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(3) EFFECTIVE DATE.—The amendment made
by paragraph (1)(A) shall not apply with respect to
any license or permit for a terrestrial radio or tele-
vision broadcast station for which the Federal Com-
munications Commission has accepted mutually ex-
clusive applications on or before the date of enact-
ment of this Act.
(b) COMMISSION OBLIGATION TO MAKE ADDITIONAL
SPECTRUM AVAILABLE BY AUCTION.—
(1) IN
GENERAL.—The Federal Communica-
tions Commission shall complete all actions nec-
essary to permit the assignment by September 30,
2002, by competitive bidding pursuant to service
309(i) of the Communications Act of 1934 (47
U.S.C. 309(j) of licenses for the use of bands of fre-
quencies that—
(A) individually span not less than 25
megahertz, unless a combination of smaller
bands can, notwithstanding the provisions of
paragraph (7) of such section, reasonably be ex-
pected to produce greater receipts;
(B) in the aggregate span not less than
100 megahertz;
(C) are located below 3 gigahertz; and
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(D) have not, as of the date of enactment
of this Act—
(i) been designated by Commission
regulation for assignment pursuant to such
section;
(ii) been identified by the Secretary of
Commerce pursuant to section 113 of the
National Telecommunications and Infor-
mation Administration Organization Act;
or
(iii) been reserved for Federal Govern-
ment use pursuant to section 305 of the
Communications Act of 1934 (47 U.S.C.
305).
The Commission shall conduct the competitive
bidding for not less than one-half of such aggre-
gate spectrum by September 30, 2000.
(2) CRITERIA FOR REASSIGNMENT.—In making
available bands of frequencies for competitive bid-
ding pursuant to paragraph (1), the Commission
shall—
(A) seek to promote the most efficient use
of the spectrum;
(B) take into account the cost to incum-
bent licensees of relocating existing uses to
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other bands of frequencies or other means of
communication;
(C) take into account the needs of public
safety radio services;
(D) comply with the requirements of inter-
national agreements concerning spectrum allo-
cations; and
(E) take into account the costs to satellite
service providers that could result from multiple
auctions of like spectrum internationally for
global satellite systems.
(3) NOTIFICATION TO NTIA.—The Commission
shall notify the Secretary of Commerce if—
(A) the Commission is not able to provide
for the effective relocation of incumbent licens-
ees to bands of frequencies that are available to
the Commission for assignment; and
(B) the Commission has identified bands
of frequencies that are—
(i) suitable for the relocation of such
licensees; and
(ii) allocated for Federal Government
use, but that could be reallocated pursuant
to part B of the National Telecommuni-
cations and Information Administration
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Organization Act (as amended by this sec-
tion).
(c) IDENTIFICATION AND REALLOCATION OF FRE-
QUENCIES.—The National Telecommunications and Infor-
mation Administration Organization Act (47 U.S.C. 901
et seq.) is amended—
(1) in section 113, by adding at the end the fol-
lowing new subsections:
‘‘(f) ADDITIONAL REALLOCATION REPORT.—If the
Secretary receives a notice from the Commission pursuant
to section 3001(b)(3) of the Balanced Budget Act of 1995,
the Secretary shall prepare and submit to the President
and the Congress a report recommending for reallocation
for use other than by Federal Government stations under
section 305 of the 1934 Act (47 U.S.C. 305), bands of
frequencies that are suitable for the uses identified in the
Commission’s notice.
‘‘(g) RELOCATION OF FEDERAL GOVERNMENT STA-
TIONS.—
‘‘(1) IN GENERAL.—In order to expedite the ef-
ficient use of the electromagnetic spectrum and not-
withstanding section 3302(b) of title 31, United
States Code, any Federal entity which operates a
Federal Government station may accept payment in
advance or in-kind reimbursement of costs, or a
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combination of payment in advance and in-kind re-
imbursement, from any person to defray entirely the
expenses of relocating the Federal entity’s oper-
ations from one or more radio spectrum frequencies
to another frequency or frequencies, including, with-
out limitation, the costs of any modification, replace-
ment, ore reissuance of equipment, facilities, operat-
ing manuals, regulations, or other expenses incurred
by that entity. Any such payment shall be deposited
in the account of such Federal entity in the Treas-
ury of the United States. Funds deposited according
to this paragraph shall be available, without appro-
priation or fiscal year limitation, only for the oper-
ations of the Federal entity for which such funds
were deposited under this paragraph.
‘‘(2) PROCESS FOR RELOCATION.—Any person
seeking to relocate a Federal Government station
that has been assigned a frequency within a band al-
located for mixed Federal and non-Federal use may
submit a petition for such relocation to NTIA. The
NTIA shall limit or terminate the Federal Govern-
ment station’s operating license when the following
requirements are met:
‘‘(A) the person seeking relocation of the
Federal Government station has guaranteed to
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defray entirely, through payment in advance,
in-kind reimbursement of costs, or a combina-
tion thereof, all relocation costs incurred by the
Federal entity, including all engineering, equip-
ment, site acquisition and construction, and
regulatory fee costs;
‘‘(B) the person seeking relocation com-
pletes all activities necessary for implementing
the relocation, including construction of replace-
ment facilities (if necessary and appropriate)
and identifying and obtaining on the Federal
entity’s behalf new frequencies for use by the
relocated Federal Government station (where
such station is not relocating to spectrum re-
served exclusively for Federal use);
‘‘(C) any necessary replacement facilities,
equipment modifications, or other changes have
been implemented and tested to ensure that the
Federal Government station is able to success-
fully accomplish its purposes; and
‘‘(D) NTIA has determined that the pro-
posed use of the spectrum frequency band to
which the Federal entity will relocate its oper-
ations is—
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‘‘(i) consistent with obligations under-
taken by the United States in international
agreements and with United States na-
tional security and public safety interests;
and
‘‘(ii) suitable for the technical charac-
teristics of the band and consistent with
other uses of the band.
In exercising its authority under subparagraph
(d)(i), NTIA shall consult with the Secretary of
Defense, the Secretary of State, or other appro-
priate officers of the Federal Government.
‘‘(3) RIGHT TO RECLAIM.—If within one year
after the relocation the Federal Government station
demonstrates to the Commission that the new facili-
ties or spectrum are not comparable to the facilities
or spectrum from which the Federal Government
station was relocated, the person seeking such relo-
cation must take reasonable steps to remedy any de-
fects or pay the Federal entity for the costs of re-
turning the Federal Government station to the spec-
trum from which such station was relocated.
‘‘(h) FEDERAL ACTION TO EXPEDITE SPECTRUM
TRANSFER.—Any Federal Government station which op-
erates on electromagnetic spectrum that has been identi-
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(A) by striking the heading of paragraph
(1) and inserting ‘‘INITIAL REALLOCATION RE-
PORT.—’’;
(B) by inserting ‘‘in the first report re-
quired by subsection (a)’’ after ‘‘recommend for
reallocation’’ in paragraph (1);
(C) by inserting ‘‘or (3)’’ after ‘‘paragraph
(1)’’ each place it appears in paragraph (2);
and
(D) by inserting after paragraph (2) the
following new paragraph:
‘‘(3) SECOND REALLOCATION REPORT.—In ac-
cordance with the provisions of this section, the Sec-
retary shall recommend for reallocation in the sec-
ond report required by subsection (a), for use other
than by Federal Government stations under section
305 of the 1934 Act (47 U.S.C. 305), a single fre-
quency band that spans not less than an additional
20 megahertz, that is located below 3 gigahertz, and
that meets the criteria specified in paragraphs (1)
through (5) of subsection (a).’’; and
(2) in section 115—
(A) in subsection (b), by striking ‘‘the re-
port required by section 113(a)’’ and inserting
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‘‘the initial reallocation report required by sec-
tion 113(a)’’; and
(B) by adding at the end the following new
subsection:
‘‘(c) ALLOCATION
AND
ASSIGNMENT
OF
FRE-
QUENCIES IDENTIFIED IN THE SECOND REALLOCATION
REPORT.—With respect to the frequencies made available
for reallocation pursuant to section 113(b)(3), the Com-
mission shall, not later than 1 year after receipt of the
second reallocation report required by such section, pre-
pare, submit to the President and the Congress, and im-
plement, a plan for the allocation and assignment under
the 1934 Act of such frequencies. Such plan shall propose
the immediate allocation and assignment of all such fre-
quencies in accordance with section 309(j) of the 1934 Act
(47 U.S.C. 309(j).’’.
SEC. 3002. AUCTION OF RECAPTURED ANALOG LICENSES.
(a) ANALOG SPECTRUM REVERSION.—
(1) LIMITATIONS ON TERMS OF ANALOG TELE-
VISION LICENSES (‘‘REVERSION DATE’’).—No analog
television license may be renewed for a period that
extends beyond the earlier of December 31, 2005 or
one year after the date the Commission finds, based
on annual surveys conducted pursuant to paragraph
(2), that at least 95% of households in the United
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States have the capability to receive and display tele-
vision signals, other than television signals transmit-
ted pursuant to an analog television license. Follow-
ing such date, only advanced television licenses shall
be issued.
(2) ANNUAL
SURVEY.—The Department of
Commerce shall, each calendar year from 1998 to
2005, conduct a survey to estimate the percentage
of households in the United States that have the ca-
pability to receive and display television signals other
than signals transmitted pursuant to an analog tele-
vision license.
(3) SPECTRUM REVERSION.—(A) The Commis-
sion shall ensure that, as analog television licenses
expire pursuant to paragraph (a)(1), spectrum pre-
viously used for the broadcast of analog television is
reclaimed and organized in such manner as to maxi-
mize the deployment of new and existing services.
(B) Licensees for new services shall be selected
by competitive bidding. The FCC shall complete the
competitive bidding procedure by March 1, 2002.
(4) MINIMUM SERVICE OBLIGATION.—(A) The
Commission, by regulation, shall establish proce-
dures to ensure that, within the year prior to the re-
version date defined in paragraph (1), the advanced
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television licensees shall provide each household
without the capability to receive and display tele-
vision signals other than television signals transmit-
ted pursuant to an analog television license, if such
household requests, with the capability to receive
and display advanced television service.
(B) Each advanced television service licensee
shall provide, each day for the duration of its li-
cense, at least one non-subscription television service
that meets or exceeds minimum technical and other
standards established by the Commission as well as
any other regulations pursuant to the Communica-
tions Act of 1934, as amended, and the Children’s
Television Act of 1990. In setting these minimum
technical standards, the Commission shall, to the ex-
tent technically feasible, ensure that picture and
audio quality are at least as good as provided to re-
cipients under current Commission rules for Na-
tional Television Systems Committee (NTSC) sig-
nals and shall adopt such technical and other re-
quirements as may be necessary or appropriate to
assure the quality of the signal used to provide ad-
vanced television services, including regulations that
set the minimum number of hours per day that such
signal must be transmitted. The Commission shall
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revoke the license of any advanced television licensee
who fails to meet this condition of the license. The
Commission shall promulgate regulations to assure
the dissemination of converter boxes or devices nec-
essary to ensure access to digital TV to all house-
holds that desire this access at a reasonable cost.
The Commission in these regulations shall—
(A) ensure that consumers receive only one
such rebate per household; and
(B) implement a mechanism by which re-
sponsibility for cost sharing can be equitably al-
located. To the extent possible, the digital con-
verter boxes distributed in accordance with this
section shall utilize an affordable technology to
process digital signals for reception on analog
television sets.
(5) PUBLIC
INTEREST
OBLIGATION.—Nothing
in this section shall be construed as relieving an ad-
vanced television licensee from its obligation to serve
the public interest, convenience, and necessity.
(b) DEFINITIONS.—As used in this section—
(1) the term ‘‘advanced television services’’
means television services provided using digital or
other advanced technology to enhance audio quality
and video resolution, as further defined in the Opin-
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ion, Report, and Order of the Commission entitled
‘‘Advanced Television Systems and Their Impact
Upon the Existing Television Service,’’ MM Docket
No. 87–268; and
(2) the term ‘‘analog television licenses’’ means
licenses issued pursuant to CFR 73.682 et seq. and
in effect November 13, 1995.
TITLE III—MEDICAID
SEC. 11300. TABLE OF CONTENTS OF SUBTITLE.
The table of contents of this subtitle is as follows:
TITLE III—MEDICAID
Sec. 11300. Table of contents of subtitle.
PART 1—FEDERAL PAYMENTS
Sec. 11301. Limitations on average per beneficiary rate of growth in Federal
financial participation.
Sec. 11302. Reduction of disproportionate share payments.
Sec. 11303. Medicaid eligibility quality control (MEQC) requirements.
PART 2—ELIGIBILITY
Sec. 11311. Extension of coverage to additional individuals, subject to poverty-
related or caseload limits.
Sec. 11312. Elimination of authority for new eligibility expansion demonstra-
tions.
Sec. 11313. Upper income limit on ‘‘less restrictive’’ eligibility methodologies.
PART 3—MANAGED CARE
Sec. 11321. Primary care case management services as State option without
need for wavier.
Sec. 11322. State options to restrict choice of providers.
Sec. 11323. Elimination of restrictions on risk contracts.
Sec. 11324. 6-month guaranteed eligibility for all individuals enrolled in man-
aged care.
Sec. 11325. Requirements to ensure quality of and access to care under man-
aged care plans.
PART 4—BENEFITS
Sec. 11331. Home- and community-based services as State option without need
for waiver.
Sec. 11332. Elimination of requirement to pay for private insurance.
Sec. 11333. Benefits for individuals covered during transition to work.
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PART 5—PROVIDER PARTICIPATION AND PAYMENT RATES
Sec. 11341. Methods for establishing provider payment rates.
Sec. 11343. Elimination of obstetrical and pediatric payment rate requirements.
PART 6—STATE PLAN ADMINISTRATION
Sec. 11351. MMIS requirements.
Sec. 11352. Elimination of personnel requirements.
Sec. 11353. Elimination of requirements for cooperative agreements with health
agencies.
Sec. 11355. State review of mentally ill or retarded nursing facility residents
upon change in physical or mental condition.
Sec. 11356. Nurse aide training in Medicare and Medicaid nursing facilities
subject to extended survey and under certain other conditions.
Sec. 11357. Combined State plan submission.
Sec. 11358. Public Process for developing State plan amendments.
PART 7—EFFECTIVE DATE
Sec. 11361. Effective date.
PART 1—FEDERAL PAYMENTS
SEC. 11301. LIMITATIONS ON AVERAGE PER BENEFICIARY
RATE OF GROWTH IN FEDERAL FINANCIAL
PARTICIPATION.
(a) IN GENERAL.—Title XIX of the Social Security
Act is amended—
(1) by redesignating section 1931 as section
1932, and
(2) by inserting after section 1930 the following
new section:
‘‘LIMITATION ON FEDERAL FINANCIAL PARTICIPATION
BASED ON AVERAGE PER BENEFICIARY EXPENDITURES
‘‘SEC. 1931. (a) AGGREGATE LIMIT.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this section, the total amount of pay-
ments in grant awards to a State under section
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1903(a) for the 4 quarters in each of fiscal years
1997 through 2002 shall not exceed the sum of the
limits, specified under paragraph (2), for each group
of medicaid enrollees (as defined in subsection
(b)(1)) for the State for the fiscal year. Such pay-
ment limit shall be based on the total net matchable
medicaid expenditures for the State for the fiscal
year as defined and specified under subsection
(c)(4).
‘‘(2) GROUP
LIMITS.—The limit under this
paragraph for a group of medicaid enrollees for a
State for a fiscal year is the product of the following
factors:
‘‘(A) The average per enrollee matchable
expenditure limit for the group for the State for
the fiscal year (determined under subsection
(c)(1)).
‘‘(B) The number of full-time equivalent
individuals in the group in the State in the fis-
cal year (determined under subsection (d)).
‘‘(C) The Federal medical assistance per-
centage for the State for the fiscal year (as de-
fined in section 1905(b)).
‘‘(3) Exception for portion of medical assistance
provided under approved waivers.—
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‘‘(A) IN GENERAL.—In the case of a State
which provides medical assistance under its
State plan under this title pursuant to a waiver
granted under section 1115 (as of [date of in-
troduction of proposal]) on a Statewide basis
(or under such a waiver that covers a substate
area with a population of at least 9 million), the
Secretary shall provide for an adjustment in the
application of this section so that—
‘‘(i) the limitation on total payments
under paragraph (1) does not apply to
Federal financial participation attributable
to the medical assistance (and related ad-
ministrative expenditures) provided under
such a waiver; and
‘‘(ii) the average per enrollee match-
able expenditure limit established under
subsection (c) and applicable to a group of
medicaid enrollees is equal to such limit
multiplied by the nonwaiver proportion (as
defined in subparagraph (B)) for that
group.
‘‘(B) NONWAIVER
PROPORTION.—In sub-
paragraph (A)(ii), the ‘nonwaiver proportion’
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for a group of medicaid enrollees for a State for
a fiscal year is the ratio of—
‘‘(i) the amount of the Federal finan-
cial participation that the Secretary esti-
mates would have been expended (in the
absence of this section) for medical assist-
ance (and related administrative expendi-
tures) for the group for the State for the
fiscal year for items and services not cov-
ered under the waiver, to
‘‘(ii) the total amount of the Federal
financial participation that the Secretary
estimates would have been expended (in
the absence of this section) for medical as-
sistance (and related administrative ex-
penditures) for the group for the State for
the fiscal year (whether or not covered
under the waiver).
‘‘(4) NO APPLICATION TO VACCINE PROGRAM.—
Nothing in this section shall be construed as apply-
ing any limitation to payments for the purchase and
delivery of qualified pediatric vaccines under section
1928.
‘‘(b) DEFINITIONS RELATING TO GROUPS OF MEDIC-
AID ENROLLEES.—In this section:
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‘‘(1) IN GENERAL.—Each of the following shall
be considered a separate ‘group of medicaid enroll-
ees’:
‘‘(A) Nondisabled medicaid children.
‘‘(B) Nondisabled medicaid adults.
‘‘(C) Elderly medicaid beneficiaries.
‘‘(D) Disabled medicaid beneficiaries.
‘‘(2) NONDISABLED
MEDICAID
CHILDREN.—
The term ‘nondisabled medicaid child’ means a med-
icaid enrollee who—
‘‘(A) is under 21 years of age,
‘‘(B) is not the custodial parent of a child,
and
‘‘(C) is not a disabled medicaid beneficiary.
‘‘(3) NONDISABLED
MEDICAID
ADULTS.—The
term ‘nondisabled medicaid adult’ means a medicaid
enrollee who—
‘‘(A) is under 65 years of age,
‘‘(B) is not a disabled medicaid bene-
ficiary, and
‘‘(C)(i) is at least 21 years of age or (ii)
is the custodial parent of a child.
‘‘(4) ELDERLY MEDICAID BENEFICIARY.—The
term ‘elderly medicaid beneficiary’ means a medicaid
enrollee who is at least 65 years of age.
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‘‘(5) DISABLED
MEDICAID
BENEFICIARIES.—
The term ‘disabled medicaid beneficiary’ means a
medicaid enrollee who—
‘‘(A) is under 65 years of age, and
‘‘(B) has been determined to meet the
standards for being blind or disabled under the
supplemental income security program under
title XVI.
‘‘(6) MEDICAID ENROLLEE.—The term ‘medic-
aid enrollee’ means, with respect to a State medical
assistance program under this title, an individual
who is enrolled with such program, but does not in-
clude an individual who is eligible only for medicare
cost-sharing benefits under the program as—
‘‘(A) a qualified medicare beneficiary (as
defined in section 1905(p)(1)),
‘‘(B) a qualified disabled and working indi-
vidual (as defined in section 1905(s)), or
‘‘(C) an individual described in section
1902(a)(10)(E)(iii).
‘‘(c) AVERAGE PER ENROLLEE MATCHABLE EX-
PENDITURE LIMIT; TOTAL NET MATCHABLE MEDICAID
EXPENDITURES DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the average ‘per enrollee matchable expenditure
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limit’, for a group of medicaid enrollees for a
State—
‘‘(A) for fiscal year 1997 is equal to the
average base per enrollee amount (as defined
under paragraph (2)(A)) for the group for the
State multiplied by the allowable growth multi-
plier (under paragraph (3)) for each of fiscal
years 1996 and 1997; and
‘‘(B) for a succeeding fiscal year is equal
to the per enrollee matchable expenditure limit
under this paragraph for the preceding fiscal
year multiplied by the allowable growth multi-
plier for that succeeding fiscal year.
Before the beginning of each of fiscal years 1997
through 2002, the Secretary shall determine and
publish each State’s average per enrollee matchable
expenditure limit under this paragraph for each
group of medicaid enrollees.
‘‘(2) BASE PER ENROLLEE AMOUNT.—
‘‘(A) IN
GENERAL.—In this section, the
‘base average per enrollee amount’, for a group
of medicaid enrollees for a State, is equal to—
‘‘(i) the sum of (i) the base medical
assistance amount (determined under sub-
paragraph (C)) for the group and State,
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and (ii) the base administrative cost
amount (determined under subparagraph
(D)) for group and the State; divided by
‘‘(ii) the number of full-year equiva-
lent medicaid enrollees in the group in the
State in fiscal year 1995 (as determined
pursuant to subsection (d)).
‘‘(B) DETERMINATION
OF
NET
MATCH-
ABLE
MEDICAID
EXPENDITURES
FOR
FISCAL
YEAR 1995.—In order to determine base average
per enrollee amounts for a State, the Secretary
shall—
‘‘(i) determine the amount of the total
net matchable medicaid expenditures (as
defined in paragraph (4)) for the State for
fiscal year 1995, and
‘‘(ii) separately identify—
‘‘(I) the portion of such amount
attributable to medical assistance, and
‘‘(II) the portion of such amount
attributable to administrative costs.
The Secretary shall base the determination
under clause (i) on the expenditures reported by
the State on line 11 of HCFA Form 64 for the
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4 quarters of fiscal year 1995, subject to the
adjustments described in paragraph (4)(B)).
‘‘(C) BASE MEDICAL ASSISTANCE AMOUNT
FOR EACH GROUP.—For each State for each
group of medicaid enrollees, the Secretary shall
determine a ‘base medical assistance amount’
equal to the amount, of the portion of the total
net matchable medicaid expenditures for fiscal
year 1995 for the State attributed to medical
assistance under subparagraph (B)(ii)(I), that
the Secretary finds is attributable to items and
services furnished to individuals in such group
for the State .
‘‘(D) 
BASE
ADMINISTRATIVE
COST
AMOUNT
FOR
EACH
GROUP.—For each State
for each group of medicaid enrollees, the Sec-
retary shall determine a ‘base administrative
cost amount’ equal to the amount that bears
the same ratio to the portion of the total net
matchable medicaid expenditures for fiscal year
1995 for the State attributed to administrative
costs under subparagraph (B)(ii)(II) as the
base medical assistance amount for the group
(as determined under subparagraph (C) for the
State) bears to the sum of the base medical as-
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sistance amounts for all the groups for the
State.
‘‘(3) ALLOWABLE
GROWTH
MULTIPLIER.—In
this subsection, the ‘allowable growth multiplier’
for—
‘‘(A) fiscal year 1996 is 6.5 percent.
‘‘(B) fiscal year 1997 is 6.5 percent.
‘‘(C) fiscal year 1998 is 6.5 percent.
‘‘(D) fiscal year 1999 is 6.0 percent.
‘‘(E) fiscal year 2000 is 5.5 percent.
‘‘(F) fiscal year 2001 is 5.0 percent.
‘‘(G) fiscal year 2002 is 4.5 percent.
‘‘(4) 
EQUITY
ADJUSTOR
IN
ALLOWABLE
GROWTH MULTIPLIER FOR STATES WITH LOW PER
CAPITA EXPENDITURES.—
‘‘(A) FISCAL YEAR 1997.—If the [per bene-
ficiary base amount described in paragraph (
) for the base fiscal year] for a State for a
[group of medicare enrollees]—
‘‘(i) does not exceed 80 percent of the
national, weighted average of such [per
beneficiary base amounts] for such group
for all States for the year, then, the deter-
mining the per beneficiary limit for such
State and group for fiscal year 1997, the
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allowable growth multiplier for each of fis-
cal years 1996 and 1997 shall be increased
by 2.0 percentage points;
‘‘(ii) exceeds 80 percent, but does not
exceed 90 percent, of such national,
weighted average, then, in determining the
per beneficiary limit for such State and
group for fiscal year 1997, the allowable
growth multiplier for each of fiscal years
‘‘(4) TOTAL
NET
MATCHABLE
MEDICAID
EX-
PENDITURES.—
‘‘(A) IN
GENERAL.—In this section, the
term ‘total net matchable medicaid expendi-
tures’ means, for a State for a fiscal year, the
total net expenditures for the State under this
title for the 4 quarters of the fiscal year for
which payments may be made under section
1903, reduced by the amount of such expendi-
tures that the Secretary determines is attrib-
utable to expenditures described in subsection
(e).
‘‘(B) USE OF FORMS AND ADJUSTMENT.—
The total net matchable medicaid expenditures
for a State for a fiscal year shall be determined
by the Secretary based on reports submitted by
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the State under section 1903 for quarters in
the fiscal year and as adjusted by the Secretary
by January 31 of the succeeding fiscal year to
take into account disallowances and similar ad-
justments for expenditures not described in sub-
section (e).
‘‘(d) DETERMINATION OF NUMBER OF FULL-YEAR
EQUIVALENT INDIVIDUALS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the number of full-year equivalent individuals
in each group of medicaid enrollees for a State for
a fiscal year shall be determined, subject to para-
graphs (2) and (3), based on reports submitted by
the State of the Secretary.
‘‘(2) PART-YEAR ENROLLEES.—In the case of
individuals who were not a medicaid enrollee for the
entire fiscal year (or are within a group of medicaid
enrollees for only part of a fiscal year), the number
shall take into account only the portion of the year
in which they were such enrollees or within such
group.
‘‘(3) SECRETARIAL
OVERSIGHT.—In order to
ensure the accuracy of the numbers reported by
States under this subsection, the Secretary is au-
thorized—
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‘‘(A) to require documentation, whether on
a sample or other basis,
‘‘(B) to audit such reports (or to require
the performance of independent audits), and
‘‘(C) to revise the numbers so reported.
‘‘(e) EXPENDITURES NOT SUBJECT TO (OR COUNT-
ED IN) LIMITATION.—For purposes of this section, the fol-
lowing expenditures (for which payments may be made to
a State under section 1903(a)) shall not be counted in
computing base medical assistance amounts or base ad-
ministrative cost amounts under subsection (c)(2) and
Federal financial participation with respect to such ex-
penditures shall not be subject to the limit established
under subsection (a)(1):
‘‘(1) DISPROPORTIONATE SHARE PAYMENT AD-
JUSTMENTS.—Expenditures attributable to payment
adjustments made under section 1923.
‘‘(2) MEDICARE COST-SHARING.—Expenditures
for medical assistance for medicare cost-sharing, as
defined in section 1905(p)(3).
‘‘(3) INDIAN
HEALTH
PROGRAMS.—Expendi-
tures for medical assistance for services provided
by—
‘‘(A) the Indian Health Service,
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‘‘(B) an Indian health program operated
by an Indian tribe or tribal organization pursu-
ant to a contract, grant, cooperative agreement,
or compact with the Indian Health Service pur-
suant to the Indian Self-Determination Act (25
U.S.C. 450 et seq.), and
‘‘(C) an urban Indian health program op-
erated by an urban Indian organization pursu-
ant to a grant or contract with the Indian
Health Service pursuant to title V of the Indian
Health Care Improvement Act (25 U.S.C. 1601
et seq.).
‘‘(4) INFORMATION
SYSTEMS.—Expenditures
described in subparagraph (A)(i) and (B) of section
1903(a)(2).
‘‘(5) 
NURSING
FACILITY
PREADMISSION
SCREENING, RESIDENT REVIEW, AND SURVEY AND
CERTIFICATION
ACTIVITIES.—Expenditures 
de-
scribed in subparagraphs (C) and (D) of section
1903(a)(2).
‘‘(6) SAVE.—Expenditures attributable to im-
plementation of the immigration status verification
system (described in section 1137(d)) pursuant to
section 1903(a)(4).
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‘‘(7) FRAUD AND ABUSE ACTIVITIES.—Expendi-
tures for activities of State medicaid fraud control
units pursuant to section 1903(a)(6).’’.
(b) ENFORCEMENT-RELATED PROVISIONS.—
(1) ASSURING ACTUAL PAYMENTS TO STATES
CONSISTENT WITH LIMITATION.—Section 1903(d) of
such Act (42 U.S.C. 1396(d)) is amended—
(A) in paragraph (2)(A), by striking ‘‘The
Secretary’’ and inserting ‘‘Subject to paragraph
(7), the Secretary’’, and
(B) by adding at the end the following new
paragraph:
‘‘(7)(A) The Secretary shall take such steps as are
necessary to assure that payments under this subsection
for quarters in a fiscal year (and for the entire fiscal year)
are consistent with the limitation established under section
1931 for the fiscal year. Such steps may include limiting
such payments for one or more quarters in a fiscal year
based on—
‘‘(i) an appropriate proportion of the limitation
under section 1931(a) for the fiscal year involved,
and
‘‘(ii) numbers of individuals within each group
of medicaid enrollees, as reported under subpara-
graph (B) for a recent previous quarter.
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‘‘(B) Each State shall include, in its report filed
under paragraph (1)(A) for a calendar quarter—
‘‘(i) the actual number of individuals within
each group of medicaid enrollees described in section
1931(b)(1) for the second previous calendar quarter
and (based on the data available) for the previous
calendar quarter, and
‘‘(ii) an estimate of such numbers for the cal-
endar quarter involved.
as well as expenditures (other than expenditures described
in section 1931(e)) attributable to each such group for
such periods.
‘‘(C) In order to implement section 1931 and this
subsection, the Secretary shall—
‘‘(i) change HCFA Form 37 to require States
to separate out spending projections by groups of
medicaid enrollees, and
‘‘(ii) change HCFA Form 64 to include enroll-
ment data and to permit the attribution of expendi-
tures to such groups.
The Secretary shall provide for the auditing of information
reported under clause (ii).
‘‘(D) The Secretary shall take such actions as may
be necessary to assure the accuracy of the base per en-
rollee amounts determined under section 1931(c)(2).’’.
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(2) UPPER INCOME LIMIT ON ‘‘LESS RESTRIC-
TIVE’’ 
ELIGIBILITY
METHODOLOGIES.—Section
1902(r)(2) of such Act (42 U.S.C. 1396a(r)(2)) is
amended—
(A) in subparagraph (A), by inserting
‘‘(except as provided in subparagraph (C))’’
after ‘‘no more restrictive’’, and
(B) by adding at the end the following new
subparagraph:
‘‘(C) The methodology described in subparagraph (A)
shall not result in an income eligibility limit (based on
gross income) that is greater than the greater of—
‘‘(i) 150 percent of the poverty line (as defined
in section 673(2) of the Community Services Block
Grant Act (42 U.S.C. 9902(2)), including any revi-
sion required by such section), or
‘‘(ii) the income eligibility limit applicable under
the State plan in effect in fiscal year 1995 (taking
into account any such limit applicable under a waiv-
er under section 1115).’’.
(c) APPLICATION OF ENHANCED MATCHING RATE
FOR DEVELOPMENT OF INFORMATION SYSTEMS.—Sec-
tion 
1903(a)(3)(A)(i) 
of 
such 
Act 
(42 
U.S.C.
1396b(a)(3)(A)(i)) is amended by inserting before the
comma at the end the following: ‘‘and including informa-
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tion systems necessary to assure compliance with report-
ing requirements identified as necessary to carry out sec-
tion lll of the [Omnibus Budget Reconciliation Act
of 1995]’’.
(d) CONFORMING AMENDMENT.—Section 1903(a) of
such Act (42 U.S.C. 1396b(a)), in the matter preceding
paragraph (1), is amended by inserting ‘‘or section 1931’’
after ‘‘except as otherwise provided in this section’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 1903(a) is amended in the matter
preceding paragraph (1) by inserting ‘‘or section
1931’’ after ‘‘except as otherwise provided in the
section’’.
(2) Section 1903 is amended by adding after
subsection (w) the following new subsections:
‘‘(x) Notwithstanding any other provision of this Act,
no State shall be entitled to payment under this title—
‘‘(1) with respect to expenditures after Septem-
ber 30, 1996, that exceed the limitation on Federal
financial participation specified in section 1931; or
‘‘(2) with respect to an expenditure made or
other obligation incurred by a State before October
1, 1996, unless the State has submitted to the Sec-
retary, not later than June 30, 1997, a claim for
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Federal financial participation in such expenditure
or obligation.’’.
TITLE IV—MEDICARE SAVINGS
(a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence is considered to be made to that section or other
provision of the Social Security Act.
PART 1—PROVISIONS RELATING TO PART A
SEC. 11101. UPDATES FOR PPS HOSPITALS.
(a) UPDATE FACTORS.—Section 1886(b)(3)(B)(i)
(42 U.S.C. 1395ww(b)(3)(B)(i)) is amended by striking
subclauses (XII) and (XIII) and inserting the following:
‘‘(XII) for each of the fiscal years 1997 through
2000, the market basket percentage increase minus
1.0 percentage points for hospitals in all areas,
‘‘(XIII) for fiscal years 2001 and 2002, the
market basket percentage increase minus 1.5 per-
centage points for hospitals in all areas, and
‘‘(XIV) for fiscal year 2003 and each subse-
quent fiscal year, the market basket percentage in-
crease for hospitals in all areas.’’.
(b) 
ADJUSTMENTS
FOR
CASE
MIX
WHEN
RECALIBRATING DRGS.—
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(1) IN
GENERAL.—Section 1886(d)(3) (42
U.S.C. 1395ww(d)(3)) is amended by adding at the
end the following:
‘‘(F) ADJUSTING FOR ESTIMATED CHANGE IN
CASE MIX.—
‘‘(i) IN
GENERAL.—Effective for dis-
charges occurring in a fiscal year in which the
Secretary implements significant changes (as
defined by the Secretary) in the diagnosis-relat-
ed group classification system and thereafter,
the Secretary may (subject to clause (ii)) adjust
the standardized amounts to take into account
estimated case mix increase not attributable to
real case mix increase anticipated to occur dur-
ing the fiscal year to which the standardized
amounts apply.
‘‘(ii) REFINEMENT.—With regard to the
adjustment described in clause (i), if the Sec-
retary determines, based on data taken from
the fiscal year to which the adjustment applied,
that the amount of the adjustment varied from
the actual amount of case mix increase not at-
tributable to real case mix increase by more
than 0.25 percentage points, the Secretary shall
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make a prospective adjustment to the standard-
ized amounts to correct for the variance.’’.
(2) 
PROPAC 
RECOMMENDATIONS.—Section
1886(e)(2)(A) (42 U.S.C. 1395ww(e)(2)(A)) is
amended by adding at the end the following: ‘‘With
respect to subsection (d) hospitals, the Commission’s
recommendation regarding the appropriate percent-
age change shall take into account the anticipated
difference during the fiscal year between the change
in the average weighting factor and the change in
real case mix.’’.
SEC. 11102. MAINTAINING SAVINGS FROM TEMPORARY RE-
DUCTION IN PPS CAPITAL RATES.
Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))
is amended by adding at the end the following: ‘‘In addi-
tion to the reduction described in the preceding sentence,
for discharges occurring after September 30, 1995, the
Secretary shall reduce by 15.7 percent the unadjusted
standard Federal capital payment rate (as described in
section 412.308(c) of volume 42 of the Code of Federal
Regulations), as in effect on September 30, 1995) and
shall reduce by 15.7 percent the unadjusted hospital-spe-
cific rate (as described in section 412.328(e)(1) of volume
42 of the Code of Federal Regulations), as in effect on
September 30, 1995).’’.
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SEC. 11103. REDUCTIONS IN DISPROPORTIONATE SHARE
PAYMENT ADJUSTMENTS.
(a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended—
(1) in clause (ii), by striking ‘‘The amount’’
and inserting ‘‘Subject to clause (ix), the amount’’,
and
(2) by adding at the end the following:
‘‘(ix) FISCAL YEAR 1999 AND LATER.—For
discharges occurring on or after October 1,
1998, the payment amount otherwise deter-
mined under clause (ii) shall be reduced by 10
percent.’’.
(b) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION
OF STANDARDIZED
AMOUNTS.—Section
1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is
amended inserting the following before the period: ‘‘, and
the Secretary shall not take into account any reductions
in the amount of such additional payments resulting from
the amendments made by section 11103(a) of the Bal-
anced Budget Act of 1995 for Economic Growth and Fair-
ness’’.
SEC. 11104. REDUCTION IN ADJUSTMENT FOR INDIRECT
MEDICAL EDUCATION.
(a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)) is amended by striking all
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after ‘‘occurring’’ and inserting the following: ‘‘the indi-
rect teaching adjustment factor for discharges occurring—
‘‘(I) on or after January 1, 1996, and be-
fore October 1, 1996, is equal to 1.77 ×
(((1+r) to the nth power) – 1),
‘‘(II) during fiscal years 1997 through
1999, is equal to 1.67 × (((1+r) to the nth
power) – 1),
‘‘(III) during the fiscal year 2000, is equal
to 1.55 × (((1+r) to nth power) – 1), and
‘‘(IV) during the fiscal years beginning
with 2001, is equal to 1.47 × (((1+r) to the
nth power) – 1),
where ‘r’ is the ratio of the hospital’s full-time equiv-
alent interns and residents to beds in ‘n’ equals
.405.’’.
(b) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION
OF STANDARDIZED
AMOUNTS.—Section
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended by adding at the end the following: ‘‘, except that
the Secretary shall not take into account any reductions
in the amount of additional payments under subsection
(d)(5)(B)(ii) resulting from the amendments made by sec-
tion 11104(a) of the Balanced Budget Act of 1995 for
Economic Growth and Fairness,’’.
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(c) ALTERNATIVE
TO
RESTANDARDIZATION
OF
COSTS.—Section 
1886(d)(3)(A) 
(42 
U.S.C.
1395ww(d)(3)(A)) is amended by adding at the end the
following:
‘‘(vi) 
ALTERNATIVE
TO
RESTANDARDIZATION OF COSTS.—Notwith-
standing clauses (i) through (v), if changes
in the amount of payment under sub-
sections (d)(3)(E), (d)(5)(B), or (d)(5)(F)
would otherwise require the Secretary top
restandardize hospital costs under sub-
section (d)(2)(C), the Secretary may com-
pute payments amounts under the sub-
paragraph in a manner that assures the
aggregate payments under this subsection
in a fiscal year not greater or less than
those that would have been made in the
year if the Secretary had restandardized
hospital costs under subsection (d)(2)(C).’’.
(d) EFFECTIVE DATE.—The amendments made by
the previous subsections apply to discharges occurring
after 1995.
SEC. 11105. REVISIONS IN DETERMINATION OF AMOUNT OF
PAYMENT FOR MEDICAL EDUCATION.
(a) INDIRECT MEDICAL EDUCATION.—
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(1) IN GENERAL.—Section 1886(d)(5)(B) (42
U.S.C. 1395ww(d)(5)(B)) is amended—
(A) in clause (ii) (as amended by section
111104(a) of the Act), by inserting before the
period ’’, subject to clause (vii)’’, and
(B) by adding at the end the following:
‘‘(v) LIMITATIONS ON NUMBERS OF INTERNS
AND RESIDENTS.—In determining such adjustment
with respect to a hospital for discharges occurring
on or after October 1, 1995—
‘‘(I) except as provided in clause (vi), the
total number of interns and residents may not
exceed the number of interns and residents with
respect to the hospital’s cost reporting period
ending on or before December 31, 1995, and
‘‘(II) except as provided in subclause (vi),
the number of interns and residents who are
not who are not primary care residents as de-
fined in section 1886 (h)(5)(H) or residents in
obstetrics and gynecology, may not exceed the
number of such residents as of such cost report-
ing period.
‘‘(vi) ADJUSTMENTS TO LIMITS.—The Secretary
shall adjust the number of interns and residents in
clause (v)—
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‘‘(I) by applying a weighting factor of 0.50
with respect to each intern or resident who was
not in an initial residency period as defined in
Section 1886(h)(5)(F),
‘‘(II) by including any interns and resi-
dents that qualify under clause (iv), and
‘‘(III) as appropriate, where a hospital has
a significant increase in the number of primary
care or obstetrics and gynecology interns and
residents after June 30, 1995.
‘‘(vii) 
LIMITATION
ON
RESIDENT-TO-BED
RATIO.—For purposes of clause (ii), ‘r’ may not ex-
ceed the ratio of the number of interns and residents
as determined under clause (v) with respect to the
hospital for its most recent cost reporting period
ending on or before December 31, 1995, to the hos-
pital’s available beds (as defined by the Secretary)
during such cost reporting period.’’.
(2) PAYMENT
FOR
INTERNS
AND
RESIDENTS
PROVIDING
OFF-SITE
SERVICES.—Section
1886(d)(5)(B)(iv) (U.S.C. 42 1395ww(d)(5)(B)(iv)
is amended to read as follows:
‘‘(iv) OFF-SITE
SERVICES.—All the
time spent by an intern or resident in pa-
tient care activities under an approved
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medical residency training program shall
be counted towards the determination of
full-time equivalency at an entity in a non-
hospital setting, if the hospital incurs all,
or substantially all, of the costs for the
training program in that setting.’’.
(b) DIRECT MEDICAL EDUCATION.—
(1) LIMITATION OF NUMBER OF RESIDENTS.—
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is
amended by adding at the end the following:
‘‘(F) LIMITATION
OF
NUMBER
OF
RESI-
DENTS
FOR
CERTAIN
FISCAL
YEARS.—Such
rules shall provide that for purposes of a cost
reporting period beginning on or after October
1, 1995—
‘‘(i) the total number of full-time
equivalent residents (as determined under
this paragraph) with respect to an ap-
proved medical residency training program
may not exceed the number of full-time
equivalent residents with respect to the
ending on or before December 31, 1995,
and
‘‘(ii) the number of a hospital’s full-
time-equivalent residents as determined
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under this paragraph who are not primary
care residents (as defined in paragraph
(5)(H)) or residents in obstetrics and gyn-
ecology may not exceed the number of such
residents as of such cost reporting period.
‘‘(G) ADJUSTMENTS
TO
LIMITATIONS.—
The Secretary may adjust the limitations speci-
fied in subparagraph (F) if a hospital has a sig-
nificant increase in the number of primary care
or obstetrics and gynecology interns or resi-
dents after June 30, 1995.’’.
(2) CONTINUATION OF FREEZE ON UPDATES TO
FTE
RESIDENT
AMOUNTS.—Section
1886(h)(2)(D)(ii) (42 U.S.C. 1395ww(h)(2)(D)(ii))
is amended by striking ‘‘fiscal year 1994 or fiscal
year 1995’’ and inserting ‘‘fiscal years 1994 through
2000’’.
(3) PERMITTING PAYMENT TO NON-HOSPITAL
PROVIDERS.—Section 1886 (42 U.S.C. 1395ww)) is
amended by adding at the end the following:
‘‘(j) PAYMENT TO NON-HOSPITAL PROVIDERS.—Be-
ginning with cost reporting periods beginning on or after
July 1, 1996, the Secretary may make payments (in such
amounts and in such form, and from each of the trust
funds under this title, as the Secretary considers appro-
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priate) to Federally Qualified Health Centers (as defined
in section 1861(aa)(4)) and Rural Health Clinics (as de-
fined in section 1861(aa)(2)) and eligible organizations
with contracts under part C for the direct costs of medical
education, if such costs are incurred in the operation of
an approved medical residence training program described
in subsection (h). The Secretary may designate additional
entities as eligible organizations for such payments as the
Secretary determines to be appropriate.’’.
(c) APPLICATION
TO COST CONTRACTS.—Section
1886(j) of the Social Security Act (42 U.S.C. 1395ww(j))
(as added by subsection (b)(3) of this section) applies to
contracts under section 1876(h) of that Act (42 U.S.C.
1395mm).
(d) EFFECTIVE DATE.—The amendments made by
the previous subsections apply to hospital cost reporting
periods beginning on or after October 1, 1995.
(e) COMMISSION
ON MEDICAL EDUCATION
AND
WORKFORCE PRIORITIES.—
(1) IN GENERAL.—There is established within
the Department of Health and Human Services a
Commission to be known as the National Commis-
sion on Medical Education and Workforce Priorities
(hereafter in this subsection referred to as the
‘‘Commission’’).
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(2) DUTIES.—The Commission shall have the
following responsibilities:
(A) To develop and recommend to the Sec-
retary specific policies to address the preserva-
tion of the research and educational capacity of
the Nation’s academic health centers and the
supply, composition, and support of the future
health care workforce. The Commission shall
examine—
(i) the financing of graduate medical
education,
(ii) issues relating to children’s and
specialty hospitals,
(iii) policies regarding international
medical school graduates, and
(iv) the relationship of graduate medi-
cal education funding and service-gen-
erated income.
(B) To make recommendations concerning
the most effective allocation of training re-
sources to ensure that the numbers and com-
petencies of health care professionals are re-
sponsive to the Nation’s needs.
(3) COMPOSITION.—
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(A) QUALIFICATIONS.—The Commission
shall consist of 15 members appointed by the
Secretary, and shall to the extent feasible in-
clude—
(i) individuals nationally recognized
for expertise in health economics, medical
education financing, medical practice, is-
sues relating to the composition of the
health care workforce, research on and de-
velopment of technological and scientific
advances in health care, and other related
fields; and
(ii) health care professionals including
physicians (both faculty and non-faculty),
consumers, a dean and a chief executive of-
ficer or an academic health center or a
teaching hospital, and representatives from
health insurance organizations, managed
care organizations, and medical workforce
accrediting organizations.
(B) NATIONAL REPRESENTATION.—To the
extent feasible, the membership of the Commis-
sion—
(i) shall represent the various geo-
graphic regions of the United States,
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(ii) shall reflect the racial, ethnic, and
gender composition of the United States;
and
(iii) shall be broadly representative of
medical schools, academic health centers,
teaching hospitals, and schools involved in
the training of non-physician providers of
health services.
(4) TERMS OF OFFICE.—Members of the Com-
mission shall first be appointed no later than July
1, 1996, for a term of two and one half years.
(5) EX OFFICIO MEMBERS.—In addition to the
members appointed pursuant to paragraph (3), the
Commission shall include—
(A) the Secretary of Health and Human
Services, the Secretary of Veterans Affairs, and
the Secretary of Defense (or a designee of each
such official); and
(B) such additional individuals as may be
designated by the Secretary from among Fed-
eral officers or employees.
(6) CHAIR.—The Secretary shall designate an
individual from among the members appointed pur-
suant to paragraph (3)(A) to serve as the chair of
the Commission.
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(7) QUORUM.—Nine members of the Commis-
sion shall constitute a quorum, but a lesser number
may hold hearings.
(8) VACANCIES.—Any vacancy in the Commis-
sion shall not affect its power to function.
(9) COMPENSATION.—Each member of the
Commission who is not otherwise employed by the
United States Government shall receive compensa-
tion at a rate equal to the daily rate prescribed for
GS–18 under the General Schedule under section
5332 of title 5, United States Code, for each day,
including travel time, such member is engaged in the
actual performance of duties as a member of the
Commission. A member of the Commission who is
an officer or employee of the United States Govern-
ment shall serve without additional compensation.
All members of the Commission shall be reimbursed
for travel, subsistence, and other necessary expenses
incurred by them in the performance of their duties.
(10) CERTAIN AUTHORITIES AND DUTIES.—In
order to carry out the provisions of this subsection,
the Commission is authorized to—
(A) collect such information, hold such
hearings, and sit and act at such times and
places, either as a whole or by subcommittee,
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and request the attendance and testimony of
such witnesses and the production of such docu-
ments as the Commission may consider advis-
able; and
(B) request the cooperation and assistance
of Federal departments, agencies, and instru-
mentalities, and such departments, agencies,
and instrumentalities are authorized to provide
such cooperation and assistance.
(11) REPORTS.—The Commission shall submit
to the Secretary a preliminary report not later than
July 1, 1997, and a final report not later than July
1, 1998, making recommendations on the matters
specified in paragraph (2).
(12) TERMINATION.—The Commission shall
terminate as of December 31, 1998.
(13) AUTHORIZATION
OF
APPROPRIATIONS.—
There is authorized to be appropriated to the Sec-
retary of Health and Human Services for use in car-
rying out this subsection not more than $250,000
for each of fiscal years 1996, 1997, 1998. Funds ap-
propriated for fiscal year 1998 shall remain available
until expended.
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‘‘(iii) CERTAIN TRANSFERS.—Effective for discharges
occurring on or after October 1, 1995, transfer cases (as
otherwise defined by the Secretary) shall also include cases
in which a patient is transferred from a subsection (d)
hospital to a hospital or hospital unit that is not a sub-
section (d) hospital (under section 1886(d)(1)(B) and im-
plementing regulations) or to a skilled nursing facility for
the purpose of receiving extended care services.’’.
SEC. 11108. MORATORIUM ON NEW LONG TERM CARE HOS-
PITAL EXCLUSIONS.
Section 
1886(d)(1)(B)(iv) 
(42 
U.S.C.
1395ww(d)(1)(B)(iv)) is amended by inserting ‘‘(and had
such an average on the date of enactment of the Balanced
Budget Act of 1995 for Economic Growth and Fairness)’’
before the comma.
SEC. 11109. PAYMENTS TO HOSPITALS EXCLUDED FROM
PPS.
(a) 
REDUCTIONS
IN
UPDATES.—Section
1886(b)(3)(B)(ii) (42 U.S.C. 1395ww(b)(4)(B)(ii)) is
amended—
(1) in subclause (V)
(A) by striking ‘‘through 1997’’ and insert-
ing ‘‘through 1995’’, and
(B) by striking ‘‘and’’,
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(2) by renumbering subclause (VI) as (VIII),
and
(3) by inserting after subclause (V) the follow-
ing:
‘‘(VI) fiscal years 1996 through 2000, the mar-
ket basket percentage increase minus 1.0 percentage
point,
‘‘(VII) fiscal years 2001 and 2002, the market
basket percentage increase minus 1.5 percentage
points, and’’.
(b) REBASING FOR PPS-EXEMPT HOSPITALS.—Sec-
tion 1886(b)(3)(A) (42 U.S.C. 1395ww(b)(3)(A)) is
amended to read as follows:
‘‘(3)(A) TARGET AMOUNT.—
‘‘(i) CALCULATION OF TARGET AMOUNT.—Sub-
ject to clauses (ii) and (iii), and except as provided
in subparagraphs (C), (D), and (E), for purposes of
this subsection, the term ‘target amount’ means—
‘‘(I) with respect to the first 12-month cost
reporting period in which this subparagraph is
applied to the hospital, the average allowable
operating costs of inpatient hospital services (as
defined in subsection (a)(4)) recognized under
this title for such hospital for the hospital’s two
most recent 12-month cost reporting periods be-
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ginning on or after October 1, 1990, subject to
the floor and ceiling for target amounts as spec-
ified in clause (ii), and increased by the applica-
ble percentage increases under subparagraph
(B)(ii) for the hospital’s succeeding cost report-
ing periods beginning before fiscal year 1996,
or
‘‘(II) with respect to a later cost reporting
period, the target amount for the preceding cost
reporting period, increased by the applicable
percentage increase under subparagraph (B)(ii).
‘‘(ii) FLOOR AND CEILING.—Subject to clause
(iii), the target amount determined under this sub-
paragraph for a hospital or unit shall not be less
than 70 percent nor more than 150 percent of the
national mean (adjusted by an appropriate wage
index) of the operating costs of inpatient hospital
services determined under this paragraph for hos-
pitals (and units thereof as applicable) of each type
of hospital described in subsection (d)(1)(B) for the
cost reporting periods noted in clause (i)(I) and up-
dated by the applicable percentage increase under
subparagraph (B)(ii).
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‘‘(iii) NEW HOSPITALS.—In the case of a hos-
pital that does not have a cost reporting period be-
ginning before October 1, 1990—
‘‘(I) with respect to cost reporting periods
beginning during the hospital’s first two fiscal
years of operation, the amount of payment
made under this title with respect to operating
costs of inpatient hospital services (as defined
in subsection (a)(4)) shall be the reasonable
costs for providing such services, except that
such amount may not exceed 150 percent of the
national mean as determined and updated in
clause (ii),
‘‘(II) with respect to a later cost reporting
period, clauses (i) and (ii) shall apply to such
hospital except that the target amount for the
hospital shall be the average allowable operating
costs of inpatient hospital services (as defined
in subsection (a)(4)) recognized under this title
for the hospital’s first two 12-month cost re-
porting periods beginning at least one year
after the hospital accepts its first patient.’’.
(c) 
EXCEPTIONS
AND
ADJUSTMENTS.—Section
1886(b)((4)(A)(i) (42 U.S.C. 1395ww(b)(4)(A)(i)) is
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amended by inserting the following after the first sen-
tence: * * *.
SEC. 11110. REDUCTIONS TO CAPITAL PAYMENTS FOR PPS-
EXEMPT HOSPITALS.
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is
amended by adding at the end the following new subpara-
graph:
‘‘(T) REDUCTIONS
FOR
PPS-EXEMPT
HOS-
PITALS.—Such regulations shall provide that, in de-
termining the amount of the payments that may be
made under this title with respect to the capital-re-
lated costs of inpatient hospital services furnished by
a hospital that is not a subsection (d) hospital (as
defined in section 1886(d)(1)(B)) or a subsection (d)
Puerto 
Rico 
hospital 
(as 
defined 
in 
section
1886(d)(9)(A)), the Secretary shall reduce the
amounts of such payments otherwise established
under this title by 15 percent for payment attrib-
utable to portions of cost reporting periods occurring
during each of the fiscal years 1996 through 2005.’’.
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SEC. 11111. MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR SKILLED NURSING FACILITIES.
(a) BASING UPDATES TO PER DIEM COST LIMITS
EFFECTIVE FOR FISCAL YEAR 1996 ON LIMITS FOR FIS-
CAL YEAR 1993.—
(1) IN GENERAL.—The last sentence of section
1888(a) (42 U.S.C. 1395yy(a)) is amended by add-
ing at the end the following: ‘‘, except that the limits
effective October 1, 1995 shall be based on the lim-
its effective on October 1, 1992 and shall not take
into account any changes in the routine service costs
of skilled nursing facilities occurring during cost re-
porting periods which began during fiscal year 1994
or fiscal year 1995.’’.
(2) NO
EXCEPTIONS
PERMITTED
BASED
ON
AMENDMENT.—The Secretary of Health and Human
Services shall not consider the amendment made by
paragraph (1) in making any adjustments pursuant
to section 1888(c) of the Social Security Act.
(b) PAYMENTS
DETERMINED
ON
PROSPECTIVE
BASIS.—Prospective payments made to skilled nursing fa-
cilities under section 1888(d) of the Social Security Act
for cost reporting periods beginning on or after October
1, 1995, shall be based on the rates effective for cost re-
porting periods beginning October 1, 1992, and before Oc-
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tober 1, 1993, and shall not take into account any changes
in the costs of services occurring during cost reporting pe-
riods which began during fiscal year 1994 or fiscal year
1995.
SEC. 11112. INTERIM PROSPECTIVE PAYMENT FOR SKILLED
NURSING FACILITIES.
(a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy)
is amended by adding at the end the following:
‘‘(e) PAYMENT
ON
AN
INTERIM
PROSPECTIVE
BASIS.—The Secretary shall, for cost reporting periods
beginning on or after October 1, 1996, provide for pay-
ment for routine service costs (excluding capital-related
costs) of extended care services in accordance with a pro-
spective payment system established by the Secretary in
the amounts provided in subsection (f), subject to the ex-
ceptions and limitations in subsections (g) and (h).
‘‘(f) DETERMINATION OF PAYMENT AMOUNTS.—
‘‘(1) PER DIEM BASIS.—The amount of pay-
ment under subsection (e) shall be determined on a
per diem basis.
‘‘(2) USE OF BASE YEAR COSTS UPDATED BY
MARKET BASKET.—The Secretary shall compute the
routine service costs per diem in a base year (deter-
mined by the Secretary) for each skilled nursing fa-
cility, and shall update the per diem rate on the
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basis of a market basket, excluding increases in rou-
tine service costs associated with fiscal year 1994
and fiscal year 1995, and other factors as the Sec-
retary determines appropriate.
‘‘(3) LIMITATION ON BASE YEAR COSTS.—The
base year routine service costs used to determine the
per diem rate applicable to a skilled nursing facility
may not exceed the following limits:
‘‘(A) RURAL
AREAS.—With respect to
skilled nursing facilities located in rural areas,
the limit shall be equal to 112 percent of the
mean per diem routine service costs in a base
year (determined by the Secretary) for free-
standing skilled nursing facilities located in
rural areas within the same region.
‘‘(B) URBAN
AREAS.—With respect to
skilled nursing facilities located in urban areas,
the limit shall be equal to 112 percent of the
mean per diem routine service costs in a base
year (determined by the Secretary) for free-
standing skilled nursing facilities located in
urban areas within the same region.
‘‘(C) DEFINITIONS.—For purposes of this
subsection, urban and rural areas shall be de-
termined in the same manner as for purposes of
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subsection (a), and the term ‘‘region’’ shall
have the same meaning as under section
1886(d)(2)(D).
‘‘(D) WAGE ADJUSTMENTS.—In establish-
ing limits under this subsection, the Secretary
may make appropriate adjustments to the
labor-related portion of the costs based upon on
a wage index and other factors as the Secretary
determines appropriate.
‘‘(4) NEW
SKILLED
NURSING
FACILITIES.—
Skilled nursing facilities entering the Medicare pro-
gram subsequent to the base period, determined in
subsection (f)(1), shall receive a routine payment
rate equal to the mean per diem routine costs of
skilled nursing facilities in the urban or rural area
in which they are located by region. The Secretary
shall compute these payment rates using per diem
costs in a base year (determined by the Secretary)
and shall update the rates on the basis of a market
basket and other factors as the Secretary determines
appropriate.
‘‘(5) LOW MEDICARE VOLUME FACILITIES.—Ef-
fective for cost reporting periods beginning on or
after October 1, 1996, low Medicare volume skilled
nursing facilities, as described in subsection (d),
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shall receive payment for routine service costs as
otherwise set forth in subsections (e) through (j), ex-
cept that they may elect to receive payment on the
basis of the rates described in subsection (f)(4).
‘‘(6) CASE MIX ADJUSTMENTS.—The Secretary
may make prospective adjustments to the routine
payment rates to account for changes in facility pa-
tient mix (case mix) as the Secretary determines ap-
propriate. Such adjustments shall be made in a
manner which does not increase expenditures for the
routine costs of skilled nursing facility services be-
yond what would otherwise occur.
‘‘(g) HOLD HARMLESS PAYMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2)
and (3), a facility’s per diem payment rate based on
the application of subsections (e) and (f) is the
greater of—
‘‘(A) its per diem payment amount in the
base year, and
‘‘(B) its base year cost per diem up to the
regional limit plus any exception amounts that
may have been granted in the base year (ad-
justed by the market basket).
‘‘(2) LIMIT.—The payment rate determined
under paragraph (1) shall not exceed the facility’s
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cost per diem incurred in the base year adjusted by
the market basket.
‘‘(3) NEW ENTITY EXCEPTION.—Subparagraph
(1)(A) does not apply if the per diem payment
amount in the base year was determined on the
basis of an exemption under subsection (f)(4).
‘‘(h) UPPER LIMITS ON REASONABLE COSTS.—The
Secretary, in making determinations on the reasonable
costs (both capital and operating) of ancillary services pro-
vided by skilled nursing facilities under part A, shall uti-
lize as an upper limit, the carrier fee schedules applicable
to such services as specified in sections 1834 and 1848.
This subsection shall not have the effect of mitigating
other limits on the reasonable costs of ancillary services
currently in effect under Part A such as those specified
in section 1861(v)(5)(A).
‘‘(i) ELIMINATION
OF EXCEPTIONS
AND EXEMP-
TIONS.—Exceptions, as described in subsection (c), and
exemptions, as described in the applicable regulations, are
eliminated for cost reporting periods beginning on or after
October 1, 1996.’’.
(b) CONSOLIDATED BILLING AND UNIFORM COD-
ING.—
(1) IN GENERAL.—Section 1862(a) (42 U.S.C.
1395y(a)) is amended—
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(A) by striking ‘‘or’’ at the end of para-
graph (14),
(B) by striking the period at the end of
paragraph (15) and adding a semicolon, and
(C) by inserting after paragraph (15) the
following:
‘‘(16) which are other than physicians’ services,
services described by sections 1861(s)(2)(K)(i)
through (iii), certified nurse-midwife services, quali-
fied psychologist services, and services of a certified
registered nurse anesthetist, and which are fur-
nished to an individual who is a resident of a skilled
nursing facility by an entity other than the skilled
nursing facility, unless the services are furnished
under 
arrangements 
(as 
defined 
in 
section
1861(w)(1)) with the entity made by the skilled
nursing facility; or
‘‘(17) which are on a claim submitted by a
skilled nursing facility under this title, unless the
claim uses the HCFA common procedure coding sys-
tem.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is
amended—
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(A) by striking ‘‘(i)’’ and inserting ‘‘(I)’’
and striking ‘‘(ii)’’ and inserting ‘‘(II)’’,
(B) by striking ‘‘(H)’’ and inserting
‘‘(H)(i)’’, and
(C) by adding at the end the following:
‘‘(ii) in the case of skilled nursing facilities which pro-
vide services for which payment may be made under this
title, to have all items and services (other than physicians’
services, and other than services described by section
1861(s)(2)(K)(i) through (iii), certified nurse-midwife
services, qualified psychologist services, and services of a
certified registered nurse anesthetist)—
‘‘(I) that are furnished to an individual who is
a resident of the skilled nursing facility, and
‘‘(II) for which the individual is entitled to have
payment made under this title, furnished by the
skilled nursing facility or otherwise under arrange-
ments (as defined in section 1861(w)(1)) made by
the skilled nursing facility,’’.
(3) EFFECTIVE DATE.—the amendments made
by the preceding paragraphs are effective for serv-
ices furnished on or after October 1, 1996.
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SEC. 11113. FULL PROSPECTIVE PAYMENT SYSTEM FOR
SKILLED NURSING FACILITIES.
(a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy)
is amended by striking subsections (e) through (i) (as
added by section 11112(a) of this Act) and adding the
following:
‘‘(e) FULL PROSPECTIVE PAYMENT SYSTEM.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for payment for all costs of extended care services
(including routine service costs, ancillary costs, and
capital related costs) in accordance with a prospec-
tive payment system established by the Secretary.
‘‘(2) BUDGET SAVINGS.—Prior to implementing
the prospective payment system described in para-
graph (1) in a budget neutral fashion, the Secretary
shall reduce, by 7 percent, the per diem rates for
routine costs, and the reasonable costs for ancillary
services and capital for skilled nursing facilities as
such rates and costs are in effect on September 30,
1998.’’.
(b) EFFECTIVE DATE.—The amendments made by
the preceding subsection apply to cost reporting periods
beginning on or after October 1, 1998.
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SEC. 11114. SALARY EQUIVALENCY GUIDELINES FOR THER-
APY SERVICES.
Section 1861(v)(5) (42 U.S.C. 1395x(v)(5)) is
amended—
(1) by redesignating subparagraph (B) as sub-
paragraph (D),
(2) in subparagraph (D), as redesignated, by
adding ‘‘(B), or (C),’’ after ‘‘subparagraph (A),’’,
(3) by inserting the following after subpara-
graph (A):
‘‘(B) SALARY
EQUIVALENCY
GUIDELINES
FOR
THERAPY SERVICES.—
‘‘(i) IN GENERAL.—Effective for services fur-
nished on or after January 1, 1996, the Secretary
shall establish guidelines relating to occupational
therapy services and speech-language pathology serv-
ices, and revise guidelines established under the sub-
paragraph (A) relating to respiratory therapy serv-
ices and physical therapy services using the meth-
odology described in clause (ii).
‘‘(ii) CALCULATION OF AMOUNTS.—The guide-
lines for each therapy shall be equal to the sum of:
‘‘(I) the sum of an hourly salary rate, plus
fringe benefits, plus a rental expense factor (in
the same base year), and
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‘‘(II) an overhead factor (excluding rental
expenses) equal to 28 percent of the amount de-
termined in subclause (I),
adjusted by geographical area using the methodology
contained in the final regulation of the Secretary of
Health and Human Services published on page
44928 of volume 48 of the Federal Register on Sep-
tember 30, 1983, updated annually from the base
year to the current year by an inflation factor.
‘‘(iii) DATA.—The data used in establishing the
guidelines under clause (ii) shall be—
‘‘(I) in the case of hourly salary rates, for
each therapy, the 75th percentile of salaries
paid to therapists working full-time in an em-
ployment relationship in the area, from the
most recent available Bureau of Labor Statis-
tics (BLS) hospital salary data for each, in-
creased by 10 percent,
‘‘(II) in the case of fringe benefits, for
each therapy, an aggregate factor derived from
hospital cost reports ending in fiscal year 1991
for BLS survey areas used in subclause (I),
‘‘(III) in the case of the rental expense fac-
tor, for each therapy, an amount derived from
local area rental income data compiled by the
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Building Owners and Managers Association
International for 1991, for BLS survey areas
used in subclause (I),
‘‘(IV) in the case of the inflation factor,
for each therapy, an amount equal to the aver-
age of Employment Cost Indices for wages and
benefits of Civilian Hospital, Professional Tech-
nical and Clerical Workers, and Private Execu-
tives, Administrators and Managers, and the
Consumer Price Indices-Urban for Housing and
all items less food and energy, weighted by the
relative proportion that each component rep-
resents of the guidelines amounts.
‘‘(C) USE OF ADDITIONAL DATA.—Nothing in sub-
paragraph (B) shall preclude the Secretary from updating
the guidelines using such data sources and methodology
as the Secretary determine to be appropriate, except that
any changes to the data sources will be made through rule-
making in a manner that does not increase aggregate
spending for such services beyond what would otherwise
occur.’’, and
(4) by adding at the end the following:
‘‘(E) NO EXCEPTION FOR PREVIOUS CONTRACTS.—
In applying limitations under section 1861(v)(5), the Sec-
retary shall not recognize an exception for a provider that
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entered into a written binding contract or contingency
contract with a therapist, provider or other organization
prior to the date the initial guidelines are published.’’.
SEC. 11115. REMOVAL OF GRADUATE MEDICAL EDUCATION,
INDIRECT MEDICAL EDUCATION, AND DIS-
PROPORTIONATE 
SHARE 
HOSPITAL 
PAY-
MENTS FROM THE CALCULATION OF THE AD-
JUSTED AVERAGE PER CAPITA COST.
(a) EXCLUSION
OF
GRADUATE
MEDICAL
EDU-
CATION, INDIRECT
MEDICAL
EDUCATION, AND
DIS-
PROPORTIONATE SHARE HOSPITAL PAYMENTS FROM THE
CALCULATION OF THE ADJUSTED AVERAGE PER CAPITA
COST.—Section 1851H(2) (as added by subtitle B of this
title) is amended by adding at the end the following:
‘‘Starting in calendar year 1998, the AAPCC shall not in-
clude estimated amounts that would have been paid for
indirect 
medical 
education 
costs 
under 
section
1886(d)(5)(B), disproportionate share payment adjust-
ments under section 1886(d)(5)(F), and direct graduate
medical education costs under section 1886(h).’’.
(b) PAYMENTS
FOR GRADUATE EDUCATION PRO-
GRAMS.—Section 1851F (as added by subtitle B of this
title) is amended by adding at the end the following:
‘‘(k) PAYMENTS
FOR GRADUATE MEDICAL EDU-
CATION PROGRAMS.—
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U.S.C. 1395ww(d)) is amended by adding at the end the
following:
‘‘(11) ADDITIONAL PAYMENTS TO HOSPITALS FOR
MANAGED CARE ENROLLEES.—
‘‘(A) IN GENERAL.—For portions of cost re-
porting periods occurring on or after January 1,
1998, the Secretary shall provide for an additional
payment amount for subsection (d) hospitals for
services furnished to individuals who are enrolled in
an organization having a contract with an eligible
organization under part C and who are entitled to
part A.
‘‘(B) AMOUNT OF PAYMENT.—Subject to sub-
paragraph (F), the amount of such payment shall be
determined by multiplying (i) the sum of the
amounts determined under subparagraphs (C) and
(D), by (ii) the product of the number of discharges
determined under subparagraph (E) and the esti-
mated average per discharge amount that would oth-
erwise have been paid under section 1886(d)(1)(A)
if the individuals had not been enrolled in an organi-
zation having a contract with an eligible organiza-
tion under part C.
‘‘(C) INDIRECT TEACHING ADJUSTMENT FAC-
TOR.—The Secretary shall determine an indirect
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teaching adjustment factor equal to 1.11×(((1+r) to
the nth power)¥1), where ‘r’ and ‘n’ have the same
meaning as in section 1886(d)(5)(B).
‘‘(D) 
DISPROPORTIONATE
SHARE
ADJUST-
MENT.—The Secretary shall determine a dispropor-
tionate share adjustment factor equal to the dis-
proportionate share adjustment percentage applica-
ble to the hospital under section 1886(d)(5)(F).
‘‘(E) DETERMINATION
OF
NUMBER
OF
DIS-
CHARGES.—The Secretary shall determine the num-
ber of discharges as equal to the lesser of—
‘‘(i) the number of discharges during the
current cost reporting period attributable to in-
dividuals who are enrolled in an organization
having a risk contract and who are entitled to
part A of this title, and
‘‘(ii) the number of discharges paid under
section 1886(d) during the hospital’s cost re-
porting period beginning in fiscal year 1992
minus the number of discharges paid under sec-
tion 1886(d) during the hospital’s current cost
reporting period.
‘‘(F) ADJUSTMENT FOR SAVINGS.—At the be-
ginning of each calendar year, the Secretary shall
make an adjustment in the amounts otherwise pay-
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able under this paragraph so that the estimated pay-
ments under this paragraph for the discharges oc-
curring in that calendar year, together with the esti-
mated amounts payable under section 1851F for
that calendar year, equal 75 percent of the amounts
the Secretary estimates would otherwise have been
payable under section 1851F during that calendar
year if the adjusted average per capita cost deter-
mined under section 1851F included estimated
amounts for indirect medical education costs, dis-
proportionate share payment adjustments, and di-
rect graduate medical education costs.’’.
(d) USE OF INTERIM FINAL REGULATIONS.—The
Secretary of Health and Human Services may issue regu-
lations on an interim final basis to implement this title
and the amendments made by this title.
SEC. 11116. SOLE COMMUNITY HOSPITALS.
(a) REBASING
THE
TARGET
AMOUNT.—Section
1886(b)(3)(C) (42 U.S.C. 13955ww (b)(3)(C)) is amend-
ed—
(1) by striking ‘‘or’’ at the end of clause (iii),
(2) in clause (iv)—
(A) by striking ‘‘and each subsequent fiscal
year’’, and
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(B) by striking the period at the end and
adding a comma,
(3) by inserting after clause (iv) the following:
‘‘(v) with respect to discharges occurring in fis-
cal year 1996, the average of—
‘‘(I) the allowable operating costs of inpa-
tient hospital services (as defined in subsection
(a)(4)) recognized under this title for the hos-
pital’s cost reporting period (if any) beginning
during fiscal year 1992 increased (in a
compounded manner) by the applicable percent-
age increases applied to such hospital under
this paragraph for cost reporting periods begin-
ning in fiscal year 1993 and for discharges oc-
curring in fiscal years 1994, 1995, and 1996,
and
‘‘(II) the allowable operating costs of inpa-
tient hospital services (as defined in subsection
(a)(4)) recognized under this title for the hos-
pital’s cost reporting period (if any) beginning
during fiscal year 1993 increased (in a
compounded manner) by the applicable percent-
age increase applied to such hospital under this
paragraph for discharges occurring in fiscal
years 1994, 1995, and 1996, or
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‘‘(vi) With respect to discharges occurring in
fiscal year 1997 and each subsequent fiscal year, the
target amount for the preceding year (determined
without application of clause (viii)) increased by the
applicable percentage increase under subparagraph
(B)(iv).’’, and
(4) by adding at the end the following:
‘‘Notwithstanding clauses (v) and (vi), the target amount
with respect to discharges occurring in fiscal year 1996
and each subsequent fiscal year shall be the higher of the
amount determined under clause (v) or (vi) (as applicable)
and the target amount with respect to discharges occur-
ring in fiscal year 1995 (as determined under clause (iv))
increased by the applicable percentage increase under sub-
paragraph (B)(iv) for discharges occurring in fiscal year
1996. The Secretary may substitute more recent cost re-
porting periods for those specified in subclause (v) but no
more often than every four fiscal years.’’.
(b) ELIMINATING THE VOLUME ADJUSTMENT.—Sec-
tion 1886(d)(5)(D)(ii) (42 U.S.C. 1395ww(d)(5)(D)(ii)) is
amended by striking ‘‘In’’ and inserting ‘‘For cost report-
ing periods beginning before October 1, 1995, in’’.
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SEC. 11117. RURAL PRIMARY CARE HOSPITAL PROGRAM.
(a) IN GENERAL.—The heading to section 1820 (42
U.S.C. 1395i–4)) is amended to read ‘‘RURAL PRIMARY
CARE HOSPITAL PROGRAM’’.
(b) EXPANSION OF PROGRAM TO ALL STATES.—Sec-
tion 1820(a)(1) (42 U.S.C. 1395i–4(a)(1)) is amended by
striking ‘‘not more than 7’’ after ‘‘shall make grants to’’.
(c) MORATORIUM ON NEW ESSENTIAL ACCESS COM-
MUNITY HOSPITAL DESIGNATIONS.—Section 1820 (42
U.S.C. 1395i–4)) is amended—
(1) in subsections (a)(3) and (b)(1)(C), by
striking ‘‘essential access community hospitals or’’
after ‘‘as’’,
(2) in subsection (c)(1)(B), by striking ‘‘an es-
sential access community hospital’’ after ‘‘is des-
ignated as’’,
(3) in subsection (d)(1), by striking ‘‘essential
access community hospitals or’’ after ‘‘facilities in
the State as’’,
(4) in subsection (d)(2), by striking ‘‘or an es-
sential access community hospital’’ after ‘‘rural pri-
mary care hospital’’,
(5) by striking subsection (e),
(6) in subsection (g)(1), by amending subpara-
graph (A) to read as follows:
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‘‘(A) at least one hospital that is not a
rural primary care hospital. and’’,
(7) in subsection (i)—
(A) in the heading, by striking ‘‘HOS-
PITALS OR’’ and ‘‘BY SECRETARY’’,
(B) by striking paragraphs (1) and (2)(C),
(C) in paragraph (2)(A)(ii), by striking
‘‘subparagraph (B)’’ and inserting ‘‘paragraph
(2)’’,
(D) by redesignating paragraph (2) as (1),
(E) by striking the subparagraph designa-
tion ‘‘(B)’’ and inserting
‘‘(2) 
FACILITIES
DESIGNATED
BY
THE SEC- RETARY.—’’,
(F) by striking the heading to paragraph
(1) (as redesignated by subparagraph (D) of
this paragraph) and the subparagraph designa-
tion ‘‘(A)’’ and inserting ‘‘FACILITIES
DES-
IGNATED BY THE STATE.—’’, and
(G) by redesignating clauses (i) through
(iii) of paragraph (1) (as redesignated by sub-
paragraph (D) of this paragraph) as subpara-
graphs (A) through (C), and
(8) in paragraphs (1) and (2) of subsection (j),
by striking ‘‘an essential access community hospital
or’’ each time it appears.
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(d) CONTINUING PARTICIPATION
OF RURAL PRI-
MARY
CARE
HOSPITALS.—Section 1820(h)(1)(A) (42
U.S.C. 1395i–4(h)(1)(A)) (as redesignated by subsection
(c)(7) of this section) is amended by inserting before the
semicolon the following: ‘‘(or in a State which the Sec-
retary finds would receive a grant under such subsection
during a fiscal year if funds were appropriated for grants
under such subsection for the fiscal year)’’.
(e) DESIGNATION OF NONPROFIT OR PUBLIC HOS-
PITALS.—Section 1820(f)(1)(A) (42 U.S.C. 1395i–
4(f)(1)(A)) is amended by inserting ‘‘is a nonprofit or pub-
lic hospital, and is’’ after ‘‘(A)’’.
(f) ESTABLISHING
A MINIMUM SEPARATION DIS-
TANCE BETWEEN FACILITIES.—Section 1820(f)(1) (42
U.S.C. 1395i–4(f)(1)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (G),
(2) by striking the period at the end of sub-
paragraph (H) and adding a semicolon, and
(3) by adding at the end the following:
‘‘(I) is located at least a 35-mile drive from
any rural primary care hospital or hospital, or
is certified by the State as being a necessary
provider of health care services to residents in
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the area, because of local geography or service
patterns.’’.
(g) REMOVAL OF REQUIREMENT FOR PRIOR COMPLI-
ANCE
WITH
HOSPITAL
STANDARDS.—Section
1820(f)(1)(B) (42 U.S.C. 1395i–4(f)(1)(B)) is amended
by striking ‘‘and had not been found, on the basis of a
survey under section 1864, to be in violation of any re-
quirement to participate as a hospital under this title’’.
(h) LIMITATION ON NUMBER OF INPATIENT BEDS.—
The matter in section 1820(f)(1)(F) (42 U.S.C. 1395i–
4(f)(1)(F)) preceding clause (i) is amended by striking
‘‘6’’ and inserting ‘‘15’’.
(i) LIMITATION ON LENGTH OF INPATIENT STAYS.—
Section 1820(f) (42 U.S.C. 1395i–4(f)) is amended—
(1) in the matter in paragraph (1)(F) preceding
clause (i), by striking ‘‘subject to paragraph (4),’’,
(2) in paragraph (1)(F)(i), by striking ‘‘72
hours’’ and inserting ‘‘96 hours’’, and
(3) by striking paragraph (4).
(j) CONFORMING CHANGE.—Section 1814(a)(8) (42
U.S.C. 1395f(a)(8)) is amended by striking ‘‘within 72
hours’’ and inserting ‘‘within 96 hours’’.
(k) PERMITTING RURAL PRIMARY CARE HOSPITALS
TO MAINTAIN SWING BEDS.—Section 1820(f)(3) (42
U.S.C. 1395i–4(f)(3)) is amended—
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(1) in the first sentence, by striking everything
after ‘‘are used for the furnishing of extended care
services’’ up to the period, and
(2) by amending the second sentence to read as
follows: ‘‘Nothing in this subsection shall be con-
strued to prohibit a rural primary care hospital from
entering into an agreement under section 1883
under which its facilities are used for the furnishing
of extended care services.’’.
(l) CONFORMING CHANGE.—Section 1883 (42 U.S.C.
1395tt) is amended by striking ‘‘hospital’’ each place it
appears and inserting ‘‘hospital or rural primary care hos-
pital’’.
(m) CHANGE IN PAYMENT METHODOLOGY.—Section
1814(l)(1) (42 U.S.C. 1395f(l)(1)) is amended by striking
‘‘services—’’ and all that follows and inserting ‘‘services
is the reasonable cost of the rural primary care hospital
in providing such services, as determined under section
1861(v).’’.
(n) ELIMINATION OF DEADLINE FOR DEVELOPMENT
OF PROSPECTIVE PAYMENT SYSTEM.—Section 1814(l)
(42 U.S.C. 1395f(l)(1)) is amended—
(1) by striking paragraph (2), and
(2) by striking ‘‘(l)(1)’’ and inserting ‘‘(l)’’.
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(o) NO CHANGE IN PAYMENT TO EXISTING ESSEN-
TIAL ACCESS COMMUNITY HOSPITALS.—Clauses (iii)(III)
and 
(v) 
of 
Section 
1886(d)(5)(D) 
(42 
U.S.C.
1395ww(d)(5)(D)) are each amended by—
(1) inserting ‘‘was’’ after ‘‘is located in a rural
area and’’, and
(2) inserting ‘‘as in effect on the day before ef-
fective date of the Balanced Budget Act of 1995 for
Economic Growth and Fairness’’ after ‘‘section
1820(I)(1)’’.
(p) CONFORMING AMENDMENT.—Section 1820(c)(3)
(42 U.S.C. 1395i–4(c)(3)) is amended by striking
‘‘(i)(2)(C)’’ and inserting ‘‘(i)(2)’’;
(q) 
TECHNICAL
AMENDMENT.—Section
1820(f)(1)(A) (42 U.S.C. 1395i–4(f)(1)(A)) is amended
by striking ‘‘section 1866(d)(2)(D)’’ and inserting ‘‘sec-
tion 1886(d)(2)(D)’’.
SEC. 11118. RESPITE BENEFIT.
(a) ENTITLEMENT.—Section 1832(a)(2) (42 U.S.C.
1395k(a)(2)) is amended by—
(1) striking ‘‘and’’ at the end of subparagraph
(I),
(2) striking the period at the end of subpara-
graph (J) and inserting ‘‘; and’’, and
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(3) inserting at the end the following new sub-
paragraph:
‘‘(K) respite services for no more than 32
hours each year’’.
(b) CONDITIONS AND LIMITATIONS ON PAYMENT.—
(1) PAYMENT RATE.—Section 1833(a)(2) (42
U.S.C. 13951(a)(2)) is amended by—
(A) adding a new subparagraph (G) to
read as follows:
‘‘(G)(i) with respect to respite services,
payment shall be made at a rate equal to $7.50
per hour for 1996 and at a rate to be deter-
mined by the Secretary in subsequent years;
and
‘‘(ii) notwithstanding any provisions of sec-
tion 1861(v), in the case of respite services fur-
nished by a home health agency (or other orga-
nization designated by the Secretary pursuant
to regulations), payment to the agency or other
organization for respite services may not exceed
110 percent of the hourly respite allowance
times the number of hours of respite for which
the agency authorizes payment.’’
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(2) 
CONDITIONS
OF
PAYMENT.—Section
1835(a)(2) (42 U.S.C. 1395n-(a)(2)) is amended
by—
(A) striking ‘‘and’’ at the end of subpara-
graph (E),
(B) striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’, and
(C) inserting at the end the following new
subparagraph:
‘‘(G) In the case of respite services, that
the individual for whom payment is claimed is
severely impaired due to irreversible dementia
(the individual has scored three or more errors
on the Short Portable Mental Status Question-
naire) and either needs assistance in at least
one out of five activities of daily living (bathing,
dressing, transferring, toileting, and eating) or
in at least one out of four instrumental activi-
ties of daily living (meal preparation, medica-
tion management, money management, and
telephoning), or needs constant supervision be-
cause of one or more behavioral problems.’’
(3) FAMILY DESIGNATION OF RESPITE SERV-
ICES
PROVIDER
AND
CARE
GIVER.—Section
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exceeds by more than two dollars the hourly
rates established under this title.’’
(c) DEFINITIONS.—Section 1861 (42 U.S.C. 1395x)
is amended—
(1) in subsection (m)—
(A) by striking ‘‘and’’ at the end of para-
graph (6);
(B) by adding ‘‘and’’ at the end of para-
graph (7); and
(C) by inserting after paragraph (7) the
following:
‘‘(8) respite services as described in subsection
(oo);’’,
(2) in subsection (o)—
(A) by striking ‘‘and’’ at the end of para-
graph (6);
(B) by adding ‘‘and’’ at the end of para-
graph (7); and
(C) by inserting after paragraph (7) the
following:
‘‘(8) agrees to provide or arrange for respite
services as described in subsection (oo);’’, and
(3) by adding at the end the following:
‘‘(oo) RESPITE SERVICES; RESPITE AIDES; RESPITE
PROVIDERS.—
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‘‘(1) RESPITE
SERVICES.—The term ‘respite
services’ means temporary care provided to individ-
uals 
who 
meet 
the 
requirements 
of 
section
1835(a)(2) for the purposes of ensuring periodic
time-off for co-resident primary informal caregivers.
Although respite providers may provide assistance
with personal care and/or household maintenance ac-
tivities, their primary function is to provide protec-
tive supervision for persons with Alzheimer’s and re-
lated dementias whose memory, orientation, judg-
ment, and reasoning abilities have become so im-
paired that, for safety’s sake , they require the con-
stant attention or close physical proximity of another
person at all or almost all hours of the day or night.
‘‘(2) RESPITE AIDES.—The term ‘respite aides’
means individuals who have been designated by the
Secretary as qualified to act as caregivers for pur-
poses of providing the services described in para-
graph (1). Respite aides may be nurse aides as iden-
tified in section 1819, home health aides as identi-
fied in section 1891, or other individuals licensed by
the State or recognized by the Secretary as having
the skills necessary to provide such services.
‘‘(3) RESPITE PROVIDERS.—The term ‘respite
providers’ means organizations identified by the Sec-
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retary in regulations as qualified to provide or ar-
range for respite services under this title. The Sec-
retary may establish by regulation any requirements
for respite providers as the Secretary determines ap-
propriate.’’.
(d) PAYMENT FROM SUPPLEMENTARY MEDICAL IN-
SURANCE TRUST FUND FOR RESPITE SERVICES FUR-
NISHED TO INDIVIDUALS WITH ONLY HOSPITAL INSUR-
ANCE COVERAGE.—(Section 1812(a) (42 U.S.C. 1395(a))
is amended by—
(1) striking ‘‘and’’ and the end of paragraph
(3),
(2) striking the period at the end of paragraph
(4), and inserting ’’; and’’, and
(3) inserting at the end the following new para-
graph:
‘‘(5) respite services, described in section
1832(a)(2)(K), except that such services shall be
furnished under the Supplementary Medical Insur-
ance Program.’’
(e) EXCLUSION
OF ADDITIONAL PART B COSTS
FROM DETERMINATION
OF PART B MONTHLY PRE-
MIUM.—Section 1839(a)(5) (42 U.S.C. 1395r(a)), as
added by section 11147(f) of this Act, is further amended
by—
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(1) inserting ‘‘AND RESPITE BENEFIT’’ after
‘‘HOME HEALTH’’, and
(2) inserting before the period the following:
‘‘and for respite services as described in section
1832(a)(2)(K).’’
(f) SUNSET.—The amendments made by this shall be
effective for services furnished through fiscal year 2005.
PART 2—PROVISIONS RELATING TO PART B
SEC. 11121. PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) ESTABLISHING UPDATE TO CONVERSION FACTOR
TO MATCH SPENDING UNDER SUSTAINABLE GROWTH
RATE.—
(1) UPDATE.—
(A) IN GENERAL.—Section 1848(d)(3) (42
U.S.C. 1395w–4(d)(3)) is amended to read as
follows:
‘‘(3) UPDATE.—
‘‘(A) IN GENERAL.—Unless Congress oth-
erwise provides, subject to subparagraph (E),
for purposes of this section the update for a
year (beginning with 1997) is equal to the
product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI (de-
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scribed in section 1842(i)(3)) for the year
(divided by 100), and
‘‘(ii) 1 plus the Secretary’s estimate of
the update adjustment factor for the year
(divided by 100),
minus 2 and multiplied by 100.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—The
‘update adjustment factor’ for a year is equal to
the quotient of—
‘‘(i) the difference between (I) the
sum of the allowed expenditures for physi-
cians’ services furnished during each of the
years 1995 through the year involved and
(II) the sum of the amount of actual ex-
penditures for physicians’ services fur-
nished during each of the years 1995
through the previous year, divided by
‘‘(ii) the Secretary’s estimate of al-
lowed expenditures for physicians’ services
furnished during the year.
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—For purposes of subparagraph
(B), allowed expenditures for physicians’ serv-
ices shall be determined as follows (as esti-
mated by the Secretary):
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‘‘(i) 1995.—In the case of allowed ex-
penditures for 1995, such expenditures
shall be equal to actual expenditures for
services furnished during the 12-month pe-
riod ending with June 30, 1995.
‘‘(ii) 1996 AND LATER YEARS.—In the
case of allowed expenditures for 1996 and
each subsequent year, such expenditures
shall be equal to allowed expenditures for
the previous year, increased by the sustain-
able growth rate under subsection (f) for
the fiscal year which begins during the
year.
‘‘(D) DETERMINATION
OF
ACTUAL
EX-
PENDITURES.—For purposes of subparagraph
(B), the amount of actual expenditures for phy-
sicians’ services furnished during a year shall
be equal to the amount of expenditures for such
services during the 12-month period ending
with June of the previous year.
‘‘(E) RESTRICTION
ON
VARIATION
FROM
MEDICARE ECONOMIC INDEX.—Notwithstanding
the amount of the update adjustment factor de-
termined under subparagraph (B), the update
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in the conversion factor under this paragraph
for a year may not be—
‘‘(i) greater than 103 percent of 1
plus the Secretary’s estimate of the per-
centage increase in the MEI (described in
section 1842(i)(3)) for the year (divided by
100), minus 1 and multiplied by 100, or
‘‘(ii) less than 93 percent of 1 plus
the Secretary’s estimate of the percentage
increase in the MEI (described in section
1842(i)(3)) for the year (divided by 100),
minus 1 and multiplied by 100.’’.
(B) EFFECTIVE DATE.—The amendments
made by subparagraph (A) apply to physicians’
services furnished on or after January 1, 1997.
(2) CONFORMING AMENDMENTS.—
(A) 
SECTION
1848(d)(2).—Section
1848(d)(2)(A) (42 U.S.C. 1395w–4(d)(2)(A)) is
amended—
(i) in the matter preceding clause
(i)—
(I) by striking ‘‘(or updates) in
the conversion factor (or factors)’’
and inserting ‘‘in the conversion fac-
tor’’,
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(II) by striking ‘‘(beginning with
1991)’’ and inserting ‘‘(beginning
with 1996)’’, and
(III) by striking the second sen-
tence,
(ii) by amending clause (ii) to read as
follows:
‘‘(ii) such factors as enter into the
calculation of the update adjustment factor
as described in paragraph (3)(B); and ’’,
(iii) by amending clause (iii) to read
as follows:
‘‘(iii) access to services.’’,
(iv) by striking clauses (iv), (v), and
(vi), and
(v) by striking the last sentence.
(B) 
SECTION
1848(d)(2)(b).—Section
1848(d)(2)(B) (42 U.S.C. 1395w–4(d)(2)(B))
is amended—
(i) by striking ‘‘and’’ at the end of
clause (iii),
(ii) by striking the period at the end
of clause (iv) and adding ‘‘; and’’, and
(iii) by adding at the end the follow-
ing new clause:
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‘‘(v) changes in volume or intensity of
services.’’.
(C) 
REDESIGNATION
OF
SUBPARA-
GRAPH.—Section 
1848(d)(2) 
(42 
U.S.C.
1395w–4(d)(2)) is further amended—
(i) by striking subparagraphs (C),
(D), and (E),
(ii) by redesignating striking subpara-
graph (F) as subparagraph (C), and
(iii) in subparagraph (C), as redesig-
nated, by striking ‘‘(or updates) in the con-
version factor (or factors)’’ and inserting
‘‘in the conversion factor’’.
(b) REPLACEMENT
OF
VOLUME
PERFORMANCE
STANDARD WITH SUSTAINABLE GROWTH RATE.—
(1) IN GENERAL.—Section 1848(f) (42 U.S.C.
1395w–4(f)) is amended by striking paragraphs (2)
through (5) and inserting the following:
‘‘(2) SPECIFICATION OF GROWTH RATE.—
‘‘(A) FISCAL YEAR 1996.—The sustainable
growth rate for all physicians’ services for fiscal
year 1996 shall be equal to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI (de-
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scribed in section 1842(i)(3)) for 1996 (di-
vided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of
the percentage change (divided by 100) in
the average number of individuals enrolled
under this part (other than private plan
enrollees) from fiscal year 1995 to fiscal
year 1996,
‘‘(iii) 1 plus the Secretary’s estimate
of the projected percentage growth in real
gross domestic product per capita (divided
by 100) from fiscal year 1995 to fiscal
year 1996, plus 1 percentage point, and
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage change (divided by 100)
in expenditures for all physicians’ services
in fiscal year 1996 (compared with fiscal
year 1995) which will result from changes
in law (including the Balanced Budget Act
of 1995 for Economic Growth and Fair-
ness), determined without taking into ac-
count estimated changes in expenditures
due to changes in the volume and intensity
of physicians’ services or change in expend-
itures resulting from changes in the update
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to the conversion factor under subsection
(d),
minus 1 and multiplied by 100.
‘‘(B) SUBSEQUENT YEARS.—The sustain-
able growth rate for all physicians’ services for
fiscal year 1997 and each subsequent year shall
be equal to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI for the
fiscal year involved (described in section
1842(i)(3)) (divided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of
the percentage change (divided by 100) in
the average number of individuals enrolled
under this part (other than private plan
enrollees) from the previous fiscal year to
the fiscal year involved,
‘‘(iii) 1 plus the Secretary’s estimate
of the projected percentage growth in real
gross domestic product per capita (divided
by 100) from the previous fiscal year to
the fiscal year involved, plus 1 percentage
point, and
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage change (divided by 100)
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in expenditures for all physicians’ services
in the fiscal year (compared with the pre-
vious fiscal year) which will result from
changes in law, determined without taking
into account estimated changes in expendi-
tures due to changes in the volume and in-
tensity of physicians’ services or change in
expenditures resulting from changes in the
update to the conversion factor under sub-
section (d), minus 1 and multiplied by 100.
‘‘(3) DEFINITIONS.—In this subsection:
‘‘(A) SERVICES INCLUDED IN PHYSICIANS’
SERVICES.—The term ‘physicians’ services’ in-
cludes other items and services (such as clinical
diagnostic laboratory test and radiology serv-
ices), specified by the Secretary, that are com-
monly performed or furnished by a physician or
in a physician’s office, but does not include
services furnished to an eligible organization en-
rollee.
‘‘(B) 
ELIGIBLE
ORGANIZATION
EN-
ROLLEE.—The term ‘eligible organization en-
rollee’ means, with respect to a fiscal year, an
individual enrolled under this part who has
elected to receive benefits under this title
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through an eligible organization with a contract
under part C (and, through 2000, enrollment
with an organization with a contract under sec-
tion 1876(h).’’.
(2) 
CONFORMING
AMENDMENTS.—Section
1848(f) (42 U.S.C. 1395w–4(f)) is amended—
(A) in the heading, by striking ‘‘VOLUME
PERFORMANCE
STANDARD
RATES
OF
IN-
CREASE’’ and inserting ‘‘SUSTAINABLE GROWTH
RATE’’,
(B) in paragraph (1)—
(i) in the heading, by striking ‘‘VOL-
UME PERFORMANCE STANDARD RATES OF
INCREASE’’ and inserting ‘‘SUSTAINABLE
GROWTH RATE’’,
(ii) in subparagraph (A), in the mat-
ter preceding clause (i), by striking ‘‘per-
formance standard rates of increase’’ and
inserting ‘‘sustainable growth rate’’, and
(iii) in subparagraph (A), by striking
‘‘HMO enrollees’’ each place it appears
and inserting ‘‘eligible organization enroll-
ees’’,
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(C) in subparagraph (B), by striking ‘‘per-
formance standard rates of increase’’ and in-
serting ‘‘sustainable growth rate’’, and
(D) in subparagraph (C)—
(i) in the heading, by striking ‘‘PER-
FORMANCE
STANDARD
RATES
OF
IN-
CREASE’’ and inserting ‘‘SUSTAINABLE
GROWTH RATE’’,
(ii) in the first sentence, by striking
‘‘with 1991), the performance standard
rates of increase’’ and all that follows
through the first period and inserting
‘‘with 1997), the sustainable growth rate
for the fiscal year beginning in that year.’’,
and
(iii) in the second sentence, by strik-
ing ‘‘January 1, 1990, the performance
standard rate of increase under subpara-
graph (D) for fiscal year 1990’’ and insert-
ing ‘‘January 1, 1997, the sustainable
growth rate for fiscal year 1997’’.
(c) ESTABLISHMENT OF SINGLE CONVERSION FAC-
TOR FOR 1996.—
(1) IN
GENERAL.—Section 1848(d)(1) (42
U.S.C. 1395w–4(d)(1)) is amended—
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(A) by redesignating subparagraph (C) as
subparagraph (D), and
(B) by inserting after subparagraph (B)
the following:
‘‘(C) SPECIAL RULE FOR 1996.—For
1996, the conversion factor under this sub-
section shall be $35.42 for all physicians’
services, except that, for surgical services
(as defined in subsection (j)(i), the conver-
sion factor for 1996 shall be $38.10.’’.
(2) CONFORMING AMENDMENTS.—Section 1848
(42 U.S.C. 1395w–4) is amended—
(A) by striking ‘‘(or factors)’’ each place it
appears 
in 
subsection 
(d)(1)(A) 
and
(d)(1)(D)(ii) (as redesignated by paragraph
(1)(a),
(B) in subsection (d)(1)(A), by striking ‘‘or
updates’’,
(C) in subsection (d)(1)(D)(ii) (as redesig-
nated by paragraph (1)(A)), by striking ‘‘(or
updates)’’, and
(D) in subsection (i)(1)(C), by striking
‘‘conversion factors’’ and inserting ‘‘the conver-
sion factor’’.
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SEC. 11122. PRACTICE EXPENSE RELATIVE VALUE UNITS.
(a) EXTENSION TO 1997.—Section 1848(c)(2)(E)(i)
(42 U.S.C. 1395w–4(c)(2)(E)(i)) is amended—
(1) by striking ‘‘and’’ at the end of subclause
(II),
(2) by striking the period at the end of
subclause (III) and inserting ‘‘, and’’, and
(3) by inserting at the end the following:
‘‘(IV) 1997, by an additional 25 percent of
such excess.’’
(b) CHANGE IN FLOOR ON REDUCTIONS AND SERV-
ICES COVERED.—Clauses (ii) and (iii)(II) of Section
1848(c)(2)(E) (42 U.S.C. 1395w–4(c)(2)(E)) are each
amended by inserting ‘‘(or 115 percent in the case of
1997)’’ after ‘‘128 percent’’.
SEC. 11123. SINGLE FEE FOR SURGERY.
(a) IN
GENERAL.—Section 1848(a) (42 U.S.C.
1395w–4(a)) is amended by adding at the end the follow-
ing:
‘‘(5) SINGLE FEE FOR SURGERY.—
‘‘(A) GENERAL
RULE.—Payment under
this part for surgical services (as defined by the
Secretary under subsection (j)(1)), when a sep-
arate payment is also made for the services of
a physician or physician assistant acting as an
assistant at surgery, may not (except as pro-
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vided in subparagraph (B)), when added to the
separate payment made for the services of that
other practitioner, exceed the amount that
would be paid for the surgical services if a sepa-
rate payment were not made for the services of
that practitioner.
‘‘(B) EXCEPTIONS.—The Secretary may
specify surgery procedures or situations to
which subparagraph (A) shall not apply.’’
(b) 
CONFORMING
AMENDMENT.—Section
1848(g)(2)(D) (42 U.S.C. 1395w–4(g)(2)(D)) is amended
by inserting ‘‘(or the lower amount under subsection
(a)(5))’’ after ‘‘subsection (a)’’.
(c) EFFECTIVE DATE.—The amendments made by
the preceding subsections apply to services furnished on
or after January 1, 1996.
SEC. 11124. INCENTIVES TO CONTROL HIGH VOLUME FOR
IN-HOSPITAL PHYSICIANS’ SERVICES.
(a) IN GENERAL.—
(1) LIMITATIONS DESCRIBED.—Part B of title
XVIII is amended by adding at the end the follow-
ing:
‘‘SEC. 1849. INCENTIVES TO CONTROL HIGH VOLUME FOR
IN-HOSPITAL PHYSICIANS’ SERVICES.
‘‘(a) SERVICES SUBJECT TO REDUCTION.—
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‘‘(1) DETERMINATION
OF
HOSPITAL-SPECIFIC
PER ADMISSION RELATIVE VALUE.—Not later than
October 1 of each year (beginning with 1998), the
Secretary shall determine for each hospital—
‘‘(A) the hospital-specific per admission
relative value under subsection (b)(2) for the
following year, and
‘‘(B) whether such hospital-specific relative
value is projected to exceed the allowable aver-
age per admission relative value applicable to
the hospital for the following year under sub-
section (b)(1).
‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS
EXCEEDING ALLOWABLE AVERAGE PER ADMISSION
RELATIVE
VALUE.—If the Secretary determines
(under paragraph (1)) that a medical staff’s hos-
pital-specific per admission relative value for a year
(beginning with 1999) is projected to exceed the al-
lowable average per admission relative value applica-
ble to the medical staff for the year, the Secretary
shall reduce (in accordance with subsection (c)) the
amount of payment otherwise determined under this
part for each physician’s service furnished during
the year to an inpatient of the hospital by an indi-
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vidual who is a member of the hospital’s medical
staff.
‘‘(3) TIMING OF DETERMINATION; NOTICE TO
MEDICAL STAFFS AND CARRIERS.—Not later than
October 1 of each year (beginning with 1998), the
Secretary shall notify the medical executive commit-
tee of each hospital (as set forth in the Standards
of the Joint Commission on the Accreditation of
Health Organizations) of the determinations made
with respect to the medical staff under paragraph
(1).
‘‘(b) DETERMINATION OF ALLOWABLE AVERAGE PER
ADMISSION RELATIVE VALUE AND HOSPITAL—SPECIFIC
PER ADMISSION RELATIVE VALUES.—
‘‘(1) ALLOWABLE
AVERAGE
PER
ADMISSION
RELATIVE VALUE.—
‘‘(A) URBAN HOSPITALS.—In the case of a
hospital located in an urban area, the allowable
average per admission relative value established
under this subsection for 1999 and 2000 is
equal to 125 percent and for years after 2000
is 120 percent of the median of 1997 hospital-
specific per admission relative values deter-
mined under paragraph (2) for all hospital
medical staffs.
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‘‘(B) RURAL HOSPITALS.—In the case of a
hospital located in a rural area, the allowable
average per admission relative value established
under this subsection for 1999 and each suc-
ceeding year, is equal to 140 percent of the me-
dian of the 1997 hospital-specific per admission
relative values determined under paragraph (2)
for all hospital medical staffs.
‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL-
ATIVE VALUE.—
‘‘(A) IN
GENERAL.—The hospital-specific
per admission relative value projected for a hos-
pital (other than a teaching hospital) for a cal-
endar year, shall be equal to the average per
admission relative value (as determined under
section 1848(c)(2)) for physicians’ services fur-
nished to inpatients of the hospital by the hos-
pital’s medical staff (excluding interns and resi-
dents) during the second year preceding such
calendar year, adjusted for variations in case-
mix and disproportionate share status among
hospitals (as determined by the Secretary under
subparagraph (C)).
‘‘(B) SPECIAL RULE FOR TEACHING HOS-
PITALS.—The hospital-specific relative value
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projected for a teaching hospital in a calendar
year shall be equal to the sum of—
‘‘(i) the average per admission relative
value 
(as 
determined 
under 
section
1848(c)(2)) for physicians’ services fur-
nished to inpatients of the hospital by the
hospital’s medical staff (excluding interns
and residents) during the second year pre-
ceding such calendar year, and
‘‘(ii) the equivalent per admission rel-
ative value (as determined under section
1848(c)(2)) for physicians’ services fur-
nished to inpatients of the hospital by in-
terns and residents of the hospital during
the second year preceding such calendar
year, adjusted for variations in case-mix,
disproportionate share status, and teaching
status among hospitals (as determined by
the Secretary under subparagraph (C)).
The Secretary shall determine such equiva-
lent relative value unit per admission for
interns and residents based on the best
available data and may make such adjust-
ment in the aggregate.
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‘‘(C) ADJUSTMENT
FOR
TEACHING
AND
DISPROPORTIONATE
SHARE
HOSPITALS.—The
Secretary shall adjust the allowable per admis-
sion relative values otherwise determined under
this paragraph to take into account the needs
of teaching hospitals and hospitals receiving ad-
ditional payments under subparagraphs (F) and
(G) of section 1886(d)(5). The adjustment for
teaching status or disproportionate share shall
not be less than zero.
‘‘(c) AMOUNT OF REDUCTION.—The amount of pay-
ment otherwise made under this part for a physician’s
service that is subject to a reduction under subsection (a)
during a year shall be reduced 15 percent, in the case of
a service furnished by a member of the medical staff of
the hospital for which the Secretary determines under sub-
section (a)(1) that the hospital medical staff’s projected
relative value per admission exceeds the allowable average
per admission relative value.
‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON
HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION
WITH ACTUAL RELATIVE VALUES.—
‘‘(1) DETERMINATION
OF
ACTUAL
AVERAGE
PER ADMISSION RELATIVE VALUE.—Not later than
October 1 of each year (beginning with 2000), the
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Secretary shall determine the actual average per ad-
mission relative value (as determined pursuant to
section 1848(c)(2)) for the physicians’ services fur-
nished by members of a hospitals medical staff to in-
patients of the hospital during the previous year, on
the basis of claims for payment for such services
that are submitted to the Secretary not later than
90 days after the last day of such previous year. The
actual average per admission relative value shall be
adjusted by the appropriate case-mix, disproportion-
ate share factor, and teaching factor for the hospital
medical staff (as determined by the Secretary under
subsection (b)(2)(C)). Notwithstanding any other
provision of this title, no payment may be made
under this part for any physician’s service furnished
by a member of a hospital’s medical staff to an inpa-
tient of the hospital during a year unless such claim
is submitted to the Secretary for payment for such
service not later than 90 days after the last day of
the year.
‘‘(2) 
RECONCILIATION
WITH
REDUCTIONS
TAKEN.—In the case of a hospital for which the pay-
ment amounts for physicians’ services furnished by
members of the hospital’s medical staff to inpatients
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of the hospital were reduced under this section for
a year—
‘‘(A) if the actual average per admission
relative value for such hospital’s medical staff
during the year (as determined by the Secretary
under paragraph (1)) did not exceed the allow-
able average per admission relative value appli-
cable to the hospital’s medical staff under sub-
section (b)(1) for the year, the Secretary shall
reimburse the fiduciary agent for the medical
staff by the amount by which payments for
such services were reduced for the year under
subsection (c), including interest at an appro-
priate rate determined by the Secretary;
‘‘(B) if the actual average per admission
relative value for such hospital’s medical staff
during the year exceeded the allowable average
per admission relative value applicable to the
hospital’s medical staff under subsection (a)(1)
for the year, the Secretary shall reimburse the
fiduciary agent for the medical staff the amount
withheld under subsection (c) multiplied by the
‘final ratio’, including interest at an appropriate
rate determined by the Secretary. The final
ratio described in the previous sentence shall be
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determined by dividing the difference between
the initial ratio and 0.85, by 0.15, where the
initial ratio is determined by dividing the medi-
cal staff’s allowable average per admission rel-
ative value for a year (as determined under sub-
section (a)(1)) by the medical staff’s actual hos-
pital-specific per admission relative value for
such year, but in no case shall the initial ratio
be less than 0.85.
‘‘(3) MEDICAL
EXECUTIVE
COMMITTEE
OF
A
HOSPITAL.—Each medical executive committee of a
hospital whose medical staff is projected to exceed
the allowable relative value per admission for a year,
shall have one year from the date of notification that
such medical staff is projected to exceed the allow-
able relative value per admission to designate a fidu-
ciary agent for the medical staff to receive and dis-
burse any appropriate withhold amount made by the
carrier.
‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM-
BERS
OF
STAFF.—At the request of a fiduciary
agent for the medical staff, if the fiduciary agent for
the medical staff is owed the reimbursement de-
scribed in paragraph (2)(B) for excess reductions in
payments during a year, the Secretary shall make
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such reimbursement to the members of the hospital’s
medical staff, on a pro-rata basis according to the
proportion of expenditures for physicians’ services
furnished to inpatients of the hospital during the
year that were furnished by each member of the
medical staff.
‘‘(e) DEFINITIONS.—In this section, the following
definitions apply:
‘‘(1) MEDICAL STAFF.—An individual furnish-
ing a physician’s service is considered to be on the
medical staff of a hospital—
‘‘(A) if (in accordance with requirements
for hospitals established by the Joint Commis-
sion on Accreditation of Health Organiza-
tions)—
‘‘(i) the individual is subject to by-
laws, rules, and regulations established by
the hospital to provide a framework for the
self-governance of medical staff activities,
‘‘(ii) subject to such bylaws, rules, and
regulations, the individual has clinical
privileges granted by the hospital’s govern-
ing body, and
‘‘(iii) under such clinical privileges,
the individual may provide physicians’
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services independently within the scope of
the individual’s clinical privileges, or
‘‘(B) if such physician provides at least one
service to a medicare beneficiary in such hos-
pital.
‘‘(2) RURAL AREA; URBAN AREA.—The terms
‘rural area’ and ‘urban area’ have the meaning given
such terms under section 1886(d)(2)(D).
‘‘(3) TEACHING
HOSPITAL.—The term ‘hos-
pital’ means a hospital which has a teaching pro-
gram approved as specified in section 1861(b)(6).
‘‘(4) HOSPITAL.—The term ‘hospital’ means a
subsection (d) hospital as defined in section 1886(d).
‘‘(5) PHYSICIANS’ SERVICES.—The term ‘physi-
cians’ services’ means those services described in
section 1848(j)(3).
(2) CONFORMING AMENDMENTS.—
(A) 
SECTION
1833
(a).—Section
1833(a)(1)(N) (42 U.S.C. 13951(a)(1)(N)) is
amended by inserting ‘‘(subject to reduction
under section 1849)’’ after ‘‘1848(a)(1)’’.
(B) 
SECTION
1848
(a).—Section
1848(a)(1)(B) (42 U.S.C. 1395w–4(a)(1)(B)) is
amended by striking ‘‘this subsection,’’ and in-
serting ‘‘this subsection and section 1849,’’.
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(b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL
AT
WHICH
SERVICE
FURNISHED.—Section
1848(g)(4)(A)(i) (42 U.S.C. 1395w–4(g)(4)(A)(i)) is
amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene-
ficiary (and, in the case of a service furnished to an inpa-
tient of a hospital, report the hospital identification num-
ber on such claim form),’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made
by subsection (a) apply to services furnished on or
after January 1, 1999.
(2) SUBSECTION (b).—The amendments made
by subsection (b) apply to services furnished on or
after January 1, 1998.
SEC. 11125. AMBULATORY SURGICAL CENTER SERVICE UP-
DATES.
Section 1833(i)(2)(C) (42 U.S.C. 13951(i)(2)(C)) is
amended—
(1) by striking ‘‘1996’’ and inserting ‘‘2003’’,
and
(2) by inserting after the subparagraph des-
ignation ‘‘(C)’’ the following: ‘‘Notwithstanding the
second sentence of subparagraph (A) or the second
sentence of subparagraph (B), with respect to fiscal
years 1996 through 2002, the Secretary shall in-
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crease amounts for facility services by the percent-
age increase in the consumer price index for all
urban consumers (U.S. city average) as estimated by
the Secretary for the 12-month period ending with
the midpoint of the year involved, reduced by two
percentage points.’’
SEC. 11126. OXYGEN AND OXYGEN EQUIPMENT.
(a) IN GENERAL.—Section 1834(a)(9)(C) (42 U.S.C.
1395m(a)(9)(C)) is amended—
(1) by striking ‘‘and’’ at the end of clause (iii),
(2) in clause (iv)—
(A) by striking ‘‘a subsequent year’’ and
inserting ‘‘1993, 1994, and 1995’’, and
(B) by striking the period at the end and
adding ‘‘; and’’, and
(3) by adding at the end the following:
‘‘(v) in each of year beginning with
1996 is the national limited monthly pay-
ment rate computed under subparagraph
(B) for the item for the year reduced by
the applicable percentage described in sub-
paragraph (D) (but in no case may the
amount determined under this clause be
less than 70 percent of such national lim-
ited payment rate).’’.
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(b) APPLICABLE PERCENTAGE DESCRIBED.—Section
1834(a)(9) (42 U.S.C. 1395m(a)(9)) is amended by add-
ing at the end the following:
‘‘(D) 
APPLICABLE
PERCENTAGE
DE-
SCRIBED.—In clause (v) of subparagraph (C),
the ‘applicable percentage’ with respect to a
year described in that clause is—
‘‘(i) for 1996, 20 percent,
‘‘(ii) for 1997, 212⁄3 percent,
‘‘(iii) for 1998, 231⁄3 percent,
‘‘(iv) for 1999, 25 percent,
‘‘(v) for 2000, 262⁄3 percent,
‘‘(vi) for 2001, 281⁄3 percent, and
‘‘(vii) for 2002 and thereafter, 30 per-
cent.’’.
SEC. 11127. PAYMENT LIMITS FOR HMOS AND CMPS WITH
RISK CONTRACTS.
(a) IN GENERAL.—Section 1851F(e)(2)(C) (as added
by subtitle B of this title) is amended—
(1) by inserting ‘‘, subject to adjustment to
take into account the provisions of the succeeding
clauses’’ before the period,
(2) by striking ‘‘The annual’’ and inserting ‘‘(i)
IN GENERAL.—The annual’’, and
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(3) by adding at the end the following new
clauses:
‘‘(ii) CEILING.—The portion of the annual per
capita rate of payment for each such class attrib-
utable to payments made from the Federal Supple-
mentary Medical Insurance Trust Fund may not ex-
ceed 95 percent of the following amount (unless the
portion of the annual per capita rate of payment for
each such class attributable to payments made from
the Federal Hospital Insurance Trust Fund is less
than 95 percent of the weighted national average of
all adjusted average per capita costs determined
under paragraph (4) for that class that are attrib-
utable to payments made from the Federal Hospital
Insurance Trust Fund):
‘‘(I) 1996.—For 1996, 150 percent of the
weighted national average of all adjusted aver-
age per capita costs determined under para-
graph (4) for that class that are attributable to
payments made from such Trust Fund, plus 80
percent of the amount by which (if any) the ad-
justed average per capita cost for that class ex-
ceeds 150 percent of that weighted national av-
erage.
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‘‘(II) 1997.—For 1997, 150 percent of the
weighted national average of all adjusted aver-
age per capita costs determined under para-
graph (4) for that class that are attributable to
payments made from such Trust Fund, plus 60
percent of the amount by which (if any) the ad-
justed average per capita cost for that class ex-
ceeds 150 percent of that weighted national av-
erage.
‘‘(III) 1998.—For 1998, 150 percent of
the weighted national average of all adjusted
average per capta costs determined under para-
graph (4) for that class that are attributable to
payments made from such Trust Fund, plus 40
percent of the amount by which (if any) the ad-
justed average per capita cost for that class ex-
ceeds 150 percent of that weighted national av-
erage.
‘‘(IV) 1999.—For 1999, 150 percent of
the weighted national average of all adjusted
average per capita costs determined under para-
graph (4) for that class that are attributable to
payments made from such Trust Fund, plus 20
percent of the amount by which (if any) the ad-
justed average per capita cost for that class ex-
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ceeds 150 percent of that weighted national av-
erage.
‘‘(V) 2000 AND LATER YEARS.—For 2000
and each succeeding year (subject to the estab-
lishment by the Secretary of alternative limits
under clause (vi)), 150 percent of the weighted
national average of all adjusted average per
capita costs determined under paragraph (4)
for that class that are attributable to payments
made from such Trust Fund.
‘‘(iii) FLOOR.—For 1996 and succeeding years,
the portion of the annual per capita rate of payment
for each such class attributable to payments made
from the Federal Supplementary Medical Insurance
Trust Fund may not be less than 80 percent of 95
percent of the weighted national average of all ad-
justed average per capita costs determined under
paragraph (4) for that class that are attributable to
payments made from such Trust Fund, unless the
portion of the annual per capita rate of payment for
each such class attributable to payments made from
the Federal Hospital Insurance Trust Fund is great-
er than 95 percent of the weighted national average
of all adjusted average per capita costs determined
under paragraph (4) for that class that are attrib-
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utable to payments made from the Federal Hospital
Insurance Trust Fund.
‘‘(iv) FUTURE REVISIONS.—For 2001 and suc-
ceeding years, the Secretary may revise any of the
percentages otherwise applicable during a year under
the preceding clauses (other than clause (i)), but
only if the aggregate payments made under this title
to eligible organizations under risk-sharing contracts
during the year is not greater than the aggregate
payments that would have been made under this title
to such organizations during the year if the Sec-
retary had not revised the percentages.
‘‘(v) DISREGARD
OF
ESRD
COSTS.—For pur-
poses of clauses (ii) and (iii), in determining the
weighted average of all adjusted average per capita
costs determined under paragraph (4) for a class,
the Secretary shall not take into account any costs
associated with individuals entitled to benefits under
this title under section 226A.’’.
(b) CONFORMING AMENDMENT.—Section 1851F(e)
(as added by subtitle B of this title)) is amended by insert-
ing ‘‘, adjusted to take into account the limitations im-
posed by clauses (ii) through (iv) of paragraph (2)(C)’’
before the period.
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SEC. 11128. WAIVE COST-SHARING FOR MAMMOGRAPHY.—
(a) DIAGNOSTIC MAMMOGRAPHY.—Section 1861(s)
(42 U.S.C. 1395x(s)) is amended—
(1) in paragraph (3), by striking ‘‘including di-
agnostic mammography if conducted by a facility
that has a certificate (or provisional certificate) is-
sued under section 354 of the Public Health Service
Act’’,
(2) by striking ‘‘and’’ at the end of paragraph
(15),
(3) by striking the period at the end of para-
graph (16) and inserting ‘‘; and’’, and
(4) by adding at the end the following:
‘‘(17) diagnostic mammography, if conducted
by a facility that has a certificate (or provisional cer-
tificate) issued under section 354 of the Public
Health Service Act.’’.
(b) PAYMENT
FOR SCREENING MAMMOGRAPHY.—
Section 1834(c)(1)(C) (42 U.S.C. 1395m(c)(1)(C)) is
amended by striking ‘‘, subject to the deductible estab-
lished under section 1833(b),’’ and ‘‘80 percent of’’.
(c) WAIVER OF DEDUCTIBLE.—The first sentence of
section 1833(b) (42 U.S.C. 1395l(b)) is amended by—
(1) striking ‘‘and’’ before ‘‘(4)’’, and
(2) inserting the following before the period: ‘‘,
and (5) such deductible shall not apply with respect
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to screening and diagnostic mammography described
in section 1861(s)(13) and section 1861(s)(17).’’
(d) WAIVER OF COINSURANCE.—Section 1833(a)(1)
(42 U.S.C. 1395l(a)(1)) is amended by—
(1) striking ‘‘and’’ at the end of clause (O),
(2) inserting after clause (P) the following: ‘‘,
and
‘‘(Q) with respect to diagnostic mammography
described in section 1861(s)(17), the amount paid
shall be 100 percent of the fee schedule amount pro-
vided under section 1848.’’.
(e) WAIVER OF COINSURANCE IN HOSPITAL OUT-
PATIENT DEPARTMENTS.—The third sentence of section
1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is amended by
inserting after ‘‘1861(s)(10)(A)’’ the following: ‘‘, with re-
spect to items and services described in section
1861(s)(13), with respect to items and services described
in section 1861(s)(17),’’.
(f) EFFECTIVE DATE.—The amendments made by
the preceding subsections apply to services furnished on
or after January 1, 1997.
SEC. 11129. ANNUAL MAMMOGRAMS.
(a) PROVIDING ANNUAL SCREENING MAMMOGRAPHY
FOR WOMEN OVER AGE 49.—Section 1834(c)(2)(A) (42
U.S.C. 1395m) (c)(2)(A)) is amended—
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(1) in clause (iv), by striking ‘‘but under 63
years of age,’’ and
(2) by striking clause (v).
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after
January 1, 1997.
SEC. 11130. COVERAGE OF COLORECTAL SCREENING.
(a) IN GENERAL.—Section 1834 (42 U.S.C. 1395m)
is amended by inserting after subsection (c) the following:
‘‘(d) FREQUENCY
AND
PAYMENT
LIMITS
FOR
SCREENING FECAL-OCCULT BLOOD TESTS, SCREENING
FLEXIBLE
SIGMOIDOSCOPIES
AND
SCREENING
COLONOSCOPY.—
‘‘(1) FREQUENCY
LIMITS
FOR
SCREENING
FECAL-OCCULT BLOOD TESTS.—Subject to revision
by the Secretary under paragraph (4), no payment
may be made under this part for a screening fecal-
occult blood test provided in an individual for the
purpose of early detection of colon cancer if the test
is performed—
‘‘(A) in the case of an individual under 65
years of age, more frequently than is provided
in a periodicity schedule established by the Sec-
retary for purposes of this subparagraph, or
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‘‘(B) in the case of any other individual,
within the 11 months following the month in
which a previous screening fecal-occult blood
test was performed.
‘‘(2) 
SCREENING
FLEXIBLE
SIGMOIDOSCOPIES.—
‘‘(A) PAYMENT AMOUNT.—The Secretary
shall establish a payment amount under section
1848 
with 
respect 
to 
screening 
flexible
sigmoidoscopies provided for the purpose of
early detection of colon cancer that is consistent
with payment amounts under such section for
similar or related services, except that such
payment amount shall be established without
regard to subsection (a)(2)(A) of such section.
‘‘(B) FREQUENCY LIMITS.—Subject to re-
vision by the Secretary under paragraph (4), no
payment may be made under this part for a
screening flexible sigmoidoscopy provided to an
individual for the purpose of early detection of
colon cancer if the procedure is performed—
‘‘(i) in the case of an individual under
65 years of age, more frequently than is
provided in a periodicity schedule estab-
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lished by the Secretary for purposes of this
subparagraph, or
‘‘(ii) in the case of any other individ-
ual, within the 59 months following the
month in which a previous screening flexi-
ble sigmoidoscopy was performed.
‘‘(3) SCREENING COLONOSCOPY FOR INDIVID-
UALS AT HIGH RISK FOR COLORECTAL CANCER.—
‘‘(A) PAYMENT AMOUNT.—The Secretary
shall establish a payment amount under section
1848 with respect to screening colonoscopy for
individuals at high risk for colorectal cancer (as
determined in accordance with criteria estab-
lished by the Secretary) provided for the pur-
pose of early detection of colon cancer that is
consistent with payment amounts under such
section for similar or related services, except
that such payment amount shall be established
without regard to subsection (a)(2)(A) of such
section.
‘‘(B) FREQUENCY LIMIT.—Subject to revi-
sion by the Secretary under paragraph (4), no
payment may be made under this part for a
screening colonoscopy for individuals at high
risk for colorectal cancer provided to an individ-
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ual for the purpose of early detection of colon
cancer if the procedure is performed within the
47 months following the month in which a pre-
vious screening colonoscopy was performed.
‘‘(C) FACTORS
CONSIDERED
IN
ESTAB-
LISHING CRITERIA FOR DETERMINING INDIVID-
UALS AT HIGH RISK.—In establishing criteria
for determining whether an individual is at high
risk for colorectal cancer for purposes of this
paragraph, the Secretary shall take into consid-
eration family history, prior experience of can-
cer, a history of chronic digestive disease condi-
tion, and the presence of any appropriate recog-
nized gene markers for colorectal cancer.
‘‘(4) REVISION OF FREQUENCY.—
‘‘(A) REVIEW.—The Secretary shall review
periodically the appropriate frequency for per-
forming screening fecal-occult blood tests,
screening flexible sigmoidoscopies, and screen-
ing colonoscopy based on age and such other
factors and the Secretary believes to be perti-
nent.
‘‘(B) REVISION OF FREQUENCY.—The Sec-
retary, taking into consideration the review
made under clause (i), may revise from time to
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time the frequency with which such tests and
procedures may be paid for under this sub-
section.’’.
(b) CONFORMING AMENDMENTS.—
(1) SECTION 1833(a).—Paragraphs (1)(D) and
(2)(D) of section 1833(a) (42 U.S.C. 13951(a)) are
each amended by striking ‘‘subsection (h)(1),’’ and
inserting ‘‘subsection (h)(1) or section 1834(d)(1),’’.
(2) SECTION 1848(a)(2)(A).—Clauses (i) and (ii)
of 
section 
1848(a)(2)(A) 
(42 
U.S.C.
13951(a)(2)(A)) are each amended by striking ‘‘a
service’’ and inserting ‘‘a service (other than a
screening flexible sigmoidoscopy provided to an indi-
vidual for the purpose of early detection of colon
cancer or a screening colonoscopy provided to an in-
dividual at high risk for colorectal cancer for the
purpose of early detection of colon cancer)’’.
(3) SECTION
1862(a).—Section 1862(a) (42
U.S.C. 1395y(a)) is amended—
(A) in paragraph (1)—
(i) by striking ‘‘and’’ at the end of
subparagraph (E),
(ii) by striking the semicolon at the
end of subparagraph (F) and inserting
‘‘and’’, and
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(iii) by adding at the end the follow-
ing:
‘‘(G) in the case of screening fecal-occult
blood tests, screening flexible sigmoidoscopies,
and screening colonoscopy provided for the pur-
pose of early detection of colon cancer, which
are performed more frequently than is covered
under section 1834(d);’’, and
(B) in paragraph (7), by striking ‘‘para-
graph (1)(B) or under paragraph (1)(F)’’ and
inserting ‘‘subparagraphs (B), (F), or (G) of
paragraph (1)’’.
(c) EFFECTIVE DATE.—The amendments made by
the preceding subsections apply to services furnished on
or after January 1, 1996.
SEC. 11131. PAYMENTS FOR VACCINES AND VACCINE AD-
MINISTRATION.
(a) PAYMENT AMOUNTS FOR THE ADMINISTRATION
OF CERTAIN VACCINES.—
(1) IN GENERAL.—Section 1833(k) (42 U.S.C.
13951(k)) is amended to read as follows:
‘‘(k) PAYMENT AMOUNT FOR CERTAIN VACCINES.—
‘‘(1) IN
GENERAL.—The payment amount
under this part for the administration of a vaccine
described in section 1861(s)(10) shall be equal to—
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‘‘(A)(i) for a vaccine administered in 1996
not in connection with the furnishing of another
service, $9.00, and
‘‘(ii) for a vaccine administered in 1996 in
connection with the furnishing of another serv-
ice, $4.00, and
‘‘(B) for a vaccine administered in any
subsequent year, the amount determined under
subparagraph (A), or under this subparagraph,
for the previous year, increased by the update
under section 1848(d)(3) for that subsequent
year for physicians’ services (described in sec-
tion 1848(d)(3)(A)(ii)(I)).
‘‘(2) CROSS REFERENCE.—For a limitation on
actual charges for items and services described in
section 1861(s)(10), see paragraphs (1) and (2) of
section 1848(g).’’.
(2) CONFORMING
AMENDMENT
TO
SECTION
1832(a)(1).—Section 
1832(a)(1) 
(42 
U.S.C.
1395k(a)(1)) is amended by striking ‘‘and (D)’’ and
inserting ‘‘, (D), and (K)’’.
(3) CONFORMING
AMENDMENTS
TO
SECTION
1832(a)(2).—Section 
1832(a)(2) 
(42 
U.S.C.
1395k(a)(2)) is amended—
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(A) in subparagraph (B), by striking ‘‘de-
scribed in subparagraph (G) or subparagraph
(I)’’ and inserting ‘‘or services described in sub-
paragraph (G), (I), or (K)’’,
(B) in subparagraph (D), by inserting be-
fore the semicolon the following: ‘‘, other than,
in either case, services described in subpara-
graph (K)’’,
(C) in subparagraph (H), by inserting be-
fore the semicolon the following: ‘‘, other than
services described in subparagraph (K)’’,
(D) in subparagraph (I), by striking the
final ‘‘and’’,
(E) in subparagraph (J), by striking the
period and adding ‘‘; and’’, and
(F) by adding at the end the following:
‘‘(K) administration of vaccines by provid-
ers of services, or as rural health clinic or Fed-
erally qualified health center services.’’.
(4) CONFORMING
AMENDMENTS
TO
SECTION
1833(a)(1).—Section 
1833(a)(1)(B) 
(42 
U.S.C.
13951(a)(1)(B)) is amended—
(A) by striking ‘‘items and services de-
scribed’’ and inserting ‘‘vaccines listed’’, and
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(B) by inserting at the end the following:
‘‘and, with respect to the administration of
those vaccines, the amounts described in sub-
section (k)(1),’’
(5) CONFORMING
AMENDMENTS
TO
SECTION
1833(a)(2).—Section 
1833(a)(2) 
(42 
U.S.C.
13951(a)(2)) is amended—
(A) in the matter preceding subparagraph
(A), by striking ‘‘and (I)’’ and inserting ‘‘, (I),
and (K)’’, and
(B) in the matter in subparagraph (A) pre-
ceding clause (i), by striking ‘‘items and serv-
ices described’’ and inserting ‘‘vaccines listed’’.
(6) CONFORMING
AMENDMENT
TO
SECTION
1833(a)(3).—Section 
1833(a)(3) 
(42 
U.S.C.
13951(a)(3)) is amended by striking ‘‘items and
services described’’ and inserting ‘‘vaccines listed’’.
(7) CONFORMING
AMENDMENTS
TO
SECTION
1833(a)(6).—Section 
1833(a)(6) 
(42 
U.S.C.
13951(a)(6)) is amended—
(A) by inserting ‘‘other than services de-
scribed in section 1832(a)(2)(K)’’ after ‘‘serv-
ices’’, and
(B) by striking ‘‘and’’.
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(8) CONFORMING
AMENDMENT
TO
SECTION
1833(a)(7).—Section 
1833(a)(7) 
(42 
U.S.C.
13951(a)(7)) is amended by striking the period and
adding at the end ‘‘; and’’.
(9) CROSS REFERENCE.—Section 1833(a) (42
U.S.C. 13951(a)) is amended by adding at the end
the following:
‘‘(8) in the case of services described in section
1832(a)(2)(k), the amount described in subsection
(k)(1).’’.
(10) CONFORMING
AMENDMENT
TO
SECTION
1834(g).—Section 
1834(g)(2) 
(42 
U.S.C.
1395m(g)(2)) is amended by inserting ‘‘(other than
services described in section 1832(a)(2)(K))’’ after
‘‘hospital services’’.
(11) CONFORMING AMENDMENTS TO SECTION
1842(b).—
(A) 
INITIAL
MATTER
IN
PARAGRAPH
(3)(b).—The matter in section 1842(b)(3)(B)
(42 U.S.C. 1395u(b)(3)(B)) preceding clause
(i) is amended by inserting ‘‘, where payment
under this part for a service is on a basis other
than a cost basis,’’ after ‘‘carrier, and’’.
(B) 
PARAGRAPH
(3)(b)(ii).—Section
1842(b)(3)(B)(ii)(I) 
(42 
U.S.C.
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1395u(b)(3)(B)(ii)(I)) is amended by inserting
‘‘(or other payment basis)’’ after ‘‘reasonable
charge’’.
(12) CONFORMING AMENDMENTS TO SECTION
1848(g).—
(A) PARAGRAPH (1).—The first sentence
of section 1848(g)(1) (42 U.S.C. 1395w–
4(g)(1)) is amended by inserting ‘‘or items and
services described in section 1861(s)(10)’’ after
‘‘January 1, 1991)’’.
(B) 
PARAGRAPH
(2).—Section
1848(g)(2)(C) (42 U.S.C. 1395w–4(g)(2)(C)) is
amended by adding at the end the following:
‘‘For items and services described in section
1861(s)(10) furnished in a year after 1994, the
‘limiting charge’ shall be 115 percent of the ap-
plicable 
amount 
described 
in 
section
1833(k)(1).’’.
(b) ELIMINATION OF COINSURANCE AND DEDUCT-
IBLE
FOR
HEPATITIS
B 
VACCINE.—Section
1833(a)(1)(B) (42 U.S.C. 13951(a)(1)(B)), the matter in
subparagraph (A) of section 1833(a)(2) (42 U.S.C.
13951(a)(2)) preceding clause (i), section 1833(a)(3) (42
U.S.C. 13951(a)(3)), paragraph (1) of the first sentence
of section 1833(b) (42 U.S.C. 13951(b)), and the third
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sentence 
of 
section 
1866(a)(2)(A) 
(42 
U.S.C.
1395cc(a)(2)(A)) 
are 
each 
amended 
by 
striking
‘‘1861(s)(10)(A)’’ and inserting ‘‘1861(s)(10)’’.
(c) REPEAL OF OBSOLETE PROVISIONS.—
(1) 
SOCIAL
SECURITY
ACT.—Section
1861(s)(10)(A) (42 U.S.C. 1395x(s)(10)(A)) is
amended by striking ‘‘, subject to section 4071(b) of
the Omnibus Reconciliation Act of 1987,’’.
(2) OBRA–1987.—Section 4071(b) of the Om-
nibus Budget Reconciliation Act of 1987 is repealed.
PART 3—PROVISIONS RELATING TO PARTS A
AND B
SEC. 11141. CENTERS OF EXCELLENCE.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1888 the following:
‘‘SEC. 1889. CENTERS OF EXCELLENCE.
‘‘(a) IN GENERAL.—The Secretary shall use a com-
petitive process to contract with centers of excellence for
cataract surgery, coronary artery by-pass surgery, and
such other services as the Secretary determines to be ap-
propriate. Payment under this title shall be made for serv-
ices subject to such contracts on the basis of negotiated
or all-inclusive rates as follows:
‘‘(1) COVERAGE OF URBAN AREA.—The center
shall cover services provided in an urban area (as
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defined in section 1886(d)(2)(D)) for years begin-
ning with fiscal year 1996.
‘‘(2) SAVINGS REQUIRED.—The amount of pay-
ment made by the Secretary to the center under this
title for services covered under the project shall be
less than the aggregate amount of the payments
that the Secretary would have made to the center for
such services had the project not been in effect.
‘‘(3) TYPES OF SERVICES.—The Secretary shall
make payments to the center on such a basis for the
following services furnished to individuals entitled to
benefits under this title:
‘‘(A) Facility, professional, and related
services relating to cataract surgery.
‘‘(B) Coronary artery bypass surgery and
related services.
‘‘(C) Such other services as the Secretary
and the center may agree to cover under the
agreement.
‘‘(b) REBATE OF PORTION OF SAVINGS.—In the case
of any services furnished by a center under subsection (a),
the Secretary shall make a payment to each individual to
whom such services are furnished at such time and in such
manner as the Secretary may provide, in an amount equal
to 10 percent of the amount by which—
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‘‘(1) the amount of payment that would have
been made by the Secretary under this title to the
center for such services if the services had not been
provided at the center, exceeds
‘‘(2) the amount of payment made by the Sec-
retary under this title to the center for such serv-
ices.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to services furnished on or after Octo-
ber 1, 1996.
SEC. 11142. MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR HOME HEALTH SERVICES.
(a) BASING UPDATES TO PER VISIT COST LIMITS ON
LIMITS
FOR
FISCAL
YEAR
1993.—Section
1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is
amended by adding at the end the following sentence: ‘‘In
establishing limits under this subparagraph, the Secretary
may not take into account any changes in the costs of
the provision of services furnished by home health agencies
with respect to cost reporting periods which began on or
after July 1, 1994, and before July 1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMEND-
MENT.—The Secretary of Health and Human Services
shall not consider the amendment made by subsection (a)
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home health agencies for cost reporting pe-
riods beginning on or after October 1,
1996, but before October 1, 1999, the Sec-
retary shall provide for an interim system
of limits. Payment shall be the lower of—
‘‘(I) costs determined under the
preceding provisions of this subpara-
graph, or
‘‘(II) an agency-specific per bene-
ficiary annual limitation calculated
from the agency’s 12-month cost re-
porting period ending on or after Jan-
uary 1, 1994, and on or before De-
cember 31, 1994, based on reasonable
costs (including nonroutine medical
supplies), updated by the home health
market basket index. The per bene-
ficiary limitation shall be multiplied
by the agency’s unduplicated census
count of patients (entitled to benefits
under this title) for the year subject
to the limitation to determine the ag-
gregate agency specific per beneficiary
limitation.
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‘‘(v) SPECIAL
RULES.—For services
furnished by home health agencies for cost
reporting periods beginning on or after Oc-
tober 1, 1996, the following rules shall
apply:
‘‘(I) For new providers and those
providers without a 12-month cost re-
porting period ending in calendar year
1994, the per beneficiary limitation
shall be equal to the mean of these
limits (or the Secretary’s best esti-
mates thereof) applied to home health
agencies as determined by the Sec-
retary. Home health agencies that
have altered their corporate structure
or name shall not be considered new
provides for payment purposes.
‘‘(II) For beneficiaries who use
services furnished by more than one
home health agency, the per bene-
ficiary limitations shall be prorated
among agencies.
‘‘(vi) 
BONUS
PAYMENTS.—Home
health agencies whose cost or utilization
experience is below 125 percent of the
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mean national or census region aggregate
per beneficiary cost or utilization experi-
ence for 1994, or best estimates thereof,
and whose year-end reasonable costs are
below the agency-specific per beneficiary
limitation, shall receive payments equal to
50 percent of the difference between the
agency’s reasonable costs and its limit for
fiscal years 1997, 1998, and 1999. Such
payments may not exceed 5 percent of
such agency’s aggregate Medicare reason-
able cost in a year.
‘‘(vii) MODIFICATIONS FOR REGIONAL
OR
NATIONAL
VARIATIONS
IN
UTILIZA-
TION.—Effective January 1, 1997, or as
soon as feasible, the Secretary shall modify
the agency-specific per beneficiary annual
limitation described in clause (iv) to pro-
vide for regional or national variations in
utilization. For purposes of determining
payment under clause (iv), the limit shall
be calculated through a blend of 75 per-
cent of the agency-specific cost or utiliza-
tion experience in 1994 with 25 percent of
the national or census region cost or utili-
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zation experience in 1994, or the Sec-
retary’s best estimates thereof.’’.
(d) USE OF INTERIM FINAL REGULATIONS.—The
Secretary shall implement the payment limits described in
section 1861(v)(1)(L)(iv) of the Social Security Act by
publishing in the Federal Register a notice of interim final
payment limits by August 1, 1996, and allowing for a pe-
riod of public comment thereon. Payments subject to these
limits will be effective for cost reporting periods beginning
on or after October 1, 1996, without the necessity for con-
sideration of comments received, but the Secretary shall,
by Federal Register notice, affirm or modify the limits
after considering those comments.
(e) DEVELOPMENT OF CASE MIX SYSTEM.—The Sec-
retary shall expand research on a prospective payment sys-
tem for home health agencies that shall tie prospective
payments to an episode of care, including an intensive ef-
fort to develop a reliable case mix adjuster that explains
a significant amount of the variances in costs.
(f) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—
Effective for cost reporting periods beginning on or after
October 1, 1998, the Secretary may require all home
health agencies to submit such additional information as
the Secretary deems necessary for the development of a
reliable case mix system.
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SEC. 11144. PROSPECTIVE PAYMENT FOR HOME HEALTH
SERVICES.
Title XVIII is amended by adding at the end the fol-
lowing:
‘‘SEC. 1893. PROSPECTIVE PAYMENT FOR HOME HEALTH
SERVICES.
‘‘(a) 
IN
GENERAL.—Notwithstanding 
section
1861(v), the Secretary shall, for cost reporting periods be-
ginning on or after October 1, 1999, provide for payments
for home health services in accordance with a prospective
payment system, which pays home health agencies on a
per episode basis, established by the Secretary.
‘‘(b) ELEMENTS OF SYSTEM.—Such a system shall
include the following:
‘‘(1) BASED ON A PER EPISODE AMOUNT.—All
services covered and paid on a reasonable cost basis
under the medicare home health benefit as of the
date of the enactment of the Balanced Budget Act
of 1995 for Economic Growth and Fairness, includ-
ing medical supplies, shall be subject to the per epi-
sode amount. In defining an episode of care, the
Secretary shall consider an appropriate length of
time for an episode, the use of services, and the
number of visits provided within an episode, poten-
tial changes in the mix of services provided within
an episode and their cost, and a general system de-
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sign that will provide for continued access to quality
services. The per episode amount shall be based on
the most current audited cost report data available
to the Secretary
‘‘(2) USE OF CASE MIX.—The Secretary shall
employ an appropriate case mix adjustment that ex-
plains a significant amount of the variation in cost.
‘‘(3) ANNUAL
ADJUSTMENTS.—The episode
payment amount shall be adjusted annually by the
home health market basket index. The labor portion
of the episode amount shall be adjusted for geo-
graphic differences in labor-related costs based on
the most current hospital wage index.
‘‘(4) OUTLIERS.—The Secretary may designate
a payment provision for outliers, recognizing the
need to adjust payments due to unusual variations
in the type or amount of medically necessary care.
‘‘(5) COORDINATION BY HOME HEALTH AGEN-
CY.—A home health agency shall be responsible for
coordinating all care for a beneficiary. If a bene-
ficiary elects to transfer to, or receive services from,
another home health agency within an episode pe-
riod, the episode payment shall be prorated between
home health agencies.
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‘‘(c) SAVINGS.—Prior to implementing the prospec-
tive system described in subsections (a) and (b) in a budg-
et neutral fashion, the Secretary shall first reduce, by 15
percent, the cost limits, per beneficiary limits, and actual
costs, described in section 1861(v)(1)(L)(iv), as such lim-
its are in effect on September 30, 1999.’’.
SEC. 11145. PAYMENT BASED ON LOCATION WHERE HOME
HEALTH SERVICE IS FURNISHED.
(a) CONDITIONS OF PARTICIPATION.—Section 1891
(42 U.S.C. 1395bbb) is amended by adding at the end
the following:
‘‘(g) PAYMENT ON BASIS OF LOCATION OF SERV-
ICE.—A home health agency shall submit claims for pay-
ment of home health services under this title only on the
basis of the geographic location at which the service is fur-
nished, as determined by the Secretary.’’.
(b) WAGE ADJUSTMENT.—Section 1861(v)(1)(L)(iii)
(42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking
‘‘agency is located’’ and inserting ‘‘service is furnished’’.
(c) EFFECTIVE DATE.—The amendments made by
previous subsections apply to services furnished on or after
October 1, 1996.
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SEC. 11146. ELIMINATION OF PERIODIC INTERIM PAY-
MENTS FOR HOME HEALTH AGENCIES.
(a) IN GENERAL.—Section 1815(e)(2) (42 U.S.C.
1395g(e)(2)) is amended—
(1) by inserting ‘‘and’’ at the end of subpara-
graph (C),
(2) by striking subparagraph (D), and
(3) by redesignating subparagraph (E) as (D).
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to payments made on or after October
1, 1999.
SEC. 11147. ESTABLISHMENT OF POST-HOSPITAL HOME
HEALTH 
BENEFIT 
UNDER 
PART 
A 
AND
TRANSFER OF OTHER HOME HEALTH SERV-
ICES TO PART B.
(a) IN GENERAL.—Section 1812(a)(3) (42 U.S.C.
1395d(a)(3)) is amended—
(1) by inserting ‘‘post-hospital’’ before ‘‘home
health services’’, and
(2) by inserting ‘‘for up to 100 visits during
any spell of illness (or, in the case of an individual
who is not enrolled in the insurance program estab-
lished by part B, home health services)’’ before the
semicolon.
(b) POST-HOSPITAL HOME HEALTH SERVICES.—
Section 1861 (42 U.S.C. 1395x), as amended by section
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11118, is further amended by adding at the end the fol-
lowing:
‘‘(pp) POST-HOSPITAL HOME HEALTH SERVICES.—
The term ‘post-hospital home health services’ means home
health services furnished to an individual under a plan of
treatment established when the individual was an inpa-
tient of a hospital or rural primary care hospital for not
less than 3 consecutive days before discharge, if home
health services are initiated for such individual within 30
days after discharge from the hospital or rural primary
care hospital.’’.
(c) CONFORMING AMENDMENTS.—Section 1812(b)
(42 U.S.C. 1395d(b)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(2);
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘; or’’, and
(3) by adding at the end the following:
‘‘(4) post-hospital home health services fur-
nished to the individual during such spell of illness
after such services had been furnished to the individ-
ual for 100 visits during such spell.’’.
(d) CLARIFICATION OF PART-TIME OR INTERMIT-
TENT NURSING CARE.—Section 1861(m) (42 U.S.C.
1395x(m)) is amended by adding at the end the following:
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‘‘For purposes of paragraphs (1) and (4), the term ‘part-
time or intermittent services’ means skilled nursing and
home health aide services furnished any number of days
per week as long as they are furnished (combined) less
than 8 hours each day and 28 or less hours each week
(or, subject to review on a case-by-case basis as to the
need for care, less than 8 hours each day and 35 or less
hours per week). For purposes of sections 1814(a)(2)(C)
and 1835(a)(2)(A), ‘intermittent’ means skilled nursing
care that is either provided or needed on fewer than 7
days each week, or less than 8 hours or each day of skilled
nursing and home health services combined for periods of
21 days or less (with extensions in exceptional cir-
cumstances when the need for additional care is finite and
predictable).’’.
(e) PAYMENTS UNDER PART B.—Subparagraph (A)
of section 1833(a)(2) (42 U.S.C. 13951(a)(2)) is amended
to read as follows:
‘‘(A) with respect to home health services
(other than a covered osteoporosis drug (as de-
fined in section 1861(kk)), and to items and
services described in section 1861(s)(10)(A),
the 
amounts 
determined 
under 
section
1861(v)(1)(L) or section 1893, or, if such serv-
ices are furnished by a public provider of serv-
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ices, or by another provider which demonstrates
to the satisfaction of the Secretary that a sig-
nificant portion of its patients are low-income
(and requests that payment be made under this
provision), free of charge or at nominal charges
to the public, the amount determined in accord-
ance with section 1814(b)(2);’’.
(f) EXCLUSION
OF ADDITIONAL PART B COSTS
FROM DETERMINATION
OF PART B MONTHLY PRE-
MIUM.—Section 1839(a) (42 U.S.C. 1395r(a)) is amend-
ed—
(A) in the second sentence of paragraph (1), by
inserting ‘‘(except as provided in paragraph (5))’’
before the period, and
(B) by adding at the end the following:
‘‘(5) EXCLUSION OF HOME HEALTH COSTS.—In es-
timating the benefits and administrative costs which will
be payable from the Federal Supplementary Medical In-
surance Trust Fund for a year (beginning with 1997), the
Secretary shall exclude an estimate of any benefits and
administrative costs attributable to home health services
for which payment would have been made under part A
during the year but for paragraph (4) of section 1812(b),
or home health services furnished under part A that are
not post-hospital home health services.’’
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(g) PAYMENTS FROM SUPPLEMENTARY MEDICAL IN-
SURANCE TRUST FUND FOR CERTAIN HOME HEALTH
SERVICES FURNISHED UNDER PART A.—Section 1815(a)
(42 U.S.C. 1395g(a)) is amended by inserting after
‘‘Trust Fund’’ the following: ‘‘or in the case of home
health services that are not post-hospital home health
services, from the Federal Supplementary Medical Insur-
ance Trust Fund)’’.
(h) EFFECTIVE DATE.—The amendments made by
the preceding subsections apply to spells of illness begin-
ning on or after October 1, 1996.
SEC. 11148. PERMANENT EXTENSION OF CERTAIN SECOND-
ARY PAYER PROVISIONS.
(a) WORKING DISABLED.—Section 1862(b)(1)(B) is
amended by striking clause (iii).
(b) INDIVIDUAL WITH END STAGE RENAL DIS-
EASE.—Section 1862(b)(1)(C) is amended—
(1) in the first sentence, by striking ‘‘12-
month’’ each place it occurs and inserting ‘‘18-
month’’, and
(2) by striking the second sentence.
(c) IRS-SSA-HCFA DATA MATCH.—
(1) 
SOCIAL
SECURITY
ACT.—Section
1862(b)(5)(C) is amended by striking clause (iii).
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(2) 
INTERNAL
REVENUE
CODE.—Section
6103(l)(12) of the Internal Revenue Code of 1986 is
amended by striking subparagraph (F).
PART 4—MEDICARE PART B PREMIUM
SEC. 11161. PART B PREMIUM.
(a) IN GENERAL.—The first and second sentences of
section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended
to read as follows: ‘‘The Secretary shall, during September
of each year, determine and promulgate a monthly pre-
mium rate for the succeeding calendar year. That monthly
premium rate shall be equal to 50 percent of the monthly
actuarial rate for enrollees age 65 and over, determined
according to paragraph (1), for that succeeding calendar
year.’’.
(b) CONFORMING AND TECHNICAL AMENDMENTS.—
Section 1839 (42 U.S.C. 1395r) is amended—
(1) in subsection (a)(2), by striking ‘‘(b) and
(e)’’ and inserting ‘‘(b), (c), and (f)’’,
(2) in the third sentence of subsection (a)(3)—
(A) by inserting ‘‘rate’’ after ‘‘premium’’,
and
(B) by striking ‘‘and the derivation of the
dollar amounts specified in this paragraph’’,
(3) by striking subsection (e), and
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(4) by redesignating subsection (g) and (e) and
inserting that subsection after subsection (d).
(c) EFFECTIVE DATE.—The amendments made by
the preceding subsections apply to premiums for months
after December 1995.
Subtitle B—Expanded Medicare
Choice
SEC. 11201. EXPANDED CHOICE UNDER MEDICARE.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.) is amended by inserting after section 1804 the fol-
lowing:
‘‘OPTION TO ENROLL IN MANAGED CARE PLANS
‘‘SEC. 1805. Every individual entitled to benefits
under part A and enrolled under part B or enrolled under
part B only shall be eligible to enroll under part C with
any eligible organization with which the Secretary has en-
tered into a contract under part C and which serves the
geographic area in which the individual resides.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to enrollments whose periods begin
after 1996.
SEC. 11202. BROADER CHOICE AMONG MANAGED CARE OR-
GANIZATIONS.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.) is amended—
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(1) by redesignating part C (42 U.S.C. 1395x
et seq.) as part D, and
(2) by inserting after part B (42 U.S.C. 1395j
et seq.) the following:
‘‘PART C—MANAGED CARE ORGANIZATIONS
‘‘SEC. 1851A. TYPES OF MANAGED CARE ORGANIZATIONS.
‘‘(a) ELIGIBLE ORGANIZATIONS.—For purposes of
this part, the term ‘eligible organization’ means a public
or private entity, organized under the laws of any State,
that is—
‘‘(1) a qualified health maintenance organiza-
tion (QHMO),
‘‘(2) a competitive medical plan (CMP),
‘‘(3) a preferred provider organization (PPO),
or
‘‘(4) a provider sponsored organization (PSO).
‘‘(b) QUALIFIED HEALTH MAINTENANCE ORGANIZA-
TION
(QHMO).—For purposes of this part, the term
‘qualified health maintenance organization’ means such as
organization (as defined in section 1310(d) of the Public
Health Service Act) that meets the requirements of sub-
paragraphs (B) and (E) of subsection (c)(1).
‘‘(c) COMPETITIVE MEDICAL PLAN (CMP).—
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‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘competitive medical plan’ means an entity
that meets the following requirements:
‘‘(A) MINIMUM
SERVICES
TO
ALL
MEM-
BERS.—The entity provides to enrolled mem-
bers at least the following health care services:
‘‘(i) Physicians’ services performed by
physicians 
(as 
defined 
in 
section
1861(r)(1)).
‘‘(ii) Inpatient hospital services.
‘‘(iii) Laboratory, X-ray, emergency,
and preventive services.
‘‘(iv) Out-of-area coverage.
‘‘(B) PROVISION
OF
PHYSICIANS’ SERV-
ICES.—The entity provides physicians’ services
primarily (i) directly through physicians who
are either employees or partners of such organi-
zation, or (ii) through contracts with individual
physicians or one or more groups of physicians
(organized on a group practice or individual
practice basis).
‘‘(C) COMPENSATION
ON
PREPAID
RISK
BASIS.—The entity is compensated (except for
deductibles, coinsurance, and copayments) for
the provision of health care services to enrolled
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members by a payment which is paid on a peri-
odic basis without regard to the date the health
care services are provided and which is fixed
without regard to the frequency, extent, or kind
of health care service actually provided to a
member.
‘‘(D) ASSUMPTION OF RISK.—The entity
assumes full financial risk on a prospective
basis for the provision of the health care serv-
ices listed in subparagraph (A), except that
such entity may—
‘‘(i) obtain insurance or make other
arrangements for the cost of providing to
any enrolled member health care services
listed in subparagraph (A) the aggregate
value of which exceeds $5,000 in any year,
‘‘(ii) obtain insurance or make other
arrangements for the cost of health care
services listed in subparagraph (A) pro-
vided to its enrolled members other than
through the entity because medical neces-
sity required their provision before they
could be secured through the entity,
‘‘(iii) obtain insurance or make other
arrangements for not more than 90 per-
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cent of the amount by which its costs for
any of its fiscal years exceed 115 percent
of its income for such fiscal year, and
‘‘(iv) make arrangements with physi-
cians or other health professionals, health
care institutions, or any combination of
such individuals or institutions to assume
all or part of the financial risk on a pro-
spective basis for the provision of basic
health services by the physicians or other
health professionals or through the institu-
tions.
‘‘(E) 
FISCAL
SOUNDNESS; 
PROVISION
AGAINST
INSOLVENCY.—The 
entity 
meets
standards for fiscal soundness (including stand-
ards for provision against the risk of insol-
vency) applicable to Federally qualified health
maintenance organizations under title XIII of
the Public Health Service Act.
‘‘(2) 
EXCEPTION
FOR
CERTAIN
GRAND-
FATHERED CONTRACTS.—Paragraph (1)(A)(ii) shall
not apply to an entity which had contracted with a
single State agency administering a State plan ap-
proved under title XIX for the provision of services
(other than inpatient hospital services) to individuals
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eligible for such services under such State plan on
a prepaid risk basis prior to 1970.
‘‘(d) 
PREFERRED
PROVIDER
ORGANIZATION
(PPO).—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘preferred provider organization’ means an
entity that meets the following requirements:
‘‘(A) MINIMUM
SERVICES
TO
ALL
MEM-
BERS.—The entity provides at least physicians’
services performed by physicians (as defined in
section 1861(r)(1)).
‘‘(B) PROVISION OF PHYSICIAN SERVICES;
FISCAL SOUNDNESS.—The entity meets the re-
quirements of subparagraphs (B) and (E) of
subsection (c)(1).
‘‘(C) ASSUMPTION
OF
RISK.—The entity
meets the requirements of subsection (c)(1)(D)
with respect to members enrolled with the orga-
nization under this part.
‘‘(2) DETERMINATION
OF
PRIVATE
MEMBER-
SHIP.—In applying the provisions of sections
1851E(g) and 1851F(e)(1)(B)(i) and (f)(1)(B)(i)
(concerning minimum private enrollment) to an or-
ganization that meets the requirements of paragraph
(1), individuals for whom the organization has as-
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sumed substantial financial risk shall be considered
to be members of the organization.
‘‘(e) 
PROVIDER
SPONSORED
ORGANIZATION
(PSO).—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘provider sponsored organization’ means an
entity that meets the following requirements:
‘‘(A) TYPE OF ENTITY.—The entity is a
hospital, a group of affiliated hospitals, or an
affiliated group consisting of a hospital or hos-
pitals and physicians (as defined in section
1861(r)(1)).
‘‘(B) MINIMUM SERVICES
TO
ALL
MEM-
BERS.—The entity provides at least physicians’
services performed by physicians (as defined in
section 1861(r)(1)) and inpatient hospital serv-
ices.
‘‘(C) DIRECT PROVISION OF SERVICES.—
The entity provides directly a substantial por-
tion of the services covered under this title (as
determined by the Secretary, which may vary
for rural or under served areas).
‘‘(D) ASSUMPTION OF RISK.—The entity
meets the requirements of subsection (c)(1)(D)
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with respect to members enrolled with the orga-
nization under this part.
‘‘(E) 
FISCAL
SOUNDNESS; 
PROVISION
AGAINST
INSOLVENCY.—The entity meets re-
quirements for fiscal soundness and provision
against insolvency developed by the Secretary.
‘‘(2) DETERMINATION
OF
PRIVATE
MEMBER-
SHIP.—In applying the provisions of sections
1851E(g) and 1851F(e)(1)(B)(i) and (f)(1)(B)(i)
(concerning minimum private enrollment) to an or-
ganization that meets the requirements of paragraph
(1), individuals for whom the organization has as-
sumed substantial financial risk shall be considered
to be members of the organization.
‘‘(3) LIMITED PREEMPTION OF STATE LAW.—
Except as otherwise provided in the next sentence,
an organization that meets the requirements of
paragraph (1) may provide health benefits to indi-
viduals enrolled with the organization under this
part without regard to any State law that imposes
requirements different from those under paragraph
(1)(E)) (concerning fiscal soundness and provision
against insolvency), or that imposes requirements (in
other respects) that differ from those imposed on
other organizations which provide health care bene-
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which the request is made for such termi-
nation;
‘‘(ii) as of the date determined in ac-
cordance with regulations, in the case of fi-
nancial insolvency of the organization; and
‘‘(iii) retroactively to the date of en-
rollment, in such special circumstances as
the Secretary may designate.
‘‘(b) INFORMATION CONCERNING ENROLLMENT.—
‘‘(1) 
STANDARDIZED
COMPARATIVE
MATE-
RIALS.—The Secretary shall develop and distribute
standardized comparative materials about eligible or-
ganizations and medicare supplemental policies (as
defined in section 1882(g)(1)) to enable individuals
to compare benefits, costs, and quality indicators.
‘‘(2) COST-SHARING BY PARTICIPATING ORGANI-
ZATIONS.—Each eligible organization with a con-
tract under this part shall pay the Secretary for its
pro rata share (as determined by the Secretary) of
the estimated costs to be incurred by the Secretary
in carrying out the requirements of the preceding
sentence, the first sentence of subsection (a)(1), and
section 4360 of the Omnibus Reconciliation Act of
1990. Those payments are appropriated to defray
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the costs described in the preceding sentence, to re-
main available until expended.
‘‘(2) REVIEW OF MARKETING MATERIALS.—The
Secretary may prescribe the procedures and condi-
tions under which an eligible organization that has
entered into a contract with the Secretary under this
subsection may furnish information about the orga-
nization to enrollees and individuals eligible to enroll
under this part. No brochures, application forms, or
other promotional or informational material may be
distributed by an organization to (or for the use of)
such individuals unless at least 45 days before its
distribution, the organization has submitted the ma-
terial to the Secretary for review, and the Secretary
has not disapproved the distribution of the material.
The Secretary shall review all such material submit-
ted and shall disapprove such material if the Sec-
retary determines, in the Secretary’s discretion, that
the material is materially inaccurate or misleading
or otherwise makes a material misrepresentation.
‘‘(c) PERIODS OF ENROLLMENT.—
‘‘(1) STANDARD
ENROLLMENT
OPPORTUNI-
TIES.—Subject to the provisions of this section, an
organization with a contract under this part shall
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permit enrollment under this part by any individ-
ual—
‘‘(A) during the month of each year speci-
fied by the Secretary for all eligible organiza-
tions;
‘‘(B) during the individual’s initial enroll-
ment period in the program under part B (as
described in section 1837(d));
‘‘(C) during a special enrollment period in
the program under part B (for individuals for-
merly electing employment-based coverage) de-
scribed in section 1837(i)(3); and
‘‘(D) during the 90-day period beginning
30 days before the date the individual takes up
residence in the service area of the organiza-
tion.
‘‘(2) SPECIAL ENROLLMENT PERIOD FOR INDI-
VIDUALS LOSING COVERAGE BY ANOTHER ORGANIZA-
TION.—
‘‘(A) IN GENERAL.—Subject to other pro-
visions of this section, if a contract with an or-
ganization under this part is not renewed or
otherwise terminated, or is renewed in a man-
ner that discontinues coverage for individuals
residing in part of the service area, each other
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organization with a contract under this part
shall permit enrollment under this part by af-
fected individuals enrolled with such other orga-
nization on the effective date of such termi-
nation or discontinuation of coverage.
‘‘(B) ENROLLMENT PERIOD.—The enroll-
ment period required by subparagraph (A) shall
be for 30 days and shall begin 30 days after the
date that the Secretary provides notice of such
requirement.
‘‘(2) ACCEPTANCE
OR
DENIAL
OF
APPLICA-
TION.—An eligible organization shall enroll individ-
uals under this part in the order of application, and
may deny enrollment of such an individual only if
the enrollment—
‘‘(A) would exceed the limits of the organi-
zation’s capacity (as determined by the Sec-
retary);
‘‘(B) would result in an enrolled population
substantially nonrepresentative, as determined
in accordance with regulations of the Secretary,
of the population in the geographic area served
by the organization; or
‘‘(C) would result in the organization’s
failing to meet the requirements of sections
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1851E(g) 
and 
1851F(e)(1)(B)(i) 
and
(f)(1)(B)(i) (concerning minimum private en-
rollment).
‘‘(3) EFFECTIVE DATE OF ENROLLMENT.—An
individual’s enrollment with an eligible organization
under this part shall be effective—
‘‘(A) in the case of an enrollment under
paragraph (1)(A), on the first day of the third
month beginning after the end of the enroll-
ment period;
‘‘(B) in the case of an enrollment under
paragraph (1)(B), as specified by section
1838(a);
‘‘(C) in the case of an enrollment under
paragraph (1)(C), as specified by section
1838(e);
‘‘(D) in the case of an enrollment under
paragraph (1)(D), on the first day of the first
month following the month in which the individ-
ual enrolled; and
‘‘(E) in the case of an enrollment under
paragraph (2), 30 days after the end of the
open enrollment period, or, if the Secretary de-
termines that such date is not feasible, such
other date as the Secretary specifies.
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‘‘(d) ENROLLMENT OR TERMINATION FOR HEALTH
REASONS PROHIBITED.—An eligible organization—
‘‘(1) shall not refuse to enroll, and shall not
expel or refuse to re-enroll, any individual eligible to
enroll or enrolled with the organization under this
part because of the individual’s health status or re-
quirements for health care services;
‘‘(2) shall include in any marketing materials a
statement of the requirements of paragraph (1); and
‘‘(3) shall notify each such individual of the re-
quirements of paragraph (1) at the time of the indi-
vidual’s enrollment.
‘‘SEC. 1851C. BENEFITS.
‘‘(a) BASIC BENEFITS.—
‘‘(1) IN
GENERAL.—An eligible organization
must provide to members enrolled under this part,
either directly or through providers and other per-
sons that meet the applicable requirements of this
title and part A of title XI—
‘‘(A) services covered under parts A and B
of this title, for those members entitled to bene-
fits under part A and enrolled under part B, or
‘‘(B) services covered under part B, for
those members enrolled only under such part,
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which are available to individuals residing in the ge-
ographic area served by the organization.
‘‘(2) PPO REQUIRED
TO
AFFORD ‘POINT
OF
SERVICE’ OPTION.—An eligible organization that
contracts as a preferred provider organization under
this part, in addition to providing services in accord-
ance with paragraph (1), shall also pay for any serv-
ice furnished to a member enrolled under this part
(in the amounts, if any, that otherwise would be
paid under this title) by any entity that may furnish
that service under this title (other than an entity
through which the organization provides services, or
other than a service with respect to which the orga-
nization is required to provide for reimbursement
under subsection (h)(2) (concerning urgently needed
services provided outside the organization).
‘‘(3) PSO 
PROHIBITED
FROM
AFFORDING
‘POINT OF SERVICE’ OPTION.—An eligible organiza-
tion that contracts as a provider sponsored organiza-
tion under this part may not pay for any service de-
scribed in subsection (d) that is furnished to a num-
ber enrolled under this part.
‘‘(b) ADDITIONAL BENEFITS
OR OTHER ADJUST-
MENT UNDER RISK PLANS.—
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‘‘(1) REQUIREMENT WHERE ADJUSTED COMMU-
NITY RATES BELOW PAYMENT RATES.—Each con-
tract under section 1851F(e) shall provide for ad-
justment in accordance with this subsection, if—
‘‘(A) the adjusted community rate for serv-
ices under parts A and B (as reduced for the
actual value of the coinsurance and deductibles
under those parts) for members enrolled under
this part with the organization and entitled to
benefits under part A and enrolled in part B,
or
‘‘(B) the adjusted community rate for serv-
ices under part B (as reduced for the actuarial
value of the coinsurance and deductibles under
that part) for members enrolled under this part
B only is less than the average of the per capita
rates of payment to be made under section
1851F(e)(2) at the beginning of an annual con-
tract period for members enrolled under this
part with the organization and entitled to bene-
fits under part A and enrolled in part B, or en-
rolled in part B only, respectively.
‘‘(2) SELECTION BY ORGANIZATION OF ADDI-
TIONAL
BENEFITS.—An eligible organization to
which paragraph (1) applies shall either—
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‘‘(A) provide to members described in
paragraph (1)(A) or (1)(B), as applicable, the
additional benefits described in paragraph (3)
which are selected by the eligible organization
and which the Secretary finds are at least equal
in value to the difference between the average
per capita payment and the adjusted commu-
nity rate (as so reduced); or
‘‘(B) elect an alternative, in accordance
with paragraph (4).
‘‘(3) ADDITIONAL
BENEFITS.—The additional
benefits referred to in paragraph (2) are—
‘‘(A) the reduction of the premium rate or
other charges made with respect to services fur-
nished by the organization to members enrolled
under this part; or
‘‘(B) the provision of additional health
benefits; or both.
‘‘(4) ALTERNATIVES
TO
ADDITIONAL
BENE-
FITS.—An eligible organization to which paragraph
(1) applies—
‘‘(A) may elect to receive a lesser payment
such that there is no longer a difference be-
tween the AAPCC and adjusted community rate
(as so reduced); and
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‘‘(B) may (with the approval of the Sec-
retary) provide that a part of the value of such
additional benefits be withheld and reserved by
the Secretary as provided in paragraph (5).
‘‘(5) BENEFIT STABILIZATION FUND.—An orga-
nization having a contract under section 1851F(e)
may (with the approval of the Secretary) provide
that a part of the value of additional benefits other-
wise required to be provided by reason of paragraph
(1) be withheld and reserved in the Federal Hospital
Insurance Trust Fund and in the Federal Supple-
mentary Medical Insurance Trust Fund (in such
proportions as the Secretary determines to be appro-
priate) by the Secretary for subsequent annual con-
tract periods, to the extent required to stabilize and
prevent undue fluctuations in the additional benefits
offered in those subsequent periods by the organiza-
tion in accordance with paragraph (3). Any of such
value of additional benefits which is not provided to
members of the organization in accordance with
paragraph (3) prior to the end of such period, shall
revert for the use of such trust funds.
‘‘(6) DETERMINATION OF PER CAPITA RATES.—
If the Secretary finds that there is insufficient en-
rollment experience to determine an average of the
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per capita rates of payment to be made under sec-
tion 1851F(e)(2) at the beginning of a contract pe-
riod, the Secretary may determine such an average
based on the enrollment experience of other con-
tracts entered into under this part.
‘‘(c) SUPPLEMENTAL BENEFITS.—
‘‘(1) SUBJECT TO SECRETARY’S APPROVAL.—
An eligible organization may provide to individuals
enrolled under this part (without affording such in-
dividuals an option to decline such coverage), such
additional health care services as the Secretary may
approve. The Secretary shall approve any such addi-
tional services unless the Secretary determines that
including such additional services will substantially
discourage enrollment by covered individuals with
the organization.
‘‘(2) AT ENROLLEES’ OPTION.—Such an orga-
nization may provide to such individuals such addi-
tional health care services as such individuals may
elect, at their option, to have covered.
‘‘(3) DISCLOSURE OF PREMIUM.—Such an or-
ganization shall furnish to such individuals informa-
tion on the portion of its premium rate or other
charges applicable to such additional services.
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‘‘(d) STANDARIZED PACKAGES OF ADDITIONAL BEN-
EFITS.—Any health care service described in subsection
(b) or (c) that is included in a standardized package of
benefits specified by the Secretary may be offered only as
part of that standardized package.
‘‘(e) AVAILABILITY AND ACCESSIBILITY OF SERV-
ICES.—
‘‘(1) SERVICES PROVIDED THROUGH THE ORGA-
NIZATION.—An eligible organization with a contract
under this part must make the services it has con-
tracted to provide to individuals enrolled with the or-
ganization under this part—
‘‘(A) available and accessible to each such
individual, within the area served by the organi-
zation, with reasonable promptness and in a
manner with assures continuity, and
‘‘(B) when medically necessary, available
and accessible twenty-four hours a day and
seven days a week.
‘‘(2) SERVICES PROVIDED OUTSIDE THE ORGA-
NIZATION.—An eligible organization with a contract
under this part must provide for reimbursement with
respect to services described in paragraph (1) pro-
vided to such an individual other than through the
organization, if—
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‘‘(A) the services were medically necessary
and immediately required because of an unfore-
seen illness, injury, or condition; and
‘‘(B) it was not reasonable given the cir-
cumstances to obtain the services through the
organization.
‘‘SEC. 1851D. LIABILITY OF BENEFICIARY AND THIRD PAR-
TIES.
‘‘(a) LIMITS ON LIABILITY FOR REQUIRED BENE-
FITS.—
‘‘(1) LIMITATION
TO
ACTUARIAL
VALUE
OF
FEE-FOR-SERVICE COVERAGE.—Total charges by an
eligible organization to individuals enrolled with the
organization under this part, with respect to services
described in section 1851C(a)—
‘‘(A) shall include no amounts other than
the individual’s share of premiums, deductibles,
coinsurance, and copayments; and
‘‘(B) shall not exceed the actuarial value of
the deductibles and coinsurance that would be
applicable under this title on the average to
such individuals if they were not members of an
eligible organization.
‘‘(2) ALTERNATIVE
DATA.—If the Secretary
finds that adequate data are not available for the de-
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termination required under paragraph (1) with re-
spect to an eligible organization, the Secretary may
substitute the actuarial value of the deductibles and
coinsurance applicable on the average to individuals
in the area, in the State, or in the United States,
eligible to enroll under this part with the organiza-
tion, or other appropriate data.
‘‘(b) LIMITS ON PREMIUM FOR SUPPLEMENTAL BEN-
EFITS.—If an eligible organization provides to its mem-
bers enrolled under this part supplemental benefits in ac-
cordance with section 1851C, the sum of—
‘‘(1) the portion of such organization’s premium
rate charged, with respect to such supplemental ben-
efits, to members enrolled under this part, and
‘‘(2) 
the 
deductibles, 
coinsurance, 
and
copayments charged, with respect to such services to
such members shall not exceed the adjusted commu-
nity rate for such services.
‘‘(c) LIMITATION
ON AMOUNTS
AN OUT-OF-PLAN
PHYSICIAN OR OTHER ENTITY MAY COLLECT.—
‘‘(1) A physician or other entity (other than a
provider of services) that does not have a contract
establishing payment amounts for services furnished
to an individual enrolled under this part with an eli-
gible organization shall accept as payment in full for
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services that are furnished to such an individual the
amounts that the physician or other entity could col-
lect if the indvidiual were not so enrolled. Any pen-
alty or other provision of law that applies to such
payments with respect to an individual entitled to
benefits under this title (but not enrolled with an eli-
gible organization under this part) shall also apply
with respect to an individual so enrolled.
‘‘(2) For similar requirements applicable to pro-
viders of services, see section 1866(a)(1)(O).
‘‘(d) PLAN AS A SECONDARY PAYER.—Notwithstand-
ing any other provision of law, an eligible organization
may (in the case of the provision of services for which the
Medicare program is a secondary payer under section
1862(b)(2)) charge or authorize the provider of such serv-
ices to charge, in accordance with the charges allowed
under such law or policy—
‘‘(1) the insurance carrier, employer, or other
entity which under such law, plan, or policy is to pay
for the provision of such services, or
‘‘(2) such member to the extent that the mem-
ber has been paid under such law, plan, or policy for
such services.
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‘‘SEC. 1851E. BENEFICIARY PROTECTIONS.
‘‘(a) EXPLANATION
OF
RIGHTS
AND
RESTRIC-
TIONS.—Each eligible organization shall provide each en-
rollee, at the time of enrollment and not less frequently
than annually thereafter, an explanation of the enrollee’s
rights under this part and other important information,
including the following:
‘‘(1) COVERAGE.—The enrollee’s rights to bene-
fits from the organization, and benefit limitations,
including—
‘‘(A) out-of-area coverage provided by the
organization,
‘‘(B) the organization’s coverage of emer-
gency services and urgently needed care, and
‘‘(C) the restrictions on payments under
this title for services furnished other than by or
through the organization.
‘‘(2) TERMINATION OF COVERAGE.—An expla-
nation that—
‘‘(A) the organization may terminate or
refuse to renew the contract under this part;
and
‘‘(B) termination of such contract could re-
sult in termination of enrollment of individuals
with the organization.
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‘‘(3) PATIENT RIGHTS.—Safeguards on enroll-
ees’ rights, including—
‘‘(A) appeal rights of enrollees,
‘‘(B) the right to be informed about var-
ious treatment options, and
‘‘(C) the right to decline treatment.
‘‘(4) EMERGENCIES.—The appropriate use of
the 911 emergency telephone system in the case of
medical emergencies.
‘‘(5) FRAUD
AND
ABUSE
REPORTING.—The
processes for reporting potential fraud or abuse.
‘‘(b) NOTIFICATION
OF TERMINATION OPTION
IN
MARKETING
MATERIALS.—Each eligible organization
with a contract under this part shall include the informa-
tion required by subsection (a)(2) in any marketing mate-
rials described in section 1851B(b)(3) that are distributed
by an eligible organization to individuals eligible to enroll
under this part with the organization.
‘‘(c) GRIEVANCE MECHANISM.—An eligible organiza-
tion with a contract under this part must provide mean-
ingful procedures for hearing and resolving grievances be-
tween the organization (including any entity or individual
through which the organization provides health care serv-
ices) and members enrolled with the organization under
this part.
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‘‘(d) COVERAGE DETERMINATIONS AND APPEALS.—
‘‘(1) DETERMINATION BY ORGANIZATION.—An
eligible organization with a contract under this part
shall have a procedure for determining whether an
individual enrolled with the organization under this
part is entitled to receive a health service described
in section 1851C(a) and the amount (if any) that
the individual is required to pay for that service,
which includes the following elements:
‘‘(A) TIMELY REVIEW.—The organization
shall provide for review of a coverage issue
within 30 days of a request by such individual,
and for reconsideration, where requested, within
60 days after the initial review.
‘‘(B) EXPEDITED
REVIEW
IN
URGENT
CASES.—The organization shall have an expe-
dited process for review and reconsideration of
a coverage issue in cases in which delayed treat-
ment may place the health of such individual in
jeopardy, risk serious impairment of bodily
functions, or limit medically appropriate treat-
ment options.
‘‘(2) REVIEW BY EXTERNAL CONTRACTOR.—An
individual dissatisfied with a determination under
paragraph (1) concerning such individual’s coverage
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under a contract under this part is entitled to a
hearing before an independent reviewer designated
by the Secretary.
‘‘(3) APPEAL
TO
SECRETARY.—An individual
dissatisfied with a determination under paragraph
(2) concerning such individual’s coverage under a
contract under this part is entitled, if the amount in
controversy is $100 or more, to a hearing before the
Secretary to the same extent as is provided in sec-
tion 205(b), and in any such hearing the Secretary
shall make the eligible organization a party. If the
amount in controversy is $1,000 or more, the indi-
vidual or eligible organization shall, upon notifying
the other party, be entitled to judicial review of the
Secretary’s final decision as provided in section
205(g), and both the individual and the eligible or-
ganization shall be entitled to be parties to that judi-
cial review. In applying sections 205(b) and 205(g)
as provided in this subparagraph, and in applying
section 205(l) thereto, any reference therein to the
Commissioner of Social Security or the Social Secu-
rity Administration shall be considered a reference
to the Secretary or the Department of Health and
Human Services, respectively.
‘‘(e) QUALITY ASSURANCE.—
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‘‘(1) INTERNAL QUALITY ASSURANCE (IQA) PRO-
GRAM.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), an eligible organization must have
arrangements, established in accordance with
regulations of the Secretary, for an ongoing
quality assurance program for health care serv-
ices provided to individuals enrolled with the or-
ganization under this part that—
‘‘(i) focuses on health outcomes; and
‘‘(ii) provides for review by physicians
and other health care professionals of the
process followed in the provision of such
health care services.
‘‘(B) ACCEPTANCE OF ACCREDITATION IN
SATISFACTION OF IQA STANDARDS.—If (or to
the extent that) an eligible organization has
been accredited by an accrediting body whose
standards with respect to one or more of the
elements of an internal quality assurance pro-
gram are at least as stringent as such stand-
ards pursuant to subparagraph (A), the organi-
zation shall be deemed to meet the require-
ments of such subparagraph (A) with respect to
such program elements.
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‘‘(2) EXTERNAL QUALITY REVIEW.—
‘‘(A) REQUIREMENTS.—Each contract with
an eligible organization under this part shall
provide that the organization will maintain an
agreement with—
‘‘(i) a utilization and quality control
peer review organization (which has a con-
tract with the Secretary under part B of
title XI for the area in which the eligible
organization is located);
‘‘(ii) an entity selected by the Sec-
retary under section 1154(a)(4)(C); or
‘‘(iii) an independent quality review
and improvement organization selected by
the organization and approved by the Sec-
retary,
under which the review organization will per-
form functions under section 1154(a)(4)(B) and
section 1154(a)(14) (other than those per-
formed under contracts described in section
1866(a)(1)(F)) with respect to services, fur-
nished by the eligible organization, for which
payment may be made under this title.
‘‘(B) QUALITY REVIEW AS COVERED SERV-
ICE.—For purposes of payment under this title,
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the cost of such agreement to the eligible orga-
nization shall be considered a cost incurred by
a provider of services in providing covered serv-
ices under this title and shall be paid directly
by the Secretary to the review organization on
behalf of such eligible organization in accord-
ance with a schedule established by the Sec-
retary.
‘‘(C) PAYMENT
FROM
TRUST
FUNDS.—
Such payments—
‘‘(i) shall be transferred in appro-
priate proportions from the Federal Hos-
pital Insurance Trust Fund and from the
Supplemental Medical Insurance Trust
Fund, without regard to amounts appro-
priated in advance in appropriation Acts,
in the same manner as transfers are made
for payment for services provided directly
to beneficiaries, and
‘‘(ii) shall not be less in the aggregate
for such organizations for a fiscal year
that the amounts the Secretary determines
to be sufficient to cover the costs of such
organizations’ conducting activities de-
scribed in subparagraph (A) with respect
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to such eligible organizations under part B
of title XI.
‘‘(f) BENEFICIARY ADVANCE DIRECTIVES CONCERN-
ING MEDICAL TREATMENT.—A contract under this part
shall provide that an eligible organization shall meet the
requirements of section 1866(f) (relating to maintaining
written policies and procedures respecting advance direc-
tives).
‘‘(g) PRIVATE ENROLLMENT REQUIREMENTS.—
‘‘(1) 50 PERCENT REQUIREMENT.—Subject to
section 11205 of the Balanced Budget Act of 1995
for Economic Growth and Fairness, each eligible or-
ganization with which the Secretary enters into a
contract under this part shall have, for the duration
of such contract, an enrolled membership (without
consideration of members enrolled in the program
under title XIX) at least one-half of which consists
of individuals who are not entitled to benefits under
this title.
‘‘(2) EXCEPTIONS.—The Secretary may modify
or waive the requirement imposed by paragraph (1)
only in the following circumstances:
‘‘(A) AREA WITH LARGE MEDICARE POPU-
LATION.—If more than 50 percent of the popu-
lation of the area served by the organization
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consists of individuals who are entitled to bene-
fits under this title.
‘‘(B) INITIAL PERIOD FOR GOVERNMENTAL
CONTRACTOR.—In the case of an eligible orga-
nization that is owned and operated by a gov-
ernmental entity, only with respect to a period
of three years beginning on the date the organi-
zation first enters into a contract under this
part, and only if the organization has taken and
is making reasonable efforts to enroll individ-
uals who are not entitled to benefits under this
title,
‘‘(C) UNDERSERVED RURAL AREA.—If the
organization serves an underserved rural area.
‘‘(D) CONTRACTOR
WITH
GOOD
PAST
RECORD.—If the organization has had contracts
under this part for a total of at least three
years, has complied with all applicable require-
ments during that period, maintains a level of
enrollment of individuals not entitled to benefits
under this title determined by the Secretary,
and complies with any additional monitoring re-
quirements established by the Secretary.
‘‘(E) CONTRACTOR WITH GOOD RECORD IN
ANOTHER GEOGRAPHIC AREA.—If—
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‘‘(i) the Secretary has not previously
entered into a contract with the organiza-
tion under this part in the same geo-
graphic area (or has entered into contracts
for a total of three years or less),
‘‘(ii) the organization (or a parent
company that controls the organization)
has entered into (or subsidiaries of the or-
ganization or parent company have entered
into) contracts under this part for at least
three different geographic areas—
‘‘(I) for which no waiver has been
granted under this paragraph and
during the course of which there has
been compliance with all applicable re-
quirements; or
‘‘(II) for which a waiver has been
granted under subparagraph (D);
‘‘(iii) the organization (or parent com-
pany) demonstrates to the Secretary a
long-term business and financial commit-
ment to the geographic area served by the
organization, and the Secretary determines
that a waiver is necessary to promote com-
petition in that area; and
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‘‘(iv) the organization complies with
all applicable requirements and any addi-
tional monitoring requirements established
by the Secretary.
‘‘(3) SUBSTITUTION
OF
QUALITY
MEASURE-
MENT SYSTEM.—For conditions under which the re-
quirements of this subsection will be replaced by re-
quirements of a quality measurement system, see
section 11205 of the Balanced Budget Act of 1995
for Economic Growth and Fairness.
‘‘(h) ACCESS TO SPECIALTY CARE AND CASE MAN-
AGEMENT.—Each eligible organization shall ensure that
enrollees with chronic illnesses or disabilities, and other
enrollees as appropriate, shall have access to medically ap-
propriate specialty care and medically appropriate case
management.
‘‘(i) RESTRICTIONS
ON
PHYSICIAN
INCENTIVE
PLANS.—
‘‘(1) CRITERIA.—Each contract with an eligible
organization under this part shall provide that the
organization may not operate any physician incentive
plan (as defined in paragraph (2)) unless the follow-
ing requirements are met:
‘‘(A) NO INDUCEMENT TO LIMIT CARE.—
No specific payment is made directly or indi-
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rectly under the plan to a physician or physi-
cian group as an inducement to reduce or limit
medically necessary services provided with re-
spect to a specific individual enrolled with the
organization.
‘‘(B) REQUIREMENTS
WHERE
PHYSICIAN
AT FINANCIAL RISK.—If the plan places a phy-
sician or physician group at substantial finan-
cial risk (as determined by the Secretary) for
services not provided by the physician or physi-
cian group, the organization—
‘‘(i) provides stop-loss protection for
the physician or group that is adequate
and appropriate, based on standards devel-
oped by the Secretary that take into ac-
count the number of physicians placed at
such substantial financial risk in the group
or under the plan and the number of indi-
viduals enrolled with the organization who
receive services from the physician or the
physician group, and
‘‘(ii) conducts periodic surveys of both
individuals enrolled and individuals pre-
viously enrolled with the organization to
determine the degree of access of such in-
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dividuals to services provided by the orga-
nization and satisfaction with the quality
of such services.
‘‘(C) DISCLOSURE
TO
SECRETARY.—The
organization provides the Secretary with de-
scriptive information regarding the plan, suffi-
cient to permit the Secretary to determine
whether the plan is in compliance with the re-
quirements of this paragraph.
‘‘(2) DEFINITION
OF ‘PHYSICIAN
INCENTIVE
PLAN’.—In this subsection, the term ‘physician in-
centive plan’ means any compensation arrangement
between an eligible organization and a physician or
physician group that may directly or indirectly have
the effect of reducing or limiting services provided
with respect to individuals enrolled with the organi-
zation.’’.
‘‘SEC. 1851F. PAYMENTS TO MEDICAREPLUS ORGANIZA-
TIONS.
‘‘(a) PAYMENTS TO ORGANIZATIONS.—
‘‘(1) MONTHLY PAYMENT.—
‘‘(A) IN
GENERAL.—Under a contract
under paragraph (1) the Secretary shall make
monthly payments under this section in advance
to each eligible organization, with respect to
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coverage of an individual under this part in a
payment area for a month, in an amount equal
to 1⁄12 of the annual capitation rate (as cal-
culated under subsection (c)) with respect to
that individual for that area, adjusted for such
risk factors as age, disability status, gender, in-
stitutional status, and such other factors as the
Secretary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary
may add to, modify, or substitute for such fac-
tors, if such changes will improve the deter-
mination of actuarial equivalence.
‘‘(B) SPECIAL
RULE
FOR
END-STAGE
RENAL DISEASE.—The Secretary shall establish
a separate rate of payment to an eligible orga-
nization with respect to any individual deter-
mined to have end-stage renal disease and en-
rolled in a plan of the organization. Such rate
of payment shall be actuarially equivalent to
rates paid to other enrollees in the payment
area (or such other area as specified by the
Secretary).
‘‘(2) ADJUSTMENT
TO
REFLECT
NUMBER
OF
ENROLLEES.—
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‘‘(A) IN GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any differences
between the actual number of individuals en-
rolled with an organization under this part and
the number of such individuals estimated to be
so enrolled in determining the amount of the
advance payment.
‘‘(B) SPECIAL
RULE
FOR
CERTAIN
EN-
ROLLEES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make retroactive
adjustments under subparagraph (A) to
take into account individuals enrolled dur-
ing the period beginning on the date on
which the individual enrolls with an eligible
organization under a plan operated, spon-
sored, or contributed to by the individual’s
employer or former employer (or the em-
ployer or former employer of the individ-
ual’s spouse) and ending on the date on
which the individual is enrolled in the or-
ganization under this part, except that for
purposes of making such retroactive ad-
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justments under this subparagraph, such
period may not exceed 90 days.
‘‘(ii) 
EXCEPTION.—No 
adjustment
may be made under clause (i) with respect
to any individual who does not certify that
the organization provided the individual
with the disclosure statement described in
section 1851(E)(a) at the time the individ-
ual enrolled with the organization.
‘‘(b) 
ANNUAL
ANNOUNCEMENT
OF
PAYMENT
RATES.—
‘‘(1) ANNUAL ANNOUNCEMENT.—The Secretary
shall annually determine, and shall announce (in a
manner intended to provide notice to interested par-
ties) not later than August 1 before the calendar
year concerned—
‘‘(A) the annual capitation rate for each
payment area for the year, and
‘‘(B) the risk and other factors to be used
in adjusting such rates under subsection
(a)(1)(A) for payments for months in that year.
‘‘(2) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (2) for a year, the
Secretary shall provide for notice to eligible organi-
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zations of proposed changes to be made in the meth-
odology from the methodology and assumptions used
in the previous announcement and shall provide such
organizations an opportunity to comment on such
proposed changes.
‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (1) for a year,
the Secretary shall include an explanation of the as-
sumptions and changes in methodology used in the
announcement in sufficient detail so that eligible or-
ganizations can compute monthly adjusted capitation
rates for individuals in each payment area which is
in whole or in part within the service area of such
an organization.
‘‘(c) 
CALCULATION
OF
ANNUAL
CAPITATION
RATES.—
‘‘(1) IN GENERAL.—For purposes of this part,
the annual capitation rate for a payment area for a
contract year consisting of a calendar year, is equal
to the greatest of the following:
‘‘(A) BLENDED
CAPITATION
RATE.—The
sum of—
‘‘(i) area-specific percentage for the
year (as specified under paragraph (2) for
the year) of the annual area-specific
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MedicarePlus capitation rate for the year
for the MedicarePlus payment area, as de-
termined under paragraph (3), and
‘‘(ii) national percentage (as specified
under paragraph (2) for the year) of the
input-price-adjusted 
annual 
national
MedicarePlus capitation, rate for the year,
as determined under paragraph (4),
multiplied by a budget neutrality adjustment
factor determined under paragraph (5).
‘‘(B) MINIMUM AMOUNT.—
‘‘(i) For 1996, $310.
‘‘(ii) For 1997, $325.
‘‘(iii) For a succeeding year, is the
minimum amount specified in this sub-
paragraph for the preceding year increased
by national per capita growth percentage,
specified under paragraph (6) for that suc-
ceeding year.
‘‘(C) MINIMUM INCREASE OF 3 PERCENT
OVER PREVIOUS YEAR’S RATE.—
‘‘(i) For 1996, 102 percent of the an-
nual per capita rate of payment for 1995
determined under section 1876(a)(1)(C)
for the payment area.
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‘‘(ii) For a subsequent year, 102 per-
cent of the annual capitation rate under
this subsection for the area for the pre-
vious year.
‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT-
AGES.—For purposes of paragraph (1)(A)—
‘‘(A) for 1996 and 1997, the ‘area-specific
percentage’ is 90 percent and the ‘national per-
centage’ is 10 percent,
‘‘(B) for 1998, the ‘area-specific percent-
age’ is 85 percent and the ‘national percentage’
is 15 percent,
‘‘(C) for 1999, the ‘area-specific percent-
age’ is 80 percent and the ‘national percentage’
is 20 percent,
‘‘(D) for 2000, the ‘area-specific percent-
age’ is 75 percent and the ‘national percentage’
is 25 percent, and
‘‘(E) for a year after 2000, the ‘area-spe-
cific percentage’ is 70 percent and the ‘national
percentage’ is 30 percent.
‘‘(3) 
ANNUAL
AREA-SPECIFIC
MEDICARE
CHOICE CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), subject to subparagraph (B), the
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annual area-specific Medicare Choice capitation
rate for a Medicare Choice payment area—
‘‘(i) for 1996 is the annual per capita
rate of payment for 1995 determined
under section 1876(a)(1)(C) for the pay-
ment area, increased by the national aver-
age per capita growth percentage for 1996
(as defined in paragraph (6)); or
‘‘(ii) for a subsequent year is the an-
nual area-specific capitation rate for the
previous year determined under this para-
graph for the payment area, increased by
the national average per capita growth per-
centage for such subsequent year.
‘‘(B) REMOVAL OF MEDICAL EDUCATION
AND DISPROPORTIONATE SHARE HOSPITAL PAY-
MENTS FROM CALCULATION OF ADJUSTED AV-
ERAGE PER CAPITA COST.—In determining the
annual area-specific Medicare Choice capitation
rate for 1997 under subparagraph (A)(i), the
average annual per capita rate of payment for
1996 determined under (A)(i) shall be deter-
mined as though the Secretary had excluded
from such rate any amounts which the Sec-
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retary estimated would have been payable under
this title during the year for—
‘‘(i) payment adjustments under sec-
tion 1886(d)(5)(F) for hospitals serving a
disproportionate share of low-income pa-
tients; and
‘‘(ii) the indirect costs of medical edu-
cation under section 1886(d)(5)(B) or for
direct graduate medical education costs
under section 1886(h).
‘‘(4) 
INPUT-PRICE-ADJUSTED
ANNUAL
NA-
TIONAL CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), the input-price-adjusted annual
national capitation rate for a payment area for
a year is equal to the sum, for all the types of
medicare services (as classified by the Sec-
retary), of the plan (for each such type) of—
‘‘(i) the national standardized annual
capitation rate (determined under subpara-
graph (B)) for the year,
‘‘(ii) the proportion of such rate for
the year which is attributable to such type
of services, and
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‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area
compared to the national average input
price of such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or
updating) national payment rates for specific
areas and localities.
‘‘(B) NATIONAL
STANDARDIZED
ANNUAL
CAPITATION
RATE.—In subparagraph (A)(i),
the ‘national standardized annual capitation
rate’ for a year is equal to—
‘‘(i) the sum (for all payment areas)
of the product of (I) the annual area-spe-
cific capitation rate for that year for the
area under paragraph (3), and (II) the av-
erage number of medicare beneficiaries re-
siding in that area in the year; divided by
‘‘(ii) the total average number of med-
icare beneficiaries residing in all the pay-
ment areas for that year.
‘‘(C) SPECIAL RULES FOR 1996.—In apply-
ing this paragraph for 1996—
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‘‘(i) medicare services shall be divided
into 2 types of services: part A services
and part B services;
‘‘(ii) the proportions described in sub-
paragraph (A)(ii) for such types of services
shall be—
‘‘(I) for part A services, the ratio
(expressed as a percentage) of the av-
erage annual per capita rate of pay-
ment for the area for part A for 1995
to the total average annual per capita
rate of payment for the area for parts
A and B for 1995, and
‘‘(II) for part B services, 100
percent minus the ratio described in
subclause (I);
‘‘(iii) for the part A services, 70 per-
cent of payments attributable to such serv-
ices shall be adjusted by the index used
under section 1886(d)(3)(E) to adjust pay-
ment rates for relative hospital wage levels
for hospitals located in the payment area
involved;
‘‘(iv) for part B services—
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‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e)
used to adjust payment rates for phy-
sicians’ services furnished in the pay-
ment area, and
‘‘(II) of the remaining 34 percent
of the amount of such payments, 70
percent shall be adjusted by the index
described in clause (iii);
‘‘(v) the index values shall be com-
puted based only on the beneficiary popu-
lation who are 65 years of age or older
who are not determined to have end stage
renal disease.
The Secretary may continue to apply the rules
described in this subparagraph (or similar
rules) for 1997.
‘‘(5) BUDGET NEUTRALITY ADJUSTMENT FAC-
TOR.—For each year, the Secretary shall compute a
budget neutrality adjustment factor so that the ag-
gregate of the payments under this part shall not ex-
ceed the aggregate payments that would have been
made under this part if the area-specific percentage