425
(B) by adding at the end the following new
paragraph:
‘‘(5) In estimating the benefits and administrative
costs which will be payable from the Federal Supple-
mentary Medical Insurance Trust Fund for a year (begin-
ning with 1996), the Secretary shall exclude an estimate
of any benefits and costs attributable to home health serv-
ices for which payment would have been made under part
A during the year but for paragraph (4) of section
1812(b).’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to spells of illness be-
ginning on or after October 1, 1995.
(e) EFFECTIVE DATE.—Except as provided in sub-
section (d)(4), the amendments made by this section shall
apply to cost reporting periods beginning on or after Octo-
ber 1, 1996.
SEC. 15702. 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
426
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)
in making any exemptions and exceptions pursuant to sec-
tion 1861(v)(1)(L)(ii) of the Social Security Act.
SEC. 15703. EXTENSION OF WAIVER OF PRESUMPTION OF
LACK OF KNOWLEDGE OF EXCLUSION FROM
COVERAGE FOR HOME HEALTH AGENCIES.
Section 9305(g)(3) of OBRA–1986, as amended by
section 426(d) of the Medicare Catastrophic Coverage Act
of 1988 and section 4207(b)(3) of OBRA–1990 (as re-
numbered by section 160(d)(4) of the Social Security Act
Amendments of 1994), is amended by striking ‘‘December
31, 1995’’ and inserting ‘‘September 30, 1996’’.
SEC. 15704. REPORT ON RECOMMENDATIONS FOR PAY-
MENTS 
AND 
CERTIFICATION 
FOR 
HOME
HEALTH SERVICES OF CHRISTIAN SCIENCE
PROVIDERS.
Not later than July 1, 1996, the Secretary of Health
and Human Services shall submit recommendations to
Congress regarding an appropriate methodology for mak-
427
ing payments under the medicare program for home
health services furnished by Christian Science providers
who meet applicable requirements of the First Church of
Christ, Scientist, Boston, Massachusetts, and appropriate
criteria for the certification of such providers for purposes
of the medicare program.
SEC. 15705. EXTENSION OF PERIOD OF HOME HEALTH
AGENCY CERTIFICATION.
Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A))
is amended—
(1) by striking ‘‘15 months’’ and inserting ‘‘36
months’’; and
(2) by striking the second sentence and insert-
ing the following: ‘‘The Secretary shall establish a
frequency for surveys of home health agencies within
this 36-month interval commensurate with the need
to assure the delivery of quality home health serv-
ices.’’.
PART 2—MEDICARE SECONDARY PAYER
IMPROVEMENTS
SEC. 15711. EXTENSION AND EXPANSION OF EXISTING RE-
QUIREMENTS.
(a) DATA MATCH.—
(1) 
Section 
1862(b)(5)(C) 
(42 
U.S.C.
1395y(b)(5)(C)) is amended by striking clause (iii).
428
(2) Section 6103(l)(12) of the Internal Revenue
Code of 1986 is amended by striking subparagraph
(F).
(b) APPLICATION
TO DISABLED INDIVIDUALS
IN
LARGE GROUP HEALTH PLANS.—
(1) IN GENERAL.—Section 1862(b)(1)(B) (42
U.S.C. 1395y(b)(1)(B)) is amended—
(A) in clause (i), by striking ‘‘clause (iv)’’
and inserting ‘‘clause (iii)’’,
(B) by striking clause (iii), and
(C) by redesignating clause (iv) as clause
(iii).
(2) CONFORMING
AMENDMENTS.—Paragraphs
(1) through (3) of section 1837(i) (42 U.S.C.
1395p(i)) and the second sentence of section
1839(b) (42 U.S.C. 1395r(b)) are each amended by
striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears
and inserting ‘‘1862(b)(1)(B)(iii)’’.
(c) EXPANSION OF PERIOD OF APPLICATION TO IN-
DIVIDUALS WITH END STAGE RENAL DISEASE.—Section
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—
(1) in the first sentence, by striking ‘‘12-
month’’ each place it appears and inserting ‘‘24-
month’’, and
(2) by striking the second sentence.
429
SEC. 15712. IMPROVEMENTS IN RECOVERY OF PAYMENTS.
(a) PERMITTING RECOVERY AGAINST THIRD PARTY
ADMINISTRATORS
OF
PRIMARY
PLANS.—Section
1862(b)(2)(B)(ii) (42 U.S.C. 1395y(b)(2)(B)(ii)) is
amended—
(1) by striking ‘‘under this subsection to pay’’
and inserting ‘‘(directly, as a third-party adminis-
trator, or otherwise) to make payment’’, and
(2) by adding at the end the following: ‘‘The
United States may not recover from a third-party
administrator under this clause in cases where the
third-party administrator would not be able to re-
cover the amount at issue from the employer or
group health plan for whom it provides administra-
tive services due to the insolvency or bankruptcy of
the employer or plan.’’.
(b) EXTENSION OF CLAIMS FILING PERIOD.—Sec-
tion 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amend-
ed by adding at the end the following new clause:
‘‘(v) CLAIMS-FILING
PERIOD.—Not-
withstanding any other time limits that
may exist for filing a claim under an em-
ployer group health plan, the United
States may seek to recover conditional pay-
ments in accordance with this subpara-
graph where the request for payment is
430
submitted to the entity required or respon-
sible under this subsection to pay with re-
spect to the item or service (or any portion
thereof) under a primary plan within the
3-year period beginning on the date on
which the item or service was furnished.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after the date of the enactment of this Act.
SEC. 15713. PROHIBITING RETROACTIVE APPLICATION OF
POLICY REGARDING ESRD BENEFICIARIES
ENROLLED IN PRIMARY PLANS.
For purposes of carrying out section 1862(b)(1)(C)
of the Social Security Act, the Secretary of Health and
Human Services shall apply the policy directive issued by
the Administrator of the Health Care Financing Adminis-
tration on April 24, 1995, only with respect to items and
services furnished on or after such date.
PART 3—FAILSAFE
SEC. 15721. FAILSAFE BUDGET MECHANISM.
(a) IN GENERAL.—Title XVIII, as amended by sec-
tions 15106(a) and 15701(a), is amended by adding at
the end the following new section:
‘‘FAILSAFE BUDGET MECHANISM
‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT AD-
JUSTMENTS
TO
ACHIEVE
MEDICARE
BUDGET
TAR-
431
GETS.—If the Secretary determines under subsection
(e)(3)(C) before a fiscal year (beginning with fiscal year
1998) that—
‘‘(1) the fee-for-service expenditures (as defined
in subsection (f)) for a sector of medicare services
(as defined in subsection (b)) for the fiscal year, will
exceed
‘‘(2) the allotment specified under subsection
(c)(2) for such fiscal year (taking into account any
adjustment in the allotment under subsection (h) for
that fiscal year),
then, notwithstanding any other provision of this title,
there shall be an adjustment (consistent with subsection
(d)) in applicable payment rates or payments for items
and services included in the sector in the fiscal year so
that such expenditures for the sector for the year will be
reduced by 1331⁄3 percent of the amount of such excess.
‘‘(b) 
SECTORS
OF
MEDICARE
SERVICES
DE-
SCRIBED.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, items and services included under each of the
following subparagraphs shall be considered to be a
separate ‘sector’ of medicare services:
‘‘(A) Inpatient hospital services.
‘‘(B) Home health services.
432
‘‘(C) Extended care services (for inpatients
of skilled nursing facilities).
‘‘(D) Hospice care.
‘‘(E) Physicians’ services (including serv-
ices 
and 
supplies 
described 
in 
section
1861(s)(2)(A)) and services of other health care
professionals 
(including 
certified 
registered
nurse anesthetists, nurse practitioners, physi-
cian assistants, and clinical psychologists) for
which separate payment is made under this
title.
‘‘(F) Outpatient hospital services and am-
bulatory facility services.
‘‘(G) Durable medical equipment and sup-
plies, including prosthetic devices and orthotics.
‘‘(H) Diagnostic tests (including clinical
laboratory services and x-ray services).
‘‘(I) Other items and services.
‘‘(2) CLASSIFICATION
OF
ITEMS
AND
SERV-
ICES.—The Secretary shall classify each type of
items and services covered and paid for separately
under this title into one of the sectors specified in
paragraph (1). After publication of such classifica-
tion under subsection (e)(1), the Secretary is not au-
433
thorized to make substantive changes in such classi-
fication.
‘‘(c) ALLOTMENT.—
‘‘(1) ALLOTMENTS
FOR
EACH
SECTOR.—For
purposes of this section, subject to subsection (h)(1),
the allotment for a sector of medicare services for
a fiscal year is equal to the product of—
‘‘(A) the total allotment for the fiscal year
established under paragraph (2), and
‘‘(B) the allotment proportion (specified
under paragraph (3)) for the sector and fiscal
year involved.
‘‘(2) TOTAL ALLOTMENT.—
‘‘(A) IN GENERAL.—For purposes of this
section, the total allotment for a fiscal year is
equal to—
‘‘(i) the medicare benefit budget for
the fiscal year (as specified under subpara-
graph (B)), reduced by
‘‘(ii) the amount of payments the Sec-
retary estimates will be made in the fiscal
year under the MedicarePlus program
under part C.
In making the estimate under clause (ii), the
Secretary shall take into account estimated en-
434
rollment and demographic profile of individuals
electing MedicarePlus products.
‘‘(B) MEDICARE BENEFIT BUDGET.—For
purposes of this subsection, subject to subpara-
graph (C), the ‘medicare benefit budget’—
‘‘(i) for fiscal year 1997 is $208.0 bil-
lion;
‘‘(ii) for fiscal year 1998 is $217.1
billion;
‘‘(iii) for fiscal year 1999 is $228.4
billion;
‘‘(iv) for fiscal year 2000 is $246.4
billion;
‘‘(v) for fiscal year 2001 is $265.5 bil-
lion;
‘‘(vi) for fiscal year 2002 is $288.0
billion; and
‘‘(vii) for a subsequent fiscal year is
equal to the medicare benefit budget under
this subparagraph for the preceding fiscal
year increased by the product of (I) 1.05,
and (II) 1 plus the annual percentage in-
crease in the average number of medicare
beneficiaries from the previous fiscal year
to the fiscal year involved.
435
‘‘(3) MEDICARE ALLOTMENT PROPORTION DE-
FINED.—
‘‘(A) IN GENERAL.—For purposes of this
section and with respect to a sector of medicare
services for a fiscal year, the term ‘medicare al-
lotment proportion’ means the ratio of—
‘‘(i) the baseline-projected medicare
expenditures (as determined under sub-
paragraph (B)) for the sector for the fiscal
year, to
‘‘(ii) the sum of such baseline expendi-
tures for all such sectors for the fiscal
year.
‘‘(B) 
BASELINE-PROJECTED
MEDICARE
EXPENDITURES.—In this paragraph, the ‘base-
line, projected medicare expenditures’ for a sec-
tor of medicare services—
‘‘(i) for fiscal year 1996 is equal to
fee-for-service expenditures for such sector
during fiscal year 1995, increased by the
baseline annual growth rate for such sector
of medicare services for fiscal year 1996
(as specified in table in subparagraph (C));
and
436
‘‘(ii) for a subsequent fiscal year is
equal to the baseline-projected medicare
expenditures under this subparagraph for
the sector for the previous fiscal year in-
creased by the baseline annual growth rate
for such sector for the fiscal year involved
(as specified in such table).
‘‘(C) 
BASELINE
ANNUAL
GROWTH
RATES.—The following table specifies the base-
line annual growth rates for each of the sectors
for different fiscal years:
‘‘For the following sector—
Baseline annual growth rates for fiscal year—
1996
1997
1998
1999
2000
2001
2002
and
there-
after
(A) Inpatient hospital services .........
5.7%
5.6%
6.0%
6.1%
5.7%
5.5%
5.2%
(B) Home health services .................
17.2%
15.1%
11.7%
9.1%
8.4%
8.1%
7.9%
(C) Extended care services ..............
19.7%
12.3%
9.3%
8.7%
8.6%
8.4%
8.0%
(D) Hospice care ..............................
32.0%
24.0%
18.0%
15.0%
12.0%
10.0%
9.0%
(E) Physicians’ services ...................
12.4%
9.7%
8.7%
9.0%
9.3%
9.6%
10.1%
(F) Outpatient hospital services ......
14.7%
13.9%
14.5%
15.0%
14.1%
13.9%
14.0%
(G) Durable medical equipment and
supplies .............................................
16.1%
15.5%
13.7%
12.4%
13.2%
13.9%
14.5%
(H) Diagnostic tests .........................
13.1%
11.3%
11.0%
11.4%
11.4%
11.5%
11.9%
(I) Other items and services ............
11.2%
10.2%
10.9%
12.0%
11.6%
11.6%
11.8%
‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this subsection, the Secretary shall
apply a payment reduction for a sector for a fiscal
year in such a manner as to—
‘‘(A) make a change in payment rates (to
the maximum extent practicable) at the time
437
payment rates are otherwise changed or subject
to change for that fiscal year; and
‘‘(B) provide for the full appropriate ad-
justment so that the fee-for-service expenditures
for the sector for the fiscal year will approxi-
mate (and not exceed) the allotment for the sec-
tor for the fiscal year.
‘‘(2) TAKING
INTO
ACCOUNT
VOLUME
AND
CASH
FLOW.—In providing for an adjustment in
payments under this subsection for a sector for a
fiscal year, the Secretary shall take into account (in
a manner consistent with actuarial projections)—
‘‘(A) the impact of such an adjustment on
the volume or type of services provided in such
sector (and other sectors), and
‘‘(B) the fact that an adjustment may
apply to items and services furnished in a fiscal
year (payment for which may occur in a subse-
quent fiscal year),
in a manner that is consistent with assuring that
total fee-for-services expenditures for each sector for
the fiscal year will not exceed the allotment under
subsection (c)(1) for such sector for such year.
‘‘(3) PROPORTIONALITY OF REDUCTIONS WITH-
IN A SECTOR.—In making adjustments under this
438
subsection in payment for items and services in-
cluded within a sector of medicare services for a fis-
cal year, the Secretary shall provide for such an ad-
justment that results (to the maximum extent fea-
sible) in the same percentage reductions in aggre-
gate Federal payments under parts A and B for the
different classes of items and services included with-
in the sector for the fiscal year.
‘‘(4) APPLICATION TO PAYMENTS MADE BASED
ON PROSPECTIVE PAYMENT RATES DETERMINED ON
A FISCAL YEAR BASIS.—
‘‘(A) IN GENERAL.—In applying subsection
(a) with respect to items and services for which
payment is made under part A or B on the
basis of rates that are established on a prospec-
tive basis for (and in advance of) a fiscal year,
the Secretary shall provide for the payment ad-
justment under such subsection through an ap-
propriate reduction in such rates established for
items and services furnished (or, in the case of
payment for operating costs of inpatient hos-
pital services of subsection (d) hospitals and
subsection (d) Puerto Rico hospitals (as defined
in paragraphs (1)(B) and (9)(A) of section
439
1886(d)), discharges occurring) during such
year.
‘‘(B) DESCRIPTION
OF
APPLICATION
TO
SPECIFIC SERVICES.—The payment adjustment
described in subparagraph (A) applies for a fis-
cal year to at least the following:
‘‘(i) UPDATE FACTOR FOR PAYMENT
FOR
OPERATING
COSTS
OF
INPATIENT
HOSPITAL SERVICES OF PPS HOSPITALS.—
To the computation of the applicable per-
centage 
increase 
specified 
in 
section
1886(d)(3)(B)(i) for discharges occurring
in the fiscal year.
‘‘(ii) HOME
HEALTH
SERVICES.—To
the extent payment amounts for home
health services are based on per visit pay-
ment rates under section 1894, to the com-
putation of the increase in the national per
visit payment rates established for the year
under section 1894(b)(2)(B).
‘‘(iii) HOSPICE CARE.—To the update
of payment rates for hospice care under
section 1814(i) for services furnished dur-
ing the fiscal year.
440
‘‘(iv) UPDATE FACTOR FOR PAYMENT
OF OPERATING COSTS OF INPATIENT HOS-
PITAL
SERVICES
OF
PPS-EXEMPT
HOS-
PITALS.—To the computation of the target
amount under section 1886(b)(3) for dis-
charges occurring during the fiscal year.
‘‘(v) COVERED
NON-ROUTINE
SERV-
ICES OF SKILLED NURSING FACILITIES.—
To the computation of the facility per stay
limits for the year under section 1888A(d)
for covered non-routine services of a skilled
nursing facility (as described in such sec-
tion).
‘‘(5) APPLICATION TO PAYMENTS MADE BASED
ON PROSPECTIVE PAYMENT RATES DETERMINED ON
A CALENDAR YEAR BASIS.—
‘‘(A) IN GENERAL.—In applying subsection
(a) for a fiscal year with respect to items and
services for which payment is made under part
A or B on the basis of rates that are estab-
lished on a prospective basis for (and in ad-
vance of) a calendar year, the Secretary shall
provide for the payment adjustment under such
subsection through an appropriate reduction in
such rates established for items and services