106TH CONGRESS
1ST SESSION
H. R. 3075
AN ACT
To amend titles XVIII, XIX, and XXI of the Social Security
Act to make corrections and refinements in the Medicare,
Medicaid, and State children’s health insurance pro-
grams, as revised by the Balanced Budget Act of 1997.
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 BBA; TABLE OF
CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare, Medicaid, and SCHIP Balanced Budget Re-
finement Act of 1999’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence shall be considered to be made to that section or
other provision of the Social Security Act.
(c) REFERENCES TO BALANCED BUDGET ACT OF
1997.—In this Act, the term ‘‘BBA’’ means the Balanced
Budget Act of 1997 (Public Law 105–33).
(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 BBA;
table of contents.
TITLE I—PROVISIONS RELATING TO PART A
Subtitle A—PPS Hospitals
Sec. 101. One-year delay in transition for indirect medical education (IME)
percentage adjustment.
Sec. 102. Decrease in reductions for disproportionate share hospitals; data col-
lection requirements.
Subtitle B—PPS Exempt Hospitals
Sec. 111. Wage adjustment of percentile cap for PPS-exempt hospitals.
Sec. 112. Enhanced payments for long-term care and psychiatric hospitals until
development of prospective payment systems for those hos-
pitals.
Sec. 113. Per discharge prospective payment system for long-term care hos-
pitals.
Sec. 114. Per diem prospective payment system for psychiatric hospitals.
Sec. 115. Refinement of prospective payment system for inpatient rehabilitation
services.
Subtitle C—Adjustments to PPS Payments for Skilled Nursing Facilities
Sec. 121. Temporary increase in payment for certain high cost patients.
Sec. 122. Market basket increase.
Sec. 123. Authorizing facilities to elect immediate transition to Federal rate.
Sec. 124. Part A pass-through payment for certain ambulance services, pros-
theses, and chemotherapy drugs.
Sec. 125. Provision for part B add-ons for facilities participating in the
NHCMQ demonstration project.
Sec. 126. Special consideration for facilities serving specialized patient popu-
lations.
Sec. 127. MedPAC study on special payment for facilities located in Hawaii
and Alaska.
Subtitle D—Other
Sec. 131. Part A BBA technical corrections.
TITLE II—PROVISIONS RELATING TO PART B
Subtitle A—Adjustments to Physician Payment Updates
Sec. 201. Modification of update adjustment factor provisions to reduce update
oscillations and require estimate revisions.
Sec. 202. Use of data collected by organizations and entities in determining
practice expense relative values.
Sec. 203. GAO study on resources required to provide safe and effective out-
patient cancer therapy.
Subtitle B—Hospital Outpatient Services
Sec. 211. Outlier adjustment and transitional pass-through for certain medical
devices, drugs, and biologicals.
Sec. 212. Establishing a transitional corridor for application of OPD PPS.
Sec. 213. Delay in application of prospective payment system to cancer center
hospitals.
Sec. 214. Limitation on outpatient hospital copayment for a procedure to the
hospital deductible amount.
Subtitle C—Other
Sec. 221. Application of separate caps to physical and speech therapy services.
Sec. 222. Transitional outlier payments for therapy services for certain high
acuity patients.
Sec. 223. Update in renal dialysis composite rate.
Sec. 224. Temporary update in durable medical equipment and oxygen rates.
Sec. 225. Requirement for new proposed rulemaking for implementation of in-
herent reasonableness policy.
Sec. 226. Increase in reimbursement for pap smears.
Sec. 227. Refinement of ambulance services demonstration project.
Sec. 228. Phase-in of PPS for ambulatory surgical centers.
Sec. 229. Extension of Medicare benefits for immunosuppressive drugs.
Sec. 230. Additional studies.
TITLE III—PROVISIONS RELATING TO PARTS A AND B
Subtitle A—Home Health Services
Sec. 301. Adjustment to reflect administrative costs not included in the interim
payment system.
Sec. 302. Delay in application of 15 percent reduction in payment rates for
home health services until 1 year after implementation of pro-
spective payment system.
Sec. 303. Clarification of surety bond requirements.
Sec. 304. Technical amendment clarifying applicable market basket increase for
PPS.
Subtitle B—Direct Graduate Medical Education
Sec. 311. Use of national average payment methodology in computing direct
graduate medical education (DGME) payments.
Sec. 312. Initial residency period for child neurology residency training pro-
grams.
Subtitle C—Other
Sec. 321. GAO study on geographic reclassification.
Sec. 322. MedPAC study on Medicare payment for non-physician health profes-
sional clinical training in hospitals.
TITLE IV—RURAL PROVIDER PROVISIONS
Sec. 401. Permitting reclassification of certain urban hospitals as rural hos-
pitals.
Sec. 402. Update of standards applied for geographic reclassification for certain
hospitals.
Sec. 403. Improvements in the critical access hospital (CAH) program.
Sec. 404. Five-year extension of Medicare dependent hospital (MDH) program.
Sec. 405. Rebasing for certain sole community hospitals.
Sec. 406. Increased flexibility in providing graduate physician training in rural
areas.
Sec. 407. Elimination of certain restrictions with respect to hospital swing bed
program.
Sec. 408. Grant program for rural hospital transition to prospective payment.
Sec. 409. MedPAC study of rural providers.
Sec. 410. Expansion of access to paramedic intercept services in rural areas.
TITLE V—PROVISIONS RELATING TO PART C
(MEDICARE+CHOICE PROGRAM)
Subtitle A—Medicare+Choice
Sec. 501. Phase-in of new risk adjustment methodology.
Sec. 502. Encouraging offering of Medicare+Choice plans in areas without
plans.
Sec. 503. Modification of 5-year re-entry rule for contract terminations.
Sec. 504. Continued computation and publication of AAPCC data.
Sec. 505. Changes in Medicare+Choice enrollment rules.
Sec. 506. Allowing variation in premium waivers within a service area if
Medicare+Choice payment rates vary within the area.
Sec. 507. Delay in deadline for submission of adjusted community rates and re-
lated information.
Sec. 508. Two-year extension of Medicare cost contracts.
Sec. 509. Medicare+Choice nursing and allied health professional education
payments.
Sec. 510. Reduction in adjustment in national per capita Medicare+Choice
growth percentage for 2002.
Sec. 511. Deeming of Medicare+Choice organization to meet requirements.
Sec. 512. Miscellaneous changes and studies.
Sec. 513. MedPAC report on Medicare MSA (medical savings account) plans.
Sec. 514. Clarification of nonapplicability of certain provisions of discharge
planning process to Medicare+Choice plans.
Subtitle B—Managed Care Demonstration Projects
Sec. 521. Extension of social health maintenance organization demonstration
(SHMO) project authority.
Sec. 522. Extension of Medicare community nursing organization demonstra-
tion project.
Sec. 523. Medicare+Choice competitive bidding demonstration project.
Sec. 524. Extension of Medicare municipal health services demonstration
projects.
Sec. 525. Medicare coordinated care demonstration project.
TITLE VI—MEDICAID
Sec. 601. Making Medicaid DSH transition rule permanent.
Sec. 602. Increase in DSH allotment for certain States and the District of Co-
lumbia.
Sec. 603. New prospective payment system for Federally-qualified health cen-
ters and rural health clinics.
Sec. 604. Parity in reimbursement for certain utilization and quality control
services.
TITLE VII—STATE CHILDREN’S HEALTH INSURANCE PROGRAM
(SCHIP)
Sec. 701. Stabilizing the SCHIP allotment formula.
Sec. 702. Increased allotments for territories under the State children’s health
insurance program.
TITLE I—PROVISIONS RELATING
TO PART A
Subtitle A—PPS Hospitals
SEC. 101. ONE-YEAR DELAY IN TRANSITION FOR INDIRECT
MEDICAL EDUCATION (IME) PERCENTAGE
ADJUSTMENT.
(a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)), as amended by section
4621(a)(1) of BBA, is amended—
(1) in subclause (IV), by inserting ‘‘and 2001’’
after ‘‘2000’’; and
(2) by striking ‘‘2000’’ in subclause (V) and in-
serting ‘‘2001’’.
(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)), as
amended by section 4621(a)(2) of BBA, is amended by
inserting ‘‘or any additional payments under such para-
graph resulting from the amendment made by section
101(a) of Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999’’ after ‘‘Balanced Budget
Act of 1997’’.
bad debt, charity care, and charges for Medicaid an
indigent care.
(2) EFFECTIVE DATE.—The Secretary shall re-
quire the submission of the data described in para-
graph (1) in cost reports for cost reporting periods
beginning on or after the date of the enactment of
this Act.
Subtitle B—PPS-Exempt Hospitals
SEC. 111. WAGE ADJUSTMENT OF PERCENTILE CAP FOR
PPS-EXEMPT HOSPITALS.
(a) IN GENERAL.—Section 1886(b)(3)(H) (42 U.S.C.
1395ww(b)(3)(H)), as amended by section 4414 of BBA,
is amended—
(1) in clause (i), by inserting ‘‘, as adjusted
under clause (iii)’’ before the period;
(2) in clause (ii), by striking ‘‘clause (i)’’ and
‘‘such clause’’ and inserting ‘‘subclause (I)’’ and
‘‘such subclause’’ respectively;
(3) by striking ‘‘(H)(i)’’ and inserting ‘‘(ii)(I)’’;
(4) by redesignating clauses (ii) and (iii) as
subclauses (II) and (III);
(5) by inserting after clause (ii), as so redesig-
nated, the following new clause:
‘‘(iii) In applying clause (ii)(I) in the case of a hos-
pital or unit, the Secretary shall provide for an appro-
priate adjustment to the labor-related portion of the
amount determined under such subparagraph to take into
account differences between average wage-related costs in
the area of the hospital and the national average of such
costs within the same class of hospital.’’; and
(6) by inserting before clause (ii), as so redesig-
nated, the following new clause:
‘‘(H)(i) In the case of a hospital or unit that is within
a class of hospital described in clause (iv), for a cost re-
porting period beginning during fiscal years 1998 through
2002, the target amount for such a hospital or unit may
not exceed the amount as updated up to or for such cost
reporting period under clause (ii).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to cost reporting periods beginning
on or after October 1, 1999.
SEC. 112. ENHANCED PAYMENTS FOR LONG-TERM CARE
AND PSYCHIATRIC HOSPITALS UNTIL DEVEL-
OPMENT OF PROSPECTIVE PAYMENT SYS-
TEMS FOR THOSE HOSPITALS.
Section 1886(b)(2) (42 U.S.C. 1395ww(b)(2)), as
added by section 4415(b) of BBA, is amended—
(1) in subparagraph (A), by striking ‘‘In addi-
tion to’’ and inserting ‘‘Except as provided in sub-
paragraph (E), in addition to’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(E)(i) In the case of an eligible hospital that is a
hospital or unit that is within a class of hospital described
in clause (ii) with a 12-month cost reporting period begin-
ning before the enactment of this subparagraph, in deter-
mining the amount of the increase under subparagraph
(A), the Secretary shall substitute for the percentage of
the target amount applicable under subparagraph
(A)(ii)—
‘‘(I) for a cost reporting period beginning on or
after October 1, 2000, and before September 30,
2001, 1.5 percent; and
‘‘(II) for a cost reporting period beginning on
or after October 1, 2001, and before September 30,
2002, 2 percent.
‘‘(ii) For purposes of clause (i), each of the fol-
lowing shall be treated as a separate class of hos-
pital:
‘‘(I) Hospitals described in clause (i) of
subsection (d)(1)(B) and psychiatric units de-
scribed in the matter following clause (v) of
such subsection.
‘‘(II) Hospitals described in clause (iv) of
such subsection.’’.
SEC. 113. PER DISCHARGE PROSPECTIVE PAYMENT SYS-
TEM FOR LONG-TERM CARE HOSPITALS.
(a) DEVELOPMENT OF SYSTEM.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall develop a per discharge pro-
spective payment system for payment for inpatient
hospital services of long-term care hospitals de-
scribed in section 1886(d)(1)(B)(iv) of the Social Se-
curity Act (42 U.S.C. 1395ww(d)(1)(B)(iv)) under
the Medicare program. Such system shall include an
adequate patient classification system that is based
on diagnosis-related groups (DRGs) and that re-
flects the differences in patient resource use and
costs, and shall maintain budget neutrality.
(2) COLLECTION OF DATA AND EVALUATION.—
In developing the system described in paragraph (1),
the Secretary may require such long-term care hos-
pitals to submit such information to the Secretary as
the Secretary may require to develop the system.
(b) REPORT.—Not later than October 1, 2001, the
Secretary shall submit to the appropriate committees of
Congress a report that includes a description of the system
developed under subsection (a)(1).
(c) IMPLEMENTATION
OF PROSPECTIVE PAYMENT
SYSTEM.—Notwithstanding section 1886(b)(3) of the So-
cial Security Act (42 U.S.C. 1395ww(b)(3)), the Secretary
shall provide, for cost reporting periods beginning on or
after October 1, 2002, for payments for inpatient hospital
services furnished by long-term care hospitals under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
in accordance with the system described in subsection (a).
SEC. 114. PER DIEM PROSPECTIVE PAYMENT SYSTEM FOR
PSYCHIATRIC HOSPITALS.
(a) DEVELOPMENT OF SYSTEM.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall develop a per diem prospective
payment system for payment for inpatient hospital
services of psychiatric hospitals and units (as de-
fined in paragraph (3)) under the Medicare pro-
gram. Such system shall include an adequate patient
classification system that reflects the differences in
patient resource use and costs among such hospitals
and shall maintain budget neutrality.
(2) COLLECTION OF DATA AND EVALUATION.—
In developing the system described in paragraph (1),
the Secretary may require such psychiatric hospitals
and units to submit such information to the Sec-
retary as the Secretary may require to develop the
system.
(3) DEFINITION.—In this section, the term
‘‘psychiatric hospitals and units’’ means a psy-