I 
108TH CONGRESS 
1ST SESSION 
H. R. 26
To amend title XVIII of the Social Security Act to revise and improve 
payments to providers of services under the Medicare Program, and 
for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 7, 2003
Mr. CARDIN introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Energy 
and Commerce, for a period to be subsequently determined by the Speak-
er, in each case for consideration of such provisions as fall within the ju-
risdiction of the committee concerned 
A BILL 
To amend title XVIII of the Social Security Act to revise 
and improve payments to providers of services under 
the Medicare Program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU-
RITY ACT; REFERENCES TO BIPA AND SEC-
RETARY; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Medicare Payment Restoration and Benefits Improve-
ment Act of 2003’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this 
Act an amendment is expressed in terms of an amendment 
to or repeal of a section or other provision, the reference 
shall be considered to be made to that section or other 
provision of the Social Security Act. 
(c) BIPA; SECRETARY.—In this Act: 
(1) BIPA.—The term ‘‘BIPA’’ means the 
Medicare, Medicaid, and SCHIP Benefits Improve-
ment and Protection Act of 2000, as enacted into 
law by section 1(a)(6) of Public Law 106–554. 
(2) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(d) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; references to BIPA and 
Secretary; table of contents. 
TITLE I—PROVISIONS RELATING TO PART A 
Subtitle A—Inpatient Hospital Services 
Sec. 101. Revision of acute care hospital payment updates. 
Sec. 102. 2-year phased-in increase in the standardized amount in rural and 
small urban areas to achieve a single, uniform standardized 
amount. 
Sec. 103. 3-year increase in level of adjustment for indirect costs of medical 
education (IME). 
Sec. 104. More frequent update in weights used in hospital market basket. 
Sec. 105. Relief for certain non-teaching hospitals. 
Sec. 106. Enhanced disproportionate share hospital (DSH) treatment for rural 
hospitals and urban hospitals with fewer than 100 beds. 
Sec. 107. Recognition of new medical technologies under inpatient hospital 
PPS. 
Sec. 108. Improvements to critical access hospital program. 
Sec. 109. Phase-in of Federal rate for hospitals in Puerto Rico. 
Sec. 110. GAO study on improving the hospital wage index.
Subtitle B—Skilled Nursing Facility Services 
Sec. 121. Payment for covered skilled nursing facility services. 
Subtitle C—Hospice Care 
Sec. 131. Coverage of hospice consultation services. 
Sec. 132. 10 percent increase in payment for hospice care furnished in a fron-
tier area. 
Sec. 133. Rural hospice demonstration project. 
TITLE II—PROVISIONS RELATING TO PART B 
Subtitle A—Physicians’ Services 
Sec. 201. Revision of updates for physicians’ services. 
Sec. 202. Studies on access to physicians’ services. 
Sec. 203. MedPAC report on payment for physicians’ services. 
Sec. 204. 1-year extension of treatment of certain physician pathology services 
under medicare. 
Sec. 205. Physician fee schedule wage index revision. 
Subtitle B—Provisions Relating to Preventive Benefits 
Sec. 211. Coverage of an initial preventive physical examination. 
Sec. 212. Coverage of cholesterol and blood lipid screening. 
Sec. 213. Improved payment for certain mammography services. 
Subtitle C—Hospital Outpatient Department Services 
Sec. 221. Adjustment to limit decline in payment. 
Subtitle D—Other Services 
Sec. 231. Adjustments to local fee schedules for clinical laboratory tests for im-
provement in cervical cancer detection. 
Sec. 232. Payment for ambulance services. 
Sec. 233. 2-year extension of moratorium on therapy caps; provisions relating 
to reports. 
Sec. 234. Renal dialysis services. 
Sec. 235. Waiver of part B late enrollment penalty for certain military retirees; 
special enrollment period. 
Sec. 236. Coverage of immunosuppressive drugs for all medicare beneficiaries. 
TITLE III—PROVISIONS RELATING TO PARTS A AND B 
Subtitle A—Home Health Services 
Sec. 301. Elimination of 15 percent reduction in payment rates under the pro-
spective payment system. 
Sec. 302. Update in home health services. 
Sec. 303. Extension of temporary increase for home health services furnished 
in a rural area. 
Sec. 304. OASIS Task Force; suspension of certain OASIS data collection re-
quirements pending Task Force submittal of report. 
Sec. 305. MedPAC study on medicare margins of home health agencies. 
Subtitle B—Other Provisions
Sec. 311. Modifications to Medicare Payment Advisory Commission (MedPAC). 
Sec. 312. Demonstration project for disease management for certain medicare 
beneficiaries with diabetes. 
Sec. 313. Demonstration project for medical adult day care services. 
Sec. 314. Publication on final written guidance concerning prohibitions against 
discrimination by national origin with respect to health care 
services. 
TITLE IV—PROVISIONS RELATING TO MANAGED CARE 
Sec. 401. Medicare+Choice improvements. 
Sec. 402. Specialized Medicare+Choice plans for special needs beneficiaries. 
Sec. 403. Extension of reasonable cost and SHMO contracts. 
Sec. 404. Extension of municipal health service demonstration projects. 
Sec. 405. Payment by PACE providers for medicare and medicaid services fur-
nished by noncontract providers. 
TITLE V—REGULATORY REDUCTION AND CONTRACTING REFORM 
Subtitle A—Regulatory Reform 
Sec. 501. Construction; definition of supplier. 
Sec. 502. Issuance of regulations. 
Sec. 503. Compliance with changes in regulations and policies. 
Sec. 504. Reports and studies relating to regulatory reform. 
Subtitle B—Contracting Reform 
Sec. 511. Increased flexibility in medicare administration. 
Sec. 512. Requirements for information security for medicare administrative 
contractors. 
Subtitle C—Education and Outreach 
Sec. 521. Provider education and technical assistance. 
Sec. 522. Small provider technical assistance demonstration program. 
Sec. 523. Medicare provider ombudsman; medicare beneficiary ombudsman. 
Sec. 524. Beneficiary outreach demonstration program. 
Subtitle D—Appeals and Recovery 
Sec. 531. Transfer of responsibility for medicare appeals. 
Sec. 532. Process for expedited access to review. 
Sec. 533. Revisions to medicare appeals process. 
Sec. 534. Prepayment review. 
Sec. 535. Recovery of overpayments. 
Sec. 536. Provider enrollment process; right of appeal. 
Sec. 537. Process for correction of minor errors and omissions on claims with-
out pursuing appeals process. 
Sec. 538. Prior determination process for certain items and services; advance 
beneficiary notices. 
Sec. 539. Appeals by providers when there is no other party available. 
Subtitle E—Miscellaneous Provisions 
Sec. 541. Policy development regarding evaluation and management (E & M) 
documentation guidelines.
Sec. 542. Prohibition of incidental fees and required purchase of non-covered 
items or services. 
Sec. 543. Improvement in oversight of technology and coverage. 
Sec. 544. Treatment of hospitals for certain services under medicare secondary 
payor (MSP) provisions. 
Sec. 545. Authorizing use of arrangements with other hospice programs to pro-
vide core hospice services in certain circumstances. 
Sec. 546. Application of OSHA bloodborne pathogens standard to certain hos-
pitals. 
Sec. 547. BIPA-related technical amendments and corrections. 
Sec. 548. Conforming authority to waive a program exclusion. 
Sec. 549. Treatment of certain dental claims. 
Sec. 550. Annual publication of list of national coverage determinations.
TITLE I—PROVISIONS RELATING 
TO PART A 
Subtitle A—Inpatient Hospital 
Services 
SEC. 101. REVISION OF ACUTE CARE HOSPITAL PAYMENT 
UPDATES. 
Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 
U.S.C. 1395ww(b)(3)(B)(i)) is amended to read as fol-
lows: 
‘‘(XVIII) for fiscal year 2003, the market bas-
ket percentage increase for sole community hospitals 
and such increase minus 0.25 percentage points for 
other hospitals, and’’.
SEC. 102. 2-YEAR PHASED-IN INCREASE IN THE STANDARD-
IZED AMOUNT IN RURAL AND SMALL URBAN 
AREAS TO ACHIEVE A SINGLE, UNIFORM 
STANDARDIZED AMOUNT. 
Section 
1886(d)(3)(A)(iv) 
(42 
U.S.C. 
1395ww(d)(3)(A)(iv)) is amended—
(1) by striking ‘‘(iv) For discharges’’ and in-
serting ‘‘(iv)(I) Subject to the succeeding provisions 
of this clause, for discharges’’; and 
(2) by adding at the end the following new sub-
clauses: 
‘‘(II) For discharges occurring during fiscal 
year 2003, the average standardized amount for hos-
pitals located other than in a large urban area shall 
be increased by 1⁄2 of the difference between the av-
erage standardized amount determined under sub-
clause (I) for hospitals located in large urban areas 
for such fiscal year and such amount determined 
(without regard to this subclause) for other hospitals 
for such fiscal year. 
‘‘(III) For discharges occurring in a fiscal year 
beginning with fiscal year 2004, the Secretary shall 
compute an average standardized amount for hos-
pitals located in any area within the United States 
and within each region equal to the average stand-
ardized amount computed for the previous fiscal 
year under this subparagraph for hospitals located 
in a large urban area (or, beginning with fiscal year 
2005, for hospitals located in any area) increased by 
the applicable percentage increase under subsection 
(b)(3)(B)(i).’’.
SEC. 103. 3-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR 
INDIRECT COSTS OF MEDICAL EDUCATION 
(IME). 
(a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42 
U.S.C. 1395ww(d)(5)(B)(ii)) is amended—
(1) in subclause (VI)—
(A) by striking ‘‘fiscal year 2002’’ and in-
serting ‘‘fiscal years 2002, 2003, and 2004’’; 
and 
(B) by striking ‘‘and’’ at the end; 
(2) by redesignating subclause (VII) as sub-
clause (VIII); 
(3) in subclause (VIII) as so redesignated, by 
striking ‘‘2002’’ and inserting ‘‘2005’’; and 
(4) by inserting after subclause (VI) the fol-
lowing new subclause: 
‘‘(VII) during fiscal year 2005, ‘c’ is equal 
to 1.47; and’’. 
(b) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION
OF
STANDARDIZED
AMOUNT.—Section 
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 
amended—
(1) by striking ‘‘1999 or’’ and inserting 
‘‘1999,’’; and
(2) by inserting ‘‘, or of section 103(a) of the 
Medicare Payment Restoration and Benefits Im-
provement Act of 2003’’ after ‘‘2000’’. 
SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN 
HOSPITAL MARKET BASKET. 
(a) MORE FREQUENT UPDATES IN WEIGHTS.—After 
revising the weights used in the hospital market basket 
under section 1886(b)(3)(B)(iii) of the Social Security Act 
(42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the most cur-
rent data available, the Secretary shall establish a fre-
quency for revising such weights in such market basket 
to reflect the most current data available more frequently 
than once every 5 years. 
(b) REPORT.—Not later than October 1, 2003, the 
Secretary shall submit a report to Congress on the fre-
quency established under subsection (a), including an ex-
planation of the reasons for, and options considered, in 
determining such frequency. 
SEC. 105. RELIEF FOR CERTAIN NON-TEACHING HOS-
PITALS. 
(a) IN GENERAL.—In the case of a non-teaching hos-
pital that meets the condition of subsection (b), in each 
of fiscal years 2003, 2004, and 2005 the amount of pay-
ment made to the hospital under section 1886(d) of the 
Social Security Act for discharges occurring during such
fiscal year only shall be increased as though the applicable 
percentage increase (otherwise applicable to discharges oc-
curring 
during 
such 
fiscal 
year 
under 
section 
1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)(i)) had been increased by 5 percentage 
points. The previous sentence shall be applied for each 
such fiscal year separately without regard to its applica-
tion in a previous fiscal year and shall not affect payment 
for discharges for any hospital occurring during a fiscal 
year after fiscal year 2005. 
(b) CONDITION.—A non-teaching hospital meets the 
condition of this subsection if—
(1) it is located in a rural area and the amount 
of the aggregate payments under subsection (d) of 
section 1886 of the Social Security Act for hospitals 
located in rural areas in the State for their cost re-
porting periods beginning during fiscal year 1999 is 
less than the aggregate allowable operating costs of 
inpatient hospital services (as defined in subsection 
(a)(4) of such section) for all subsection (d) hos-
pitals in such areas in such State with respect to 
such cost reporting periods; or 
(2) it is located in an urban area and the 
amount of the aggregate payments under subsection 
(d) of such section for hospitals located in urban
areas in the State for their cost reporting periods 
beginning during fiscal year 1999 is less than 103 
percent of the aggregate allowable operating costs of 
inpatient hospital services (as defined in subsection 
(a)(4) of such section) for all subsection (d) hos-
pitals in such areas in such State with respect to 
such cost reporting periods. 
The amounts under paragraphs (1) and (2) shall be deter-
mined by the Secretary of Health and Human Services 
based on data of the Medicare Payment Advisory Commis-
sion. 
(c) DEFINITIONS.—For purposes of this section: 
(1) 
NON-TEACHING
HOSPITAL.—The 
term 
‘‘non-teaching hospital’’ means, for a cost reporting 
period, a subsection (d) hospital (as defined in sub-
section (d)(1)(B) of section 1886 of the Social Secu-
rity Act, 42 U.S.C. 1395ww)) that is not receiving 
any additional payment under subsection (d)(5)(B) 
of such section or a payment under subsection (h) 
of such section for discharges occurring during the 
period. A subsection (d) hospital that receives addi-
tional payments under subsection (d)(5)(B) or (h) of 
such section shall, for purposes of this section, also 
be treated as a non-teaching hospital unless a chair-
man of a department in the medical school with
which the hospital is affiliated is serving or has been 
appointed as a clinical chief of service in the hos-
pital. 
(2) RURAL; URBAN.—The terms ‘‘rural’’ and 
‘‘urban’’ have the meanings given such terms for 
purposes of section 1886(d) of the Social Security 
Act (42 U.S.C. 1395ww(d)). 
SEC. 106. ENHANCED DISPROPORTIONATE SHARE HOS-
PITAL (DSH) TREATMENT FOR RURAL HOS-
PITALS AND URBAN HOSPITALS WITH FEWER 
THAN 100 BEDS. 
(a) BLENDING OF PAYMENT AMOUNTS.—
(1) IN GENERAL.—Section 1886(d)(5)(F) (42 
U.S.C. 1395ww(d)(5)(F)) is amended by adding at 
the end the following new clause: 
‘‘(xiv)(I) In the case of discharges in a fiscal year 
beginning on or after October 1, 2002, subject to sub-
clause (II), there shall be substituted for the dispropor-
tionate share adjustment percentage otherwise determined 
under clause (iv) (other than subclause (I)) or under 
clause (viii), (x), (xi), (xii), or (xiii), the old blend propor-
tion (specified under subclause (III)) of the dispropor-
tionate share adjustment percentage otherwise determined 
under the respective clause and 100 percent minus such 
old blend proportion of the disproportionate share adjust-
ment percentage determined under clause (vii) (relating 
to large, urban hospitals). 
‘‘(II) Under subclause (I), the disproportionate share 
adjustment percentage shall not exceed 10 percent for a 
hospital that is not classified as a rural referral center 
under subparagraph (C). 
‘‘(III) For purposes of subclause (I), the old blend 
proportion for fiscal year 2003 is 80 percent, for each sub-
sequent year (through 2006) is the old blend proportion 
under this subclause for the previous year minus 20 per-
centage points, and for each year beginning with 2007 is 
0 percent.’’. 
(2) 
CONFORMING
AMENDMENTS.—Section 
1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is 
amended—
(A) in each of subclauses (II), (III), (IV), 
(V), and (VI) of clause (iv), by inserting ‘‘sub-
ject to clause (xiv) and’’ before ‘‘for discharges 
occurring’’; 
(B) in clause (viii), by striking ‘‘The for-
mula’’ and inserting ‘‘Subject to clause (xiv), 
the formula’’; and 
(C) in each of clauses (x), (xi), (xii), and 
(xiii), by striking ‘‘For purposes’’ and inserting 
‘‘Subject to clause (xiv), for purposes’’.
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to discharges occur-
ring on or after October 1, 2002. 
SEC. 107. RECOGNITION OF NEW MEDICAL TECHNOLOGIES 
UNDER INPATIENT HOSPITAL PPS. 
(a) IMPROVING TIMELINESS
OF DATA COLLEC-
TION.—Section 
1886(d)(5)(K) 
(42 
U.S.C. 
1395ww(d)(5)(K)) is amended by adding at the end the 
following new clause: 
‘‘(vii) Under the mechanism under this subpara-
graph, the Secretary shall provide for the addition of new 
diagnosis and procedure codes in April 1 of each year, but 
the addition of such codes shall not require the Secretary 
to adjust the payment (or diagnosis-related group classi-
fication) under this subsection until the fiscal year that 
begins after such date.’’. 
(b) ELIGIBILITY STANDARD.—
(1) MINIMUM
PERIOD
FOR
RECOGNITION
OF 
NEW
TECHNOLOGIES.—Section 
1886(d)(5)(K)(vi) 
(42 U.S.C. 1395ww(d)(5)(K)(vi)) is amended—
(A) by inserting ‘‘(I)’’ after ‘‘(vi)’’; and 
(B) by adding at the end the following new 
subclause: 
‘‘(II) Under such criteria, a service or technology 
shall not be denied treatment as a new service or tech-
nology on the basis of the period of time in which the serv-
ice or technology has been in use if such period ends before 
the end of the 2-to-3-year period that begins on the effec-
tive date of implementation of a code under ICD–9–CM 
(or a successor coding methodology) that enables the iden-
tification of a significant sample of specific discharges in 
which the service or technology has been used.’’. 
(2) ADJUSTMENT
OF
THRESHOLD.—Section 
1886(d)(5)(K)(ii)(I) 
(42 
U.S.C. 
1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
‘‘(applying a threshold specified by the Secretary 
that is the lesser of 50 percent of the national aver-
age standardized amount for operating costs of inpa-
tient hospital services for all hospitals and all diag-
nosis-related groups or one standard deviation for 
the diagnosis-related group involved)’’ after ‘‘is inad-
equate’’. 
(3) CRITERION
FOR
SUBSTANTIAL
IMPROVE-
MENT.—Section 
1886(d)(5)(K)(vi) 
(42 
U.S.C. 
1395ww(d)(5)(K)(vi)), as amended by paragraph 
(1), is further amended by adding at the end the fol-
lowing subclause: 
‘‘(III) The Secretary shall by regulation provide for 
further clarification of the criteria applied to determine 
whether a new service or technology represents an advance
in medical technology that substantially improves the diag-
nosis or treatment of beneficiaries. Under such criteria, 
in determining whether a new service or technology rep-
resents an advance in medical technology that substan-
tially improves the diagnosis or treatment of beneficiaries, 
the Secretary shall deem a service or technology as meet-
ing such requirement if the service or technology is a drug 
or biological that is designated under section 506 or 526 
of the Federal Food, Drug, and Cosmetic Act, approved 
under section 314.510 or 601.41 of title 21, Code of Fed-
eral Regulations, or designated for priority review when 
the marketing application for such drug or biological was 
filed or is a medical device for which an exemption has 
been granted under section 520(m) of such Act, or for 
which priority review has been provided under section 
515(d)(5) of such Act.’’. 
(4) PROCESS
FOR
PUBLIC
INPUT.—Section 
1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as 
amended by paragraph (1), is amended—
(A) in clause (i), by adding at the end the 
following: ‘‘Such mechanism shall be modified 
to meet the requirements of clause (viii).’’; and 
(B) by adding at the end the following new 
clause:
‘‘(viii) The mechanism established pursuant to clause 
(i) shall be adjusted to provide, before publication of a 
proposed rule, for public input regarding whether a new 
service or technology not described in the second sentence 
of clause (vi)(III) represents an advance in medical tech-
nology that substantially improves the diagnosis or treat-
ment of beneficiaries as follows: 
‘‘(I) The Secretary shall make public and peri-
odically update a list of all the services and tech-
nologies for which an application for additional pay-
ment under this subparagraph is pending. 
‘‘(II) The Secretary shall accept comments, rec-
ommendations, and data from the public regarding 
whether the service or technology represents a sub-
stantial improvement. 
‘‘(III) The Secretary shall provide for a meeting 
at which organizations representing hospitals, physi-
cians, medicare beneficiaries, manufacturers, and 
any other interested party may present comments, 
recommendations, and data to the clinical staff of 
the Centers for Medicare & Medicaid Services before 
publication of a notice of proposed rulemaking re-
garding whether service or technology represents a 
substantial improvement.’’.
(c) PREFERENCE FOR USE OF DRG ADJUSTMENT.—
Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is 
further amended by adding at the end the following new 
clause: 
‘‘(ix) Before establishing any add-on payment under 
this subparagraph with respect to a new technology, the 
Secretary shall seek to identify one or more diagnosis-re-
lated groups associated with such technology, based on 
similar clinical or anatomical characteristics and the cost 
of the technology. Within such groups the Secretary shall 
assign an eligible new technology into a diagnosis-related 
group where the average costs of care most closely approx-
imate the costs of care of using the new technology. In 
such case, no add-on payment under this subparagraph 
shall be made with respect to such new technology and 
this clause shall not affect the application of paragraph 
(4)(C)(iii).’’. 
(d) IMPROVEMENT IN PAYMENT FOR NEW TECH-
NOLOGY.—Section 
1886(d)(5)(K)(ii)(III) 
(42 
U.S.C. 
1395ww(d)(5)(K)(ii)(III)) is amended by inserting after 
‘‘the estimated average cost of such service or technology’’ 
the following: ‘‘(based on the marginal rate applied to 
costs under subparagraph (A))’’. 
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—The Secretary shall imple-
ment the amendments made by this section so that 
they apply to classification for fiscal years beginning 
with fiscal year 2004. 
(2) RECONSIDERATIONS OF APPLICATIONS FOR 
FISCAL YEAR 2003 THAT ARE DENIED.—In the case 
of an application for a classification of a medical 
service or technology as a new medical service or 
technology under section 1886(d)(5)(K) of the Social 
Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
filed for fiscal year 2003 and that is denied—
(A) the Secretary shall automatically re-
consider the application as an application for 
fiscal year 2004 under the amendments made 
by this section; and 
(B) the maximum time period otherwise 
permitted for such classification of the service 
or technology shall be extended by 12 months. 
SEC. 108. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL 
PROGRAM. 
(a) REINSTATEMENT OF PERIODIC INTERIM PAY-
MENT
(PIP).—Section 
1815(e)(2) 
(42 
U.S.C. 
1395g(e)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (C);
(2) by adding ‘‘and’’ at the end of subpara-
graph (D); and 
(3) by inserting after subparagraph (D) the fol-
lowing new subparagraph: 
‘‘(E) inpatient critical access hospital services;’’. 
(b) CONDITION FOR APPLICATION OF SPECIAL PHY-
SICIAN PAYMENT ADJUSTMENT.—Section 1834(g)(2) (42 
U.S.C. 1395m(g)(2)) is amended by adding after and 
below subparagraph (B) the following: 
‘‘The Secretary may not require, as a condition for 
applying subparagraph (B) with respect to a critical 
access hospital, that each physician providing profes-
sional services in the hospital must assign billing 
rights with respect to such services, except that such 
subparagraph shall not apply to those physicians 
who have not assigned such billing rights.’’. 
(c) FLEXIBILITY
IN BED LIMITATION
FOR HOS-
PITALS.—Section 1820 (42 U.S.C. 1395i–4) is amended—
(1) in subsection (c)(2)(B)(iii), by inserting 
‘‘subject to paragraph (3)’’ after ‘‘(iii) provides’’; 
(2) by adding at the end of subsection (c) the 
following new paragraph: 
‘‘(3) INCREASE IN MAXIMUM NUMBER OF BEDS 
FOR HOSPITALS WITH STRONG SEASONAL CENSUS 
FLUCTUATIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (C), in the case of a hospital that dem-
onstrates that it meets the standards estab-
lished under subparagraph (B) and has not 
made the election described in subsection 
(f)(2)(A), the bed limitations otherwise applica-
ble under paragraph (2)(B)(iii) and subsection 
(f) shall be increased by 5 beds. 
‘‘(B) STANDARDS.—The Secretary shall 
specify standards for determining whether a 
critical access hospital has sufficiently strong 
seasonal variations in patient admissions to jus-
tify the increase in bed limitation provided 
under subparagraph (A).’’; and 
(3) in subsection (f)—
(A) by inserting ‘‘(1)’’ after ‘‘(f)’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(2)(A) A hospital may elect to treat the reference 
in paragraph (1) to ‘15 beds’ as a reference to ‘25 beds’, 
but only if no more than 10 beds in the hospital are at 
any time used for non-acute care services. A hospital that 
makes such an election is not eligible for the increase pro-
vided under subsection (c)(3)(A).
‘‘(B) The limitations in numbers of beds under the 
first sentence of paragraph (1) are subject to adjustment 
under subsection (c)(3).’’. 
(d) 5-YEAR EXTENSION
OF
THE AUTHORIZATION 
FOR APPROPRIATIONS FOR GRANT PROGRAM.—Section 
1820(j) (42 U.S.C. 1395i–4(j)) is amended by striking 
‘‘through 2002’’ and inserting ‘‘through 2007’’.
(e) PROHIBITION OF RETROACTIVE RECOUPMENT.—
The Secretary shall not recoup (or otherwise seek to re-
cover) overpayments made for outpatient critical access 
hospital services under part B of title XVIII of the Social 
Security Act, for services furnished in cost reporting peri-
ods that began before October 1, 2002, insofar as such 
overpayments are attributable to payment being based on 
80 percent of reasonable costs (instead of 100 percent of 
reasonable costs minus 20 percent of charges). 
(f) EFFECTIVE DATES.—
(1) REINSTATEMENT
OF
PIP.—The amend-
ments made by subsection (a) shall apply to pay-
ments made on or after January 1, 2003. 
(2) PHYSICIAN PAYMENT ADJUSTMENT CONDI-
TION.—The amendment made by subsection (b) 
shall be effective as if included in the enactment of 
section 403(d) of the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999 
(113 Stat. 1501A–371). 
(3) FLEXIBILITY
IN
BED
LIMITATION.—The 
amendments made by subsection (c) shall apply to 
designations made on or after January 1, 2003, but 
shall not apply to critical access hospitals that were 
designated as of such date. 
SEC. 109. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN 
PUERTO RICO. 
Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is 
amended—
(1) in subparagraph (A)—
(A) in clause (i), by striking ‘‘for dis-
charges beginning on or after October 1, 1997, 
50 percent (and for discharges between October 
1, 1987, and September 30, 1997, 75 percent)’’ 
and inserting ‘‘the applicable Puerto Rico per-
centage (specified in subparagraph (E))’’; and 
(B) in clause (ii), by striking ‘‘for dis-
charges beginning in a fiscal year beginning on 
or after October 1, 1997, 50 percent (and for 
discharges between October 1, 1987, and Sep-
tember 30, 1997, 25 percent)’’ and inserting 
‘‘the applicable Federal percentage (specified in 
subparagraph (E))’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(E) For purposes of subparagraph (A), for dis-
charges occurring—
‘‘(i) between October 1, 1987, and September 
30, 1997, the applicable Puerto Rico percentage is 
75 percent and the applicable Federal percentage is 
25 percent; 
‘‘(ii) on or after October 1, 1997, and before 
October 1, 2003, the applicable Puerto Rico percent-
age is 50 percent and the applicable Federal per-
centage is 50 percent; 
‘‘(iii) during fiscal year 2004, the applicable 
Puerto Rico percentage is 45 percent and the appli-
cable Federal percentage is 55 percent; 
‘‘(iv) during fiscal year 2005, the applicable 
Puerto Rico percentage is 40 percent and the appli-
cable Federal percentage is 60 percent; 
‘‘(v) during fiscal year 2006, the applicable 
Puerto Rico percentage is 35 percent and the appli-
cable Federal percentage is 65 percent; 
‘‘(vi) during fiscal year 2007, the applicable 
Puerto Rico percentage is 30 percent and the appli-
cable Federal percentage is 70 percent; and
‘‘(vii) on or after October 1, 2007, the applica-
ble Puerto Rico percentage is 25 percent and the ap-
plicable Federal percentage is 75 percent.’’. 
SEC. 110. GAO STUDY ON IMPROVING THE HOSPITAL WAGE 
INDEX. 
(a) STUDY.—
(1) IN GENERAL.—The Comptroller General of 
the United States shall conduct a study on the im-
provements that can be made in the measurement of 
regional differences in hospital wages reflected in the 
hospital wage index under section 1886(d) of the So-
cial Security Act (42 U.S.C. 1395ww(d)). 
(2) EXAMINATION OF USE OF METROPOLITAN 
STATISTICAL AREAS (MSAS).—The study shall spe-
cifically examine the use of metropolitan statistical 
areas for purposes of computing and applying the 
wage index and whether the boundaries of such 
areas accurately reflect local labor markets. In addi-
tion, the study shall examine whether regional in-
equities are created as a result of infrequent updates 
of such boundaries and policies of the Bureau of the 
Census relating to commuting criteria. 
(3) WAGE DATA.—The study shall specifically 
examine the portions of the hospital cost reports re-
lating to wages, and methods for improving the ac-
curacy of the wage data and for reducing inequities 
resulting from differences among hospitals in the re-
porting of wage data. 
(b) CONSULTATION WITH OMB.—The Comptroller 
General shall consult with the Director of Office of Man-
agement and Budget in conducting the study under sub-
section (a)(2). 
(c) REPORT.—Not later than July 1, 2003, the 
Comptroller General shall submit to Congress a report on 
the study conducted under subsection (a) and shall include 
in the report such recommendations as may be appropriate 
on—
(1) changes in the definition of labor market 
areas used for purposes of the area wage index 
under section 1886 of the Social Security Act; and 
(2) improvements in methods for the collection 
of wage data. 
Subtitle B—Skilled Nursing 
Facility Services 
SEC. 121. PAYMENT FOR COVERED SKILLED NURSING FA-
CILITY SERVICES. 
(a) 2-YEAR EXTENSION OF TEMPORARY INCREASE 
IN NURSING COMPONENT OF PPS FEDERAL RATE.—Sec-
tion 312(a) of BIPA is amended by striking ‘‘, and before
October 1, 2002’’ and inserting ‘‘and before October 1, 
2004’’. 
(b) ADJUSTMENT
TO
RUGS
FOR
AIDS RESI-
DENTS.—
(1) IN GENERAL.—Paragraph (12) of section 
1888(e) (42 U.S.C. 1395yy(e)) is amended to read 
as follows: 
‘‘(12) ADJUSTMENT
FOR
RESIDENTS
WITH 
AIDS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of a resident of a skilled 
nursing facility who is afflicted with acquired 
immune deficiency syndrome (AIDS), the per 
diem amount of payment otherwise applicable 
shall be increased by 128 percent to reflect in-
creased costs associated with such residents. 
‘‘(B) SUNSET.—Subparagraph (A) shall 
not apply on and after such date as the Sec-
retary certifies that there is an appropriate ad-
justment in the case mix under paragraph 
(4)(G)(i) to compensate for the increased costs 
associated with residents described in such sub-
paragraph.’’.
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to services furnished on 
or after October 1, 2003. 
(c) CMS STUDY AND REPORT.—
(1) STUDY.—The Secretary shall conduct a 
study to review the adequacy of funding under the 
medicaid program under title XIX of the Social Se-
curity Act for nursing facility care. 
(2) REPORT.—Not later than one year after the 
date of the enactment of this Act, the Secretary 
shall submit to Congress a report on the study con-
ducted under paragraph (1). The report shall in-
clude recommendations of the Secretary with respect 
to structural reform of funding systems to ensure 
quality nursing facility services for those eligible for 
benefits under the medicaid program. 
Subtitle C—Hospice Care 
SEC. 131. COVERAGE OF HOSPICE CONSULTATION SERV-
ICES. 
(a) COVERAGE OF HOSPICE CONSULTATION SERV-
ICES.—Section 1812(a) (42 U.S.C. 1395d(a)) is amend-
ed—
(1) by striking ‘‘and’’ at the end of paragraph 
(3);
(2) by striking the period at the end of para-
graph (4) and inserting ‘‘; and’’; and 
(3) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) for individuals who are terminally ill, have 
not made an election under subsection (d)(1), and 
have not previously received services under this 
paragraph, services that are furnished by a physi-
cian who is either the medical director or an em-
ployee of a hospice program and that consist of—
‘‘(A) an evaluation of the individual’s need 
for pain and symptom management; 
‘‘(B) counseling the individual with respect 
to end-of-life issues and care options; and 
‘‘(C) advising the individual regarding ad-
vanced care planning.’’. 
(b) PAYMENT.—Section 1814(i) (42 U.S.C. l395f(i)) 
is amended by adding at the end the following new para-
graph: 
‘‘(4) The amount paid to a hospice program with re-
spect to the services under section 1812(a)(5) for which 
payment may be made under this part shall be equal to 
an amount equivalent to the amount established for an 
office or other outpatient visit for evaluation and manage-
ment associated with presenting problems of moderate se-
verity under the fee schedule established under section 
1848(b), other than the portion of such amount attrib-
utable to the practice expense component.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
1861(dd)(2)(A)(i) (42 U.S.C. 1395x(dd)(2)(A)(i)) is 
amended by inserting before the comma at the end the 
following: ‘‘and services described in section 1812(a)(5)’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services provided by a hospice 
program on or after January 1, 2004. 
SEC. 132. 10 PERCENT INCREASE IN PAYMENT FOR HOS-
PICE CARE FURNISHED IN A FRONTIER AREA. 
(a) IN GENERAL.—Section 1814(i)(1) (42 U.S.C. 
1395f(i)(1)) is amended by adding at the end the following 
new subparagraph: 
‘‘(D) With respect to hospice care furnished in a fron-
tier area on or after January 1, 2003, and before January 
1, 2008, the payment rates otherwise established for such 
care shall be increased by 10 percent. For purposes of this 
subparagraph, the term ‘frontier area’ means a county in 
which the population density is less than 7 persons per 
square mile.’’. 
(b) REPORT ON COSTS.—Not later than January 1, 
2007, the Comptroller General of the United States shall 
submit to Congress a report on the costs of furnishing
hospice care in frontier areas. Such report shall include 
recommendations regarding the appropriateness of extend-
ing, and modifying, the payment increase provided under 
the amendment made by subsection (a). 
SEC. 133. RURAL HOSPICE DEMONSTRATION PROJECT. 
(a) IN GENERAL.—The Secretary shall conduct a 
demonstration project for the delivery of hospice care to 
medicare beneficiaries in rural areas. Under the project 
medicare beneficiaries who are unable to receive hospice 
care in the home for lack of an appropriate caregiver are 
provided such care in a facility of 20 or fewer beds which 
offers, within its walls, the full range of services provided 
by hospice programs under section 1861(dd) of the Social 
Security Act (42 U.S.C. 1395x(dd)). 
(b) SCOPE OF PROJECT.—The Secretary shall con-
duct the project under this section with respect to no more 
than 3 hospice programs over a period of not longer than 
5 years each. 
(c) COMPLIANCE WITH CONDITIONS.—Under the 
demonstration project—
(1) the hospice program shall comply with oth-
erwise applicable requirements, except that it shall 
not be required to offer services outside of the home 
or 
to 
meet 
the 
requirements 
of 
section 
1861(dd)(2)(A)(iii) of the Social Security Act; and
(2) payments for hospice care shall be made at 
the rates otherwise applicable to such care under 
title XVIII of such Act. 
The Secretary may require the program to comply with 
such additional quality assurance standards for its provi-
sion of services in its facility as the Secretary deems ap-
propriate. 
(d) REPORT.—Upon completion of the project, the 
Secretary shall submit a report to Congress on the project 
and shall include in the report recommendations regarding 
extension of such project to hospice programs serving 
rural areas.
TITLE II—PROVISIONS 
RELATING TO PART B 
Subtitle A—Physicians’ Services 
SEC. 201. REVISION OF UPDATES FOR PHYSICIANS’ SERV-
ICES. 
(a) UPDATE FOR 2003 THROUGH 2005.—
(1) IN GENERAL.—Section 1848(d) (42 U.S.C. 
1395w–4(d)) is amended by adding at the end the 
following new paragraphs: 
‘‘(5) UPDATE
FOR
2003.—The update to the 
single conversion factor established in paragraph 
(1)(C) for 2003 is 2 percent.
‘‘(6) SPECIAL
RULES
FOR
UPDATE
FOR
2004 
AND 2005.—The following rules apply in determining 
the update adjustment factors under paragraph 
(4)(B) for 2004 and 2005: 
‘‘(A) USE OF 2002 DATA IN DETERMINING 
ALLOWABLE COSTS.—
‘‘(i) The reference in clause (ii)(I) of 
such paragraph to April 1, 1996, is 
deemed to be a reference to January 1, 
2002. 
‘‘(ii) The allowed expenditures for 
2002 is deemed to be equal to the actual 
expenditures for physicians’ services fur-
nished during 2002, as estimated by the 
Secretary. 
‘‘(B) 1 PERCENTAGE POINT INCREASE IN 
GDP UNDER SGR.—The annual average percent-
age growth in real gross domestic product per 
capita under subsection (f)(2)(C) for each of 
2003, 2004, and 2005 is deemed to be in-
creased by 1 percentage point.’’. 
(2) 
CONFORMING
AMENDMENT.—Paragraph 
(4)(B) of such section is amended, in the matter be-
fore clause (i), by inserting ‘‘and paragraph (6)’’ 
after ‘‘subparagraph (D)’’.
(3) NOT TREATED AS CHANGE IN LAW AND 
REGULATION IN SUSTAINABLE GROWTH RATE DE-
TERMINATION.—The amendments made by this sub-
section shall not be treated as a change in law for 
purposes of applying section 1848(f)(2)(D) of the 
Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)). 
(b) USE OF 10-YEAR ROLLING AVERAGE IN COM-
PUTING GROSS DOMESTIC PRODUCT.—
(1) IN
GENERAL.—Section 1848(f)(2)(C) (42 
U.S.C. 1395w–4(f)(2)(C)) is amended—
(A) by striking ‘‘projected’’ and inserting 
‘‘annual average’’; and 
(B) by striking ‘‘from the previous applica-
ble period to the applicable period involved’’ 
and inserting ‘‘during the 10-year period ending 
with the applicable period involved’’.
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to computations of the 
sustainable growth rate for years beginning with 
2002. 
(c) ELIMINATION OF TRANSITIONAL ADJUSTMENT.—
Section 1848(d)(4)(F) (42 U.S.C. 1395w–4(d)(4)(F)) is 
amended by striking ‘‘subparagraph (A)’’ and all that fol-
lows and inserting ‘‘subparagraph (A), for each of 2001 
and 2002, of ¥0.2 percent.’’.
(d) GAO STUDY OF MEDICARE PAYMENT FOR INHA-
LATION THERAPY.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study to examine the 
adequacy of current reimbursements for inhalation 
therapy under the medicare program. 
(2) REPORT.—Not later than July 1, 2003, the 
Comptroller General shall submit to Congress a re-
port on the study conducted under paragraph (1). 
SEC. 202. STUDIES ON ACCESS TO PHYSICIANS’ SERVICES. 
(a) GAO STUDY ON BENEFICIARY ACCESS TO PHYSI-
CIANS’ SERVICES.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study on access of 
medicare beneficiaries to physicians’ services under 
the medicare program. The study shall include—
(A) an assessment of the use by bene-
ficiaries of such services through an analysis of 
claims submitted by physicians for such services 
under part B of the medicare program; 
(B) an examination of changes in the use 
by beneficiaries of physicians’ services over 
time;
(C) an examination of the extent to which 
physicians are not accepting new medicare 
beneficiaries as patients. 
(2) REPORT.—Not later than 18 months after 
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report on 
the study conducted under paragraph (1). The re-
port shall include a determination whether—
(A) data from claims submitted by physi-
cians under part B of the medicare program in-
dicate potential access problems for medicare 
beneficiaries in certain geographic areas; and 
(B) access by medicare beneficiaries to 
physicians’ services may have improved, re-
mained constant, or deteriorated over time.
(b) STUDY
AND REPORT
ON SUPPLY
OF PHYSI-
CIANS.—
(1) STUDY.—The Secretary shall request the 
Institute of Medicine of the National Academy of 
Sciences to conduct a study on the adequacy of the 
supply of physicians (including specialists) in the 
United States and the factors that affect such sup-
ply. 
(2) REPORT TO CONGRESS.—Not later than 2 
years after the date of enactment of this section, the
Secretary shall submit to Congress a report on the 
results of the study described in paragraph (1), in-
cluding any recommendations for legislation. 
SEC. 203. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS’ 
SERVICES. 
Not later than 1 year after the date of the enactment 
of this Act, the Medicare Payment Advisory Commission 
shall submit to Congress a report on the effect of refine-
ments to the practice expense component of payments for 
physicians’ services, after the transition to a full resource-
based payment system in 2002, under section 1848 of the 
Social Security Act (42 U.S.C. 1395w–4). Such report 
shall examine the following matters by physician specialty: 
(1) The effect of such refinements on payment 
for physicians’ services. 
(2) The interaction of the practice expense com-
ponent with other components of and adjustments to 
payment for physicians’ services under such section. 
(3) The appropriateness of the amount of com-
pensation by reason of such refinements. 
(4) The effect of such refinements on access to 
care by medicare beneficiaries to physicians’ serv-
ices. 
(5) The effect of such refinements on physician 
participation under the medicare program.
SEC. 204. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN 
PHYSICIAN PATHOLOGY SERVICES UNDER 
MEDICARE. 
Section 542(c) of BIPA is amended by striking ‘‘2-
year period’’ and inserting ‘‘3-year period’’.
SEC. 205. PHYSICIAN FEE SCHEDULE WAGE INDEX REVI-
SION. 
(a) INDEX REVISION.—
(1) IN GENERAL.—Subject to paragraph (2), 
notwithstanding any other provision of law, for pur-
poses of payment under the physician fee schedule 
under section 1848 of the Social Security Act (42 
U.S.C. 1395w–4) for physicians’ services furnished 
during 2004, in no case may the work geographic 
index 
otherwise 
calculated 
under 
subsection 
(e)(1)(A)(iii) of such section be less than 0.985. 
(2) SECRETARIAL DISCRETION.—Paragraph (1) 
shall not take effect or be in force if the Secretary 
determines, taking into account the report of the 
Comptroller General under subsection (b)(2), that 
there is no sound economic rationale for the imple-
mentation of such paragraph. 
(3) EXEMPTION FROM LIMITATION ON ANNUAL 
ADJUSTMENTS.—Any increase in expenditures at-
tributable to paragraph (1) during 2004 shall not be 
taken 
into 
account 
in 
applying 
section
1848(c)(2)(B)(ii)(II) of the Social Security Act (42 
U.S.C. 1395w–4(c)(2)(B)(ii)(II)) for that year. 
(b) GAO REPORT.—
(1) EVALUATION.—As part of the study on geo-
graphic differences in payments for physicians’ serv-
ices conducted under section 309, the Comptroller 
General shall evaluate the following: 
(A) Whether there is a sound economic 
basis for the implementation of the adjustment 
under subsection (a)(1) in those areas in which 
the adjustment applies. 
(B) The effect of such adjustment on phy-
sician location and retention in areas affected 
by such adjustment, taking into account—
(i) differences in recruitment costs 
and retention rates for physicians, includ-
ing specialists, between large urban areas 
and other areas; and 
(ii) the mobility of physicians, includ-
ing specialists, over the last decade. 
(C) The appropriateness of establishing a 
floor of 1.0 for the work geographic index. 
(2) REPORT.—By not later than September 1, 
2003, the Comptroller General shall submit to Con-
sistent with the recommendations of the United States 
Preventive Services Task Force.’’. 
(c) WAIVER OF DEDUCTIBLE AND COINSURANCE.—
(1) DEDUCTIBLE.—The first sentence of sec-
tion 1833(b) (42 U.S.C. 1395l(b)) is amended—
(A) by striking ‘‘and’’ before ‘‘(6)’’, and 
(B) by inserting before the period at the 
end the following: ‘‘, and (7) such deductible 
shall not apply with respect to an initial preven-
tive physical examination (as defined in section 
1861(ww))’’. 
(2) COINSURANCE.—Section 1833(a)(1) (42 
U.S.C. 1395l(a)(1)) is amended—
(A) in clause (N), by inserting ‘‘(or 100 
percent in the case of an initial preventive phys-
ical 
examination, 
as 
defined 
in 
section 
1861(ww))’’ after ‘‘80 percent’’; and 
(B) in clause (O), by inserting ‘‘(or 100 
percent in the case of an initial preventive phys-
ical 
examination, 
as 
defined 
in 
section 
1861(ww))’’ after ‘‘80 percent’’. 
(d) PAYMENT AS PHYSICIANS’ SERVICES.—Section 
1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by in-
serting ‘‘(2)(W),’’ after ‘‘(2)(S),’’.
(e) OTHER CONFORMING AMENDMENTS.—Section 
1862(a) (42 U.S.C. 1395y(a)) is amended—
(1) in paragraph (1)—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (H); 
(B) by striking the semicolon at the end of 
subparagraph (I) and inserting ‘‘, and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(J) in the case of an initial preventive physical 
examination, which is performed not later than 1 
year after the date the individual’s first coverage pe-
riod begins under part B;’’; and 
(2) in paragraph (7), by striking ‘‘or (H)’’ and 
inserting ‘‘(H), or (J)’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services furnished on or after 
January 1, 2004, but only for individuals whose coverage 
period begins on or after such date. 
SEC. 212. COVERAGE OF CHOLESTEROL AND BLOOD LIPID 
SCREENING. 
(a) COVERAGE.—Section 1861(s)(2) (42 U.S.C. 
1395x(s)(2)), as amended by section 211(a), is amended—
(1) in subparagraph (V), by striking ‘‘and’’ at 
the end;
(2) in subparagraph (W), by inserting ‘‘and’’ at 
the end; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(X) cholesterol and other blood lipid 
screening tests (as defined in subsection 
(XX));’’. 
(b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 
1395x), as amended by section 211(b), is amended by add-
ing at the end the following new subsection:
‘‘Cholesterol and Other Blood Lipid Screening Tests 
‘‘(xx)(1) The term ‘cholesterol and other blood lipid 
screening tests’ means diagnostic testing of cholesterol 
and other lipid levels of the blood for the purpose of early 
detection of abnormal cholesterol and other lipid levels. 
‘‘(2) The Secretary shall establish standards, in con-
sultation with appropriate organizations, regarding the 
frequency and type of cholesterol and other blood lipid 
screening tests, except that such frequency may not be 
more often than once every 2 years.’’. 
(c) FREQUENCY.—Section 1862(a)(1) (42 U.S.C. 
1395y(a)(1)), as amended by section 514(e), is amend-
ed—
(1) by striking ‘‘and’’ at the end of subpara-
graph (I);
(2) by striking the semicolon at the end of sub-
paragraph (J) and inserting ‘‘; and’’; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(K) in the case of a cholesterol and other 
blood lipid screening tests (as defined in section 
1861(xx)(1)), which is performed more frequently 
than is covered under section 1861(xx)(2).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to tests furnished on or after Janu-
ary 1, 2004.
SEC. 213. IMPROVED PAYMENT FOR CERTAIN MAMMOG-
RAPHY SERVICES. 
(a) EXCLUSION FROM OPD FEE SCHEDULE.—Sec-
tion 1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is 
amended by inserting before the period at the end the fol-
lowing: ‘‘and does not include screening mammography (as 
defined in section 1861(jj)) and unilateral and bilateral 
diagnostic mammography’’. 
(b) ADJUSTMENT TO TECHNICAL COMPONENT.—For 
diagnostic mammography performed on or after January 
1, 2004, for which payment is made under the physician 
fee schedule under section 1848 of the Social Security Act 
(42 U.S.C. 1395w–4), the Secretary, based on the most 
recent cost data available, shall provide for an appropriate
adjustment in the payment amount for the technical com-
ponent of the diagnostic mammography. 
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to mammography performed on 
or after January 1, 2004. 
Subtitle C—Hospital Outpatient 
Department Services 
SEC. 221. ADJUSTMENT TO LIMIT DECLINE IN PAYMENT. 
Section 1833(t)(7) (42 U.S.C. 1395l(t)(7)) is amend-
ed—
(1) in the heading, by striking ‘‘TRANSITIONAL 
ADJUSTMENT’’ and inserting ‘‘ADJUSTMENT’’; 
(2) in subparagraph (A)—
(A) in the heading, by striking ‘‘BEFORE 
2002’’ and inserting ‘‘IN GENERAL’’; 
(B) in the matter preceding clause (i)—
(i) by striking ‘‘subparagraph (D)’’ 
and inserting ‘‘subparagraph (B)’’; 
(ii) by striking ‘‘furnished before Jan-
uary 1, 2002,’’; and 
(iii) by striking ‘‘subparagraph (E)’’ 
and inserting ‘‘subparagraph (C)’’; and 
(C) in clause (i), by striking ‘‘subpara-
graph (F)’’ and inserting ‘‘subparagraph (D)’’;
(3) by striking subparagraph (D) and inserting 
the following new subparagraph: 
‘‘(D) HOLD
HARMLESS
PROVISIONS
FOR 
CANCER AND CHILDREN’S HOSPITALS.—In the 
case of a hospital that is described in clause 
(iii) or (v) of section 1886(d)(1)(B), for covered 
OPD services—
‘‘(i) that are furnished on or after the 
date on which payment is first made under 
this subsection; and 
‘‘(ii) for which the PPS amount is less 
than the pre-BBA amount (or for services 
furnished on or after January 1, 2002, is 
less than the greater of the pre-BBA 
amount or the reasonable costs incurred in 
furnishing such services), 
the amount of payment under this subsection 
shall be increased by the amount of such dif-
ference.’’;
(4) in subparagraph (F)(ii)(I), by striking 
‘‘subparagraph (E)’’ and inserting ‘‘subparagraph 
(C)’’; and 
(5) by striking subparagraphs (B) and (C) and 
redesignating subparagraphs (D), (E), (F), (G),
(H), and (I) as subparagraphs (B), (C), (D), (E), 
(F), and (G), respectively. 
Subtitle D—Other Services 
SEC. 231. ADJUSTMENTS TO LOCAL FEE SCHEDULES FOR 
CLINICAL 
LABORATORY 
TESTS 
FOR 
IM-
PROVEMENT IN CERVICAL CANCER DETEC-
TION. 
Section 1833(h)(2) (42 U.S.C. 1395l(h)(2)) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(C) Notwithstanding any other provision of law, in 
the case of a diagnostic test for the detection of cervical 
cancer utilizing automated thin layer preparation tech-
niques for specimens collected in fluid medium, and for 
which a national limitation amount has been set pursuant 
to the parenthetical in paragraph (4)(B)(viii), furnished 
on or after July 1, 2003, and before June 30, 2005, the 
Secretary shall permit carriers and medicare administra-
tive contractors, as the case may be, to raise their local 
fee schedule amount for purposes of determining payment 
for such tests under this section, up to, but not to exceed 
the national limitation amount previously established for 
that test. Any such adjustment shall not affect such na-
tional limitation amount.’’.
SEC. 232. PAYMENT FOR AMBULANCE SERVICES. 
(a) PHASE-IN PROVIDING FLOOR USING BLEND OF 
FEE SCHEDULE AND REGIONAL FEE SCHEDULES.—Sec-
tion 1834(l) (42 U.S.C. 1395m(l)) is amended—
(1) in paragraph (2)(E), by inserting ‘‘con-
sistent with paragraph (10)’’ after ‘‘in an efficient 
and fair manner’’;
(2) by redesignating the paragraph (8) added 
by section 221(a) of BIPA as paragraph (9); and 
(3) by adding at the end the following new 
paragraph: 
‘‘(10) PHASE-IN
PROVIDING
FLOOR
USING 
BLEND
OF
FEE
SCHEDULE
AND
REGIONAL
FEE 
SCHEDULES.—In carrying out the phase-in under 
paragraph (2)(E) for each level of service furnished 
in a year before January 1, 2007, the portion of the 
payment amount that is based on the fee schedule 
shall not be less than the following blended rate of 
the fee schedule under paragraph (1) and of a re-
gional fee schedule for the region involved: 
‘‘(A) For 2003, the blended rate shall be 
based 20 percent on the fee schedule under 
paragraph (1) and 80 percent on the regional 
fee schedule. 
‘‘(B) For 2004, the blended rate shall be 
based 40 percent on the fee schedule under
paragraph (1) and 60 percent on the regional 
fee schedule. 
‘‘(C) For 2005, the blended rate shall be 
based 60 percent on the fee schedule under 
paragraph (1) and 40 percent on the regional 
fee schedule. 
‘‘(D) For 2006, the blended rate shall be 
based 80 percent on the fee schedule under 
paragraph (1) and 20 percent on the regional 
fee schedule. 
For purposes of this paragraph, the Secretary shall 
establish a regional fee schedule for each of the 9 
Census divisions using the methodology (used in es-
tablishing the fee schedule under paragraph (1)) to 
calculate a regional conversion factor and a regional 
mileage payment rate and using the same payment 
adjustments and the same relative value units as 
used in the fee schedule under such paragraph.’’. 
(b) ADJUSTMENT IN PAYMENT FOR CERTAIN LONG 
TRIPS.—Section 1834(l), as amended by subsection (a), 
is further amended by adding at the end the following new 
paragraph: 
‘‘(11) ADJUSTMENT IN PAYMENT FOR CERTAIN 
LONG
TRIPS.—In the case of ground ambulance 
services furnished on or after January 1, 2003, and
before January 1, 2008, regardless of where the 
transportation originates, the fee schedule estab-
lished under this subsection shall provide that, with 
respect to the payment rate for mileage for a trip 
above 50 miles the per mile rate otherwise estab-
lished shall be increased by 1⁄4 of the payment per 
mile otherwise applicable to such miles.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to ambulance services furnished 
on or after January 1, 2003. 
SEC. 233. 2-YEAR EXTENSION OF MORATORIUM ON THER-
APY CAPS; PROVISIONS RELATING TO RE-
PORTS. 
(a) 2-YEAR EXTENSION OF MORATORIUM ON THER-
APY CAPS.—Section 1833(g)(4) (42 U.S.C. 1395l(g)(4)) 
is amended by striking ‘‘and 2002’’ and inserting ‘‘2002, 
2003, and 2004’’. 
(b) PROMPT SUBMISSION OF OVERDUE REPORTS ON 
PAYMENT AND UTILIZATION OF OUTPATIENT THERAPY 
SERVICES.—Not later than December 31, 2002, the Sec-
retary shall submit to Congress the reports required under 
section 4541(d)(2) of the Balanced Budget Act of 1997 
(relating to alternatives to a single annual dollar cap on 
outpatient therapy) and under section 221(d) of the Medi-
care, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (relating to utilization patterns for outpatient 
therapy).
(c) IDENTIFICATION OF CONDITIONS AND DISEASES 
JUSTIFYING WAIVER OF THERAPY CAP.—
(1) STUDY.—The Secretary shall request the 
Institute of Medicine of the National Academy of 
Sciences to identify conditions or diseases that 
should justify conducting an assessment of the need 
to waive the therapy caps under section 1833(g)(4) 
of the Social Security Act (42 U.S.C. 1395l(g)(4)). 
(2) REPORTS TO CONGRESS.—Not later than 
September 1, 2003, the Secretary shall submit to 
Congress a preliminary report on the conditions and 
diseases identified under paragraph (1) and not later 
than December 31, 2003, a final report on the con-
ditions and diseases so identified. 
(d) GAO STUDY OF PATIENT ACCESS TO PHYSICAL 
THERAPIST SERVICES.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study on access to 
physical therapist services in States authorizing such 
services without a physician referral and in States 
that require such a physician referral. The study 
shall—
(A) examine the use of and referral pat-
terns for physical therapist services for patients 
age 50 and older in States that authorize such 
services without a physician referral and in 
States that require such a physician referral; 
(B) examine the use of and referral pat-
terns for physical therapist services for patients 
who are medicare beneficiaries; 
(C) examine the potential effect of prohib-
iting a physician from referring patients to 
physical therapy services owned by the physi-
cian and provided in the physician’s office; 
(D) examine the delivery of physical thera-
pists’ services within the facilities of Depart-
ment of Defense; and 
(E) analyze the potential impact on medi-
care beneficiaries and on expenditures under 
the medicare program of eliminating the need 
for a physician referral and physician certifi-
cation for physical therapist services under the 
medicare program. 
(2) REPORT.—The Comptroller General shall 
submit to Congress a report on the study conducted 
under paragraph (1) by not later than 1 year after 
the date of the enactment of this Act.
SEC. 234. RENAL DIALYSIS SERVICES. 
(a) REPORT ON DIFFERENCES IN COSTS IN DIF-
FERENT SETTINGS.—Not later than 1 year after the date 
of the enactment of this Act, the Comptroller General of 
the United States shall submit to Congress a report con-
taining—
(1) an analysis of the differences in costs of 
providing renal dialysis services under the medicare 
program in home settings and in facility settings; 
(2) an assessment of the percentage of overhead 
costs in home settings and in facility settings; and 
(3) an evaluation of whether the charges for 
home dialysis supplies and equipment are reasonable 
and necessary. 
(b) RESTORING COMPOSITE RATE EXCEPTIONS FOR 
PEDIATRIC FACILITIES.—
(1) IN GENERAL.—Section 422(a)(2) of BIPA 
is amended—
(A) in subparagraph (A), by striking ‘‘and 
(C)’’ and inserting ‘‘, (C), and (D)’’; 
(B) in subparagraph (B), by striking ‘‘In 
the case’’ and inserting ‘‘Subject to subpara-
graph (D), in the case’’; and 
(C) by adding at the end the following new 
subparagraph:
‘‘(D) INAPPLICABILITY TO PEDIATRIC FA-
CILITIES.—Subparagraphs (A) and (B) shall 
not apply, as of October 1, 2002, to pediatric 
facilities that do not have an exception rate de-
scribed in subparagraph (C) in effect on such 
date. For purposes of this subparagraph, the 
term ‘pediatric facility’ means a renal facility at 
least 50 percent of whose patients are individ-
uals under 18 years of age.’’. 
(2) CONFORMING
AMENDMENT.—The fourth 
sentence 
of 
section 
1881(b)(7) 
(42 
U.S.C. 
1395rr(b)(7)) is amended by striking ‘‘The Sec-
retary’’ and inserting ‘‘Subject to section 422(a)(2) 
of the Medicare, Medicaid, and SCHIP Benefits Im-
provement and Protection Act of 2000, the Sec-
retary’’. 
(c) INCREASE IN RENAL DIALYSIS COMPOSITE RATE 
FOR SERVICES FURNISHED IN 2004.—Notwithstanding 
any other provision of law, with respect to payment under 
part B of title XVIII of the Social Security Act for renal 
dialysis services furnished in 2004, the composite payment 
rate otherwise established under section 1881(b)(7) of 
such Act (42 U.S.C. 1395rr(b)(7)) shall be increased by 
1.2 percent.
SEC. 235. WAIVER OF PART B LATE ENROLLMENT PENALTY 
FOR CERTAIN MILITARY RETIREES; SPECIAL 
ENROLLMENT PERIOD. 
(a) WAIVER OF PENALTY.—
(1) IN GENERAL.—Section 1839(b) (42 U.S.C. 
1395r(b)) is amended by adding at the end the fol-
lowing new sentence: ‘‘No increase in the premium 
shall be effected for a month in the case of an indi-
vidual who is 65 years of age or older, who enrolls 
under this part during 2001, 2002, or 2003, and 
who demonstrates to the Secretary before December 
31, 2003, that the individual is a covered beneficiary 
(as defined in section 1072(5) of title 10, United 
States Code). The Secretary of Health and Human 
Services shall consult with the Secretary of Defense 
in identifying individuals described in the previous 
sentence.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to premiums for 
months beginning with January 2003. The Secretary 
of Health and Human Services shall establish a 
method for providing rebates of premium penalties 
paid for months on or after January 2003 for which 
a penalty does not apply under such amendment but 
for which a penalty was previously collected.
(b) MEDICARE PART B SPECIAL ENROLLMENT PE-
RIOD.—
(1) IN GENERAL.—In the case of any individual 
who, as of the date of the enactment of this Act, is 
65 years of age or older, is eligible to enroll but is 
not enrolled under part B of title XVIII of the So-
cial Security Act, and is a covered beneficiary (as 
defined in section 1072(5) of title 10, United States 
Code), the Secretary of Health and Human Services 
shall provide for a special enrollment period during 
which the individual may enroll under such part. 
Such period shall begin as soon as possible after the 
date of the enactment of this Act and shall end on 
December 31, 2003. 
(2) COVERAGE PERIOD.—In the case of an indi-
vidual who enrolls during the special enrollment pe-
riod provided under paragraph (1), the coverage pe-
riod under part B of title XVIII of the Social Secu-
rity Act shall begin on the first day of the month 
following the month in which the individual enrolls. 
SEC. 236. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR 
ALL MEDICARE BENEFICIARIES. 
(a) IN GENERAL.—Section 1861(s)(2)(J) (42 U.S.C. 
1395x(s)(2)(J)) is amended by striking ‘‘, to an individual 
who receives’’ and all that follows before the semicolon at
the end and inserting ‘‘to an individual who has received 
an organ transplant’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to drugs furnished on or after the 
date of the enactment of this Act. 
TITLE III—PROVISIONS 
RELATING TO PARTS A AND B 
Subtitle A—Home Health Services 
SEC. 301. ELIMINATION OF 15 PERCENT REDUCTION IN 
PAYMENT RATES UNDER THE PROSPECTIVE 
PAYMENT SYSTEM. 
(a) IN GENERAL.—Section 1895(b)(3)(A) (42 U.S.C. 
1395fff(b)(3)(A)) is amended to read as follows: 
‘‘(A) INITIAL BASIS.—Under such system 
the Secretary shall provide for computation of 
a standard prospective payment amount (or 
amounts) as follows: 
‘‘(i) Such amount (or amounts) shall 
initially be based on the most current au-
dited cost report data available to the Sec-
retary and shall be computed in a manner 
so that the total amounts payable under 
the system for fiscal year 2001 shall be 
equal to the total amount that would have 
been made if the system had not been in
effect and if section 1861(v)(1)(L)(ix) had 
not been enacted. 
‘‘(ii) For fiscal year 2002 and for the 
first quarter of fiscal year 2003, such 
amount (or amounts) shall be equal to the 
amount (or amounts) determined under 
this paragraph for the previous fiscal year, 
updated under subparagraph (B). 
‘‘(iii) For 2003, such amount (or 
amounts) shall be equal to the amount (or 
amounts) determined under this paragraph 
for fiscal year 2002, updated under sub-
paragraph (B) for 2003. 
‘‘(iv) For 2004 and each subsequent 
year, such amount (or amounts) shall be 
equal to the amount (or amounts) deter-
mined under this paragraph for the pre-
vious year, updated under subparagraph 
(B). 
Each such amount shall be standardized in a 
manner that eliminates the effect of variations 
in relative case mix and area wage adjustments 
among different home health agencies in a 
budget neutral manner consistent with the case 
mix and wage level adjustments provided under
paragraph (4)(A). Under the system, the Sec-
retary may recognize regional differences or dif-
ferences based upon whether or not the services 
or agency are in an urbanized area.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect as if included in the 
amendments made by section 501 of the Medicare, Med-
icaid, and SCHIP Benefits Improvement and Protection 
Act of 2000 (as enacted into law by section 1(a)(6) of 
Public Law 106–554). 
SEC. 302. UPDATE IN HOME HEALTH SERVICES. 
(a) CHANGE TO CALENDAR YEAR UPDATE.—
(1) IN GENERAL.—Section 1895(b) (42 U.S.C. 
1395fff(b)(3)) is amended—
(A) in paragraph (3)(B)(i)—
(i) by striking ‘‘each fiscal year (be-
ginning with fiscal year 2002)’’ and insert-
ing ‘‘fiscal year 2002 and for each subse-
quent year (beginning with 2003)’’; and 
(ii) by inserting ‘‘or year’’ after ‘‘the 
fiscal year’’; 
(B) in paragraph (3)(B)(ii)—
(i) in subclause (II), by striking ‘‘fis-
cal year’’ and inserting ‘‘year’’ and by re-
designating such subclause as subclause 
(III); and 
(ii) in subclause (I), by striking ‘‘each 
of fiscal years 2002 and 2003’’ and insert-
ing the following: ‘‘fiscal year 2002, the 
home health market basket percentage in-
crease (as defined in clause (iii)) minus 1.1 
percentage points; 
‘‘(II) 2003’’; 
(C) in paragraph (3)(B)(iii), by inserting 
‘‘or year’’ after ‘‘fiscal year’’ each place it ap-
pears; 
(D) in paragraph (3)(B)(iv)—
(i) by inserting ‘‘or year’’ after ‘‘fiscal 
year’’ each place it appears; and 
(ii) by inserting ‘‘or years’’ after ‘‘fis-
cal years’’; and 
(E) in paragraph (5), by inserting ‘‘or 
year’’ after ‘‘fiscal year’’. 
(2) TRANSITION RULE.—The standard prospec-
tive payment amount (or amounts) under section 
1895(b)(3) of the Social Security Act for the cal-
endar quarter beginning on October 1, 2002, shall 
be such amount (or amounts) for the previous cal-
endar quarter.
(b) CHANGES IN UPDATES FOR 2003, 2004, AND 
2005.—Section 
1895(b)(3)(B)(ii) 
(42 
U.S.C. 
1395fff(b)(3)(B)(ii)), as amended by subsection (a)(1)(B), 
is amended—
(1) in subclause (II), by striking ‘‘the home 
health market basket percentage increase (as defined 
in clause (iii)) minus 1.1 percentage points’’ and in-
serting ‘‘2.0 percentage points’’; 
(2) by striking ‘‘or’’ at the end of subclause 
(II); 
(3) by redesignating subclause (III) as sub-
clause (V); and 
(4) by inserting after subclause (II) the fol-
lowing new subclause: 
‘‘(III) 
2004, 
1.1 
percentage 
points; 
‘‘(IV) 
2005, 
2.7 
percentage 
points; or’’. 
(c) PAYMENT ADJUSTMENT.—
(1) IN
GENERAL.—Section 1895(b)(5) (42 
U.S.C. 1395fff(b)(5)) is amended by striking ‘‘5 per-
cent’’ and inserting ‘‘3 percent’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to years beginning with 
2003.
SEC. 303. EXTENSION OF TEMPORARY INCREASE FOR 
HOME HEALTH SERVICES FURNISHED IN A 
RURAL AREA. 
(a) IN GENERAL.—Section 508(a) BIPA (114 Stat. 
2763A–533) is amended—
(1) by striking ‘‘24-MONTH INCREASE BEGIN-
NING APRIL 1, 2001’’ and inserting ‘‘IN GENERAL’’; 
and 
(2) by striking ‘‘April 1, 2003’’ and inserting 
‘‘January 1, 2005’’. 
(b) CONFORMING AMENDMENT.—Section 547(c)(2) 
of BIPA (114 Stat. 2763A–553) is amended by striking 
‘‘the period beginning on April 1, 2001, and ending on 
September 30, 2002,’’ and inserting ‘‘a period under such 
section’’. 
SEC. 304. OASIS TASK FORCE; SUSPENSION OF CERTAIN 
OASIS DATA COLLECTION REQUIREMENTS 
PENDING TASK FORCE SUBMITTAL OF RE-
PORT. 
(a) ESTABLISHMENT.—The Secretary of Health and 
Human Services shall establish and appoint a task force 
(to be known as the ‘‘OASIS Task Force’’) to examine 
the data collection and reporting requirements under 
OASIS. For purposes of this section, the term ‘‘OASIS’’ 
means the Outcome and Assessment Information Set re-
quired by reason of section 4602(e) of Balanced Budget 
Act of 1997 (42 U.S.C. 1395fff note). 
(b) COMPOSITION.—The OASIS Task Force shall be 
composed of the following: 
(1) Staff of the Centers for Medicare & Med-
icaid Services with expertise in post-acute care. 
(2) Representatives of home health agencies. 
(3) Health care professionals and research and 
health care quality experts outside the Federal Gov-
ernment with expertise in post-acute care. 
(4) Advocates for individuals requiring home 
health services.
(c) DUTIES.—
(1) REVIEW
AND
RECOMMENDATIONS.—The 
OASIS Task Force shall review and make rec-
ommendations to the Secretary regarding changes in 
OASIS to improve and simplify data collection for 
purposes of—
(A) assessing the quality of home health 
services; and 
(B) providing consistency in classification 
of patients into home health resource groups 
(HHRGs) for payment under section 1895 of 
the Social Security Act (42 U.S.C. 1395fff).
(2) SPECIFIC ITEMS.—In conducting the review 
under paragraph (1), the OASIS Task Force shall 
specifically examine—
(A) the 41 outcome measures currently in 
use; 
(B) the timing and frequency of data col-
lection; and 
(C) the collection of information on 
comorbidities and clinical indicators. 
(3) REPORT.—The OASIS Task Force shall 
submit a report to the Secretary containing its find-
ings and recommendations for changes in OASIS by 
not later than 18 months after the date of the enact-
ment of this Act. 
(d) SUNSET.—The OASIS Task Force shall termi-
nate 60 days after the date on which the report is sub-
mitted under subsection (c)(2).
(e) NONAPPLICATION OF FACA.—The provisions of 
the Federal Advisory Committee Act shall not apply to 
the OASIS Task Force. 
(f) SUSPENSION OF OASIS REQUIREMENT FOR COL-
LECTION OF DATA ON NON-MEDICARE AND NON-MED-
ICAID PATIENTS PENDING TASK FORCE REPORT.—
(1) IN GENERAL.—During the period described 
in paragraph (2), the Secretary of Health and
Human Services may not require, under section 
4602(e) of the Balanced Budget Act of 1997 or oth-
erwise under OASIS, a home health agency to gath-
er or submit information that relates to an indi-
vidual who is not eligible for benefits under either 
title XVIII or title XIX of the Social Security Act. 
(2) PERIOD OF SUSPENSION.—The period de-
scribed in this paragraph—
(A) begins on January 1, 2003, and 
(B) ends on the last day of the second 
month beginning after the date the report is 
submitted under subsection (c)(2). 
SEC. 305. MEDPAC STUDY ON MEDICARE MARGINS OF 
HOME HEALTH AGENCIES. 
(a) STUDY.—The Medicare Payment Advisory Com-
mission shall conduct a study of payment margins of home 
health agencies under the home health prospective pay-
ment system under section 1895 of the Social Security Act 
(42 U.S.C. 1395fff). Such study shall examine whether 
systematic differences in payment margins are related to 
differences in case mix (as measured by home health re-
source groups (HHRGs)) among such agencies. The study 
shall use the partial or full-year cost reports filed by home 
health agencies.
(b) REPORT.—Not later than 2 years after the date 
of the enactment of this Act, the Commission shall submit 
to Congress a report on the study under subsection (a). 
Subtitle B—Other Provisions 
SEC. 311. MODIFICATIONS TO MEDICARE PAYMENT ADVI-
SORY COMMISSION (MEDPAC). 
(a) EXAMINATION OF BUDGET CONSEQUENCES.—
Section 1805(b) (42 U.S.C. 1395b–6(b)) is amended by 
adding at the end the following new paragraph: 
‘‘(8) 
EXAMINATION
OF
BUDGET
CON-
SEQUENCES.—Before making any recommendations, 
the Commission shall examine the budget con-
sequences of such recommendations, directly or 
through consultation with appropriate expert enti-
ties.’’. 
(b) CONSIDERATION OF EFFICIENT PROVISION OF 
SERVICES.—Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b–
6(b)(2)(B)(i)) is amended by inserting ‘‘the efficient provi-
sion of’’ after ‘‘expenditures for’’. 
(c) ADDITIONAL REPORTS.—
(1) DATA NEEDS AND SOURCES.—The Medicare 
Payment Advisory Commission shall conduct a 
study, and submit a report to Congress by not later 
than June 1, 2003, on the need for current data, 
and sources of current data available, to determine
the solvency and financial circumstances of hospitals 
and other medicare providers of services. The Com-
mission shall examine data on uncompensated care, 
as well as the share of uncompensated care ac-
counted for by the expenses for treating illegal 
aliens. 
(2) USE
OF
TAX-RELATED
RETURNS.—Using 
return information provided under Form 990 of the 
Internal Revenue Service, the Commission shall sub-
mit to Congress, by not later than July 1, 2003, a 
report on the following: 
(A) Investments and capital financing of 
hospitals participating under the medicare pro-
gram and related foundations. 
(B) Access to capital financing for private 
and for not-for-profit hospitals. 
SEC. 312. DEMONSTRATION PROJECT FOR DISEASE MAN-
AGEMENT FOR CERTAIN MEDICARE BENE-
FICIARIES WITH DIABETES. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services shall conduct a demonstration project 
under this section (in this section referred to as the 
‘‘project’’) to demonstrate the impact on costs and health 
outcomes of applying disease management to certain medi-
care beneficiaries with diagnosed diabetes. In no case may
the number of participants in the project exceed 30,000 
at any time. 
(b) VOLUNTARY PARTICIPATION.—
(1) ELIGIBILITY.—Medicare beneficiaries are 
eligible to participate in the project only if—
(A) they are a member of a health dis-
parity 
population 
(as 
defined 
in 
section 
485E(d) of the Public Health Service Act), 
such as Hispanics; 
(B) they meet specific medical criteria 
demonstrating the appropriate diagnosis and 
the advanced nature of their disease; 
(C) their physicians approve of participa-
tion in the project; and 
(D) 
they 
are 
not 
enrolled 
in 
a 
Medicare+Choice plan. 
(2) BENEFITS.—A medicare beneficiary who is 
enrolled in the project shall be eligible—
(A) for disease management services re-
lated to their diabetes; and 
(B) for payment for all costs for prescrip-
tion drugs without regard to whether or not 
they relate to the diabetes, except that the 
project may provide for modest cost-sharing 
with respect to prescription drug coverage.
(c) CONTRACTS WITH DISEASE MANAGEMENT ORGA-
NIZATIONS.—
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall carry out the project through 
contracts with up to three disease management orga-
nizations. The Secretary shall not enter into such 
a contract with an organization unless the organiza-
tion demonstrates that it can produce improved 
health outcomes and reduce aggregate medicare ex-
penditures consistent with paragraph (2). 
(2) CONTRACT PROVISIONS.—Under such con-
tracts—
(A) such an organization shall be required 
to provide for prescription drug coverage de-
scribed in subsection (b)(2)(B); 
(B) such an organization shall be paid a 
fee negotiated and established by the Secretary 
in a manner so that (taking into account sav-
ings in expenditures under parts A and B of 
the medicare program under title XVIII of the 
Social Security Act) there will be no net in-
crease, and to the extent practicable, there will 
be a net reduction in expenditures under the 
medicare program as a result of the project; 
and
(C) such an organization shall guarantee, 
through an appropriate arrangement with a re-
insurance company or otherwise, the prohibition 
on net increases in expenditures described in 
subparagraph (B). 
(3) PAYMENTS.—Payments to such organiza-
tions shall be made in appropriate proportion from 
the Trust Funds established under title XVIII of the 
Social Security Act. 
(d) APPLICATION
OF MEDIGAP PROTECTIONS
TO 
DEMONSTRATION PROJECT ENROLLEES.—(1) Subject to 
paragraph (2), the provisions of section 1882(s)(3) (other 
than clauses (i) through (iv) of subparagraph (B)) and 
1882(s)(4) of the Social Security Act shall apply to enroll-
ment (and termination of enrollment) in the demonstra-
tion project under this section, in the same manner as they 
apply to enrollment (and termination of enrollment) with 
a Medicare+Choice organization in a Medicare+Choice 
plan. 
(2) In applying paragraph (1)—
(A) any reference in clause (v) or (vi) of section 
1882(s)(3)(B) of such Act to 12 months is deemed 
a reference to the period of the demonstration 
project; and
(B) the notification required under section 
1882(s)(3)(D) of such Act shall be provided in a 
manner specified by the Secretary of Health and 
Human Services. 
(e) DURATION.—The project shall last for not longer 
than 3 years. 
(f) WAIVER.—The Secretary of Health and Human 
Services shall waive such provisions of title XVIII of the 
Social Security Act as may be necessary to provide for 
payment for services under the project in accordance with 
subsection (c)(3). 
(g) REPORT.—The Secretary of Health and Human 
Services shall submit to Congress an interim report on the 
project not later than 2 years after the date it is first im-
plemented and a final report on the project not later than 
6 months after the date of its completion. Such reports 
shall include information on the impact of the project on 
costs and health outcomes and recommendations on the 
cost-effectiveness of extending or expanding the project. 
(h) WORKING GROUP ON MEDICARE DISEASE MAN-
AGEMENT
PROGRAMS.—The Secretary shall establish 
within the Department of Health and Human Services a 
working group consisting of employees of the Department 
to carry out the following: 
(1) To oversee the project.
(2) To establish policy and criteria for medicare 
disease management programs within the Depart-
ment, including the establishment of policy and cri-
teria for such programs. 
(3) To identify targeted medical conditions and 
targeted individuals. 
(4) To select areas in which such programs are 
carried out. 
(5) To monitor health outcomes under such 
programs. 
(6) To measure the effectiveness of such pro-
grams in meeting any budget neutrality require-
ments. 
(7) Otherwise to serve as a central focal point 
within the Department for dissemination of informa-
tion on medicare disease management programs. 
(i) GAO STUDY ON DISEASE MANAGEMENT PRO-
GRAMS.—The Comptroller General of the United States 
shall conduct a study that compares disease management 
programs under title XVIII of the Social Security Act with 
such programs conducted in the private sector, including 
the prevalence of such programs and programs for case 
management. The study shall identify the cost-effective-
ness of such programs and any savings achieved by such 
programs. The Comptroller General shall submit a report
on such study to Congress by not later than 18 months 
after the date of the enactment of this Act. 
SEC. 313. DEMONSTRATION PROJECT FOR MEDICAL ADULT 
DAY CARE SERVICES. 
(a) ESTABLISHMENT.—Subject to the succeeding 
provisions of this section, the Secretary of Health and 
Human Services shall establish a demonstration project 
(in this section referred to as the ‘‘demonstration project’’) 
under which the Secretary shall, as part of a plan of an 
episode of care for home health services established for 
a medicare beneficiary, permit a home health agency, di-
rectly or under arrangements with a medical adult day 
care facility, to provide medical adult day care services as 
a substitute for a portion of home health services that 
would otherwise be provided in the beneficiary’s home. 
(b) PAYMENT.—
(1) IN GENERAL.—The amount of payment for 
an episode of care for home health services, a por-
tion of which consists of substitute medical adult 
day care services, under the demonstration project 
shall be made at a rate equal to 95 percent of the 
amount that would otherwise apply for such home 
health services under section 1895 of the Social Se-
curity Act (42 U.S.C. 1395fff). In no case may a 
home health agency, or a medical adult day care fa-
cility under arrangements with a home health agen-
cy, separately charge a beneficiary for medical adult 
day care services furnished under the plan of care. 
(2) BUDGET
NEUTRALITY
FOR
DEMONSTRA-
TION PROJECT.—Notwithstanding any other provi-
sion of law, the Secretary shall provide for an appro-
priate reduction in the aggregate amount of addi-
tional payments made under section 1895 of the So-
cial Security Act (42 U.S.C. 1395fff) to reflect any 
increase in amounts expended from the Trust Funds 
as a result of the demonstration project conducted 
under this section. 
(c) DEMONSTRATION PROJECT SITES.—The project 
established under this section shall be conducted in not 
more than 5 States selected by the Secretary that license 
or certify providers of services that furnish medical adult 
day care services. 
(d) DURATION.—The Secretary shall conduct the 
demonstration project for a period of 3 years. 
(e) VOLUNTARY PARTICIPATION.—Participation of 
medicare beneficiaries in the demonstration project shall 
be voluntary. The total number of such beneficiaries that 
may participate in the project at any given time may not 
exceed 15,000.
(f) PREFERENCE IN SELECTING AGENCIES.—In se-
lecting home health agencies to participate under the dem-
onstration project, the Secretary shall give preference to 
those agencies that are currently licensed or certified 
through common ownership and control to furnish medical 
adult day care services. 
(g) WAIVER AUTHORITY.—The Secretary may waive 
such requirements of title XVIII of the Social Security Act 
as may be necessary for the purposes of carrying out the 
demonstration project, other than waiving the requirement 
that an individual be homebound in order to be eligible 
for benefits for home health services. 
(h) EVALUATION AND REPORT.—The Secretary shall 
conduct an evaluation of the clinical and cost effectiveness 
of the demonstration project. Not later than 30 months 
after the commencement of the project, the Secretary shall 
submit to Congress a report on the evaluation, and shall 
include in the report the following: 
(1) An analysis of the patient outcomes and 
costs of furnishing care to the medicare beneficiaries 
participating in the project as compared to such out-
comes and costs to beneficiaries receiving only home 
health services for the same health conditions.
(2) Such recommendations regarding the exten-
sion, expansion, or termination of the project as the 
Secretary determines appropriate. 
(i) DEFINITIONS.—In this section: 
(1) HOME HEALTH AGENCY.—The term ‘‘home 
health agency’’ has the meaning given such term in 
section 1861(o) of the Social Security Act (42 
U.S.C. 1395x(o)). 
(2) MEDICAL ADULT DAY CARE FACILITY.—The 
term ‘‘medical adult day care facility’’ means a facil-
ity that—
(A) has been licensed or certified by a 
State to furnish medical adult day care services 
in the State for a continuous 2-year period; 
(B) is engaged in providing skilled nursing 
services and other therapeutic services directly 
or under arrangement with a home health agen-
cy; 
(C) meets such standards established by 
the Secretary to assure quality of care and such 
other requirements as the Secretary finds nec-
essary in the interest of the health and safety 
of individuals who are furnished services in the 
facility; and
(D) provides medical adult day care serv-
ices. 
(3) MEDICAL
ADULT
DAY
CARE
SERVICES.—
The term ‘‘medical adult day care services’’ means—
(A) home health service items and services 
described in paragraphs (1) through (7) of sec-
tion 1861(m) furnished in a medical adult day 
care facility; 
(B) a program of supervised activities fur-
nished in a group setting in the facility that—
(i) meet such criteria as the Secretary 
determines appropriate; and 
(ii) is designed to promote physical 
and mental health of the individuals; and 
(C) such other services as the Secretary 
may specify. 
(4) 
MEDICARE
BENEFICIARY.—The 
term 
‘‘medicare beneficiary’’ means an individual entitled 
to benefits under part A of this title, enrolled under 
part B of this title, or both.
SEC. 314. PUBLICATION ON FINAL WRITTEN GUIDANCE 
CONCERNING PROHIBITIONS AGAINST DIS-
CRIMINATION BY NATIONAL ORIGIN WITH 
RESPECT TO HEALTH CARE SERVICES. 
Not later than June 1, 2003, the Secretary shall issue 
final written guidance concerning the application of the 
prohibition in title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d et seq.) against national origin discrimina-
tion as it affects persons with limited English proficiency 
with respect to access to health care services under the 
medicare program under title XVIII of the Social Security 
Act, the medicaid program under title XIX of such Act, 
and the SCHIP program under title XXI of such Act. 
TITLE IV—PROVISIONS 
RELATING TO MANAGED CARE 
SEC. 401. MEDICARE+CHOICE IMPROVEMENTS. 
(a) EQUALIZING PAYMENTS BETWEEN FEE-FOR-
SERVICE AND MEDICARE+CHOICE.—
(1) IN
GENERAL.—Section 1853(c)(1) (42 
U.S.C. 1395w–23(c)(1)) is amended by adding at 
the end the following: 
‘‘(D) BASED
ON
100
PERCENT
OF
FEE-
FOR-SERVICE COSTS.—
‘‘(i) IN
GENERAL.—For 2003 and 
2004, the adjusted average per capita cost 
for the year involved, determined under
section 
1876(a)(4) 
for 
the 
Medicare+Choice payment area for serv-
ices covered under parts A and B for indi-
viduals entitled to benefits under part A 
and enrolled under part B who are not en-
rolled in a Medicare+Choice plan under 
this part for the year, but adjusted to ex-
clude costs attributable to payments under 
section 1886(h).
‘‘(ii) INCLUSION OF COSTS OF VA AND 
DOD
MILITARY
FACILITY
SERVICES
TO 
MEDICARE-ELIGIBLE
BENEFICIARIES.—In 
determining the adjusted average per cap-
ita cost under clause (i) for a year, such 
cost shall be adjusted to include the Sec-
retary’s estimate, on a per capita basis, of 
the amount of additional payments that 
would have been made in the area involved 
under this title if individuals entitled to 
benefits under this title had not received 
services from facilities of the Department 
of Veterans Affairs or the Department of 
Defense.’’. 
(2) CONFORMING AMENDMENT.—Such section 
is further amended, in the matter before subpara-
graph (A), by striking ‘‘or (C)’’ and inserting ‘‘(C), 
or (D)’’. 
(b) REVISION OF BLEND.—
(1) REVISION OF NATIONAL AVERAGE USED IN 
CALCULATION
OF
BLEND.—Section 
1853(c)(4)(B)(i)(II) 
(42 
U.S.C. 
1395w–
23(c)(4)(B)(i)(II)) is amended by inserting ‘‘who 
(with respect to determinations for 2003 and for 
2004) are enrolled in a Medicare+Choice plan’’ 
after ‘‘the average number of medicare bene-
ficiaries’’. 
(2) CHANGE IN BUDGET NEUTRALITY.—Section 
1853(c) (42 U.S.C. 1395w–23(c)) is amended—
(A) in paragraph (1)(A), by inserting ‘‘(for 
a year before 2003)’’ after ‘‘multiplied’’; and 
(B) in paragraph (5), by inserting ‘‘(before 
2003)’’ after ‘‘for each year’’. 
(c) REVISION IN MINIMUM PERCENTAGE INCREASE 
FOR 2003 AND 2004.—Section 1853(c)(1)(C) (42 U.S.C. 
1395w–23(c)(1)(C)) is amended by striking clause (iv) 
and inserting the following: 
‘‘(iv) For 2002, 102 percent of the 
annual Medicare+Choice capitation rate 
under this paragraph for the area for 
2001.
‘‘(v) For 2003 and 2004, 103 percent 
of the annual Medicare+Choice capitation 
rate under this paragraph for the area for 
the previous year. 
‘‘(vi) For 2005 and each succeeding 
year, 
102 
percent 
of 
the 
annual 
Medicare+Choice capitation rate under 
this paragraph for the area for the pre-
vious year.’’. 
(d) INCLUSION OF COSTS OF DOD AND VA MILI-
TARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENE-
FICIARIES IN CALCULATION OF MEDICARE+CHOICE PAY-
MENT RATES.—Section 1853(c)(3) (42 U.S.C. 1395w–
23(c)(3)) is amended—
(1) in subparagraph (A), by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B) and 
(E)’’, and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(E) INCLUSION OF COSTS OF DOD AND 
VA MILITARY FACILITY SERVICES TO MEDICARE-
ELIGIBLE BENEFICIARIES.—In determining the 
area-specific Medicare+Choice capitation rate 
under subparagraph (A) for a year (beginning 
with 2003), the annual per capita rate of pay-
ment for 1997 determined under section 
1876(a)(1)(C) shall be adjusted to include in 
the rate the Secretary’s estimate, on a per cap-
ita basis, of the amount of additional payments 
that would have been made in the area involved 
under this title if individuals entitled to benefits 
under this title had not received services from 
facilities of the Department of Defense or the 
Department of Veterans Affairs.’’. 
(e) 
ANNOUNCEMENT
OF
REVISED 
MEDICARE+CHOICE PAYMENT RATES.—Within 4 weeks 
after the date of the enactment of this Act, the Secretary 
shall determine, and shall announce (in a manner intended 
to provide notice to interested parties) Medicare+Choice 
capitation rates under section 1853 of the Social Security 
Act (42 U.S.C. 1395w–23) for 2003, revised in accordance 
with the provisions of this section. 
(f) MEDPAC STUDY OF AAPCC.—
(1) STUDY.—The Medicare Payment Advisory 
Commission shall conduct a study that assesses the 
method used for determining the adjusted average 
per capita cost (AAPCC) under section 1876(a)(4) 
of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395mm(a)(4)). Such study shall examine—
(A) the bases for variation in such costs 
between different areas, including differences in 
input prices, utilization, and practice patterns; 
(B) the appropriate geographic area for 
payment under the Medicare+Choice program 
under part C of title XVIII of such Act; and 
(C) the accuracy of risk adjustment meth-
ods in reflecting differences in costs of pro-
viding care to different groups of beneficiaries 
served under such program. 
(2) REPORT.—Not later than 9 months after 
the date of the enactment of this Act, the Commis-
sion shall submit to Congress a report on the study 
conducted under paragraph (1). Such report shall 
include recommendations regarding changes in the 
methods for computing the adjusted average per 
capita cost among different areas. 
(g) REPORT ON IMPACT OF INCREASED FINANCIAL 
ASSISTANCE TO MEDICARE+CHOICE PLANS.—Not later 
than July 1, 2003, the Secretary of Health and Human 
Services shall submit to Congress a report that describes 
the impact of additional financing provided under this Act 
and other Acts (including the Medicare, Medicaid, and 
SCHIP Balanced Budget Refinement Act of 1999 and 
BIPA) on the availability of Medicare+Choice plans in
different areas and its impact on lowering premiums and 
increasing benefits under such plans. 
SEC. 402. SPECIALIZED MEDICARE+CHOICE PLANS FOR 
SPECIAL NEEDS BENEFICIARIES. 
(a) TREATMENT AS COORDINATED CARE PLAN.—
Section 1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is 
amended by adding at the end the following new sentence: 
‘‘Specialized Medicare+Choice plans for special needs 
beneficiaries (as defined in section 1859(b)(4)) may be 
any type of coordinated care plan.’’. 
(b) SPECIALIZED MEDICARE+CHOICE PLAN
FOR 
SPECIAL
NEEDS
BENEFICIARIES
DEFINED.—Section 
1859(b) (42 U.S.C. 1395w–29(b)) is amended by adding 
at the end the following new paragraph: 
‘‘(4) SPECIALIZED
MEDICARE+CHOICE
PLANS 
FOR SPECIAL NEEDS BENEFICIARIES.—
‘‘(A) IN GENERAL.—The term ‘specialized 
Medicare+Choice plan for special needs bene-
ficiaries’ means a Medicare+Choice plan that 
exclusively serves special needs beneficiaries (as 
defined in subparagraph (B)). 
‘‘(B) SPECIAL NEEDS BENEFICIARY.—The 
term ‘special needs beneficiary’ means a 
Medicare+Choice eligible individual who—
‘‘(i) is institutionalized (as defined by 
the Secretary); 
‘‘(ii) is entitled to medical assistance 
under a State plan under title XIX; or 
‘‘(iii) meets such requirements as the 
Secretary may determine would benefit 
from enrollment in such a specialized 
Medicare+Choice plan described in sub-
paragraph (A) for individuals with severe 
or disabling chronic conditions.’’. 
(c) RESTRICTION ON ENROLLMENT PERMITTED.—
Section 1859 (42 U.S.C. 1395w–29) is amended by add-
ing at the end the following new subsection: 
‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIAL-
IZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
BENEFICIARIES.—In 
the 
case 
of 
a 
specialized 
Medicare+Choice plan (as defined in subsection (b)(4)), 
notwithstanding any other provision of this part and in 
accordance with regulations of the Secretary and for peri-
ods before January 1, 2007, the plan may restrict the en-
rollment of individuals under the plan to individuals who 
are within one or more classes of special needs bene-
ficiaries.’’.
(d) REPORT TO CONGRESS.—Not later than Decem-
ber 31, 2005, the Medicare Benefits Administrator shall
submit to Congress a report that assesses the impact of 
specialized Medicare+Choice plans for special needs bene-
ficiaries on the cost and quality of services provided to 
enrollees. Such report shall include an assessment of the 
costs and savings to the medicare program as a result of 
amendments made by subsections (a), (b), and (c). 
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
subsections (a), (b), and (c) shall take effect upon 
the date of the enactment of this Act. 
(2) DEADLINE
FOR
ISSUANCE
OF
REQUIRE-
MENTS FOR SPECIAL NEEDS BENEFICIARIES; TRAN-
SITION.—No later than 6 months after the date of 
the enactment of this Act, the Secretary of Health 
and Human Services shall issue final regulations to 
establish requirements for special needs beneficiaries 
under section 1859(b)(4)(B)(iii) of the Social Secu-
rity Act, as added by subsection (b). 
SEC. 403. EXTENSION OF REASONABLE COST AND SHMO 
CONTRACTS. 
(a) REASONABLE COST CONTRACTS.—
(1) IN GENERAL.—Section 1876(h)(5)(C) (42 
U.S.C. 1395mm(h)(5)(C)) is amended—
(A) by inserting ‘‘(i)’’ after ‘‘(C)’’;
(B) by inserting before the period the fol-
lowing: ‘‘, except (subject to clause (ii)) in the 
case of a contract for an area which is not cov-
ered in the service area of 1 or more coordi-
nated care Medicare+Choice plans under part 
C’’; and 
(C) by adding at the end the following new 
clause: 
‘‘(ii) In the case in which—
‘‘(I) a reasonable cost reimbursement contract 
includes an area in its service area as of a date that 
is after December 31, 2003; 
‘‘(II) such area is no longer included in such 
service area after such date by reason of the oper-
ation of clause (i) because of the inclusion of such 
area within the service area of a Medicare+Choice 
plan; and 
‘‘(III) all Medicare+Choice plans subsequently 
terminate coverage in such area; 
such reasonable cost reimbursement contract may be ex-
tended and renewed to cover such area (so long as it is 
not included in the service area of any Medicare+Choice 
plan).’’. 
(2) STUDY.—The Medicare Benefits Adminis-
trator shall conduct a study of an appropriate tran-
sition for plans offered under reasonable cost con-
tracts under section 1876 of the Social Security Act 
on and after January 1, 2005. Such a transition 
may take into account whether there are one or 
more coordinated care Medicare+Choice plans being 
offered in the areas involved. Not later than Feb-
ruary 1, 2004, the Administrator shall submit to 
Congress a report on such study and shall include 
recommendations regarding any changes in the 
amendment made by paragraph (1) as the Adminis-
trator determines to be appropriate. 
(b) EXTENSION OF SOCIAL HEALTH MAINTENANCE 
ORGANIZATION (SHMO) DEMONSTRATION PROJECT.—
(1) IN GENERAL.—Section 4018(b)(1) of the 
Omnibus Budget Reconciliation Act of 1987 is 
amended by striking ‘‘the date that is 30 months 
after the date that the Secretary submits to Con-
gress the report described in section 4014(c) of the 
Balanced Budget Act of 1997’’ and inserting ‘‘De-
cember 31, 2004’’. 
(2) SHMOS
OFFERING
MEDICARE+CHOICE 
PLANS.—Nothing in such section 4018 shall be con-
strued as preventing a social health maintenance or-
ganization from offering a Medicare+Choice plan
under part C of title XVIII of the Social Security 
Act.
SEC. 404. EXTENSION OF MUNICIPAL HEALTH SERVICE 
DEMONSTRATION PROJECTS. 
The last sentence of section 9215(a) of the Consoli-
dated Omnibus Budget Reconciliation Act of 1985 (42 
U.S.C. 1395b–1 note), as previously amended, is amended 
by striking ‘‘December 31, 2004, but only with respect 
to’’ and all that follows and inserting ‘‘December 31, 
2009, but only with respect to individuals who reside in 
the city in which the project is operated and so long as 
the total number of individuals participating in the project 
does not exceed the number of such individuals partici-
pating as of January 1, 1996.’’. 
SEC. 405. PAYMENT BY PACE PROVIDERS FOR MEDICARE 
AND MEDICAID SERVICES FURNISHED BY 
NONCONTRACT PROVIDERS. 
(a) MEDICARE SERVICES.—
(1) MEDICARE SERVICES FURNISHED BY PRO-
VIDERS OF SERVICES.—Section 1866(a)(1)(O) (42 
U.S.C. 1395cc(a)(1)(O)) is amended—
(A) by striking ‘‘part C or’’ and inserting 
‘‘part C, with a PACE provider under section 
1894 or 1934, or’’; 
(B) by striking ‘‘(i)’’;
(C) by striking ‘‘and (ii)’’; and 
(D) by striking ‘‘members of the organiza-
tion’’ and inserting ‘‘members of the organiza-
tion or PACE program eligible individuals en-
rolled with the PACE provider,’’. 
(2) MEDICARE SERVICES FURNISHED BY PHYSI-
CIANS AND OTHER ENTITIES.—Section 1894(b) (42 
U.S.C. 1395eee(b)) is amended by adding at the end 
the following new paragraphs: 
‘‘(3) TREATMENT OF MEDICARE SERVICES FUR-
NISHED BY NONCONTRACT PHYSICIANS AND OTHER 
ENTITIES.—
‘‘(A) APPLICATION OF MEDICARE+CHOICE 
REQUIREMENT
WITH
RESPECT
TO
MEDICARE 
SERVICES FURNISHED BY NONCONTRACT PHY-
SICIANS
AND
OTHER
ENTITIES.—Section 
1852(k)(1) (relating to limitations on balance 
billing against Medicare+Choice organizations 
for noncontract physicians and other entities 
with respect to services covered under this title) 
shall apply to PACE providers, PACE program 
eligible individuals enrolled with such PACE 
providers, and physicians and other entities 
that do not have a contract establishing pay-
ment amounts for services furnished to such an
individual in the same manner as such section 
applies to Medicare+Choice organizations, indi-
viduals enrolled with such organizations, and 
physicians and other entities referred to in such 
section. 
‘‘(B) REFERENCE TO RELATED PROVISION 
FOR NONCONTRACT PROVIDERS OF SERVICES.—
For the provision relating to limitations on bal-
ance billing against PACE providers for serv-
ices covered under this title furnished by non-
contract providers of services, see section 
1866(a)(1)(O). 
‘‘(4) REFERENCE TO RELATED PROVISION FOR 
SERVICES
COVERED
UNDER
TITLE
XIX
BUT
NOT 
UNDER THIS TITLE.—For provisions relating to limi-
tations on payments to providers participating under 
the State plan under title XIX that do not have a 
contract with a PACE provider establishing payment 
amounts for services covered under such plan (but 
not under this title) when such services are fur-
nished to enrollees of that PACE provider, see sec-
tion 1902(a)(66).’’. 
(b) MEDICAID SERVICES.—
(1) REQUIREMENT UNDER STATE PLAN.—Sec-
tion 1902(a) (42 U.S.C. 1396a(a) is amended—
(A) in paragraph (64), by striking ‘‘and’’ 
at the end; 
(B) in paragraph (65), by striking the pe-
riod at the end and inserting ‘‘; and’’; and 
(C) by inserting after paragraph (65) the 
following new paragraph: 
‘‘(66) provide, with respect to services cov-
ered under the State plan (but not under title 
XVIII) that are furnished to a PACE program 
eligible individual enrolled with a PACE pro-
vider by a provider participating under the 
State plan that does not have a contract with 
the PACE provider that establishes payment 
amounts for such services, that such partici-
pating provider may not require the PACE pro-
vider to pay the participating provider an 
amount greater than the amount that would 
otherwise be payable for the service to the par-
ticipating provider under the State plan for the 
State where the PACE provider is located (in 
accordance with regulations issued by the Sec-
retary).’’. 
(2) REFERENCE IN MEDICAID STATUTE.—Sec-
tion 1934(b) (42 U.S.C. 1396u–4(b)) is amended by 
adding at the end the following new paragraphs:
‘‘(3) TREATMENT OF MEDICARE SERVICES FUR-
NISHED BY NONCONTRACT PHYSICIANS AND OTHER 
ENTITIES.—
‘‘(A) APPLICATION OF MEDICARE+CHOICE 
REQUIREMENT
WITH
RESPECT
TO
MEDICARE 
SERVICES FURNISHED BY NONCONTRACT PHY-
SICIANS
AND
OTHER
ENTITIES.—Section 
1852(k)(1) (relating to limitations on balance 
billing against Medicare+Choice organizations 
for noncontract physicians and other entities 
with respect to services covered under title 
XVIII) shall apply to PACE providers, PACE 
program eligible individuals enrolled with such 
PACE providers, and physicians and other enti-
ties that do not have a contract establishing 
payment amounts for services furnished to such 
an individual in the same manner as such sec-
tion applies to Medicare+Choice organizations, 
individuals enrolled with such organizations, 
and physicians and other entities referred to in 
such section. 
‘‘(B) REFERENCE TO RELATED PROVISION 
FOR NONCONTRACT PROVIDERS OF SERVICES.—
For the provision relating to limitations on bal-
ance billing against PACE providers for serv-
ices covered under title XVIII furnished by non-
contract providers of services, see section 
1866(a)(1)(O). 
‘‘(4) REFERENCE TO RELATED PROVISION FOR 
SERVICES COVERED UNDER THIS TITLE BUT NOT 
UNDER TITLE XVIII.—For provisions relating to lim-
itations on payments to providers participating 
under the State plan under this title that do not 
have a contract with a PACE provider establishing 
payment amounts for services covered under such 
plan (but not under title XVIII) when such services 
are furnished to enrollees of that PACE provider, 
see section 1902(a)(66).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services furnished on or after 
January 1, 2003. 
TITLE V—REGULATORY REDUC-
TION AND CONTRACTING RE-
FORM 
Subtitle A—Regulatory Reform 
SEC. 501. CONSTRUCTION; DEFINITION OF SUPPLIER. 
(a) CONSTRUCTION.—Nothing in this title shall be 
construed—
(1) to compromise or affect existing legal rem-
edies for addressing fraud or abuse, whether it be
criminal prosecution, civil enforcement, or adminis-
trative remedies, including under sections 3729 
through 3733 of title 31, United States Code 
(known as the False Claims Act); or 
(2) to prevent or impede the Department of 
Health and Human Services in any way from its on-
going efforts to eliminate waste, fraud, and abuse in 
the medicare program. 
Furthermore, the consolidation of medicare administrative 
contracting set forth in this Act does not constitute con-
solidation of the Federal Hospital Insurance Trust Fund 
and the Federal Supplementary Medical Insurance Trust 
Fund or reflect any position on that issue. 
(b) DEFINITION OF SUPPLIER.—Section 1861 (42 
U.S.C. 1395x) is amended by inserting after subsection 
(c) the following new subsection: 
‘‘Supplier 
‘‘(d) The term ‘supplier’ means, unless the context 
otherwise requires, a physician or other practitioner, a fa-
cility, or other entity (other than a provider of services) 
that furnishes items or services under this title.’’.
SEC. 502. ISSUANCE OF REGULATIONS. 
(a) CONSOLIDATION OF PROMULGATION TO ONCE A 
MONTH.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C. 
1395hh) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(d)(1) Subject to paragraph (2), the Secretary shall 
issue proposed or final (including interim final) regula-
tions to carry out this title only on one business day of 
every month. 
‘‘(2) The Secretary may issue a proposed or final reg-
ulation described in paragraph (1) on any other day than 
the day described in paragraph (1) if the Secretary—
‘‘(A) finds that issuance of such regulation on 
another day is necessary to comply with require-
ments under law; or 
‘‘(B) finds that with respect to that regulation 
the limitation of issuance on the date described in 
paragraph (1) is contrary to the public interest. 
If the Secretary makes a finding under this paragraph, 
the Secretary shall include such finding, and brief state-
ment of the reasons for such finding, in the issuance of 
such regulation. 
‘‘(3) The Secretary shall coordinate issuance of new 
regulations described in paragraph (1) relating to a cat-
egory of provider of services or suppliers based on an anal-
ysis of the collective impact of regulatory changes on that 
category of providers or suppliers.’’.
(2) GAO REPORT ON PUBLICATION OF REGULA-
TIONS ON A QUARTERLY BASIS.—Not later than 3 
years after the date of the enactment of this Act, the 
Comptroller General of the United States shall sub-
mit to Congress a report on the feasibility of requir-
ing that regulations described in section 1871(d) of 
the Social Security Act be promulgated on a quar-
terly basis rather than on a monthly basis. 
(3) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to regulations promul-
gated on or after the date that is 30 days after the 
date of the enactment of this Act. 
(b) REGULAR
TIMELINE
FOR
PUBLICATION
OF 
FINAL RULES.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 
1395hh(a)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(3)(A) The Secretary, in consultation with the Di-
rector of the Office of Management and Budget, shall es-
tablish and publish a regular timeline for the publication 
of final regulations based on the previous publication of 
a proposed regulation or an interim final regulation. 
‘‘(B) Such timeline may vary among different regula-
tions based on differences in the complexity of the regula-
tion, the number and scope of comments received, and
other relevant factors, but shall not be longer than 3 years 
except under exceptional circumstances. If the Secretary 
intends to vary such timeline with respect to the publica-
tion of a final regulation, the Secretary shall cause to have 
published in the Federal Register notice of the different 
timeline by not later than the timeline previously estab-
lished with respect to such regulation. Such notice shall 
include a brief explanation of the justification for such 
variation. 
‘‘(C) In the case of interim final regulations, upon 
the expiration of the regular timeline established under 
this paragraph for the publication of a final regulation 
after opportunity for public comment, the interim final 
regulation shall not continue in effect unless the Secretary 
publishes (at the end of the regular timeline and, if appli-
cable, at the end of each succeeding 1-year period) a notice 
of continuation of the regulation that includes an expla-
nation of why the regular timeline (and any subsequent 
1-year extension) was not complied with. If such a notice 
is published, the regular timeline (or such timeline as pre-
viously extended under this paragraph) for publication of 
the final regulation shall be treated as having been ex-
tended for 1 additional year. 
‘‘(D) The Secretary shall annually submit to Con-
gress a report that describes the instances in which the
Secretary failed to publish a final regulation within the 
applicable regular timeline under this paragraph and that 
provides an explanation for such failures.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. The Secretary shall provide 
for an appropriate transition to take into account 
the backlog of previously published interim final reg-
ulations. 
(c) LIMITATIONS ON NEW MATTER IN FINAL REGU-
LATIONS.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 
1395hh(a)), as amended by subsection (b), is further 
amended by adding at the end the following new 
paragraph: 
‘‘(4) If the Secretary publishes notice of proposed 
rulemaking relating to a regulation (including an interim 
final regulation), insofar as such final regulation includes 
a provision that is not a logical outgrowth of such notice 
of proposed rulemaking, that provision shall be treated as 
a proposed regulation and shall not take effect until there 
is the further opportunity for public comment and a publi-
cation of the provision again as a final regulation.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to final regulations
published on or after the date of the enactment of 
this Act. 
SEC. 503. COMPLIANCE WITH CHANGES IN REGULATIONS 
AND POLICIES. 
(a) NO
RETROACTIVE
APPLICATION
OF
SUB-
STANTIVE CHANGES.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C. 
1395hh), as amended by section 502(a), is amended 
by adding at the end the following new subsection: 
‘‘(e)(1)(A) A substantive change in regulations, man-
ual instructions, interpretative rules, statements of policy, 
or guidelines of general applicability under this title shall 
not be applied (by extrapolation or otherwise) retroactively 
to items and services furnished before the effective date 
of the change, unless the Secretary determines that—
‘‘(i) such retroactive application is necessary to 
comply with statutory requirements; or 
‘‘(ii) failure to apply the change retroactively 
would be contrary to the public interest.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to substantive changes 
issued on or after the date of the enactment of this 
Act. 
(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE 
CHANGES AFTER NOTICE.—
100
(1) IN
GENERAL.—Section 1871(e)(1), as 
added by subsection (a), is amended by adding at 
the end the following: 
‘‘(B)(i) Except as provided in clause (ii), a sub-
stantive change referred to in subparagraph (A) shall not 
become effective before the end of the 30-day period that 
begins on the date that the Secretary has issued or pub-
lished, as the case may be, the substantive change. 
‘‘(ii) The Secretary may provide for such a sub-
stantive change to take effect on a date that precedes the 
end of the 30-day period under clause (i) if the Secretary 
finds that waiver of such 30-day period is necessary to 
comply with statutory requirements or that the application 
of such 30-day period is contrary to the public interest. 
If the Secretary provides for an earlier effective date pur-
suant to this clause, the Secretary shall include in the 
issuance or publication of the substantive change a finding 
described in the first sentence, and a brief statement of 
the reasons for such finding. 
‘‘(C) No action shall be taken against a provider of 
services or supplier with respect to noncompliance with 
such a substantive change for items and services furnished 
before the effective date of such a change.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to compliance actions
101
undertaken on or after the date of the enactment of 
this Act. 
(c) RELIANCE ON GUIDANCE.—
(1) IN GENERAL.—Section 1871(e), as added 
by subsection (a), is further amended by adding at 
the end the following new paragraph: 
‘‘(2)(A) If—
‘‘(i) a provider of services or supplier follows 
the written guidance (which may be transmitted 
electronically) provided by the Secretary or by a 
medicare contractor (as defined in section 1889(g)) 
acting within the scope of the contractor’s contract 
authority, with respect to the furnishing of items or 
services and submission of a claim for benefits for 
such items or services with respect to such provider 
or supplier; 
‘‘(ii) the Secretary determines that the provider 
of services or supplier has accurately presented the 
circumstances relating to such items, services, and 
claim to the contractor in writing; and 
‘‘(iii) the guidance was in error; 
the provider of services or supplier shall not be subject 
to any sanction (including any penalty or requirement for 
repayment of any amount) if the provider of services or 
supplier reasonably relied on such guidance.
102
‘‘(B) Subparagraph (A) shall not be construed as pre-
venting the recoupment or repayment (without any addi-
tional penalty) relating to an overpayment insofar as the 
overpayment was solely the result of a clerical or technical 
operational error.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act but shall not apply to any 
sanction for which notice was provided on or before 
the date of the enactment of this Act. 
SEC. 504. REPORTS AND STUDIES RELATING TO REGU-
LATORY REFORM. 
(a) GAO STUDY ON ADVISORY OPINION AUTHOR-
ITY.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study to determine the 
feasibility and appropriateness of establishing in the 
Secretary authority to provide legally binding advi-
sory opinions on appropriate interpretation and ap-
plication of regulations to carry out the medicare 
program under title XVIII of the Social Security 
Act. Such study shall examine the appropriate time-
frame for issuing such advisory opinions, as well as 
the need for additional staff and funding to provide 
such opinions.
103
(2) REPORT.—The Comptroller General shall 
submit to Congress a report on the study conducted 
under paragraph (1) by not later than January 1, 
2004. 
(b) REPORT ON LEGAL AND REGULATORY INCON-
SISTENCIES.—Section 1871 (42 U.S.C. 1395hh), as 
amended by section 503(a), is amended by adding at the 
end the following new subsection: 
‘‘(f)(1) Not later than 2 years after the date of the 
enactment of this subsection, and every 2 years thereafter, 
the Secretary shall submit to Congress a report with re-
spect to the administration of this title and areas of incon-
sistency or conflict among the various provisions under 
law and regulation. 
‘‘(2) In preparing a report under paragraph (1), the 
Secretary shall collect—
‘‘(A) information from individuals entitled to 
benefits under part A or enrolled under part B, or 
both, providers of services, and suppliers and from 
the Medicare Beneficiary Ombudsman and the Medi-
care Provider Ombudsman with respect to such 
areas of inconsistency and conflict; and 
‘‘(B) information from medicare contractors 
that tracks the nature of written and telephone in-
quiries.
104
‘‘(3) A report under paragraph (1) shall include a de-
scription of efforts by the Secretary to reduce such incon-
sistency or conflicts, and recommendations for legislation 
or administrative action that the Secretary determines ap-
propriate to further reduce such inconsistency or con-
flicts.’’.
Subtitle B—Contracting Reform 
SEC. 511. INCREASED FLEXIBILITY IN MEDICARE ADMINIS-
TRATION. 
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE 
ADMINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by 
inserting after section 1874 the following new sec-
tion: 
‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE 
CONTRACTORS 
‘‘SEC. 1874A. (a) AUTHORITY.—
‘‘(1) 
AUTHORITY
TO
ENTER
INTO
CON-
TRACTS.—The Secretary may enter into contracts 
with any eligible entity to serve as a medicare ad-
ministrative contractor with respect to the perform-
ance of any or all of the functions described in para-
graph (4) or parts of those functions (or, to the ex-
tent provided in a contract, to secure performance 
thereof by other entities).
105
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is 
eligible to enter into a contract with respect to the 
performance of a particular function described in 
paragraph (4) only if—
‘‘(A) the entity has demonstrated capa-
bility to carry out such function; 
‘‘(B) the entity complies with such conflict 
of interest standards as are generally applicable 
to Federal acquisition and procurement; 
‘‘(C) the entity has sufficient assets to fi-
nancially support the performance of such func-
tion; and 
‘‘(D) the entity meets such other require-
ments as the Secretary may impose. 
‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR 
DEFINED.—For purposes of this title and title XI—
‘‘(A) IN
GENERAL.—The term ‘medicare 
administrative contractor’ means an agency, or-
ganization, or other person with a contract 
under this section. 
‘‘(B) APPROPRIATE
MEDICARE
ADMINIS-
TRATIVE
CONTRACTOR.—With respect to the 
performance of a particular function in relation 
to an individual entitled to benefits under part 
A or enrolled under part B, or both, a specific
106
provider of services or supplier (or class of such 
providers of services or suppliers), the ‘appro-
priate’ medicare administrative contractor is the 
medicare administrative contractor that has a 
contract under this section with respect to the 
performance of that function in relation to that 
individual, provider of services or supplier or 
class of provider of services or supplier. 
‘‘(4) FUNCTIONS
DESCRIBED.—The functions 
referred to in paragraphs (1) and (2) are payment 
functions, provider services functions, and functions 
relating to services furnished to individuals entitled 
to benefits under part A or enrolled under part B, 
or both, as follows: 
‘‘(A) 
DETERMINATION
OF
PAYMENT 
AMOUNTS.—Determining (subject to the provi-
sions of section 1878 and to such review by the 
Secretary as may be provided for by the con-
tracts) the amount of the payments required 
pursuant to this title to be made to providers 
of services, suppliers and individuals. 
‘‘(B) MAKING
PAYMENTS.—Making pay-
ments described in subparagraph (A) (including 
receipt, disbursement, and accounting for funds 
in making such payments).
107
‘‘(C) BENEFICIARY
EDUCATION
AND
AS-
SISTANCE.—Providing education and outreach 
to individuals entitled to benefits under part A 
or enrolled under part B, or both, and pro-
viding assistance to those individuals with spe-
cific issues, concerns or problems. 
‘‘(D) PROVIDER
CONSULTATIVE
SERV-
ICES.—Providing consultative services to insti-
tutions, agencies, and other persons to enable 
them to establish and maintain fiscal records 
necessary for purposes of this title and other-
wise to qualify as providers of services or sup-
pliers. 
‘‘(E) 
COMMUNICATION
WITH
PRO-
VIDERS.—Communicating to providers of serv-
ices and suppliers any information or instruc-
tions furnished to the medicare administrative 
contractor by the Secretary, and facilitating 
communication between such providers and sup-
pliers and the Secretary. 
‘‘(F) PROVIDER
EDUCATION
AND
TECH-
NICAL ASSISTANCE.—Performing the functions 
relating to provider education, training, and 
technical assistance.
108
‘‘(G) 
ADDITIONAL
FUNCTIONS.—Per-
forming such other functions as are necessary 
to carry out the purposes of this title. 
‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
‘‘(A) NONDUPLICATION
OF
DUTIES.—In 
entering into contracts under this section, the 
Secretary shall assure that functions of medi-
care administrative contractors in carrying out 
activities under parts A and B do not duplicate 
activities carried out under the Medicare Integ-
rity Program under section 1893. The previous 
sentence shall not apply with respect to the ac-
tivity described in section 1893(b)(5) (relating 
to prior authorization of certain items of dura-
ble 
medical 
equipment 
under 
section 
1834(a)(15)). 
‘‘(B) CONSTRUCTION.—An entity shall not 
be treated as a medicare administrative con-
tractor merely by reason of having entered into 
a contract with the Secretary under section 
1893. 
‘‘(6) APPLICATION
OF
FEDERAL
ACQUISITION 
REGULATION.—Except to the extent inconsistent 
with a specific requirement of this title, the Federal
110
‘‘(C) TRANSFER
OF
FUNCTIONS.—The 
Secretary may transfer functions among medi-
care administrative contractors consistent with 
the provisions of this paragraph. The Secretary 
shall ensure that performance quality is consid-
ered in such transfers. The Secretary shall pro-
vide public notice (whether in the Federal Reg-
ister or otherwise) of any such transfer (includ-
ing a description of the functions so trans-
ferred, a description of the providers of services 
and suppliers affected by such transfer, and 
contact information for the contractors in-
volved). 
‘‘(D) INCENTIVES
FOR
QUALITY.—The 
Secretary shall provide incentives for medicare 
administrative contractors to provide quality 
service and to promote efficiency. 
‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No 
contract under this section shall be entered into with 
any medicare administrative contractor unless the 
Secretary finds that such medicare administrative 
contractor will perform its obligations under the con-
tract efficiently and effectively and will meet such 
requirements as to financial responsibility, legal au-
111
thority, quality of services provided, and other mat-
ters as the Secretary finds pertinent. 
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT
OF
SPECIFIC
PER-
FORMANCE
REQUIREMENTS.—In 
developing 
contract performance requirements, the Sec-
retary shall develop performance requirements 
applicable to functions described in subsection 
(a)(4). 
‘‘(B) CONSULTATION.— In developing such 
requirements, the Secretary may consult with 
providers of services and suppliers, organiza-
tions representing individuals entitled to bene-
fits under part A or enrolled under part B, or 
both, and organizations and agencies per-
forming functions necessary to carry out the 
purposes of this section with respect to such 
performance requirements. 
‘‘(C) INCLUSION IN CONTRACTS.—All con-
tractor performance requirements shall be set 
forth in the contract between the Secretary and 
the appropriate medicare administrative con-
tractor. Such performance requirements—
‘‘(i) shall reflect the performance re-
quirements developed under subparagraph
112
(A), but may include additional perform-
ance requirements; 
‘‘(ii) shall be used for evaluating con-
tractor performance under the contract; 
and 
‘‘(iii) shall be consistent with the writ-
ten statement of work provided under the 
contract. 
‘‘(4) INFORMATION REQUIREMENTS.—The Sec-
retary shall not enter into a contract with a medi-
care administrative contractor under this section un-
less the contractor agrees—
‘‘(A) to furnish to the Secretary such time-
ly information and reports as the Secretary may 
find necessary in performing his functions 
under this title; and 
‘‘(B) to maintain such records and afford 
such access thereto as the Secretary finds nec-
essary to assure the correctness and verification 
of the information and reports under subpara-
graph (A) and otherwise to carry out the pur-
poses of this title. 
‘‘(5) SURETY BOND.—A contract with a medi-
care administrative contractor under this section 
may require the medicare administrative contractor,
113
and any of its officers or employees certifying pay-
ments or disbursing funds pursuant to the contract, 
or otherwise participating in carrying out the con-
tract, to give surety bond to the United States in 
such amount as the Secretary may deem appro-
priate. 
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—A contract with any medi-
care administrative contractor under this section 
may contain such terms and conditions as the Sec-
retary finds necessary or appropriate and may pro-
vide for advances of funds to the medicare adminis-
trative contractor for the making of payments by it 
under subsection (a)(4)(B). 
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN 
DATA COLLECTION.—The Secretary may not require, 
as a condition of entering into, or renewing, a con-
tract under this section, that the medicare adminis-
trative contractor match data obtained other than in 
its activities under this title with data used in the 
administration of this title for purposes of identi-
fying situations in which the provisions of section 
1862(b) may apply. 
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD-
MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
114
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as 
a certifying officer shall, in the absence of gross neg-
ligence or intent to defraud the United States, be 
liable with respect to any payments certified by the 
individual under this section. 
‘‘(2) DISBURSING OFFICER.—No disbursing of-
ficer shall, in the absence of gross negligence or in-
tent to defraud the United States, be liable with re-
spect to any payment by such officer under this sec-
tion if it was based upon an authorization (which 
meets the applicable requirements for such internal 
controls established by the Comptroller General) of 
a certifying officer designated as provided in para-
graph (1) of this subsection. 
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE 
CONTRACTOR.—No medicare administrative con-
tractor shall be liable to the United States for a pay-
ment by a certifying or disbursing officer unless in 
connection with such payment or in the supervision 
of or selection of such officer the medicare adminis-
trative contractor acted with gross negligence. 
‘‘(4) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (D), in the case of a medicare
115
administrative contractor (or a person who is a 
director, officer, or employee of such a con-
tractor or who is engaged by the contractor to 
participate directly in the claims administration 
process) who is made a party to any judicial or 
administrative proceeding arising from or relat-
ing directly to the claims administration process 
under this title, the Secretary may, to the ex-
tent the Secretary determines to be appropriate 
and as specified in the contract with the con-
tractor, indemnify the contractor and such per-
sons. 
‘‘(B) CONDITIONS.—The Secretary may 
not provide indemnification under subparagraph 
(A) insofar as the liability for such costs arises 
directly from conduct that is determined by the 
judicial proceeding or by the Secretary to be 
criminal in nature, fraudulent, or grossly neg-
ligent. If indemnification is provided by the Sec-
retary with respect to a contractor before a de-
termination that such costs arose directly from 
such conduct, the contractor shall reimburse the 
Secretary for costs of indemnification. 
‘‘(C) SCOPE
OF
INDEMNIFICATION.—In-
demnification by the Secretary under subpara-
116
graph (A) may include payment of judgments, 
settlements (subject to subparagraph (D)), 
awards, and costs (including reasonable legal 
expenses). 
‘‘(D) WRITTEN
APPROVAL
FOR
SETTLE-
MENTS.—A contractor or other person de-
scribed in subparagraph (A) may not propose to 
negotiate a settlement or compromise of a pro-
ceeding described in such subparagraph without 
the prior written approval of the Secretary to 
negotiate such settlement or compromise. Any 
indemnification under subparagraph (A) with 
respect to amounts paid under a settlement or 
compromise of a proceeding described in such 
subparagraph are conditioned upon prior writ-
ten approval by the Secretary of the final settle-
ment or compromise. 
‘‘(E) CONSTRUCTION.—Nothing in this 
paragraph shall be construed—
‘‘(i) to change any common law immu-
nity that may be available to a medicare 
administrative contractor or person de-
scribed in subparagraph (A); or 
‘‘(ii) to permit the payment of costs 
not otherwise allowable, reasonable, or allo-
117
cable under the Federal Acquisition Regu-
lations.’’. 
(2) CONSIDERATION
OF
INCORPORATION
OF 
CURRENT LAW STANDARDS.—In developing contract 
performance requirements under section 1874A(b) 
of the Social Security Act, as inserted by paragraph 
(1), the Secretary shall consider inclusion of the per-
formance standards described in sections 1816(f)(2) 
of such Act (relating to timely processing of recon-
siderations and applications for exemptions) and sec-
tion 1842(b)(2)(B) of such Act (relating to timely 
review of determinations and fair hearing requests), 
as such sections were in effect before the date of the 
enactment of this Act. 
(b) CONFORMING AMENDMENTS TO SECTION 1816 
(RELATING TO FISCAL INTERMEDIARIES).—Section 1816 
(42 U.S.C. 1395h) is amended as follows: 
(1) The heading is amended to read as follows: 
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF 
PART A’’. 
(2) Subsection (a) is amended to read as fol-
lows: 
‘‘(a) The administration of this part shall be con-
ducted through contracts with medicare administrative 
contractors under section 1874A.’’. 
(3) Subsection (b) is repealed.
118
(4) Subsection (c) is amended—
(A) by striking paragraph (1); and 
(B) in each of paragraphs (2)(A) and 
(3)(A), by striking ‘‘agreement under this sec-
tion’’ and inserting ‘‘contract under section 
1874A that provides for making payments 
under this part’’. 
(5) Subsections (d) through (i) are repealed. 
(6) Subsections (j) and (k) are each amended—
(A) by striking ‘‘An agreement with an 
agency or organization under this section’’ and 
inserting ‘‘A contract with a medicare adminis-
trative contractor under section 1874A with re-
spect to the administration of this part’’; and 
(B) by striking ‘‘such agency or organiza-
tion’’ and inserting ‘‘such medicare administra-
tive contractor’’ each place it appears. 
(7) Subsection (l) is repealed. 
(c) CONFORMING AMENDMENTS TO SECTION 1842 
(RELATING
TO CARRIERS).—Section 1842 (42 U.S.C. 
1395u) is amended as follows: 
(1) The heading is amended to read as follows: 
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF 
PART B’’. 
(2) Subsection (a) is amended to read as fol-
lows:
119
‘‘(a) The administration of this part shall be con-
ducted through contracts with medicare administrative 
contractors under section 1874A.’’. 
(3) Subsection (b) is amended—
(A) by striking paragraph (1); 
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and 
(B); 
(ii) in subparagraph (C), by striking 
‘‘carriers’’ and inserting ‘‘medicare admin-
istrative contractors’’; and 
(iii) by striking subparagraphs (D) 
and (E); 
(C) in paragraph (3)—
(i) in the matter before subparagraph 
(A), by striking ‘‘Each such contract shall 
provide that the carrier’’ and inserting 
‘‘The Secretary’’;
(ii) by striking ‘‘will’’ the first place it 
appears in each of subparagraphs (A), (B), 
(F), (G), (H), and (L) and inserting 
‘‘shall’’; 
(iii) in subparagraph (B), in the mat-
ter before clause (i), by striking ‘‘to the 
policyholders and subscribers of the car-
120
rier’’ and inserting ‘‘to the policyholders 
and subscribers of the medicare adminis-
trative contractor’’; 
(iv) by striking subparagraphs (C), 
(D), and (E); 
(v) in subparagraph (H)—
(I) by striking ‘‘if it makes deter-
minations or payments with respect to 
physicians’ services,’’ in the matter 
preceding clause (i); and 
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’ in clause (i); 
(vi) by striking subparagraph (I); 
(vii) in subparagraph (L), by striking 
the semicolon and inserting a period; 
(viii) in the first sentence, after sub-
paragraph (L), by striking ‘‘and shall con-
tain’’ and all that follows through the pe-
riod; and 
(ix) in the seventh sentence, by insert-
ing ‘‘medicare administrative contractor,’’ 
after ‘‘carrier,’’; and 
(D) by striking paragraph (5);
121
(E) in paragraph (6)(D)(iv), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and 
(F) in paragraph (7), by striking ‘‘the car-
rier’’ and inserting ‘‘the Secretary’’ each place 
it appears. 
(4) Subsection (c) is amended—
(A) by striking paragraph (1); 
(B) in paragraph (2)(A), by striking ‘‘con-
tract under this section which provides for the 
disbursement of funds, as described in sub-
section (a)(1)(B),’’ and inserting ‘‘contract 
under section 1874A that provides for making 
payments under this part’’; 
(C) in paragraph (3)(A), by striking ‘‘sub-
section 
(a)(1)(B)’’ 
and 
inserting 
‘‘section 
1874A(a)(3)(B)’’; 
(D) in paragraph (4), in the matter pre-
ceding subparagraph (A), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’; and 
(E) by striking paragraphs (5) and (6). 
(5) Subsections (d), (e), and (f) are repealed.
122
(6) Subsection (g) is amended by striking ‘‘car-
rier or carriers’’ and inserting ‘‘medicare administra-
tive contractor or contractors’’. 
(7) Subsection (h) is amended—
(A) in paragraph (2)—
(i) by striking ‘‘Each carrier having 
an agreement with the Secretary under 
subsection (a)’’ and inserting ‘‘The Sec-
retary’’; and 
(ii) by striking ‘‘Each such carrier’’ 
and inserting ‘‘The Secretary’’; 
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an 
agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘medicare ad-
ministrative contractor having a contract 
under section 1874A that provides for 
making payments under this part’’; and 
(ii) by striking ‘‘such carrier’’ and in-
serting ‘‘such contractor’’; 
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and insert-
ing ‘‘a medicare administrative contractor’’ 
each place it appears; and
123
(ii) by striking ‘‘the carrier’’ and in-
serting ‘‘the contractor’’ each place it ap-
pears; and 
(D) in paragraphs (5)(A) and (5)(B)(iii), 
by striking ‘‘carriers’’ and inserting ‘‘medicare 
administrative contractors’’ each place it ap-
pears. 
(8) Subsection (l) is amended—
(A) in paragraph (1)(A)(iii), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and 
(B) in paragraph (2), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’. 
(9) Subsection (p)(3)(A) is amended by striking 
‘‘carrier’’ and inserting ‘‘medicare administrative 
contractor’’. 
(10) Subsection (q)(1)(A) is amended by strik-
ing ‘‘carrier’’. 
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN
GENERAL.—Except as otherwise 
provided in this subsection, the amendments 
made by this section shall take effect on Octo-
ber 1, 2004, and the Secretary is authorized to
124
take such steps before such date as may be nec-
essary to implement such amendments on a 
timely basis. 
(B) CONSTRUCTION
FOR
CURRENT
CON-
TRACTS.—Such amendments shall not apply to 
contracts in effect before the date specified 
under subparagraph (A) that continue to retain 
the terms and conditions in effect on such date 
(except as otherwise provided under this Act, 
other than under this section) until such date 
as the contract is let out for competitive bid-
ding under such amendments. 
(C) DEADLINE
FOR
COMPETITIVE
BID-
DING.—The Secretary shall provide for the let-
ting by competitive bidding of all contracts for 
functions of medicare administrative contrac-
tors for annual contract periods that begin on 
or after October 1, 2009. 
(D) WAIVER
OF
PROVIDER
NOMINATION 
PROVISIONS DURING TRANSITION.—During the 
period beginning on the date of the enactment 
of this Act and before the date specified under 
subparagraph (A), the Secretary may enter into 
new agreements under section 1816 of the So-
cial Security Act (42 U.S.C. 1395h) without re-
125
gard to any of the provider nomination provi-
sions of such section. 
(2) GENERAL
TRANSITION
RULES.—The Sec-
retary shall take such steps, consistent with para-
graph (1)(B) and (1)(C), as are necessary to provide 
for an appropriate transition from contracts under 
section 1816 and section 1842 of the Social Security 
Act (42 U.S.C. 1395h, 1395u) to contracts under 
section 1874A, as added by subsection (a)(1). 
(3) AUTHORIZING
CONTINUATION
OF
MIP 
FUNCTIONS
UNDER
CURRENT
CONTRACTS
AND 
AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—
The provisions contained in the exception in section 
1893(d)(2) of the Social Security Act (42 U.S.C. 
1395ddd(d)(2)) shall continue to apply notwith-
standing the amendments made by this section, and 
any reference in such provisions to an agreement or 
contract shall be deemed to include a contract under 
section 1874A of such Act, as inserted by subsection 
(a)(1), that continues the activities referred to in 
such provisions. 
(e) REFERENCES.—On and after the effective date 
provided under subsection (d)(1), any reference to a fiscal 
intermediary or carrier under title XI or XVIII of the So-
cial Security Act (or any regulation, manual instruction,
126
interpretative rule, statement of policy, or guideline issued 
to carry out such titles) shall be deemed a reference to 
an appropriate medicare administrative contractor (as 
provided under section 1874A of the Social Security Act). 
(f) REPORTS ON IMPLEMENTATION.—
(1) PLAN FOR IMPLEMENTATION.—By not later 
than October 1, 2003, the Secretary shall submit a 
report to Congress and the Comptroller General of 
the United States that describes the plan for imple-
mentation of the amendments made by this section. 
The Comptroller General shall conduct an evaluation 
of such plan and shall submit to Congress, not later 
than 6 months after the date the report is received, 
a report on such evaluation and shall include in such 
report such recommendations as the Comptroller 
General deems appropriate. 
(2) STATUS OF IMPLEMENTATION.—The Sec-
retary shall submit a report to Congress not later 
than October 1, 2007, that describes the status of 
implementation of such amendments and that in-
cludes a description of the following: 
(A) The number of contracts that have 
been competitively bid as of such date. 
(B) The distribution of functions among 
contracts and contractors.
127
(C) A timeline for complete transition to 
full competition. 
(D) A detailed description of how the Sec-
retary has modified oversight and management 
of medicare contractors to adapt to full com-
petition. 
SEC. 512. REQUIREMENTS FOR INFORMATION SECURITY 
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS. 
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 511(a)(1), is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) REQUIREMENTS
FOR
INFORMATION
SECU-
RITY.—
‘‘(1) DEVELOPMENT
OF
INFORMATION
SECU-
RITY
PROGRAM.—A medicare administrative con-
tractor that performs the functions referred to in 
subparagraphs (A) and (B) of subsection (a)(4) (re-
lating to determining and making payments) shall 
implement a contractor-wide information security 
program to provide information security for the op-
eration and assets of the contractor with respect to 
such functions under this title. An information secu-
rity program under this paragraph shall meet the re-
quirements for information security programs im-
128
posed on Federal agencies under section 3534(b)(2) 
of title 44, United States Code (other than require-
ments under subparagraphs (B)(ii), (F)(iii), and 
(F)(iv) of such section). 
‘‘(2) INDEPENDENT AUDITS.—
‘‘(A) PERFORMANCE OF ANNUAL EVALUA-
TIONS.—Each year a medicare administrative 
contractor that performs the functions referred 
to in subparagraphs (A) and (B) of subsection 
(a)(4) (relating to determining and making pay-
ments) shall undergo an evaluation of the infor-
mation security of the contractor with respect 
to such functions under this title. The evalua-
tion shall—
‘‘(i) be performed by an entity that 
meets such requirements for independence 
as the Inspector General of the Depart-
ment of Health and Human Services may 
establish; and 
‘‘(ii) test the effectiveness of informa-
tion security control techniques for an ap-
propriate subset of the contractor’s infor-
mation systems (as defined in section 
3502(8) of title 44, United States Code) 
relating to such functions under this title
129
and an assessment of compliance with the 
requirements of this subsection and related 
information security policies, procedures, 
standards and guidelines. 
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case 
of a medicare administrative contractor 
covered by this subsection that has not 
previously performed the functions referred 
to in subparagraphs (A) and (B) of sub-
section (a)(4) (relating to determining and 
making payments) as a fiscal intermediary 
or carrier under section 1816 or 1842, the 
first independent evaluation conducted 
pursuant subparagraph (A) shall be com-
pleted prior to commencing such functions. 
‘‘(ii) OTHER
CONTRACTORS.—In the 
case of a medicare administrative con-
tractor covered by this subsection that is 
not described in clause (i), the first inde-
pendent evaluation conducted pursuant 
subparagraph (A) shall be completed with-
in 1 year after the date the contractor
130
commences functions referred to in clause 
(i) under this section. 
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE INSPECTOR GENERAL.—
The results of independent evaluations 
under subparagraph (A) shall be submitted 
promptly to the Inspector General of the 
Department of Health and Human Serv-
ices. 
‘‘(ii) TO
CONGRESS.—The Inspector 
General of Department of Health and 
Human Services shall submit to Congress 
annual reports on the results of such eval-
uations.’’. 
(b) APPLICATION
OF REQUIREMENTS
TO FISCAL 
INTERMEDIARIES AND CARRIERS.—
(1) IN
GENERAL.—The provisions of section 
1874A(e)(2) of the Social Security Act (other than 
subparagraph (B)), as added by subsection (a), shall 
apply to each fiscal intermediary under section 1816 
of the Social Security Act (42 U.S.C. 1395h) and 
each carrier under section 1842 of such Act (42 
U.S.C. 1395u) in the same manner as they apply to 
medicare administrative contractors under such pro-
visions.
131
(2) DEADLINE FOR INITIAL EVALUATION.—In 
the case of such a fiscal intermediary or carrier with 
an agreement or contract under such respective sec-
tion in effect as of the date of the enactment of this 
Act, 
the 
first 
evaluation 
under 
section 
1874A(e)(2)(A) of the Social Security Act (as added 
by subsection (a)), pursuant to paragraph (1), shall 
be completed (and a report on the evaluation sub-
mitted to the Secretary) by not later than 1 year 
after such date. 
Subtitle C—Education and 
Outreach 
SEC. 521. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE. 
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—The Social Security Act is 
amended by inserting after section 1888 the fol-
lowing new section: 
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE 
‘‘SEC. 1889. (a) COORDINATION
OF EDUCATION 
FUNDING.—The Secretary shall coordinate the edu-
cational activities provided through medicare contractors 
(as defined in subsection (g), including under section 
1893) in order to maximize the effectiveness of Federal 
education efforts for providers of services and suppliers.’’.
132
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. 
(3) REPORT.—Not later than October 1, 2003, 
the Secretary shall submit to Congress a report that 
includes a description and evaluation of the steps 
taken to coordinate the funding of provider edu-
cation under section 1889(a) of the Social Security 
Act, as added by paragraph (1). 
(b) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE.—
(1) IN GENERAL.—Section 1874A, as added by 
section 511(a)(1) and as amended by section 512(a), 
is amended by adding at the end the following new 
subsection: 
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—
In order to give medicare administrative contractors an 
incentive to implement effective education and outreach 
programs for providers of services and suppliers, the Sec-
retary shall develop and implement a methodology to 
measure the specific claims payment error rates of such 
contractors in the processing or reviewing of medicare 
claims.’’.
133
(2) APPLICATION TO FISCAL INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(f) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under 
section 1816 of the Social Security Act (42 U.S.C. 
1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they 
apply to medicare administrative contractors under 
such provisions. 
(3) GAO REPORT ON ADEQUACY OF METHOD-
OLOGY.—Not later than October 1, 2003, the Comp-
troller General of the United States shall submit to 
Congress and to the Secretary a report on the ade-
quacy of the methodology under section 1874A(f) of 
the Social Security Act, as added by paragraph (1), 
and shall include in the report such recommenda-
tions as the Comptroller General determines appro-
priate with respect to the methodology. 
(4) REPORT ON USE OF METHODOLOGY IN AS-
SESSING
CONTRACTOR
PERFORMANCE.—Not later 
than October 1, 2003, the Secretary shall submit to 
Congress a report that describes how the Secretary 
intends to use such methodology in assessing medi-
care contractor performance in implementing effec-
tive education and outreach programs, including
134
whether to use such methodology as a basis for per-
formance bonuses. The report shall include an anal-
ysis of the sources of identified errors and potential 
changes in systems of contractors and rules of the 
Secretary that could reduce claims error rates. 
(c) PROVISION OF ACCESS TO AND PROMPT RE-
SPONSES FROM MEDICARE ADMINISTRATIVE CONTRAC-
TORS.—
(1) IN GENERAL.—Section 1874A, as added by 
section 511(a)(1) and as amended by section 512(a) 
and subsection (b), is further amended by adding at 
the end the following new subsection: 
‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PRO-
VIDERS OF SERVICES AND SUPPLIERS.—
‘‘(1) COMMUNICATION
STRATEGY.—The Sec-
retary shall develop a strategy for communications 
with individuals entitled to benefits under part A or 
enrolled under part B, or both, and with providers 
of services and suppliers under this title. 
‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 
medicare administrative contractor shall, for those 
providers of services and suppliers which submit 
claims to the contractor for claims processing and 
for those individuals entitled to benefits under part 
A or enrolled under part B, or both, with respect
135
to whom claims are submitted for claims processing, 
provide general written responses (which may be 
through electronic transmission) in a clear, concise, 
and accurate manner to inquiries of providers of 
services, suppliers and individuals entitled to bene-
fits under part A or enrolled under part B, or both, 
concerning the programs under this title within 45 
business days of the date of receipt of such inquiries. 
‘‘(3) RESPONSE
TO
TOLL-FREE
LINES.—The 
Secretary shall ensure that each medicare adminis-
trative contractor shall provide, for those providers 
of services and suppliers which submit claims to the 
contractor for claims processing and for those indi-
viduals entitled to benefits under part A or enrolled 
under part B, or both, with respect to whom claims 
are submitted for claims processing, a toll-free tele-
phone number at which such individuals, providers 
of services and suppliers may obtain information re-
garding billing, coding, claims, coverage, and other 
appropriate information under this title. 
‘‘(4) 
MONITORING
OF
CONTRACTOR
RE-
SPONSES.—
‘‘(A) IN GENERAL.—Each medicare admin-
istrative contractor shall, consistent with stand-
136
ards developed by the Secretary under subpara-
graph (B)—
‘‘(i) maintain a system for identifying 
who provides the information referred to in 
paragraphs (2) and (3); and 
‘‘(ii) monitor the accuracy, consist-
ency, and timeliness of the information so 
provided. 
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN
GENERAL.—The Secretary 
shall establish and make public standards 
to monitor the accuracy, consistency, and 
timeliness of the information provided in 
response to written and telephone inquiries 
under this subsection. Such standards shall 
be consistent with the performance require-
ments established under subsection (b)(3). 
‘‘(ii) 
EVALUATION.—In 
conducting 
evaluations of individual medicare adminis-
trative contractors, the Secretary shall 
take into account the results of the moni-
toring conducted under subparagraph (A) 
taking into account as performance re-
quirements 
the 
standards 
established 
under clause (i). The Secretary shall, in
137
consultation 
with 
organizations 
rep-
resenting providers of services, suppliers, 
and individuals entitled to benefits under 
part A or enrolled under part B, or both, 
establish standards relating to the accu-
racy, consistency, and timeliness of the in-
formation so provided. 
‘‘(C) DIRECT
MONITORING.—Nothing in 
this paragraph shall be construed as preventing 
the Secretary from directly monitoring the ac-
curacy, consistency, and timeliness of the infor-
mation so provided.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect October 1, 2003. 
(3) APPLICATION TO FISCAL INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(g) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under 
section 1816 of the Social Security Act (42 U.S.C. 
1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they 
apply to medicare administrative contractors under 
such provisions. 
(d) IMPROVED PROVIDER EDUCATION AND TRAIN-
ING.—
138
(1) IN GENERAL.—Section 1889, as added by 
subsection (a), is amended by adding at the end the 
following new subsections: 
‘‘(b) ENHANCED EDUCATION AND TRAINING.—
‘‘(1) ADDITIONAL RESOURCES.—There are au-
thorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund) $25,000,000 for each of fis-
cal years 2004 and 2005 and such sums as may be 
necessary for succeeding fiscal years. 
‘‘(2) USE.—The funds made available under 
paragraph (1) shall be used to increase the conduct 
by medicare contractors of education and training of 
providers of services and suppliers regarding billing, 
coding, and other appropriate items and may also be 
used to improve the accuracy, consistency, and time-
liness of contractor responses. 
‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI-
TIES FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare con-
tractor conducts education and training activities, it 
shall tailor such activities to meet the special needs 
of small providers of services or suppliers (as defined 
in paragraph (2)).
139
‘‘(2) SMALL PROVIDER OF SERVICES OR SUP-
PLIER.—In this subsection, the term ‘small provider 
of services or supplier’ means—
‘‘(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
‘‘(B) a supplier with fewer than 10 full-
time-equivalent employees.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2003. 
(e) 
REQUIREMENT
TO
MAINTAIN
INTERNET 
SITES.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsection (d), is 
further amended by adding at the end the following 
new subsection: 
‘‘(d) INTERNET SITES; FAQS.—The Secretary, and 
each medicare contractor insofar as it provides services 
(including claims processing) for providers of services or 
suppliers, shall maintain an Internet site which—
‘‘(1) provides answers in an easily accessible 
format to frequently asked questions, and 
‘‘(2) includes other published materials of the 
contractor,
140
that relate to providers of services and suppliers under the 
programs under this title (and title XI insofar as it relates 
to such programs).’’.
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2003. 
(f) ADDITIONAL
PROVIDER
EDUCATION
PROVI-
SIONS.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsections (d) 
and (e), is further amended by adding at the end the 
following new subsections: 
‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDU-
CATION PROGRAM ACTIVITIES.—A medicare contractor 
may not use a record of attendance at (or failure to at-
tend) educational activities or other information gathered 
during an educational program conducted under this sec-
tion or otherwise by the Secretary to select or track pro-
viders of services or suppliers for the purpose of con-
ducting any type of audit or prepayment review. 
‘‘(f) CONSTRUCTION.—Nothing in this section or sec-
tion 1893(g) shall be construed as providing for disclosure 
by a medicare contractor of information that would com-
promise pending law enforcement activities or reveal find-
ings of law enforcement-related audits.
141
‘‘(g) DEFINITIONS.—For purposes of this section, the 
term ‘medicare contractor’ includes the following: 
‘‘(1) A medicare administrative contractor with 
a contract under section 1874A, including a fiscal 
intermediary with a contract under section 1816 and 
a carrier with a contract under section 1842. 
‘‘(2) An eligible entity with a contract under 
section 1893. 
Such term does not include, with respect to activities of 
a specific provider of services or supplier an entity that 
has no authority under this title or title IX with respect 
to such activities and such provider of services or sup-
plier.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. 
SEC. 522. SMALL PROVIDER TECHNICAL ASSISTANCE DEM-
ONSTRATION PROGRAM. 
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary shall establish 
a demonstration program (in this section referred to 
as the ‘‘demonstration program’’) under which tech-
nical assistance described in paragraph (2) is made 
available, upon request and on a voluntary basis, to 
small providers of services or suppliers in order to
142
improve compliance with the applicable requirements 
of the programs under medicare program under title 
XVIII of the Social Security Act (including provi-
sions of title XI of such Act insofar as they relate 
to such title and are not administered by the Office 
of the Inspector General of the Department of 
Health and Human Services). 
(2) FORMS OF TECHNICAL ASSISTANCE.—The 
technical assistance described in this paragraph is—
(A) evaluation and recommendations re-
garding billing and related systems; and 
(B) information and assistance regarding 
policies and procedures under the medicare pro-
gram, including coding and reimbursement. 
(3) SMALL PROVIDERS OF SERVICES OR SUP-
PLIERS.—In this section, the term ‘‘small providers 
of services or suppliers’’ means—
(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
(B) a supplier with fewer than 10 full-
time-equivalent employees. 
(b) QUALIFICATION
OF
CONTRACTORS.—In con-
ducting the demonstration program, the Secretary shall 
enter into contracts with qualified organizations (such as 
peer review organizations or entities described in section
143
1889(g)(2) of the Social Security Act, as inserted by sec-
tion 5(f)(1)) with appropriate expertise with billing sys-
tems of the full range of providers of services and sup-
pliers to provide the technical assistance. In awarding such 
contracts, the Secretary shall consider any prior investiga-
tions of the entity’s work by the Inspector General of De-
partment of Health and Human Services or the Comp-
troller General of the United States. 
(c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The 
technical assistance provided under the demonstration 
program shall include a direct and in-person examination 
of billing systems and internal controls of small providers 
of services or suppliers to determine program compliance 
and to suggest more efficient or effective means of achiev-
ing such compliance. 
(d) AVOIDANCE OF RECOVERY ACTIONS FOR PROB-
LEMS IDENTIFIED AS CORRECTED.—The Secretary shall 
provide that, absent evidence of fraud and notwith-
standing any other provision of law, any errors found in 
a compliance review for a small provider of services or sup-
plier that participates in the demonstration program shall 
not be subject to recovery action if the technical assistance 
personnel under the program determine that—
(1) the problem that is the subject of the com-
pliance review has been corrected to their satisfac-
144
tion within 30 days of the date of the visit by such 
personnel to the small provider of services or sup-
plier; and 
(2) such problem remains corrected for such pe-
riod as is appropriate. 
The previous sentence applies only to claims filed as part 
of the demonstration program and lasts only for the dura-
tion of such program and only as long as the small pro-
vider of services or supplier is a participant in such pro-
gram. 
(e) GAO EVALUATION.—Not later than 2 years after 
the date of the date the demonstration program is first 
implemented, the Comptroller General, in consultation 
with the Inspector General of the Department of Health 
and Human Services, shall conduct an evaluation of the 
demonstration program. The evaluation shall include a de-
termination of whether claims error rates are reduced for 
small providers of services or suppliers who participated 
in the program and the extent of improper payments made 
as a result of the demonstration program. The Comp-
troller General shall submit a report to the Secretary and 
the Congress on such evaluation and shall include in such 
report recommendations regarding the continuation or ex-
tension of the demonstration program.
145
(f) FINANCIAL PARTICIPATION BY PROVIDERS.—The 
provision of technical assistance to a small provider of 
services or supplier under the demonstration program is 
conditioned upon the small provider of services or supplier 
paying an amount estimated (and disclosed in advance of 
a provider’s or supplier’s participation in the program) to 
be equal to 25 percent of the cost of the technical assist-
ance. 
(g) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance Trust 
Fund and the Federal Supplementary Medical Insurance 
Trust Fund) to carry out the demonstration program— 
(1) for fiscal year 2004, $1,000,000, and 
(2) for fiscal year 2005, $6,000,000. 
SEC. 523. MEDICARE PROVIDER OMBUDSMAN; MEDICARE 
BENEFICIARY OMBUDSMAN. 
(a) MEDICARE
PROVIDER
OMBUDSMAN.—Section 
1868 (42 U.S.C. 1395ee) is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’; 
(2) by inserting ‘‘PRACTICING PHYSICIANS AD-
VISORY COUNCIL.—(1)’’ after ‘‘(a)’’;
146
(3) in paragraph (1), as so redesignated under 
paragraph (2), by striking ‘‘in this section’’ and in-
serting ‘‘in this subsection’’; 
(4) by redesignating subsections (b) and (c) as 
paragraphs (2) and (3), respectively; and 
(5) by adding at the end the following new sub-
section: 
‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—The Sec-
retary shall appoint within the Department of Health and 
Human Services a Medicare Provider Ombudsman. The 
Ombudsman shall—
‘‘(1) provide assistance, on a confidential basis, 
to providers of services and suppliers with respect to 
complaints, grievances, and requests for information 
concerning the programs under this title (including 
provisions of title XI insofar as they relate to this 
title and are not administered by the Office of the 
Inspector General of the Department of Health and 
Human Services) and in the resolution of unclear or 
conflicting guidance given by the Secretary and 
medicare contractors to such providers of services 
and suppliers regarding such programs and provi-
sions and requirements under this title and such 
provisions; and
147
‘‘(2) submit recommendations to the Secretary 
for improvement in the administration of this title 
and such provisions, including—
‘‘(A) recommendations to respond to recur-
ring patterns of confusion in this title and such 
provisions (including recommendations regard-
ing suspending imposition of sanctions where 
there is widespread confusion in program ad-
ministration), and 
‘‘(B) recommendations to provide for an 
appropriate and consistent response (including 
not providing for audits) in cases of self-identi-
fied overpayments by providers of services and 
suppliers. 
The Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, but 
may identify issues and problems in payment or coverage 
policies.’’. 
(b) MEDICARE BENEFICIARY OMBUDSMAN.—Title 
XVIII, as amended by sections 105 and 701, is amended 
by inserting after section 1808 the following new section: 
‘‘MEDICARE BENEFICIARY OMBUDSMAN 
‘‘SEC. 1809. (a) IN GENERAL.—The Secretary shall 
appoint within the Department of Health and Human 
Services a Medicare Beneficiary Ombudsman who shall 
have expertise and experience in the fields of health care
148
and education of (and assistance to) individuals entitled 
to benefits under this title. 
‘‘(b) DUTIES.—The Medicare Beneficiary Ombuds-
man shall—
‘‘(1) receive complaints, grievances, and re-
quests for information submitted by individuals enti-
tled to benefits under part A or enrolled under part 
B, or both, with respect to any aspect of the medi-
care program; 
‘‘(2) provide assistance with respect to com-
plaints, grievances, and requests referred to in para-
graph (1), including—
‘‘(A) assistance in collecting relevant infor-
mation for such individuals, to seek an appeal 
of a decision or determination made by a fiscal 
intermediary, carrier, Medicare+Choice organi-
zation, or the Secretary; and 
‘‘(B) assistance to such individuals with 
any problems arising from disenrollment from a 
Medicare+Choice plan under part C; and 
‘‘(3) submit annual reports to Congress and the 
Secretary that describe the activities of the Office 
and that include such recommendations for improve-
ment in the administration of this title as the Om-
budsman determines appropriate.
149
The Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, but 
may identify issues and problems in payment or coverage 
policies. 
‘‘(c) WORKING WITH HEALTH INSURANCE COUN-
SELING PROGRAMS.—To the extent possible, the Ombuds-
man shall work with health insurance counseling programs 
(receiving funding under section 4360 of Omnibus Budget 
Reconciliation Act of 1990) to facilitate the provision of 
information to individuals entitled to benefits under part 
A or enrolled under part B, or both regarding 
Medicare+Choice plans and changes to those plans. Noth-
ing in this subsection shall preclude further collaboration 
between the Ombudsman and such programs.’’. 
(c) DEADLINE FOR APPOINTMENT.—The Secretary 
shall appoint the Medicare Provider Ombudsman and the 
Medicare Beneficiary Ombudsman, under the amendments 
made by subsections (a) and (b), respectively, by not later 
than 1 year after the date of the enactment of this Act. 
(d) FUNDING.—There are authorized to be appro-
priated to the Secretary (in appropriate part from the 
Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund) to carry 
out the provisions of subsection (b) of section 1868 of the 
Social Security Act (relating to the Medicare Provider
150
Ombudsman), as added by subsection (a)(5) and section 
1809 of such Act (relating to the Medicare Beneficiary 
Ombudsman), as added by subsection (b), such sums as 
are necessary for fiscal year 2003 and each succeeding fis-
cal year. 
(e) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–
MEDICARE).—
(1) PHONE TRIAGE SYSTEM; LISTING IN MEDI-
CARE HANDBOOK INSTEAD OF OTHER TOLL-FREE 
NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–
2(b)) is amended by adding at the end the following: 
‘‘The Secretary shall provide, through the toll-free 
number 1–800–MEDICARE, for a means by which 
individuals seeking information about, or assistance 
with, such programs who phone such toll-free num-
ber are transferred (without charge) to appropriate 
entities for the provision of such information or as-
sistance. Such toll-free number shall be the toll-free 
number listed for general information and assistance 
in the annual notice under subsection (a) instead of 
the listing of numbers of individual contractors.’’. 
(2) MONITORING ACCURACY.—
(A) STUDY.—The Comptroller General of 
the United States shall conduct a study to mon-
itor the accuracy and consistency of information
151
provided to individuals entitled to benefits 
under part A or enrolled under part B, or both, 
through the toll-free number 1–800–MEDI-
CARE, including an assessment of whether the 
information provided is sufficient to answer 
questions of such individuals. In conducting the 
study, the Comptroller General shall examine 
the education and training of the individuals 
providing information through such number. 
(B) REPORT.—Not later than 1 year after 
the date of the enactment of this Act, the 
Comptroller General shall submit to Congress a 
report on the study conducted under subpara-
graph (A). 
SEC. 524. BENEFICIARY OUTREACH DEMONSTRATION PRO-
GRAM. 
(a) IN GENERAL.—The Secretary shall establish a 
demonstration program (in this section referred to as the 
‘‘demonstration program’’) under which medicare special-
ists employed by the Department of Health and Human 
Services provide advice and assistance to individuals enti-
tled to benefits under part A of title XVIII of the Social 
Security Act, or enrolled under part B of such title, or 
both, regarding the medicare program at the location of 
existing local offices of the Social Security Administration.
152
(b) LOCATIONS.—
(1) IN GENERAL.—The demonstration program 
shall be conducted in at least 6 offices or areas. 
Subject to paragraph (2), in selecting such offices 
and areas, the Secretary shall provide preference for 
offices with a high volume of visits by individuals re-
ferred to in subsection (a). 
(2) ASSISTANCE FOR RURAL BENEFICIARIES.—
The Secretary shall provide for the selection of at 
least 2 rural areas to participate in the demonstra-
tion program. In conducting the demonstration pro-
gram in such rural areas, the Secretary shall provide 
for medicare specialists to travel among local offices 
in a rural area on a scheduled basis. 
(c) DURATION.—The demonstration program shall be 
conducted over a 3-year period. 
(d) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall provide 
for an evaluation of the demonstration program. 
Such evaluation shall include an analysis of—
(A) utilization of, and satisfaction of those 
individuals referred to in subsection (a) with, 
the assistance provided under the program; and 
(B) the cost-effectiveness of providing ben-
eficiary assistance through out-stationing medi-
153
care specialists at local offices of the Social Se-
curity Administration. 
(2) REPORT.—The Secretary shall submit to 
Congress a report on such evaluation and shall in-
clude in such report recommendations regarding the 
feasibility of permanently out-stationing medicare 
specialists at local offices of the Social Security Ad-
ministration. 
Subtitle D—Appeals and Recovery 
SEC. 531. TRANSFER OF RESPONSIBILITY FOR MEDICARE 
APPEALS. 
(a) TRANSITION PLAN.—
(1) IN GENERAL.—Not later than October 1, 
2003, the Commissioner of Social Security and the 
Secretary shall develop and transmit to Congress 
and the Comptroller General of the United States a 
plan under which the functions of administrative law 
judges responsible for hearing cases under title 
XVIII of the Social Security Act (and related provi-
sions in title XI of such Act) are transferred from 
the responsibility of the Commissioner and the So-
cial Security Administration to the Secretary and 
the Department of Health and Human Services. 
(2) GAO EVALUATION.—The Comptroller Gen-
eral of the United States shall evaluate the plan
154
and, not later than the date that is 6 months after 
the date on which the plan is received by the Comp-
troller General, shall submit to Congress a report on 
such evaluation. 
(b) TRANSFER OF ADJUDICATION AUTHORITY.—
(1) IN
GENERAL.—Not earlier than July 1, 
2004, and not later than October 1, 2004, the Com-
missioner of Social Security and the Secretary shall 
implement the transition plan under subsection (a) 
and transfer the administrative law judge functions 
described in such subsection from the Social Secu-
rity Administration to the Secretary. 
(2) ASSURING INDEPENDENCE OF JUDGES.—
The Secretary shall assure the independence of ad-
ministrative law judges performing the administra-
tive law judge functions transferred under para-
graph (1) from the Centers for Medicare & Medicaid 
Services and its contractors.
(3) GEOGRAPHIC
DISTRIBUTION.—The Sec-
retary shall provide for an appropriate geographic 
distribution of administrative law judges performing 
the administrative law judge functions transferred 
under paragraph (1) throughout the United States 
to ensure timely access to such judges.
155
(4) 
HIRING
AUTHORITY.—Subject 
to 
the 
amounts provided in advance in appropriations Act, 
the Secretary shall have authority to hire adminis-
trative law judges to hear such cases, giving priority 
to those judges with prior experience in handling 
medicare appeals and in a manner consistent with 
paragraph (3), and to hire support staff for such 
judges. 
(5) FINANCING.—Amounts payable under law 
to the Commissioner for administrative law judges 
performing the administrative law judge functions 
transferred under paragraph (1) from the Federal 
Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund shall 
become payable to the Secretary for the functions so 
transferred. 
(6) SHARED RESOURCES.—The Secretary shall 
enter into such arrangements with the Commissioner 
as may be appropriate with respect to transferred 
functions of administrative law judges to share office 
space, support staff, and other resources, with ap-
propriate reimbursement from the Trust Funds de-
scribed in paragraph (5). 
(c) INCREASED FINANCIAL SUPPORT.—In addition to 
any amounts otherwise appropriated, to ensure timely ac-
156
tion on appeals before administrative law judges and the 
Departmental Appeals Board consistent with section 1869 
of the Social Security Act (as amended by section 521 of 
BIPA, 114 Stat. 2763A–534), there are authorized to be 
appropriated (in appropriate part from the Federal Hos-
pital Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund) to the Secretary 
such sums as are necessary for fiscal year 2004 and each 
subsequent fiscal year to—
(1) increase the number of administrative law 
judges (and their staffs) under subsection (b)(4); 
(2) improve education and training opportuni-
ties for administrative law judges (and their staffs); 
and 
(3) increase the staff of the Departmental Ap-
peals Board. 
(d) 
CONFORMING
AMENDMENT.—Section 
1869(f)(2)(A)(i) (42 U.S.C. 1395ff(f)(2)(A)(i)), as added 
by section 522(a) of BIPA (114 Stat. 2763A–543), is 
amended by striking ‘‘of the Social Security Administra-
tion’’. 
SEC. 532. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 
(a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—Sec-
tion 1869(b) (42 U.S.C. 1395ff(b)) as amended by BIPA, 
is amended—
157
(1) in paragraph (1)(A), by inserting ‘‘, subject 
to paragraph (2),’’ before ‘‘to judicial review of the 
Secretary’s final decision’’; 
(2) in paragraph (1)(F)—
(A) by striking clause (ii); 
(B) by striking ‘‘PROCEEDING’’ and all 
that follows through ‘‘DETERMINATION’’ and in-
serting ‘‘DETERMINATIONS
AND
RECONSIDER-
ATIONS’’; and 
(C) by redesignating subclauses (I) and 
(II) as clauses (i) and (ii) and by moving the 
indentation of such subclauses (and the matter 
that follows) 2 ems to the left; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(2) EXPEDITED
ACCESS
TO
JUDICIAL
RE-
VIEW.—
‘‘(A) IN
GENERAL.—The Secretary shall 
establish a process under which a provider of 
services or supplier that furnishes an item or 
service or an individual entitled to benefits 
under part A or enrolled under part B, or both, 
who has filed an appeal under paragraph (1) 
may obtain access to judicial review when a re-
view panel (described in subparagraph (D)), on
158
its own motion or at the request of the appel-
lant, determines that no entity in the adminis-
trative appeals process has the authority to de-
cide the question of law or regulation relevant 
to the matters in controversy and that there is 
no material issue of fact in dispute. The appel-
lant may make such request only once with re-
spect to a question of law or regulation in a 
case of an appeal. 
‘‘(B) PROMPT DETERMINATIONS.—If, after 
or coincident with appropriately filing a request 
for an administrative hearing, the appellant re-
quests a determination by the appropriate re-
view panel that no review panel has the author-
ity to decide the question of law or regulations 
relevant to the matters in controversy and that 
there is no material issue of fact in dispute and 
if such request is accompanied by the docu-
ments and materials as the appropriate review 
panel shall require for purposes of making such 
determination, such review panel shall make a 
determination on the request in writing within 
60 days after the date such review panel re-
ceives the request and such accompanying docu-
ments and materials. Such a determination by
159
such review panel shall be considered a final de-
cision and not subject to review by the Sec-
retary. 
‘‘(C) ACCESS TO JUDICIAL REVIEW.—
‘‘(i) IN GENERAL.—If the appropriate 
review panel—
‘‘(I) determines that there are no 
material issues of fact in dispute and 
that the only issue is one of law or 
regulation that no review panel has 
the authority to decide; or 
‘‘(II) fails to make such deter-
mination within the period provided 
under subparagraph (B); 
then the appellant may bring a civil action 
as described in this subparagraph. 
‘‘(ii) DEADLINE
FOR
FILING.—Such 
action shall be filed, in the case described 
in—
‘‘(I) clause (i)(I), within 60 days 
of date of the determination described 
in such subparagraph; or 
‘‘(II) clause (i)(II), within 60 
days of the end of the period provided