315
Subtitle F, Part 2
(b) REQUIREMENTS DESCRIBED.—Section 1819 (42
U.S.C. 1395i–3) is amended by striking subsections (b)
through (i) and inserting the following:
‘‘(b) STANDARDS FOR AND CERTIFICATION OF FA-
CILITIES.—
‘‘(1) STANDARDS FOR FACILITIES.—
‘‘(A) IN
GENERAL.—The Secretary shall
provide for the establishment and maintenance
of standards consistent with the contents de-
scribed in subparagraph (B) for skilled nursing
facilities which furnish services for which pay-
ment may be made under this title.
‘‘(B) CONTENTS
OF
STANDARDS.—The
standards established for facilities under this
paragraph shall contain provisions relating to
the following items:
‘‘(i) The treatment of resident medical
records.
‘‘(ii) Policies, procedures, and bylaws
for operation.
‘‘(iii) Quality assurance systems.
‘‘(iv) Resident assessment procedures,
including care planning and outcome eval-
uation.
316
Subtitle F, Part 2
‘‘(vi) The assurance of a safe and ade-
quate physical plant for the facility.
‘‘(vii) Qualifications for staff suffi-
cient to provide adequate care.
‘‘(viii) Utilization review.
‘‘(ix) The protection and enforcement
of resident rights described in subpara-
graph (C).
‘‘(C) RESIDENT RIGHTS DESCRIBED.—The
resident rights described in this subparagraph
are the rights of residents to the following:
‘‘(i) To exercise the individual’s rights
as a resident of the facility and as a citizen
or resident of the United States.
‘‘(ii) To receive notice of rights and
services.
‘‘(iii) To be protected against the mis-
use of resident funds.
‘‘(iv) To be provided privacy and con-
fidentiality.
‘‘(v) To voice grievances.
‘‘(vi) To examine the results of inspec-
tions under the certification program.
‘‘(vii) To refuse to perform services
for the facility.
317
Subtitle F, Part 2
‘‘(viii) To be provided privacy in com-
munications and to receive mail.
‘‘(ix) To have the facility provide im-
mediate access to any resident by any rep-
resentative of the certification program,
the resident’s individual physician, the
State long term care ombudsman, and any
person the resident has designated as a
visitor.
‘‘(x) To retain and use personal prop-
erty.
‘‘(xi) To be free from abuse, including
verbal, sexual, physical and mental abuse,
corporal punishment, and involuntary se-
clusion.
‘‘(xii) To be provided with prior writ-
ten notice of a pending transfer or dis-
charge.
‘‘(D) 
REQUIRING
NOTICE
AND
COM-
MENT.—The standards established for facilities
under this paragraph may only take effect after
the Secretary has provided the public with no-
tice and an opportunity for comment.
‘‘(2) CERTIFICATION PROGRAM.—
318
Subtitle F, Part 2
‘‘(A) IN
GENERAL.—The Secretary shall
provide for the establishment and operation of
a program consistent with the requirements of
subparagraph (B) for the certification of skilled
nursing facilities which meet the standards es-
tablished under paragraph (1) and the decerti-
fication of facilities which fail to meet such
standards.
‘‘(B) REQUIREMENTS FOR PROGRAM.—In
addition to any other requirements the Sec-
retary may impose, in establishing and operat-
ing the certification program under subpara-
graph (A), the Secretary shall ensure the fol-
lowing:
‘‘(i) The Secretary shall ensure public
access (as defined by the Secretary) to the
certification program’s evaluations of par-
ticipating facilities, including compliance
records and enforcement actions and other
reports by the Secretary regarding the
ownership, compliance histories, and serv-
ices provided by certified facilities.
‘‘(ii) Not less often than every 4
years, the Secretary shall audit its expendi-
tures under the program, through an en-
319
Subtitle F, Part 2
tity designated by the Secretary which is
not affiliated with the program, as des-
ignated by the Secretary.
‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—
‘‘(1) AUTHORITY.—In addition to any other au-
thority, where the Secretary determines that a nurs-
ing facility which is certified for participation under
this title plan no longer substantially meets the re-
quirements for such a facility under this title and
further determines that the facility’s deficiencies—
‘‘(A) immediately jeopardize the health and
safety of its residents, the Secretary shall at
least provide for the termination of the facility’s
certification for participation under this title, or
‘‘(B) do not immediately jeopardize the
health and safety of its residents, the Secretary
may, in lieu of providing for terminating the fa-
cility’s certification for participation under the
plan, provide lesser sanctions including one that
provides that no payment will be made under
this title with respect to any individual admit-
ted to such facility after a date specified by the
Secretary.
‘‘(2) NOTICE.—The Secretary shall not make
such a decision with respect to a facility until the fa-
320
Subtitle F, Part 2
cility has had a reasonable opportunity, following the
initial determination that it no longer substantially
meets the requirements for such a facility under the
plan, to correct its deficiencies, and, following this
period, has been given reasonable notice and oppor-
tunity for a hearing.
‘‘(3) EFFECTIVENESS.—The Secretary’s deci-
sion to deny payment may be made effective only
after such notice to the public and to the facility as
may be provided for by the Secretary, and its effec-
tiveness shall terminate (A) when the Secretary
finds that the facility is in substantial compliance
(or is making good faith efforts to achieve substan-
tial compliance) with the requirements for such a fa-
cility under this title, or (B) in the case described
in paragraph (1)(B), with the end of the eleventh
month following the month such decision is made ef-
fective, whichever occurs first. If a facility to which
clause (B) of the previous sentence applies still fails
to substantially meet the provisions of the respective
section on the date specified in such clause, the Sec-
retary shall terminate such facility’s certification for
participation under this title effective with the first
day of the first month following the month specified
in such clause.
321
Subtitle F, Part 2
‘‘(c) STATE-CERTIFIED
FACILITY
DEFINED.—In
subsection (a), a ‘State-certified facility’ means a facility
licensed or certified as a skilled nursing facility by the
State in which it is located, or a facility which otherwise
meets the requirements applicable to providers of nursing
facility services under the State plan under title XIX or
the MediGrant program under title XXI.’’.
(c) 
CONFORMING
AMENDMENTS.—(1) 
Section
1861(v)(1)(E) (42 U.S.C. 1395x(v)(1)(E)) is amended by
striking the second sentence.
(2) Section 1864 (42 U.S.C. 1395aa) is amended by
striking subsection (d).
(3) Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is
amended by striking ‘‘1819(c)(2)(E),’’.
(4) Section 1883(f) (42 U.S.C. 1395tt(f)) is amend-
ed—
(A) in the second sentence, by striking ‘‘such a
hospital’’ and inserting ‘‘a hospital which enters into
an agreement with the Secretary under this section’’;
and
(B) by striking the first sentence.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to cost reporting peri-
ods beginning on or after October 1, 1995.
322
Subtitle F, Part 2
SEC. 15527. MEDICAL REVIEW PROCESS.
In order to ensure that medicare beneficiaries are
furnished appropriate extended care services, the Sec-
retary of Health and Human Services shall establish and
implement a thorough medical review process to examine
the effects of the amendments made by this part on the
quality of extended care services furnished to medicare
beneficiaries. In developing such a medical review process,
the Secretary shall place a particular emphasis on the
quality of non-routine covered services for which payment
is made under section 1888A of the Social Security Act.
SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COM-
MISSION.
Not later than October 1, 1997, the Medicare Pay-
ment Review Commission shall submit to Congress a re-
port on the system under which payment is made under
the medicare program for extended care services furnished
by skilled nursing facilities, and shall include in the report
the following:
(1) An analysis of the effect of the methodology
established under section 1888A of the Social Secu-
rity Act (as added by section 15522) on the pay-
ments for, and the quality of, extended care services
under the medicare program.
(2) An analysis of the advisability of determin-
ing the amount of payment for covered non-routine
323
Subtitle F, Part 2
services of facilities (as described in such section) on
the basis of the amounts paid for such services when
furnished by suppliers under part B of the medicare
program.
(3) An analysis of the desirability of maintain-
ing separate limits for hospital-based and freestand-
ing facilities in the costs of extended care services
recognized as reasonable under the medicare pro-
gram.
(4) An analysis of the quality of services fur-
nished by skilled nursing facilities.
(5) An analysis of the adequacy of the process
and standards used to provide exceptions to the lim-
its described in paragraph (3).
SEC. 15529. EFFECTIVE DATE.
Except as otherwise provided in this subchapter, the
amendments made by this subchapter shall apply to serv-
ices furnished during cost reporting periods (or portions
of cost reporting periods) beginning on or after October
1, 1996.
324
Subtitle G, Part 1
Subtitle G—Provisions Relating to
Medicare Part B
PART 1—PAYMENT REFORMS
SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) REPLACEMENT
OF
VOLUME
PERFORMANCE
STANDARD WITH SUSTAINABLE GROWTH RATE.—Section
1848(f)(2) (42 U.S.C. 1395w–4(f)(2)) is amended to read
as follows:
‘‘(f) SUSTAINABLE GROWTH RATE.—
‘‘(1) SPECIFICATION OF GROWTH RATE.—
‘‘(A) FISCAL YEAR 1996.—The sustainable
growth rate for all physicians’ services for fiscal
year 1996 shall be equal to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage change in the medicare eco-
nomic index for 1996 (described in the
fourth sentence of section 1842(b)(3)) (di-
vided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of
the percentage change (divided by 100) in
the average number of individuals enrolled
under this part (other than private plan
enrollees) from fiscal year 1995 to fiscal
year 1996,
325
Subtitle G, Part 1
‘‘(iii) 1 plus the Secretary’s estimate
of the projected percentage growth in real
gross domestic product per capita (divided
by 100) from fiscal year 1995 to fiscal
year 1996, plus 2 percentage points, and
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage change (divided by 100)
in expenditures for all physicians’ services
in fiscal year 1996 (compared with fiscal
year 1995) which will result from changes
in law, determined without taking into ac-
count estimated changes in expenditures
due to changes in the volume and intensity
of physicians’ services or changes in ex-
penditures resulting from changes in the
update to the conversion factor under sub-
section (d),
minus 1 and multiplied by 100.
‘‘(B) SUBSEQUENT
FISCAL
YEARS.—The
sustainable growth rate for all physicians’ serv-
ices for fiscal year 1997 and each subsequent
fiscal year shall be equal to the sustainable
growth rate determined under this paragraph
for the previous fiscal year, increased by the
product of—
326
Subtitle G, Part 1
‘‘(i) 1 plus the Secretary’s estimate of
the percentage change in the medicare eco-
nomic index for the fiscal year involved
(described in the fourth sentence of section
1842(b)(3)) (divided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of
the percentage change (divided by 100) in
the average number of individuals enrolled
under this part (other than private plan
enrollees) from the previous fiscal year to
the fiscal year involved,
‘‘(iii) 1 plus the Secretary’s estimate
of the projected percentage growth in real
gross domestic product per capita (divided
by 100) from the previous fiscal year to
the fiscal year involved, plus 2 percentage
points, and
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage change (divided by 100)
in expenditures for all physicians’ services
in the fiscal year (compared with the pre-
vious fiscal year) which will result from
changes in law, determined without taking
into account estimated changes in expendi-
tures due to changes in the volume and in-
327
Subtitle G, Part 1
tensity of physicians’ services or changes in
expenditures resulting from changes in the
update to the conversion factor under sub-
section (d)(3),
minus 1 and multiplied by 100.’’.
‘‘(2) EXCLUSION OF SERVICES FURNISHED TO
PRIVATE PLAN ENROLLEES.—In this subsection, the
term ‘physicians’ services’ with respect to a fiscal
year does not include services furnished to an indi-
vidual enrolled under this part who has elected to re-
ceive benefits under this title for the fiscal year
through a MedicarePlus product offered under part
C or through enrollment with an eligible organiza-
tion with a risk-sharing contract under section
1876.’’.
(b) ESTABLISHING UPDATE TO CONVERSION FAC-
TOR
TO
MATCH
SPENDING
UNDER
SUSTAINABLE
GROWTH RATE.—
(1) IN GENERAL.—Section 1848(d) (42 U.S.C.
1395w–4(d)(3)) is amended—
(A) by striking paragraph (2);
(B) by amending paragraph (3) to read as
follows:
‘‘(3) UPDATE.—
328
Subtitle G, Part 1
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (E), for purposes of this section the up-
date for a year (beginning with 1997) is equal
to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the medicare
economic index (described in the fourth
sentence of section 1842(b)(3)) for the
year (divided by 100), and
‘‘(ii) 1 plus the Secretary’s estimate of
the update adjustment factor for the year
(divided by 100),
minus 1 and multiplied by 100.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—The
‘update adjustment factor’ for a year is equal to
the quotient of—
‘‘(i) the difference between (I) the
sum of the allowed expenditures for physi-
cians’ services furnished during each of the
years 1995 through the year involved and
(II) the sum of the amount of actual ex-
penditures for physicians’ services fur-
nished during each of the years 1995
through the previous year; divided by
329
Subtitle G, Part 1
‘‘(ii) the Secretary’s estimate of al-
lowed expenditures for physicians’ services
furnished during the year.
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—For purposes of subparagraph
(B), allowed expenditures for physicians’ serv-
ices shall be determined as follows (as esti-
mated by the Secretary):
‘‘(i) In the case of allowed expendi-
tures for 1995, such expenditures shall be
equal to actual expenditures for services
furnished during the 12-month period end-
ing with June of 1995.
‘‘(ii) In the case of allowed expendi-
tures for 1996 and each subsequent year,
such expenditures shall be equal to allowed
expenditures for the previous year, in-
creased by the sustainable growth rate
under subsection (f) for the fiscal year
which begins during the year.
‘‘(D) DETERMINATION
OF
ACTUAL
EX-
PENDITURES.—For purposes of subparagraph
(B), the amount of actual expenditures for phy-
sicians’ services furnished during a year shall
be equal to the amount of expenditures for such
330
Subtitle G, Part 1
services during the 12-month period ending
with June of the previous year.
‘‘(E) RESTRICTION
ON
VARIATION
FROM
MEDICARE ECONOMIC INDEX.—Notwithstanding
the amount of the update adjustment factor de-
termined under subparagraph (B) for a year,
the update in the conversion factor under this
paragraph for the year may not be—
‘‘(i) greater than 103 percent of the
Secretary’s estimate of the percentage in-
crease in the medicare economic index (de-
scribed in the fourth sentence of section
1842(b)(3)) for the year; or
‘‘(ii) less than 93 percent of the Sec-
retary’s estimate of the percentage in-
crease in the medicare economic index (de-
scribed in the fourth sentence of section
1842(b)(3)) for the year.’’; and
(C) by adding at the end the following new
paragraph:
‘‘(4) REPORTING REQUIREMENTS.—
‘‘(A) IN
GENERAL.—Not later than No-
vember 1 of each year (beginning with 1996),
the Secretary shall transmit to the Congress a
report that describes the update in the conver-
331
Subtitle G, Part 1
sion factor for physicians’ services (as defined
in subsection (f)(3)(A)) in the following year.
‘‘(B) COMMISSION REVIEW.—The Medicare
Payment Review Commission shall review the
report submitted under subparagraph (A) for a
year and shall submit to the Congress, by not
later than December 1 of the year, a report
containing its analysis of the conversion factor
for the following year.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to physicians’ services
furnished on or after January 1, 1997.
(c) ESTABLISHMENT OF SINGLE CONVERSION FAC-
TOR FOR 1996.—
(1) IN
GENERAL.—Section 1848(d)(1) (42
U.S.C. 1395w–4(d)(1)) is amended—
(A) by redesignating subparagraph (C) as
subparagraph (D); and
(B) by inserting after subparagraph (B)
the following new subparagraph:
‘‘(C) SPECIAL RULE FOR 1996.—For 1996,
the conversion factor under this subsection shall
be $34.60 for all physicians’ services.’’.
332
Subtitle G, Part 1
(2) CONFORMING AMENDMENTS.—Section 1848
(42 U.S.C. 1395w–4) is amended—
(A) by striking ‘‘(or factors)’’ each place it
appears 
in 
subsection 
(d)(1)(A) 
and
(d)(1)(C)(ii);
(B) in subsection (d)(1)(A), by striking ‘‘or
updates’’;
(C) in subsection (d)(1)(C)(ii), by striking
‘‘(or updates)’’; and
(D) in subsection (i)(1)(C), by striking
‘‘conversion factors’’ and inserting ‘‘the conver-
sion factor’’.
SEC. 15602. 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—
(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).’’.
333
Subtitle G, Part 1
(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 Octo-
ber 1, 1995.
SEC. 
15603. 
REDUCTION 
IN 
UPDATES 
TO 
PAYMENT
AMOUNTS FOR DURABLE MEDICAL EQUIP-
MENT.
(a) IN GENERAL.—
(1) 
FREEZE
IN
UPDATE
FOR
COVERED
ITEMS.—Section 
1834(a)(14) 
(42 
U.S.C.
1395m(a)(14)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (A);
(B) in subparagraph (B)—
(i) by striking ‘‘a subsequent year’’
and inserting ‘‘1993, 1994, and 1995’’,
and
334
Subtitle G, Part 1
(ii) by striking the period at the end
and inserting ‘‘; and’’; and
(C) by adding at the end the following:
‘‘(C) for each of the years 1996 through
2002, 0 percentage points; and
‘‘(D) for a subsequent year, the percentage
increase in the consumer price index for all
urban consumers (U.S. urban average) for the
12-month period ending with June of the pre-
vious year.’’.
(2) UPDATE FOR ORTHOTICS AND PROSTHET-
ICS.—Section 
1834(h)(4)(A) 
(42 
U.S.C.
1395m(h)(4)(A)) is amended—
(A) by striking ‘‘and’’ at the end of clause
(iii);
(B) by redesignating clause (iv) as clause
(v); and
(C) by inserting after clause (iii) the fol-
lowing new clause:
‘‘(iv) for each of the years 1996
through 2002, 1 percent, and’’.
(b) OXYGEN
AND OXYGEN EQUIPMENT.—Section
1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended—
(1) by striking ‘‘and’’ at the end of clause (iii);
(2) in clause (iv)—
335
Subtitle G, Part 1
(A) by striking ‘‘a subsequent year’’ and
inserting ‘‘1993, 1994, and 1995’’, and
(B) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new
clauses:
‘‘(v) in 1996, is 80 percent of the na-
tional limited monthly payment rate com-
puted under subparagraph (B) for the item
for the year; and
‘‘(vi) in a subsequent year, is the na-
tional limited monthly payment rate com-
puted under subparagraph (B) for the item
for the year.’’.
SEC. 
15604. 
REDUCTION 
IN 
UPDATES 
TO 
PAYMENT
AMOUNTS FOR CLINICAL DIAGNOSTIC LAB-
ORATORY TESTS.
(a) 
CHANGE
IN
UPDATE.—Section
1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV))
is amended striking ‘‘1994 and 1995’’ and inserting
‘‘1994 through 2002’’.
(b) LOWERING CAP ON PAYMENT AMOUNTS.—Sec-
tion 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amend-
ed—
(1) in clause (vi), by striking ‘‘and’’ at the end;
336
Subtitle G, Part 1
(2) in clause (vii)—
(A) by inserting ‘‘and before January 1,
1997,’’ after ‘‘1995,’’, and
(B) by striking the period at the end and
inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(viii) after December 31, 1996, is equal to 65
percent of such median.’’.
SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR
COSTS OF HOSPITAL OUTPATIENT SERVICES.
(a) REDUCTION IN PAYMENTS FOR CAPITAL-RELAT-
ED
COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.
1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through
1998’’ and inserting ‘‘through 2002’’.
(b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—
Section 
1861(v)(1)(S)(ii)(II) 
(42 
U.S.C.
1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through
1998’’ and inserting ‘‘through 2002’’.
SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR-
GICAL CENTER SERVICES.
The Secretary of Health and Human Services shall
not provide for any inflation update in the payment
amounts under subparagraphs (A) and (B) of section
337
Subtitle G, Part 1
1833(i)(2) of the Social Security Act for any of the fiscal
years 1996 through 2002.
SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.
(a) COVERAGE UNDER PART B.—Section 1832(a)(2)
(42 U.S.C. 1395k(a)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (I);
(2) by striking the period at the end of sub-
paragraph (J) and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(K) rural emergency access care hospital
services (as defined in section 1861(oo)(2)).’’.
(b) PAYMENT BASED ON REASONABLE COSTS.—Sec-
tion 1833(a)(2) (42 U.S.C. 1395l(a)(2)), as amended by
section 15607(c), is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (F);
(2) by adding ‘‘and’’ at the end of subpara-
graph (G); and
(3) by adding at the end the following new sub-
paragraph:
‘‘(H) with respect to rural emergency ac-
cess care hospital services, the reasonable cost
of such services (as determined under section
338
Subtitle G, Part 2
1861(v)), less the amount the hospital may
charge as described in clause (ii) of section
1866(a)(2)(A), but in no case may the payment
for such services exceed 80 percent of such rea-
sonable cost;’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
October 1, 1995.
PART 2—PART B PREMIUM
SEC. 15611. EXTENSION OF PART B PREMIUM.
(a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C.
1395r(e)(1)) is amended—
(1) in subparagraph (A)—
(A) by striking ‘‘and prior to January
1999’’, and
(B) by inserting ‘‘(or, if higher, the per-
cent described in subparagraph (C))’’ after ‘‘50
percent’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(C) For purposes of subparagraph (A), the percent
described in this subparagraph is the ratio (expressed as
a percentage) of the monthly premium established under
this section for months in 1995 to the monthly actuarial
rate for enrollees age 65 and over applicable to such
339
Subtitle G, Part 2
months (as specified in the most recent report of the
Board of Trustees of the Federal Supplementary Medical
Insurance Trust Fund published prior to the date of the
enactment of the Medicare Preservation Act of 1995).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to premiums for months beginning
with January 1996.
SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE
SUBSIDY.
(a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r)
is amended by adding at the end the following:
‘‘(h)(1) Notwithstanding the previous subsections of
this section, in the case of an individual whose modified
adjusted gross income for a taxable year ending with or
within a calendar year (as initially determined by the Sec-
retary in accordance with paragraph (3)) exceeds the
threshold amount described in paragraph (4), the Sec-
retary shall increase the amount of the monthly premium
for months in the calendar year by an amount equal to
the difference between—
‘‘(A) 200 percent of the monthly actuarial rate
for enrollees age 65 and over as determined under
subsection (a)(1) for that calendar year; and
340
Subtitle G, Part 2
‘‘(B) the total of the monthly premiums paid by
the individual under this section (determined without
regard to subsection (b)) during such calendar year.
‘‘(2) In the case of an individual described in para-
graph (1) whose modified adjusted gross exceeds the
threshold amount by less than $25,000, the amount of the
increase in the monthly premium applicable under para-
graph (1) shall be an amount which bears the same ratio
to the amount of the increase described in paragraph (1)
(determined without regard to this paragraph) as such ex-
cess bears to $25,000. In the case of a joint return filed
under section 6013 of the Internal Revenue Code of 1986
by spouses both of whom are enrolled under this part, the
previous sentence shall be applied by substituting
‘$50,000’ for ‘$25,000’. The preceding provisions of this
paragraph shall not apply to any individual whose thresh-
old amount is zero.
‘‘(3) The Secretary shall make an initial determina-
tion of the amount of an individual’s adjusted gross in-
come for a taxable year ending with or within a calendar
year for purposes of this subsection as follows:
‘‘(A) Not later than October 1 of the year pre-
ceding the year, the Secretary shall provide notice to
each individual whom the Secretary finds (on the
basis of the individual’s actual adjusted gross in-
341
Subtitle G, Part 2
come for the most recent taxable year for which such
information is available or other information pro-
vided to the Secretary by the Secretary of the Treas-
ury) will be subject to an increase under this sub-
section that the individual will be subject to such an
increase, and shall include in such notice the Sec-
retary’s estimate of the individual’s adjusted gross
income for the year.
‘‘(B) If, during the 30-day period beginning on
the date notice is provided to an individual under
subparagraph (A), the individual provides the Sec-
retary with information on the individual’s antici-
pated adjusted gross income for the year, the
amount initially determined by the Secretary under
this paragraph with respect to the individual shall be
based on the information provided by the individual.
‘‘(C) If an individual does not provide the Sec-
retary with information under subparagraph (B), the
amount initially determined by the Secretary under
this paragraph with respect to the individual shall be
the amount included in the notice provided to the in-
dividual under subparagraph (A).
‘‘(4)(A) If the Secretary determines (on the basis of
final information provided by the Secretary of the Treas-
ury) that the amount of an individual’s actual adjusted
342
Subtitle G, Part 2
gross income for a taxable year ending with or within a
calendar year is less than or greater than the amount ini-
tially determined by the Secretary under paragraph (3),
the Secretary shall increase or decrease the amount of the
individual’s monthly premium under this section (as the
case may be) for months during the following calendar
year by an amount equal to 1⁄12 of the difference be-
tween—
‘‘(i) the total amount of all monthly premiums
paid by the individual under this section during the
previous calendar year; and
‘‘(ii) the total amount of all such premiums
which would have been paid by the individual during
the previous calendar year if the amount of the indi-
vidual’s adjusted gross income initially determined
under paragraph (3) were equal to the actual
amount of the individual’s adjusted gross income de-
termined under this paragraph.
‘‘(B) In the case of an individual who is not enrolled
under this part for any calendar year for which the indi-
vidual’s monthly premium under this section for months
during the year would be increased pursuant to subpara-
graph (A) if the individual were enrolled under this part
for the year, the Secretary may take such steps as the
Secretary considers appropriate to recover from the indi-
343
Subtitle G, Part 2
vidual the total amount by which the individual’s monthly
premium for months during the year would have been in-
creased under subparagraph (A) if the individual were en-
rolled under this part for the year.
‘‘(5) In this subsection, the following definitions
apply:
‘‘(A) The term ‘modified adjusted gross income’
means, with respect to an individual for a taxable
year, the individual’s adjusted gross income under
the Internal Revenue Code of 1986—
‘‘(i) determined without regard to sections
135, 911, 931, and 933 of such Code, and
‘‘(ii) increased by the amount of interest
received or accrued by the individual during the
taxable year which is exempt from tax under
such Code.
‘‘(B) The term ‘threshold amount’ means—
‘‘(i) except as otherwise provided in this
paragraph, $75,000,
‘‘(ii) $125,000, in the case of a joint re-
turn, and
‘‘(iii) zero in the case of a taxpayer who—
‘‘(I) is married at the close of the tax-
able year but does not file a joint return
for such year, and
344
Subtitle G, Part 2
‘‘(II) does not live apart from his
spouse at all times during the taxable
year.’’.
(b) CONFORMING
AMENDMENT.—Section 1839(f)
(42 U.S.C. 1395r(f)) is amended by striking ‘‘if an indi-
vidual’’ and inserting the following: ‘‘if an individual
(other than an individual subject to an increase in the
monthly premium under this section pursuant to sub-
section (h))’’.
(c) REPORTING REQUIREMENTS FOR SECRETARY OF
THE TREASURY.—Notwithstanding section 6103 of the
Internal Revenue Code of 1986, the Secretary of the
Treasury shall provide, at the request of the Secretary of
Health and Human Services, such information (at such
times and in such form as the Secretary of Health and
Human Services may require) as is necessary for the Sec-
retary of Health and Human Services to carry out section
1839(h) of the Social Security Act (as added by subsection
(a)).
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to the monthly pre-
mium under section 1839 of the Social Security Act for
months beginning with January 1997.
345
Subtitle H, Part 1
Subtitle H—Provisions Relating to
Medicare Parts A and B
PART 1—PAYMENTS FOR HOME HEALTH
SERVICES
SEC. 15701. PAYMENT FOR HOME HEALTH SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 15106, is amended by adding
at the end the following new section:
‘‘PAYMENT FOR HOME HEALTH SERVICES
‘‘SEC. 1894. (a) IN GENERAL.—
‘‘(1) PER
VISIT
PAYMENTS.—Subject to sub-
section (c), the Secretary shall make per visit pay-
ments beginning with fiscal year 1997 to a home
health agency in accordance with this section for
each type of home health service described in para-
graph (2) furnished to an individual who at the time
the service is furnished is under a plan of care by
the home health agency under this title (without re-
gard to whether or not the item or service was fur-
nished by the agency or by others under arrange-
ment with them made by the agency, or otherwise).
‘‘(2) TYPES OF SERVICES.—The types of home
health services described in this paragraph are the
following:
346
Subtitle H, Part 1
‘‘(A) Part-time or intermittent nursing
care provided by or under the supervision of a
registered professional nurse.
‘‘(B) Physical therapy.
‘‘(C) Occupational therapy.
‘‘(D) Speech-language pathology services.
‘‘(E) Medical social services under the di-
rection of a physician.
‘‘(F) To the extent permitted in regula-
tions, part-time or intermittent services of a
home health aide who has successfully com-
pleted a training program approved by the Sec-
retary.
‘‘(b) ESTABLISHMENT
OF PER VISIT RATE
FOR
EACH TYPE OF SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall, sub-
ject to paragraph (3), establish a per visit payment
rate for a home health agency in an area for each
type of home health service described in subsection
(a)(2). Such rate shall be equal to the national per
visit payment rate determined under paragraph (2)
for each such type, except that the labor-related por-
tion of such rate shall be adjusted by the area wage
index applicable under section 1886(d)(3)(E) for the
area in which the agency is located (as determined
347
Subtitle H, Part 1
without regard to any reclassification of the area
under section 1886(d)(8)(B) or a decision of the
Medicare Geographic Classification Review Board or
the Secretary under section 1886(d)(10) for cost re-
porting periods beginning after October 1, 1995).
‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—
The national per visit payment rate for each type of
service described in subsection (a)(2)—
‘‘(A) for fiscal year 1997, is an amount
equal to the national average amount paid per
visit under this title to home health agencies for
such type of service during the most recent 12-
month cost reporting period ending on or before
June 30, 1994, increased (in a compounded
manner) by the home health market basket per-
centage increase for fiscal years 1995, 1996,
and 1997; and
‘‘(B) for each subsequent fiscal year, is an
amount equal to the national per visit payment
rate in effect for the preceding fiscal year, in-
creased by the home health market basket per-
centage increase for such subsequent fiscal year
minus 2 percentage points.
‘‘(3) REBASING
OF
RATES.—The Secretary
shall provide for an update to the national per visit
348
Subtitle H, Part 1
payment rates under this subsection for cost report-
ing periods beginning not later than the first day of
the fifth fiscal year which begins after fiscal year
1997, and not later than every 5 years thereafter, to
reflect the most recent available data.
‘‘(4) HOME
HEALTH
MARKET
BASKET
PER-
CENTAGE
INCREASE.—For purposes of this sub-
section, the term ‘home health market basket per-
centage increase’ means, with respect to a fiscal
year, a percentage (estimated by the Secretary be-
fore the beginning of the fiscal year) determined and
applied with respect to the types of home health
services described in subsection (a)(2) in the same
manner as the market basket percentage increase
under section 1886(b)(3)(B)(iii) is determined and
applied to inpatient hospital services for the fiscal
year.
‘‘(c) PER EPISODE LIMIT.—
‘‘(1) AGGREGATE LIMIT.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), a home health agency may not
receive aggregate per visit payments under sub-
section (a) for a fiscal year in excess of an
amount equal to the sum of the following prod-
349
Subtitle H, Part 1
ucts determined for each case-mix category for
which the agency receives payments:
‘‘(i) The number of episodes of each
case-mix category during the fiscal year;
multiplied by
‘‘(ii) the per episode limit determined
for such case-mix category for such fiscal
year.
‘‘(B) ESTABLISHMENT
OF
PER
EPISODE
LIMITS.—
‘‘(i) IN
GENERAL.—The per episode
limit for a fiscal year for any case-mix cat-
egory for the area in which a home health
agency is located is equal to—
‘‘(I) the mean number of visits
for each type of home health service
described in subsection (a)(2) fur-
nished during an episode of such case-
mix category in such area during fis-
cal year 1994, adjusted by the case-
mix adjustment factor determined in
clause (ii) for the fiscal year involved;
multiplied by
‘‘(II) the per visit payment rate
established under subsection (b) for
350
Subtitle H, Part 1
such type of home health service for
the fiscal year for which the deter-
mination is being made.
‘‘(ii) CASE
MIX
ADJUSTMENT
FAC-
TOR.—For purposes of clause (i), the case-
mix adjustment factor for a year is the
factor determined by the Secretary to as-
sure that aggregate payments for home
health services under this section during
the year will not exceed the payment for
such services during the previous year as a
result of changes in the number and type
of home health visits within case-mix cat-
egories over the previous year.
‘‘(iii) REBASING
OF
PER
EPISODE
AMOUNTS.—Beginning with fiscal year
1999 and every 2 years thereafter, the Sec-
retary shall revise the mean number of
home health visits determined under clause
(i)(I) for each type of home health service
visit described in subsection (a)(2) fur-
nished during an episode in a case-mix cat-
egory to reflect the most recently available
data on the number of visits.
351
Subtitle H, Part 1
‘‘(iv) DETERMINATION
OF
APPLICA-
BLE AREA.—For purposes of determining
per episode limits under this subpara-
graph, the area in which a home health
agency is considered to be located shall be
such area as the Secretary finds appro-
priate for purposes of this subparagraph.
‘‘(C) CASE-MIX CATEGORY.—For purposes
of this paragraph, the term ‘case-mix category’
means each of the 18 case-mix categories estab-
lished under the Phase II Home Health Agency
Prospective Payment Demonstration Project
conducted by the Health Care Financing Ad-
ministration. The Secretary may develop an al-
ternate methodology for determining case-mix
categories.
‘‘(D) EPISODE.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, the term ‘episode’ means
the continuous 120-day period that—
‘‘(I) begins on the date of an in-
dividual’s first visit for a type of home
health service described in subsection
(a)(2) for a case-mix category, and
352
Subtitle H, Part 1
‘‘(II) is immediately preceded by
a 60-day period in which the individ-
ual did not receive visits for a type of
home health service described in sub-
section (a)(2).
‘‘(ii) TREATMENT OF EPISODES SPAN-
NING
COST
REPORTING
PERIODS.—The
Secretary shall provide for such rules as
the Secretary considers appropriate regard-
ing the treatment of episodes under this
paragraph which begin during a cost re-
porting period and end in a subsequent
cost reporting period.
‘‘(E) EXEMPTIONS
AND
EXCEPTIONS.—
The Secretary may provide for exemptions and
exceptions to the limits established under this
paragraph for a fiscal year as the Secretary
deems appropriate, to the extent such exemp-
tions and exceptions do not result in greater
payments under this section than the exemp-
tions and exceptions provided under section
1861(v)(1)(L)(ii) in fiscal year 1994, increased
by the home health market basket percentage
increase for the fiscal year involved (as defined
in subsection (b)(4)).
353
Subtitle H, Part 1
‘‘(2) RECONCILIATION OF AMOUNTS.—
‘‘(A) OVERPAYMENTS
TO
HOME
HEALTH
AGENCIES.—Subject to subparagraph (B), if a
home health agency has received aggregate per
visit payments under subsection (a) for a fiscal
year in excess of the amount determined under
paragraph (1) with respect to such home health
agency for such fiscal year, the Secretary shall
reduce payments under this section to the home
health agency in the following fiscal year in
such manner as the Secretary considers appro-
priate (including on an installment basis) to re-
capture the amount of such excess.
‘‘(B) EXCEPTION
FOR
HOME
HEALTH
SERVICES FURNISHED OVER A PERIOD GREAT-
ER THAN 165 DAYS.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the amount of aggre-
gate per visit payments determined under
subsection (a) shall not include payments
for home health visits furnished to an indi-
vidual on or after a continuous period of
more than 165 days after an individual be-
gins an episode described in subsection
354
Subtitle H, Part 1
(c)(1)(D) (if such period is not interrupted
by the beginning of a new episode).
‘‘(ii) 
REQUIREMENT
OF
CERTIFI-
CATION.—Clause (i) shall not apply if the
agency has not obtained a physician’s cer-
tification with respect to the individual re-
quiring such visits that includes a state-
ment that the individual requires such con-
tinued visits, the reason for the need for
such visits, and a description of such serv-
ices furnished during such visits.
‘‘(C) SHARE OF SAVINGS.—
‘‘(i) BONUS
PAYMENTS.—If a home
health agency has received aggregate per
visit payments under subsection (a) for a
fiscal year in an amount less than the
amount determined under paragraph (1)
with respect to such home health agency
for such fiscal year, the Secretary shall pay
such home health agency a bonus payment
equal to 50 percent of the difference be-
tween such amounts in the following fiscal
year, except that the bonus payment may
not exceed 5 percent of the aggregate per
355
Subtitle H, Part 1
visit payments made to the agency for the
year.
‘‘(ii) 
INSTALLMENT
BONUS
PAY-
MENTS.—The Secretary may make install-
ment payments during a fiscal year to a
home health agency based on the estimated
bonus payment that the agency would be
eligible to receive with respect to such fis-
cal year.
‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary
shall implement a medical review process (with a particu-
lar emphasis on fiscal years 1997 and 1998) for the sys-
tem of payments described in this section that shall pro-
vide an assessment of the pattern of care furnished to in-
dividuals receiving home health services for which pay-
ments are made under this section to ensure that such
individuals receive appropriate home health services. Such
review process shall focus on low-cost cases described in
subsection (e)(3) and cases described in subsection
(c)(2)(B) 
and 
shall 
require 
recertification 
by
intermediaries at 30, 60, 90, 120, and 165 days into an
episode described in subsection (c)(1)(D).
‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIR-
CUMVENTION OF LIMITS.—
356
Subtitle H, Part 1
‘‘(1) IN GENERAL.—The Secretary shall provide
for appropriate adjustments to payments to home
health agencies under this section to ensure that
agencies do not circumvent the purpose of this sec-
tion by—
‘‘(A) discharging patients to another home
health agency or similar provider;
‘‘(B) altering corporate structure or name
to avoid being subject to this section or for the
purpose of increasing payments under this title;
or
‘‘(C) undertaking other actions considered
unnecessary for effective patient care and in-
tended to achieve maximum payments under
this title.
‘‘(2) TRACKING
OF
PATIENTS
THAT
SWITCH
HOME HEALTH AGENCIES DURING EPISODE.—
‘‘(A) DEVELOPMENT
OF
SYSTEM.—The
Secretary shall develop a system that tracks
home health patients that receive home health
services described in subsection (a)(2) from
more than 1 home health agency during an epi-
sode described in subsection (c)(1)(D).
‘‘(B) ADJUSTMENT
OF
PAYMENTS.—The
Secretary shall adjust payments under this sec-
374
Subtitle H, Part 3
‘‘(2) TAKING
INTO
ACCOUNT
VOLUME
AND
CASH
FLOW.—In providing for an adjustment in
payments under this subsection for a sector for a
fiscal year, the Secretary shall take into account (in
a manner consistent with actuarial projections)—
‘‘(A) the impact of such an adjustment on
the volume or type of services provided in such
sector (and other sectors), and
‘‘(B) the fact that an adjustment may
apply to items and services furnished in a fiscal
year (payment for which may occur in a subse-
quent fiscal year),
in a manner that is consistent with assuring that
total fee-for-services expenditures for each sector for
the fiscal year will not exceed the allotment under
subsection (c)(1) for such sector for such year.
‘‘(3) PROPORTIONALITY OF REDUCTIONS WITH-
IN A SECTOR.—In making adjustments under this
subsection in payment for items and services in-
cluded within a sector of medicare services for a fis-
cal year, the Secretary shall provide for such an ad-
justment that results (to the maximum extent fea-
sible) in the same percentage reductions in aggre-
gate Federal payments under parts A and B for the