731
Title IV, Subtitle A
1877 of the Social Security Act shall be considered a ref-
erence to such section as amended by section 13562(a)
of OBRA–1993.
SEC. 4043. CIVIL MONETARY PENALTIES.
(a) PROHIBITION AGAINST OFFERING INDUCEMENTS
TO INDIVIDUALS ENROLLED UNDER PLANS.—
(1) 
OFFER
OF
REMUNERATION.—Section
1128A(a) (42 U.S.C. 1320a–7a(a)) (as amended by
section 4041(a)(1)) is amended—
(A) by striking ‘‘; or’’ at the end of para-
graph (3) and inserting a semicolon;
(B) by striking the semicolon at the end of
paragraph (4) and inserting ‘‘; or’’; and
(C) by inserting after paragraph (4) the
following new paragraph:
‘‘(5) offers, pays, or transfers remuneration to
any individual eligible for benefits under title XVIII
of this Act, or under a State health care program
(as defined in section 1128(h)) that such person
knows or should know is likely to influence such in-
dividual to order or receive from a particular pro-
vider, practitioner, or supplier any item or service
for which payment may be made, in whole or in
part, under title XVIII, or a State health care pro-
gram;’’.
732
Title IV, Subtitle A
(2) 
REMUNERATION
DEFINED.—Section
1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by
adding at the end the following new paragraph:
‘‘(6) The term ‘remuneration’ includes the waiv-
er of coinsurance and deductible amounts (or any
part thereof), and transfers of items or services for
free or for other than fair market value, except that
such term does not include the waiver of coinsurance
or deductible amounts by a person or entity, if—
‘‘(A) the waiver is not offered as part of
any advertisement or solicitation;
‘‘(B) the person does not routinely waive
coinsurance or deductible amounts; and
‘‘(C) the person—
‘‘(i) waives the coinsurance and de-
ductible amounts after determining in good
faith that the individual is indigent;
‘‘(ii) fails to collect coinsurance or de-
ductible amounts after making reasonable
collection efforts; or
‘‘(iii) provides for any permissible
waiver as specified in section 1128B(b)(3)
or in regulations issued by the Secretary.’’.
(b) CLAIM FOR ITEM OR SERVICE BASED ON INCOR-
RECT CODING
OR MEDICALLY UNNECESSARY SERV-
733
Title IV, Subtitle A
ICES.—Section 1128A(a)(1) (42 U.S.C. 1320a–7a(a)(1))
is amended—
(1) in subparagraph (A), by striking ‘‘claimed,’’
and inserting the following: ‘‘claimed, including any
person who presents or causes to be presented a
claim for an item or service which includes a proce-
dure or diagnosis code that the person knows or
should know will result in a greater payment to the
person than the code applicable to the item or serv-
ice actually provided or actual patient medical condi-
tion,’’;
(2) in subparagraph (C), by striking ‘‘or’’ at
the end;
(3) in subparagraph (D), by striking ‘‘; or’’ and
inserting ‘‘, or’’; and
(4) by inserting after subparagraph (D) the fol-
lowing new subparagraph:
‘‘(E) is for a medical or other item or serv-
ice that a person knows or should know is not
medically necessary; or’’.
(c) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP
OR CONTROL INTEREST IN PARTICIPATING ENTITY.—
Section 1128A(a) of such Act, as amended by section
4041(a)(1) and subsection (a)(1), is further amended—
734
Title IV, Subtitle A
(1) by striking ‘‘or’’ at the end of paragraph
(4);
(2) by striking the semicolon at the end of
paragraph (5) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (5) the fol-
lowing new paragraph:
‘‘(6) in the case of a person who is not an orga-
nization, agency, or other entity, who is excluded
from participating in a program under title XVIII or
a State health care program in accordance with this
section, section 1128, or section 1156 and who, dur-
ing the period of exclusion, retains either a direct or
indirect ownership or control interest of 5 percent or
more in, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer,
director, agent, or managing employee (as defined in
section 1126(b)) of, an entity that is participating in
a program under title XVIII or a State health care
program;’’.
(d) ADDITIONAL OFFENSES RELATING TO ALLIANCE
SYSTEM.—Section 1128A(a) of such Act, as amended by
section 4041(a)(1) and subsections (a)(1) and (c), is fur-
ther amended—
(1) by striking ‘‘or’’ at the end of paragraph
(5);
735
Title IV, Subtitle A
(2) by striking the semicolon at the end of
paragraph (6) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (6) the fol-
lowing new paragraphs:
‘‘(7) engages in a practice that circumvents a
payment methodology intended to reimburse for two
or more discreet medical items or services at a single
or fixed amount, including but not limited to, mul-
tiple admissions or readmission to hospitals and
other institutions reimbursed on a diagnosis reim-
bursement grouping basis;
‘‘(8) engages in a practice which has the effect
of limiting or discouraging (as compared to other
plan enrollees) the utilization of health care services
covered by law or under the service contract by title
XIX or other publicly subsidized patients, including
but not limited to differential standards for the loca-
tion and hours of service offered by providers par-
ticipating in the plan;
‘‘(9) substantially fails to cooperate with a qual-
ity assurance program or a utilization review activ-
ity;
‘‘(10) fails substantially to provide or authorize
medically necessary items and services that are re-
quired to be provided to an individual covered under
736
Title IV, Subtitle A
a health plan under the Health Security Act or pub-
lic program for the delivery of or payment for health
care items or services, if the failure has adversely af-
fected (or had a substantial likelihood of adversely
affecting) the individual;
‘‘(11) employs or contracts with any individual
or entity who is excluded from participating in a
program under title XVIII or a State health care
program in accordance with this section, section
1128, or section 1156, for the provision of any serv-
ices (including but not limited to health care, utiliza-
tion review, medical social work, or administrative),
or employs or contracts with any entity for the di-
rect or indirect provision of such services, through
such an excluded individual or entity; or
‘‘(12) submits false or fraudulent statements,
data or information or claims to the National Health
Board established under part 1 of subtitle F of title
I of the Health Security Act, any other Federal
agency, a State health care agency, a health alliance
(under subtitle D of title I of such Act), or any
other Federal, State or local agency charged with
implementation or oversight of a health plan under
such Act or a public program that the person knows
or should know is fraudulent;’’.
737
Title IV, Subtitle A
(e) MODIFICATIONS
OF AMOUNTS
OF PENALTIES
AND
ASSESSMENTS.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)), as amended by section 4041(a), subsection
(a)(1), subsection (c), and subsection (d), is amended in
the matter following paragraph (12)—
(1) 
by 
striking 
‘‘$2,000’’ 
and 
inserting
‘‘$10,000’’;
(2) by inserting after ‘‘under paragraph (4),
$50,000 for each such violation’’ the following: ‘‘; in
cases under paragraph (5), $10,000 for each such
offer, payment, or transfer; in cases under para-
graph (6), $10,000 for each day the prohibited rela-
tionship occurs; in cases under paragraphs (7)
through (12), an amount not to exceed $50,000 for
each such determination by the Secretary’’; and
(3) by striking ‘‘twice the amount’’ and insert-
ing ‘‘three times the amount’’.
(f) INTEREST ON PENALTIES.—Section 1128A(f) (42
U.S.C. 1320a–7a(f)) is amended by adding after the first
sentence the following: ‘‘Interest shall accrue on the pen-
alties and assessments imposed by a final determination
of the Secretary in accordance with an annual rate estab-
lished by the Secretary under the Federal Claims Collec-
tion Act. The rate of interest charged shall be the rate
in effect on the date the determination becomes final and
738
Title IV, Subtitle A
shall remain fixed at that rate until the entire amount due
is paid. In addition, the Secretary is authorized to recover
the costs of collection in any case where the penalties and
assessments are not paid within 30 days after the deter-
mination becomes final, or in the case of a compromised
amount, where payments are more than 90 days past due.
In lieu of actual costs, the Secretary is authorized to im-
pose a charge of up to 10 percent of the amount of pen-
alties and assessments owed to cover the costs of collec-
tion.’’.
(g) AUTHORIZATION TO ACT.—
(1) IN GENERAL.—The first sentence of section
1128A(c)(1) (42 U.S.C. 1320a–7a(c)(1)) is amended
by striking all that follows ‘‘(b)’’ and inserting the
following: ‘‘unless, within one year after the date the
Secretary presents a case to the Attorney General
for consideration, the Attorney General brings an ac-
tion in a district court of the United States.’’.
(2) EFFECTIVE DATE.—The amendment made
by this paragraph (1) shall apply to cases presented
by the Secretary of Health and Human Services for
consideration on or after the date of the enactment
of this Act.
(h) DEPOSIT OF PENALTIES COLLECTED INTO ALL-
PAYER
ACCOUNT.—Section 1128A(f)(3) (42 U.S.C.
739
Title IV, Subtitle A
1320a–7a(f)(3)) is amended by striking ‘‘as miscellaneous
receipts of the Treasury of the United States’’ and insert-
ing ‘‘in the All-Payer Health Care Fraud and Abuse Con-
trol Account established under section 5402 of the Health
Security Act’’.
(i) CLARIFICATION OF PENALTY IMPOSED ON EX-
CLUDED
PROVIDER
FURNISHING
SERVICES.—Section
1128A(a)(1)(D) 
(42 
U.S.C. 
1320a–7a(a)(1)(D)) 
is
amended by inserting ‘‘who furnished the service’’ after
‘‘in which the person’’.
SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION.
(a) MANDATORY EXCLUSION FOR INDIVIDUAL CON-
VICTED OF CRIMINAL OFFENSE RELATED TO HEALTH
CARE FRAUD.—Section 1128 (42 U.S.C. 1320a–7) is
amended—
(1) by amending paragraph (1) of subsection
(a) to read as follows:
‘‘(1) 
CONVICTIONS
OF
PROGRAM-RELATED
CRIMES AND HEALTH CARE FRAUD.—
‘‘(A) Any individual or entity that has been
convicted of a criminal offense related to the
delivery of an item or service under title XVIII
or under any State health care program; or
‘‘(B) Any individual or entity that has
been convicted, under Federal or State law, in
740
Title IV, Subtitle A
connection with the delivery of a health care
item or service of a criminal offense relating to
fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct.’’;
and
(2) in subsection (b)(1), by striking ‘‘in connec-
tion with the delivery of a health care item or service
or’’.
(b) ESTABLISHMENT OF MINIMUM PERIOD OF EX-
CLUSION FOR CERTAIN INDIVIDUALS AND ENTITIES SUB-
JECT TO PERMISSIVE EXCLUSION FROM MEDICARE AND
STATE HEALTH CARE PROGRAMS.—Section 1128(c)(3)
(42 U.S.C. 1320a–7(c)(3)) is amended by adding at the
end the following new subparagraphs:
‘‘(D) In the case of an exclusion of an individual or
entity under paragraphs (1), (2), or (3) of subsection (b),
the period of exclusion shall be a minimum of 3 years,
unless the Secretary determines that a longer period is
appropriate because of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individual or
entity under paragraph (4) or (5) of subsection (b), the
period of the exclusion shall not be less than the period
during which the individual’s or entity’s license to provide
health care is revoked, suspended, or surrendered, or the
741
Title IV, Subtitle A
individual or the entity is excluded or suspended from a
Federal or State health care program.
‘‘(F) In the case of an exclusion of an individual or
entity under subsection (b)(6)(B), the period of the exclu-
sion shall be not less than 1 year.’’.
(c) REVISION
TO EXCLUSION
FOR DEFAULT
ON
HEALTH EDUCATION LOAN OR SCHOLARSHIP OBLIGA-
TIONS.—Section 1128(b)(14) (42 U.S.C. 1320a–7(b)(14))
is amended by striking ‘‘all reasonable steps’’ and insert-
ing ‘‘reasonable steps’’.
(d) PERMISSIVE EXCLUSION OF INDIVIDUALS WITH
OWNERSHIP OR CONTROL INTEREST IN SANCTIONED EN-
TITIES.—Section 1128(b) (42 U.S.C. 1320a–7(b)) is
amended by adding at the end the following new para-
graph:
‘‘(15) INDIVIDUALS
CONTROLLING
A
SANC-
TIONED ENTITY.—Any individual who has a direct
or indirect ownership or control interest of 5 percent
or more, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer,
director, agent, or managing employee (as defined in
section 1126(b)) of, an entity—
‘‘(A) that has been convicted of any of-
fense described in subsection (a) or in para-
graph (1), (2), or (3) of this subsection;
742
Title IV, Subtitle A
‘‘(B) against which a civil monetary pen-
alty has been assessed under section 1128A; or
‘‘(C) that has been excluded from partici-
pation under a program under title XVIII or
under a State health care program.’’.
(e) EXCLUSIONS BASED ON ACTIONS UNDER ALLI-
ANCE SYSTEM.—Section 1128 (42 U.S.C. 1320a–7), as
amended by subsections (a) and (d), is amended—
(1) in subsection (a)(1)(A), by striking ‘‘XVIII
or under a State health care program’’ and inserting
‘‘XVIII, a State health care program, or under an
applicable health plan (as defined in section 1902(6)
of the Health Security Act)’’;
(2) in subsection (b)(5)—
(A) by striking ‘‘or’’ at the end of subpara-
graph (A),
(B) by adding ‘‘or’’ at the end of subpara-
graph (B), and
(C) by inserting after subparagraph (B)
the following new subparagraph:
‘‘(C) an applicable health plan (as defined
in section 1902(6) of the Health Security Act)
under section 5411 or 5412(b)(3) of such
Act,’’;
743
Title IV, Subtitle A
(3) in subsection (b)(6)(B), by striking ‘‘XVIII
or under a State health care program’’ and inserting
‘‘XVIII, a State health care program, or an applica-
ble health plan (as defined in section 1902(6) of the
Health Security Act)’’;
(4) in subsection (b)(7), by striking the period
at the end and inserting ‘‘, or in section 5412 of the
Health Security Act.’’;
(5) in subsection (b)(8)(B)—
(A) in clause (ii), by striking ‘‘1128A’’ and
inserting ‘‘1128A or under section 5412 of the
Health Security Act’’, and
(B) in clause (iii), by striking ‘‘XVIII or
under a State health care program’’ and insert-
ing ‘‘XVIII, a State health care program, or
under an applicable health plan (as defined in
section 1902(6) of the Health Security Act)’’;
(6) in subsection (b)(9), by striking the period
at the end and inserting ‘‘, or provide any informa-
tion requested by the Inspector General of the De-
partment of Health and Human Services to carry
out the All-Payer Health Care Fraud and Abuse
Control Program established under section 5401 of
the Health Security Act.’’;
(7) in subsection (b)(11)—
744
Title IV, Subtitle A
(A) by striking ‘‘title XVIII or a State
health care program’’ and inserting ‘‘title
XVIII, a State health care program, or an ap-
plicable health plan (as defined in section
1902(6) of the Health Security Act)’’,
(B) by striking ‘‘Secretary or the appro-
priate State agency’’ and inserting ‘‘Secretary,
the appropriate State agency, or plan sponsor’’,
and
(C) by striking ‘‘Secretary or that agency’’
and inserting ‘‘Secretary, that agency, or that
sponsor’’;
(8) in subsection (b)(12), by adding at the end
the following new subparagraph:
‘‘(E) Any entity authorized by law to (i)
conduct on-site health, safety or patient care re-
views and surveys or (ii) to investigate whether
any violations of law have occurred, including
violations under this section, section 1128A,
section 1128B, or part 2 of subtitle E of title
V of the Health Security Act.’’;
(9) in subsection (b)(14), by striking ‘‘XVIII or
XIX’’ and inserting ‘‘XVIII, a State health care pro-
gram, or an applicable health plan (as defined in
section 1902(6) of the Health Security Act)’’; and
745
Title IV, Subtitle A
(10) in subsection (b)(15)—
(A) in subparagraph (B), by striking
‘‘1128A’’ and inserting ‘‘1128A or section 5412
of the Health Security Act’’, and
(B) in subparagraph (C), by striking ‘‘title
XVIII or under a State health care program’’
and inserting ‘‘title XVIII, a State health care
program, or an applicable health plan (as de-
fined in section 1902(6) of the Health Security
Act’’.
(f) APPEAL
OF EXCLUSIONS
TO COURT
OF AP-
PEALS.—Section 1128(f)(1) (42 U.S.C. 1320a–7(f)(1)) is
amended by striking the period at the end and inserting
the following: ‘‘, except that any action brought to appeal
such decision shall be brought in the United States Court
of Appeals for the judicial circuit in which the individual
or entity resides or has a principal place of business (or,
if the individual or entity does not reside or have a prin-
cipal place of business within any such judicial circuit, in
the United States Court of Appeals for the District of Co-
lumbia Circuit).’’.
746
Title IV, Subtitle A
SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATU-
TORY OBLIGATIONS RELATING TO QUALITY
OF CARE.
(a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI-
TIONERS AND PERSONS FAILING TO MEET STATUTORY
OBLIGATIONS.—
(1) IN GENERAL.—The second sentence of sec-
tion 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is
amended by striking ‘‘may prescribe)’’ and inserting
‘‘may prescribe, except that such period may not be
less than one year)’’.
(2) 
CONFORMING
AMENDMENT.—Section
1156(b)(2) (42 U.S.C. 1320c-5(b)(2)) is amended by
striking ‘‘shall remain’’ and inserting ‘‘shall (subject
to the minimum period specified in the second sen-
tence of paragraph (1)) remain’’.
(b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI-
TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)
(42 U.S.C. 1320c-5(b)(1)) is amended—
(1) in the second sentence, by striking ‘‘and de-
termines’’ and all that follows through ‘‘such obliga-
tions,’’ and
(2) by striking the third sentence.
(c) AMOUNT OF CIVIL MONEY PENALTY.—Section
1156(b)(3) (42 U.S.C. 1320c-5(b)(3)) is amended by
747
Title IV, Subtitle A
striking ‘‘the actual or estimated cost’’ and inserting the
following: ‘‘$50,000 for each instance’’.
SEC. 4046. EFFECTIVE DATE.
The amendments made by this part shall take effect
January 1, 1995.
PART 6—FUNDING OF GRADUATE MEDICAL
EDUCATION AND ACADEMIC HEALTH CENTERS
SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS
FOR GRADUATE MEDICAL EDUCATION.
(a) IN GENERAL.—For purposes of complying with
section 3034(a), there shall be transferred to the Sec-
retary from the Federal Hospital Insurance Trust Fund
(established under section 1817 of the Social Security Act)
and the Federal Supplementary Medical Insurance Trust
Fund (established under section 1841 of such Act) the fol-
lowing amount (in the aggregate), as applicable to a fiscal
year:
(1) 
In 
the 
case 
of 
fiscal 
year 
1996,
$1,500,000,000.
(2) In the case of each of the fiscal years 1997
and 1998, $1,600,000,000.
(3) In the case of each subsequent fiscal year,
the amount specified in paragraph (2) increased by
the Secretary’s estimate of the percentage increase
in the consumer price index for all urban consumers
748
Title IV, Subtitle A
(U.S. city average) for the 12-month period ending
with the midpoint of the previous fiscal year.
(b) ALLOCATION OF AMOUNT AMONG FUNDS.—With
respect to the amount required under subsection (a) to
be transferred for a year from the Federal Hospital Insur-
ance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund, the Secretary shall determine an
equitable allocation of such amount among the funds.
(c) TERMINATION
OF GRADUATE MEDICAL EDU-
CATION PAYMENTS UNDER MEDICARE.—
(1) IN GENERAL.— Section 1886(h) (42 U.S.C.
1395ww(h)) is amended by adding at the end the
following new paragraph:
‘‘(6) TERMINATION
OF
PAYMENTS
ATTRIB-
UTABLE TO COSTS OF TRAINING PHYSICIANS.—Not-
withstanding any other provision of this section or
section 1861(v), no payment may be made under
this title for direct graduate medical education costs
attributable to an approved medical residency train-
ing program for any cost reporting period (or por-
tion thereof) beginning on or after October 1,
1995.’’.
(2) PROHIBITION
AGAINST
RECOGNITION
OF
COSTS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1))
749
Title IV, Subtitle A
is amended by adding at the end the following new
subparagraph:
‘‘(T) Such regulations shall not include any provision
for specific recognition of the costs of graduate medical
education for hospitals for any cost reporting period (or
portion thereof) beginning on or after October 1, 1995.
Nothing in the previous sentence shall be construed to af-
fect in any way payments to hospitals for the costs of any
approved educational activities that are not described in
such sentence.’’.
SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST
FUND FOR ACADEMIC HEALTH CENTERS.
(a) IN GENERAL.—For purposes of complying with
section 3104(a), there shall be transferred to the Sec-
retary from the Federal Hospital Insurance Trust Fund
(established under section 1817 of the Social Security Act)
the following amount (in the aggregate), as applicable to
a fiscal year:
(1) 
In 
the 
case 
of 
fiscal 
year 
1996,
$2,100,000,000.
(2) In the case of each of the fiscal years 1997
and 1998, $2,000,000,000.
(3) In the case of each subsequent fiscal year,
the amount specified in paragraph (2) increased by
the Secretary’s estimate of the percentage increase
750
Title IV, Subtitle A
in the consumer price index for all urban consumers
(U.S. city average) for the 12-month period ending
with the midpoint of the previous fiscal year.
(b) TERMINATION
OF PAYMENTS UNDER MEDI-
CARE.—
(1) IN GENERAL.—Section 1886(d)(5)(B) (42
U.S.C. 1395ww(d)(5)(B)) is amended in the matter
preceding clause (i) by striking ‘‘The Secretary’’ and
inserting ‘‘For discharges occurring before October
1, 1995, the Secretary’’.
(2) 
ADJUSTMENT
TO
STANDARDIZED
AMOUNTS.—Section 1886(d)(2)(C)(i) (42 U.S.C.
1395ww(d)(2)(C)(i)) is amended by striking ‘‘exclud-
ing’’ and inserting ‘‘for discharges occurring before
October 1, 1995, excluding’’.
PART 7—COVERAGE OF SERVICES PROVIDED BY
FACILITIES AND PLANS OF DEPARTMENTS
OF DEFENSE AND VETERANS AFFAIRS
SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH
PLAN AS ELIGIBLE ORGANIZATION UNDER
MEDICARE.
(a) 
IN
GENERAL.—Section 
1876 
(42 
U.S.C.
1395mm), as amended by section 4002(a), is further
amended by adding at the end the following new sub-
section:
751
Title IV, Subtitle A
‘‘(l) Notwithstanding any other provision of this sec-
tion, a Uniformed Services Health Plan of the Department
of Defense under chapter 55 of title 10, United States
Code, shall be considered an eligible organization under
this section, and the Secretary shall make payments to
such Plan during a year on behalf of any individuals enti-
tled to benefits under this title who are enrolled with such
a Plan during the year in the same amounts and under
the same terms and conditions under which the Secretary
makes payments to eligible organizations with risk-sharing
contracts under section 1876.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to items and services furnished
under title XVIII of the Social Security Act on or after
October 1, 1995.
SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDI-
CARE BENEFICIARIES BY PLANS AND FACILI-
TIES OF DEPARTMENT OF VETERANS AF-
FAIRS.
(a) IN GENERAL.—Title XVIII, as amended by sec-
tions 4001 and 4003, is further amended by adding at
the end the following new section:
‘‘TREATMENT OF PLANS AND FACILITIES OF
DEPARTMENT OF VETERANS AFFAIRS AS PROVIDERS
‘‘SEC. 1895. (a) IN GENERAL.—Notwithstanding any
other provision of this title—
752
Title IV, Subtitle A
‘‘(1) a VA health plan (as defined in section
1801(2) of title 38, United States Code) shall be
considered an eligible organization for purposes of
section 1876; and
‘‘(2) a health care facility of the Department of
Veterans Affairs shall be considered a provider of
services under section 1861(u).
‘‘(b) ELIGIBILITY FOR PAYMENTS.—
‘‘(1) VA HEALTH PLANS.—The Secretary shall
make payments to a VA health plan during a year
on behalf of any veteran, other than a veteran de-
scribed in section 1831(b) during the year (other
than any individuals described in section 1831(b) of
title 38, United States Code) in the same amounts
and under the same terms and conditions under
which the Secretary makes payments to eligible or-
ganizations with a risk-sharing contract under sec-
tion 1876.
‘‘(2) HEALTH
CARE
FACILITIES.—The Sec-
retary shall make payments to a health care facility
of the Department of Veterans Affairs for services
provided to an individual entitled to benefits under
this title in the same amounts and under the same
terms and conditions under which the Secretary
753
Title IV, Subtitle B
makes payments to provider of services under this
title.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to items and services furnished
under title XVIII of the Social Security Act on or after
January 1, 1998.
SEC. 4063. CONFORMING AMENDMENTS.
(a) PART A.—Section 1814 (42 U.S.C. 1395f) is
amended by striking subsection (c).
(b) PART B.—Section 1835 (42 U.S.C. 1395n) is
amended by striking subsection (d).
(c) ADDITIONAL CONFORMING AMENDMENT.—Sec-
tion 1880(a) (42 U.S.C. 1395qq(a)) is amended by strik-
ing ‘‘, notwithstanding sections 1814(c) and 1835(d),’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect January 1, 1998.
Subtitle B—Savings in Medicare
Program
PART 1—SAVINGS RELATING TO PART A
SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOS-
PITAL SERVICES.
Section 
1886(b)(3)(B)(i) 
(42 
U.S.C.
1395ww(b)(3)(B)(i)), as amended by section 13501(a)(1)
of OBRA–1993, is amended—
(1) in subclause (XII)—
754
Title IV, Subtitle B
(A) by striking ‘‘fiscal year 1997’’ and in-
serting ‘‘for each of the fiscal years 1997
through 2000’’, and
(B) by striking ‘‘0.5 percentage point’’ and
inserting ‘‘2.0 percentage points’’; and
(2) in subclause (XIII), by striking ‘‘fiscal year
1998’’ and inserting ‘‘fiscal year 2003’’.
SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT
MEDICAL EDUCATION.
(a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as fol-
lows:
‘‘(ii) For purposes of clause (i)(II), the indirect
teaching adjustment factor is equal to c * (((1+r)
to the nth power) ¥ 1), where ‘r’ is the ratio of the
hospital’s full-time equivalent interns and residents
to beds and ‘n’ equals .405. For discharges occur-
ring on or after—
‘‘(I) May 1, 1986, and before October 1,
1995, ‘c’ is equal to 1.89, and
‘‘(II) October 1, 1995, ‘c’ is equal to
0.74.’’.
(b) 
NO
RESTANDARDIZATION
OF
PAYMENT
AMOUNTS
REQUIRED.—Section 1886(d)(2)(C)(i) (42
U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ‘‘of
755
Title IV, Subtitle B
1985’’ and inserting ‘‘of 1985, but not taking into account
the amendments made by section 4102(a) of the Health
Security Act’’.
SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RE-
LATED COSTS FOR INPATIENT HOSPITAL
SERVICES.
(a) PPS HOSPITALS.—
(1) REDUCTION IN BASE PAYMENT RATES.—
Section 
1886(g)(1)(A) 
(42 
U.S.C.
1395ww(g)(1)(A)), 
as 
amended 
by 
section
13501(a)(3) of OBRA–1993, is amended by adding
at the end the following new sentence: ‘‘In addition
to the reduction described in the preceding sentence,
for discharges occurring after September 30, 1995,
the Secretary shall reduce by 7.31 percent the
unadjusted standard Federal capital payment rate
(as described in 42 CFR 412.308(c), as in effect on
the date of the enactment of the Health Security
Act) and shall reduce by 10.41 percent the
unadjusted hospital-specific rate (as described in 42
CFR 412.328(e)(1), as in effect on the date of the
enactment of the Health Security Act).’’.
(2) 
REDUCTION
IN
UPDATE.—Section
1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended—
(A) in subparagraph (B)(i)—
756
Title IV, Subtitle B
(i) by striking ‘‘and (II)’’ and insert-
ing ‘‘(II)’’, and
(ii) by striking the semicolon at the
end and inserting the following: ‘‘, and
(III) an annual update factor established
for the prospective payment rates applica-
ble to discharges in a fiscal year which
(subject to reduction under subparagraph
(C)) will be based upon such factor as the
Secretary determines appropriate to take
into account amounts necessary for the ef-
ficient and effective delivery of medically
appropriate and necessary care of high
quality;’’;
(B) by redesignating subparagraph (C) as
subparagraph (D); and
(C) by inserting after subparagraph (B)
the following new subparagraph:
‘‘(C)(i) With respect to payments attributable
to portions of cost reporting periods or discharges
occurring during each of the fiscal years 1996
through 2003, the Secretary shall include a reduc-
tion in the annual update factor established under
subparagraph (B)(i)(III) for discharges in the year
equal to the applicable update reduction described in
757
Title IV, Subtitle B
clause (ii) to adjust for excessive increases in capital
costs per discharge for fiscal years prior to fiscal
year 1992 (but in no event may such reduction re-
sult in an annual update factor less than zero).
‘‘(ii) In clause (i), the term ‘applicable update
reduction’ means, with respect to the update factor
for a fiscal year—
‘‘(I) 4.9 percentage points; or
‘‘(II) if the annual update factor for the
previous fiscal year was less than the applicable
update reduction for the previous year, the sum
of 4.9 percentage points and the difference be-
tween the annual update factor for the previous
year and the applicable update reduction for the
previous year.’’.
(b) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1)
(42 U.S.C. 1395x(v)(1)), as amended by section
4051(c)(2), is further amended by adding at the end the
following new subparagraph:
‘‘(U) Such regulations shall provide that, in deter-
mining the amount of the payments that may be made
under this title with respect to the capital-related costs
of inpatient hospital services furnished by a hospital that
is not a subsection (d) hospital (as defined in section
1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital
758
Title IV, Subtitle B
(as defined in section 1886(d)(9)(A)), the Secretary shall
reduce the amounts of such payments otherwise estab-
lished under this title by 15 percent for payments attrib-
utable to portions of cost reporting periods occurring dur-
ing each of the fiscal years 1996 through 2003.’’.
SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR
DISPROPORTIONATE SHARE HOSPITALS IN
PARTICIPATING STATES.
(a) 
APPLICATION
OF
ALTERNATIVE
ADJUST-
MENTS.—Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is
amended—
(1) by redesignating subparagraphs (H) and (I)
as subparagraphs (I) and (J); and
(2) by inserting after subparagraph (G) the fol-
lowing new subparagraph:
‘‘(H)(i) In accordance with this subparagraph, the
Secretary shall provide for an additional payment for each
subsection (d) hospital that is located in a participating
State under the Health Security Act during a cost report-
ing period and that meets the eligibility requirements de-
scribed in clause (iii).
‘‘(ii) The amount of the additional payment made
under clause (i) for each discharge shall be determined
by multiplying—
759
Title IV, Subtitle B
‘‘(I) the sum of the amount determined under
paragraph (1)(A)(ii)(II) (or, if applicable, the
amount determined under paragraph (1)(A)(iii)) and
the amount paid to the hospital under subparagraph
(A) for the discharge, by
‘‘(II) the SSI adjustment percentage for the
cost reporting period in which the discharge occurs
(as defined in clause (iv)).
‘‘(iii) A hospital meets the eligibility requirements de-
scribed in this clause with respect to a cost reporting pe-
riod if—
‘‘(I) in the case of a hospital that is located in
an urban area and that has more than 100 beds, the
hospital’s SSI patient percentage (as defined in
clause (v)) for the cost reporting period is not less
than 5.5 percent;
‘‘(II) in the case of a hospital that is located in
an urban area and that has less than 100 beds, the
hospital’s SSI patient percentage is not less than 17
percent;
‘‘(III) in the case of a hospital that is classified
as a rural referral center under subparagraph (C) or
a sole community hospital under subparagraph (D),
the hospital’s SSI patient percentage for the cost re-
porting period is not less than 23 percent; and
760
Title IV, Subtitle B
‘‘(IV) in the case of any other hospital, the hos-
pital’s SSI patient percentage is not less than 23
percent.
‘‘(iv) For purposes of clause (ii), the ‘SSI adjustment
percentage’ applicable to a hospital for a cost reporting
period is equal to—
‘‘(I) in the case of a hospital described in clause
(iii)(I), the percentage determined in accordance
with the following formula: e to the nth power ¥ 1,
where ‘e’ is the natural antilog of 1 and where ‘n’
is equal to (.5642 * (the hospital’s SSI patient per-
centage for the cost reporting period ¥ .055));
‘‘(II) in the case of a hospital described in
clause (iii)(II) or clause (iii)(IV), 2 percent; and
‘‘(III) in the case of a hospital described in
clause (iii)(III), the sum of 2 percent and .30 per-
cent of the difference between the hospital’s SSI pa-
tient percentage for the cost reporting period and 23
percent.
‘‘(v) In this subparagraph, a hospital’s ‘SSI patient
percentage’ with respect to a cost reporting period is equal
to the fraction (expressed as a percentage)—
‘‘(I) the numerator of which is the number of
the hospital’s patient days for such period which
were made up of patients who (for such days) were
761
Title IV, Subtitle B
entitled to benefits under part A and were entitled
to supplementary security income benefits (excluding
State supplementation) under title XVI; and
‘‘(II) the denominator of which is the number
of the hospital’s patient days for such period which
were made up of patients who (for such days) were
entitled to benefits under part A.’’.
(b) NO STANDARDIZATION RESULTING FROM RE-
DUCTION.—Section 
1886(d)(2)(C)(iv) 
(42 
U.S.C.
1395ww(d)(2)(C)(iv)) is amended—
(1) by striking ‘‘exclude additional payments’’
and inserting ‘‘adjust such estimate for changes in
payments’’;
(2) by striking ‘‘1989 or’’ and inserting
‘‘1989,’’; and
(3) by striking the period at the end and insert-
ing the following: ‘‘, or the enactment of section
4104 of the Health Security Act.’’.
(c) 
CONFORMING
AMENDMENT.—Section
1886(d)(5)(F)(i) (42 U.S.C. 1395ww(d)(5)(F)(i)) is
amended in the matter preceding subclause (I) by insert-
ing after ‘‘hospital’’ the following: ‘‘that is not located in
a State that is a participating State under the Health Se-
curity Act’’.
762
Title IV, Subtitle B
SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL
LONG-TERM CARE HOSPITALS.
Notwithstanding clause (iv) of section 1886(d)(1)(B)
of the Social Security Act, a hospital which has an average
inpatient length of stay (as determined by the Secretary
of Health and Human Services) of greater than 25 days
shall not be treated as a hospital described in such clause
for purposes of title XVIII of such Act unless the hospital
was treated as a hospital described in such clause for pur-
poses of such title as of the date of the enactment of this
Act.
SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROU-
TINE SERVICE COSTS OF SKILLED NURSING
FACILITIES.
(a) PAYMENTS BASED ON COST LIMITS.—Section
1888(a) (42 U.S.C. 1395yy(a)) is amended by striking
‘‘112 percent’’ each place it appears and inserting ‘‘100
percent (adjusted by such amount as the Secretary deter-
mines to be necessary to preserve the savings resulting
from the enactment of section 13503(a)(1) of the Omni-
bus Budget Reconciliation Act of 1993)’’.
(b) PAYMENTS
DETERMINED
ON
PROSPECTIVE
BASIS.—Section 
1888(d)(2)(B) 
(42 
U.S.C.
1395yy(d)(2)(B)) is amended by striking ‘‘105 percent’’
and inserting ‘‘100 percent (adjusted by such amount as
the Secretary determines to be necessary to preserve the
763
Title IV, Subtitle B
savings resulting from the enactment of section 13503(b)
of the Omnibus Budget Reconciliation Act of 1993)’’.
(c) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to cost reporting peri-
ods beginning on or after October 1, 1995.
PART 2—SAVINGS RELATING TO PART B
SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDI-
TURE GOALS FOR PHYSICIAN SERVICES.
(a) USE OF CUMULATIVE PERFORMANCE STAND-
ARD.—Section 1848(f)(2) (42 U.S.C. 1395w–4(f)(2)) is
amended—
(1) in subparagraph (A)—
(A) in the heading, by striking ‘‘IN GEN-
ERAL’’ and inserting ‘‘FISCAL
YEARS
1991
THROUGH 1994.—’’,
(B) in the matter preceding clause (i), by
striking ‘‘a fiscal year (beginning with fiscal
year 1991)’’ and inserting ‘‘fiscal years 1991,
1992, 1993, and 1994’’, and
(C) in the matter following clause (iv), by
striking ‘‘subparagraph (B)’’ and inserting
‘‘subparagraph (C)’’;
(2) in subparagraph (B), by striking ‘‘subpara-
graph (A)’’ and inserting ‘‘subparagraphs (A) and
(B)’’;
764
Title IV, Subtitle B
(3) by redesignating subparagraphs (B) and
(C) as subparagraphs (C) and (D); and
(4) by inserting after subparagraph (A) the fol-
lowing new subparagraph:
‘‘(B) FISCAL YEARS BEGINNING WITH FIS-
CAL
YEAR
1995.—Unless Congress otherwise
provides, the performance standard rate of in-
crease, for all physicians’ services and for each
category of physicians’ services, for a fiscal year
beginning with fiscal year 1995 shall be equal
to the performance standard rate of increase
determined under this paragraph for the pre-
vious fiscal year, increased by the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the weighted average percentage increase
(divided by 100) in the fees for all physi-
cians’ services or for the category of physi-
cians’ services, respectively, under this part
for portions of calendar years included in
the fiscal year involved,
‘‘(ii) 1 plus the Secretary’s estimate of
the percentage increase or decrease (di-
vided by 100) in the average number of in-
dividuals enrolled under this part (other
765
Title IV, Subtitle B
than HMO enrollees) from the previous fis-
cal year to the fiscal year involved,
‘‘(iii) 1 plus the Secretary’s estimate
of the average annual percentage growth
(divided by 100) in volume and intensity of
all physicians’ services or of the category
of physicians’ services, respectively, under
this part for the 5-fiscal-year period ending
with the preceding fiscal year (based upon
information contained in the most recent
annual report made pursuant to section
1841(b)(2)), and
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage increase or decrease (di-
vided by 100) in expenditures for all physi-
cians’ services or of the category of physi-
cians’ services, respectively, in the fiscal
year (compared with the previous fiscal
year) which are estimated to result from
changes in law or regulations affecting the
percentage increase described in clause (i)
and which is not taken into account in the
percentage increase described in clause (i),
766
Title IV, Subtitle B
minus 1, multiplied by 100, and reduced by the
performance standard factor (specified in sub-
paragraph (C)).’’.
(b) TREATMENT OF DEFAULT UPDATE.—
(1) IN GENERAL.—Section 1848(d)(3)(B) (42
U.S.C. 1395w–4(d)(3)(B)) is amended—
(A) in clause (i)—
(i) in the heading, by striking ‘‘IN
GENERAL’’ and inserting ‘‘1992 THROUGH
1996’’, and
(ii) by striking ‘‘for a year’’ and in-
serting ‘‘for 1992, 1993, 1994, 1995, and
1996’’; and
(B) by adding after clause (ii) the fol-
lowing new clause:
‘‘(iii) YEARS BEGINNING WITH 1997.—
‘‘(I) IN
GENERAL.—The update
for a category of physicians’ services
for a year beginning with 1997 pro-
vided under subparagraph (A) shall be
increased or decreased by the same
percentage by which the cumulative
percentage increase in actual expendi-
tures for such category of physicians’
services for such year was less or
767
Title IV, Subtitle B
greater, respectively, than the per-
formance standard rate of increase
(established under subsection (f)) for
such category of services for such
year.
‘‘(II) CUMULATIVE PERCENTAGE
INCREASE
DEFINED.—In subclause
(I), the ‘cumulative percentage in-
crease in actual expenditures’ for a
year shall be equal to the product of
the adjusted increases for each year
beginning with 1995 up to and includ-
ing the year involved, minus 1 and
multiplied by 100. In the previous
sentence, the ‘adjusted increase’ for a
year is equal to 1 plus the percentage
increase in actual expenditures for the
year.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1848(d)(3)(A)(i) (42 U.S.C. 1395w–4(d)(3)(A)(i)) is
amended by striking ‘‘subparagraph (B)’’ and insert-
ing ‘‘subparagraphs (B) and (C)’’.
768
Title IV, Subtitle B
SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND
INTENSITY; REPEAL OF RESTRICTION ON
MAXIMUM REDUCTION PERMITTED IN DE-
FAULT UPDATE.
(a) USE OF REAL GDP TO ADJUST FOR VOLUME
AND INTENSITY.—Section 1848(f)(2)(B)(iii) (42 U.S.C.
1395w–4(f)(2)(B)(iii)), as added by section 4111(a), is
amended to read as follows:
‘‘(iii) 1 plus the average per capita
growth in the real gross domestic product
(divided by 100) for the 5-fiscal-year pe-
riod ending with the previous fiscal year
(increased by 1.5 percentage points for the
category of services consisting of primary
care services), and’’.
(b) REPEAL OF RESTRICTION ON MAXIMUM REDUC-
TION.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w–
4(d)(3)(B)(ii)), as amended by section 13512(b) of
OBRA–1993, is amended—
(1) in the heading, by inserting ‘‘IN CERTAIN
YEARS’’ after ‘‘ADJUSTMENT’’;
(2) in the matter preceding subclause (I), by
striking ‘‘for a year’’;
(3) in subclause (I), by adding ‘‘and’’ at the
end;
769
Title IV, Subtitle B
(4) in subclause (II), by striking ‘‘, and’’ and
inserting a period; and
(5) by striking subclause (III).
(c) REPEAL
OF PERFORMANCE STANDARD FAC-
TOR.—
(1) IN
GENERAL.—Section 1842(f)(2), as
amended by section 4111(a)(3), is amended by strik-
ing subparagraph (C) and redesignating subpara-
graph (D) as subparagraph (C).
(2) 
CONFORMING
AMENDMENT.—Section
1842(f)(2)(B), as added by section 4111(a), is
amended in the matter following clause (iv) by strik-
ing ‘‘1, multiplied by 100’’ and all that follows
through ‘‘subparagraph (C))’’ and inserting ‘‘1 and
multiplied by 100’’.
SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHY-
SICIAN FEE SCHEDULE FOR 1995.
Section 1848(d)(1) (42 U.S.C. 1395w–4(d)(1)) is
amended—
(1) in subparagraph (A), by inserting after
‘‘subparagraph (B)’’ the following: ‘‘, and, in the
case of 1995, specified in subparagraph (C)’’;
(2) by redesignating subparagraph (C) as sub-
paragraph (D); and
770
Title IV, Subtitle B
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) SPECIAL PROVISION FOR 1995.—For
purposes of subparagraph (A), the conversion
factor specified in this subparagraph for 1995
is—
‘‘(i) in the case of physicians’ services
included in the category of primary care
services (as defined in subsection (j)(1)),
the conversion factor established under this
subsection for 1994 adjusted by the update
established under paragraph (3) for 1995;
and
‘‘(ii) in the case of any other physi-
cians’ services, the conversion factor estab-
lished under this subsection for 1994 re-
duced by 3 percent and adjusted by the
update established under paragraph (3) for
1995.’’.
SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS’
SERVICES FURNISHED BY HIGH-COST HOS-
PITAL MEDICAL STAFFS.
(a) IN GENERAL.—
(1) LIMITATIONS DESCRIBED.—Part B of title
XVIII, as amended by section 2003(a), is amended
771
Title IV, Subtitle B
by inserting after section 1848 the following new
section:
‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES
FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS
‘‘SEC. 1849. (a) SERVICES SUBJECT
TO REDUC-
TION.—
‘‘(1) DETERMINATION
OF
HOSPITAL-SPECIFIC
PER ADMISSION RELATIVE VALUE.—Not later than
October 1 of each year (beginning with 1997), the
Secretary shall determine for each hospital—
‘‘(A) the hospital-specific per admission
relative value under subsection (b)(2) for the
following year; and
‘‘(B) whether such hospital-specific relative
value is projected to exceed the allowable aver-
age per admission relative value applicable to
the hospital for the following year under sub-
section (b)(1).
‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS
EXCEEDING ALLOWABLE AVERAGE PER ADMISSION
RELATIVE
VALUE.—If the Secretary determines
(under paragraph (1)) that a medical staff’s hos-
pital-specific per admission relative value for a year
(beginning with 1998) is projected to exceed the al-
lowable average per admission relative value applica-
ble to the medical staff for the year, the Secretary
772
Title IV, Subtitle B
shall reduce (in accordance with subsection (c)) the
amount of payment otherwise determined under this
part for each physician’s service furnished during
the year to an inpatient of the hospital by an indi-
vidual who is a member of the hospital’s medical
staff.
‘‘(3) TIMING OF DETERMINATION; NOTICE TO
HOSPITALS AND CARRIERS.—Not later than October
1 of each year (beginning with 1997), the Secretary
shall notify the medical executive committee of each
hospital (as set forth in the Standards of the Joint
Commission on the Accreditation of Health Organi-
zations) of the determinations made with respect to
the medical staff under paragraph (1).
‘‘(b) DETERMINATION
OF ALLOWABLE AVERAGE
PER ADMISSION RELATIVE VALUE AND HOSPITAL-SPE-
CIFIC PER ADMISSION RELATIVE VALUES.—
‘‘(1) ALLOWABLE
AVERAGE
PER
ADMISSION
RELATIVE VALUE.—
‘‘(A) URBAN HOSPITALS.—In the case of a
hospital located in an urban area, the allowable
average per admission relative value established
under this subsection for a year is equal to 125
percent (or 120 percent for years after 1999) of
the median of 1996 hospital-specific per admis-
773
Title IV, Subtitle B
sion relative values determined under paragraph
(2) for all hospital medical staffs.
‘‘(B) RURAL HOSPITALS.—In the case of a
hospital located in a rural area, the allowable
average per admission relative value established
under this subsection for 1998 and each suc-
ceeding year, is equal to 140 percent of the me-
dian of the 1996 hospital-specific per admission
relative values determined under paragraph (2)
for all hospital medical staffs.
‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL-
ATIVE VALUE.—
‘‘(A) IN
GENERAL.—The hospital-specific
per admission relative value projected for a hos-
pital (other than a teaching hospital) for a cal-
endar year, shall be equal to the average per
admission relative value (as determined under
section 1848(c)(2)) for physicians’ services fur-
nished to inpatients of the hospital by the hos-
pital’s medical staff (excluding interns and resi-
dents) during the second year preceding such
calendar year, adjusted for variations in case-
mix and disproportionate share status among
hospitals (as determined by the Secretary under
subparagraph (C)).
774
Title IV, Subtitle B
‘‘(B) SPECIAL RULE FOR TEACHING HOS-
PITALS.—The hospital-specific relative value
projected for a teaching hospital in a calendar
year shall be equal to the sum of—
‘‘(i) the average per admission relative
value 
(as 
determined 
under 
section
1848(c)(2)) for physicians’ services fur-
nished to inpatients of the hospital by the
hospital’s medical staff (excluding interns
and residents) during the second year pre-
ceding such calendar year; and
‘‘(ii) the equivalent per admission rel-
ative value (as determined under section
1848(c)(2)) for physicians’ services fur-
nished to inpatients of the hospital by in-
terns and residents of the hospital during
the second year preceding such calendar
year, adjusted for variations in case-mix,
disproportionate share status, and teaching
status among hospitals (as determined by
the Secretary under subparagraph (C)).
The Secretary shall determine such equiva-
lent relative value unit per admission for
interns and residents based on the best
available data for teaching hospitals and
775
Title IV, Subtitle B
may make such adjustment in the aggre-
gate.
‘‘(C) ADJUSTMENT
FOR
TEACHING
AND
DISPROPORTIONATE
SHARE
HOSPITALS.—The
Secretary shall adjust the allowable per admis-
sion relative values otherwise determined under
this paragraph to take into account the needs
of teaching hospitals and hospitals receiving ad-
ditional payments under subparagraphs (F) and
(G) of section 1886(d)(5). The adjustment for
teaching status or disproportionate share shall
not be less than zero.
‘‘(c) AMOUNT OF REDUCTION.—The amount of pay-
ment otherwise made under this part for a physician’s
service that is subject to a reduction under subsection (a)
during a year shall be reduced 15 percent, in the case of
a service furnished by a member of the medical staff of
the hospital for which the Secretary determines under sub-
section (a)(1) that the hospital medical staff’s projected
relative value per admission exceeds the allowable average
per admission relative value.
‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON
HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION
WITH ACTUAL RELATIVE VALUES.—
776
Title IV, Subtitle B
‘‘(1) DETERMINATION
OF
ACTUAL
AVERAGE
PER ADMISSION RELATIVE VALUE.—Not later than
October 1 of each year (beginning with 1999), the
Secretary shall determine the actual average per ad-
mission relative value (as determined pursuant to
section 1848(c)(2)) for the physicians’ services fur-
nished by members of a hospital’s medical staff to
inpatients of the hospital during the previous year,
on the basis of claims for payment for such services
that are submitted to the Secretary not later than
90 days after the last day of such previous year. The
actual average per admission shall be adjusted by
the appropriate case-mix, disproportionate share fac-
tor, and teaching factor for the hospital medical
staff (as determined by the Secretary under sub-
section (b)(2)(C)). Notwithstanding any other provi-
sion of this title, no payment may be made under
this part for any physician’s service furnished by a
member of a hospital’s medical staff to an inpatient
of the hospital during a year unless the hospital sub-
mits a claim to the Secretary for payment for such
service not later than 90 days after the last day of
the year.
‘‘(2) 
RECONCILIATION
WITH
REDUCTIONS
TAKEN.—In the case of a hospital for which the pay-
777
Title IV, Subtitle B
ment amounts for physicians’ services furnished by
members of the hospital’s medical staff to inpatients
of the hospital were reduced under this section for
a year—
‘‘(A) if the actual average per admission
relative value for such hospital’s medical staff
during the year (as determined by the Secretary
under paragraph (1)) did not exceed the allow-
able average per admission relative value appli-
cable to the hospital’s medical staff under sub-
section (b)(1) for the year, the Secretary shall
reimburse the fiduciary agent for the medical
staff by the amount by which payments for
such services were reduced for the year under
subsection (c), including interest at an appro-
priate rate determined by the Secretary;
‘‘(B) if the actual average per admission
relative value for such hospital’s medical staff
during the year is less than 15 percentage
points above the allowable average per admis-
sion relative value applicable to the hospital’s
medical staff under subsection (b)(1) for the
year, the Secretary shall reimburse the fidu-
ciary agent for the medical staff, as a percent
of the total allowed charges for physicians’ serv-
778
Title IV, Subtitle B
ices performed in such hospital (prior to the
withhold), the difference between 15 percentage
points and the actual number of percentage
points that the staff exceeds the limit allowable
average per admission relative value, including
interest at an appropriate rate determined by
the Secretary; and
‘‘(C) if the actual average per admission
relative value for such hospital’s medical staff
during the year exceeded the allowable average
per admission relative value applicable to the
hospital’s medical staff by 15 percentage points
or more, none of the withhold is paid to the fi-
duciary agent for the medical staff.
‘‘(3) MEDICAL
EXECUTIVE
COMMITTEE
OF
A
HOSPITAL.—Each medical executive committee of a
hospital whose medical staff is projected to exceed
the allowable relative value per admission for a year,
shall have one year from the date of notification that
such medical staff is projected to exceed the allow-
able relative value per admission to designate a fidu-
ciary agent for the medical staff to receive and dis-
burse any appropriate withhold amount made by the
carrier.
779
Title IV, Subtitle B
‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM-
BERS
OF
STAFF.—At the request of a fiduciary
agent for the medical staff, if the fiduciary agent for
the medical staff is owed the reimbursement de-
scribed in paragraph (2)(B) for excess reductions in
payments during a year, the Secretary shall make
such reimbursement to the members of the hospital’s
medical staff, on a pro-rata basis according to the
proportion of physicians’ services furnished to inpa-
tients of the hospital during the year that were fur-
nished by each member of the medical staff.
‘‘(e) DEFINITIONS.—In this section, the following
definitions apply:
‘‘(1) MEDICAL
STAFF.—An individual fur-
nishing a physician’s service is considered to be on
the medical staff of a hospital—
‘‘(A) if (in accordance with requirements
for hospitals established by the Joint Commis-
sion on Accreditation of Health Organiza-
tions)—
‘‘(i) the individual is subject to by-
laws, rules, and regulations established by
the hospital to provide a framework for the
self-governance of medical staff activities;
780
Title IV, Subtitle B
‘‘(ii) subject to such bylaws, rules, and
regulations, the individual has clinical
privileges granted by the hospital’s gov-
erning body; and
‘‘(iii) under such clinical privileges,
the individual may provide physicians’
services independently within the scope of
the individual’s clinical privileges, or
‘‘(B) if such physician provides at least one
service to a medicare beneficiary in such hos-
pital.
‘‘(2) RURAL AREA; URBAN AREA.—The terms
‘rural area’ and ‘urban area’ have the meaning given
such terms under section 1886(d)(2)(D).
‘‘(3) TEACHING HOSPITAL.—The term ‘teaching
hospital’ means a hospital which has a teaching pro-
gram approved as specified in section 1861(b)(6).’’.
(2) CONFORMING AMENDMENTS.—(A) Section
1833(a)(1)(N) 
(42 
U.S.C. 
1395l(a)(1)(N)) 
is
amended by inserting ‘‘(subject to reduction under
section 1849)’’ after ‘‘1848(a)(1)’’.
(B) Section 1848(a)(1)(B) (42 U.S.C. 1395w–
4(a)(1)(B)) is amended by striking ‘‘this sub-
section,’’ and inserting ‘‘this subsection and section
1849,’’.
781
Title IV, Subtitle B
(b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL
AT
WHICH
SERVICE
FURNISHED.—Section
1848(g)(4)(A)(i) (42 U.S.C. 1395w–4(g)(4)(A)(i)) is
amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene-
ficiary (and, in the case of a service furnished to an inpa-
tient of a hospital, report the hospital identification num-
ber on such claim form),’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
January 1, 1998.
SEC. 4115. MEDICARE INCENTIVES FOR PHYSICIANS TO
PROVIDE PRIMARY CARE.
(a) RESOURCE-BASED PRACTICE EXPENSE REL-
ATIVE VALUE UNITS.—
(1) INCREASE IN PRACTICE EXPENSE RELATIVE
VALUE
UNITS
FOR
CERTAIN
SERVICES.—Section
1848(c)(2) (42 U.S.C. 1395w–4(c)(2)), as amended
by sections 13513 and 13514 of OBRA–93, is
amended by adding at the end the following new
subparagraph:
‘‘(G) INCREASE
IN
PRACTICE
EXPENSE
RELATIVE VALUE UNITS FOR CERTAIN SERV-
ICES.—The Secretary shall increase the practice
expense relative value units applied in primary
782
Title IV, Subtitle B
care services, as defined in section 1842(i)(4),
by 10 percent, beginning with 1996.’’.
(2) ASSURING BUDGET NEUTRALITY.—Section
1842(c)(2)(F) (42 U.S.C. 1395u(c)(2)(F)), as added
by section 13513 and amended by section 13514 of
OBRA–93, is amended by adding at the end the fol-
lowing new clause:
‘‘(iii) shall reduce the relative values
for all services (other than anesthesia serv-
ices and primary care services, as defined
in section 1842(i)(4)) established under
this paragraph (and, in the case of anes-
thesia services, the conversion factor estab-
lished by the Secretary for such services)
by such percentage as the Secretary deter-
mines to be necessary so that, beginning in
1996, the amendment made by section
4115(a)(1) of the Health Security Act
would not result in expenditures under this
section that exceed the amount of such ex-
penditures that would have been made if
such amendment had not been made.’’.
(3) STUDY.—The Secretary of Health and
Human Services shall—
783
Title IV, Subtitle B
(A) develop a methodology for imple-
menting in 1997 a resource-based system for
determining practice expense relative values
unit for each physician’s service, and
(B) transmit a report by June 30, 1996,
on the methodology developed under paragraph
(1) to the Committees on Ways and Means and
Energy and Commerce of the House of Rep-
resentatives and the Committee on Finance of
the Senate. The reported shall include a presen-
tation of the data utilized in developing the
methodology and an explanation of the method-
ology.
(b) OFFICE VISIT PRE- AND POST-TIME.—
(1) INCREASE IN WORK RELATIVE VALUE UNITS
FOR OFFICE VISITS.—Section 1848(c)(2) (42 U.S.C.
1395w–4(c)(2)), as amended by subsection (a)(1), is
amended by adding at the end the following new
subparagraph:
‘‘(H) INCREASE IN WORK RELATIVE VALUE
UNITS FOR CERTAIN SERVICES.—The Secretary
shall increase the work relative value units ap-
plied to office visits by 10 percent, beginning
with 1996.’’.
784
Title IV, Subtitle B
(2) ASSURING BUDGET NEUTRALITY.—Section
1842(c)(2)(F)(iii) (42 U.S.C. 1395u(c)(2)(F)(iii)),
as added by subsection (a)(2), is amended by strik-
ing ‘‘section 4115(a)(1)’’ and substituting ‘‘sections
4115(a)(1) and (b)(1)’’.
(c) OFFICE CONSULTATIONS.—Section 1848(c)(2)
(42 U.S.C. 1395w–4(c)(2)), as amended by subsections
(a)(1) and (b)(1), is amended by adding at the end the
following new subparagraph:
‘‘(I) AMENDMENT
IN
RELATIVE
VALUES
FOR OFFICE CONSULTATIONS.—The Secretary
shall reduce the work, practice expense and
malpractice relative value components of office
consultations to be equal to the work, practice
expense and malpractice relative value compo-
nents for comparable office visits beginning
with 1996. In making such adjustment, the
Secretary shall apply the savings from such re-
duction to increase each of the relative value
components for office visits in a manner that
would not result in expenditures under this sec-
tion that exceed the amount of such expendi-
tures that would have been made if such
amendment had not been made.’’.
785
Title IV, Subtitle B
(d) OUTLIER INTENSITY RELATIVE VALUE ADJUST-
MENTS.—
(1) ADJUSTMENT OF OUTLIER INTENSITY OF
RELATIVE VALUES.—Section 1848(c)(2) (42 U.S.C.
1395w–4(c)(2)), as amended by subsections (a)(1),
(b)(1), and (c), is amended by adding at the end the
following new subparagraph:
‘‘(J) ADJUSTMENT OF OUTLIER INTENSITY
OF RELATIVE VALUES.—Beginning with 1996,
the Secretary shall reduce the work relative
value components of procedures, or classes of
procedures, where the intensity exceeds thresh-
olds established by the Secretary. In the pre-
vious sentence, intensity shall mean the work
relative value units for the procedure divided by
the time for the procedure. The Secretary shall
apply the savings from such reductions to in-
crease the work relative value components of
primary care services, as defined in section
1842(i)(4), such that the changes made by this
subsection would not result in expenditures
under this section that exceed the amount of
such expenditures that would have been made if
such amendment had not been made.’’.
786
Title IV, Subtitle B
(e) CHANGES IN UNDERSERVED AREA BONUS PAY-
MENTS.—
(1) IN GENERAL.—Section 1833(m) (42 U.S.C.
1395l(m)) is amended—
(A) by striking ‘‘10 percent’’ and inserting
‘‘a percent’’,
(B) by striking ‘‘service’’ the last place it
appears and inserting ‘‘services’’, and
(C) by adding the following new sentence:
‘‘The percent referred to in the previous sen-
tence is 20 percent in the case of primary care
services, as defined in section 1842(i)(4), and
10 percent for services other than primary care
services furnished in health professional short-
age areas located in rural areas as defined in
section 1886(d)(2)(D).’’.
(2) The amendments made by paragraph (1)
are effective for services furnished on or after Janu-
ary 1, 1996.
SEC. 4116. ELIMINATION OF FORMULA-DRIVEN OVERPAY-
MENTS FOR CERTAIN OUTPATIENT HOSPITAL
SERVICES.
(a) 
AMBULATORY
SURGICAL
CENTER
PROCE-
DURES.—Section 
1833(i)(3)(B)(i)(II) 
(42 
U.S.C.
1395l(i)(3)(B)(i)(II)) is amended—
787
Title IV, Subtitle B
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end and insert-
ing the following: ‘‘, less the amount a provider may
charge as described in clause (ii) of section
1866(a)(2)(A).’’.
(b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE-
DURES.—Section 
1833(n)(1)(B)(i)(II) 
(42 
U.S.C.
1395l(n)(1)(B)(i)(II)) is amended—
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end and insert-
ing the following: ‘‘, less the amount a provider may
charge as described in clause (ii) of section
1866(a)(2)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished during por-
tions of cost reporting periods occurring on or after July
1, 1994.
SEC. 4117. IMPOSITION OF COINSURANCE ON LABORATORY
SERVICES.
(a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of
section 1833(a) (42 U.S.C. 1395l(a)) are each amended—
(1) by striking ‘‘(or 100 percent’’ and all that
follows through ‘‘the first opinion))’’; and
788
Title IV, Subtitle B
(2) by striking ‘‘100 percent of such negotiated
rate’’ and inserting ‘‘80 percent of such negotiated
rate’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to tests furnished on or after
January 1, 1995.
SEC. 4118. APPLICATION OF COMPETITIVE ACQUISITION
PROCESS FOR PART B ITEMS AND SERVICES.
(a) GENERAL RULE.—Part B of title XVIII of the
Social Security Act is amended by inserting after section
1846 the following:
‘‘COMPETITION ACQUISITION FOR ITEMS AND SERVICES
‘‘SEC. 1847. (a) ESTABLISHMENT
OF
BIDDING
AREAS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish competitive acquisition areas for the purpose of
awarding a contract or contracts for the furnishing
under this part of the items and services described
in subsection (c) on or after January 1, 1995. The
Secretary may establish different competitive acqui-
sition areas under this subsection for different class-
es of items and services under this part.
‘‘(2) CRITERIA
FOR
ESTABLISHMENT.—The
competitive acquisition areas established under para-
graph (1) shall—
789
Title IV, Subtitle B
‘‘(A) initially be, or be within, metropolitan
statistical areas; and
‘‘(B) be chosen based on the availability
and accessibility of suppliers and the probable
savings to be realized by the use of competitive
bidding in the furnishing of items and services
in the area.
‘‘(b) AWARDING OF CONTRACTS IN AREAS.—
‘‘(1) IN GENERAL.—The Secretary shall con-
duct a competition among individuals and entities
supplying items and services under this part for
each competitive acquisition area established under
subsection (a) for each class of items and services.
‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—
The Secretary may not award a contract to any indi-
vidual or entity under the competition conducted
pursuant to paragraph (1) to furnish an item or
service under this part unless the Secretary finds
that the individual or entity—
‘‘(A) meets quality standards specified by
the Secretary for the furnishing of such item or
service; and
‘‘(B) offers to furnish a total quantity of
such item or service that is sufficient to meet
790
Title IV, Subtitle B
the expected need within the competitive acqui-
sition area.
‘‘(3) CONTENTS OF CONTRACT.—A contract en-
tered into with an individual or entity under the
competition conducted pursuant to paragraph (1)
shall specify (for all of the items and services within
a class)—
‘‘(A) the quantity of items and services the
entity shall provide; and
‘‘(B) such other terms and conditions as
the Secretary may require.
‘‘(c) SERVICES DESCRIBED.—The items and services
to which the provisions of this section shall apply are as
follows:
‘‘(1) Magnetic resonance imaging tests and
computerized axial tomography scans, including a
physician’s interpretation of the results of such tests
and scans.
‘‘(2) Oxygen and oxygen equipment.
‘‘(3) Such other items and services for which
the Secretary determines that the use of competitive
acquisition under this section will be appropriate and
cost-effective.’’.
(b) ITEMS AND SERVICES TO BE FURNISHED ONLY
THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)
791
Title IV, Subtitle B
(42 U.S.C. 1395y(a)), as amended by section 4034(b)(4),
is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14);
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (15) the fol-
lowing new paragraph:
‘‘(16) where such expenses are for an item or
service furnished in a competitive acquisition area
(as established by the Secretary under section
1847(a)) by an individual or entity other than the
supplier with whom the Secretary has entered into
a contract under section 1847(b) for the furnishing
of such item or service in that area, unless the Sec-
retary finds that such expenses were incurred in a
case of urgent need.’’.
(c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI-
TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC-
TION IN PAYMENTS.—Notwithstanding any other provi-
sion of title XVIII of the Social Security Act, if the estab-
lishment of competitive acquisition areas under section
1847 of such Act (as added by subsection (a)) and the
limitation of coverage for items and services under part
B of such title to items and services furnished by providers
792
Title IV, Subtitle B
with competitive acquisition contracts under such section
does not result in a reduction of at least 10 percent in
the projected payment amount that would have applied to
the item or service under part B if the item or service
had not been furnished through competitive acquisition
under such section, the Secretary shall reduce the pay-
ment amount by such percentage as the Secretary deter-
mines necessary to result in such a reduction.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished
under part B of title XVIII of the Social Security Act on
or after January 1, 1995.
SEC. 4119. APPLICATION OF COMPETITIVE ACQUISITION
PROCEDURES FOR LABORATORY SERVICES.
(a) IN GENERAL.—Section 1847(c), as added by sec-
tion 4118, is amended—
(1) by redesignating paragraph (4) as para-
graph (5); and
(2) by inserting after paragraph (3) the fol-
lowing new paragraph:
‘‘(4) Clinical diagnostic laboratory tests.’’.
(b) REDUCTION IN FEE SCHEDULE AMOUNTS IF
COMPETITIVE ACQUISITION FAILS
TO ACHIEVE SAV-
INGS.—Section 1833(h) (42 U.S.C. 1395l(h)) is amended
by adding at the end the following new paragraph:
793
Title IV, Subtitle B
‘‘(7) Notwithstanding any other provision of this sub-
section, if the Secretary applies the authority provided
under section 1847 to establish competitive acquisition
areas for the furnishing of clinical diagnostic laboratory
tests in a year and the application of such authority does
not result in a reduction of at least 10 percent in the pro-
jected payment amount that would have applied to such
tests under this section if the tests had not been furnished
through competitive acquisition under section 1847, the
Secretary shall reduce each payment amount otherwise de-
termined under the fee schedules and negotiated rates es-
tablished under this subsection by such percentage as the
Secretary determines necessary to result in such a reduc-
tion.’’.
PART 3—SAVINGS RELATING TO PARTS A AND B
SEC. 4131. MEDICARE SECONDARY PAYER CHANGES.
(a) EXTENSION OF DATA MATCH.—
(1) 
Section 
1862(b)(5)(C) 
(42 
U.S.C.
1395y(b)(5)(C)) is amended by striking clause (iii).
(2) Section 6103(l)(12) of the Internal Revenue
Code of 1986 is amended by striking subparagraph
(F).
(b) REPEAL OF SUNSET ON APPLICATION TO DIS-
ABLED EMPLOYEES OF EMPLOYERS WITH MORE THAN
100 EMPLOYEES.—Section 1862(b)(1)(B)(iii) (42 U.S.C.
794
Title IV, Subtitle B
1395y(b)(1)(B)(iii)), as amended by section 13561(b) of
OBRA–1993, is amended—
(1) in the heading, by striking ‘‘SUNSET’’ and
inserting ‘‘EFFECTIVE DATE’’; and
(2) by striking ‘‘, and before October 1, 1998’’.
(c) EXTENSION OF PERIOD FOR END STAGE RENAL
DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) (42
U.S.C. 1395y(b)(1)(C)), as amended by section 13561(c)
of OBRA–1993, is amended in the second sentence by
striking ‘‘and on or before October 1, 1998,’’.
SEC. 4132. PAYMENT LIMITS FOR HMOS AND CMPS WITH
RISK-SHARING CONTRACTS.
(a) IN GENERAL.—Section 1876(a)(1)(C) (42 U.S.C.
1395mm(a)(1)(C)) is amended—
(1) by inserting ‘‘, subject to adjustment to
take into account the provisions of the succeeding
clauses’’ before the period,
(2) by striking ‘‘(C)’’ and inserting ‘‘(C)(i)’’,
and
(3) by adding at the end the following new
clauses:
‘‘(ii) The portion of the annual per capita rate of pay-
ment for each such class attributable to payments made
from the Federal Supplementary Medical Insurance Trust
Fund may not exceed 95 percent of the following amount
795
Title IV, Subtitle B
(unless the portion of the annual per capita rate of pay-
ment for each such class attributable to payments made
from the Federal Hospital Insurance Trust Fund is less
than 95 percent of the weighted national average of all
adjusted average per capita costs determined under para-
graph (4) for that class that are attributable to payments
made from the Federal Hospital Insurance Trust Fund):
‘‘(I) For 1995, 150 percent of the weighted na-
tional average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 80 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 150 percent of that weighted national
average.
‘‘(II) For 1996, 150 percent of the weighted
national average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 60 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 150 percent of that weighted national
average.
‘‘(III) For 1997, 150 percent of the weighted
national average of all adjusted average per capita
796
Title IV, Subtitle B
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 40 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 150 percent of that weighted national
average.
‘‘(IV) For 1998, 150 percent of the weighted
national average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 20 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 150 percent of that weighted national
average.
‘‘(V) For 1999 and each succeeding year (sub-
ject to the establishment by the Secretary of alter-
native limits under clause (vi)), 150 percent of the
weighted national average of all adjusted average
per capita costs determined under paragraph (4) for
that class that are attributable to payments made
from such Trust Fund.
‘‘(iii) The portion of the annual per capita rate of
payment for each such class attributable to payments
made from the Federal Hospital Insurance Trust Fund
may not exceed 95 percent of the following amount (unless
797
Title IV, Subtitle B
the portion of the annual per capita rate of payment for
each such class attributable to payments made from the
Federal Supplementary Medical Insurance Trust Fund is
less than 95 percent of the weighted national average of
all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to pay-
ments made from the Federal Supplementary Medical In-
surance Trust Fund):
‘‘(I) For 1995, 170 percent of the weighted na-
tional average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 80 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 170 percent of that weighted national
average.
‘‘(II) For 1996, 170 percent of the weighted
national average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 60 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 170 percent of that weighted national
average.
798
Title IV, Subtitle B
‘‘(III) For 1997, 170 percent of the weighted
national average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 40 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 170 percent of that weighted national
average.
‘‘(IV) For 1998, 170 percent of the weighted
national average of all adjusted average per capita
costs determined under paragraph (4) for that class
that are attributable to payments made from such
Trust Fund, plus 20 percent of the amount by which
(if any) the adjusted average per capita cost for that
class exceeds 170 percent of that weighted national
average.
‘‘(V) For 1999 and each succeeding year (sub-
ject to the establishment by the Secretary of alter-
native limits under clause (vi)), 170 percent of the
weighted national average of all adjusted average
per capita costs determined under paragraph (4) for
that class that are attributable to payments made
from such Trust Fund.
‘‘(iv) For 1995 and succeeding years, the portion of
the annual per capita rate of payment for each such class
799
Title IV, Subtitle B
attributable to payments made from the Federal Supple-
mentary Medical Insurance Trust Fund may not be less
than 80 percent of 95 percent of the weighted national
average of all adjusted average per capita costs deter-
mined under paragraph (4) for that class that are attrib-
utable to payments made from such Trust Fund, unless
the portion of the annual per capita rate of payment for
each such class attributable to payments made from the
Federal Hospital Insurance Trust Fund is greater than
95 percent of the weighted national average of all adjusted
average per capita costs determined under paragraph (4)
for that class that are attributable to payments made from
the Federal Hospital Insurance Trust Fund.
‘‘(v) For 1995 and succeeding years, the portion of
the annual per capita rate of payment for each such class
attributable to payments made from the Federal Hospital
Insurance Trust Fund may not be less than 80 percent
of 95 percent of the weighted national average of all ad-
justed average per capita costs determined under para-
graph (4) for that class that are attributable to payments
made from such Trust Fund, unless the portion of the
annual per capita rate of payment for each such class at-
tributable to payments made from the Federal Supple-
mentary Medical Insurance Trust Fund is greater than
95 percent of the weighted national average of all adjusted
800
Title IV, Subtitle B
average per capita costs determined under paragraph (4)
for that class that are attributable to payments made from
the Federal Supplementary Medical Insurance Trust
Fund.
‘‘(vi) For 2000 and succeeding years, the Secretary
may revise any of the percentages otherwise applicable
during a year under the preceding clauses (other than
clause (i)), but only if the aggregate payments made under
this title to eligible organizations under risk-sharing con-
tracts during the year is not greater than the aggregate
payments that would have been made under this title to
such organizations during the year if the Secretary had
not revised the percentages.
‘‘(vii) For purposes of clauses (ii) through (v), in de-
termining the weighed average of all adjusted average per
capita costs determined under paragraph (4) for a class,
the Secretary shall not take into account any costs associ-
ated with individuals entitled to benefits under this title
under section 226A.’’.
(b) 
CONFORMING
AMENDMENT.—Section
1876(a)(5)(A) (42 U.S.C. 1395mm(a)(5)(A)) is amended
by inserting ‘‘, adjusted to take into account the limita-
tions imposed by clauses (ii) through (vi) of paragraph
(1)(C)’’ before the period.
801
Title IV, Subtitle B
SEC. 4133. REDUCTION IN ROUTINE COST LIMITS FOR
HOME HEALTH SERVICES.
(a) REDUCTION IN UPDATE TO MAINTAIN FREEZE
IN
1996.—Section 
1861(v)(1)(L)(i) 
(42 
U.S.C.
1395x(v)(1)(L)(i)) is amended—
(1) in subclause (II), by striking ‘‘or’’ at the
end;
(2) in subclause (III), by striking ‘‘112 per-
cent,’’ and inserting ‘‘and before July 1, 1996, 112
percent, or’’; and
(3) by inserting after subclause (III) the fol-
lowing new subclause:
‘‘(IV) July 1, 1996, 100 percent (adjusted by
such amount as the Secretary determines to be nec-
essary to preserve the savings resulting from the en-
actment of section 13564(a)(1) of the Omnibus
Budget Reconciliation Act of 1993),’’.
(b) BASING LIMITS IN SUBSEQUENT YEARS ON ME-
DIAN OF COSTS.—
(1) IN
GENERAL.—Section 1861(v)(1)(L)(i)
(U.S.C. 1395x(v)(1)(L)(i)), as amended by sub-
section (a), is amended in the matter following sub-
clause (IV) by striking ‘‘the mean’’ and inserting
‘‘the median’’.
802
Title IV, Subtitle B
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to cost reporting peri-
ods beginning on or after July 1, 1997.
SEC. 4134. IMPOSITION OF COPAYMENT FOR CERTAIN
HOME HEALTH VISITS.
(a) IN GENERAL.—
(1) PART
A.—Section 1813(a) (42 U.S.C.
1395e(a)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(5) The amount payable for home health services
furnished to an individual under this part shall be reduced
by a copayment amount equal to 10 percent of the average
of all per visit costs for home health services furnished
under this title determined under section 1861(v)(1)(L)
(as determined by the Secretary on a prospective basis for
services furnished during a calendar year), unless such
services were furnished to the individual during the 30-
day period that begins on the date the individual is dis-
charged as an inpatient from a hospital.’’.
(2) PART B.—Section 1833(a)(2) (42 U.S.C.
1395l(a)(2)) is amended—
(A) in subparagraph (A), by striking ‘‘to
home health services,’’ and by striking the
comma after ‘‘opinion)’’;
803
Title IV, Subtitle B
(B) in subparagraph (D), by striking
‘‘and’’ at the end;
(C) in subparagraph (E), by striking the
semicolon at the end and inserting ‘‘; and’’; and
(D) by adding at the end the following new
subparagraph:
‘‘(F) 
with 
respect 
to 
home 
health
services—
‘‘(i) the lesser of —
‘‘(I) the reasonable cost of such
services, as determined under section
1861(v), or
‘‘(II) the customary charges with
respect to such services,
less the amount a provider may charge as
described 
in 
clause 
(ii) 
of 
section
1866(a)(2)(A),
‘‘(ii) if such services are furnished by
a public provider of services, or by another
provider which demonstrates to the satis-
faction of the Secretary that a significant
portion of its patients are low-income (and
requests that payment be made under this
clause), free of charge or at nominal
charges to the public, the amount deter-
804
Title IV, Subtitle B
mined 
in 
accordance 
with 
section
1814(b)(2), or
‘‘(iii) if (and for so long as) the condi-
tions described in section 1814(b)(3) are
met, the amounts determined under the re-
imbursement system described in such sec-
tion,
less a copayment amount equal to 10 percent of
the average of all per visit costs for home
health services furnished under this title deter-
mined under section 1861(v)(1)(L) (as deter-
mined by the Secretary on a prospective basis
for services furnished during a calendar year),
unless such services were furnished to the indi-
vidual during the 30-day period that begins on
the date the individual is discharged as an inpa-
tient from a hospital;’’.
(3) 
PROVIDER
CHARGES.—Section
1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i)) is
amended—
(A) by striking ‘‘deduction or coinsurance’’
and inserting ‘‘deduction, coinsurance, or co-
payment’’; and
(B) by striking ‘‘or (a)(4)’’ and inserting
‘‘(a)(4), or (a)(5)’’.
805
Title IV, Subtitle B
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to home health services fur-
nished on or after July 1, 1995.
SEC. 4135. EXPANSION OF CENTERS OF EXCELLENCE.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall use a competitive process to con-
tract with centers of excellence for cataract surgery, coro-
nary artery by-pass surgery, and such other services as
the Secretary determines to be appropriate. Payment
under title XVIII of the Social Security Act will be made
for services subject to such contracts on the basis of nego-
tiated or all-inclusive rates as follows:
(1) The center shall cover services provided in
an urban area (as defined in section 1886(d)(2)(D)
of the Social Security Act) for years beginning with
fiscal year 1995.
(2) The amount of payment made by the Sec-
retary to the center under title XVIII of the Social
Security Act for services covered under the project
shall be less than the aggregate amount of the pay-
ments that the Secretary would have made to the
center for such services had the project not been in
effect.
(3) The Secretary shall make payments to the
center on such a basis for the following services fur-
806
Title IV, Subtitle B
nished to individuals entitled to benefits under such
title:
(A) Facility, professional, and related serv-
ices relating to cataract surgery.
(B) Coronary artery bypass surgery and
related services.
(C) Such other services as the Secretary
and the center may agree to cover under the
agreement.
(b) REBATE OF PORTION OF SAVINGS.—In the case
of any services provided under a demonstration project
conducted under subsection (a), the Secretary shall make
a payment to each individual to whom such services are
furnished (at such time and in such manner as the Sec-
retary may provide) in an amount equal to 10 percent of
the amount by which—
(1) the amount of payment that would have
been made by the Secretary under title XVIII of the
Social Security Act to the center for such services if
the services had not been provided under the project,
exceeds
(2) the amount of payment made by the Sec-
retary under such title to the center for such serv-
ices.
807
Title IV, Subtitle B
PART 4—PART B PREMIUM
SEC. 4141. GENERAL PART B PREMIUM.
Section 1839(e) (42 U.S.C. 1395r(e)), as amended
by section 13571 of OBRA–1993, is amended—
(1) in paragraph (1)(A), by striking ‘‘and prior
to January 1999’’; and
(2) in paragraph (2), by striking ‘‘prior to Jan-
uary 1998’’.
PART 5—REPORT ON MEDICARE SAVINGS FOR
FISCAL YEARS 2000 THROUGH 2003
SEC. 4151. REPORT ON SAVINGS.
(a) IN GENERAL.—The Secretary shall submit to
Congress, by January 30, 1999, a report that contains—
(1) a determination of whether the average, an-
nual rate of growth in spending under the medicare
program (taking into account savings under this
subtitle) in the 4-fiscal-year period beginning with
fiscal year 2000 will exceed the rate of growth de-
scribed in subsection (b); and
(2) if so, recommendations as to how to achieve
the rate of growth specified in subsection (b).
(b) RATE OF GROWTH DESCRIBED.—The rate of
growth described in this subsection is the sum of the fol-
lowing:
(1) CPI.—The average annual percentage
change in the CPI.
808
Title IV, Subtitle C
(2) MEDICARE POPULATION.—The average, an-
nual percentage change in the number of medicare-
eligible individuals.
(3) REAL GDP PER CAPITA.—The average, an-
nual percentage change in the real, per capita gross
domestic product of the United States, and
(4) 1 PERCENT.—1 percentage point.
Subtitle C—Medicaid
PART 1—COMPREHENSIVE BENEFIT PACKAGE
SEC. 4201. LIMITING COVERAGE UNDER MEDICAID OF
ITEMS AND SERVICES COVERED UNDER COM-
PREHENSIVE BENEFIT PACKAGE.
(a) REMOVAL OF COMPREHENSIVE BENEFITS PACK-
AGE FROM STATE PLAN.—Title XIX is amended by redes-
ignating section 1931 as section 1932 and by inserting
after section 1930 the following new section:
‘‘TREATMENT OF COMPREHENSIVE BENEFIT PACKAGE
UNDER HEALTH SECURITY ACT
‘‘SEC. 1931. (a) ITEMS AND SERVICES COVERED
UNDER COMPREHENSIVE BENEFIT PACKAGE.—If a State
plan for medical assistance under this title provides for
payment in accordance with section 1902(a)(63) for a
year, notwithstanding any other provision of this title, the
State plan under this title is not required to provide med-
ical assistance consisting of payment for items and serv-
ices in the comprehensive benefit package under subtitle
809
Title IV, Subtitle C
B of title I of the Health Security Act for alliance eligible
individuals (as defined in section 1902(5) of such Act).
‘‘(b) CONSTRUCTION.—(1) Payment under section
1902(a)(63) shall not constitute medical assistance for
purposes of section 1903(a).
‘‘(2) This section shall not be construed as affecting
the provision of medical assistance under this title for
items and services included in the comprehensive benefit
package for—
‘‘(A) medicare-eligible individuals, or
‘‘(B) certain emergency services to certain
aliens under section 1903(v)(2).’’.
(b) SUBSTITUTE REQUIREMENT
OF STATE PAY-
MENT.—Section 1902(a) (42 U.S.C. 1396a(a)), as amend-
ed by section 13631(a)(3) of OBRA–1993, is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61),
(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’, and
(3) by inserting after paragraph (62) the fol-
lowing new paragraph:
‘‘(63) provide for payment to regional alliances
of the amounts required under subtitle A of title IX
of the Health Security Act.’’.
810
Title IV, Subtitle C
(c) NO FEDERAL FINANCIAL PARTICIPATION.—Sec-
tion 1903(i) (42 U.S.C. 1396b(i)), as amended by section
13631(h)(1)(C) of OBRA–1993, is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14),
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (15) the fol-
lowing new paragraph:
‘‘(16) with respect to items and services covered
under the comprehensive benefit package under sub-
title B of title I of the Health Security Act for alli-
ance eligible individuals (as defined in section
1902(5) of such Act).’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to items or services
furnished in a State on or after January 1 of the first
year (as defined in section 1902(17)) for the State.
PART 2—EXPANDING ELIGIBILITY FOR NURSING
FACILITY SERVICES; LONG-TERM CARE INTE-
GRATION OPTION
SEC. 4211. SPENDDOWN ELIGIBILITY FOR NURSING FACIL-
ITY RESIDENTS.
(a) IN GENERAL.—Section 1902(a)(10)(A)(i) (42
U.S.C. 1396a(a)(10)(A)(i)) is amended—
811
Title IV, Subtitle C
(1) by striking ‘‘or’’ at the end of subclause
(VI);
(2) by striking the semicolon at the end of sub-
clause (VII) and inserting ‘‘, or’’; and
(3) by inserting after subclause (VII) the fol-
lowing new subclause:
‘‘(VIII) who are individuals who
would meet the income and resource
requirements of the appropriate State
plan described in subclause (I) or the
supplemental security income program
(as the case may be), if incurred ex-
penses for medical care as recognized
under State law were deducted from
income;’’.
(b) LIMITATION TO BENEFITS FOR NURSING FACIL-
ITY SERVICES.—Section 1902(a)(10) of such Act (42
U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1)
of OBRA–1993, is amended in the matter following sub-
paragraph (F)—
(1) by striking ‘‘and (XIII)’’ and inserting
‘‘(XIII)’’; and
(2) by inserting before the semicolon at the end
the following: ‘‘, and (XIV) the medical assistance
made available to an individual described in sub-
812
Title IV, Subtitle C
paragraph (A)(i)(VIII) shall be limited to medical
assistance for nursing facility services, except to the
extent that assistance is provided in accordance with
the election described in section 1932 in the case of
a State making such election’’.
(c) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply with respect to a State
as of January 1, 1996.
SEC. 4212. INCREASED INCOME AND RESOURCE DIS-
REGARDS 
FOR 
NURSING 
FACILITY 
RESI-
DENTS.
(a) INCREASED DISREGARDS FOR PERSONAL NEEDS
ALLOWANCE; RESOURCES.—Section 1902(a)(10) (42
U.S.C. 1396a(a)(1)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(F); and
(2) by adding at the end the following new
paragraph:
‘‘(G) that, in determining the eligibility of
any individual who is an inpatient in a nursing
facility or intermediate care facility for the
mentally retarded—
‘‘(i) the first $50 of income for each
month shall be disregarded; and
820
Title IV, Subtitle C
‘‘(1) IN GENERAL.—In this section, a ‘qualified
child’ is an eligible individual (as defined in section
1001(c) of the Health Security Act) who—
‘‘(A) for years prior to 1998, is a resident
of a participating State under the Health Secu-
rity Act;
‘‘(B) is under the age of 19; and
‘‘(C) meets the requirements relating to fi-
nancial eligibility described in paragraph (2).
‘‘(2) REQUIREMENTS RELATING TO FINANCIAL
ELIGIBILITY.—An individual meets the requirements
of this paragraph if—
‘‘(A) the individual is an AFDC recipient
or an SSI recipient (as such terms are defined
in section 1902 of the Health Security Act);
‘‘(B) the individual is eligible to receive
medical assistance under the State plan under
section 1902(a)(10)(C); or
‘‘(C) the individual is—
‘‘(i) under one year of age and has
adjusted family income at or below 133
percent of the income official poverty line
(as defined by the Office of Management
and Budget, and revised annually in ac-
cordance with section 673(2) of the Omni-