I
104TH CONGRESS
1ST SESSION
H. R. 2422
To amend title XVIII of the Social Security Act to provide for security
of the medicare program.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 28, 1995
Mr. MCDERMOTT (for himself, Mr. FORD, Mr. OLVER, Mr. DELLUMS, Mr.
TORRES, Mr. MOAKLEY, Mrs. CLAYTON, Mr. KLECZKA, Mr. SCOTT, Ms.
MCKINNEY, Ms. PELOSI, Mr. SPRATT, Mr. BARRETT of Wisconsin, Mr.
OWENS, Mr. FALEOMAVAEGA, Mr. YATES, Mr. VENTO, Mr. CONYERS,
Mr. MARTINEZ, Miss COLLINS of Michigan, Mr. GENE GREEN of Texas,
and Mr. WATT of North Carolina) introduced the following bill; which
was referred to the Committee on Ways and Means, and in addition to
the Committee on Commerce, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to provide
for security of the medicare program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Security Act of 1995’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—MEDICARE SECURITY COMMISSION
Sec. 101. Establishment of Medicare Security Commission.
Sec. 102. Duties.
Sec. 103. Membership.
Sec. 104. Staff and consultants.
Sec. 105. Powers.
Sec. 106. Report.
Sec. 107. Termination.
TITLE II—MEDICARE SAVINGS
Subtitle A—Savings in Medicare Part A
Sec. 201. Reductions in updates for inpatient hospital services subject to pro-
spective payment system.
Sec. 202. Payment for ancillary costs of skilled nursing facilities under physi-
cian fee schedule.
Sec. 203. Maintaining savings resulting from temporary freeze on payment in-
creases skilled nursing facility services.
Sec. 204. Continuation of reduction in payments for capital-related costs of in-
patient hospital services.
Subtitle B—Savings in Medicare Part B
Sec. 211. Elimination of formula-driven overpayments for certain outpatient
hospital services.
Sec. 212. Continuing reduction in practice expense relative value units for cer-
tain services.
Sec. 213. Correction of MVPS upward bias.
Sec. 214. Application of competitive acquisition process for durable medical
equipment and clinical diagnostic laboratory tests.
Subtitle C—Savings in Parts A and B
Sec. 221. Extension of secondary payer data match requirements.
Sec. 222. Maintaining savings resulting from temporary freeze on payment in-
creases for home health services.
Sec. 223. 6 percent reduction in AAPCC paid to medicare health maintenance
organizations.
Subtitle D—Transfers to Part A Trust Fund
Sec. 231. Transfer of amounts saved to Federal Hospital Insurance Trust
Fund.
TITLE I—MEDICARE SECURITY
COMMISSION
SEC. 101. ESTABLISHMENT OF MEDICARE SECURITY COM-
MISSION.
There is established a commission to be known as the
Medicare Security Commission (in this Act referred to as
the ‘‘Commission’’).
SEC. 102. DUTIES.
The Commission shall make specific recommenda-
tions regarding revisions to the medicare program and
health care financing and coverage generally to assure the
continuing viability of the program during 2010 and there-
after when demographic changes are expected to expand
medicare’s enrollment significantly. Such revisions must
be designed in a manner that does not increase the num-
ber of uninsured or reduce access to care by program
beneficiaries or patients in general and does not increase
the financial obligations of current program beneficiaries,
including revisions to the methodology under which pay-
ments are made by the medicare program on behalf of
beneficiaries who are enrolled in private health care plans.
SEC. 103. MEMBERSHIP.
(a) APPOINTMENT.—
(1) IN
GENERAL.—The Commission shall be
composed of seven members appointed by the Presi-
dent, of whom two shall be appointed from a list of
nominees submitted by the President pro tempore of
the Senate (after consultation with the minority
leader of the Senate) and two shall be appointed
from among a list of nominees submitted by the
Speaker of the House of Representatives (after con-
sultation with the minority leader of the House of
Representatives). Not more than three members of
the Commission may be of the same political party.
(2) 
DEADLINE
FOR
APPOINTMENT
AND
TERMS.—The members of the Commission shall be
appointed not later than December 1, 1995, and
shall serve for the life of the Commission.
(b) CHAIRMAN AND VICE CHAIRMAN.—The Commis-
sion shall elect a chairman and a vice chairman from
among its members.
(c) VACANCIES.—Any vacancy in the membership of
the Commission shall be filled in the manner in which the
original appointment was made and shall not affect the
power of the remaining members to execute the duties of
the Commission.
(d) QUORUM.—A quorum shall consist of five mem-
bers of the Commission, except that two members may
conduct a hearing under section 105(a).
(e) MEETINGS.—The Commission shall meet at the
call of its chairman or a majority of its members.
(f) COMPENSATION AND REIMBURSEMENT OF EX-
PENSES.—Members of the Commission are not entitled to
receive compensation for service on the Commission. Mem-
bers may be reimbursed for travel, subsistence, and other
necessary expenses incurred in carrying out the duties of
the Commission.
SEC. 104. STAFF AND CONSULTANTS.
(a) STAFF.—The Commission may appoint and de-
termine the compensation of such staff as may be nec-
essary to carry out the duties of the Commission. Such
appointments and compensation may be made without re-
gard to the provisions of title 5, United States Code, that
govern appointments in the competitive services, and the
provisions of chapter 51 and subchapter III of chapter 53
of such title that relate to classifications and the General
Schedule pay rates.
(b) CONSULTANTS.—The Commission may procure
such temporary and intermittent services of consultants
under section 3109(b) of title 5, United States Code, as
the Commission determines to be necessary to carry out
the duties of the Commission.
SEC. 105. POWERS.
(a) HEARINGS AND OTHER ACTIVITIES.—For the
purpose of carrying out its duties, the Commission may
hold such hearings and undertake such other activities as
the Commission determines to be necessary to carry out
its duties.
(b) STUDIES BY GENERAL ACCOUNTING OFFICE.—
Upon the request of the Commission, the Comptroller
General shall conduct such studies or investigations as the
Commission determines to be necessary to carry out its
duties.
(c) COST ESTIMATES BY CONGRESSIONAL BUDGET
OFFICE.—
(1) IN
GENERAL.—Upon the request of the
Commission, the Director of the Congressional
Budget Office shall provide to the Commission such
cost estimates as the Commission determines to be
necessary to carry out its duties.
(2) REIMBURSEMENT.—The Commission shall
reimburse the Director of the Congressional Budget
Office for expenses relating to the employment in
the office of the Director of such additional staff as
may be necessary for the Director to comply with re-
quests by the Commission under paragraph (1).
(d) DETAIL OF FEDERAL EMPLOYEES.—Upon the
request of the Commission, the head of any Federal agen-
eral Services shall provide to the Commission on a reim-
bursable basis such administrative support services as the
Commission may request.
(i) ACCEPTANCE OF DONATIONS.—The Commission
may accept, use, and dispose of gifts or donations of serv-
ices or property.
SEC. 106. REPORT.
Not later than January 1, 1998, the Commission
shall submit to Congress a report containing its rec-
ommendations under section 102, and shall include in the
report recommendations for appropriate legislative initia-
tives to carry out its recommendations.
SEC. 107. TERMINATION.
The Commission shall terminate 30 days after the
date of submission of the report required in section 106.
TITLE II—MEDICARE SAVINGS
Subtitle A—Savings in Medicare
Part A
SEC. 201. REDUCTIONS IN UPDATES FOR INPATIENT HOS-
PITAL SERVICES SUBJECT TO PROSPECTIVE
PAYMENT SYSTEM.
Section 1886(b)(3)(B)(i) of the Social Security Act
(42 U.S.C. 1395ww(b)(3)(B)(i)) is amended—
(1) in subclause (XI), by striking ‘‘fiscal year
1996’’ and inserting ‘‘fiscal years 1996 through
1999’’, and
(2) by striking subclauses (XII) and (XIII) and
inserting the following:
‘‘(XII) for fiscal years 2000 through 2002, the
market basket percentage increase minus 1 percent-
age point for hospitals in all areas, and
‘‘(XIII) for fiscal year 2003 and each subse-
quent fiscal year, the market basket percentage in-
crease for hospitals in all areas.’’.
SEC. 202. PAYMENT FOR ANCILLARY COSTS OF SKILLED
NURSING FACILITIES UNDER PHYSICIAN FEE
SCHEDULE.
(a) REQUIRING PAYMENT UNDER PART B TO BE
MADE UNDER PHYSICIAN FEE SCHEDULE.—
(1) IN GENERAL.—Section 1832(a)(2)(C) of the
Social Security Act (42 U.S.C. 1395k(a)(2)(C)) is
amended by striking the semicolon at the end and
inserting the following: ‘‘, other than services fur-
nished by a skilled nursing facility or by others
under arrangement with them made by the facility;’’.
(2) CLARIFICATION OF PAYMENT FOR SPEECH-
LANGUAGE PATHOLOGY SERVICES.—The fourth sen-
tence of section 1861(p) of such Act (42 U.S.C.
1395x(p)) is amended by striking ‘‘outpatient,’’ and
inserting ‘‘outpatient or as an inpatient of an ex-
tended care facility,’’.
(b) CONFORMING AMENDMENT FOR SERVICES FUR-
NISHED UNDER PART A.—Section 1814 of such Act (42
U.S.C. 1395f) is amended—
(1) in subsection (b) in the matter preceding
paragraph (1)—
(A) by striking ‘‘and other than’’ and in-
serting ‘‘other than’’, and
(B) by striking ‘‘equipment)’’ and inserting
‘‘equipment, and other than a skilled nursing
facility with respect to extended care services
described in section 1861(h)(3))’’; and
(2) by adding at the end the following new sub-
section:
‘‘Payments to Skilled Nursing Facilities for Certain
Therapy Services
‘‘(m) The amount paid to any skilled nursing facility
with respect to extended care services described in section
1861(h)(3) for which payment may be made under this
part shall be the amount determined pursuant to section
1833(a)(1)(N).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
October 1, 1995.
SEC. 203. MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
SKILLED NURSING FACILITY SERVICES.
(a) BASING UPDATES TO PER DIEM COST LIMITS ON
LIMITS FOR FISCAL YEAR 1993.—
(1) IN GENERAL.—The last sentence of section
1888(a) of the Social Security Act (42 U.S.C.
1395yy(a)) is amended by adding at the end the fol-
lowing: ‘‘(except that such updates may not take
into account any changes in the routine service costs
of skilled nursing facilities occurring during cost re-
porting periods which began during fiscal year 1994
or fiscal year 1995).’’.
(2) NO
EXCEPTIONS
PERMITTED
BASED
ON
AMENDMENT.—The Secretary of Health and Human
Services shall not consider the amendment made by
paragraph (1) in making any adjustments pursuant
to section 1888(c) of the Social Security Act.
(b) PAYMENTS
DETERMINED
ON
PROSPECTIVE
BASIS.—Any change made by the Secretary of Health and
Human Services in the amount of any prospective pay-
ment paid to a skilled nursing facility under section
1888(d) of the Social Security Act for cost reporting peri-
ods beginning on or after October 1, 1995, may not take
into account any changes in the costs of services occurring
during cost reporting periods which began during fiscal
year 1994 or fiscal year 1995.
SEC. 204. CONTINUATION OF REDUCTION IN PAYMENTS
FOR CAPITAL-RELATED COSTS OF INPATIENT
HOSPITAL SERVICES.
Section 1886(g)(1)(A) of the Social Security Act (42
U.S.C. 
1395ww(g)(1)(A)) 
is 
amended 
by 
striking
‘‘through 1995’’ and inserting ‘‘through 2002’’.
Subtitle B—Savings in Medicare
Part B
SEC. 211. ELIMINATION OF FORMULA-DRIVEN OVERPAY-
MENTS FOR CERTAIN OUTPATIENT HOSPITAL
SERVICES.
(a) 
AMBULATORY
SURGICAL
CENTER
PROCE-
DURES.—Section 1833(i)(3)(B)(i)(II) of the Social Secu-
rity Act (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).’’.
(b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE-
DURES.—Section 1833(n)(1)(B)(i)(II) of such Act (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 Janu-
ary 1, 1996.
SEC. 212. CONTINUING REDUCTION IN PRACTICE EXPENSE
RELATIVE VALUE UNITS FOR CERTAIN SERV-
ICES.
(a) IN GENERAL.—Section 1848(c)(2)(E)(i) of the
Social Security Act (42 U.S.C. 1395w@4(c)(2)(E)(i)) is
amended—
(1) by striking ‘‘and’’ at the end of subclause
(II);
(2) by striking the period at the end of
subclause (III); and
(3) by adding at the end the following new
subclause:
‘‘(IV) 1997, by an additional 25
percent of such excess.’’.
(b) LOWERING FLOOR
ON REDUCTIONS.—Section
1848(c)(2)(E)(ii) 
of 
such 
Act 
(42 
U.S.C.
1395w@4(c)(2)(E)(ii)) is amended by striking ‘‘128 per-
cent’’ and inserting ‘‘120 percent’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to physicians’ services furnished
on or after January 1, 1997.
SEC. 213. CORRECTION OF MVPS UPWARD BIAS.
(a) IN GENERAL.—Section 1848(f)(2)(A)(iv) of the
Social Security Act (42 U.S.C. 1395w–4(f)(2)(A)(iv)) is
amended by striking ‘‘including changes in law and regula-
tions affecting the percentage increase described in clause
(i)’’ and inserting ‘‘excluding anticipated responses to
such changes’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to performance
standard rates of increase determined for fiscal year 1996
and succeeding fiscal years.
SEC. 214. APPLICATION OF COMPETITIVE ACQUISITION
PROCESS FOR DURABLE MEDICAL EQUIP-
MENT AND CLINICAL DIAGNOSTIC LABORA-
TORY TESTS.
(a) IN GENERAL.—Part B of title XVIII of the Social
Security Act is amended by inserting after section 1846
the following:
‘‘COMPETITION ACQUISITION FOR CERTAIN ITEMS AND
SERVICES
‘‘SEC. 1847. (a) ESTABLISHMENT
OF
BIDDING
AREAS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish competitive acquisition areas for the purpose of
awarding a contract or contracts for the furnishing
under this part of the items and services described
in subsection (c) on or after January 1, 1997. The
Secretary may establish different competitive acqui-
sition areas under this subsection for different class-
es of items and services under this part.
‘‘(2) CRITERIA
FOR
ESTABLISHMENT.—The
competitive acquisition areas established under para-
graph (1) shall—
‘‘(A) initially be, or be within, metropolitan
statistical areas; and
‘‘(B) be chosen based on the availability
and accessibility of suppliers and the probable
savings to be realized by the use of competitive
bidding in the furnishing of items and services
in the area.
‘‘(b) AWARDING OF CONTRACTS IN AREAS.—
‘‘(1) IN GENERAL.—The Secretary shall con-
duct a competition among individuals and entities
supplying items and services under this part for
each competitive acquisition area established under
subsection (a) for each class of items and services.
‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—
The Secretary may not award a contract to any indi-
vidual or entity under the competition conducted
pursuant to paragraph (1) to furnish an item or
service under this part unless the Secretary finds
that the individual or entity—
‘‘(A) meets quality standards specified by
the Secretary for the furnishing of such item or
service; and
‘‘(B) offers to furnish a total quantity of
such item or service that is sufficient to meet
the expected need within the competitive acqui-
sition area.
‘‘(3) CONTENTS OF CONTRACT.—A contract en-
tered into with an individual or entity under the
competition conducted pursuant to paragraph (1)
shall specify (for all of the items and services within
a class)—
‘‘(A) the quantity of items and services the
entity shall provide; and
‘‘(B) such other terms and conditions as
the Secretary may require.
‘‘(c) SERVICES DESCRIBED.—The items and services
to which the provisions of this section shall apply are as
follows:
‘‘(1) Covered items under section 1834(a).
‘‘(2) Clinical diagnostic laboratory tests.
‘‘(3) Such other items and services for which
the Secretary determines that the use of competitive
acquisition under this section is appropriate and
cost-effective.’’.
(b) ITEMS AND SERVICES TO BE FURNISHED ONLY
THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)
of such Act (42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14);
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (15) the fol-
lowing new paragraph:
‘‘(16) where such expenses are for an item or
service furnished in a competitive acquisition area
(as established by the Secretary under section
1847(a)) by an individual or entity other than the
supplier with whom the Secretary has entered into
a contract under section 1847(b) for the furnishing
of such item or service in that area, unless the Sec-
retary finds that such expenses were incurred in a
case of urgent need.’’.
(c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI-
TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC-
TION IN PAYMENTS.—Notwithstanding any other provi-
sion of title XVIII of the Social Security Act, if the estab-
lishment of competitive acquisition areas under section
1847 of such Act (as added by subsection (a)) and the
limitation of coverage for items and services under part
B of such title to items and services furnished by providers
with competitive acquisition contracts under such section
does not result in a reduction of at least 10 percent in
the projected payment amount that would have applied to
the item or service under part B if the item or service
had not been furnished through competitive acquisition
under such section, the Secretary shall reduce the pay-
ment amount by such percentage as the Secretary deter-
mines necessary to result in such a reduction.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after January 1, 1997.
Subtitle C—Savings in Parts A and
B
SEC. 221. EXTENSION OF SECONDARY PAYER DATA MATCH
REQUIREMENTS.
(a) IN GENERAL.—Section 1862(b)(5)(C)(iii) of the
Social Security Act (42 U.S.C. 1395y(b)(5)(C)(iii)) is
amended by striking ‘‘1998’’ and inserting ‘‘2002’’.
(b) 
CONFORMING
AMENDMENT.—Section
6103(l)(12) of the Internal Revenue Code of 1986 is
amended by striking ‘‘1998’’ and inserting ‘‘2002’’.
SEC. 222. MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR HOME HEALTH SERVICES.
(a) BASING UPDATES TO PER VISIT COST LIMITS ON
LIMITS
FOR
FISCAL
YEAR
1993.—Section
1861(v)(1)(L)(iii) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by adding at the end the
following sentence: ‘‘In establishing limits under this sub-
paragraph, the Secretary may not take into account any
changes in the costs of the provision of services furnished
by home health agencies with respect to cost reporting pe-
riods which began on or after July 1, 1994, and before
July 1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMEND-
MENT.—The Secretary of Health and Human Services
shall not consider the amendment made by subsection (a)
in making any exemptions and exceptions pursuant to sec-
tion 1861(v)(1)(L)(ii) of the Social Security Act.
SEC. 223. 6 PERCENT REDUCTION IN AAPCC PAID TO MEDI-
CARE 
HEALTH 
MAINTENANCE 
ORGANIZA-
TIONS.
(a) IN GENERAL.—Section 1876(a)(1)(C) of the So-
cial Security Act (42 U.S.C. 1395mm(a)(1)(C)) is amend-
ed by striking ‘‘95 percent’’ and inserting ‘‘89 percent’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to contracts entered
into or renewed under section 1876 of the Social Security
Act on or after the date of the enactment of this Act.
Subtitle D—Transfers to Part A
Trust Fund
SEC. 231. TRANSFER OF AMOUNTS SAVED TO FEDERAL
HOSPITAL INSURANCE TRUST FUND.
(a) IN GENERAL.—For each fiscal year, the Sec-
retary of the Treasury shall transfer to the Federal Hos-
pital Insurance Trust Fund under section 1817 of the So-
cial Security Act amounts equivalent to the Secretary of
the Treasury’s estimate of the amount which would have
been expended from the Federal Supplementary Medical
Insurance Trust Fund under section 1841 of such Act
during such fiscal year but for the provisions of this title.
(b) TRANSFER RULES, ETC..—The provisions of sec-
tion 9602 of the Internal Revenue Code of 1986 shall
apply to transfers under this section.
Æ
HR 2422 IH——2