who are military retirees shall be given pref-
erence for participating in the project conducted
at that site.
‘‘(D) COST-SHARING.—The Secretary of
Veterans Affairs may establish cost-sharing re-
quirements for veterans participating in the
demonstration project. If such cost-sharing re-
quirements are established, those requirements
shall be the same as the requirements that
apply to targeted medicare-eligible patients at
medical centers that are not Veterans Affairs
medical facilities.
‘‘(E) DATA MATCH.—
‘‘(i) 
ESTABLISHMENT
OF
DATA
MATCHING
PROGRAM.—The administering
Secretaries shall establish a data matching
program under which there is an exchange
of information of the Department of Vet-
erans Affairs and of the Department of
Health and Human Services as is nec-
essary to identify veterans (as defined in
section 101(2) of title 38, United States
Code) who are entitled to benefits under
part A or enrolled under part B, or both,
in order to carry out this section. The pro-
visions of section 552a of title 5, United
States Code, shall apply with respect to
such matching program only to the extent
the administering Secretaries find it fea-
sible and appropriate in carrying out this
section in a timely and efficient manner.
‘‘(ii) 
PERFORMANCE
OF
DATA
MATCH.—The administering Secretaries,
using the data matching program estab-
lished under clause (i), shall perform a
comparison in order to identify veterans
who are entitled to benefits under part A
or enrolled under part B, or both. To the
extent such Secretaries deem appropriate
to carry out this section, the comparison
and identification may distinguish among
such veterans by category of veterans, by
entitlement to benefits under this title, or
by other characteristics.
‘‘(iii) DEADLINE
FOR
FIRST
DATA
MATCH.—Not later than October 31, 1999,
the administering Secretaries shall first
perform a comparison under clause (ii).
‘‘(iv) CERTIFICATION
BY
INSPECTOR
GENERAL.—
‘‘(I) IN GENERAL.—The admin-
istering Secretaries may not conduct
the program unless the Inspector Gen-
eral of the Department of Health and
Human Services certifies to Congress
that the administering Secretaries
have established the data matching
program under clause (i) and have
performed a comparison under clause
(ii).
‘‘(II) DEADLINE
FOR
CERTIFI-
CATION.—Not later than December
15, 1999, the Inspector General of the
Department of Health and Human
Services shall submit a report to Con-
gress 
containing 
the 
certification
under subclause (I) or the denial of
such certification.
‘‘(2) NUMBER OF DEMONSTRATION SITES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs 
(B) 
and 
(C), 
and 
subsection
(g)(1)(D)(ii), the administering Secretaries
shall establish a plan for the selection of up to
10 demonstration sites located in geographically
dispersed locations to participate in the project.
‘‘(B) CRITERIA.—The administering Secre-
taries shall favor selection of those demonstra-
tion sites that consideration of the following
factors indicate are suited to serve targeted
medicare-eligible veterans:
‘‘(i) There is a high potential demand
by targeted medicare-eligible veterans for
the services to be provided at the dem-
onstration site.
‘‘(ii) The demonstration site has suffi-
cient capability in billing and accounting to
participate in the project.
‘‘(iii) The demonstration site can dem-
onstrate favorable indicators of quality of
care, including patient satisfaction.
‘‘(iv) The demonstration site delivers
a range of services required by targeted
medicare-eligible veterans.
‘‘(v) The demonstration site meets
other relevant factors identified in the
plan.
‘‘(C) REQUIRED DEMONSTRATION SITES.—
At least 1 of each of the following demonstra-
tion sites shall be selected for inclusion in the
demonstration project:
‘‘(i) 
DEMONSTRATION
SITE
NEAR
CLOSED BASE.—A demonstration site that
is in the same catchment area as a mili-
tary treatment facility referred to in sec-
tion 1074(a) of title 10, United States
Code, which was closed pursuant to
either—
‘‘(I) the Defense Base Closure
and Realignment Act of 1990 (part A
of title XXIX of Public Law 101–510;
10 U.S.C. 2687 note); or
‘‘(II) title II of the Defense Au-
thorization Amendments and Base
Closure and Realignment Act (Public
Law 100–526; 10 U.S.C. 2687 note).
‘‘(ii) DEMONSTRATION
SITE
IN
A
RURAL AREA.—A demonstration site that
serves a predominantly rural population.
‘‘(3) RESTRICTION.—No new buildings may be
built or existing buildings expanded with funds from
the demonstration project.
‘‘(4) DURATION.—The administering Secre-
taries shall conduct the demonstration project dur-
ing the 3-year period beginning on January 1, 2000.
‘‘(c) CREDITING OF PAYMENTS.—A payment received
by the Secretary of Veterans Affairs under the demonstra-
tion project shall be credited to the applicable Department
of Veterans Affairs medical appropriation and (within that
appropriation) to funds that have been allotted to the
demonstration site that furnished the services for which
the payment is made. Any such payment received during
a fiscal year for services provided during a prior fiscal year
may be obligated by the Secretary of Veterans Affairs dur-
ing the fiscal year during which the payment is received.
‘‘(d) AUTHORITY TO WAIVE CERTAIN MEDICARE RE-
QUIREMENTS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary may, to the extent nec-
essary to carry out the demonstration project, waive
any requirement under this title.
‘‘(2) BENEFICIARY
PROTECTIONS
FOR
MAN-
AGED CARE PLANS.—In the case of a managed care
plan established by the Secretary of Veterans Affairs
pursuant to subsection (g), such plan shall comply
with the requirements of part C of this title that re-
late to beneficiary protections and other matters, in-
cluding such requirements relating to the following
areas:
‘‘(A) Enrollment and disenrollment.
‘‘(B) Nondiscrimination.
‘‘(C) Information provided to beneficiaries.
‘‘(D) Cost-sharing limitations.
‘‘(E) Appeal and grievance procedures.
‘‘(F) Provider participation.
‘‘(G) Access to services.
‘‘(H) Quality assurance and external re-
view.
‘‘(I) Advance directives.
‘‘(J) Other areas of beneficiary protections
that the Secretary determines are applicable to
such project.
‘‘(3) DESCRIPTION
OF
WAIVER.—If the Sec-
retary waives any requirement pursuant to para-
graph (1), the Secretary shall include a description
of such waiver in the agreement described in sub-
section (b)(1)(B).
‘‘(e) INSPECTOR GENERAL.—Nothing in the agree-
ment entered into under subsection (b) shall limit the In-
spector General of the Department of Health and Human
Services from investigating any matters regarding the ex-
penditure of funds under this title for the demonstration
project, including compliance with the provisions of this
title and all other relevant laws.
‘‘(f) REPORT.—At least 60 days prior to the com-
mencement of the demonstration project, the admin-
istering Secretaries shall submit a copy of the agreement
entered into under subsection (b) to the committees of ju-
risdiction in Congress.
‘‘(g) MANAGED HEALTH CARE.—
‘‘(1) MANAGED HEALTH CARE PLANS.—
‘‘(A) IN GENERAL.—The Secretary of Vet-
erans Affairs may establish and operate man-
aged health care plans at demonstration sites.
‘‘(B) 
REQUIREMENTS.—Any 
managed
health care plan established in accordance with
subparagraph (A) shall be operated by or
through a Veterans Affairs medical facility, or
a group of Veterans Affairs medical facilities,
and may include the provision of health care
services by public and private entities under ar-
rangements made between the Department of
Veterans Affairs and the other public or private
entity concerned. Any such managed health
care plan shall be established and operated in
conformance with standards prescribed by the
administering Secretaries.
‘‘(C) MINIMUM
BENEFITS.—The admin-
istering Secretaries shall prescribe the min-
imum health care benefits to be provided under
a managed health care plan to veterans enrolled
in the plan, which benefits shall include at least
all health care services covered under the medi-
care program under this title.
‘‘(D) INCLUSION
IN
NUMBER
OF
DEM-
ONSTRATION SITES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), if the Secretary of Veterans Affairs
elects to establish a managed health care
plan under this section, the establishment
of such plan is a selected demonstration
site for purposes of applying the numerical
limitation under subsection (b)(2).
‘‘(ii) LIMITATION.—The Secretary of
Veterans Affairs shall not establish more
than 4 managed health care plans under
this section.
‘‘(2) DEMONSTRATION SITE REQUIREMENTS.—
The Secretary of Veterans Affairs may establish a
managed health care plan under paragraph (1)
using 1 or more demonstration sites and other pub-
lic or private entities only after the Secretary of Vet-
erans Affairs submits to Congress a report setting
forth a plan for the use of such sites and entities.
The plan may not be implemented until the Sec-
retary of Veterans Affairs has received from the In-
spector General of the Department of Veterans Af-
fairs, and has forwarded to Congress, certification of
each of the following:
‘‘(A) The cost accounting system of the
Veterans 
Health 
Administration 
(currently
known as the Decision Support System) is oper-
ational and is providing reliable cost informa-
tion on care delivered on an inpatient and out-
patient basis at such sites and entities.
‘‘(B) The demonstration sites and entities
have developed a credible plan (on the basis of
market surveys, data from the Decision Support
System, actuarial analysis, or other appropriate
methods and taking into account the level of
payment under subsection (h) and the costs of
providing covered services at the sites and enti-
ties) to minimize, to the extent feasible, the risk
that appropriated funds allocated to the sites
and entities will be required to meet the obliga-
tion of the sites and entities to targeted medi-
care-eligible veterans under the demonstration
project.
‘‘(C) The demonstration sites and entities
collectively have available capacity to provide
the contracted benefits package to a sufficient
number of targeted medicare-eligible veterans.
‘‘(D) The Veterans Affairs medical facility
administering the health plan has sufficient sys-
tems and safeguards in place to minimize any
risk that instituting the managed care model
will result in reducing the quality of care deliv-
ered to participants in the demonstration
project or to other veterans receiving care under
paragraph (1) or (2) of section 1710(a) of title
38, United States Code.
‘‘(3) RESERVES.—The Secretary of Veterans
Affairs shall maintain such reserves as may be nec-
essary to ensure against the risk that appropriated
funds, allocated to demonstration sites and public or
private entities participating in the demonstration
project through a managed health care plan under
this section, will be required to meet the obligations
of those sites and entities to targeted medicare-eligi-
ble veterans.
‘‘(h) PAYMENTS BASED
ON REGULAR MEDICARE
PAYMENT RATES.—
‘‘(1) PAYMENTS.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this subsection, the Sec-
retary shall reimburse the Secretary of Vet-
erans Affairs for services provided under the
demonstration project at the following rates:
‘‘(i) NONCAPITATION.—Except as pro-
vided in clause (ii) and subject to subpara-
graphs (B) and (D), at a rate equal to 95
percent of the amounts that otherwise
would be payable under this title on a
noncapitated basis for such services if the
demonstration site was not part of this
demonstration project, was participating in
the 
medicare 
program, 
and 
imposed
charges for such services.
‘‘(ii) CAPITATION.—Subject to sub-
paragraphs (B) and (D), in the case of
services provided to an enrollee under a
managed health care plan established
under subsection (g), at a rate equal to 95
percent 
of 
the 
amount 
paid 
to 
a
Medicare+Choice organization under part
C with respect to such an enrollee.
‘‘(iii) OTHER
CASES.—In cases in
which a payment amount may not other-
wise be readily computed under clauses (i)
or (ii), the Secretaries shall establish rules
for computing equivalent or comparable
payment amounts.
‘‘(B) EXCLUSION OF CERTAIN AMOUNTS.—
In computing the amount of payment under
subparagraph (A), the following shall be ex-
cluded:
‘‘(i) DISPROPORTIONATE SHARE HOS-
PITAL ADJUSTMENT.—Any amount attrib-
utable to an adjustment under section
1886(d)(5)(F) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(F)).
‘‘(ii) DIRECT
GRADUATE
MEDICAL
EDUCATION PAYMENTS.—Any amount at-
tributable to a payment under subsection
(h) of such section.
‘‘(iii) 
PERCENTAGE
OF
INDIRECT
MEDICAL
EDUCATION
ADJUSTMENT.—40
percent of any amount attributable to the
adjustment under subsection (d)(5)(B) of
such section.
‘‘(iv) PERCENTAGE OF CAPITAL PAY-
MENTS.—67 percent of any amounts at-
tributable to payments for capital-related
costs under subsection (g) of such section.
‘‘(C) PERIODIC
PAYMENTS
FROM
MEDI-
CARE
TRUST
FUNDS.—Payments under this
subsection shall be made—
‘‘(i) on a periodic basis consistent
with the periodicity of payments under this
title; and
‘‘(ii) in appropriate part, as deter-
mined by the Secretary, from the trust
funds.
‘‘(D) ANNUAL LIMIT ON MEDICARE PAY-
MENTS.—The amount paid to the Department
of Veterans Affairs under this subsection for
any year for the demonstration project may not
exceed $50,000,000.
‘‘(2) REDUCTION IN PAYMENT FOR VA FAILURE
TO MAINTAIN EFFORT.—
‘‘(A) IN GENERAL.—To avoid shifting onto
the medicare program under this title costs pre-
viously assumed by the Department of Veterans
Affairs for the provision of medicare-covered
services to targeted medicare-eligible veterans,
the payment amount under this subsection for
the project for a fiscal year shall be reduced by
the amount (if any) by which—
‘‘(i) the amount of the VA effort level
for targeted veterans (as defined in sub-
paragraph (B)) for the fiscal year ending
in such year, is less than
‘‘(ii) the amount of the VA effort level
for targeted veterans for fiscal year 1998.
‘‘(B) VA EFFORT LEVEL FOR TARGETED
VETERANS
DEFINED.—For purposes of sub-
paragraph (A), the term ‘VA effort level for
targeted veterans’ means, for a fiscal year, the
amount, as estimated by the administering Sec-
retaries, that would have been expended under
the medicare program under this title for VA-
provided medicare-covered services for targeted
veterans (as defined in subparagraph (C)) for
that fiscal year if benefits were available under
the medicare program for those services. Such
amount does not include expenditures attrib-
utable to services for which reimbursement is
made under the demonstration project.
‘‘(C) VA-PROVIDED
MEDICARE-COVERED
SERVICES
FOR
TARGETED
VETERANS.—For
purposes of subparagraph (B), the term ‘VA-
provided medicare-covered services for targeted
veterans’ means, for a fiscal year, items and
services—
‘‘(i) that are provided during the fis-
cal year by the Department of Veterans
Affairs to targeted medicare-eligible vet-
erans;
‘‘(ii) that constitute hospital care and
medical services under chapter 17 of title
38, United States Code; and
‘‘(iii) for which benefits would be
available under the medicare program
under this title if they were provided other
than by a Federal provider of services that
does not charge for those services.
‘‘(3) ASSURING NO INCREASE IN COST TO MEDI-
CARE PROGRAM.—
‘‘(A) 
MONITORING
EFFECT
OF
DEM-
ONSTRATION PROGRAM ON COSTS TO MEDICARE
PROGRAM.—
‘‘(i) IN
GENERAL.—The Secretaries,
in consultation with the Comptroller Gen-
eral, shall closely monitor the expenditures
made under the medicare program for tar-
geted medicare-eligible veterans during the
period of the demonstration project com-
pared to the expenditures that would have
been made for such veterans during that
period if the demonstration project had not
been conducted.
‘‘(ii) ANNUAL REPORT BY THE COMP-
TROLLER GENERAL.—Not later than De-
cember 31 of each year during which the
demonstration project is conducted, the
Comptroller General shall submit to the
Secretaries and the appropriate committees
of Congress a report on the extent, if any,
to which the costs of the Secretary under
the medicare program under this title in-
creased during the preceding fiscal year as
a result of the demonstration project.
‘‘(B) REQUIRED RESPONSE IN CASE OF IN-
CREASE IN COSTS.—
‘‘(i) IN
GENERAL.—If the admin-
istering Secretaries find, based on subpara-
graph (A), that the expenditures under the
medicare program under this title in-
creased (or are expected to increase) dur-
ing a fiscal year because of the demonstra-
tion project, the administering Secretaries
shall take such steps as may be needed—
‘‘(I) to recoup for the medicare
program the amount of such increase
in expenditures; and
‘‘(II) to prevent any such in-
crease in the future.
‘‘(ii) STEPS.—Such steps—
‘‘(I) under clause (i)(I), shall in-
clude payment of the amount of such
increased expenditures by the Sec-
retary of Veterans Affairs from the
current medical care appropriation of
the Department of Veterans Affairs to
the trust funds; and
‘‘(II) under clause (i)(II), shall
include suspending or terminating the
demonstration project (in whole or in
part) or lowering the amount of pay-
ment under paragraph (1)(A).
‘‘(i) EVALUATION AND REPORTS.—
‘‘(1) INDEPENDENT EVALUATION.—
‘‘(A) IN
GENERAL.—The administering
Secretaries shall arrange for an independent en-
tity with expertise in the evaluation of health
care services to conduct an evaluation of the
demonstration project.
‘‘(B) CONTENTS.—The evaluation con-
ducted under subparagraph (A) shall include an
assessment, based on the agreement entered
into under subsection (b), of the following:
‘‘(i) The cost to the Department of
Veterans Affairs of providing care to vet-
erans under the project.
‘‘(ii) Compliance of participating dem-
onstration sites with applicable measures
of quality of care, compared to such com-
pliance for other medicare-participating
medical centers that are not Veterans Af-
fairs medical facilities.
‘‘(iii) A comparison of the costs of
participation of the demonstration sites in
the program with the reimbursements pro-
vided for services of such sites.
‘‘(iv) Any savings or costs to the
medicare program under this title from the
project.
‘‘(v) Any change in access to care or
quality of care for targeted medicare-eligi-
ble veterans participating in the project.
‘‘(vi) Any effect of the project on the
access to care and quality of care for tar-
geted medicare-eligible veterans not par-
ticipating in the project and other veterans
not participating in the project.
‘‘(vii) The provision of services under
managed health care plans under sub-
section (g), including the circumstances (if
any) under which the Secretary of Vet-
erans Affairs uses reserves described in
paragraph (3) of such subsection and the
Secretary of Veterans Affairs’ response to
such circumstances (including the termi-
nation of managed health care plans re-
quiring the use of such reserves).
‘‘(viii) Any effect that the demonstra-
tion project has on the enrollment in
Medicare+Choice 
plans 
offered 
by
Medicare+Choice organizations under part
C of this title in the established site areas.
‘‘(ix) Any additional elements that the
independent entity determines is appro-
priate to assess regarding the demonstra-
tion project.
‘‘(C) ANNUAL REPORTS.—The independent
entity conducting the evaluation under subpara-
graph (A) shall submit reports on such evalua-
tion to the administering Secretaries and to the
committees of jurisdiction in the Congress as
follows:
‘‘(i) INITIAL
REPORT.—The entity
shall submit the initial report not later
than 12 months after the date on which
the demonstration project begins operation.
‘‘(ii) SECOND ANNUAL REPORT.—The
entity shall submit the second annual re-
port not later than 30 months after the
date on which the demonstration project
begins operation.
‘‘(iii) FINAL
REPORT.—The entity
shall submit the final report not later than
31⁄2 years after the date on which the dem-
onstration project begins operation.
‘‘(2) REPORT ON EXTENSION AND EXPANSION
OF DEMONSTRATION PROJECT.—Not later than 31⁄2
years after the date on which the demonstration
project begins operation, the administering Secre-
taries 
shall 
submit 
to 
Congress 
a 
report
containing—
‘‘(A) their recommendation as to—
‘‘(i) whether to extend the demonstra-
tion project or make the project perma-
nent;
‘‘(ii) whether to expand the project to
cover additional demonstration sites and to
increase the maximum amount of reim-
bursement (or the maximum amount of re-
imbursement permitted for managed health
care plans under this section) under the
project in any year; and
‘‘(iii) whether the terms and condi-
tions of the project should be continued (or
modified) if the project is extended or ex-
panded; and
‘‘(B) a detailed description of any costs as-
sociated with their recommendation made pur-
suant to clauses (i) and (ii) of subparagraph
(A).’’.
SEC. 3. IMPROVEMENT OF TRICARE PROGRAM.
(a) IMPROVEMENT
OF TRICARE PROGRAM.—(1)
Chapter 55 of title 10, United States Code, is amended
by inserting after section 1097a the following new section:
‘‘§ 1097b. TRICARE: comparability of benefits with
benefits under Federal Employees Health
Benefits program; other requirements
and authorities
‘‘(a) COMPARABILITY OF BENEFITS.—The Secretary
of Defense shall, to the maximum extent practicable, en-
sure that the health care coverage available through the
TRICARE program is substantially similar to the health
care coverage available under similar health benefits plans
offered under the Federal Employees Health Benefits pro-
gram established under chapter 89 of title 5.
‘‘(b) PORTABILITY OF BENEFITS.—The Secretary of
Defense shall provide that any covered beneficiary enrolled
in the TRICARE program may receive benefits under that
program at facilities that provide benefits under that pro-
gram throughout the various regions of that program.
‘‘(c) PATIENT MANAGEMENT.—(1) The Secretary of
Defense shall, to the maximum extent practicable, mini-
mize the authorization or certification requirements im-
posed upon covered beneficiaries under the TRICARE
program as a condition of access to benefits under that
program.
‘‘(2) The Secretary of Defense shall, to the maximum
extent practicable, utilize practices for processing claims
under the TRICARE program that are similar to the best
industry practices for processing claims for health care
from a third-party payer the reasonable charges for health
care services described in paragraph (2) that are incurred
by the facility on behalf of a covered beneficiary under
that program to the extent that the beneficiary would be
eligible to receive reimbursement or indemnification from
the third-party payer if the beneficiary were to incur such
charges on the beneficiary’s own behalf.
‘‘(2) The reasonable charges described in this para-
graph are reasonable charges for services or care covered
by the medicare program under title XVIII of the Social
Security Act.
‘‘(3) The collection of charges, and the utilization of
amounts collected, under this subsection shall be subject
to the provisions of section 1095 of this title. The term
‘reasonable costs’, as used in that section shall be deemed
for purposes of the application of that section to this sub-
section to refer to the reasonable charges described in
paragraph (2).
‘‘(f) CONSULTATION.—The Secretary of Defense
shall carry out any actions under this section after con-
sultation with the other administering Secretaries.’’.
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 1097a the following new item:
‘‘1097b. TRICARE: comparability of benefits with benefits under Federal Em-
ployees Health Benefits program; other requirements and au-
thorities.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect one year after the date of
the enactment of this Act.
(c) REPORT ON IMPLEMENTATION.—(1) Not later
than 6 months after the date of the enactment of this Act,
the Secretary of Defense, in consultation with the other
administering Secretaries, shall submit to Congress a re-
port assessing the effects of the implementation of the re-
quirements and authorities set forth in section 1097b of
title 10, United States Code (as added by subsection (a)).
(2) The report shall include the following:
(A) An assessment of the cost of the implemen-
tation of such requirements and authorities.
(B) An assessment whether or not the imple-
mentation of any such requirements and authorities
will result in the utilization by the TRICARE pro-
gram of the best industry practices with respect to
the matters covered by such requirements and au-
thorities.
(3) In this subsection, the term ‘‘administering Secre-
taries’’ has the meaning given that term in section
1072(3) of title 10, United States Code.
(3) report to the Congress by June 1, 1999, on
measures taken to improve processing time for vet-
erans’ claims.
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