441
furnished at any time during such calendar
year as follows:
‘‘(i) For fiscal year 1997, the reduc-
tion shall be made for payment rates dur-
ing calendar year 1997 in a manner so as
to achieve the necessary payment reduc-
tions for such fiscal year for items and
services furnished during the first 3 quar-
ters of calendar year 1997.
‘‘(ii) For a subsequent fiscal year, the
reduction shall be made for payment rates
during the calendar year in which the fis-
cal year ends in a manner so as to achieve
the necessary payment reductions for such
fiscal year for items and services furnished
during the first 3 quarters of the calendar
year, but also taking into account the pay-
ment reductions made in the first quarter
of the fiscal year resulting from payment
reductions made under this paragraph for
the previous calendar year.
‘‘(iii) Payment rate reductions ef-
fected under this subparagraph for a cal-
endar year and applicable to the last 3
quarters of the fiscal year in which the cal-
442
endar year ends shall continue to apply
during the first quarter of the succeeding
fiscal year.
‘‘(B) APPLICATION IN SPECIFIC CASES.—
The payment adjustment described in subpara-
graph (A) applies for a fiscal year to at least
the following:
‘‘(i) UPDATE IN CONVERSION FACTOR
FOR PHYSICIANS’ SERVICES.—To the com-
putation of the conversion factor under
subsection (d) of section 1848 used in the
fee schedule established under subsection
(b) of such section, for items and services
furnished during the calendar year in
which the fiscal year ends.
‘‘(ii) PAYMENT
RATES
FOR
OTHER
HEALTH
CARE
PROFESSIONALS.—To the
computation of payments for professional
services of certified registered nurse anes-
thetists under section 1833(l), nurse mid-
wives, physician assistants, nurse practi-
tioners and clinical nurse specialists under
section 1833(r), clinical psychologists, clin-
ical social workers, physical or occupational
therapists, and any other health profes-
443
sionals for which payment rates are based
(in whole or in part) on payments for phy-
sicians’ services, for services furnished dur-
ing the calendar year in which the fiscal
year ends.
‘‘(iii) UPDATE
IN
LAB
FEE
SCHED-
ULE.—To the computation of the fee
schedule amount under section 1833(h)(2)
for clinical diagnostic laboratory services
furnished during the calendar year in
which the fiscal year ends.
‘‘(iv) 
UPDATE
IN
REASONABLE
CHARGES
FOR
VACCINES.—To the com-
putation of the reasonable charge for vac-
cines described in section 1861(s)(10) for
vaccines furnished during the calendar
year in which the fiscal year ends.
‘‘(v) DURABLE MEDICAL EQUIPMENT-
RELATED ITEMS.—To the computation of
the 
payment 
basis 
under 
section
1834(a)(1)(B) for covered items described
in section 1834(a)(13), for items furnished
during the calendar year in which the fis-
cal year ends.
444
‘‘(vi) 
RADIOLOGIST
SERVICES.—To
the computation of conversion factors for
radiologist services under section 1834(b),
for services furnished during the calendar
year in which the fiscal year ends.
‘‘(vii) SCREENING
MAMMOGRAPHY.—
To the computation of payment rates for
screening mammography under section
1834(c)(1)(C)(ii), for screening mammog-
raphy performed during the calendar year
in which the fiscal year ends.
‘‘(viii) 
PROSTHETICS
AND
ORTHOTICS.—To the computation of the
amount to be recognized under section
1834(h) for payment for prosthetic devices
and orthotics and prosthetics, for items
furnished during the calendar year in
which the fiscal year ends.
‘‘(ix) SURGICAL DRESSINGS.—To the
computation of the payment amount re-
ferred to in section 1834(i)(1)(B) for sur-
gical dressings, for items furnished during
the calendar year in which the fiscal year
ends.
445
‘‘(x) PARENTERAL AND ENTERAL NU-
TRITION.—To the computation of reason-
able charge screens for payment for paren-
teral and enteral nutrition under section
1834(h), for nutrients furnished during the
calendar year in which the fiscal year ends.
‘‘(xi) AMBULANCE SERVICES.—To the
computation 
of 
limits 
on 
reasonable
charges for ambulance services, for services
furnished during the calendar year in
which the fiscal year ends.
‘‘(6) APPLICATION TO PAYMENTS MADE BASED
ON COSTS DURING A COST REPORTING PERIOD.—
‘‘(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 costs incurred for items
and services in a cost reporting period, the Sec-
retary shall provide for the payment adjustment
under such subsection for a fiscal year through
an appropriate proportional reduction in the
payment for costs for such items and services
incurred at any time during each cost reporting
period any part of which occurs during the fis-
cal year involved, but only (for each such cost
446
reporting period) in the same proportion as the
fraction of the cost reporting period that occurs
during the fiscal year involved.
‘‘(B) APPLICATION IN SPECIFIC CASES.—
The payment adjustment described in subpara-
graph (A) applies for a fiscal year to at least
the following:
‘‘(i) CAPITAL-RELATED
COSTS
OF
HOSPITAL SERVICES.—To the computation
of payment amounts for inpatient and out-
patient hospital services under sections
1886(g) and 1861(v) for portions of cost
reporting periods occurring during the fis-
cal year.
‘‘(ii) OPERATING COSTS FOR PPS-EX-
EMPT HOSPITALS.—To the computation of
payment amounts under section 1886(b)
for operating costs of inpatient hospital
services of PPS-exempt hospitals for por-
tions of cost reporting periods occurring
during the fiscal year.
‘‘(iii) DIRECT
GRADUATE
MEDICAL
EDUCATION.—To the computation of pay-
ment amounts under section 1886(h) for
reasonable costs of direct graduate medical
447
education costs for portions of cost report-
ing periods occurring during the fiscal
year.
‘‘(iv) INPATIENT
RURAL
PRIMARY
CARE HOSPITAL SERVICES.—To the com-
putation of payment amounts under sec-
tion 1814(j) for inpatient rural primary
care hospital services for portions of cost
reporting periods occurring during the fis-
cal year.
‘‘(v) EXTENDED CARE SERVICES OF A
SKILLED NURSING FACILITY.—To the com-
putation of payment amounts under sec-
tion 1861(v) for post-hospital extended
care services of a skilled nursing facility
(other than covered non-routine services
subject to section 1888A) for portions of
cost reporting periods occurring during the
fiscal year.
‘‘(vi) 
REASONABLE
COST
CON-
TRACTS.—To the computation of payment
amounts under section 1833(a)(1)(A) for
organizations for portions of cost reporting
periods occurring during the fiscal year.
448
‘‘(vii) HOME
HEALTH
SERVICES.—
Subject to paragraph (4)(B)(ii), for pay-
ment amounts for home health services, for
portions of cost reporting periods occurring
during such fiscal year.
‘‘(7) OTHER.—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 a
basis not described in a previous paragraph of this
subsection, the Secretary shall provide for the pay-
ment adjustment under such subsection through an
appropriate proportional reduction in the payments
(or payment bases for items and services furnished)
during the fiscal year.
‘‘(8) ADJUSTMENT OF PAYMENT LIMITS.—The
Secretary shall provide for such proportional adjust-
ment in any limits on payment established under
part A or B for payment for items and services with-
in a sector as may be appropriate based on (and in
order to properly carry out) the adjustment on the
amount of payment under this subsection in the sec-
tor.
‘‘(9) REFERENCES TO PAYMENT RATES.—Ex-
cept as the Secretary may provide, any reference in
this title (other than this section) to a payment rate
449
is deemed a reference to such a rate as adjusted
under this subsection.
‘‘(e) PUBLICATION OF DETERMINATIONS; JUDICIAL
REVIEW.—
‘‘(1) ONE-TIME PUBLICATION OF SECTORS AND
GENERAL PAYMENT ADJUSTMENT METHODOLOGY.—
Not later than October 1, 1996, the Secretary shall
publish in the Federal Register the classification of
medicare items and services into the sectors of medi-
care services under subsection (b) and the general
methodology to be used in applying payment adjust-
ments to the different classes of items and services
within the sectors.
‘‘(2) INCLUSION
OF
INFORMATION
IN
PRESI-
DENT’S BUDGET.—
‘‘(A) IN GENERAL.—With respect to fiscal
years beginning with fiscal year 1999, the
President shall include in the budget submitted
under section 1105 of title 31, United States
Code, information on—
‘‘(i) the fee-for-service expenditures,
within each sector, for the second previous
fiscal year, and how such expenditures
compare to the adjusted sector allotment
for that sector for that fiscal year; and
450
‘‘(ii) actual annual growth rates for
fee-for-service expenditures in the different
sectors in the second previous fiscal year.
‘‘(B) 
RECOMMENDATIONS
REGARDING
GROWTH FACTORS.—The President may include
in such budget for a fiscal year (beginning with
fiscal year 1998) recommendations regarding
percentages that should be applied (for one or
more fiscal years beginning with that fiscal
year) instead of the baseline annual growth
rates under subsection (c)(3)(C). Such rec-
ommendations shall take into account medically
appropriate practice patterns.
‘‘(3) DETERMINATIONS CONCERNING PAYMENT
ADJUSTMENTS.—
‘‘(A) RECOMMENDATIONS
OF
COMMIS-
SION.—By not later than March 1 of each year
(beginning with 1997), the Medicare Payment
Review Commission shall submit to the Sec-
retary and the Congress a report that analyzes
the previous operation (if any) of this section
and that includes recommendations concerning
the manner in which this section should be ap-
plied for the following fiscal year.
451
‘‘(B) 
PRELIMINARY
NOTICE
BY
SEC-
RETARY.—Not later than May 15 preceding the
beginning of each fiscal year (beginning with
fiscal year 1998), the Secretary shall publish in
the Federal Register a notice containing the
Secretary’s preliminary determination, for each
sector of medicare services, concerning the fol-
lowing:
‘‘(i) The projected allotment under
subsection (c) for such sector for the fiscal
year.
‘‘(ii) Whether there will be a payment
adjustment for items and services included
in such sector for the fiscal year under
subsection (a).
‘‘(iii) If there will be such an adjust-
ment, the size of such adjustment and the
methodology to be used in making such a
payment adjustment for classes of items
and services included in such sector.
‘‘(iv) Beginning with fiscal year 1999,
the fee-for-service expenditures for such
sector for the second preceding fiscal year.
Such notice shall include an explanation of the
basis for such determination. Determinations
452
under this subparagraph and subparagraph (C)
shall be based on the best data available at the
time of such determinations.
‘‘(C) FINAL
DETERMINATION.—Not later
than September 1 preceding the beginning of
each fiscal year (beginning with fiscal year
1998), the Secretary shall publish in the Fed-
eral Register a final determination, for each
sector of medicare services, concerning the mat-
ters described in subparagraph (B) and an ex-
planation of the reasons for any differences be-
tween such determination and the preliminary
determination for such fiscal year published
under subparagraph (B).
‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDI-
CIAL REVIEW.—There shall be no administrative or
judicial review under section 1878 or otherwise of—
‘‘(A) the classification of items and serv-
ices among the sectors of medicare services
under subsection (b),
‘‘(B) the determination of the amounts of
allotments for the different sectors of medicare
services under subsection (c),
453
‘‘(C) the determination of the amount (or
method of application) of any payment adjust-
ment under subsection (d), or
‘‘(D) any adjustment in an allotment ef-
fected under subsection (h).
‘‘(f) FEE-FOR-SERVICE EXPENDITURES DEFINED.—
In this section, the term ‘fee-for-service expenditures’, for
items and services within a sector of medicare services in
a fiscal year, means amounts payable for such items and
services which are furnished during the fiscal year, and—
‘‘(1) includes types of expenses otherwise reim-
bursable under parts A and B (including administra-
tive costs incurred by organizations described in sec-
tions 1816 and 1842) with respect to such items and
services, and
‘‘(2) does not include amounts paid under part
C.
‘‘(g) EXPEDITED PROCESS
FOR ADJUSTMENT
OF
SECTOR GROWTH RATES.—
‘‘(1) OPTIONAL
INCLUSION
OF
LEGISLATIVE
PROPOSAL.—The President may include in rec-
ommendations under subsection (e)(2)(B) submitted
with respect to a fiscal year a specific legislative pro-
posal that provides only for the substitution of per-
centages specified in the proposal for one or more of
454
the baseline annual growth rates (specified in the
table in subsection (c)(3)(C) or in a previous legisla-
tive proposal under this subsection) for that fiscal
year or any subsequent fiscal year.
‘‘(2) CONGRESSIONAL CONSIDERATION.—
‘‘(A) IN GENERAL.—The percentages con-
tained in a legislative proposal submitted under
paragraph (1) shall apply under this section if
a joint resolution (described in subparagraph
(B)) approving such proposal is enacted, in ac-
cordance with the provisions of subparagraph
(C), before the end of the 60-day period begin-
ning on the date on which such proposal was
submitted. For purposes of applying the preced-
ing sentence and subparagraphs (B) and (C),
the days on which either House of Congress is
not in session because of an adjournment of
more than three days to a day certain shall be
excluded in the computation of a period.
‘‘(B) JOINT RESOLUTION OF APPROVAL.—
A joint resolution described in this subpara-
graph means only a joint resolution which is in-
troduced within the 10-day period beginning on
the date on which the President submits a pro-
posal under paragraph (1) and—
455
‘‘(i) which does not have a preamble;
‘‘(ii) the matter after the resolving
clause of which is as follows: ‘That Con-
gress approves the proposal of the Presi-
dent providing for substitution of percent-
ages for certain baseline annual growth
rates under section 1895 of the Social Se-
curity Act, as submitted by the President
on lllllll.’, the blank space
being filled in with the appropriate date;
and
‘‘(iii) the title of which is as follows:
‘Joint resolution approving Presidential
proposal to substitute certain specified per-
centages for baseline annual growth rates
under section 1895 of the Social Security
Act, as submitted by the President on
lllllll.’, the blank space being
filled in with the appropriate date.
‘‘(C) PROCEDURES
FOR
CONSIDERATION
OF
RESOLUTION
OF
APPROVAL.—Subject to
subparagraph (D), the provisions of section
2908 (other than subsection (a)) of the Defense
Base Closure and Realignment Act of 1990
shall apply to the consideration of a joint reso-
456
lution described in subparagraph (B) in the
same manner as such provisions apply to a joint
resolution described in section 2908(a) of such
Act.
‘‘(D) SPECIAL
RULES.—For purposes of
applying subparagraph (C) with respect to such
provisions—
‘‘(i) any reference to the Committee
on Armed Services of the House of Rep-
resentatives shall be deemed a reference to
an appropriate Committee of the House of
Representatives (specified by the Speaker
of the House of Representatives at the
time of submission of a legislative proposal
under paragraph (1)) and any reference to
the Committee on Armed Services of the
Senate shall be deemed a reference to the
Committee on Finance of the Senate;
‘‘(ii) any reference to a resolution of
which a committee shall be discharged
from further consideration shall be deemed
to be a reference to the first such resolu-
tion introduced; and
‘‘(iii) any reference to the date on
which the President transmits a report
458
sector for the fiscal year if the actual amount
of payments made in the fiscal year under the
MedicarePlus program under part C in the fis-
cal year were substituted for the amount de-
scribed in subsection (c)(2)(A)(ii) for that fiscal
year,
‘‘(B) adjusted to take into account the
amount of any adjustment under paragraph (1)
for that fiscal year (based on expenditures in
the second previous fiscal year).
‘‘(i) PROSPECTIVE APPLICATION OF CERTAIN NA-
TIONAL COVERAGE DETERMINATIONS.—In the case of a
national coverage determination that the Secretary
projects will result in significant additional expenditures
under this title (taking into account any substitution for
existing procedures or technologies), such determination
shall not become effective before the beginning of the fiscal
year that begins after the date of such determination and
shall apply to contracts under part C entered into (or re-
newed) after the date of such determination.’’.
(b) REPORT OF TRUSTEES ON GROWTH RATE IN
PART
A EXPENDITURES.—Section 1817 (42 U.S.C.
1395i) is amended by adding at the end the following new
subsection:
459
‘‘(k) Each annual report provided in subsection (b)(2)
shall include information regarding the annual rate of
growth in program expenditures that would be required
to maintain the financial solvency of the Trust Fund and
the extent to which the provisions of section 1895 restrain
the rate of growth of expenditures under this part in order
to achieve such solvency.’’.
PART 4—ADMINISTRATIVE SIMPLIFICATION
SEC. 15731. STANDARDS FOR MEDICARE INFORMATION
TRANSACTIONS AND DATA ELEMENTS.
Title XVIII, as amended by section 15031, is amend-
ed by inserting after section 1806 the following new sec-
tion:
‘‘STANDARDS FOR MEDICARE INFORMATION
TRANSACTIONS AND DATA ELEMENTS
‘‘SEC. 1807. (a) ADOPTION
OF STANDARDS
FOR
DATA ELEMENTS.—
‘‘(1) IN GENERAL.—Pursuant to subsection (b),
the Secretary shall adopt standards for information
transactions and data elements of medicare informa-
tion and modifications to the standards under this
section that are—
‘‘(A) consistent with the objective of reduc-
ing the administrative costs of providing and
paying for health care; and
460
‘‘(B) developed or modified by a standard
setting organization (as defined in subsection
(h)(8)).
‘‘(2) SPECIAL RULE RELATING TO DATA ELE-
MENTS.—The Secretary may adopt or modify a
standard relating to data elements that is different
from the standard developed by a standard setting
organization, if—
‘‘(A) the different standard or modification
will substantially reduce administrative costs to
health care providers and health plans com-
pared to the alternative; and
‘‘(B) the standard or modification is pro-
mulgated in accordance with the rulemaking
procedures of subchapter III of chapter 5 of
title 5, United States Code.
‘‘(3) SECURITY STANDARDS FOR HEALTH IN-
FORMATION NETWORK.—
‘‘(A) IN
GENERAL.—Each person, who
maintains or transmits medicare information or
data elements of medicare information and is
subject to this section, shall maintain reason-
able and appropriate administrative, technical,
and physical safeguards—
461
‘‘(i) to ensure the integrity and con-
fidentiality of the information;
‘‘(ii) to protect against any reasonably
anticipated—
‘‘(I) threats or hazards to the se-
curity or integrity of the information;
and
‘‘(II) unauthorized uses or disclo-
sures of the information; and
‘‘(iii) to otherwise ensure compliance
with this section by the officers and em-
ployees of such person.
‘‘(B) SECURITY
STANDARDS.—The Sec-
retary shall establish security standards and
modifications to such standards with respect to
medicare information network services, health
plans, and health care providers that—
‘‘(i) take into account—
‘‘(I) the technical capabilities of
record systems used to maintain medi-
care information;
‘‘(II) the costs of security meas-
ures;
462
‘‘(III) the need for training per-
sons who have access to medicare in-
formation; and
‘‘(IV) the value of audit trails in
computerized record systems; and
‘‘(ii) ensure that a medicare informa-
tion network service, if it is part of a larg-
er organization, has policies and security
procedures which isolate the activities of
such service with respect to processing in-
formation in a manner that prevents unau-
thorized access to such information by
such larger organization.
The security standards established by the Sec-
retary shall be based on the standards devel-
oped or modified by standard setting organiza-
tions. If such standards do not exist, the Sec-
retary shall rely on the recommendations of the
Medicare Information Advisory Committee (es-
tablished under subsection (g)) and shall con-
sult with appropriate government agencies and
private organizations in accordance with para-
graph (5).
‘‘(4) IMPLEMENTATION SPECIFICATIONS.—The
Secretary shall establish specifications for imple-
463
menting each of the standards and the modifications
to the standards adopted pursuant to paragraph (1)
or (3).
‘‘(5) ASSISTANCE
TO
THE
SECRETARY.—In
complying with the requirements of this section, the
Secretary shall rely on recommendations of the Med-
icare Information Advisory Committee established
under subsection (g) and shall consult with appro-
priate Federal and State agencies and private orga-
nizations. The Secretary shall publish in the Federal
Register the recommendations of the Medicare Infor-
mation Advisory Committee regarding the adoption
of a standard under this section.
‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS
AND DATA ELEMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall adopt
standards for transactions and data elements to
make medicare information uniformly available to be
exchanged electronically, that is—
‘‘(A) appropriate for the following financial
and administrative transactions: claims (includ-
ing coordination of benefits) or equivalent en-
counter 
information, 
enrollment 
and
disenrollment, eligibility, premium payments,
and referral certification and authorization; and
464
‘‘(B) related to other financial and admin-
istrative transactions determined appropriate by
the Secretary consistent with the goals of im-
proving the operation of the health care system
and reducing administrative costs.
‘‘(2) UNIQUE HEALTH IDENTIFIERS.—
‘‘(A) ADOPTION
OF
STANDARDS.—The
Secretary shall adopt standards providing for a
standard unique health identifier for each indi-
vidual, employer, health plan, and health care
provider for use in the medicare information
system. In developing unique health identifiers
for each health plan and health care provider,
the Secretary shall take into account multiple
uses for identifiers and multiple locations and
specialty classifications for health care provid-
ers.
‘‘(B) PENALTY
FOR
IMPROPER
DISCLO-
SURE.—A person who knowingly uses or causes
to be used a unique health identifier under sub-
paragraph (A) for a purpose that is not author-
ized by the Secretary shall—
‘‘(i) be fined not more than $50,000,
imprisoned not more than 1 year, or both;
or
465
‘‘(ii) if the offense is committed under
false pretenses, be fined not more than
$100,000, imprisoned not more than 5
years, or both.
‘‘(3) CODE SETS.—
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Medicare Information Advi-
sory Committee, experts from the private sec-
tor, and Federal and State agencies, shall—
‘‘(i) select code sets for appropriate
data elements from among the code sets
that have been developed by private and
public entities; or
‘‘(ii) establish code sets for such data
elements if no code sets for the data ele-
ments have been developed.
‘‘(B) DISTRIBUTION.—The Secretary shall
establish efficient and low-cost procedures for
distribution (including electronic distribution) of
code sets and modifications made to such code
sets under subsection (c)(2).
‘‘(4) ELECTRONIC SIGNATURE.—
‘‘(A) IN GENERAL.—The Secretary, after
consultation with the Medicare Information Ad-
visory Committee, shall promulgate regulations
466
specifying procedures for the electronic trans-
mission and authentication of signatures, com-
pliance with which will be deemed to satisfy
Federal and State statutory requirements for
written signatures with respect to information
transactions required by this section and writ-
ten signatures on enrollment and disenrollment
forms.
‘‘(B) PAYMENTS FOR SERVICES AND PRE-
MIUMS.—Nothing in this section shall be con-
strued to prohibit the payment of health care
services or health plan premiums by debit, cred-
it, payment card or numbers, or other electronic
means.
‘‘(5) TRANSFER
OF
INFORMATION
BETWEEN
HEALTH PLANS.—The Secretary shall develop rules
and procedures—
‘‘(A) for determining the financial liability
of health plans when health care benefits are
payable under two or more health plans; and
‘‘(B) for transferring among health plans
appropriate standard data elements needed for
the coordination of benefits, the sequential
processing of claims, and other data elements
467
for individuals who have more than one health
plan.
‘‘(6) COORDINATION OF BENEFITS.—If, at the
end of the 5-year period beginning on the date of the
enactment of this section, the Secretary determines
that additional transaction standards for coordinat-
ing benefits are necessary to reduce administrative
costs or duplicative (or inappropriate) payment of
claims, the Secretary shall establish further trans-
action standards for the coordination of benefits be-
tween health plans.
‘‘(7) PROTECTION
OF
TRADE
SECRETS.—Ex-
cept as otherwise required by law, the standards
adopted under this section shall not require disclo-
sure of trade secrets or confidential commercial in-
formation by an entity operating a medicare infor-
mation network.
‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—
‘‘(1) INITIAL STANDARDS.—Not later than 18
months after the date of the enactment of this sec-
tion, the Secretary shall adopt standards relating to
the information transactions, data elements of medi-
care information and security described in sub-
sections (a) and (b).
468
‘‘(2) 
ADDITIONS
AND
MODIFICATIONS
TO
STANDARDS.—
‘‘(A) IN
GENERAL.—The Secretary shall
review the standards adopted under this section
and shall adopt additional or modified stand-
ards, that have been developed or modified by
a standard setting organization, as determined
appropriate, but not more frequently than once
every 12 months. Any addition or modification
to such standards shall be completed in a man-
ner which minimizes the disruption and cost of
compliance.
‘‘(B) ADDITIONS AND MODIFICATIONS TO
CODE SETS.—
‘‘(i) IN
GENERAL.—The Secretary
shall ensure that procedures exist for the
routine maintenance, testing, enhancement,
and expansion of code sets.
‘‘(ii) ADDITIONAL RULES.—If a code
set is modified under this paragraph, the
modified code set shall include instructions
on how data elements of medicare informa-
tion that were encoded prior to the modi-
fication may be converted or translated so
as to preserve the informational value of
470
sections (a) and (b) with respect to any type of in-
formation transaction or data element of medicare
information or with respect to security, a health plan
shall comply with the requirements of this section
with respect to such transaction or data element.
‘‘(4) COMPLIANCE
WITH
MODIFIED
STAND-
ARDS.—If the Secretary adopts a modified standard
under subsection (a) or (b), a health plan shall be
required to comply with the modified standard at
such time as the Secretary determines appropriate
taking into account the time needed to comply due
to the nature and extent of the modification. How-
ever, the time determined appropriate under the pre-
ceding sentence shall be not earlier than the last day
of the 180-day period beginning on the date such
modified standard is adopted. The Secretary may ex-
tend the time for compliance for small health plans,
if the Secretary determines such extension is appro-
priate.
‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY
WITH REQUIREMENTS AND STANDARDS.—
‘‘(1) GENERAL PENALTY.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), the Secretary shall impose on
471
any person that violates a requirement or
standard—
‘‘(i) with respect to medicare informa-
tion transactions, data elements of medi-
care information, or security imposed
under subsection (a) or (b); or
‘‘(ii) with respect to health plans im-
posed under subsection (d);
a penalty of not more than $100 for each such
violation of a specific standard or requirement,
but the total amount imposed for all such viola-
tions of a specific standard or requirement dur-
ing the calendar year shall not exceed $25,000.
‘‘(B) PROCEDURES.—The provisions of
section 1128A (other than subsections (a) and
(b) and the second sentence of subsection (f))
shall apply to the imposition of a civil money
penalty under this paragraph in the same man-
ner as such provisions apply to the imposition
of a penalty under such section 1128A.
‘‘(C) DENIAL
OF
PAYMENT.—Except as
provided in paragraph (2), the Secretary may
deny payment under this title for an item or
service furnished by a person if the person fails
to comply with an applicable requirement or
472
standard for medicare information relating to
that item or service.
‘‘(2) LIMITATIONS.—
‘‘(A) 
NONCOMPLIANCE
NOT
DISCOV-
ERED.—A penalty may not be imposed under
paragraph (1) if it is established to the satisfac-
tion of the Secretary that the person liable for
the penalty did not know, and by exercising rea-
sonable diligence would not have known, that
such person failed to comply with the require-
ment or standard described in paragraph (1).
‘‘(B) FAILURES
DUE
TO
REASONABLE
CAUSE.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), a penalty may not be
imposed under paragraph (1) if—
‘‘(I) the failure to comply was
due to reasonable cause and not to
willful neglect; and
‘‘(II) the failure to comply is cor-
rected during the 30-day period begin-
ning on the first date the person liable
for the penalty knew, or by exercising
reasonable 
diligence 
would 
have
473
known, that the failure to comply oc-
curred.
‘‘(ii) EXTENSION OF PERIOD.—
‘‘(I) NO
PENALTY.—The period
referred to in clause (i)(II) may be ex-
tended as determined appropriate by
the Secretary based on the nature and
extent of the failure to comply.
‘‘(II) ASSISTANCE.—If the Sec-
retary determines that a health plan
failed to comply because such plan
was unable to comply, the Secretary
may provide technical assistance to
such plan during the period described
in clause (i)(II). Such assistance shall
be provided in any manner determined
appropriate by the Secretary.
‘‘(C) REDUCTION.—In the case of a failure
to comply which is due to reasonable cause and
not to willful neglect, any penalty under para-
graph (1) that is not entirely waived under sub-
paragraph (B) may be waived to the extent that
the payment of such penalty would be excessive
relative to the compliance failure involved.
‘‘(f) EFFECT ON STATE LAW.—
474
‘‘(1) GENERAL EFFECT.—
‘‘(A) GENERAL RULE.—Except as provided
in subparagraph (B), a provision, requirement,
or standard under this section shall supersede
any contrary provision of State law, including a
provision of State law that requires medical or
health plan records (including billing informa-
tion) to be maintained or transmitted in written
rather than electronic form.
‘‘(B) EXCEPTIONS.—A provision, require-
ment, or standard under this section shall not
supersede a contrary provision of State law if
the Secretary determines that the provision of
State law should be continued for any reason,
including for reasons relating to prevention of
fraud and abuse or regulation of controlled sub-
stances.
‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in
this section shall be construed to invalidate or limit
the authority, power, or procedures established
under any law providing for the reporting of disease
or injury, child abuse, birth, or death, public health
surveillance, or public health investigation or inter-
vention.
475
‘‘(g) MEDICARE INFORMATION ADVISORY COMMIT-
TEE.—
‘‘(1) ESTABLISHMENT.—There is established a
committee to be known as the Medicare Information
Advisory Committee (in this subsection referred to
as the ‘committee’).
‘‘(2) DUTIES.—The committee shall—
‘‘(A) advise the Secretary in the develop-
ment of standards under this section; and
‘‘(B) be generally responsible for advising
the Secretary and the Congress on the status
and the future of the medicare information net-
work.
‘‘(3) MEMBERSHIP.—
‘‘(A) IN GENERAL.—The committee shall
consist of 9 members of whom—
‘‘(i) 3 shall be appointed by the Presi-
dent;
‘‘(ii) 3 shall be appointed by the
Speaker of the House of Representatives
after consultation with the minority leader
of the House of Representatives; and
‘‘(iii) 3 shall be appointed by the
President pro tempore of the Senate after
476
consultation with the minority leader of
the Senate.
The appointments of the members shall be
made not later than 60 days after the date of
the enactment of this section. The President
shall designate 1 member as the Chair.
‘‘(B) EXPERTISE.—The membership of the
committee shall consist of individuals who are
of recognized standing and distinction in the
areas of information systems, information
networking and integration, consumer health,
or health care financial management, and who
possess the demonstrated capacity to discharge
the duties imposed on the committee.
‘‘(C) TERMS.—Each member of the com-
mittee shall be appointed for a term of 5 years,
except that the members first appointed shall
serve staggered terms such that the terms of
not more than 3 members expire at one time.
‘‘(D) INITIAL
MEETING.—Not later than
30 days after the date on which a majority of
the members have been appointed, the commit-
tee shall hold its first meeting.
‘‘(4) REPORTS.—Not later than 1 year after the
date of the enactment of this section, and annually
477
thereafter, the committee shall submit to Congress
and the Secretary a report regarding—
‘‘(A) the extent to which entities using the
medicare information network are meeting the
standards adopted under this section and work-
ing together to form an integrated network that
meets the needs of its users;
‘‘(B) the extent to which such entities are
meeting the security standards established pur-
suant to this section and the types of penalties
assessed for noncompliance with such stand-
ards;
‘‘(C) any problems that exist with respect
to implementation of the medicare information
network; and
‘‘(D) the extent to which timetables under
this section are being met.
Reports made under this subsection shall be made
available to health care providers, health plans, and
other entities that use the medicare information net-
work to exchange medicare information.
‘‘(h) DEFINITIONS.—For purposes of this section:
‘‘(1) CODE SET.—The term ‘code set’ means
any set of codes used for encoding data elements,
478
such as tables of terms, enrollment information, and
encounter data.
‘‘(2) COORDINATION OF BENEFITS.—The term
‘coordination of benefits’ means determining and co-
ordinating the financial obligations of health plans
when health care benefits are payable under such a
plan and under this title (including under a
MedicarePlus product).
‘‘(3) 
MEDICARE
INFORMATION.—The 
term
‘medicare information’ means any information that
relates to the enrollment of individuals under this
title (including information relating to elections of
MedicarePlus products under section 1805) and the
provision of health benefits (including benefits pro-
vided under such products) under this title.
‘‘(4) MEDICARE INFORMATION NETWORK.—The
term ‘medicare information network’ means the
medicare information system that is formed through
the application of the requirements and standards
established under this section.
‘‘(5) MEDICARE INFORMATION NETWORK SERV-
ICE.—The term ‘medicare information network serv-
ice’ means a public or private entity that—
479
‘‘(A) processes or facilitates the processing
of nonstandard data elements of medicare infor-
mation into standard data elements;
‘‘(B) provides the means by which persons
may meet the requirements of this section; or
‘‘(C) provides specific information process-
ing services.
‘‘(6) HEALTH PLAN.—The term ‘health plan’
means a plan which provides, or pays the cost of,
health benefits. Such term includes the following, or
any combination thereof:
‘‘(A) Part A or part B of this title, and in-
cludes a MedicarePlus product.
‘‘(B) The medicaid program under title
XIX and the MediGrant program under title
XXI.
‘‘(C) A medicare supplemental policy (as
defined in section 1882(g)(1)).
‘‘(D) Worker’s compensation or similar in-
surance.
‘‘(E) Automobile or automobile medical-
payment insurance.
‘‘(F) A long-term care policy, other than a
fixed indemnity policy.
480
‘‘(G) The Federal Employees Health Bene-
fit Plan under chapter 89 of title 5, United
States Code.
‘‘(H) An employee welfare benefit plan, as
defined in section 3(1) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(1)), but only to the extent the plan is es-
tablished or maintained for the purpose of pro-
viding health benefits.
‘‘(7) INDIVIDUALLY
IDENTIFIABLE
MEDICARE
INFORMATION.—The term ‘individually identifiable
medicare information’ means medicare enrollment
information, including demographic information col-
lected from an individual, that—
‘‘(A) is created or received by a health care
provider, health plan, employer, or medicare in-
formation network service, and
‘‘(B) identifies an individual.
‘‘(8) STANDARD SETTING ORGANIZATION.—The
term ‘standard setting organization’ means a stand-
ard setting organization accredited by the American
National Standards Institute.
‘‘(9) 
STANDARD
TRANSACTION.—The 
term
‘standard transaction’ means, when referring to an
information transaction or to data elements of medi-
481
care information, any transaction that meets the re-
quirements and implementation specifications adopt-
ed by the Secretary under subsections (a) and (b).’’.
PART 5—OTHER PROVISIONS RELATING TO
PARTS A AND B
SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF
ITEMS AND SERVICES ASSOCIATED WITH
CERTAIN MEDICAL DEVICES APPROVED FOR
INVESTIGATIONAL USE.
(a) COVERAGE.—Nothing in title XVIII of the Social
Security Act may be construed to prohibit coverage under
part A or part B of the medicare program of items and
services associated with the use of a medical device in the
furnishing of inpatient hospital services (as defined for
purposes of part A of the medicare program) solely on the
grounds that the device is not an approved device, if—
(1) the device is an investigational device; and
(2) the device is used instead of an approved
device.
(b) CLARIFICATION
OF PAYMENT AMOUNT.—Not-
withstanding any other provision of title XVIII of the So-
cial Security Act, the amount of payment made under the
medicare program for any item or service associated with
the use of an investigational device in the furnishing of
inpatient hospital services (as defined for purposes of part
482
A of the medicare program) may not exceed the amount
of the payment which would have been made under the
program for the item or service if the item or service were
associated with the use of an approved device.
(c) DEFINITIONS.—In this section—
(1) the term ‘‘approved device’’ means a medi-
cal device which has been approved for marketing
under pre-market approval under the Federal Food,
Drug, and Cosmetic Act or cleared for marketing
under a 510(k) notice under such Act; and
(2) the term ‘‘investigational device’’ means a
medical device (other than a device described in
paragraph (1)) which is approved for investigational
use under section 520(g) of the Federal Food, Drug,
and Cosmetic Act.
SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.
(a) IN
GENERAL.—Section 1862(a) (42 U.S.C.
1395y(a)), as amended by section 15525(a)(2), section
15609B(a), and section 15701(c)(2)(C), is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(17),
(2) by striking the period at the end of para-
graph (18) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (18) the fol-
lowing new paragraph:
483
‘‘(19) where such expenses are for items or
services, or to assist in the purchase, in whole or in
part, of health benefit coverage that includes items
or services, for the purpose of causing, or assisting
in causing, the death, suicide, euthanasia, or mercy
killing of a person.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to payment for items and serv-
ices furnished on or after the date of the enactment of
this Act.
SEC. 15743. COMPETITIVE BIDDING FOR CERTAIN ITEMS
AND SERVICES.
(a) ESTABLISHMENT
OF
DEMONSTRATION.—Not
later than 1 year after the date of the enactment of this
Act, the Secretary of Health and Human Services shall
establish and operate over a 2-year period a demonstration
project in 2 geographic regions selected by the Secretary
under which (notwithstanding any provision of title XVIII
of the Social Security Act to the contrary) the amount
of payment made under the medicare program for a se-
lected item or service (other than clinical diagnostic lab-
oratory tests) furnished in the region shall be equal to the
price determined pursuant to a competitive bidding proc-
ess which meets the requirements of subsection (b).
484
(b) REQUIREMENTS
FOR COMPETITIVE BIDDING
PROCESS.—The competitive bidding process used under
the demonstration project under this section shall meet
such requirements as the Secretary may impose to ensure
the cost-effective delivery to medicare beneficiaries in the
project region of items and services of high quality.
(c) DETERMINATION OF SELECTED ITEMS OR SERV-
ICES.—The Secretary shall select items and services to be
subject to the demonstration project under this section if
the Secretary determines that the use of competitive bid-
ding with respect to the item or service under the project
will be appropriate and cost-effective. In determining the
items or services to be selected, the Secretary shall consult
with an advisory taskforce which includes representatives
of providers and suppliers of items and services (including
small business providers and suppliers) in each geographic
region in which the project will be effective.
SEC. 15744. DISCLOSURE OF CRIMINAL CONVICTIONS RE-
LATING TO PROVISION OF HOME HEALTH
SERVICES.
(a) 
IN
GENERAL.—Section 
1891 
(42 
U.S.C.
1395bbb) is amended by adding at the end the following
new subsection:
‘‘(g) The Secretary, and each State or local survey
agency or other State agency responsible for monitoring
485
compliance of home health agencies with requirements,
shall make available, upon request of any person, informa-
tion the Secretary or agency has on individuals who have
been convicted of felonies relating to the provision of home
health services.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 15745. REQUIRING RENAL DIALYSIS FACILITIES TO
MAKE SERVICES AVAILABLE ON A 24-HOUR
BASIS.
(a) IN GENERAL.—Section 1881(b)(1) (42 U.S.C.
1395rr(b)(1)) is amended by striking the period at the end
and inserting the following: ‘‘, together with a requirement
(in the case of a renal dialysis facility) that the facility
make institutional dialysis services and supplies available
on a 24-hour basis (either directly or through arrange-
ments with providers of services or other renal dialysis fa-
cilities that meet the requirements of such subparagraph)
and that the facility provide notice informing its patients
of the other providers of services or renal dialysis facilities
(if any) with whom the facility has made such arrange-
ments.’’.
486
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to items and services furnished
on or after January 1, 1996.
Subtitle I—Clinical Laboratories
SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORA-
TORIES.
Section 353(d) of the Public Health Service Act (42
U.S.C. 263a(d)) is amended—
(1) by redesignating paragraphs (2), (3), and
(4) as paragraphs (3), (4), and (5) and by adding
after paragraph (1) the following:
‘‘(2) EXEMPTION OF PHYSICIAN OFFICE LAB-
ORATORIES.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a clinical laboratory in a
physician’s office (including an office of a group
of physicians) which is directed by a physician
and in which examinations and procedures are
either performed by a physician or by individ-
uals supervised by a physician solely as an ad-
junct to other services provided by the physi-
cian’s office is exempt from this section.
‘‘(B) EXCEPTION.—A clinical laboratory
described in subparagraph (A) is not exempt
487
from this section when it performs a pap smear
(Papanicolaou Smear) analysis.
‘‘(C) DEFINITION.—For purposes of sub-
paragraph (A), the term ‘physician’ has the
same meaning as is prescribed for such term by
section 1861(r) of the Social Security Act (42
U.S.C. 1395x(r)).’’;
(2) in paragraph (3) (as so redesignated) by
striking ‘‘(3)’’ and inserting ‘‘(4)’’; and
(3) in paragraphs (4) and (5) (as so redesig-
nated) by striking ‘‘(2)’’ and inserting ‘‘(3)’’.
Subtitle 
J—Lock-Box 
Provisions
for Medicare Part B Savings
from Growth Reductions
SEC. 15901. ESTABLISHMENT OF MEDICARE GROWTH RE-
DUCTION TRUST FUND FOR PART B SAVINGS.
Part B of title XVIII is amended by inserting after
section 1841 the following new section:
‘‘MEDICARE GROWTH REDUCTION TRUST FUND
‘‘SEC. 1841A. (a)(1) There is hereby created on the
books of the Treasury of the United States a trust fund
to be known as the ‘Federal Medicare Growth Reduction
Trust Fund’ (in this section referred to as the ‘Trust
Fund’). The Trust Fund shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1)
and amounts appropriated under paragraph (2).
488
‘‘(2) There are hereby appropriated to the Trust
Fund, out of any amounts in the Treasury not otherwise
appropriated, amounts equivalent to 100 percent of the
Secretary’s estimate of the reductions in outlays under
this part that are attributable to the Medicare Preserva-
tion Act of 1995. The amounts appropriated by the pre-
ceding sentence shall be transferred from time to time (not
less frequently than monthly) from the general fund in the
Treasury to the Trust Fund.
‘‘(3)(A) Subject to subparagraph (B), with respect to
monies transferred to the Trust Fund, no transfers, au-
thorizations of appropriations, or appropriations are per-
mitted.
‘‘(B) Beginning with fiscal year 2003, the Secretary
may expend funds in the Trust Fund to carry out this
title, but only to the extent provided by Congress in ad-
vance through a specific amendment to this section.
‘‘(b) The provisions of subsections (b) through (e) of
section 1841 shall apply to the Trust Fund in the same
manner as they apply to the Federal Supplementary Medi-
cal Insurance Trust Fund, except that the Board of Trust-
ees and Managing Trustee of the Trust Fund shall be
composed of the members of the Board of Trustees and
489
the Managing Trustee, respectively, of the Federal Supple-
mentary Medical Insurance Trust Fund.’’.
Passed the House of Representatives October 19,
1995.
Attest:
Clerk.