, D, and E. 
‘‘(F) AUTHORITY TO ESTABLISH ORGANIZA-
TIONAL UNITS.—The Administrator may estab-
lish, alter, consolidate, or discontinue such orga-
nizational units or components within the Ad-
ministration as the Administrator considers nec-
essary or appropriate, except as specified in this 
section. 
‘‘(G) AUTHORITY TO DELEGATE.—The Ad-
ministrator may assign duties, and delegate, or 
authorize successive redelegations of, authority to 
act and to render decisions, to such officers and 
employees of the Administration as the Adminis-
trator may find necessary. Within the limita-
tions of such delegations, redelegations, or as-
signments, all official acts and decisions of such 
officers and employees shall have the same force
445
and effect as though performed or rendered by 
the Administrator. 
‘‘(2) DEPUTY ADMINISTRATOR.—
‘‘(A) IN GENERAL.—There shall be a Dep-
uty Administrator of the Medicare Benefits Ad-
ministration who shall be appointed by the 
President, by and with the advice and consent of 
the Senate. 
‘‘(B) COMPENSATION.—The Deputy Admin-
istrator shall be paid at the rate of basic pay 
payable for level IV of the Executive Schedule 
under section 5315 of title 5, United States Code. 
‘‘(C) TERM OF OFFICE.—The Deputy Ad-
ministrator shall be appointed for a term of 4 
years. In any case in which a successor does not 
take office at the end of a Deputy Administra-
tor’s term of office, such Deputy Administrator 
may continue in office until the entry upon of-
fice of such a successor. A Deputy Administrator 
appointed to a term of office after the commence-
ment of such term may serve under such ap-
pointment only for the remainder of such term. 
‘‘(D) DUTIES.—The Deputy Administrator 
shall perform such duties and exercise such pow-
ers as the Administrator shall from time to time
446
assign or delegate. The Deputy Administrator 
shall be Acting Administrator of the Administra-
tion during the absence or disability of the Ad-
ministrator and, unless the President designates 
another officer of the Government as Acting Ad-
ministrator, in the event of a vacancy in the of-
fice of the Administrator. 
‘‘(3) CHIEF ACTUARY.—
‘‘(A) IN GENERAL.—There is established in 
the Administration the position of Chief Actu-
ary. The Chief Actuary shall be appointed by, 
and in direct line of authority to, the Adminis-
trator of such Administration. The Chief Actu-
ary shall be appointed from among individuals 
who have demonstrated, by their education and 
experience, superior expertise in the actuarial 
sciences. The Chief Actuary may be removed only 
for cause. 
‘‘(B) COMPENSATION.—The Chief Actuary 
shall be compensated at the highest rate of basic 
pay for the Senior Executive Service under sec-
tion 5382(b) of title 5, United States Code. 
‘‘(C) DUTIES.—The Chief Actuary shall ex-
ercise such duties as are appropriate for the of-
447
fice of the Chief Actuary and in accordance with 
professional standards of actuarial independence. 
‘‘(4) SECRETARIAL COORDINATION OF PROGRAM 
ADMINISTRATION.—The Secretary shall ensure appro-
priate coordination between the Administrator and 
the Administrator of the Centers for Medicare & Med-
icaid Services in carrying out the programs under 
this title. 
‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—
‘‘(1) DUTIES.—
‘‘(A) GENERAL
DUTIES.—The Adminis-
trator shall carry out parts C, D, and E, includ-
ing—
‘‘(i) negotiating, entering into, and en-
forcing, contracts with plans for the offering 
of Medicare Advantage plans under part C 
and EFFS plans under part E, including 
the offering of qualified prescription drug 
coverage under such plans; and 
‘‘(ii) negotiating, entering into, and 
enforcing, contracts with PDP sponsors for 
the offering of prescription drug plans 
under part D. 
‘‘(B) OTHER DUTIES.—The Administrator 
shall carry out any duty provided for under part
448
C, part D, or part E, including demonstration 
projects carried out in part or in whole under 
such parts, the programs of all-inclusive care for 
the elderly (PACE program) under section 1894, 
the social health maintenance organization 
(SHMO) demonstration projects (referred to in 
section 4104(c) of the Balanced Budget Act of 
1997), medicare cost contractors under section 
1876(h), and through a Medicare Advantage 
project that demonstrates the application of capi-
tation payment rates for frail elderly medicare 
beneficiaries through the use of a interdiscipli-
nary team and through the provision of primary 
care services to such beneficiaries by means of 
such a team at the nursing facility involved). 
‘‘(C) PRESCRIPTION DRUG CARD.—The Ad-
ministrator shall carry out section 1807 (relat-
ing to the medicare prescription drug discount 
card endorsement program). 
‘‘(D) NONINTERFERENCE.—In carrying out 
its duties with respect to the provision of quali-
fied prescription drug coverage to beneficiaries 
under this title, the Administrator may not—
449
‘‘(i) require a particular formulary or 
institute a price structure for the reimburse-
ment of covered outpatient drugs; 
‘‘(ii) interfere in any way with nego-
tiations between PDP sponsors and Medi-
care Advantage organizations and EFFS 
organizations and drug manufacturers, 
wholesalers, or other suppliers of covered 
outpatient drugs; and 
‘‘(iii) otherwise interfere with the com-
petitive nature of providing such coverage 
through such sponsors and organizations. 
‘‘(E) ANNUAL REPORTS.—Not later March 
31 of each year, the Administrator shall submit 
to Congress and the President a report on the 
administration of parts C, D, and E during the 
previous fiscal year. 
‘‘(2) STAFF.—
‘‘(A) IN
GENERAL.—The Administrator, 
with the approval of the Secretary, may employ, 
without regard to chapter 31 of title 5, United 
States Code, other than sections 3102 through 
3113, 3131, 3133, 3136, 3151, and 3161, such of-
ficers and employees as are necessary to admin-
ister the activities to be carried out through the
450
Medicare Benefits Administration. The Adminis-
trator shall employ staff with appropriate and 
necessary expertise in negotiating contracts in 
the private sector. 
‘‘(B) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN
GENERAL.—The staff of the 
Medicare Benefits Administration shall, 
subject to clause (ii), be paid without regard 
to the provisions of chapter 51 (other than 
section 5101) and chapter 53 (other than 
section 5301, sections 5303 through 5305, 
5311, and 5372 of such title (relating to 
classification and schedule pay rates). 
‘‘(ii) MAXIMUM
RATE.—In no case 
may the rate of compensation determined 
under clause (i) exceed the rate of basic pay 
payable for level IV of the Executive Sched-
ule under section 5315 of title 5, United 
States Code. 
‘‘(C) LIMITATION
ON
FULL-TIME
EQUIVA-
LENT STAFFING FOR CURRENT CMS FUNCTIONS 
BEING TRANSFERRED.—The Administrator may 
not employ under this paragraph a number of 
full-time equivalent employees, to carry out func-
451
tions that were previously conducted by the Cen-
ters for Medicare & Medicaid Services and that 
are conducted by the Administrator by reason of 
this section, that exceeds the number of such full-
time equivalent employees authorized to be em-
ployed by the Centers for Medicare & Medicaid 
Services to conduct such functions as of the date 
of the enactment of this Act. 
‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS OF 
THE
CENTERS
FOR
MEDICARE
&
MEDICAID
SERV-
ICES.—
‘‘(A) IN GENERAL.—The Secretary, the Ad-
ministrator, and the Administrator of the Cen-
ters for Medicare & Medicaid Services shall es-
tablish an appropriate transition of responsi-
bility in order to redelegate the administration 
of part C from the Secretary and the Adminis-
trator of the Centers for Medicare & Medicaid 
Services to the Administrator as is appropriate 
to carry out the purposes of this section. 
‘‘(B) TRANSFER
OF
DATA
AND
INFORMA-
TION.—The Secretary shall ensure that the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services transfers to the Administrator of 
the Medicare Benefits Administration such infor-
452
mation and data in the possession of the Admin-
istrator of the Centers for Medicare & Medicaid 
Services as the Administrator of the Medicare 
Benefits Administration requires to carry out the 
duties described in paragraph (1). 
‘‘(C) CONSTRUCTION.—Insofar as a respon-
sibility of the Secretary or the Administrator of 
the Centers for Medicare & Medicaid Services is 
redelegated to the Administrator under this sec-
tion, any reference to the Secretary or the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services in this title or title XI with re-
spect to such responsibility is deemed to be a ref-
erence to the Administrator.
‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish within the Medicare Benefits Administration 
an Office of Beneficiary Assistance to coordinate 
functions relating to outreach and education of medi-
care beneficiaries under this title, including the func-
tions described in paragraph (2). The Office shall be 
separate operating division within the Administra-
tion. 
‘‘(2) DISSEMINATION OF INFORMATION ON BENE-
FITS AND APPEALS RIGHTS.—
453
‘‘(A) DISSEMINATION OF BENEFITS INFOR-
MATION.—The Office of Beneficiary Assistance 
shall disseminate, directly or through contract, to 
medicare beneficiaries, by mail, by posting on 
the Internet site of the Medicare Benefits Admin-
istration and through a toll-free telephone num-
ber, information with respect to the following: 
‘‘(i) Benefits, and limitations on pay-
ment (including cost-sharing, stop-loss pro-
visions, and formulary restrictions) under 
parts C, D, and E. 
‘‘(ii) Benefits, and limitations on pay-
ment under parts A and B, including infor-
mation on medicare supplemental policies 
under section 1882. 
Such information shall be presented in a manner 
so that medicare beneficiaries may compare ben-
efits under parts A, B, D, and medicare supple-
mental policies with benefits under Medicare Ad-
vantage plans under part C and EFFS plans 
under part E. 
‘‘(B) DISSEMINATION OF APPEALS RIGHTS 
INFORMATION.—The Office of Beneficiary Assist-
ance shall disseminate to medicare beneficiaries 
in the manner provided under subparagraph (A)
454
a description of procedural rights (including 
grievance and appeals procedures) of bene-
ficiaries under the original medicare fee-for-serv-
ice program under parts A and B, the Medicare 
Advantage program under part C, the Voluntary 
Prescription Drug Benefit Program under part 
D, and the Enhanced Fee-for-Service program 
under part E. 
‘‘(e) MEDICARE POLICY ADVISORY BOARD.—
‘‘(1) 
ESTABLISHMENT.—There 
is 
established 
within the Medicare Benefits Administration the 
Medicare Policy Advisory Board (in this section re-
ferred to the ‘Board’). The Board shall advise, consult 
with, and make recommendations to the Adminis-
trator of the Medicare Benefits Administration with 
respect to the administration of parts C, D, and E, 
including the review of payment policies under such 
parts. 
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—With respect to matters 
of the administration of parts C, D, and E the 
Board shall submit to Congress and to the Ad-
ministrator of the Medicare Benefits Administra-
tion such reports as the Board determines appro-
priate. Each such report may contain such rec-
455
ommendations as the Board determines appro-
priate for legislative or administrative changes 
to improve the administration of such parts, in-
cluding the topics described in subparagraph 
(B). Each such report shall be published in the 
Federal Register. 
‘‘(B) TOPICS DESCRIBED.—Reports required 
under subparagraph (A) may include the fol-
lowing topics: 
‘‘(i) FOSTERING
COMPETITION.—Rec-
ommendations or proposals to increase com-
petition under parts C, D, and E for serv-
ices furnished to medicare beneficiaries. 
‘‘(ii) EDUCATION AND ENROLLMENT.—
Recommendations for the improvement to 
efforts to provide medicare beneficiaries in-
formation and education on the program 
under this title, and specifically parts C, D, 
and E, and the program for enrollment 
under the title. 
‘‘(iii) IMPLEMENTATION
OF
RISK-AD-
JUSTMENT.—Evaluation of the implementa-
tion under section 1853(a)(3)(C) of the risk 
adjustment methodology to payment rates 
under that section to Medicare Advantage
456
organizations offering Medicare Advantage 
plans (and the corresponding payment pro-
visions under part E) that accounts for 
variations in per capita costs based on 
health status, geography, and other demo-
graphic factors. 
‘‘(iv) RURAL
ACCESS.—Recommenda-
tions to improve competition and access to 
plans under parts C, D, and E in rural 
areas. 
‘‘(C) 
MAINTAINING
INDEPENDENCE
OF 
BOARD.—The Board shall directly submit to 
Congress reports required under subparagraph 
(A). No officer or agency of the United States 
may require the Board to submit to any officer 
or agency of the United States for approval, 
comments, or review, prior to the submission to 
Congress of such reports. 
‘‘(3) DUTY
OF
ADMINISTRATOR
OF
MEDICARE 
BENEFITS ADMINISTRATION.—With respect to any re-
port submitted by the Board under paragraph (2)(A), 
not later than 90 days after the report is submitted, 
the Administrator of the Medicare Benefits Adminis-
tration shall submit to Congress and the President an 
analysis of recommendations made by the Board in
457
such report. Each such analysis shall be published in 
the Federal Register. 
‘‘(4) MEMBERSHIP.—
‘‘(A) APPOINTMENT.—Subject to the suc-
ceeding provisions of this paragraph, the Board 
shall consist of seven members to be appointed as 
follows: 
‘‘(i) Three members shall be appointed 
by the President. 
‘‘(ii) Two members shall be appointed 
by the Speaker of the House of Representa-
tives, with the advice of the chairmen and 
the ranking minority members of the Com-
mittees on Ways and Means and on Energy 
and Commerce of the House of Representa-
tives. 
‘‘(iii) Two members shall be appointed 
by the President pro tempore of the Senate 
with the advice of the chairman and the 
ranking minority member of the Senate 
Committee on Finance. 
‘‘(B) QUALIFICATIONS.—The members shall 
be chosen on the basis of their integrity, impar-
tiality, and good judgment, and shall be individ-
uals who are, by reason of their education and
458
experience in health care benefits management, 
exceptionally qualified to perform the duties of 
members of the Board. 
‘‘(C) PROHIBITION ON INCLUSION OF FED-
ERAL EMPLOYEES.—No officer or employee of the 
United States may serve as a member of the 
Board. 
‘‘(5) COMPENSATION.—Members of the Board 
shall receive, for each day (including travel time) they 
are engaged in the performance of the functions of the 
board, compensation at rates not to exceed the daily 
equivalent to the annual rate in effect for level IV of 
the Executive Schedule under section 5315 of title 5, 
United States Code. 
‘‘(6) TERMS OF OFFICE.—
‘‘(A) IN GENERAL.—The term of office of 
members of the Board shall be 3 years. 
‘‘(B) TERMS OF INITIAL APPOINTEES.—As 
designated by the President at the time of ap-
pointment, of the members first appointed—
‘‘(i) one shall be appointed for a term 
of 1 year; 
‘‘(ii) three shall be appointed for terms 
of 2 years; and
459
‘‘(iii) three shall be appointed for 
terms of 3 years. 
‘‘(C) REAPPOINTMENTS.—Any person ap-
pointed as a member of the Board may not serve 
for more than 8 years. 
‘‘(D) VACANCY.—Any member appointed to 
fill a vacancy occurring before the expiration of 
the term for which the member’s predecessor was 
appointed shall be appointed only for the re-
mainder of that term. A member may serve after 
the expiration of that member’s term until a suc-
cessor has taken office. A vacancy in the Board 
shall be filled in the manner in which the origi-
nal appointment was made. 
‘‘(7) CHAIR.—The Chair of the Board shall be 
elected by the members. The term of office of the Chair 
shall be 3 years. 
‘‘(8) MEETINGS.—The Board shall meet at the 
call of the Chair, but in no event less than three times 
during each fiscal year. 
‘‘(9) DIRECTOR AND STAFF.—
‘‘(A) APPOINTMENT
OF
DIRECTOR.—The 
Board shall have a Director who shall be ap-
pointed by the Chair.
460
‘‘(B) IN GENERAL.—With the approval of 
the Board, the Director may appoint, without re-
gard to chapter 31 of title 5, United States Code, 
such additional personnel as the Director con-
siders appropriate. 
‘‘(C) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN GENERAL.—The Director and 
staff of the Board shall, subject to clause 
(ii), be paid without regard to the provi-
sions of chapter 51 and chapter 53 of such 
title (relating to classification and schedule 
pay rates). 
‘‘(ii) MAXIMUM
RATE.—In no case 
may the rate of compensation determined 
under clause (i) exceed the rate of basic pay 
payable for level IV of the Executive Sched-
ule under section 5315 of title 5, United 
States Code. 
‘‘(D) ASSISTANCE
FROM
THE
ADMINIS-
TRATOR OF THE MEDICARE BENEFITS ADMINIS-
TRATION.—The Administrator of the Medicare 
Benefits Administration shall make available to 
the Board such information and other assistance 
as it may require to carry out its functions.
461
‘‘(10) CONTRACT AUTHORITY.—The Board may 
contract with and compensate government and pri-
vate agencies or persons to carry out its duties under 
this subsection, without regard to section 3709 of the 
Revised Statutes (41 U.S.C. 5). 
‘‘(f) FUNDING.—There is authorized to be appro-
priated, in appropriate part from the Federal Hospital In-
surance Trust Fund and from the Federal Supplementary 
Medical Insurance Trust Fund (including the Medicare 
Prescription Drug Account), such sums as are necessary to 
carry out this section.’’. 
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by sub-
section (a) shall take effect on the date of the enact-
ment of this Act. 
(2) DUTIES WITH RESPECT TO ELIGIBILITY DE-
TERMINATIONS
AND
ENROLLMENT.—The Adminis-
trator of the Medicare Benefits Administration shall 
carry out enrollment under title XVIII of the Social 
Security Act, make eligibility determinations under 
such title, and carry out parts C and E of such title 
for years beginning or after January 1, 2006. 
(3) TRANSITION.—Before the date the Adminis-
trator of the Medicare Benefits Administration is ap-
pointed and assumes responsibilities under this sec-
462
tion and section 1807 of the Social Security Act, the 
Secretary of Health and Human Services shall pro-
vide for the conduct of any responsibilities of such 
Administrator that are otherwise provided under law. 
(c) MISCELLANEOUS ADMINISTRATIVE PROVISIONS.—
(1) ADMINISTRATOR AS MEMBER OF THE BOARD 
OF TRUSTEES OF THE MEDICARE TRUST FUNDS.—
Section 1817(b) and section 1841(b) (42 U.S.C. 
1395i(b), 1395t(b)) are each amended by striking 
‘‘and the Secretary of Health and Human Services, 
all ex officio,’’ and inserting ‘‘the Secretary of Health 
and Human Services, and the Administrator of the 
Medicare Benefits Administration, all ex officio,’’. 
(2) INCREASE IN GRADE TO EXECUTIVE LEVEL 
III FOR THE ADMINISTRATOR OF THE CENTERS FOR 
MEDICARE & MEDICAID SERVICES; LEVEL FOR MEDI-
CARE BENEFITS ADMINISTRATOR.—
(A) IN GENERAL.—Section 5314 of title 5, 
United States Code, by adding at the end the fol-
lowing: 
‘‘Administrator of the Centers for Medicare & 
Medicaid Services. 
‘‘Administrator of the Medicare Benefits Admin-
istration.’’.
463
(B) 
CONFORMING
AMENDMENT.—Section 
5315 of such title is amended by striking ‘‘Ad-
ministrator of the Health Care Financing Ad-
ministration.’’. 
(C) EFFECTIVE
DATE.—The amendments 
made by this paragraph take effect on January 
1, 2004.
TITLE IX—REGULATORY REDUC-
TION AND CONTRACTING RE-
FORM 
Subtitle A—Regulatory Reform 
SEC. 901. CONSTRUCTION; DEFINITION OF SUPPLIER. 
(a) CONSTRUCTION.—Nothing in this title shall be con-
strued—
(1) to compromise or affect existing legal rem-
edies for addressing fraud or abuse, whether it be 
criminal prosecution, civil enforcement, or adminis-
trative remedies, including under sections 3729 
through 3733 of title 31, United States Code (known 
as the False Claims Act); or 
(2) to prevent or impede the Department of 
Health and Human Services in any way from its on-
going efforts to eliminate waste, fraud, and abuse in 
the medicare program.
464
Furthermore, the consolidation of medicare administrative 
contracting set forth in this Act does not constitute consoli-
dation of the Federal Hospital Insurance Trust Fund and 
the Federal Supplementary Medical Insurance Trust Fund 
or reflect any position on that issue. 
(b) DEFINITION
OF SUPPLIER.—Section 1861 (42 
U.S.C. 1395x) is amended by inserting after subsection (c) 
the following new subsection: 
‘‘Supplier 
‘‘(d) The term ‘supplier’ means, unless the context oth-
erwise requires, a physician or other practitioner, a facility, 
or other entity (other than a provider of services) that fur-
nishes items or services under this title.’’. 
SEC. 902. ISSUANCE OF REGULATIONS. 
(a) REGULAR TIMELINE FOR PUBLICATION OF FINAL 
RULES.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 
1395hh(a)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(3)(A) The Secretary, in consultation with the Direc-
tor of the Office of Management and Budget, shall establish 
and publish a regular timeline for the publication of final 
regulations based on the previous publication of a proposed 
regulation or an interim final regulation.
465
‘‘(B) Such timeline may vary among different regula-
tions based on differences in the complexity of the regula-
tion, the number and scope of comments received, and other 
relevant factors, but shall not be longer than 3 years except 
under exceptional circumstances. If the Secretary intends 
to vary such timeline with respect to the publication of a 
final regulation, the Secretary shall cause to have published 
in the Federal Register notice of the different timeline by 
not later than the timeline previously established with re-
spect to such regulation. Such notice shall include a brief 
explanation of the justification for such variation. 
‘‘(C) In the case of interim final regulations, upon the 
expiration of the regular timeline established under this 
paragraph for the publication of a final regulation after 
opportunity for public comment, the interim final regula-
tion shall not continue in effect unless the Secretary pub-
lishes (at the end of the regular timeline and, if applicable, 
at the end of each succeeding 1-year period) a notice of con-
tinuation of the regulation that includes an explanation of 
why the regular timeline (and any subsequent 1-year exten-
sion) was not complied with. If such a notice is published, 
the regular timeline (or such timeline as previously ex-
tended under this paragraph) for publication of the final 
regulation shall be treated as having been extended for 1 
additional year.
466
‘‘(D) The Secretary shall annually submit to Congress 
a report that describes the instances in which the Secretary 
failed to publish a final regulation within the applicable 
regular timeline under this paragraph and that provides 
an explanation for such failures.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on the date of the en-
actment of this Act. The Secretary shall provide for 
an appropriate transition to take into account the 
backlog of previously published interim final regula-
tions. 
(b) LIMITATIONS ON NEW MATTER IN FINAL REGULA-
TIONS.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 
1395hh(a)), as amended by subsection (a), is amended 
by adding at the end the following new paragraph: 
‘‘(4) If the Secretary publishes a final regulation that 
includes a provision that is not a logical outgrowth of a 
previously published notice of proposed rulemaking or in-
terim final rule, such provision shall be treated as a pro-
posed regulation and shall not take effect until there is the 
further opportunity for public comment and a publication 
of the provision again as a final regulation.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall apply to final regulations pub-
467
lished on or after the date of the enactment of this 
Act. 
SEC. 903. COMPLIANCE WITH CHANGES IN REGULATIONS 
AND POLICIES. 
(a) NO RETROACTIVE APPLICATION OF SUBSTANTIVE 
CHANGES.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C. 
1395hh), as amended by section 902(a), is amended 
by adding at the end the following new subsection: 
‘‘(e)(1)(A) A substantive change in regulations, man-
ual instructions, interpretative rules, statements of policy, 
or guidelines of general applicability under this title shall 
not be applied (by extrapolation or otherwise) retroactively 
to items and services furnished before the effective date of 
the change, unless the Secretary determines that—
‘‘(i) such retroactive application is necessary to 
comply with statutory requirements; or 
‘‘(ii) failure to apply the change retroactively 
would be contrary to the public interest.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall apply to substantive changes 
issued on or after the date of the enactment of this 
Act. 
(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE 
CHANGES AFTER NOTICE.—
468
(1) IN GENERAL.—Section 1871(e)(1), as added 
by subsection (a), is amended by adding at the end 
the following: 
‘‘(B)(i) Except as provided in clause (ii), a substantive 
change referred to in subparagraph (A) shall not become 
effective before the end of the 30-day period that begins on 
the date that the Secretary has issued or published, as the 
case may be, the substantive change. 
‘‘(ii) The Secretary may provide for such a substantive 
change to take effect on a date that precedes the end of the 
30-day period under clause (i) if the Secretary finds that 
waiver of such 30-day period is necessary to comply with 
statutory requirements or that the application of such 30-
day period is contrary to the public interest. If the Sec-
retary provides for an earlier effective date pursuant to this 
clause, the Secretary shall include in the issuance or publi-
cation of the substantive change a finding described in the 
first sentence, and a brief statement of the reasons for such 
finding. 
‘‘(C) No action shall be taken against a provider of 
services or supplier with respect to noncompliance with 
such a substantive change for items and services furnished 
before the effective date of such a change.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall apply to compliance actions un-
469
dertaken on or after the date of the enactment of this 
Act. 
(c) RELIANCE ON GUIDANCE.—
(1) IN GENERAL.—Section 1871(e), as added by 
subsection (a), is further amended by adding at the 
end the following new paragraph: 
‘‘(2)(A) If—
‘‘(i) a provider of services or supplier follows the 
written guidance (which may be transmitted elec-
tronically) provided by the Secretary or by a medi-
care contractor (as defined in section 1889(g)) acting 
within the scope of the contractor’s contract authority, 
with respect to the furnishing of items or services and 
submission of a claim for benefits for such items or 
services with respect to such provider or supplier; 
‘‘(ii) the Secretary determines that the provider 
of services or supplier has accurately presented the 
circumstances relating to such items, services, and 
claim to the contractor in writing; and 
‘‘(iii) the guidance was in error; 
the provider of services or supplier shall not be subject to 
any sanction (including any penalty or requirement for re-
payment of any amount) if the provider of services or sup-
plier reasonably relied on such guidance.
470
‘‘(B) Subparagraph (A) shall not be construed as pre-
venting the recoupment or repayment (without any addi-
tional penalty) relating to an overpayment insofar as the 
overpayment was solely the result of a clerical or technical 
operational error.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on the date of the en-
actment of this Act but shall not apply to any sanc-
tion for which notice was provided on or before the 
date of the enactment of this Act. 
SEC. 904. REPORTS AND STUDIES RELATING TO REGU-
LATORY REFORM. 
(a) GAO STUDY ON ADVISORY OPINION AUTHORITY.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study to determine the 
feasibility and appropriateness of establishing in the 
Secretary authority to provide legally binding advi-
sory opinions on appropriate interpretation and ap-
plication of regulations to carry out the medicare pro-
gram under title XVIII of the Social Security Act. 
Such study shall examine the appropriate timeframe 
for issuing such advisory opinions, as well as the need 
for additional staff and funding to provide such opin-
ions.
471
(2) REPORT.—The Comptroller General shall 
submit to Congress a report on the study conducted 
under paragraph (1) by not later than one year after 
the date of the enactment of this Act. 
(b) REPORT ON LEGAL AND REGULATORY INCONSIST-
ENCIES.—Section 1871 (42 U.S.C. 1395hh), as amended by 
section 2(a), is amended by adding at the end the following 
new subsection: 
‘‘(f)(1) Not later than 2 years after the date of the en-
actment of this subsection, and every 2 years thereafter, the 
Secretary shall submit to Congress a report with respect 
to the administration of this title and areas of inconsistency 
or conflict among the various provisions under law and reg-
ulation. 
‘‘(2) In preparing a report under paragraph (1), the 
Secretary shall collect—
‘‘(A) information from individuals entitled to 
benefits under part A or enrolled under part B, or 
both, providers of services, and suppliers and from the 
Medicare Beneficiary Ombudsman and the Medicare 
Provider Ombudsman with respect to such areas of 
inconsistency and conflict; and 
‘‘(B) information from medicare contractors that 
tracks the nature of written and telephone inquiries.
472
‘‘(3) A report under paragraph (1) shall include a de-
scription of efforts by the Secretary to reduce such inconsist-
ency or conflicts, and recommendations for legislation or 
administrative action that the Secretary determines appro-
priate to further reduce such inconsistency or conflicts.’’. 
Subtitle B—Contracting Reform 
SEC. 911. INCREASED FLEXIBILITY IN MEDICARE ADMINIS-
TRATION. 
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE 
ADMINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by in-
serting after section 1874 the following new section: 
‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE 
CONTRACTORS 
‘‘SEC. 1874A. (a) AUTHORITY.—
‘‘(1) AUTHORITY TO ENTER INTO CONTRACTS.—
The Secretary may enter into contracts with any eli-
gible entity to serve as a medicare administrative 
contractor with respect to the performance of any or 
all of the functions described in paragraph (4) or 
parts of those functions (or, to the extent provided in 
a contract, to secure performance thereof by other en-
tities). 
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is el-
igible to enter into a contract with respect to the per-
473
formance of a particular function described in para-
graph (4) only if—
‘‘(A) the entity has demonstrated capability 
to carry out such function; 
‘‘(B) the entity complies with such conflict 
of interest standards as are generally applicable 
to Federal acquisition and procurement; 
‘‘(C) the entity has sufficient assets to fi-
nancially support the performance of such func-
tion; and 
‘‘(D) the entity meets such other require-
ments as the Secretary may impose. 
‘‘(3) MEDICARE
ADMINISTRATIVE
CONTRACTOR 
DEFINED.—For purposes of this title and title XI—
‘‘(A) IN GENERAL.—The term ‘medicare ad-
ministrative contractor’ means an agency, orga-
nization, or other person with a contract under 
this section. 
‘‘(B) APPROPRIATE MEDICARE ADMINISTRA-
TIVE CONTRACTOR.—With respect to the perform-
ance of a particular function in relation to an 
individual entitled to benefits under part A or 
enrolled under part B, or both, a specific pro-
vider of services or supplier (or class of such pro-
viders of services or suppliers), the ‘appropriate’
474
medicare administrative contractor is the medi-
care administrative contractor that has a con-
tract under this section with respect to the per-
formance of that function in relation to that in-
dividual, provider of services or supplier or class 
of provider of services or supplier. 
‘‘(4) FUNCTIONS DESCRIBED.—The functions re-
ferred to in paragraphs (1) and (2) are payment 
functions, provider services functions, and functions 
relating to services furnished to individuals entitled 
to benefits under part A or enrolled under part B, or 
both, as follows: 
‘‘(A) 
DETERMINATION
OF
PAYMENT 
AMOUNTS.—Determining (subject to the provi-
sions of section 1878 and to such review by the 
Secretary as may be provided for by the con-
tracts) the amount of the payments required pur-
suant to this title to be made to providers of 
services, suppliers and individuals. 
‘‘(B) MAKING
PAYMENTS.—Making pay-
ments described in subparagraph (A) (including 
receipt, disbursement, and accounting for funds 
in making such payments). 
‘‘(C) BENEFICIARY EDUCATION AND ASSIST-
ANCE.—Providing education and outreach to in-
475
dividuals entitled to benefits under part A or en-
rolled under part B, or both, and providing as-
sistance to those individuals with specific issues, 
concerns or problems. 
‘‘(D) 
PROVIDER
CONSULTATIVE
SERV-
ICES.—Providing consultative services to institu-
tions, agencies, and other persons to enable them 
to establish and maintain fiscal records nec-
essary for purposes of this title and otherwise to 
qualify as providers of services or suppliers. 
‘‘(E) COMMUNICATION WITH PROVIDERS.—
Communicating to providers of services and sup-
pliers any information or instructions furnished 
to the medicare administrative contractor by the 
Secretary, and facilitating communication be-
tween such providers and suppliers and the Sec-
retary. 
‘‘(F) PROVIDER EDUCATION AND TECHNICAL 
ASSISTANCE.—Performing the functions relating 
to provider education, training, and technical 
assistance. 
‘‘(G) ADDITIONAL FUNCTIONS.—Performing 
such other functions as are necessary to carry 
out the purposes of this title. 
‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
476
‘‘(A) NONDUPLICATION OF DUTIES.—In en-
tering into contracts under this section, the Sec-
retary shall assure that functions of medicare 
administrative contractors in carrying out ac-
tivities under parts A and B do not duplicate 
activities carried out under the Medicare Integ-
rity Program under section 1893. The previous 
sentence shall not apply with respect to the ac-
tivity described in section 1893(b)(5) (relating to 
prior authorization of certain items of durable 
medical equipment under section 1834(a)(15)). 
‘‘(B) CONSTRUCTION.—An entity shall not 
be treated as a medicare administrative con-
tractor merely by reason of having entered into 
a contract with the Secretary under section 
1893. 
‘‘(6) APPLICATION
OF
FEDERAL
ACQUISITION 
REGULATION.—Except to the extent inconsistent with 
a specific requirement of this title, the Federal Acqui-
sition Regulation applies to contracts under this title. 
‘‘(b) CONTRACTING REQUIREMENTS.—
‘‘(1) USE OF COMPETITIVE PROCEDURES.—
‘‘(A) IN GENERAL.—Except as provided in 
laws with general applicability to Federal acqui-
sition and procurement or in subparagraph (B),
477
the Secretary shall use competitive procedures 
when entering into contracts with medicare ad-
ministrative contractors under this section, tak-
ing into account performance quality as well as 
price and other factors. 
‘‘(B) RENEWAL OF CONTRACTS.—The Sec-
retary may renew a contract with a medicare 
administrative contractor under this section 
from term to term without regard to section 5 of 
title 41, United States Code, or any other provi-
sion of law requiring competition, if the medi-
care administrative contractor has met or ex-
ceeded the performance requirements applicable 
with respect to the contract and contractor, ex-
cept that the Secretary shall provide for the ap-
plication of competitive procedures under such a 
contract not less frequently than once every five 
years. 
‘‘(C) TRANSFER OF FUNCTIONS.—The Sec-
retary may transfer functions among medicare 
administrative contractors consistent with the 
provisions of this paragraph. The Secretary shall 
ensure that performance quality is considered in 
such transfers. The Secretary shall provide pub-
lic notice (whether in the Federal Register or
478
otherwise) of any such transfer (including a de-
scription of the functions so transferred, a de-
scription of the providers of services and sup-
pliers affected by such transfer, and contact in-
formation for the contractors involved). 
‘‘(D) INCENTIVES FOR QUALITY.—The Sec-
retary shall provide incentives for medicare ad-
ministrative contractors to provide quality serv-
ice and to promote efficiency. 
‘‘(2) COMPLIANCE
WITH
REQUIREMENTS.—No 
contract under this section shall be entered into with 
any medicare administrative contractor unless the 
Secretary finds that such medicare administrative 
contractor will perform its obligations under the con-
tract efficiently and effectively and will meet such re-
quirements as to financial responsibility, legal au-
thority, quality of services provided, and other mat-
ters as the Secretary finds pertinent. 
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT OF SPECIFIC PERFORM-
ANCE
REQUIREMENTS.—In developing contract 
performance requirements, the Secretary shall 
develop performance requirements applicable to 
functions described in subsection (a)(4).
479
‘‘(B) CONSULTATION.— In developing such 
requirements, the Secretary may consult with 
providers of services and suppliers, organizations 
representing individuals entitled to benefits 
under part A or enrolled under part B, or both, 
and organizations and agencies performing func-
tions necessary to carry out the purposes of this 
section with respect to such performance require-
ments. 
‘‘(C) INCLUSION IN CONTRACTS.—All con-
tractor performance requirements shall be set 
forth in the contract between the Secretary and 
the appropriate medicare administrative con-
tractor. Such performance requirements—
‘‘(i) shall reflect the performance re-
quirements developed under subparagraph 
(A), but may include additional perform-
ance requirements; 
‘‘(ii) shall be used for evaluating con-
tractor performance under the contract; and 
‘‘(iii) shall be consistent with the writ-
ten statement of work provided under the 
contract. 
‘‘(4) INFORMATION
REQUIREMENTS.—The Sec-
retary shall not enter into a contract with a medicare
480
administrative contractor under this section unless 
the contractor agrees—
‘‘(A) to furnish to the Secretary such timely 
information and reports as the Secretary may 
find necessary in performing his functions under 
this title; and 
‘‘(B) to maintain such records and afford 
such access thereto as the Secretary finds nec-
essary to assure the correctness and verification 
of the information and reports under subpara-
graph (A) and otherwise to carry out the pur-
poses of this title. 
‘‘(5) SURETY BOND.—A contract with a medi-
care administrative contractor under this section may 
require the medicare administrative contractor, and 
any of its officers or employees certifying payments or 
disbursing funds pursuant to the contract, or other-
wise participating in carrying out the contract, to 
give surety bond to the United States in such amount 
as the Secretary may deem appropriate. 
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—A contract with any medi-
care administrative contractor under this section may 
contain such terms and conditions as the Secretary 
finds necessary or appropriate and may provide for
481
advances of funds to the medicare administrative con-
tractor for the making of payments by it under sub-
section (a)(4)(B). 
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN 
DATA COLLECTION.—The Secretary may not require, 
as a condition of entering into, or renewing, a con-
tract under this section, that the medicare adminis-
trative contractor match data obtained other than in 
its activities under this title with data used in the ad-
ministration of this title for purposes of identifying 
situations in which the provisions of section 1862(b) 
may apply. 
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE ADMIN-
ISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as 
a certifying officer shall, in the absence of the reckless 
disregard of the individual’s obligations or the intent 
by that individual to defraud the United States, be 
liable with respect to any payments certified by the 
individual under this section. 
‘‘(2) DISBURSING OFFICER.—No disbursing offi-
cer shall, in the absence of the reckless disregard of the 
officer’s obligations or the intent by that officer to de-
fraud the United States, be liable with respect to any
482
payment by such officer under this section if it was 
based upon an authorization (which meets the appli-
cable requirements for such internal controls estab-
lished by the Comptroller General) of a certifying offi-
cer designated as provided in paragraph (1) of this 
subsection. 
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE 
CONTRACTOR.—
‘‘(A) IN GENERAL.—No medicare administrative 
contractor shall be liable to the United States for a 
payment by a certifying or disbursing officer unless, 
in connection with such payment, the medicare ad-
ministrative contractor acted with reckless disregard 
of its obligations under its medicare administrative 
contract or with intent to defraud the United States. 
‘‘(B) RELATIONSHIP TO FALSE CLAIMS ACT.—
Nothing in this subsection shall be construed to limit 
liability for conduct that would constitute a violation 
of sections 3729 through 3731 of title 31, United 
States Code (commonly known as the ‘False Claims 
Act’). 
‘‘(4) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (D), in the case of a medicare 
administrative contractor (or a person who is a
483
director, officer, or employee of such a contractor 
or who is engaged by the contractor to partici-
pate directly in the claims administration proc-
ess) who is made a party to any judicial or ad-
ministrative proceeding arising from or relating 
directly to the claims administration process 
under this title, the Secretary may, to the extent 
the Secretary determines to be appropriate and 
as specified in the contract with the contractor, 
indemnify the contractor and such persons. 
‘‘(B) CONDITIONS.—The Secretary may not 
provide indemnification under subparagraph (A) 
insofar as the liability for such costs arises di-
rectly from conduct that is determined by the ju-
dicial proceeding or by the Secretary to be crimi-
nal in nature, fraudulent, or grossly negligent. If 
indemnification is provided by the Secretary 
with respect to a contractor before a determina-
tion that such costs arose directly from such con-
duct, the contractor shall reimburse the Secretary 
for costs of indemnification. 
‘‘(C) SCOPE OF INDEMNIFICATION.—Indem-
nification by the Secretary under subparagraph 
(A) may include payment of judgments, settle-
484
ments (subject to subparagraph (D)), awards, 
and costs (including reasonable legal expenses). 
‘‘(D) WRITTEN
APPROVAL
FOR
SETTLE-
MENTS.—A contractor or other person described 
in subparagraph (A) may not propose to nego-
tiate a settlement or compromise of a proceeding 
described in such subparagraph without the 
prior written approval of the Secretary to nego-
tiate such settlement or compromise. Any indem-
nification under subparagraph (A) with respect 
to amounts paid under a settlement or com-
promise of a proceeding described in such sub-
paragraph are conditioned upon prior written 
approval by the Secretary of the final settlement 
or compromise. 
‘‘(E) 
CONSTRUCTION.—Nothing 
in 
this 
paragraph shall be construed—
‘‘(i) to change any common law immu-
nity that may be available to a medicare 
administrative contractor or person de-
scribed in subparagraph (A); or 
‘‘(ii) to permit the payment of costs 
not otherwise allowable, reasonable, or allo-
cable under the Federal Acquisition Regula-
tions.’’.
485
(2) CONSIDERATION OF INCORPORATION OF CUR-
RENT LAW STANDARDS.—In developing contract per-
formance requirements under section 1874A(b) of the 
Social Security Act, as inserted by paragraph (1), the 
Secretary shall consider inclusion of the performance 
standards described in sections 1816(f)(2) of such Act 
(relating to timely processing of reconsiderations and 
applications 
for 
exemptions) 
and 
section 
1842(b)(2)(B) of such Act (relating to timely review 
of determinations and fair hearing requests), as such 
sections were in effect before the date of the enactment 
of this Act. 
(b) CONFORMING AMENDMENTS TO SECTION 1816 (RE-
LATING TO FISCAL INTERMEDIARIES).—Section 1816 (42 
U.S.C. 1395h) is amended as follows: 
(1) The heading is amended to read as follows: 
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART 
A’’. 
(2) Subsection (a) is amended to read as follows: 
‘‘(a) The administration of this part shall be conducted 
through contracts with medicare administrative contractors 
under section 1874A.’’. 
(3) Subsection (b) is repealed. 
(4) Subsection (c) is amended—
(A) by striking paragraph (1); and
486
(B) in each of paragraphs (2)(A) and 
(3)(A), by striking ‘‘agreement under this sec-
tion’’ and inserting ‘‘contract under section 
1874A that provides for making payments under 
this part’’. 
(5) Subsections (d) through (i) are repealed. 
(6) Subsections (j) and (k) are each amended—
(A) by striking ‘‘An agreement with an 
agency or organization under this section’’ and 
inserting ‘‘A contract with a medicare adminis-
trative contractor under section 1874A with re-
spect to the administration of this part’’; and 
(B) by striking ‘‘such agency or organiza-
tion’’ and inserting ‘‘such medicare administra-
tive contractor’’ each place it appears. 
(7) Subsection (l) is repealed. 
(c) CONFORMING AMENDMENTS TO SECTION 1842 (RE-
LATING TO CARRIERS).—Section 1842 (42 U.S.C. 1395u) 
is amended as follows: 
(1) The heading is amended to read as follows: 
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART 
B’’. 
(2) Subsection (a) is amended to read as follows: 
‘‘(a) The administration of this part shall be conducted 
through contracts with medicare administrative contractors 
under section 1874A.’’.
487
(3) Subsection (b) is amended—
(A) by striking paragraph (1); 
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and 
(B); 
(ii) in subparagraph (C), by striking 
‘‘carriers’’ and inserting ‘‘medicare admin-
istrative contractors’’; and 
(iii) by striking subparagraphs (D) 
and (E); 
(C) in paragraph (3)—
(i) in the matter before subparagraph 
(A), by striking ‘‘Each such contract shall 
provide that the carrier’’ and inserting 
‘‘The Secretary’’; 
(ii) by striking ‘‘will’’ the first place it 
appears in each of subparagraphs (A), (B), 
(F), (G), (H), and (L) and inserting 
‘‘shall’’; 
(iii) in subparagraph (B), in the mat-
ter before clause (i), by striking ‘‘to the pol-
icyholders and subscribers of the carrier’’ 
and inserting ‘‘to the policyholders and sub-
scribers of the medicare administrative con-
tractor’’;
488
(iv) by striking subparagraphs (C), 
(D), and (E); 
(v) in subparagraph (H)—
(I) by striking ‘‘if it makes deter-
minations or payments with respect to 
physicians’ services,’’ in the matter 
preceding clause (i); and 
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’ in clause (i); 
(vi) by striking subparagraph (I); 
(vii) in subparagraph (L), by striking 
the semicolon and inserting a period; 
(viii) in the first sentence, after sub-
paragraph (L), by striking ‘‘and shall con-
tain’’ and all that follows through the pe-
riod; and 
(ix) in the seventh sentence, by insert-
ing ‘‘medicare administrative contractor,’’ 
after ‘‘carrier,’’; and 
(D) by striking paragraph (5); 
(E) in paragraph (6)(D)(iv), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and
489
(F) in paragraph (7), by striking ‘‘the car-
rier’’ and inserting ‘‘the Secretary’’ each place it 
appears. 
(4) Subsection (c) is amended—
(A) by striking paragraph (1); 
(B) in paragraph (2)(A), by striking ‘‘con-
tract under this section which provides for the 
disbursement of funds, as described in subsection 
(a)(1)(B),’’ and inserting ‘‘contract under section 
1874A that provides for making payments under 
this part’’; 
(C) in paragraph (3)(A), by striking ‘‘sub-
section 
(a)(1)(B)’’ 
and 
inserting 
‘‘section 
1874A(a)(3)(B)’’; 
(D) in paragraph (4), in the matter pre-
ceding subparagraph (A), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’; and 
(E) by striking paragraphs (5) and (6). 
(5) Subsections (d), (e), and (f) are repealed. 
(6) Subsection (g) is amended by striking ‘‘car-
rier or carriers’’ and inserting ‘‘medicare administra-
tive contractor or contractors’’. 
(7) Subsection (h) is amended—
(A) in paragraph (2)—
490
(i) by striking ‘‘Each carrier having 
an agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘The Secretary’’; 
and 
(ii) by striking ‘‘Each such carrier’’ 
and inserting ‘‘The Secretary’’; 
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an 
agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘medicare ad-
ministrative contractor having a contract 
under section 1874A that provides for mak-
ing payments under this part’’; and 
(ii) by striking ‘‘such carrier’’ and in-
serting ‘‘such contractor’’; 
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and insert-
ing ‘‘a medicare administrative contractor’’ 
each place it appears; and 
(ii) by striking ‘‘the carrier’’ and in-
serting ‘‘the contractor’’ each place it ap-
pears; and 
(D) in paragraphs (5)(A) and (5)(B)(iii), 
by striking ‘‘carriers’’ and inserting ‘‘medicare
491
administrative contractors’’ each place it ap-
pears. 
(8) Subsection (l) is amended—
(A) in paragraph (1)(A)(iii), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and 
(B) in paragraph (2), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’. 
(9) Subsection (p)(3)(A) is amended by striking 
‘‘carrier’’ and inserting ‘‘medicare administrative 
contractor’’. 
(10) Subsection (q)(1)(A) is amended by striking 
‘‘carrier’’. 
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made 
by this section shall take effect on October 1, 
2005, and the Secretary is authorized to take 
such steps before such date as may be necessary 
to implement such amendments on a timely 
basis. 
(B) CONSTRUCTION
FOR
CURRENT
CON-
TRACTS.—Such amendments shall not apply to
492
contracts in effect before the date specified under 
subparagraph (A) that continue to retain the 
terms and conditions in effect on such date (ex-
cept as otherwise provided under this Act, other 
than under this section) until such date as the 
contract is let out for competitive bidding under 
such amendments. 
(C) DEADLINE
FOR
COMPETITIVE
BID-
DING.—The Secretary shall provide for the let-
ting by competitive bidding of all contracts for 
functions of medicare administrative contractors 
for annual contract periods that begin on or 
after October 1, 2010. 
(D) WAIVER
OF
PROVIDER
NOMINATION 
PROVISIONS
DURING
TRANSITION.—During the 
period beginning on the date of the enactment of 
this Act and before the date specified under sub-
paragraph (A), the Secretary may enter into 
new agreements under section 1816 of the Social 
Security Act (42 U.S.C. 1395h) without regard 
to any of the provider nomination provisions of 
such section. 
(2) GENERAL
TRANSITION
RULES.—The Sec-
retary shall take such steps, consistent with para-
graph (1)(B) and (1)(C), as are necessary to provide
493
for an appropriate transition from contracts under 
section 1816 and section 1842 of the Social Security 
Act (42 U.S.C. 1395h, 1395u) to contracts under sec-
tion 1874A, as added by subsection (a)(1). 
(3) AUTHORIZING CONTINUATION OF MIP FUNC-
TIONS
UNDER
CURRENT
CONTRACTS
AND
AGREE-
MENTS AND UNDER ROLLOVER CONTRACTS.—The pro-
visions contained in the exception in section 
1893(d)(2) of the Social Security Act (42 U.S.C. 
1395ddd(d)(2)) shall continue to apply notwith-
standing the amendments made by this section, and 
any reference in such provisions to an agreement or 
contract shall be deemed to include a contract under 
section 1874A of such Act, as inserted by subsection 
(a)(1), that continues the activities referred to in such 
provisions. 
(e) REFERENCES.—On and after the effective date pro-
vided under subsection (d)(1), any reference to a fiscal 
intermediary or carrier under title XI or XVIII of the So-
cial Security Act (or any regulation, manual instruction, 
interpretative rule, statement of policy, or guideline issued 
to carry out such titles) shall be deemed a reference to a 
medicare administrative contractor (as provided under sec-
tion 1874A of the Social Security Act). 
(f) REPORTS ON IMPLEMENTATION.—
494
(1) PLAN FOR IMPLEMENTATION.—By not later 
than October 1, 2004, the Secretary shall submit a re-
port to Congress and the Comptroller General of the 
United States that describes the plan for implementa-
tion of the amendments made by this section. The 
Comptroller General shall conduct an evaluation of 
such plan and shall submit to Congress, not later 
than 6 months after the date the report is received, a 
report on such evaluation and shall include in such 
report such recommendations as the Comptroller Gen-
eral deems appropriate. 
(2) STATUS
OF
IMPLEMENTATION.—The Sec-
retary shall submit a report to Congress not later 
than October 1, 2008, that describes the status of im-
plementation of such amendments and that includes 
a description of the following: 
(A) The number of contracts that have been 
competitively bid as of such date. 
(B) The distribution of functions among 
contracts and contractors. 
(C) A timeline for complete transition to 
full competition. 
(D) A detailed description of how the Sec-
retary has modified oversight and management
495
of medicare contractors to adapt to full competi-
tion. 
SEC. 912. REQUIREMENTS FOR INFORMATION SECURITY 
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS. 
(a) IN GENERAL.—Section 1874A, as added by section 
911(a)(1), is amended by adding at the end the following 
new subsection: 
‘‘(e) REQUIREMENTS FOR INFORMATION SECURITY.—
‘‘(1) DEVELOPMENT OF INFORMATION SECURITY 
PROGRAM.—A medicare administrative contractor 
that performs the functions referred to in subpara-
graphs (A) and (B) of subsection (a)(4) (relating to 
determining and making payments) shall implement 
a contractor-wide information security program to 
provide information security for the operation and 
assets of the contractor with respect to such functions 
under this title. An information security program 
under this paragraph shall meet the requirements for 
information security programs imposed on Federal 
agencies under paragraphs (1) through (8) of section 
3544(b) of title 44, United States Code (other than the 
requirements under paragraphs (2)(D)(i), (5)(A), and 
(5)(B) of such section). 
‘‘(2) INDEPENDENT AUDITS.—
496
‘‘(A) PERFORMANCE
OF
ANNUAL
EVALUA-
TIONS.—Each year a medicare administrative 
contractor that performs the functions referred to 
in subparagraphs (A) and (B) of subsection 
(a)(4) (relating to determining and making pay-
ments) shall undergo an evaluation of the infor-
mation security of the contractor with respect to 
such functions under this title. The evaluation 
shall—
‘‘(i) be performed by an entity that 
meets such requirements for independence as 
the Inspector General of the Department of 
Health and Human Services may establish; 
and 
‘‘(ii) test the effectiveness of informa-
tion security control techniques of an ap-
propriate subset of the contractor’s informa-
tion systems (as defined in section 3502(8) 
of title 44, United States Code) relating to 
such functions under this title and an as-
sessment of compliance with the require-
ments of this subsection and related infor-
mation security policies, procedures, stand-
ards and guidelines, including policies and 
procedures as may be prescribed by the Di-
497
rector of the Office of Management and 
Budget and applicable information security 
standards promulgated under section 11331 
of title 40, United States Code. 
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case 
of a medicare administrative contractor 
covered by this subsection that has not pre-
viously performed the functions referred to 
in subparagraphs (A) and (B) of subsection 
(a)(4) (relating to determining and making 
payments) as a fiscal intermediary or car-
rier under section 1816 or 1842, the first 
independent evaluation conducted pursuant 
subparagraph (A) shall be completed prior 
to commencing such functions. 
‘‘(ii) OTHER
CONTRACTORS.—In the 
case of a medicare administrative con-
tractor covered by this subsection that is not 
described in clause (i), the first independent 
evaluation conducted pursuant subpara-
graph (A) shall be completed within 1 year 
after the date the contractor commences
498
functions referred to in clause (i) under this 
section. 
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE DEPARTMENT OF HEALTH 
AND
HUMAN
SERVICES.—The results of 
independent evaluations under subpara-
graph (A) shall be submitted promptly to 
the Inspector General of the Department of 
Health and Human Services and to the Sec-
retary. 
‘‘(ii) TO
CONGRESS.—The Inspector 
General of Department of Health and 
Human Services shall submit to Congress 
annual reports on the results of such eval-
uations, including assessments of the scope 
and sufficiency of such evaluations. 
‘‘(iii) AGENCY REPORTING.—The Sec-
retary shall address the results of such eval-
uations in reports required under section 
3544(c) of title 44, United States Code.’’. 
(b) APPLICATION
OF
REQUIREMENTS
TO
FISCAL 
INTERMEDIARIES AND CARRIERS.—
(1) IN
GENERAL.—The provisions of section 
1874A(e)(2) of the Social Security Act (other than 
subparagraph (B)), as added by subsection (a), shall
499
apply to each fiscal intermediary under section 1816 
of the Social Security Act (42 U.S.C. 1395h) and 
each carrier under section 1842 of such Act (42 
U.S.C. 1395u) in the same manner as they apply to 
medicare administrative contractors under such pro-
visions. 
(2) DEADLINE FOR INITIAL EVALUATION.—In the 
case of such a fiscal intermediary or carrier with an 
agreement or contract under such respective section in 
effect as of the date of the enactment of this Act, the 
first evaluation under section 1874A(e)(2)(A) of the 
Social Security Act (as added by subsection (a)), pur-
suant to paragraph (1), shall be completed (and a re-
port on the evaluation submitted to the Secretary) by 
not later than 1 year after such date. 
Subtitle C—Education and 
Outreach 
SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE. 
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—Title XVIII is amended by in-
serting after section 1888 the following new section: 
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE 
‘‘SEC. 1889. (a) COORDINATION OF EDUCATION FUND-
ING.—The Secretary shall coordinate the educational activi-
ties provided through medicare contractors (as defined in
500
subsection (g), including under section 1893) in order to 
maximize the effectiveness of Federal education efforts for 
providers of services and suppliers.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on the date of the en-
actment of this Act. 
(3) REPORT.—Not later than October 1, 2004, 
the Secretary shall submit to Congress a report that 
includes a description and evaluation of the steps 
taken to coordinate the funding of provider education 
under section 1889(a) of the Social Security Act, as 
added by paragraph (1). 
(b) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE.—
(1) IN GENERAL.—Section 1874A, as added by 
section 911(a)(1) and as amended by section 912(a), 
is amended by adding at the end the following new 
subsection: 
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE IN PROVIDER EDUCATION AND OUTREACH.—The Sec-
retary shall use specific claims payment error rates or simi-
lar methodology of medicare administrative contractors in 
the processing or reviewing of medicare claims in order to 
give such contractors an incentive to implement effective
501
education and outreach programs for providers of services 
and suppliers.’’. 
(2) APPLICATION
TO
FISCAL
INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(f) of 
the Social Security Act, as added by paragraph (1), 
shall apply to each fiscal intermediary under section 
1816 of the Social Security Act (42 U.S.C. 1395h) 
and each carrier under section 1842 of such Act (42 
U.S.C. 1395u) in the same manner as they apply to 
medicare administrative contractors under such pro-
visions. 
(3) GAO REPORT ON ADEQUACY OF METHOD-
OLOGY.—Not later than October 1, 2004, the Comp-
troller General of the United States shall submit to 
Congress and to the Secretary a report on the ade-
quacy of the methodology under section 1874A(f) of 
the Social Security Act, as added by paragraph (1), 
and shall include in the report such recommendations 
as the Comptroller General determines appropriate 
with respect to the methodology. 
(4) REPORT ON USE OF METHODOLOGY IN AS-
SESSING
CONTRACTOR
PERFORMANCE.—Not later 
than October 1, 2004, the Secretary shall submit to 
Congress a report that describes how the Secretary in-
tends to use such methodology in assessing medicare
502
contractor performance in implementing effective edu-
cation and outreach programs, including whether to 
use such methodology as a basis for performance bo-
nuses. The report shall include an analysis of the 
sources of identified errors and potential changes in 
systems of contractors and rules of the Secretary that 
could reduce claims error rates. 
(c) PROVISION
OF ACCESS
TO
AND PROMPT RE-
SPONSES FROM MEDICARE ADMINISTRATIVE CONTRAC-
TORS.—
(1) IN GENERAL.—Section 1874A, as added by 
section 911(a)(1) and as amended by section 912(a) 
and subsection (b), is further amended by adding at 
the end the following new subsection: 
‘‘(g) COMMUNICATIONS
WITH BENEFICIARIES, PRO-
VIDERS OF SERVICES AND SUPPLIERS.—
‘‘(1) COMMUNICATION STRATEGY.—The Secretary 
shall develop a strategy for communications with in-
dividuals entitled to benefits under part A or enrolled 
under part B, or both, and with providers of services 
and suppliers under this title. 
‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 
medicare administrative contractor shall, for those 
providers of services and suppliers which submit 
claims to the contractor for claims processing and for
503
those individuals entitled to benefits under part A or 
enrolled under part B, or both, with respect to whom 
claims are submitted for claims processing, provide 
general written responses (which may be through elec-
tronic transmission) in a clear, concise, and accurate 
manner to inquiries of providers of services, suppliers 
and individuals entitled to benefits under part A or 
enrolled under part B, or both, concerning the pro-
grams under this title within 45 business days of the 
date of receipt of such inquiries. 
‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Sec-
retary shall ensure that each medicare administrative 
contractor shall provide, for those providers of services 
and suppliers which submit claims to the contractor 
for claims processing and for those individuals enti-
tled to benefits under part A or enrolled under part 
B, or both, with respect to whom claims are submitted 
for claims processing, a toll-free telephone number at 
which such individuals, providers of services and sup-
pliers may obtain information regarding billing, cod-
ing, claims, coverage, and other appropriate informa-
tion under this title. 
‘‘(4) 
MONITORING
OF
CONTRACTOR
RE-
SPONSES.—
504
‘‘(A) IN GENERAL.—Each medicare admin-
istrative contractor shall, consistent with stand-
ards developed by the Secretary under subpara-
graph (B)—
‘‘(i) maintain a system for identifying 
who provides the information referred to in 
paragraphs (2) and (3); and 
‘‘(ii) monitor the accuracy, consist-
ency, and timeliness of the information so 
provided. 
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN GENERAL.—The Secretary shall 
establish and make public standards to 
monitor the accuracy, consistency, and 
timeliness of the information provided in 
response to written and telephone inquiries 
under this subsection. Such standards shall 
be consistent with the performance require-
ments established under subsection (b)(3). 
‘‘(ii) 
EVALUATION.—In 
conducting 
evaluations of individual medicare admin-
istrative contractors, the Secretary shall 
take into account the results of the moni-
toring conducted under subparagraph (A) 
taking into account as performance require-
505
ments the standards established under 
clause (i). The Secretary shall, in consulta-
tion with organizations representing pro-
viders of services, suppliers, and individuals 
entitled to benefits under part A or enrolled 
under part B, or both, establish standards 
relating to the accuracy, consistency, and 
timeliness of the information so provided. 
‘‘(C) DIRECT MONITORING.—Nothing in this 
paragraph shall be construed as preventing the 
Secretary from directly monitoring the accuracy, 
consistency, and timeliness of the information so 
provided.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect October 1, 2004. 
(3) APPLICATION
TO
FISCAL
INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(g) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under sec-
tion 1816 of the Social Security Act (42 U.S.C. 
1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they 
apply to medicare administrative contractors under 
such provisions.
506
(d) IMPROVED PROVIDER EDUCATION
AND TRAIN-
ING.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a), is amended by adding at the end the 
following new subsections: 
‘‘(b) ENHANCED EDUCATION AND TRAINING.—
‘‘(1) ADDITIONAL
RESOURCES.—There are au-
thorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund) $25,000,000 for each of fiscal 
years 2005 and 2006 and such sums as may be nec-
essary for succeeding fiscal years. 
‘‘(2) USE.—The funds made available under 
paragraph (1) shall be used to increase the conduct by 
medicare contractors of education and training of 
providers of services and suppliers regarding billing, 
coding, and other appropriate items and may also be 
used to improve the accuracy, consistency, and timeli-
ness of contractor responses. 
‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI-
TIES FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare con-
tractor conducts education and training activities, it 
shall tailor such activities to meet the special needs
507
of small providers of services or suppliers (as defined 
in paragraph (2)). 
‘‘(2) SMALL
PROVIDER
OF
SERVICES
OR
SUP-
PLIER.—In this subsection, the term ‘small provider 
of services or supplier’ means—
‘‘(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
‘‘(B) a supplier with fewer than 10 full-
time-equivalent employees.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on October 1, 2004. 
(e) REQUIREMENT TO MAINTAIN INTERNET SITES.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsection (d), is 
further amended by adding at the end the following 
new subsection: 
‘‘(d) INTERNET SITES; FAQS.—The Secretary, and 
each medicare contractor insofar as it provides services (in-
cluding claims processing) for providers of services or sup-
pliers, shall maintain an Internet site which—
‘‘(1) provides answers in an easily accessible for-
mat to frequently asked questions, and 
‘‘(2) includes other published materials of the 
contractor,
508
that relate to providers of services and suppliers under the 
programs under this title (and title XI insofar as it relates 
to such programs).’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on October 1, 2004. 
(f) ADDITIONAL PROVIDER EDUCATION PROVISIONS.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsections (d) and 
(e), is further amended by adding at the end the fol-
lowing new subsections: 
‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDU-
CATION PROGRAM ACTIVITIES.—A medicare contractor 
may not use a record of attendance at (or failure to attend) 
educational activities or other information gathered during 
an educational program conducted under this section or 
otherwise by the Secretary to select or track providers of 
services or suppliers for the purpose of conducting any type 
of audit or prepayment review. 
‘‘(f) CONSTRUCTION.—Nothing in this section or sec-
tion 1893(g) shall be construed as providing for disclosure 
by a medicare contractor of information that would com-
promise pending law enforcement activities or reveal find-
ings of law enforcement-related audits. 
‘‘(g) DEFINITIONS.—For purposes of this section, the 
term ‘medicare contractor’ includes the following:
509
‘‘(1) A medicare administrative contractor with 
a contract under section 1874A, including a fiscal 
intermediary with a contract under section 1816 and 
a carrier with a contract under section 1842. 
‘‘(2) An eligible entity with a contract under sec-
tion 1893. 
Such term does not include, with respect to activities of a 
specific provider of services or supplier an entity that has 
no authority under this title or title IX with respect to such 
activities and such provider of services or supplier.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
paragraph (1) shall take effect on the date of the en-
actment of this Act. 
SEC. 922. SMALL PROVIDER TECHNICAL ASSISTANCE DEM-
ONSTRATION PROGRAM. 
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary shall establish 
a demonstration program (in this section referred to 
as the ‘‘demonstration program’’) under which tech-
nical assistance described in paragraph (2) is made 
available, upon request and on a voluntary basis, to 
small providers of services or suppliers in order to 
improve compliance with the applicable requirements 
of the programs under medicare program under title 
XVIII of the Social Security Act (including provi-
510
sions of title XI of such Act insofar as they relate to 
such title and are not administered by the Office of 
the Inspector General of the Department of Health 
and Human Services). 
(2) FORMS
OF
TECHNICAL
ASSISTANCE.—The 
technical assistance described in this paragraph is—
(A) evaluation and recommendations re-
garding billing and related systems; and 
(B) information and assistance regarding 
policies and procedures under the medicare pro-
gram, including coding and reimbursement. 
(3) SMALL
PROVIDERS
OF
SERVICES
OR
SUP-
PLIERS.—In this section, the term ‘‘small providers of 
services or suppliers’’ means—
(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
(B) a supplier with fewer than 10 full-time-
equivalent employees. 
(b) QUALIFICATION OF CONTRACTORS.—In conducting 
the demonstration program, the Secretary shall enter into 
contracts with qualified organizations (such as peer review 
organizations or entities described in section 1889(g)(2) of 
the Social Security Act, as inserted by section 5(f)(1)) with 
appropriate expertise with billing systems of the full range 
of providers of services and suppliers to provide the tech-
511
nical assistance. In awarding such contracts, the Secretary 
shall consider any prior investigations of the entity’s work 
by the Inspector General of Department of Health and 
Human Services or the Comptroller General of the United 
States. 
(c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The 
technical assistance provided under the demonstration pro-
gram shall include a direct and in-person examination of 
billing systems and internal controls of small providers of 
services or suppliers to determine program compliance and 
to suggest more efficient or effective means of achieving such 
compliance. 
(d) AVOIDANCE OF RECOVERY ACTIONS FOR PROB-
LEMS IDENTIFIED AS CORRECTED.—The Secretary shall 
provide that, absent evidence of fraud and notwithstanding 
any other provision of law, any errors found in a compli-
ance review for a small provider of services or supplier that 
participates in the demonstration program shall not be sub-
ject to recovery action if the technical assistance personnel 
under the program determine that—
(1) the problem that is the subject of the compli-
ance review has been corrected to their satisfaction 
within 30 days of the date of the visit by such per-
sonnel to the small provider of services or supplier; 
and
512
(2) such problem remains corrected for such pe-
riod as is appropriate. 
The previous sentence applies only to claims filed as part 
of the demonstration program and lasts only for the dura-
tion of such program and only as long as the small provider 
of services or supplier is a participant in such program. 
(e) GAO EVALUATION.—Not later than 2 years after 
the date of the date the demonstration program is first im-
plemented, the Comptroller General, in consultation with 
the Inspector General of the Department of Health and 
Human Services, shall conduct an evaluation of the dem-
onstration program. The evaluation shall include a deter-
mination of whether claims error rates are reduced for 
small providers of services or suppliers who participated 
in the program and the extent of improper payments made 
as a result of the demonstration program. The Comptroller 
General shall submit a report to the Secretary and the Con-
gress on such evaluation and shall include in such report 
recommendations regarding the continuation or extension 
of the demonstration program. 
(f) FINANCIAL PARTICIPATION BY PROVIDERS.—The 
provision of technical assistance to a small provider of serv-
ices or supplier under the demonstration program is condi-
tioned upon the small provider of services or supplier pay-
ing an amount estimated (and disclosed in advance of a
513
provider’s or supplier’s participation in the program) to 
be equal to 25 percent of the cost of the technical assistance. 
(g) AUTHORIZATION OF APPROPRIATIONS.—There are 
authorized to be appropriated to the Secretary (in appro-
priate part from the Federal Hospital Insurance Trust 
Fund and the Federal Supplementary Medical Insurance 
Trust Fund) to carry out the demonstration program— 
(1) for fiscal year 2005, $1,000,000, and 
(2) for fiscal year 2006, $6,000,000. 
SEC. 923. MEDICARE PROVIDER OMBUDSMAN; MEDICARE 
BENEFICIARY OMBUDSMAN. 
(a) MEDICARE PROVIDER OMBUDSMAN.—Section 1868 
(42 U.S.C. 1395ee) is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’; 
(2) by inserting ‘‘PRACTICING PHYSICIANS ADVI-
SORY COUNCIL.—(1)’’ after ‘‘(a)’’; 
(3) in paragraph (1), as so redesignated under 
paragraph (2), by striking ‘‘in this section’’ and in-
serting ‘‘in this subsection’’; 
(4) by redesignating subsections (b) and (c) as 
paragraphs (2) and (3), respectively; and 
(5) by adding at the end the following new sub-
section:
514
‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—The Sec-
retary shall appoint within the Department of Health and 
Human Services a Medicare Provider Ombudsman. The 
Ombudsman shall—
‘‘(1) provide assistance, on a confidential basis, 
to providers of services and suppliers with respect to 
complaints, grievances, and requests for information 
concerning the programs under this title (including 
provisions of title XI insofar as they relate to this 
title and are not administered by the Office of the In-
spector General of the Department of Health and 
Human Services) and in the resolution of unclear or 
conflicting guidance given by the Secretary and medi-
care contractors to such providers of services and sup-
pliers regarding such programs and provisions and 
requirements under this title and such provisions; 
and 
‘‘(2) submit recommendations to the Secretary 
for improvement in the administration of this title 
and such provisions, including—
‘‘(A) recommendations to respond to recur-
ring patterns of confusion in this title and such 
provisions (including recommendations regard-
ing suspending imposition of sanctions where
515
there is widespread confusion in program ad-
ministration), and 
‘‘(B) recommendations to provide for an ap-
propriate and consistent response (including not 
providing for audits) in cases of self-identified 
overpayments by providers of services and sup-
pliers. 
The Ombudsman shall not serve as an advocate for any in-
creases in payments or new coverage of services, but may 
identify issues and problems in payment or coverage poli-
cies.’’. 
(b) MEDICARE
BENEFICIARY
OMBUDSMAN.—Title 
XVIII, as previously amended, is amended by inserting 
after section 1809 the following new section: 
‘‘MEDICARE BENEFICIARY OMBUDSMAN 
‘‘SEC. 1810. (a) IN GENERAL.—The Secretary shall 
appoint within the Department of Health and Human 
Services a Medicare Beneficiary Ombudsman who shall 
have expertise and experience in the fields of health care 
and education of (and assistance to) individuals entitled 
to benefits under this title. 
‘‘(b) DUTIES.—The Medicare Beneficiary Ombudsman 
shall—
‘‘(1) receive complaints, grievances, and requests 
for information submitted by individuals entitled to 
benefits under part A or enrolled under part B, or
516
both, with respect to any aspect of the medicare pro-
gram; 
‘‘(2) provide assistance with respect to com-
plaints, grievances, and requests referred to in para-
graph (1), including—
‘‘(A) assistance in collecting relevant infor-
mation for such individuals, to seek an appeal of 
a decision or determination made by a fiscal 
intermediary, carrier, Medicare+Choice organi-
zation, or the Secretary; 
‘‘(B) assistance to such individuals with 
any problems arising from disenrollment from a 
Medicare+Choice plan under part C; and 
‘‘(C) assistance to such individuals in pre-
senting information under section 1860D–
2(b)(4)(D)(v); and 
‘‘(3) submit annual reports to Congress and the 
Secretary that describe the activities of the Office and 
that include such recommendations for improvement 
in the administration of this title as the Ombudsman 
determines appropriate. 
The Ombudsman shall not serve as an advocate for any in-
creases in payments or new coverage of services, but may 
identify issues and problems in payment or coverage poli-
cies.
517
‘‘(c) WORKING WITH HEALTH INSURANCE COUN-
SELING PROGRAMS.—To the extent possible, the Ombuds-
man shall work with health insurance counseling programs 
(receiving funding under section 4360 of Omnibus Budget 
Reconciliation Act of 1990) to facilitate the provision of in-
formation to individuals entitled to benefits under part A 
or 
enrolled 
under 
part 
B, 
or 
both 
regarding 
Medicare+Choice plans and changes to those plans. Noth-
ing in this subsection shall preclude further collaboration 
between the Ombudsman and such programs.’’. 
(c) DEADLINE
FOR APPOINTMENT.—The Secretary 
shall appoint the Medicare Provider Ombudsman and the 
Medicare Beneficiary Ombudsman, under the amendments 
made by subsections (a) and (b), respectively, by not later 
than 1 year after the date of the enactment of this Act. 
(d) FUNDING.—There are authorized to be appro-
priated to the Secretary (in appropriate part from the Fed-
eral Hospital Insurance Trust Fund and the Federal Sup-
plementary Medical Insurance Trust Fund) to carry out 
the provisions of subsection (b) of section 1868 of the Social 
Security Act (relating to the Medicare Provider Ombuds-
man), as added by subsection (a)(5) and section 1807 of 
such Act (relating to the Medicare Beneficiary Ombuds-
man), as added by subsection (b), such sums as are nec-
essary for fiscal year 2004 and each succeeding fiscal year.
518
(e) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–
MEDICARE).—
(1) PHONE TRIAGE SYSTEM; LISTING IN MEDI-
CARE
HANDBOOK
INSTEAD
OF
OTHER
TOLL-FREE 
NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–2(b)) 
is amended by adding at the end the following: ‘‘The 
Secretary shall provide, through the toll-free number 
1–800–MEDICARE, for a means by which individ-
uals seeking information about, or assistance with, 
such programs who phone such toll-free number are 
transferred (without charge) to appropriate entities 
for the provision of such information or assistance. 
Such toll-free number shall be the toll-free number 
listed for general information and assistance in the 
annual notice under subsection (a) instead of the list-
ing of numbers of individual contractors.’’. 
(2) MONITORING ACCURACY.—
(A) STUDY.—The Comptroller General of 
the United States shall conduct a study to mon-
itor the accuracy and consistency of information 
provided to individuals entitled to benefits under 
part A or enrolled under part B, or both, 
through the toll-free number 1–800–MEDICARE, 
including an assessment of whether the informa-
tion provided is sufficient to answer questions of
519
such individuals. In conducting the study, the 
Comptroller General shall examine the education 
and training of the individuals providing infor-
mation through such number. 
(B) REPORT.—Not later than 1 year after 
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report 
on the study conducted under subparagraph (A). 
SEC. 924. BENEFICIARY OUTREACH DEMONSTRATION PRO-
GRAM. 
(a) IN GENERAL.—The Secretary shall establish a 
demonstration program (in this section referred to as the 
‘‘demonstration program’’) under which medicare special-
ists employed by the Department of Health and Human 
Services provide advice and assistance to individuals enti-
tled to benefits under part A of title XVIII of the Social 
Security Act, or enrolled under part B of such title, or both, 
regarding the medicare program at the location of existing 
local offices of the Social Security Administration. 
(b) LOCATIONS.—
(1) IN GENERAL.—The demonstration program 
shall be conducted in at least 6 offices or areas. Sub-
ject to paragraph (2), in selecting such offices and 
areas, the Secretary shall provide preference for offices
520
with a high volume of visits by individuals referred 
to in subsection (a). 
(2) ASSISTANCE FOR RURAL BENEFICIARIES.—
The Secretary shall provide for the selection of at 
least 2 rural areas to participate in the demonstra-
tion program. In conducting the demonstration pro-
gram in such rural areas, the Secretary shall provide 
for medicare specialists to travel among local offices 
in a rural area on a scheduled basis. 
(c) DURATION.—The demonstration program shall be 
conducted over a 3-year period. 
(d) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall provide 
for an evaluation of the demonstration program. Such 
evaluation shall include an analysis of—
(A) utilization of, and satisfaction of those 
individuals referred to in subsection (a) with, the 
assistance provided under the program; and 
(B) the cost-effectiveness of providing bene-
ficiary assistance through out-stationing medi-
care specialists at local offices of the Social Secu-
rity Administration. 
(2) REPORT.—The Secretary shall submit to 
Congress a report on such evaluation and shall in-
clude in such report recommendations regarding the
521
feasibility of permanently out-stationing medicare 
specialists at local offices of the Social Security Ad-
ministration. 
SEC. 925. INCLUSION OF ADDITIONAL INFORMATION IN NO-
TICES TO BENEFICIARIES ABOUT SKILLED 
NURSING FACILITY BENEFITS. 
(a) IN GENERAL.—The Secretary shall provide that in 
medicare beneficiary notices provided (under section 
1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a)) 
with respect to the provision of post-hospital extended care 
services under part A of title XVIII of the Social Security 
Act, there shall be included information on the number of 
days of coverage of such services remaining under such part 
for the medicare beneficiary and spell of illness involved. 
(b) EFFECTIVE DATE.—Subsection (a) shall apply to 
notices provided during calendar quarters beginning more 
than 6 months after the date of the enactment of this Act. 
SEC. 926. INFORMATION ON MEDICARE-CERTIFIED SKILLED 
NURSING 
FACILITIES 
IN 
HOSPITAL 
DIS-
CHARGE PLANS. 
(a) AVAILABILITY OF DATA.—The Secretary shall pub-
licly provide information that enables hospital discharge 
planners, medicare beneficiaries, and the public to identify 
skilled nursing facilities that are participating in the medi-
care program.
522
(b) INCLUSION OF INFORMATION IN CERTAIN HOS-
PITAL DISCHARGE PLANS.—
(1) IN
GENERAL.—Section 1861(ee)(2)(D) (42 
U.S.C. 1395x(ee)(2)(D)) is amended—
(A) by striking ‘‘hospice services’’ and in-
serting ‘‘hospice care and post-hospital extended 
care services’’; and 
(B) by inserting before the period at the end 
the following: ‘‘and, in the case of individuals 
who are likely to need post-hospital extended care 
services, the availability of such services through 
facilities that participate in the program under 
this title and that serve the area in which the 
patient resides’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to discharge plans made 
on or after such date as the Secretary shall specify, 
but not later than 6 months after the date the Sec-
retary provides for availability of information under 
subsection (a). 
Subtitle D—Appeals and Recovery 
SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE 
APPEALS. 
(a) TRANSITION PLAN.—
523
(1) IN
GENERAL.—Not later than October 1, 
2004, the Commissioner of Social Security and the 
Secretary shall develop and transmit to Congress and 
the Comptroller General of the United States a plan 
under which the functions of administrative law 
judges responsible for hearing cases under title XVIII 
of the Social Security Act (and related provisions in 
title XI of such Act) are transferred from the responsi-
bility of the Commissioner and the Social Security 
Administration to the Secretary and the Department 
of Health and Human Services. 
(2) GAO EVALUATION.—The Comptroller Gen-
eral of the United States shall evaluate the plan and, 
not later than the date that is 6 months after the date 
on which the plan is received by the Comptroller Gen-
eral, shall submit to Congress a report on such eval-
uation. 
(b) TRANSFER OF ADJUDICATION AUTHORITY.—
(1) IN GENERAL.—Not earlier than July 1, 2005, 
and not later than October 1, 2005, the Commissioner 
of Social Security and the Secretary shall implement 
the transition plan under subsection (a) and transfer 
the administrative law judge functions described in 
such subsection from the Social Security Administra-
tion to the Secretary.
524
(2) ASSURING INDEPENDENCE OF JUDGES.—The 
Secretary shall assure the independence of adminis-
trative law judges performing the administrative law 
judge functions transferred under paragraph (1) from 
the Centers for Medicare & Medicaid Services and its 
contractors. In order to assure such independence, the 
Secretary shall place such judges in an administra-
tive office that is organizationally and functionally 
separate from such Centers. Such judges shall report 
to, and be under the general supervision of, the Sec-
retary, but shall not report to, or be subject to super-
vision by, another other officer of the Department. 
(3) GEOGRAPHIC DISTRIBUTION.—The Secretary 
shall provide for an appropriate geographic distribu-
tion of administrative law judges performing the ad-
ministrative law judge functions transferred under 
paragraph (1) throughout the United States to ensure 
timely access to such judges. 
(4) HIRING AUTHORITY.—Subject to the amounts 
provided in advance in appropriations Act, the Sec-
retary shall have authority to hire administrative law 
judges to hear such cases, giving priority to those 
judges with prior experience in handling medicare 
appeals and in a manner consistent with paragraph 
(3), and to hire support staff for such judges.
525
(5) FINANCING.—Amounts payable under law to 
the Commissioner for administrative law judges per-
forming the administrative law judge functions trans-
ferred under paragraph (1) from the Federal Hospital 
Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund shall become 
payable to the Secretary for the functions so trans-
ferred. 
(6) SHARED RESOURCES.—The Secretary shall 
enter into such arrangements with the Commissioner 
as may be appropriate with respect to transferred 
functions of administrative law judges to share office 
space, support staff, and other resources, with appro-
priate reimbursement from the Trust Funds described 
in paragraph (5). 
(c) INCREASED FINANCIAL SUPPORT.—In addition to 
any amounts otherwise appropriated, to ensure timely ac-
tion on appeals before administrative law judges and the 
Departmental Appeals Board consistent with section 1869 
of the Social Security Act (as amended by section 521 of 
BIPA, 114 Stat. 2763A–534), there are authorized to be ap-
propriated (in appropriate part from the Federal Hospital 
Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund) to the Secretary such sums
526
as are necessary for fiscal year 2005 and each subsequent 
fiscal year to—
(1) increase the number of administrative law 
judges (and their staffs) under subsection (b)(4); 
(2) improve education and training opportuni-
ties for administrative law judges (and their staffs); 
and 
(3) increase the staff of the Departmental Ap-
peals Board. 
(d) 
CONFORMING
AMENDMENT.—Section 
1869(f)(2)(A)(i) (42 U.S.C. 1395ff(f)(2)(A)(i)), as added by 
section 522(a) of BIPA (114 Stat. 2763A–543), is amended 
by striking ‘‘of the Social Security Administration’’. 
SEC. 932. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 
(a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—Sec-
tion 1869(b) (42 U.S.C. 1395ff(b)) as amended by BIPA, 
is amended—
(1) in paragraph (1)(A), by inserting ‘‘, subject 
to paragraph (2),’’ before ‘‘to judicial review of the 
Secretary’s final decision’’; 
(2) in paragraph (1)(F)—
(A) by striking clause (ii); 
(B) by striking ‘‘PROCEEDING’’ and all that 
follows through ‘‘DETERMINATION’’ and inserting
527
‘‘DETERMINATIONS
AND
RECONSIDERATIONS’’; 
and 
(C) by redesignating subclauses (I) and (II) 
as clauses (i) and (ii) and by moving the inden-
tation of such subclauses (and the matter that 
follows) 2 ems to the left; and 
(3) by adding at the end the following new para-
graph: 
‘‘(2) EXPEDITED
ACCESS
TO
JUDICIAL
RE-
VIEW.—
‘‘(A) IN GENERAL.—The Secretary shall es-
tablish a process under which a provider of serv-
ices or supplier that furnishes an item or service 
or an individual entitled to benefits under part 
A or enrolled under part B, or both, who has 
filed an appeal under paragraph (1) may obtain 
access to judicial review when a review panel 
(described in subparagraph (D)), on its own mo-
tion or at the request of the appellant, deter-
mines that no entity in the administrative ap-
peals process has the authority to decide the 
question of law or regulation relevant to the mat-
ters in controversy and that there is no material 
issue of fact in dispute. The appellant may make
528
such request only once with respect to a question 
of law or regulation in a case of an appeal. 
‘‘(B) PROMPT DETERMINATIONS.—If, after 
or coincident with appropriately filing a request 
for an administrative hearing, the appellant re-
quests a determination by the appropriate review 
panel that no review panel has the authority to 
decide the question of law or regulations relevant 
to the matters in controversy and that there is 
no material issue of fact in dispute and if such 
request is accompanied by the documents and 
materials as the appropriate review panel shall 
require for purposes of making such determina-
tion, such review panel shall make a determina-
tion on the request in writing within 60 days 
after the date such review panel receives the re-
quest and such accompanying documents and 
materials. Such a determination by such review 
panel shall be considered a final decision and 
not subject to review by the Secretary. 
‘‘(C) ACCESS TO JUDICIAL REVIEW.—
‘‘(i) IN GENERAL.—If the appropriate 
review panel—
‘‘(I) determines that there are no 
material issues of fact in dispute and
529
that the only issue is one of law or reg-
ulation that no review panel has the 
authority to decide; or 
‘‘(II) fails to make such deter-
mination within the period provided 
under subparagraph (B); 
then the appellant may bring a civil action 
as described in this subparagraph. 
‘‘(ii) DEADLINE
FOR
FILING.—Such 
action shall be filed, in the case described 
in—
‘‘(I) clause (i)(I), within 60 days 
of date of the determination described 
in such subparagraph; or 
‘‘(II) clause (i)(II), within 60 
days of the end of the period provided 
under subparagraph (B) for the deter-
mination. 
‘‘(iii) VENUE.—Such action shall be 
brought in the district court of the United 
States for the judicial district in which the 
appellant is located (or, in the case of an 
action brought jointly by more than one ap-
plicant, the judicial district in which the 
greatest number of applicants are located)
530
or in the district court for the District of 
Columbia. 
‘‘(iv) INTEREST ON AMOUNTS IN CON-
TROVERSY.—Where a provider of services or 
supplier seeks judicial review pursuant to 
this paragraph, the amount in controversy 
shall be subject to annual interest beginning 
on the first day of the first month beginning 
after the 60-day period as determined pur-
suant to clause (ii) and equal to the rate of 
interest on obligations issued for purchase 
by the Federal Hospital Insurance Trust 
Fund and by the Federal Supplementary 
Medical Insurance Trust Fund for the 
month in which the civil action authorized 
under this paragraph is commenced, to be 
awarded by the reviewing court in favor of 
the prevailing party. No interest awarded 
pursuant to the preceding sentence shall be 
deemed income or cost for the purposes of 
determining reimbursement due providers of 
services or suppliers under this Act. 
‘‘(D) REVIEW
PANELS.—For purposes of 
this subsection, a ‘review panel’ is a panel con-
sisting of 3 members (who shall be administra-
531
tive law judges, members of the Departmental 
Appeals Board, or qualified individuals associ-
ated with a qualified independent contractor (as 
defined in subsection (c)(2)) or with another 
independent entity) designated by the Secretary 
for purposes of making determinations under 
this paragraph.’’. 
(b) APPLICATION TO PROVIDER AGREEMENT DETER-
MINATIONS.—Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)) 
is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) An institution or agency described in subpara-
graph (A) that has filed for a hearing under subparagraph 
(A) shall have expedited access to judicial review under this 
subparagraph in the same manner as providers of services, 
suppliers, and individuals entitled to benefits under part 
A or enrolled under part B, or both, may obtain expedited 
access to judicial review under the process established under 
section 1869(b)(2). Nothing in this subparagraph shall be 
construed to affect the application of any remedy imposed 
under section 1819 during the pendency of an appeal under 
this subparagraph.’’.
532
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to appeals filed on or after October 1, 
2004. 
(d) EXPEDITED
REVIEW
OF
CERTAIN
PROVIDER 
AGREEMENT DETERMINATIONS.—
(1) TERMINATION AND CERTAIN OTHER IMME-
DIATE REMEDIES.—The Secretary shall develop and 
implement a process to expedite proceedings under 
sections 1866(h) of the Social Security Act (42 U.S.C. 
1395cc(h)) in which the remedy of termination of 
participation, or a remedy described in clause (i) or 
(iii) of section 1819(h)(2)(B) of such Act (42 U.S.C. 
1395i–3(h)(2)(B)) which is applied on an immediate 
basis, has been imposed. Under such process priority 
shall be provided in cases of termination. 
(2) INCREASED FINANCIAL SUPPORT.—In addi-
tion to any amounts otherwise appropriated, to re-
duce by 50 percent the average time for administra-
tive determinations on appeals under section 1866(h) 
of the Social Security Act (42 U.S.C. 1395cc(h)), 
there are authorized to be appropriated (in appro-
priate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund) to the Secretary such addi-
tional sums for fiscal year 2005 and each subsequent