to benefits under part A and enrolled under part
B who are not enrolled in a Medicare+Choice plan
under this part for the year, but adjusted to ex-
clude costs attributable to payments under section
1886(h).
‘‘(ii) INCLUSION OF COSTS OF VA AND DOD
MILITARY FACILITY SERVICES TO MEDICARE-ELIGI-
BLE BENEFICIARIES.—In determining the adjusted
average per capita cost under clause (i) for a year,
such cost shall be adjusted to include the Sec-
retary’s estimate, on a per capita basis, of the
amount of additional payments that would have
been made in the area involved under this title if
individuals entitled to benefits under this title had
not received services from facilities of the Depart-
ment of Veterans Affairs or the Department of De-
fense.’’.
(2) CONFORMING AMENDMENT.—Such section is fur-
ther amended, in the matter before subparagraph (A), by
striking ‘‘or (C)’’ and inserting ‘‘(C), or (D)’’.
(b) REVISION OF BLEND.—
(1) REVISION OF NATIONAL AVERAGE USED IN CAL-
CULATION
OF
BLEND.—Section 1853(c)(4)(B)(i)(II) (42
U.S.C. 1395w–23(c)(4)(B)(i)(II)) is amended by inserting
‘‘who (with respect to determinations for 2003 and for
2004) are enrolled in a Medicare+Choice plan’’ after ‘‘the
average number of medicare beneficiaries’’.
(2) 
CHANGE
IN
BUDGET
NEUTRALITY.—Section
1853(c) (42 U.S.C. 1395w–23(c)) is amended—
(A) in paragraph (1)(A), by inserting ‘‘(for a year
before 2003)’’ after ‘‘multiplied’’; and
(B) in paragraph (5), by inserting ‘‘(before 2003)’’
after ‘‘for each year’’.
(c) REVISION IN MINIMUM PERCENTAGE INCREASE FOR
2003 AND 2004.—Section 1853(c)(1)(C) (42 U.S.C. 1395w–
23(c)(1)(C)) is amended by striking clause (iv) and inserting
the following:
‘‘(iv) For 2002, 102 percent of the annual
Medicare+Choice capitation rate under this para-
graph for the area for 2001.
‘‘(v) For 2003 and 2004, 103 percent of the
annual Medicare+Choice capitation rate under this
paragraph for the area for the previous year.
‘‘(iv) For 2005 and each succeeding year, 102
percent of the annual Medicare+Choice capitation
rate under this paragraph for the area for the pre-
vious year.’’.
(d) INCLUSION OF COSTS OF DOD AND VA MILITARY FA-
CILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES IN
CALCULATION
OF MEDICARE+CHOICE PAYMENT RATES.—
Section 1853(c)(3) (42 U.S.C. 1395w–23(c)(3)) is amended—
(1) in subparagraph (A), by striking ‘‘subparagraph
(B)’’ and inserting ‘‘subparagraphs (B) and (E)’’, and
(2) by adding at the end the following new subpara-
graph:
‘‘(E) INCLUSION OF COSTS OF DOD AND VA MILI-
TARY
FACILITY
SERVICES
TO
MEDICARE-ELIGIBLE
BENEFICIARIES.—In 
determining 
the 
area-specific
Medicare+Choice capitation rate under subparagraph
(A) for a year (beginning with 2003), the annual per
capita rate of payment for 1997 determined under sec-
tion 1876(a)(1)(C) shall be adjusted to include in the
rate the Secretary’s estimate, on a per capita basis, of
the amount of additional payments that would have
been made in the area involved under this title if indi-
viduals entitled to benefits under this title had not re-
ceived services from facilities of the Department of De-
fense or the Department of Veterans Affairs.’’.
(e) ANNOUNCEMENT
OF REVISED MEDICARE+CHOICE
PAYMENT RATES.—Within 2 weeks after the date of the enact-
ment of this Act, the Secretary shall determine, and shall an-
nounce (in a manner intended to provide notice to interested
parties) Medicare+Choice capitation rates under section 1853
of the Social Security Act (42 U.S.C. 1395w–23) for 2003, re-
vised in accordance with the provisions of this section.
(f) MEDPAC STUDY OF AAPCC.—
(1) STUDY.—The Medicare Payment Advisory Com-
mission shall conduct a study that assesses the method
used for determining the adjusted average per capita cost
(AAPCC) under section 1876(a)(4) of the Social Security
Act 
(42 
U.S.C. 
1395mm(a)(4)). 
Such 
study 
shall
examine—
(A) the bases for variation in such costs between
different areas, including differences in input prices,
utilization, and practice patterns;
(B) the appropriate geographic area for payment
under the Medicare+Choice program under part C of
title XVIII of such Act; and
(C) the accuracy of risk adjustment methods in re-
flecting differences in costs of providing care to dif-
ferent groups of beneficiaries served under such pro-
gram.
(2) REPORT.—Not later than 9 months after the date
of the enactment of this Act, the Commission shall submit
to Congress a report on the study conducted under para-
graph (1). Such report shall include recommendations re-
garding changes in the methods for computing the adjusted
average per capita cost among different areas.
SEC. 
202. 
MAKING 
PERMANENT 
CHANGE 
IN
MEDICARE+CHOICE REPORTING DEADLINES
AND ANNUAL, COORDINATED ELECTION PE-
RIOD.
(a) 
CHANGE
IN
REPORTING
DEADLINE.—Section
1854(a)(1) (42 U.S.C. 1395w–24(a)(1)), as amended by sec-
tion 532(b)(1) of the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002, is amended by strik-
ing ‘‘2002, 2003, and 2004 (or July 1 of each other year)’’ and
inserting ‘‘2002 and each subsequent year (or July 1 of each
year before 2002)’’.
(b) DELAY
IN ANNUAL, COORDINATED ELECTION PE-
RIOD.—Section 1851(e)(3)(B) (42 U.S.C. 1395w–21(e)(3)(B)),
as amended by section 532(c)(1)(A) of the Public Health Secu-
rity and Bioterrorism Preparedness and Response Act of 2002,
is amended by striking ‘‘and after 2005, the month of Novem-
ber before such year and with respect to 2003, 2004, and
2005’’ and inserting ‘‘, the month of November before such
year and with respect to 2003 and any subsequent year’’.
(c) ANNUAL ANNOUNCEMENT OF PAYMENT RATES.—Sec-
tion 1853(b)(1) (42 U.S.C. 1395w–23(b)(1)), as amended by
section 532(d)(1) of the Public Health Security and Bioter-
rorism Preparedness and Response Act of 2002, is amended by
striking ‘‘and after 2005 not later than March 1 before the cal-
endar year concerned and for 2004 and 2005’’ and inserting
‘‘not later than March 1 before the calendar year concerned
and for 2004 and each subsequent year’’.
(d) REQUIRING PROVISION OF AVAILABLE INFORMATION
COMPARING PLAN OPTIONS.—The first sentence of section
1851(d)(2)(A)(ii) (42 U.S.C. 1395w–21(d)(2)(A)(ii)) is amend-
ed by inserting before the period the following: ‘‘to the extent
such information is available at the time of preparation of ma-
terials for the mailing’’.
SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.
(a) IN GENERAL.—Section 1856(b)(3) (42 U.S.C. 1395w–
26(b)(3)) is amended to read as follows:
‘‘(3) RELATION TO STATE LAWS.—The standards es-
tablished under this subsection shall supersede any State
law or regulation (other than State licensing laws or State
laws 
relating 
to 
plan 
solvency) 
with 
respect 
to
Medicare+Choice 
plans 
which 
are 
offered 
by
Medicare+Choice organizations under this part.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date of the enactment of this
Act.
SEC. 204. SPECIALIZED MEDICARE+CHOICE PLANS FOR
SPECIAL NEEDS BENEFICIARIES.
(a) TREATMENT AS COORDINATED CARE PLAN.—Section
1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is amended by
adding at the end the following new sentence: ‘‘Specialized
Medicare+Choice plans for special needs beneficiaries (as de-
fined in section 1859(b)(4)) may be any type of coordinated
care plan.’’.
(b) SPECIALIZED MEDICARE+CHOICE PLAN FOR SPECIAL
NEEDS
BENEFICIARIES
DEFINED.—Section 1859(b) (42
U.S.C. 1395w–29(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(4) SPECIALIZED
MEDICARE+CHOICE
PLANS
FOR
SPECIAL NEEDS BENEFICIARIES.—
‘‘(A) 
IN
GENERAL.—The 
term 
‘specialized
Medicare+Choice plan for special needs beneficiaries’
means a Medicare+Choice plan that exclusively serves
special needs beneficiaries (as defined in subparagraph
(B)).
‘‘(B) SPECIAL
NEEDS
BENEFICIARY.—The term
‘special needs beneficiary’ means a Medicare+Choice
eligible individual who—
‘‘(i) is institutionalized (as defined by the Sec-
retary);
‘‘(ii) is entitled to medical assistance under a
State plan under title XIX; or
‘‘(iii) meets such requirements as the Sec-
retary may determine would benefit from enroll-
ment in such a specialized Medicare+Choice plan
described in subparagraph (A) for individuals with
severe or disabling chronic conditions.’’.
(c) RESTRICTION ON ENROLLMENT PERMITTED.—Section
1859 (42 U.S.C. 1395w–29) is amended by adding at the end
the following new subsection:
‘‘(f) RESTRICTION
ON ENROLLMENT
FOR SPECIALIZED
MEDICARE+CHOICE
PLANS
FOR
SPECIAL
NEEDS
BENE-
FICIARIES.—In the case of a specialized Medicare+Choice plan
(as defined in subsection (b)(4)), notwithstanding any other
provision of this part and in accordance with regulations of the
Secretary and for periods before January 1, 2007, the plan
may restrict the enrollment of individuals under the plan to in-
dividuals who are within one or more classes of special needs
beneficiaries.’’.
(d) REPORT TO CONGRESS.—Not later than December 31,
2005, the Medicare Benefits Administrator shall submit to
Congress a report that assesses the impact of specialized
Medicare+Choice plans for special needs beneficiaries on the
cost and quality of services provided to enrollees. Such report
shall include an assessment of the costs and savings to the
medicare program as a result of amendments made by sub-
sections (a), (b), and (c).
(e) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by sub-
sections (a), (b), and (c) shall take effect upon the date of
the enactment of this Act.
(2) DEADLINE FOR ISSUANCE OF REQUIREMENTS FOR
SPECIAL
NEEDS
BENEFICIARIES; TRANSITION.—No later
than 6 months after the date of the enactment of this Act,
the Secretary of Health and Human Services shall issue
final regulations to establish requirements for special needs
beneficiaries under section 1859(b)(4)(B)(iii) of the Social
Security Act, as added by subsection (b).
SEC. 205. MEDICARE MSAS.
(a) EXEMPTION
FROM QUALITY ASSURANCE PROGRAM
REQUIREMENT.—
(1) IN
GENERAL.—Section 1852(e)(1) (42 U.S.C.
1395w–22(e)(1)) is amended by inserting ‘‘(other than
MSA plans)’’ after ‘‘Medicare+Choice plans’’.
(2) CONFORMING
AMENDMENTS.—Section 1852 (42
U.S.C. 1395w–22) is amended—
(A) in subsection (c)(1)(I), by inserting before the
period at the end the following: ‘‘if required under such
section’’; and
(B) in subparagraphs (A) and (B) of subsection
(e)(2), by striking ‘‘, a non-network MSA plan,’’ and
‘‘, NON-NETWORK MSA PLANS,’’ each place it appears.
(b) MAKING PROGRAM PERMANENT
AND ELIMINATING
CAP.—Section 1851(b)(4) (42 U.S.C. 1395w–21(b)(4)) is
amended—
(1) in the heading of subparagraph (A), by striking
‘‘ON A DEMONSTRATION BASIS’’;
(2) by striking the first sentence of subparagraph (A);
and
(3) by striking the second sentence of subparagraph
(C).
(c) APPLYING LIMITATIONS ON BALANCE BILLING.—Sec-
tion 1852(k)(1) (42 U.S.C. 1395w–22(k)(1)) is amended by in-
serting ‘‘or with an organization offering a MSA plan’’ after
‘‘section 1851(a)(2)(A)’’.
(d) ADDITIONAL
AMENDMENT.—Section 1851(e)(5)(A)
(42 U.S.C. 1395w–21(e)(5)(A)) is amended—
(1) by adding ‘‘or’’ at the end of clause (i);
(2) by striking ‘‘, or’’ at the end of clause (ii) and in-
serting a semicolon; and
(3) by striking clause (iii).
SEC. 206. EXTENSION OF REASONABLE COST AND SHMO
CONTRACTS.
(a) REASONABLE COST CONTRACTS.—
(1) IN GENERAL.—Section 1876(h)(5)(C) (42 U.S.C.
1395mm(h)(5)(C)) is amended—
(A) by inserting ‘‘(i)’’ after ‘‘(C)’’;
(B) by inserting before the period the following: ‘‘,
except (subject to clause (ii)) in the case of a contract
for an area which is not covered in the service area of
1 or more coordinated care Medicare+Choice plans
under part C’’; and
(C) by adding at the end the following new clause:
‘‘(ii) In the case in which—
‘‘(I) a reasonable cost reimbursement contract includes
an area in its service area as of a date that is after Decem-
ber 31, 2003;
‘‘(II) such area is no longer included in such service
area after such date by reason of the operation of clause
(i) because of the inclusion of such area within the service
area of a Medicare+Choice plan; and
‘‘(III) all Medicare+Choice plans subsequently termi-
nate coverage in such area;
such reasonable cost reimbursement contract may be extended
and renewed to cover such area (so long as it is not included
in the service area of any Medicare+Choice plan).’’.
(2) STUDY.—The Medicare Benefits Administrator
shall conduct a study of an appropriate transition for plans
offered under reasonable cost contracts under section 1876
of the Social Security Act on and after January 1, 2005.
Such a transition may take into account whether there are
one or more coordinated care Medicare+Choice plans being
offered in the areas involved. Not later than February 1,
2004, the Administrator shall submit to Congress a report
on such study and shall include recommendations regarding
any changes in the amendment made by paragraph (1) as
the Administrator determines to be appropriate.
(b) EXTENSION OF SOCIAL HEALTH MAINTENANCE OR-
GANIZATION (SHMO) DEMONSTRATION PROJECT.—
(1) IN GENERAL.—Section 4018(b)(1) of the Omnibus
Budget Reconciliation Act of 1987 is amended by striking
‘‘the date that is 30 months after the date that the Sec-
retary submits to Congress the report described in section
4014(c) of the Balanced Budget Act of 1997’’ and insert-
ing ‘‘December 31, 2004’’.
(2) SHMOS OFFERING MEDICARE+CHOICE PLANS.—
Nothing in such section 4018 shall be construed as pre-
venting a social health maintenance organization from of-
fering a Medicare+Choice plan under part C of title XVIII
of the Social Security Act.
Subtitle B—Medicare+Choice
Competition Program
SEC. 211. MEDICARE+CHOICE COMPETITION PROGRAM.
(a) SUBMISSION OF BID AMOUNTS.—Section 1854 (42
U.S.C. 1395w–24) is amended—
(1) by amending the heading to read as follows:
‘‘SUBMISSION OF BID AMOUNTS’’;
(2) in subsection (a)(1)(A)—
(A) by striking ‘‘(A)’’ and inserting ‘‘(A)(i) if the
following year is before 2005,’’; and
(B) by inserting before the semicolon at the end
the following: ‘‘ or (ii) if the following year is 2005 or
later, the information described in paragraph (6)(A)’’;
and
(3) by adding at the end of subsection (a) the fol-
lowing:
‘‘(6) 
SUBMISSION
OF
BID
AMOUNTS
BY
MEDICARE+CHOICE ORGANIZATIONS.—
‘‘(A) INFORMATION TO BE SUBMITTED.—The in-
formation described in this subparagraph is as follows:
‘‘(i) The monthly aggregate bid amount for
provision of all items and services under this part
and the actuarial basis for determining such
amount.
‘‘(ii) The proportions of such bid amount that
are attributable to—
‘‘(I) the provision of statutory non-drug
benefits (such portion referred to in this part
as the ‘unadjusted non-drug monthly bid
amount’);
‘‘(II) the provision of statutory prescrip-
tion drug benefits; and
‘‘(III) the provision of non-statutory bene-
fits;
and the actuarial basis for determining such pro-
portions.
‘‘(iii) Such additional information as the Ad-
ministrator may require to verify the actuarial
bases described in clauses (i) and (ii).
‘‘(B) STATUTORY BENEFITS DEFINED.—For pur-
poses of this part:
‘‘(i) The term ‘statutory non-drug benefits’
means benefits under parts A and B.
‘‘(ii) The term ‘statutory prescription drug
benefits’ means benefits under part D.
‘‘(iii) The term ‘statutory benefits’ means stat-
utory prescription drug benefits and statutory non-
drug benefits.
‘‘(C) ACCEPTANCE
AND
NEGOTIATION
OF
BID
AMOUNTS.—The Administrator has the authority to ne-
gotiate regarding monthly bid amounts submitted
under subparagraph (A) (and the proportion described
in subparagraph (A)(ii)). The Administrator may reject
such a bid amount or proportion if the Administrator
determines that such amount or proportion is not sup-
ported by the actuarial bases provided under subpara-
graph (A).’’.
(b) PROVIDING FOR BENEFICIARY SAVINGS FOR CERTAIN
PLANS.—
(1) IN
GENERAL.—Section 1854(b) (42 U.S.C.
1395w–24(b)) is amended—
(A) by adding at the end of paragraph (1) the fol-
lowing new subparagraph:
‘‘(C) BENEFICIARY REBATE RULE.—
‘‘(i) REQUIREMENT.—The Medicare+Choice
plan shall provide to the enrollee a monthly rebate
equal to 75 percent of the average per capita sav-
ings (if any) described in paragraph (3) applicable
to the plan and year involved.
‘‘(iii) FORM OF REBATE.—A rebate required
under this subparagraph shall be provided—
‘‘(I) through the crediting of the amount
of the rebate towards the Medicare+Choice
monthly supplementary beneficiary premium or
the premium imposed for prescription drug cov-
erage under part D;
‘‘(II) through a direct monthly payment
(through electronic funds transfer or other-
wise); or
‘‘(III) through other means approved by
the Medicare Benefits Administrator,
or any combination thereof.’’; and
(B) by adding at the end the following new para-
graph:
‘‘(3) COMPUTATION OF AVERAGE PER CAPITA MONTH-
LY SAVINGS.—For purposes of paragraph (1)(C)(i), the av-
erage per capita monthly savings referred to in such para-
graph for a Medicare+Choice plan and year is computed
as follows:
‘‘(A) DETERMINATION OF STATE-WIDE AVERAGE
RISK ADJUSTMENT.—
‘‘(i) IN GENERAL.—The Medicare Benefits Ad-
ministrator shall determine, at the same time rates
are promulgated under section 1853(b)(1) (begin-
ning with 2005), for each State the average of the
risk adjustment factors to be applied to enrollees
under section 1853(a)(1)(A) in that State. In the
case of a State in which a Medicare+Choice plan
was offered in the previous year, the Administrator
may compute such average based upon risk adjust-
ment factors applied in that State in a previous
year.
‘‘(ii) TREATMENT OF NEW STATES.—In the
case of a State in which no Medicare+Choice plan
was offered in the previous year, the Administrator
shall estimate such average. In making such esti-
mate, the Administrator may use average risk ad-
justment factors applied to comparable States or
applied on a national basis.
‘‘(B) DETERMINATION OF RISK ADJUSTED BENCH-
MARK
AND
RISK-ADJUSTED
BID.—For 
each
Medicare+Choice plan offered in a State, the Adminis-
trator shall—
‘‘(i) adjust the fee-for-service area-specific
non-drug benchmark amount by the applicable av-
erage risk adjustment factor computed under sub-
paragraph (A); and
‘‘(ii) adjust the unadjusted non-drug monthly
bid amount by such applicable average risk adjust-
ment factor.
‘‘(C) DETERMINATION OF AVERAGE PER CAPITA
MONTHLY SAVINGS.—The average per capita monthly
savings described in this subparagraph is equal to the
amount (if any) by which—
‘‘(i) the risk-adjusted benchmark amount com-
puted under subparagraph (B)(i), exceeds
‘‘(ii) the risk-adjusted bid computed under
subparagraph (B)(ii).
‘‘(D) AUTHORITY TO DETERMINE RISK ADJUST-
MENT FOR AREAS OTHER THAN STATES.—The Admin-
istrator may provide for the determination and applica-
tion of risk adjustment factors under this paragraph on
the basis of areas other than States.’’.
(2) COMPUTATION
OF
FEE-FOR-SERVICE
AREA-SPE-
CIFIC NON-DRUG BENCHMARK.—Section 1853 (42 U.S.C.
1395w–23) is amended by adding at the end the following
new subsection:
‘‘(j) COMPUTATION OF FEE-FOR-SERVICE AREA-SPECIFIC
NON-DRUG BENCHMARK AMOUNT.—For purposes of this part,
the term ‘fee-for-service area-specific non-drug benchmark
amount’ means, with respect to a Medicare+Choice payment
area for a month in a year, an amount equal to the greater
of the following (but in no case less than 1⁄12 of the rate com-
puted under subsection (c)(1), without regard to subparagraph
(A), for the year):
‘‘(1) BASED ON 100 PERCENT OF FEE-FOR-SERVICE
COSTS IN THE AREA.—An amount equal to 1⁄12 of 100 per-
cent (for 2005 through 2007, or 95 percent for 2008 and
years thereafter) of the adjusted average per capita cost for
the year involved, determined under section 1876(a)(4) for
the Medicare+Choice payment area, for the area and the
year involved, for services covered under parts A and B for
individuals entitled to benefits under part A and enrolled
under part B who are not enrolled in a Medicare+Choice
plan under this part for the year, and adjusted to exclude
from such cost the amount the Medicare Benefits Adminis-
trator estimates is payable for costs described in subclauses
(I) and (II) of subsection (c)(3)(C)(i) for the year involved
and also adjusted in the manner described in subsection
(c)(1)(D)(ii) (relating to inclusion of costs of VA and DOD
military facility services to medicare-eligible beneficiaries).
‘‘(2) MINIMUM
MONTHLY
AMOUNT.—The minimum
amount specified in this paragraph is the amount specified
in subsection (c)(1)(B)(iv) for the year involved.’’.
(c) PAYMENT OF PLANS BASED ON BID AMOUNTS.—
(1) IN GENERAL.—Section 1853(a)(1)(A) (42 U.S.C.
1395w–23) is amended by striking ‘‘in an amount’’ and all
that follows and inserting the following: ‘‘in an amount de-
termined as follows:
‘‘(i) PAYMENT BEFORE 2005.—For years be-
fore 2005, the payment amount shall be equal to
1⁄12 of the annual Medicare+Choice capitation rate
(as calculated under subsection (c)) with respect to
that individual for that area, reduced by the
amount of any reduction elected under section
1854(f )(1)(E) and adjusted under clause (iii).
‘‘(ii) PAYMENT
FOR
STATUTORY
NON-DRUG
BENEFITS BEGINNING WITH 2005.—For years be-
ginning with 2005—
‘‘(I) PLANS
WITH
BIDS
BELOW
BENCH-
MARK.—In the case of a plan for which there
are average per capita monthly savings de-
scribed in section 1854(b)(3)(C), the payment
under 
this 
subsection 
is 
equal 
to 
the
unadjusted non-drug monthly bid amount, ad-
justed under clause (iii), plus the amount of
the monthly rebate computed under section
1854(b)(1)(C)(i) for that plan and year.
‘‘(II) PLANS
WITH
BIDS
AT
OR
ABOVE
BENCHMARK.—In the case of a plan for which
there are no average per capita monthly sav-
ings described in section 1854(b)(3)(C), the
payment amount under this subsection is equal
to the fee-for-service area-specific non-drug
benchmark amount, adjusted under clause (iii).
‘‘(iii) DEMOGRAPHIC
ADJUSTMENT, INCLUD-
ING ADJUSTMENT FOR HEALTH STATUS.—The Ad-
ministrator shall adjust the payment amount under
clause (i), the unadjusted non-drug monthly bid
amount under clause (ii)(I), and the fee-for-service
area-specific non-drug benchmark amount under
clause (ii)(II) for such risk factors as age, disability
status, gender, institutional status, and such other
factors as the Administrator determines to be ap-
propriate, including adjustment for health status
under paragraph (3), so as to ensure actuarial
equivalence. The Administrator may add to, mod-
ify, or substitute for such adjustment factors if
such changes will improve the determination of ac-
tuarial equivalence.
‘‘(iv) REFERENCE TO SUBSIDY PAYMENT FOR
STATUTORY DRUG BENEFITS.—In the case in which
an enrollee is enrolled under part D, the
Medicare+Choice organization also is entitled to a
subsidy payment amount under section 1860H.’’.
(d) CONFORMING AMENDMENTS.—
(1) PROTECTION AGAINST BENEFICIARY SELECTION.—
Section 1852(b)(1)(A) (42 U.S.C. 1395w–22(b)(1)(A)) is
amended by adding at the end the following: ‘‘The Admin-
istrator shall not approve a plan of an organization if the
Administrator determines that the benefits are designed to
substantially 
discourage 
enrollment 
by 
certain
Medicare+Choice eligible individuals with the organiza-
tion.’’.
(2) CONFORMING AMENDMENT TO PREMIUM TERMI-
NOLOGY.—Subparagraphs 
(A) 
and 
(B) 
of 
section
1854(b)(2) (42 U.S.C. 1395w–24(b)(2)) are amended to
read as follows:
‘‘(A) MEDICARE+CHOICE MONTHLY BASIC BENE-
FICIARY
PREMIUM.—The 
term 
‘Medicare+Choice
monthly basic beneficiary premium’ means, with re-
spect to a Medicare+Choice plan—
‘‘(i) described in section 1853(a)(1)(A)(ii)(I)
(relating to plans providing rebates), zero; or
‘‘(ii) described in section 1853(a)(1)(A)(ii)(II),
the amount (if any) by which the unadjusted non-
drug monthly bid amount exceeds the fee-for-serv-
ice area-specific non-drug benchmark amount.
‘‘(B) 
MEDICARE+CHOICE
MONTHLY
SUPPLE-
MENTAL
BENEFICIARY
PREMIUM.—The 
term
‘Medicare+Choice monthly supplemental beneficiary
premium’ means, with respect to a Medicare+Choice
plan, the portion of the aggregate monthly bid amount
submitted under clause (i) of subsection (a)(6)(A) for
the year that is attributable under such section to the
provision of nonstatutory benefits.’’.
(3) REQUIREMENT
FOR
UNIFORM
BID
AMOUNTS.—
Section 1854(c) (42 U.S.C. 1395w–24(c)) is amended to
read as follows:
‘‘(c) UNIFORM BID AMOUNTS.—The Medicare+Choice
monthly bid amount submitted under subsection (a)(6) of a
Medicare+Choice organization under this part may not vary
among individuals enrolled in the plan.’’.
(4) PERMITTING BENEFICIARY REBATES.—
(A) Section 1851(h)(4)(A) (42 U.S.C. 1395w–
21(h)(4)(A)) is amended by inserting ‘‘except as pro-
vided under section 1854(b)(1)(C)’’ after ‘‘or other-
wise’’.
(B) Section 1854(d) (42 U.S.C. 1395w–24(d)) is
amended by inserting ‘‘, except as provided under sub-
section (b)(1)(C),’’ after ‘‘and may not provide’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to payments and premiums for months be-
ginning with January 2005.
SEC. 212. DEMONSTRATION PROGRAM FOR COMPETI-
TIVE-DEMONSTRATION AREAS.
(a) IDENTIFICATION
OF COMPETITIVE-DEMONSTRATION
AREAS
FOR DEMONSTRATION PROGRAM; COMPUTATION
OF
CHOICE NON-DRUG BENCHMARKS.—Section 1853, as amended
by section 211(b)(2), is amended by adding at the end the fol-
lowing new subsection:
‘‘(k) ESTABLISHMENT OF COMPETITIVE DEMONSTRATION
PROGRAM.—
‘‘(1) DESIGNATION OF COMPETITIVE-DEMONSTRATION
AREAS AS PART OF PROGRAM.—
‘‘(A) IN GENERAL.—For purposes of this part, the
Administrator shall establish a demonstration program
under 
which 
the 
Administrator 
designates
Medicare+Choice areas as competitive-demonstration
areas consistent with the following limitations:
‘‘(i) LIMITATION ON NUMBER OF AREAS THAT
MAY BE DESIGNATED.—The Administrator may not
designate more than 4 areas as competitive-dem-
onstration areas.
‘‘(ii) LIMITATION ON PERIOD OF DESIGNATION
OF ANY AREA.—The Administrator may not des-
ignate any area as a competitive-demonstration
area for a period of more than 2 years.
The Administrator has the discretion to decide whether
or not to designate as a competitive-demonstration area
an area that qualifies for such designation.
‘‘(B) QUALIFICATIONS
FOR
DESIGNATION.—For
purposes of this title, a Medicare+Choice area (which
is a metropolitan statistical area or other area with a
substantial number of Medicare+Choice enrollees) may
not be designated as a ‘competitive-demonstration area’
for a 2-year period beginning with a year unless the
Administrator determines, by such date before the be-
ginning of the year as the Administrator determines
appropriate, that—
‘‘(i) there will be offered during the open en-
rollment period under this part before the begin-
ning of the year at least 2 Medicare+Choice plans
(in addition to the fee-for-service program under
parts A and B), each offered by a different
Medicare+Choice organization; and
‘‘(ii) during March of the previous year at
least 50 percent of the number of Medicare+Choice
eligible individuals who reside in the area were en-
rolled in a Medicare+Choice plan.
‘‘(2) CHOICE NON-DRUG BENCHMARK AMOUNT.—For
purposes of this part, the term ‘choice non-drug benchmark
amount’ means, with respect to a Medicare+Choice pay-
ment area for a month in a year, the sum of the 2 compo-
nents described in paragraph (3) for the area and year.
The Administrator shall compute such benchmark amount
for each competitive-demonstration area before the begin-
ning of each annual, coordinated election period under sec-
tion 1851(e)(3)(B) for each year (beginning with 2005) in
which it is designated as such an area.
‘‘(3) 2 COMPONENTS.—For purposes of paragraph (2),
the 2 components described in this paragraph for an area
and a year are the following:
‘‘(A) FEE-FOR-SERVICE
COMPONENT
WEIGHTED
BY NATIONAL FEE-FOR-SERVICE MARKET SHARE.—The
product of the following:
‘‘(i) NATIONAL
FEE-FOR-SERVICE
MARKET
SHARE.—The national fee-for-service market share
percentage (determined under paragraph (5)) for
the year.
‘‘(ii) FEE-FOR-SERVICE
AREA-SPECIFIC
NON-
DRUG BID.—The fee-for-service area-specific non-
drug bid (as defined in paragraph (6)) for the area
and year.
‘‘(B) M+C COMPONENT WEIGHTED BY NATIONAL
MEDICARE+CHOICE MARKET SHARE.—The product of
the following:
‘‘(i) NATIONAL
MEDICARE+CHOICE
MARKET
SHARE.—1 minus the national fee-for-service mar-
ket share percentage for the year.
‘‘(ii) WEIGHTED AVERAGE OF PLAN BIDS IN
AREA.—The weighted average of the plan bids for
the area and year (as determined under paragraph
(4)(A)).
‘‘(4) DETERMINATION OF WEIGHTED AVERAGE BIDS
FOR AN AREA.—
‘‘(A) IN GENERAL.—For purposes of paragraph
(3)(B)(ii), the weighted average of plan bids for an
area and a year is the sum of the following products
for Medicare+Choice plans described in subparagraph
(C) in the area and year:
‘‘(i) PROPORTION OF EACH PLAN’S ENROLL-
EES IN THE AREA.—The number of individuals de-
scribed in subparagraph (B), divided by the total
number 
of 
such 
individuals 
for 
all
Medicare+Choice plans described in subparagraph
(C) for that area and year.
‘‘(ii) MONTHLY NON-DRUG BID AMOUNT.—The
unadjusted non-drug monthly bid amount.
‘‘(B) COUNTING OF INDIVIDUALS.—The Adminis-
trator shall count, for each Medicare+Choice plan de-
scribed in subparagraph (C) for an area and year, the
number of individuals who reside in the area and who
were enrolled under such plan under this part during
March of the previous year.
‘‘(C) EXCLUSION OF PLANS NOT OFFERED IN PRE-
VIOUS
YEAR.—For 
an 
area 
and 
year, 
the
Medicare+Choice plans described in this subparagraph
are plans that are offered in the area and year and
were offered in the area in March of the previous year.
‘‘(5) COMPUTATION OF NATIONAL FEE-FOR-SERVICE
MARKET
SHARE
PERCENTAGE.—The Administrator shall
determine, for a year, the proportion (in this subsection re-
ferred to as the ‘national fee-for-service market share per-
centage’) of Medicare+Choice eligible individuals who dur-
ing March of the previous year were not enrolled in a
Medicare+Choice plan.
‘‘(6) FEE-FOR-SERVICE
AREA-SPECIFIC
NON-DRUG
BID.—For purposes of this part, the term ‘fee-for-service
area-specific non-drug bid’ means, for an area and year,
the amount described in section 1853(j)(1) for the area and
year, except that any reference to a percent of less than
100 percent shall be deemed a reference to 100 percent.’’.
(b) APPLICATION OF CHOICE NON-DRUG BENCHMARK IN
COMPETITIVE-DEMONSTRATION AREAS.—
(1) IN GENERAL.—Section 1854 is amended—
(A) in subsection (b)(1)(C)(i), as added by section
211(b)(1)(A), by striking ‘‘(i) REQUIREMENT.—If’’ and
inserting ‘‘(i) REQUIREMENT FOR NON-COMPETITIVE-
DEMONSTRATION
AREAS.—In 
the 
case 
of 
a
Medicare+Choice payment area that is not a competi-
tive-demonstration area designated under section
1853(k)(1), if’’;
(B) in subsection (b)(1)(C), as so added, by insert-
ing after clause (i) the following new clause:
‘‘(ii) REQUIREMENT
FOR
COMPETITIVE-DEM-
ONSTRATION
AREAS.—In 
the 
case 
of 
a
Medicare+Choice payment area that is designated
as a competitive-demonstration area under section
1853(k)(1), if there are average per capita monthly
savings 
described 
in 
paragraph 
(4) 
for 
a
Medicare+Choice 
plan 
and 
year, 
the
Medicare+Choice plan shall provide to the enrollee
a monthly rebate equal to 75 percent of such sav-
ings.’’;
(C) by adding at the end of subsection (b), as
amended by section 211(b)(1), the following new para-
graph:
‘‘(4) COMPUTATION OF AVERAGE PER CAPITA MONTH-
LY SAVINGS FOR COMPETITIVE-DEMONSTRATION AREAS.—
For purposes of paragraph (1)(C)(ii), the average per cap-
ita monthly savings referred to in such paragraph for a
Medicare+Choice plan and year shall be computed in the
same manner as the average per capita monthly savings is
computed under paragraph (3) except that the reference to
the fee-for-service area-specific non-drug benchmark in
paragraph (3)(B)(i) (or to the benchmark amount as ad-
justed under paragraph (3)(C)(i)) is deemed to be a ref-
erence to the choice non-drug benchmark amount (or such
amount as adjusted in the manner described in paragraph
(3)(B)(i)).’’; and
(D) in subsection (d), as amended by section
211(d)(4), by inserting ‘‘and subsection (b)(1)(D)’’
after ‘‘subsection (b)(1)(C),’’.
(2) CONFORMING AMENDMENTS.—
(A) 
PAYMENT
OF
PLANS.—Section
1853(a)(1)(A)(ii), as amended by section 211(c)(1), is
amended—
(i) in subclause (I), by inserting ‘‘(or, in the
case of a competitive-demonstration area, the
choice non-drug benchmark amount)’’ after ‘‘bench-
mark amount’’; and
(ii) in subclauses (I) and (II), by inserting
‘‘(or, in the case of a competitive-demonstration
area, described in section 1854(b)(4))’’ after ‘‘sec-
tion 1854(b)(1)(C)’’.
(B) DEFINITION OF MONTHLY BASIC PREMIUM.—
Section 1854(b)(2)(A)(ii), as amended by section
211(d)(2), is amended by inserting ‘‘(or, in the case of
a competitive-demonstration area, the choice non-drug
benchmark amount)’’ after ‘‘benchmark amount’’.
(c) PREMIUM ADJUSTMENT.—Section 1839 (42 U.S.C.
1395r) is amended by adding at the end the following new sub-
section:
‘‘(h)(1) In the case of an individual who resides in a com-
petitive-demonstration 
area 
designated 
under 
section
1851(k)(1) and who is not enrolled in a Medicare+Choice plan
under part C, the monthly premium otherwise applied under
this part (determined without regard to subsections (b) and (f)
or any adjustment under this subsection) shall be adjusted as
follows: If the fee-for-service area-specific non-drug bid (as de-
fined in section 1853(k)(6)) for the Medicare+Choice area in
which the individual resides for a month—
‘‘(A) does not exceed the choice non-drug benchmark
(as determined under section 1853(k)(2)) for such area,
the amount of the premium for the individual for the
month shall be reduced by an amount equal to 75 percent
of the amount by which such benchmark exceeds such fee-
for-service bid; or
‘‘(B) exceeds such choice non-drug benchmark, the
amount of the premium for the individual for the month
shall be adjusted to ensure that—
‘‘(i) the sum of the amount of the adjusted pre-
mium and the choice non-drug benchmark for the area,
is equal to
‘‘(ii) the sum of the unadjusted premium plus
amount of the fee-for-service area-specific non-drug bid
for the area.
‘‘(2) Nothing in this subsection shall be construed as pre-
venting a reduction under paragraph (1)(A) in the premium
otherwise applicable under this part to zero or from requiring
the provision of a rebate to the extent such premium would
otherwise be required to be less than zero.
‘‘(3) The adjustment in the premium under this subsection
shall be effected in such manner as the Medicare Benefits Ad-
ministrator determines appropriate.
‘‘(4) In order to carry out this subsection (insofar as it is
effected through the manner of collection of premiums under
1840(a)), the Medicare Benefits Administrator shall transmit
to the Commissioner of Social Security—
‘‘(A) at the beginning of each year, the name, social
security account number, and the amount of the adjust-
ment (if any) under this subsection for each individual en-
rolled under this part for each month during the year; and
‘‘(B) periodically throughout the year, information to
update the information previously transmitted under this
paragraph for the year.’’.
(d) CONFORMING
AMENDMENT.—Section 1844(c) (42
U.S.C. 1395w(c)) is amended by inserting ‘‘and without regard
to any premium adjustment effected under section 1839(h)’’
before the period at the end.
(e) REPORT ON DEMONSTRATION PROGRAM.—Not later
than 6 months after the date on which the designation of the
4th competitive-demonstration area under section 1851(k)(1) of
the Social Security Act ends, the Medicare Payment Advisory
Commission shall submit to Congress a report on the impact
of the demonstration program under the amendments made by
this section, including such impact on premiums of medicare
beneficiaries, savings to the medicare program, and on adverse
selection.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to payments and premiums for periods be-
ginning on or after January 1, 2005.
SEC. 213. CONFORMING AMENDMENTS.
(a) CONFORMING AMENDMENTS RELATING TO BIDS.—
(1) Section 1854 (42 U.S.C. 1395w–24) is amended—
(A) in the heading by inserting ‘‘AND
BID
AMOUNTS’’ after ‘‘PREMIUMS’’;
(B) in the heading of subsection (a), by inserting
‘‘AND BID AMOUNTS’’ after ‘‘PREMIUMS’’; and
(C) in subsection (a)(5)(A), by inserting ‘‘para-
graphs (2), (3), and (4) of’’ after ‘‘filed under’’.
(b) ADDITIONAL CONFORMING AMENDMENTS.—
(1) ANNUAL
DETERMINATION
AND
ANNOUNCEMENT
OF
CERTAIN
FACTORS.—Section 1853(b) (42 U.S.C.
1395w–23(b)) is amended—
(A) in paragraph (1), by striking ‘‘the calendar
year concerned’’ and all that follows and inserting the
following: ‘‘the calendar year concerned with respect to
each Medicare+Choice payment area, the following:
‘‘(A) 
PRE-COMPETITION
INFORMATION.—For
years before 2005, the following:
‘‘(i) 
MEDICARE+CHOICE
CAPITATION
RATES.—The annual Medicare+Choice capitation
rate for each Medicare+Choice payment area for
the year.
‘‘(ii) ADJUSTMENT
FACTORS.—The risk and
other factors to be used in adjusting such rates
under subsection (a)(1)(A) for payments for
months in that year.
‘‘(B) COMPETITION INFORMATION.—For years be-
ginning with 2005, the following:
‘‘(i) BENCHMARKS.—The fee-for-service area-
specific non-drug benchmark under section 1853(j)
and, if applicable, the choice non-drug benchmark
under section 1853(k)(2), for the year involved
and, if applicable, the national fee-for-service mar-
ket share percentage.
‘‘(ii) ADJUSTMENT
FACTORS.—The adjust-
ment 
factors 
applied 
under 
section
1853(a)(1)(A)(iii) (relating to demographic adjust-
ment), section 1853(a)(1)(B) (relating to adjust-
ment for end-stage renal disease), and section
1853(a)(3) (relating to health status adjustment).
‘‘(iii) PROJECTED FEE-FOR-SERVICE BID.—In
the case of a competitive area, the projected fee-
for-service area-specific non-drug bid (as deter-
mined under subsection (k)(6)) for the area.
‘‘(iv) INDIVIDUALS.—The number of individ-
uals counted under subsection (k)(4)(B) and en-
rolled in each Medicare+Choice plan in the area.’’;
and
(B) in paragraph (3), by striking ‘‘in sufficient de-
tail’’ and all that follows up to the period at the end.
(2) REPEAL OF PROVISIONS RELATING TO ADJUSTED
COMMUNITY RATE (ACR).—
(A) IN GENERAL.—Subsections (e) and (f) of sec-
tion 1854 (42 U.S.C. 1395w–24) are repealed.
(B) 
CONFORMING
AMENDMENT.—Section
1839(a)(2) (42 U.S.C. 1395r(a)(2)) is amended by
striking ‘‘, and to reflect’’ and all that follows and in-
serting a period.
(3) PROSPECTIVE
IMPLEMENTATION
OF
NATIONAL
COVERAGE
DETERMINATIONS.—Section 1852(a)(5) (42
U.S.C. 1395w–22(a)(5)) is amended to read as follows:
‘‘(5) PROSPECTIVE
IMPLEMENTATION
OF
NATIONAL
COVERAGE
DETERMINATIONS.—The Secretary shall only
implement a national coverage determination that will re-
sult 
in 
a 
significant 
change 
in 
the 
costs 
to 
a
Medicare+Choice organization in a prospective manner
that applies to announcements made under section 1853(b)
after the date of the implementation of the determina-
tion.’’.
(4) PERMITTING GEOGRAPHIC ADJUSTMENT TO CON-
SOLIDATE MULTIPLE MEDICARE+CHOICE PAYMENT AREAS
IN
A
STATE
INTO
A
SINGLE
STATEWIDE
MEDICARE+CHOICE PAYMENT AREA.—Section 1853(d)(3)
(42 U.S.C. 1395w–23(e)(3)) is amended—
(A) by amending clause (i) of subparagraph (A) to
read as follows:
‘‘(i) to a single statewide Medicare+Choice
payment area,’’; and
(B) by amending subparagraph (B) to read as fol-
lows:
‘‘(B) BUDGET NEUTRALITY ADJUSTMENT.—In the
case of a State requesting an adjustment under this
paragraph, the Medicare Benefits Administrator shall
initially (and annually thereafter) adjust the payment
rates otherwise established under this section for
Medicare+Choice payment areas in the State in a man-
ner so that the aggregate of the payments under this
section in the State shall not exceed the aggregate pay-
ments that would have been made under this section
for Medicare+Choice payment areas in the State in the
absence of the adjustment under this paragraph.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to payments and premiums for periods be-
ginning on or after January 1, 2005.
TITLE III—RURAL HEALTH CARE
IMPROVEMENTS
SEC. 301. REFERENCE TO FULL MARKET BASKET IN-
CREASE FOR SOLE COMMUNITY HOSPITALS.
For provision eliminating any reduction from full market
basket in the update for inpatient hospital services for sole
community hospitals, see section 401.
SEC. 302. ENHANCED DISPROPORTIONATE SHARE HOS-
PITAL (DSH) TREATMENT FOR RURAL HOS-
PITALS 
AND 
URBAN 
HOSPITALS 
WITH
FEWER THAN 100 BEDS.
(a) BLENDING OF PAYMENT AMOUNTS.—
(1) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended by adding at the end the fol-
lowing new clause:
‘‘(xiv)(I) In the case of discharges in a fiscal year begin-
ning on or after October 1, 2002, subject to subclause (II),
there shall be substituted for the disproportionate share adjust-
ment percentage otherwise determined under clause (iv) (other
than subclause (I)) or under clause (viii), (x), (xi), (xii), or
(xiii), the old blend proportion (specified under subclause (III))
of the disproportionate share adjustment percentage otherwise
determined under the respective clause and 100 percent minus
such old blend proportion of the disproportionate share adjust-
ment percentage determined under clause (vii) (relating to
large, urban hospitals).
‘‘(II) Under subclause (I), the disproportionate share ad-
justment percentage shall not exceed 10 percent for a hospital
that is not classified as a rural referral center under subpara-
graph (C).
‘‘(III) For purposes of subclause (I), the old blend propor-
tion for fiscal year 2003 is 80 percent, for each subsequent
year (through 2006) is the old blend proportion under this sub-
clause for the previous year minus 20 percentage points, and
for each year beginning with 2007 is 0 percent.’’.
(2) 
CONFORMING
AMENDMENTS.—Section
1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is amended—
(A) in each of subclauses (II), (III), (IV), (V), and
(VI) of clause (iv), by inserting ‘‘subject to clause (xiv)
and’’ before ‘‘for discharges occurring’’;
(B) in clause (viii), by striking ‘‘The formula’’ and
inserting ‘‘Subject to clause (xiv), the formula’’; and
(C) in each of clauses (x), (xi), (xii), and (xiii), by
striking ‘‘For purposes’’ and inserting ‘‘Subject to
clause (xiv), for purposes’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to discharges occurring on or
after October 1, 2002.
SEC. 303. 2-YEAR PHASED-IN INCREASE IN THE STAND-
ARDIZED AMOUNT IN RURAL AND SMALL
URBAN AREAS TO ACHIEVE A SINGLE, UNI-
FORM STANDARDIZED AMOUNT.
Section 
1886(d)(3)(A)(iv) 
(42 
U.S.C.
1395ww(d)(3)(A)(iv)) is amended—
(1) by striking ‘‘(iv) For discharges’’ and inserting
‘‘(iv)(I) Subject to the succeeding provisions of this clause,
for discharges’’; and
(2) by adding at the end the following new subclauses:
‘‘(II) For discharges occurring during fiscal year
2003, the average standardized amount for hospitals lo-
cated other than in a large urban area shall be increased
by 1⁄2 of the difference between the average standardized
amount determined under subclause (I) for hospitals lo-
cated in large urban areas for such fiscal year and such
amount determined (without regard to this subclause) for
other hospitals for such fiscal year.
‘‘(III) For discharges occurring in a fiscal year begin-
ning with fiscal year 2004, the Secretary shall compute an
average standardized amount for hospitals located in any
area within the United States and within each region equal
to the average standardized amount computed for the pre-
vious fiscal year under this subparagraph for hospitals lo-
cated in a large urban area (or, beginning with fiscal year
2005, for hospitals located in any area) increased by the
applicable 
percentage 
increase 
under 
subsection
(b)(3)(B)(i).’’.
SEC. 304. MORE FREQUENT UPDATE IN WEIGHTS USED
IN HOSPITAL MARKET BASKET.
(a) MORE FREQUENT UPDATES IN WEIGHTS.—After re-
vising the weights used in the hospital market basket under
section 1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B)(iii)) to reflect the most current data avail-
able, the Secretary shall establish a frequency for revising such
weights in such market basket to reflect the most current data
available more frequently than once every 5 years.
(b) REPORT.—Not later than October 1, 2003, the Sec-
retary shall submit a report to Congress on the frequency es-
tablished under subsection (a), including an explanation of the
reasons for, and options considered, in determining such fre-
quency.
SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOS-
PITAL PROGRAM.
(a) REINSTATEMENT
OF PERIODIC INTERIM PAYMENT
(PIP).—Section 
1815(e)(2) 
(42 
U.S.C. 
1395g(e)(2)) 
is
amended—
(1) by striking ‘‘and’’ at the end of subparagraph (C);
(2) by adding ‘‘and’’ at the end of subparagraph (D);
and
(3) by inserting after subparagraph (D) the following
new subparagraph:
168
(vi) by striking subparagraph (I);
(vii) in subparagraph (L), by striking the
semicolon and inserting a period;
(viii) in the first sentence, after subparagraph
(L), by striking ‘‘and shall contain’’ and all that
follows through the period; and
(ix) in the seventh sentence, by inserting
‘‘medicare administrative contractor,’’ after ‘‘car-
rier,’’; and
(D) by striking paragraph (5);
(E) in paragraph (6)(D)(iv), by striking ‘‘carrier’’
and inserting ‘‘medicare administrative contractor’’;
and
(F) in paragraph (7), by striking ‘‘the carrier’’
and inserting ‘‘the Secretary’’ each place it appears.
(4) Subsection (c) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2), by striking ‘‘contract under
this section which provides for the disbursement of
funds, as described in subsection (a)(1)(B),’’ and in-
serting ‘‘contract under section 1874A that provides for
making payments under this part’’;
(C) in paragraph (3)(A), by striking ‘‘subsection
(a)(1)(B)’’ and inserting ‘‘section 1874A(a)(3)(B)’’;
(D) in paragraph (4), by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative contractor’’; and
(E) by striking paragraphs (5) and (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ‘‘carrier or
carriers’’ and inserting ‘‘medicare administrative contractor
or contractors’’.
(7) Subsection (h) is amended—
(A) in paragraph (2)—
(i) by striking ‘‘Each carrier having an agree-
ment with the Secretary under subsection (a)’’ and
inserting ‘‘The Secretary’’; and
169
(ii) by striking ‘‘Each such carrier’’ and in-
serting ‘‘The Secretary’’;
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an agreement
with the Secretary under subsection (a)’’ and in-
serting ‘‘medicare administrative contractor having
a contract under section 1874A that provides for
making payments under this part’’; and
(ii) by striking ‘‘such carrier’’ and inserting
‘‘such contractor’’;
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and inserting ‘‘a
medicare administrative contractor’’ each place it
appears; and
(ii) by striking ‘‘the carrier’’ and inserting
‘‘the contractor’’ each place it appears; and
(D) in paragraphs (5)(A) and (5)(B)(iii), by strik-
ing ‘‘carriers’’ and inserting ‘‘medicare administrative
contractors’’ each place it appears.
(8) Subsection (l) is amended—
(A) in paragraph (1)(A)(iii), by striking ‘‘carrier’’
and inserting ‘‘medicare administrative contractor’’;
and
(B) in paragraph (2), by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative contractor’’.
(9) Subsection (p)(3)(A) is amended by striking ‘‘car-
rier’’ and inserting ‘‘medicare administrative contractor’’.
(10) Subsection (q)(1)(A) is amended by striking ‘‘car-
rier’’.
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as otherwise provided
in this subsection, the amendments made by this sec-
tion shall take effect on October 1, 2004, and the Sec-
retary is authorized to take such steps before such date
as may be necessary to implement such amendments on
a timely basis.