I
106TH CONGRESS
1ST SESSION
H. R. 3145
To modify the provisions of the Balanced Budget Act of 1997 relating
to the Medicare Program under title XVIII of the Social Security Act.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 26, 1999
Mr. RUSH introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committees on Commerce,
and the Judiciary, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To modify the provisions of the Balanced Budget Act of
1997 relating to the Medicare Program under title XVIII
of the Social Security Act.
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; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Health Care Preservation and Accessibility Act of 1999’’.
(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) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; table of contents.
TITLE I—TEACHING HOSPITALS
Sec. 101. Termination of multiyear reduction of indirect graduate medical edu-
cation payments.
Sec. 102. Program of payments to children’s hospitals that operate graduate
medical education programs.
Sec. 103. Exclusion of nursing and allied health education costs in calculating
Medicare+Choice payment rate.
TITLE II—RURAL HOSPITALS
Sec. 201. Revision of criteria for designation as a critical access hospital.
Sec. 202. Authority to establish a prospective payment system for RHC serv-
ices.
Sec. 203. Requirement to consider rural issues in establishing fee schedule for
ambulance services.
Sec. 204. Stop-loss protection for rural hospital OPD services.
TITLE III—SAFETY NET PROVIDERS
Sec. 301. New prospective payment system for Federally-qualified health cen-
ters and rural health clinics under the Medicaid Program.
Sec. 302. Carving out DSH payments from payments to Medicare+Choice or-
ganizations and paying the amounts directly to DSH hospitals
enrolling Medicare+Choice enrollees.
Sec. 303. Limitation in reduction of payments to disproportionate share hos-
pitals.
TITLE IV—OTHER HOSPITAL PROVISIONS
Sec. 401. Delay of financial limitation on rehabilitation services.
Sec. 402. Multiyear transition to prospective payment system for hospital out-
patient department services.
TITLE V—SKILLED NURSING FACILITIES
Sec. 501. Modification of case mix categories for certain conditions.
Sec. 502. Exclusion of ambulance services to and from dialysis treatments and
prosthetic services from the PPS for SNFs.
Sec. 503. Waiver of 3-day prior hospitalization requirement for coverage of
skilled nursing facility services.
Sec. 504. Extension of certain Medicare community nursing organization dem-
onstration projects.
TITLE VI—COST-EFFICIENT HOME HEALTH PROVIDERS
Sec. 601. Delay in contingency reduction.
Sec. 602. Elimination of 15-minute reporting requirement.
Sec. 603. Recoupment of overpayments.
Sec. 604. Increase in per visit limit.
TITLE VII—MEDICARE+CHOICE AND MEDIGAP PROTECTIONS
FOR SENIORS AND THE DISABLED
Sec. 701. Two-year Medicare+Choice trial period.
Sec. 702. Permitting enrollment in alternative plans upon receipt of notice of
Medicare+Choice plan termination.
Sec. 703. Guaranteed issuance of certain Medigap policies in cases of a sub-
stantial change in benefits under a Medicare+Choice plan.
Sec. 704. Guaranteed issuance of certain Medigap policies to disabled
Medicare+Choice disenrollees.
Sec. 705. Issuance of same Medigap benefit package guaranteed for certain
Medicare+Choice disenrollees.
Sec. 706. Prohibition of attained-age rating of premiums for Medigap policies.
TITLE VIII—MEDICARE PRESERVATION THROUGH FRAUD
PREVENTION
Sec. 801. Site inspections and background checks.
Sec. 802. Registration of billing agencies.
Sec. 803. Expanded access to the health integrity protection database
(HIPDB).
Sec. 804. Liability of Medicare carriers and fiscal intermediaries for claims sub-
mitted by excluded providers.
Sec. 805. Community mental health centers.
Sec. 806. Limiting the discharge of debts in bankruptcy proceedings in cases
where a health care provider or a supplier engages in fraudu-
lent activity.
Sec. 807. Illegal distribution of a Medicare or Medicaid beneficiary identifica-
tion or provider number.
Sec. 808. Treatment of certain Social Security Act crimes as Federal health
care offenses.
Sec. 809. Authority of Office of Inspector General of the Department of Health
and Human Services.
Sec. 810. Universal product numbers on claims forms for reimbursement under
the Medicare Program.
TITLE I—TEACHING HOSPITALS
SEC. 101. TERMINATION OF MULTIYEAR REDUCTION OF IN-
DIRECT 
GRADUATE 
MEDICAL 
EDUCATION
PAYMENTS.
Section 
1886(d)(5)(B)(ii) 
(42 
U.S.C.
1395ww(d)(5)(B)(ii)) is amended—
(1) by adding ‘‘and’’ at the end of subclause
(II); and
(2) by striking subclauses (III), (IV), and (V)
and inserting the following:
‘‘(III) on or after October 1,
1998, ‘c’ is equal to 1.6.’’.
SEC. 102. PROGRAM OF PAYMENTS TO CHILDREN’S HOS-
PITALS THAT OPERATE GRADUATE MEDICAL
EDUCATION PROGRAMS.
(a) PAYMENTS.—The Secretary shall make two pay-
ments under this section to each children’s hospital for
each of fiscal years 2000 and 2001, one for the direct ex-
penses and the other for indirect expenses associated with
operating approved graduate medical residency training
programs.
(b) AMOUNT OF PAYMENTS.—
(1) IN GENERAL.—Subject to paragraph (2),
the amounts payable under this section to a chil-
dren’s hospital for an approved graduate medical
residency training program for a fiscal year are each
of the following amounts:
(A) 
DIRECT
EXPENSE
AMOUNT.—The
amount determined under subsection (c) for di-
rect expenses associated with operating ap-
proved graduate medical residency training pro-
grams.
(B) INDIRECT
EXPENSE
AMOUNT.—The
amount determined under subsection (d) for in-
direct expenses associated with the treatment of
more severely ill patients and the additional
costs relating to teaching residents in such pro-
grams.
(2) CAPPED AMOUNT.—
(A) IN GENERAL.—The total of the pay-
ments made to children’s hospitals under para-
graph (1)(A) or paragraph (1)(B) in a fiscal
year shall not exceed the funds appropriated
under paragraph (1) or (2), respectively, of sub-
section (f) for such payments for that fiscal
year.
(B) PRO RATA REDUCTIONS OF PAYMENTS
FOR DIRECT EXPENSES.—If the Secretary de-
termines that the amount of funds appropriated
under subsection (f)(1) for a fiscal year is in-
sufficient to provide the total amount of pay-
ments otherwise due for such periods under
paragraph (1)(A), the Secretary shall reduce
the amounts so payable on a pro rata basis to
reflect such shortfall.
(c) AMOUNT OF PAYMENT FOR DIRECT GRADUATE
MEDICAL EDUCATION.—
(1) IN
GENERAL.—The amount determined
under this subsection for payments to a children’s
hospital for direct graduate expenses relating to ap-
proved graduate medical residency training pro-
grams for a fiscal year is equal to the product of—
(A) the updated per resident amount for
direct graduate medical education, as deter-
mined under paragraph (2)); and
(B) the average number of full-time equiv-
alent residents in the hospital’s graduate ap-
proved medical residency training programs (as
determined under section 1886(h)(4) of the So-
cial Security Act (42 U.S.C. 1395ww(h)(4)))
during the fiscal year.
(2) UPDATED PER RESIDENT AMOUNT FOR DI-
RECT
GRADUATE
MEDICAL
EDUCATION.—The up-
dated per resident amount for direct graduate med-
ical education for a hospital for a fiscal year is an
amount determined as follows:
(A) DETERMINATION OF HOSPITAL SINGLE
PER RESIDENT AMOUNT.—The Secretary shall
compute for each hospital operating an ap-
proved graduate medical education program (re-
gardless of whether or not it is a children’s hos-
pital) a single per resident amount equal to the
average (weighted by number of full-time equiv-
alent residents) of the primary care per resident
amount and the non-primary care per resident
amount computed under section 1886(h)(2) of
the Social Security Act for cost reporting peri-
ods ending during fiscal year 1997.
(B) DETERMINATION OF WAGE AND NON-
WAGE-RELATED PROPORTION OF THE SINGLE
PER RESIDENT AMOUNT.—The Secretary shall
estimate the average proportion of the single
per resident amounts computed under subpara-
graph (A) that is attributable to wages and
wage-related costs.
(C) 
STANDARDIZING
PER
RESIDENT
AMOUNTS.—The Secretary shall establish a
standardized per resident amount for each such
hospital—
(i) by dividing the single per resident
amount computed under subparagraph (A)
into a wage-related portion and a non-
wage-related portion by applying the pro-
portion determined under subparagraph
(B);
(ii) by dividing the wage-related por-
tion by the factor applied under section
1886(d)(3)(E) of the Social Security Act
(42 U.S.C. 1395ww(d)(3)(E)) for dis-
charges occurring during fiscal year 1999
for the hospital’s area; and
(iii) by adding the non-wage-related
portion to the amount computed under
clause (ii).
(D) DETERMINATION OF NATIONAL AVER-
AGE.—The Secretary shall compute a national
average per resident amount equal to the aver-
age of the standardized per resident amounts
computed under subparagraph (C) for such hos-
pitals, with the amount for each hospital
weighted by the average number of full-time
equivalent residents at such hospital.
(E) APPLICATION
TO
INDIVIDUAL
HOS-
PITALS.—The Secretary shall compute for each
such hospital that is a children’s hospital a per
resident amount—
(i) by dividing the national average
per resident amount computed under sub-
paragraph (D) into a wage-related portion
and a non-wage-related portion by applying
the proportion determined under subpara-
graph (B);
(ii) by multiplying the wage-related
portion by the factor described in subpara-
graph (C)(ii) for the hospital’s area; and
(iii) by adding the non-wage-related
portion to the amount computed under
clause (ii).
(F) UPDATING RATE.—The Secretary shall
update such per resident amount for each such
children’s hospital by the estimated percentage
increase in the consumer price index for all
urban consumers during the period beginning
October 1997 and ending with the midpoint of
the hospital’s cost reporting period that begins
during fiscal year 2000.
(d) AMOUNT OF PAYMENT FOR INDIRECT MEDICAL
EDUCATION.—
(1) IN
GENERAL.—The amount determined
under this subsection for payments to a children’s
hospital for indirect expenses associated with the
treatment of more severely ill patients and the addi-
tional costs related to the teaching of residents for
a fiscal year is equal to an amount determined ap-
propriate by the Secretary.
(2) FACTORS.—In determining the amount
under paragraph (1), the Secretary shall—
(A) take into account variations in case
mix among children’s hospitals and the number
of full-time equivalent residents in the hospitals’
approved graduate medical residency training
programs; and
(B) assure that the aggregate of the pay-
ments for indirect expenses associated with the
treatment of more severely ill patients and the
additional costs related to the teaching of resi-
dents under this section in a fiscal year are
equal to the amount appropriated for such ex-
penses for the fiscal year involved under sub-
section (f)(2).
(e) MAKING OF PAYMENTS.—
(1) INTERIM PAYMENTS.—The Secretary shall
determine, before the beginning of each fiscal year
involved for which payments may be made for a hos-
pital under this section, the amounts of the pay-
ments for direct graduate medical education and in-
direct medical education for such fiscal year and
shall (subject to paragraph (2)) make the payments
of such amounts in 26 equal interim installments
during such period.
(2) WITHHOLDING.—The Secretary shall with-
hold up to 25 percent from each interim installment
for direct graduate medical education paid under
paragraph (1).
(3) RECONCILIATION.—At the end of each fis-
cal year for which payments may be made under this
section, the hospital shall submit to the Secretary
such information as the Secretary determines to be
necessary to determine the percent (if any) of the
total amount withheld under paragraph (2) that is
due under this section for the hospital for the fiscal
year. Based on such determination, the Secretary
shall recoup any overpayments made, or pay any
balance due. The amount so determined shall be
considered a final intermediary determination for
purposes of applying section 1878 of the Social Se-
curity Act (42 U.S.C. 1395oo) and shall be subject
to review under that section in the same manner as
the amount of payment under section 1886(d) of
such Act (42 U.S.C. 1395ww(d)) is subject to review
under such section.
(f) AUTHORIZATION OF APPROPRIATIONS.—
(1) DIRECT GRADUATE MEDICAL EDUCATION.—
(A) IN GENERAL.—There are hereby au-
thorized to be appropriated, out of any money
in the Treasury not otherwise appropriated, for
payments under subsection (b)(1)(A)—
(i) for fiscal year 2000, $90,000,000;
and
(ii) for fiscal year 2001, $95,000,000.
(B) 
CARRYOVER
OF
EXCESS.—The
amounts appropriated under subparagraph (A)
for fiscal year 2000 shall remain available for
obligation through the end of fiscal year 2001.
(2) INDIRECT
MEDICAL
EDUCATION.—There
are hereby authorized to be appropriated, out of any
money in the Treasury not otherwise appropriated,
for payments under subsection (b)(1)(A)—
(A) for fiscal year 2000, $190,000,000;
and
(B) for fiscal year 2001, $190,000,000.
(f) RELATION TO MEDICARE AND MEDICAID PAY-
MENTS.—Notwithstanding any other provision of law,
cation costs’’ has the meaning given such term in
section 1886(h)(5)(C) of the Social Security Act (42
U.S.C. 1395ww(h)(5)(C)).
(4) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
SEC. 103. EXCLUSION OF NURSING AND ALLIED HEALTH
EDUCATION 
COSTS 
IN 
CALCULATING
MEDICARE+CHOICE PAYMENT RATE.
(a) EXCLUDING COSTS IN CALCULATING PAYMENT
RATE.—
(1) IN GENERAL.—Section 1853(c)(3)(C)(i) (42
U.S.C. 1395w–23(c)(3)(C)(i)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
clause (I);
(B) by striking the period at the end of
subclause (II) and inserting ‘‘, and’’; and
(C) by adding at the end the following:
‘‘(III) for costs attributable to
approved nursing and allied health
education programs under section
1861(v).’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) apply in determining the annual
per capita rate of payment for years beginning with
2001.
(b) PAYMENT TO HOSPITALS OF NURSING AND AL-
LIED
HEALTH
EDUCATION
PROGRAM
COSTS
FOR
MEDICARE+CHOICE ENROLLEES.—Section 1861(v)(1) of
such Act (42 U.S.C. 1395x(v)(1)) is amended by adding
at the end the following:
‘‘(V) In determining the amount of payment to a hos-
pital for cost reporting periods (or portions thereof) occur-
ring on or after January 1, 2001, with respect to the rea-
sonable costs for approved nursing and allied health edu-
cation programs, individuals who are enrolled with a
Medicare+Choice organization under part C shall be
treated as if they were not so enrolled.’’.
TITLE II—RURAL HOSPITALS
SEC. 201. REVISION OF CRITERIA FOR DESIGNATION AS A
CRITICAL ACCESS HOSPITAL.
(a) CONVERSION
OF DOWNSIZED
OR RECENTLY
CLOSED HOSPITALS TO CRITICAL ACCESS HOSPITALS.—
Section 
1820(c)(2) 
(42 
U.S.C. 
1395i–4(c)(2)) 
is
amended—
(1) in subparagraph (A), by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B), (C),
(D), and (E)’’; and
(2) by adding at the end the following:
‘‘(C) RECENTLY
CLOSED
FACILITIES.—A
State may designate a facility as a critical ac-
cess hospital if the facility—
‘‘(i) was a nonprofit or public hospital
that ceased operations within the 3-year
period ending on the date of enactment of
the Health Care Preservation Act of 1999;
and
‘‘(ii) as of the effective date of such
designation, meets the criteria for designa-
tion under subparagraph (B).
‘‘(D) DOWNSIZED
FACILITIES.—A State
may designate a health clinic or a health center
(as defined by the State) as a critical access
hospital if such clinic or center—
‘‘(i) is licensed by the State as a
health clinic or a health center if the State
requires such licensure in order to operate
as a health clinic or health center;
‘‘(ii) was a nonprofit or public hos-
pital that was downsized to a health clinic
or health center; and
‘‘(iii) as of the effective date of such
designation, meets the criteria for designa-
tion under subparagraph (B).
‘‘(E) 
FEDERALLY-QUALIFIED
HEALTH
CENTER.—A State may designate a Federally-
qualified health center (as defined in section
1905(l)(2)(B)) as a critical access hospital if
such center—
‘‘(i) operates a laboratory that has in
effect a certificate issued under section
353 of the Public Health Service Act that
permits such laboratory to perform tests
categorized as high complexity;
‘‘(ii) operates a radiology department;
and
‘‘(iii) as of the effective date of such
designation, meets the criteria for designa-
tion under subparagraph (B).’’.
(b) REVISION OF CRITERIA FOR DESIGNATION AS A
CRITICAL ACCESS HOSPITAL.—Section 1820(c)(2)(B)(iii)
(42 U.S.C. 1395i–4(c)(2)(B)(iii)) is amended by striking
‘‘not to exceed 96 hours’’ and all that follows to the semi-
colon and inserting ‘‘not to exceed, on average, 96 hours
per patient’’.
(c) EFFECTIVE DATE.—The amendments made by
this section take effect on the date of enactment of this
Act.
SEC. 202. AUTHORITY TO ESTABLISH A PROSPECTIVE PAY-
MENT SYSTEM FOR RHC SERVICES.
(a) ESTABLISHMENT OF SYSTEM.—Section 1833 (42
U.S.C. 1395l) is amended by adding at the end the fol-
lowing:
‘‘(u) AUTHORITY TO ESTABLISH PROSPECTIVE PAY-
MENT SYSTEM FOR RURAL HEALTH CLINIC SERVICES.—
‘‘(1) 
IN
GENERAL.—Notwithstanding 
sub-
sections (a)(3) and (f), the Secretary may establish
by regulation a prospective payment system for rural
health clinic services (except for such services pro-
vided by a rural health clinic located in a rural hos-
pital with less than 50 beds).
‘‘(2) BUDGET
NEUTRAL
PAYMENTS.—If the
Secretary establishes a prospective payment system
pursuant to paragraph (1), the Secretary shall es-
tablish the initial payment levels under such system
in a manner that results in aggregate payments (in-
cluding payments by individuals to whom services
are provided) for the first year, as estimated by the
Secretary, approximately equal to the aggregate pay-
ments that would have otherwise been made under
this part.’’.
(b) CONFORMING AMENDMENTS.—
(1) PAYMENT.—Section 1833(a)(3) (42 U.S.C.
1395l(a)(3)) is amended by inserting ‘‘subject to
subsection (u),’’ before ‘‘in the case’’.
(2) 
LIMITS.—Section 
1833(f) 
(42 
U.S.C.
1395l(f)) is amended by striking ‘‘In establishing’’
and inserting ‘‘Subject to subsection (u), in estab-
lishing’’.
(3) REQUIREMENT FOR RURAL HEALTH CLIN-
ICS.—Clause (ii) of the second sentence of section
1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended
by inserting ‘‘(and section 1833(u) if the Secretary
implements a prospective payment system under
that section)’’ after ‘‘section 1833’’.
SEC. 203. REQUIREMENT TO CONSIDER RURAL ISSUES IN
ESTABLISHING FEE SCHEDULE FOR AMBU-
LANCE SERVICES.
(a) IN GENERAL.—Section 1834(l)(2)(C) (42 U.S.C.
1395m(l)(2)(C)) is amended by inserting ‘‘, including dif-
ferences in rural and non-rural areas’’ after ‘‘differences’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) takes effect as if included in the enactment
of the Balanced Budget Act of 1997 (Public Law 105–
33; 111 Stat. 251).
SEC. 204. STOP-LOSS PROTECTION FOR RURAL HOSPITAL
OPD SERVICES.
(a) IN GENERAL.—Section 1833(t)(10)(D)(i) (42
U.S.C. 1395l(t)(10)(D)(i)) (as added by section 402) is
amended by adding at the end the following:
‘‘The applicable percentage shall be 100
percent with respect to covered OPD serv-
ices furnished during a transition year in
a rural hospital.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect as if included in the amendments
made by section 4523 of the Balanced Budget Act of 1997
(Public Law 105–33; 111 Stat. 445).
TITLE III—SAFETY NET
PROVIDERS
SEC. 301. NEW PROSPECTIVE PAYMENT SYSTEM FOR FED-
ERALLY-QUALIFIED HEALTH CENTERS AND
RURAL HEALTH CLINICS UNDER THE MED-
ICAID PROGRAM.
(a) IN GENERAL.—Section 1902(a)(13) (42 U.S.C.
1396a(a)(13)) is amended—
(1) in subparagraph (A), by adding ‘‘and’’ at
the end;
(2) in subparagraph (B), by striking ‘‘and’’ at
the end; and
(3) by striking subparagraph (C).
(b) NEW PROSPECTIVE PAYMENT SYSTEM.—Section
1902 (42 U.S.C. 1396a) is amended by adding at the end
the following:
‘‘(aa) PAYMENT FOR SERVICES PROVIDED BY FED-
ERALLY-QUALIFIED
HEALTH
CENTERS
AND
RURAL
HEALTH CLINICS.—
‘‘(1) IN GENERAL.—Beginning with fiscal year
2000 and each succeeding fiscal year, the State plan
shall provide for payment for services described in
section 1905(a)(2)(C) furnished by a Federally-
qualified health center and services described in sec-
tion 1905(a)(2)(B) furnished by a rural health clinic
in accordance with the provisions of this subsection.
‘‘(2) FISCAL YEAR 2000.—For fiscal year 2000,
the State plan shall provide for payment for such
services in an amount (calculated on a per visit
basis) that is equal to 100 percent of the costs in-
curred by the center or clinic in furnishing such
services during fiscal year 1999 which are reason-
able and related to the cost of furnishing such serv-
ices, or based on such other tests of reasonableness
as the Secretary prescribes in regulations under sec-
tion 1833(a)(3), or in the case of services to which
such regulations do not apply, the same methodology
used under section 1833(a)(3), adjusted to take into
account any increase in the scope of such services
furnished by the center or clinic during fiscal year
2000.
‘‘(3) FISCAL
YEAR
2001
AND
SUCCEEDING
YEARS.—For fiscal year 2001 and each succeeding
fiscal year, the State plan shall provide for payment
for such services in an amount (calculated on a per
visit basis) that is equal to the amount calculated for
such services under this subsection for the preceding
fiscal year—
‘‘(A) increased by the percentage increase
in the MEI (Medicare economic index) (as de-
fined in section 1842(i)(3)) applicable to pri-
mary care services (as defined in section
1842(i)(4)) for that fiscal year; and
‘‘(B) adjusted to take into account any in-
crease in the scope of such services furnished by
the center or clinic during that fiscal year.
‘‘(4) ESTABLISHMENT OF INITIAL YEAR PAY-
MENT AMOUNT FOR NEW CENTERS OR CLINICS.—In
any case in which an entity first qualifies as a Fed-
erally-qualified health center or rural health clinic
after October 1, 2000, the State plan shall provide
for payment for services described in section
1905(a)(2)(C) furnished by the center or services
described in section 1905(a)(2)(B) furnished by the
clinic in the first fiscal year in which the center or
clinic qualifies in an amount (calculated on a per
visit basis) that is equal to 100 percent of the costs
of furnishing such services during such fiscal year in
accordance with the regulations and methodology re-
ferred to in paragraph (2). For each fiscal year fol-
lowing the fiscal year in which the entity first quali-
fies as a Federally-qualified health center or rural
health clinic, the State plan shall provide for the
payment amount to be calculated in accordance with
paragraph (3) of this subsection.
‘‘(5) ADMINISTRATION IN THE CASE OF MAN-
AGED CARE.—In the case of services furnished by a
Federally-qualified health center or rural health clin-
ic pursuant to a contract between the center or clinic
and a managed care entity (as defined in section
1932(a)(1)(B)), the State plan shall provide for pay-
ment to the center or clinic (at least quarterly) by
the State of a supplemental payment equal to the
amount (if any) by which the amount determined
under paragraphs (2), (3), and (4) of this subsection
exceeds the amount of the payments provided under
the contract.
‘‘(6) ALTERNATIVE
PAYMENT
SYSTEM.—Not-
withstanding any other provision of this section, the
State plan may provide for payment in any fiscal
year to a Federally-qualified health center (as de-
fined in section 1905(l)(2)(B)) for services described
in section 1905(a)(2)(C) or to a rural health clinic
for services described in section 1905(a)(2)(B) in an
amount that is in excess of the amount otherwise re-
quired to be paid to the center or clinic under this
subsection.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4712 of the Balanced Budget Act
of 1997 (Public Law 105–33; 111 Stat. 508) is
amended by striking subsection (c).
(2) Section 1915(b) (42 U.S.C. 1396n(b)) is
amended by striking ‘‘1902(a)(13)(E)’’ and insert-
ing ‘‘1902(aa)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section take effect on October 1, 1999.
SEC. 302. CARVING OUT DSH PAYMENTS FROM PAYMENTS
TO MEDICARE+CHOICE ORGANIZATIONS AND
PAYING THE AMOUNTS DIRECTLY TO DSH
HOSPITALS ENROLLING MEDICARE+CHOICE
ENROLLEES.
(a) IN GENERAL.—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
(D)’’;
(2) by redesignating subparagraph (D) as sub-
paragraph (E); and
(3) by inserting after subparagraph (C) the fol-
lowing:
‘‘(D) REMOVAL
OF
PAYMENTS
ATTRIB-
UTABLE
TO
DISPROPORTIONATE
SHARE
PAY-
MENTS FROM CALCULATION OF ADJUSTED AV-
ERAGE PER CAPITA COST.—
‘‘(i) IN
GENERAL.—In determining
the area-specific Medicare+Choice capita-
tion rate under subparagraph (A) for a
year (beginning with 2001), the annual per
capita rate of payment for 1997 deter-
mined under section 1876(a)(1)(C) shall be
adjusted, subject to clause (ii), to exclude
from the rate the additional payments that
the Secretary estimates were made during
1997 for additional payments described in
section 1886(d)(5)(F).
‘‘(ii) TREATMENT OF PAYMENTS COV-
ERED
UNDER
STATE
HOSPITAL
REIM-
BURSEMENT SYSTEM.—To the extent that
the Secretary estimates that an annual per
capita rate of payment for 1997 described
in clause (i) reflects payments to hospitals
reimbursed under section 1814(b)(3), the
Secretary shall estimate a payment adjust-
ment that is comparable to the payment
adjustment that would have been made
under clause (i) if the hospitals had not
been reimbursed under such section.’’.
(b) ADDITIONAL PAYMENTS FOR MANAGED CARE
ENROLLEES.—Section 
1886(d)(5)(F) 
(42 
U.S.C.
1395ww(d)(5)(F)) is amended—
(1) in clause (ii), by striking ‘‘clause (ix)’’ and
inserting ‘‘clauses (ix) and (x)’’; and
(2) by adding at the end the following:
‘‘(x)(I) For cost reporting periods (or portions there-
of) occurring on or after January 1, 2001, the Secretary
shall provide for an additional payment amount for each
applicable discharge of any subsection (d) hospital that is
a disproportionate share hospital (as described in clause
(i)).
‘‘(II) For purposes of this clause, the term ‘applicable
discharge’ means the discharge of any individual who is
enrolled with a Medicare+Choice organization under part
C.
‘‘(III) The amount of the payment under this clause
with respect to any applicable discharge shall be equal to
the estimated average per discharge amount (as deter-
mined by the Secretary) that would otherwise have been
paid under this subparagraph if the individual had not
been enrolled as described in subclause (II).
‘‘(IV) The Secretary shall establish rules for an addi-
tional payment amount for any hospital reimbursed under
a reimbursement system authorized under section
1814(b)(3) if such hospital would qualify as a dispropor-
tionate share hospital under clause (i) were it not so reim-
bursed. Such payment shall be determined in the same
manner as the amount of payment is determined under
this clause for disproportionate share hospitals.’’.
SEC. 303. LIMITATION IN REDUCTION OF PAYMENTS TO
DISPROPORTIONATE SHARE HOSPITALS.
(a) IN GENERAL.—Section 1886(d)(5)(F)(ix) (42
U.S.C. 1395ww(d)(5)(F)(ix)) is amended—
(1) in subclause (IV), by striking ‘‘4’’ and in-
serting ‘‘3’’; and
(2) in subclause (V), by striking ‘‘5’’ and in-
serting ‘‘3’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) takes effect as if included in the amend-
ments made by section 4403 of the Balanced Budget Act
of 1997 (Public Law 105–33; 111 Stat. 398).
TITLE IV—OTHER HOSPITAL
PROVISIONS
SEC. 401. DELAY OF FINANCIAL LIMITATION ON REHABILI-
TATION SERVICES.
(a) IN
GENERAL.—Section 1833(g) (42 U.S.C.
1395l(g)) is amended by adding at the end the following:
‘‘(4) Notwithstanding the preceding provisions of this
subsection, for outpatient physical therapy services, out-
patient occupational therapy services, and outpatient
speech-language pathology services covered under this title
and furnished on or after January 1, 2000, and before
January 1, 2002, the Secretary shall implement a pay-
ment methodology based on the classification of individ-
uals by diagnostic category, functional status, and prior
use of services in both inpatient and outpatient settings.’’.
(b) BUDGET NEUTRALITY IN IMPLEMENTATION.—
The payment methodology implemented under section
1833(g)(4) (42 U.S.C. 1395l(g)(4)), as added by sub-
section (a), shall be designed so that the methodology, tak-
ing into account the increased expenditures resulting from
the implementation of such methodology, does not result
in any increase or decrease in the expenditures under title
XVIII of the Social Security Act on a fiscal year basis.
SEC. 402. MULTIYEAR TRANSITION TO PROSPECTIVE PAY-
MENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.
(a) IN
GENERAL.—Section 1833(t) (42 U.S.C.
1395l(t)) is amended by adding at the end the following:
‘‘(10) MULTIYEAR TRANSITION.—
‘‘(A) IN GENERAL.—In the case of covered
OPD services furnished by a hospital during a
transition year, the Secretary shall increase the
payments for such services under the prospec-
tive payment system established under this sub-
section by the amount (if any) which the Sec-
retary determines necessary to ensure that the
payment to cost ratio of the hospital for the
transition year equals a ratio equal to the appli-
cable percentage of the payment to cost ratio of
the hospital for 1996.
‘‘(B) PAYMENT TO COST RATIO.—
‘‘(i) IN
GENERAL.—The payment to
cost ratio of a hospital for any year is the
ratio which—
‘‘(I) the hospital’s reimbursement
under this title for covered OPD serv-
ices furnished during the year, includ-
ing through cost-sharing described in
subparagraph (D)(ii), bears to
‘‘(II) the cost of such services.
‘‘(ii) CALCULATION OF 1996 PAYMENT
TO COST RATIO.—The Secretary shall de-
termine each hospital’s payment to cost
ratio for 1996 as if the amendments made
to this title by the provisions of section
4521 of the Balanced Budget Act of 1997
were in effect in 1996.
‘‘(iii) TRANSITION YEARS.—The Sec-
retary shall estimate each payment to cost
ratio of a hospital for any transition year
before the beginning of such year.
‘‘(C) INTERIM PAYMENTS.—
‘‘(i) IN
GENERAL.—The Secretary
shall make interim payments to a hospital
during any transition year for which the
Secretary estimates a payment is required
under subparagraph (A).
‘‘(ii) ADJUSTMENTS.—If the Secretary
makes payments under clause (i) for any
transition year, the Secretary shall make
retrospective adjustments to each hospital
based on its settled cost report so that the
amount of any additional payment to a
hospital for such year equals the amount
described in subparagraph (A).
‘‘(D) DEFINITIONS.—In this paragraph:
‘‘(i) APPLICABLE PERCENTAGE.—The
term ‘applicable percentage’ means, with
respect to covered OPD services furnished
during—
‘‘(I) the first full year (and any
portion of the immediately preceding
year) for which the prospective pay-
ment system under this subsection is
in effect, 95 percent;
‘‘(II) the second full calendar
year for which such system is in ef-
fect, 90 percent; and
‘‘(III) the third full calendar year
for which such system is in effect, 85
percent.
‘‘(ii) COST-SHARING.—The term ‘cost-
sharing’ includes—
‘‘(I) 
copayment 
amounts 
de-
scribed in paragraph (5);
‘‘(II) coinsurance described in
section 1866(a)(2)(A)(ii); and
‘‘(III) the deductible described
under section 1833(b).
‘‘(iii) TRANSITION
YEAR.—The term
‘transition year’ means any year (or por-
tion thereof) described in clause (i).
‘‘(E) EFFECT ON COPAYMENTS.—Nothing
in this paragraph shall be construed as affect-
ing the unadjusted copayment amount de-
scribed in paragraph (3)(B).
‘‘(F) APPLICATION WITHOUT REGARD TO
BUDGET
NEUTRALITY.—The transitional pay-
ments made under this paragraph—
‘‘(i) shall not be considered an adjust-
ment under paragraph (2)(E); and
‘‘(ii) shall not be implemented in a
budget neutral manner.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section take effect as if included in the amendments
made by section 4523 of the Balanced Budget Act of 1997
(Public Law 105–33; 111 Stat. 445).
TITLE V—SKILLED NURSING
FACILITIES
SEC. 501. MODIFICATION OF CASE MIX CATEGORIES FOR
CERTAIN CONDITIONS.
(a) IN GENERAL.—For purposes of applying any for-
mula under paragraph (1) of section 1888(e) of the Social
Security Act (42 U.S.C. 1395yy(e)), for services provided
on or after October 1, 1999, and before the earlier of Oc-
tober 1, 2001, or the date described in subsection (c), the
Secretary of Health and Human Services shall increase
the adjusted Federal per diem rate otherwise determined
under paragraph (4) of such section for services provided
to any individual during the period in which such indi-
vidual is in a RUG III category by the applicable payment
add-on as determined in accordance with the following
table:
RUG III category
Applicable payment add-on
SE3 ..........................................................................................
$75.87
SE2 ..........................................................................................
$65.70
SE1 ..........................................................................................
$58.46
SSC ..........................................................................................
$57.15
SSB ..........................................................................................
$54.52
SSA ..........................................................................................
$53.21
CC2 ..........................................................................................
$56.82
CC1 ..........................................................................................
$52.55
CB2 ..........................................................................................
$49.93
CB1 ..........................................................................................
$47.62
RUG III category
Applicable payment add-on
CA2 ..........................................................................................
$47.30
CA1 ..........................................................................................
$44.67.
(b) UPDATE.—The Secretary shall adjust the applica-
ble payment add-on under subsection (a) for fiscal year
2001 by the skilled nursing facility market basket percent-
age change (as defined under section 1888(e)(5)(B) of the
Social Security Act (42 U.S.C. 1395yy(e)(5)(B))) applica-
ble to such fiscal year.
(c) DATE DESCRIBED.—The date described in this
subsection is the date on which the Secretary of Health
and Human Services implements a case mix methodology
under section 1888(e)(4)(G)(i) of the Social Security Act
(42 U.S.C. 1395yy(e)(4)(G)(i)) that takes into account
adjustments for the provision of nontherapy ancillary serv-
ices and supplies such as drugs and respiratory therapy.
SEC. 502. EXCLUSION OF AMBULANCE SERVICES TO AND
FROM DIALYSIS TREATMENTS AND PROS-
THETIC SERVICES FROM THE PPS FOR SNFs.
(a) IN GENERAL.—The first sentence of section
1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)) is
amended by inserting ‘‘ambulance services furnished an
individual in conjunction with a renal dialysis service,
prosthetic and orthotic devices, including testing, fitting,
or training in the use of prosthetic and orthotic devices,’’
after ‘‘subparagraphs (F) and (O) of section 1861(s)(2),’’.
(b) EFFECTIVE DATE.—The amendment made by
this section applies to services furnished on or after the
date of enactment of this Act.
SEC. 503. WAIVER OF 3-DAY PRIOR HOSPITALIZATION RE-
QUIREMENT FOR COVERAGE OF SKILLED
NURSING FACILITY SERVICES.
(a) IN GENERAL.—Not later than October 1, 2000,
the Secretary of Health and Human Services (in this sec-
tion referred to as the ‘‘Secretary’’) shall provide for cov-
erage under section 1812(f) of the Social Security Act (42
U.S.C. 1395d(f)) of extended care services (as defined in
section 1861(h) of such Act (42 U.S.C. 1395x(h))) for in-
dividuals with a condition that is classifiable within a diag-
nosis-related group identified under subsection (b).
(b) IDENTIFICATION OF DRGS.—For purposes of
subsection (a) and subject to subsections (f) through (h),
the diagnosis-related groups identified under this sub-
section are—
(1) diagnosis-related group code 410 (relating
to chemotherapy without acute leukemia as sec-
ondary diagnosis); and
(2) the diagnosis-related groups described in
subsections (c) through (e).
(c) IDENTIFICATION OF DRGS THROUGH A MEDI-
CARE SELECT STUDY AND REPORT.—
(1) IN GENERAL.—The diagnosis related groups
described in this subsection are those diagnosis-re-
lated groups identified in the report submitted under
paragraph (3) and determined to reduce the total of
payments made under the Medicare Program under
title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) (in this section referred to as the
‘‘Medicare Program’’).
(2) STUDY.—
(A) IN
GENERAL.—The Secretary shall
conduct a study of extended care services pro-
vided in skilled nursing facilities for which cov-
erage is provided under the Medicare select pro-
gram under section 1882(t) of the Social Secu-
rity Act (42 U.S.C. 1395ss(t)) to obtain data
concerning—
(i) the length of stay of individuals in
hospitals; and
(ii) extended care services provided to
individuals in skilled nursing facilities.
(B) DRGS IDENTIFIED.—The study con-
ducted under subparagraph (A) shall include
the identification of those diagnosis-related
groups that are generally treated with less than
a 3-day hospital stay under such program.
(3) REPORT.—Not later than January 1, 2001,
the Secretary shall submit to the appropriate com-
mittees of Congress a report on the study conducted
under paragraph (2) that shall include—
(A) a description of each diagnosis-related
group identified under subparagraph (B) of
such paragraph; and
(B) a determination as to whether waiving
the 3-day hospitalization stay requirement with
respect to each diagnosis-related group would
reduce the total of payments made under the
Medicare Program.
(d) IDENTIFICATION
OF DRGS THROUGH DEM-
ONSTRATION PROGRAMS.—
(1) IN GENERAL.—The diagnosis related groups
described in this subsection are those diagnosis-re-
lated groups identified in the report submitted under
paragraph (3) and determined to reduce the total of
payments made under the Medicare Program.
(2) DEMONSTRATION PROGRAMS.—
(A) 
ESTABLISHMENT.—The 
Secretary
shall—
(i) establish demonstration programs
under which the Secretary provides for
coverage under section 1812(f) of the So-