I
107TH CONGRESS
1ST SESSION
H. R. 2768
To amend title XVIII of the Social Security Act to provide regulatory relief
and contracting flexibility under the Medicare Program.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 2, 2001
Mrs. JOHNSON of Connecticut (for herself, Mr. STARK, Mr. CAMP, Mr.
CARDIN, Mr. CRANE, Ms. DUNN of Washington, Mr. ENGLISH, Mr.
FOLEY, Mr. HAYWORTH, Mr. SAM JOHNSON of Texas, Mr. KLECZKA,
Mr. LEWIS of Georgia, Mr. LEWIS of Kentucky, Mr. MCCRERY, Mr.
MCDERMOTT, Mr. MCNULTY, Mr. RAMSTAD, Mr. SHAW, Mrs. THURMAN,
and Mr. WELLER) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on En-
ergy and 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
regulatory relief and contracting flexibility under 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; AMENDMENTS TO SOCIAL SECU-
RITY ACT; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Regulatory and Contracting Reform Act of
2001’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
Act an amendment is expressed in terms of an amendment
to or repeal of a section or other provision, the reference
shall be considered to be made to that section or other
provision of the Social Security Act.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; table of contents.
Sec. 2. Issuance of regulations.
Sec. 3. Compliance with changes in regulations and policies.
Sec. 4. Increased flexibility in medicare administration.
Sec. 5. Provider education and technical assistance.
Sec. 6. Small provider technical assistance demonstration program.
Sec. 7. Medicare Provider Ombudsman.
Sec. 8. Provider appeals.
Sec. 9. Recovery of overpayments and prepayment review; enrollment of pro-
viders.
Sec. 10. Beneficiary outreach demonstration program.
Sec. 11. Policy development regarding evaluation and management (E & M)
documentation guidelines.
(d) CONSTRUCTION.—Nothing in this Act shall be
construed—
(1) to compromise or affect existing legal au-
thority for addressing fraud or abuse, whether it be
criminal prosecution, civil enforcement, or adminis-
trative remedies, including under sections 3729
through 3733 of title 31, United States Code
(known as the False Claims Act); or
(2) to prevent or impede the Department of
Health and Human Services in any way from its on-
going efforts to eliminate waste, fraud, and abuse in
the medicare program.
Furthermore, the consolidation of medicare administrative
contracting set forth in this Act does not constitute con-
solidation of the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance Trust
Fund or reflect any position on that issue.
SEC. 2. ISSUANCE OF REGULATIONS.
(a) CONSOLIDATION OF PROMULGATION TO ONCE A
MONTH.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C.
1395hh) is amended by adding at the end the fol-
lowing new subsection:
‘‘(d) The Secretary shall issue proposed or final (in-
cluding interim final) regulations to carry out this title
only on one business day of every month unless publication
on another date is necessary to comply with requirements
under law.’’.
(2) REPORT ON PUBLICATION OF REGULATIONS
ON A QUARTERLY BASIS.—Not later than 3 years
after the date of the enactment of this Act, the Sec-
retary of Health and Human Services shall submit
to Congress a report on the feasibility of requiring
that regulations described in section 1871(d) of the
Social Security Act only be promulgated on a single
day every calendar quarter.
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to regulations promul-
gated on or after the date that is 30 days after the
date of the enactment of this Act.
(b) REGULAR
TIMELINE
FOR
PUBLICATION
OF
FINAL RULES.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3) The Secretary, in consultation with the Director
of the Office of Management and Budget, shall establish
a regular timeline for the publication of final regulations
based on the previous publication of a proposed regulation
or an interim final regulation. Such timeline may vary
among different regulations based on differences in the
complexity of the regulation, the number and scope of
comments received, and other relevant factors. In the case
of interim final regulations, upon the expiration of the reg-
ular timeline established under this paragraph for the pub-
lication of a final regulation after opportunity for public
comment, the interim final regulation shall not continue
in effect unless the Secretary publishes a notice of continu-
ation of the regulation that includes an explanation of why
the regular timeline was not complied with. If such a no-
tice is published, the regular timeline for publication of
the final regulation shall be treated as having begun again
as of the date of publication of the notice.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act. The Secretary of Health and
Human Services shall provide for an appropriation
transition to take into account the backlog of pre-
viously published interim final regulations.
(c) LIMITATIONS ON NEW MATTER IN FINAL REGU-
LATIONS.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)), as amended by subsection (b), is further
amended by adding at the end the following new
paragraph:
‘‘(4) Insofar as a final regulation (other than
an interim final regulation) includes a provision that
is not a logical outgrowth of the relevant notice of
proposed rulemaking relating to such regulation,
that provision shall be treated as a proposed regula-
tion and shall not take effect until there is the fur-
ther opportunity for public comment and a publica-
tion of the provision again as a final regulation.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to final regulations
published on or after the date of the enactment of
this Act.
SEC. 3. COMPLIANCE WITH CHANGES IN REGULATIONS
AND POLICIES.
(a) NO
RETROACTIVE
APPLICATION
OF
SUB-
STANTIVE CHANGES; TIMELINE FOR COMPLIANCE WITH
SUBSTANTIVE CHANGES AFTER NOTICE.—Section 1871
(42 U.S.C. 1395hh), as amended by section 2(a), is
amended by adding at the end the following new sub-
section:
‘‘(e)(1)(A) A substantive change in regulations, man-
ual instructions, interpretative rules, statements of policy,
or guidelines of general applicability under this title shall
not be applied (by extrapolation or otherwise) retroactively
to items and services furnished before the date the change
was issued, unless the Secretary determines that such ret-
roactive application would have a positive impact on bene-
ficiaries or providers of services, physicians, practitioners,
and other suppliers or would be necessary to comply with
statutory requirements.
the provider of services, physician, practitioner or supplier
shall not be subject to any sanction if the provider of serv-
ices, physician, practitioner, or supplier reasonably relied
on such guidance.’’.
SEC. 4. INCREASED FLEXIBILITY IN MEDICARE ADMINIS-
TRATION.
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE
ADMINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by
inserting after section 1874 the following new sec-
tion:
‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE
CONTRACTORS
‘‘SEC. 1874A. (a) AUTHORITY.—
‘‘(1) 
AUTHORITY
TO
ENTER
INTO
CON-
TRACTS.—The Secretary may enter into contracts
with any entity to serve as a medicare administrative
contractor with respect to the performance of any or
all of the functions described in paragraph (3) or
parts of those functions (or, to the extent provided
in a contract, to secure performance thereof by other
entities).
‘‘(2) MEDICARE ADMINISTRATIVE CONTRACTOR
DEFINED.—For purposes of this title and title XI—
‘‘(A) IN
GENERAL.—The term ‘medicare
administrative contractor’ means an agency, or-
ganization, or other person with a contract
under this section.
‘‘(B) APPROPRIATE
MEDICARE
ADMINIS-
TRATIVE
CONTRACTOR.—With respect to the
performance of a particular function or activity
in relation to an individual entitled to benefits
under part A or enrolled under part B, or both,
a specific provider of services, physician, practi-
tioner, or supplier (or class of such providers of
services, physicians, practitioners, or suppliers),
the ‘appropriate’ medicare administrative con-
tractor is the medicare administrative con-
tractor that has a contract under this section
with respect to the performance of that function
or activity in relation to that individual, pro-
vider of services, physician, practitioner, or sup-
plier or class of provider of services, physician,
practitioner, or supplier.
‘‘(3) FUNCTIONS
DESCRIBED.—The functions
referred to in paragraph (1) are payment functions,
provider services functions, and beneficiary services
functions as follows:
‘‘(A) 
DETERMINATION
OF
PAYMENT
AMOUNTS.—Determining (subject to the provi-
sions of section 1878 and to such review by the
Secretary as may be provided for by the con-
tracts) the amount of the payments required
pursuant to this title to be made to providers
of services, physicians, practitioners, and sup-
pliers.
‘‘(B) MAKING
PAYMENTS.—Making pay-
ments described in subparagraph (A).
‘‘(C) BENEFICIARY
EDUCATION
AND
AS-
SISTANCE.—Serving as a center for, and com-
municating to individuals entitled to benefits
under part A or enrolled under part B, or both,
with respect to education and outreach for
those individuals, and assistance with specific
issues, concerns or problems of those individ-
uals.
‘‘(D) PROVIDER
CONSULTATIVE
SERV-
ICES.—Providing consultative services to insti-
tutions, agencies, and other persons to enable
them to establish and maintain fiscal records
necessary for purposes of this title and other-
wise to qualify as providers of services, physi-
cians, practitioners, or suppliers.
‘‘(E) 
COMMUNICATION
WITH
PRO-
VIDERS.—Serving as a center for, and commu-
nicating to providers of services, physicians,
practitioners, and suppliers, any information or
instructions furnished to the medicare adminis-
trative contractor by the Secretary, and serving
as a channel of communication from such pro-
viders, physicians, practitioners, and suppliers
to the Secretary.
‘‘(F) PROVIDER
EDUCATION
AND
TECH-
NICAL ASSISTANCE.—Performing the functions
described in subsections (e) and (f), relating to
provider education, training, and technical as-
sistance.
‘‘(G) 
ADDITIONAL
FUNCTIONS.—Per-
forming such other functions as are necessary
to carry out the purposes of this title.
‘‘(4) RELATIONSHIP TO MIP CONTRACTS.—
‘‘(A) NONDUPLICATION
OF
DUTIES.—In
entering into contracts under this section, the
Secretary shall assure that functions of medi-
care administrative contractors in carrying out
activities under parts A and B do not duplicate
functions carried out under the Medicare Integ-
rity Program under section 1893. The previous
sentence shall not apply with respect to the ac-
tivity described in section 1893(b)(5) (relating
to prior authorization of certain items of dura-
ble 
medical 
equipment 
under 
section
1834(a)(15)).
‘‘(B) CONSTRUCTION.—An entity shall not
be treated as a medicare administrative con-
tractor merely by reason of having entered into
a contract with the Secretary under section
1893.
‘‘(b) CONTRACTING REQUIREMENTS.—
‘‘(1) USE OF COMPETITIVE PROCEDURES.—
‘‘(A) IN GENERAL.—Except as provided in
laws with general applicability to Federal acqui-
sition and procurement or in subparagraph (B),
the Secretary shall use competitive procedures
when entering into contracts with medicare ad-
ministrative contractors under this section.
‘‘(B) RENEWAL OF CONTRACTS.—The Sec-
retary may renew a contract with a medicare
administrative contractor under this section
from term to term without regard to section 5
of title 41, United States Code, or any other
provision of law requiring competition, if the
medicare administrative contractor has met or
exceeded the performance requirements applica-
ble with respect to the contract and contractor,
except that the Secretary shall provide for the
application of competitive procedures under
such a contract not less frequently than once
every four years.
‘‘(C) TRANSFER
OF
FUNCTIONS.—Func-
tions may be transferred among medicare ad-
ministrative contractors without regard to any
provision of law requiring competition. The Sec-
retary shall ensure that performance quality is
considered in such transfers.
‘‘(D) INCENTIVES
FOR
QUALITY.—The
Secretary shall provide incentives for medicare
administrative contractors to provide quality
service and to promote efficiency.
‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No
contract under this section shall be entered into with
any medicare administrative contractor unless the
Secretary finds that such medicare administrative
contractor will perform its obligations under the con-
tract efficiently and effectively and will meet such
requirements as to financial responsibility, legal au-
thority, and other matters as the Secretary finds
pertinent.
‘‘(3) DEVELOPMENT
OF
SPECIFIC
PERFORM-
ANCE REQUIREMENTS.—In developing contract per-
formance requirements, the Secretary shall develop
such amount as the Secretary may deem appro-
priate.
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—A contract with any medi-
care administrative contractor under this section
may contain such terms and conditions as the Sec-
retary finds necessary or appropriate and may pro-
vide for advances of funds to the medicare adminis-
trative contractor for the making of payments by it
under subsection (a)(3)(B).
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN
DATA COLLECTION.—The Secretary may not require,
as a condition of entering into a contract under this
section, that the medicare administrative contractor
match data obtained other than in its activities
under this title with data used in the administration
of this title for purposes of identifying situations in
which the provisions of section 1862(b) may apply.
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD-
MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as
a certifying officer shall, in the absence of negligence
or intent to defraud the United States, be liable with
respect to any payments certified by the individual
under this section.
‘‘(2) DISBURSING OFFICER.—No disbursing of-
ficer shall, in the absence of negligence or intent to
defraud the United States, be liable with respect to
any payment by such officer under this section if it
was based upon an authorization (which meets the
applicable requirements for such internal controls es-
tablished by the Comptroller General) of a certifying
officer designated as provided in paragraph (1) of
this subsection.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE
CONTRACTOR.—A 
medicare 
administrative 
con-
tractor shall be liable to the United States for a pay-
ment referred to in paragraph (1) or (2) if, in con-
nection with such payment, an individual referred to
in either such paragraph acted with negligence or in-
tent to defraud the United States.’’.
(2) CONSIDERATION
OF
INCORPORATION
OF
CURRENT LAW STANDARDS.—In developing contract
performance requirements under section 1874A(b)
of the Social Security Act, as inserted by paragraph
(1), the Secretary of Health and Human Services
shall consider inclusion of the performance stand-
ards described in sections 1816(f)(2) of such Act
(relating to timely processing of reconsiderations and
applications 
for 
exemptions) 
and 
section
1842(b)(2)(B) of such Act (relating to timely review
of determinations and fair hearing requests), as such
sections were in effect before the date of the enact-
ment of this Act.
(b) CONFORMING AMENDMENTS TO SECTION 1816
(RELATING TO FISCAL INTERMEDIARIES).—Section 1816
(42 U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF
PART A’’.
(2) Subsection (a) is amended to read as fol-
lows:
‘‘(a) The administration of this part shall be con-
ducted through contracts with medicare administrative
contractors under section 1874A.’’.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended—
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and
(3)(A), by striking ‘‘agreement under this sec-
tion’’ and inserting ‘‘contract under section
1874A that provides for making payments
under this part’’.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended—
(A) by striking ‘‘An agreement with an
agency or organization under this section’’ and
inserting ‘‘A contract with a medicare adminis-
trative contractor under section 1874A with re-
spect to the administration of this part’’; and
(B) by striking ‘‘such agency or organiza-
tion’’ and inserting ‘‘such medicare administra-
tive contractor’’ each place it appears.
(7) Subsection (l) is repealed.
(c) CONFORMING AMENDMENTS TO SECTION 1842
(RELATING
TO CARRIERS).—Section 1842 (42 U.S.C.
1395u) is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF
PART B’’.
(2) Subsection (a) is amended to read as fol-
lows:
‘‘(a) The administration of this part shall be con-
ducted through contracts with medicare administrative
contractors under section 1874A.’’.
(3) Subsection (b) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and
(B);
(ii) in subparagraph (C), by striking
‘‘carriers’’ and inserting ‘‘medicare admin-
istrative contractors’’; and
(iii) by striking subparagraphs (D)
and (E);
(C) in paragraph (3)—
(i) in the matter before subparagraph
(A), by striking ‘‘Each such contract shall
provide that the carrier’’ and inserting
‘‘The Secretary’’;
(ii) in subparagraph (B), in the mat-
ter before clause (i), by striking ‘‘to the
policyholders and subscribers of the car-
rier’’ and inserting ‘‘to the policyholders
and subscribers of the medicare adminis-
trative contractor’’;
(iii) by striking subparagraphs (C),
(D), and (E);
(iv) in subparagraph (H)—
(I) by striking ‘‘it’’ and inserting
‘‘the Secretary’’; and
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’; and