SEC. 2. FINDINGS.
Congress finds that the interim payment system for
home health services under medicare enacted as part of
the Balanced Budget Act of 1997 is having the following
unintended consequences:
(1) The sickest, most frail medicare bene-
ficiaries are losing access to medically necessary
home health services which are otherwise covered
under the medicare program.
(2) Many high-quality, cost-effective agencies
have had per beneficiary limits set so low that they
are finding it impossible to continue their participa-
tion in the medicare program.
(3) Many agencies are being subjected to aggre-
gate per beneficiary limits which do not accurately
reflect their current patient mix and make it impos-
sible for these agencies to compete with similarly sit-
uated agencies.
(4) Residents of certain States and regions of
the country are being afforded access to far fewer
home health services under medicare than residents
of certain other States or regions of the country who
have identical medical conditions.
(5) Under the surety bond requirements, high-
quality, law-abiding home health agencies which
have participated satisfactorily in the medicare pro-
gram for years are being excluded.
SEC. 3. PAYMENTS TO HOME HEALTH AGENCIES UNDER
MEDICARE.
(a) RETROACTIVE RESTORATION OF PER VISIT COST
LIMIT TO 112 PERCENT OF THE MEAN OF COSTS.—
(1) IN GENERAL.—Section 1861(v)(1)(L)(i) of
the Social Security Act (42 U.S.C. 1395x(v)(1)(L)(i)
is amended—
(A) in subclause (II), by adding at the end
‘‘or’’;
(B) in subclause (III)—
(i) by striking ‘‘and before October 1,
1997,’’; and
(ii) by striking ‘‘, or’’ and inserting a
period; and
(C) by striking subclause (IV).
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) are effective as if included in the
enactment of the Balanced Budget Act of 1997
(Public Law 105–33).
(b) REVISION OF INTERIM PAYMENT SYSTEM FOR
HOME HEALTH SERVICES.—
(1) RETROACTIVE REPEAL OF NEW PER BENE-
FICIARY LIMITS.—
(A) IN
GENERAL.—Clauses (v) through
(vii) of section 1861(v)(1)(L) of the Social Se-
curity Act (42 U.S.C. 1395x(v)(1)(L)) are re-
pealed
(B) EFFECTIVE DATE.—The repeal made
by subparagraph (A) is effective as if included
in the enactment of the Balanced Budget Act
of 1997 (Public Law 105–33).
(2) ESTABLISHMENT OF NEW LIMITS.—
(A) IN GENERAL.—Section 1861(v)(1)(L)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395x(v)(1)(L)), as amended by paragraph
(1)(A), is amended by adding at the end the
following:
‘‘(v)(I) For services furnished by home health agen-
cies for cost reporting periods beginning on or after Octo-
ber 1, 1998, the Secretary shall provide for an interim
system of limits. Payment shall not exceed the costs deter-
mined under the preceding provisions of this subpara-
graph or, if lower, an agency-specific, annual per bene-
ficiary limitation equal to the sum of the base amount de-
scribed in clause (vi) and the outlier amount described in
clause (vii).
‘‘(II) Such limitations shall be prorated among agen-
cies for any beneficiary who receives covered home health
services from more than one agency under common owner-
ship or control for cost reporting periods beginning in a
fiscal year.
‘‘(III) The Secretary shall establish such limitations
not later than October 1, 1998, for cost reporting periods
beginning during fiscal year 1999 and not later than Au-
gust 1 before the beginning of each succeeding fiscal year
for cost reporting periods beginning during such fiscal
year.
‘‘(vi) The base amount described in this clause for
a cost reporting period is equal to the product of—
‘‘(I) the amount of the reasonable costs (includ-
ing nonroutine medical supplies) of the standardized
average cost per unduplicated patient in fiscal year
1994 of providing services for the first 120 days
after home health services have commenced (as de-
termined under clause (viii), such costs updated by
the home health market basket index; and
‘‘(II) the agency’s unduplicated census count of
base patients (entitled to benefits under this title)
for the cost reporting period subject to the limita-
tion, as determined under clause (ix).
‘‘(vii) The outlier amount described in this clause for
a cost reporting period is equal to the product of—
‘‘(I) subject to clause (viii)(III), the amount of
the reasonable costs (including nonroutine medical
supplies) of the standardized average cost per
unduplicated patient in fiscal year 1994 of providing
services for the more than 120 days after home
health services have commenced (as determined
under clause (viii), such costs updated by the home
health market basket index; and
‘‘(II) the agency’s unduplicated census count of
outlier patients (entitled to benefits under this title)
for the cost reporting period subject to the limita-
tion, as determined under clause (ix).
‘‘(viii)(I) The standardized average costs per
unduplicated patient described in clause (vi)(I) or (vii)(I)
shall be determined based upon an appropriate percentage
of a standardized average cost described in subclause (II).
For cost reporting periods beginning during fiscal year
1998, such appropriate percentages shall be 82 percent
and 110 percent, respectively.
‘‘(II) The standardized average cost described in this
subclause is the reasonable costs (including nonroutine
medical supplies) of standardized average cost per
unduplicated patient in fiscal year 1994 of providing home
health services to any patient described in clause (vi)(I)
or (vii)(I), which are necessary for the efficient delivery
of needed services covered by the insurance programs es-
tablished under this title. Such standardized average cost
shall be determined, for a home health agency located in
a census division, based 50 percent on such average deter-
mined on a national basis for all agencies and 50 percent
on such average determined on a regional basis for all
agencies located in that census division.
‘‘(III) In determining the amount described in clause
(vii)(I) in the case of a patient who may be counted in
the base patient count under clause (vi)(II) for a cost re-
porting period and who may also be counted in the outlier
patient count under clause (vii)(II) for the period, the
amount described in clause (vii)(II) with respect to that
patient shall be 2⁄3 of the amount otherwise determined
under such clause.
‘‘(ix)(I) For purposes of determining an agency’s
unduplicated census count of base patients for purposes
of clause (vi)(II) for a cost reporting period, an individual
who has been counted in the agency’s unduplicated census
count under such clause may not be counted again under
such clause during the same home health spell of illness.
For purposes of this clause, the term ‘home health spell
of illness’ has the meaning given such term in section
1861(tt)(2) except that such spell shall begin with the first
day (not included in a previous home health spell of ill-
ness) on which the individual is furnished any home health
services for which benefits are available under this title
and which occurs in a month for which the individual is
entitled to benefits under either part A or part B.
‘‘(II) No patient shall be included in the outlier cen-
sus count under subclause (vi)(II) for a home health agen-
cy unless the fiscal intermediary involved has determined
that the patient meets the conditions for coverage of home
health services beyond 120 days in a home health spell
of illness. The Secretary shall establish a precertification
process to ensure that such determinations are made in
a timely manner that avoids interruptions in coverage for
individuals who continuously meet such conditions of cov-
erage. Such a determination that a patient does not meet
such conditions is reviewable under section 1869(b) to the
same extent as a claim for benefits involving $1,000 or
more in controversy.’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) applies to cost re-
porting periods beginning on or after October 1,
1998.
(C) TRANSITIONAL RULE FOR COUNTING
CURRENT PATIENTS IN COUNT OF OUTLIER PA-
TIENTS.—In the case of a patient who—
(i) is receiving covered home health
services from a home health agency as of
the first day of the first cost reporting pe-
riod in which clause (v) of section
1861(v)(1)(L) of the Social Security Act
(as added by paragraph (2)) applies to the
agency, and
(ii) received such services from such
agency for more than 120 days during a
home health spell of illness (as defined for
purposes of clause (ix) of such section, as
so added),
the patient shall be counted in the count of
outlier patients under clause (vii)(II) of such
section and not in the count of base patients
under clause (vi)(II) of such section.
(c) APPLICATION OF WAGE INDEX BASED ON LOCA-
TION OF AGENCY.—
(1) IN GENERAL.—Section 1861(v)(1)(L)(iii) of
such Act (42 U.S.C. 1395x(v)(1)(L)(iii)) is amended
by inserting before the period at the end the follow-
ing: ‘‘, or, in the case of limits established under
clause (v), based upon the geographic area in which
the agency is located’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies to cost reporting periods
beginning on or after October 1, 1998.
(d) LIMITATION ON APPLICATION OF FREEZE IN UP-
DATE TO PER VISIT LIMITS.—
(1) IN GENERAL.—Section 1861(v)(1)(L)(iv) of
such Act (42 U.S.C. 1395x(v)(1)(L)(iv)) is amended
by striking ‘‘under this subparagraph’’ and inserting
‘‘under clause (i)’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies to cost reporting periods
beginning on or after October 1, 1998.
(e) ADJUSTMENT IN 15 PERCENT REDUCTION TO
ACHIEVE ORIGINAL CBO SPENDING TARGETS.—
(1) IN GENERAL.—Section 4603(e) of the Bal-
anced Budget Act of 1997 is amended by striking
‘‘by 15 percent’’ and inserting before the period at
the end the following: ‘‘, by a percentage which is
sufficient to assure that total expenditures under
this title for benefits for home health services in
each of fiscal years 1999 through 2002 do not ex-
ceed the amount of such expenditures for such fiscal
year, as estimated by the Congressional Budget Of-
fice immediately before the date of the enactment of
this Act’’.
(2) CONFORMING
AMENDMENT
TO
PROSPEC-
TIVE PAYMENT SYSTEM.—Section 1895(b)(3)(A)(ii)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395fff(b)(3)(A)(ii)) is amended by striking ‘‘by 15
percent’’ and inserting before the period at the end
the following: ‘‘, by a percentage which is sufficient
to assure that total expenditures under this title for
benefits for home health services in each of fiscal
years 1999 through 2002 do not exceed the amount
of such expenditures for such fiscal year, as esti-
mated by the Congressional Budget Office imme-
diately before the date of the enactment of this sec-
tion.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection apply to cost reporting periods be-
ginning on or after October 1, 1999.
(f) RESTORATION OF PERIODIC INTERIM PAYMENTS
FOR HOME HEALTH AGENCIES.—
(1) IN
GENERAL.—Section 1815(e)(2) of the
Social Security Act (42 U.S.C. 1395g(e)(2)) is
amended—
(A) in subparagraph (C), by striking
‘‘and’’ at the end;
(B) by redesignating subparagraph (D) as
subparagraph (E); and
(C) by inserting after subparagraph (C)
the following:
‘‘(D) home health services; and’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) apply to payment for services fur-
nished on or after October 1, 1999.
SEC. 4. EXTENSION OF HOME HEALTH PER EPISODE PRO-
SPECTIVE 
PAYMENT 
DEMONSTRATION
PROJECT.
The Secretary of Health and Human Services shall
continue the home health per episode prospective payment
demonstration project authorized under section 4027 of
the Omnibus Budget Reconciliation Act of 1987 (42
U.S.C. 1395n note) until the prospective payment system
is established and implemented under section 1895 of the
Social Security Act (42 U.S.C. 1395fff). Any final report
otherwise required under section 4027 shall be due not
later than 6 months after the date such demonstration
project is completed.
SEC. 5. REVISION OF SURETY BOND REQUIREMENT FOR
HOME HEALTH AGENCIES.
(a) 
UNDER
MEDICARE
PROGRAM.—Section
1861(o)(7) of the Social Security Act (42 U.S.C.
1395x(o)(7)) is amended to read as follows:
‘‘(7) provides the Secretary, prior to the initial
certification of the home health agency and for 1
year thereafter, with a surety bond against fraudu-
lent or abusive activities in a form specified by the
Secretary and in an amount equal to $25,000; and’’.
(b) 
UNDER
MEDICAID
PROGRAM.—Section
1903(i)(18) of such Act (42 U.S.C. 1396b(i)(18)) is
amended to read as follows:
‘‘(18) with respect to any amount expended for
home health care services provided by an agency or
organization unless the agency or organization pro-
vides the State agency, prior to the initial certifi-
cation of the home health agency and for 1 year
thereafter, with a surety bond against fraudulent or
abusive activities in a form specified by the Sec-
retary under paragraph (7) of section 1861(o) and
in an amount equal to $25,000 or such comparable
surety bond as the Secretary may permit under the
last sentence of such section.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section apply to services furnished on or after the date
of enactment of this Act.
SEC. 6. REQUIREMENT FOR FRAUD AND ABUSE COMPLI-
ANCE PROGRAM AS A CONDITION OF PAR-
TICIPATION FOR HOME HEALTH AGENCIES
UNDER THE MEDICARE PROGRAM.
(a) IN GENERAL.—Section 1891(a) of the Social Se-
curity Act (42 U.S.C. 1395bbb(a)) is amended by adding
at the end the following:
‘‘(8) The agency has developed and imple-
mented a fraud and abuse compliance program.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after
such date as the Secretary of Health and Human Services
specifies in regulations promulgated to carry out such
amendment. The Secretary shall promulgate such regula-
tions as soon as practicable after the date of the enact-
ment of this Act.
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