authority, with respect to the furnishing of items or 
services and submission of a claim for benefits for 
such items or services with respect to such provider 
or supplier; 
‘‘(ii) the Secretary determines that the provider 
of services or supplier has accurately presented the 
circumstances relating to such items, services, and 
claim to the contractor in writing; and 
‘‘(iii) the guidance was in error; 
the provider of services or supplier shall not be subject 
to any penalty or interest under this title or the provisions 
of title XI insofar as they relate to this title (including 
interest under a repayment plan under section 1893 or 
otherwise) relating to the provision of such items or serv-
ice or such claim if the provider of services or supplier 
reasonably relied on such guidance. 
‘‘(B) Subparagraph (A) shall not be construed as pre-
venting the recoupment or repayment (without any addi-
tional penalty) relating to an overpayment insofar as the 
overpayment was solely the result of a clerical or technical 
operational error.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act and shall only apply to a pen-
alty or interest imposed with respect to guidance 
provided on or after July 24, 2003. 
SEC. 204. REPORTS AND STUDIES RELATING TO REGU-
LATORY REFORM. 
(a) GAO STUDY ON ADVISORY OPINION AUTHOR-
ITY.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study to determine the 
feasibility and appropriateness of establishing in the 
Secretary authority to provide legally binding advi-
sory opinions on appropriate interpretation and ap-
plication of regulations to carry out the medicare 
program under title XVIII of the Social Security 
Act. Such study shall examine the appropriate time-
frame for issuing such advisory opinions, as well as 
the need for additional staff and funding to provide 
such opinions. 
(2) REPORT.—The Comptroller General shall 
submit to Congress a report on the study conducted 
under paragraph (1) by not later than 1 year after 
the date of the enactment of this Act. 
(b) REPORT ON LEGAL AND REGULATORY INCON-
SISTENCIES.—Section 1871 (42 U.S.C. 1395hh), as 
amended by section 203(a)(1), is amended by adding at 
the end the following new subsection:
‘‘(f)(1) Not later than 2 years after the date of the 
enactment of this subsection, and every 3 years thereafter, 
the Secretary shall submit to Congress a report with re-
spect to the administration of this title and areas of incon-
sistency or conflict among the various provisions under 
law and regulation. 
‘‘(2) In preparing a report under paragraph (1), the 
Secretary shall collect—
‘‘(A) information from individuals entitled to 
benefits under part A or enrolled under part B, or 
both, providers of services, and suppliers and from 
the Medicare Beneficiary Ombudsman with respect 
to such areas of inconsistency and conflict; and 
‘‘(B) information from medicare contractors 
that tracks the nature of written and telephone in-
quiries. 
‘‘(3) A report under paragraph (1) shall include a de-
scription of efforts by the Secretary to reduce such incon-
sistency or conflicts, and recommendations for legislation 
or administrative action that the Secretary determines ap-
propriate to further reduce such inconsistency or con-
flicts.’’.
Subtitle B—Contracting Reform 
SEC. 211. 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 eligible entity to serve as a medicare ad-
ministrative contractor with respect to the perform-
ance of any or all of the functions described in para-
graph (4) or parts of those functions (or, to the ex-
tent provided in a contract, to secure performance 
thereof by other entities). 
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is 
eligible to enter into a contract with respect to the 
performance of a particular function described in 
paragraph (4) only if—
‘‘(A) the entity has demonstrated capa-
bility to carry out such function;
‘‘(B) the entity complies with such conflict 
of interest standards as are generally applicable 
to Federal acquisition and procurement; 
‘‘(C) the entity has sufficient assets to fi-
nancially support the performance of such func-
tion; and 
‘‘(D) the entity meets such other require-
ments as the Secretary may impose. 
‘‘(3) 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 in relation 
to an individual entitled to benefits under part 
A or enrolled under part B, or both, a specific 
provider of services or supplier (or class of such 
providers of services or suppliers), the ‘appro-
priate’ medicare administrative contractor is the 
medicare administrative contractor that has a 
contract under this section with respect to the 
performance of that function in relation to that
individual, provider of services or supplier or 
class of provider of services or supplier. 
‘‘(4) FUNCTIONS
DESCRIBED.—The functions 
referred to in paragraphs (1) and (2) are payment 
functions (including the function of developing local 
coverage determinations, as defined in section 
1869(f)(2)(B)), provider services functions, and 
functions relating to services furnished to individuals 
entitled to benefits under part A or enrolled under 
part B, or both, 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, suppliers and individuals. 
‘‘(B) MAKING
PAYMENTS.—Making pay-
ments described in subparagraph (A) (including 
receipt, disbursement, and accounting for funds 
in making such payments). 
‘‘(C) BENEFICIARY
EDUCATION
AND
AS-
SISTANCE.—Providing education and outreach 
to individuals entitled to benefits under part A 
or enrolled under part B, or both, and pro-
viding assistance to those individuals with spe-
cific issues, concerns, or problems. 
‘‘(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 or sup-
pliers. 
‘‘(E) 
COMMUNICATION
WITH
PRO-
VIDERS.—Communicating to providers of serv-
ices and suppliers any information or instruc-
tions furnished to the medicare administrative 
contractor by the Secretary, and facilitating 
communication between such providers and sup-
pliers and the Secretary. 
‘‘(F) PROVIDER
EDUCATION
AND
TECH-
NICAL ASSISTANCE.—Performing the functions 
relating to provider education, training, and 
technical assistance. 
‘‘(G) 
ADDITIONAL
FUNCTIONS.—Per-
forming such other functions, including (subject 
to paragraph (5)) functions under the Medicare 
Integrity Program under section 1893, as are 
necessary to carry out the purposes of this title.
‘‘(5) 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 
activities carried out under a contract entered 
into under the Medicare Integrity Program 
under section 1893. The previous sentence shall 
not apply with respect to the activity described 
in section 1893(b)(5) (relating to prior author-
ization of certain items of durable 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. 
‘‘(6) APPLICATION
OF
FEDERAL
ACQUISITION 
REGULATION.—Except to the extent inconsistent 
with a specific requirement of this section, the Fed-
eral Acquisition Regulation applies to contracts 
under this section.
‘‘(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, tak-
ing into account performance quality as well as 
price and other factors. 
‘‘(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 5 years. 
‘‘(C) TRANSFER
OF
FUNCTIONS.—The 
Secretary may transfer functions among medi-
care administrative contractors consistent with 
the provisions of this paragraph. The Secretary
shall ensure that performance quality is consid-
ered in such transfers. The Secretary shall pro-
vide public notice (whether in the Federal Reg-
ister or otherwise) of any such transfer (includ-
ing a description of the functions so trans-
ferred, a description of the providers of services 
and suppliers affected by such transfer, and 
contact information for the contractors in-
volved). 
‘‘(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, quality of services provided, and other mat-
ters as the Secretary finds pertinent. 
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT
OF
SPECIFIC
PER-
FORMANCE REQUIREMENTS.—
‘‘(i) IN
GENERAL.—The Secretary 
shall develop contract performance require-
ments to carry out the specific require-
ments applicable under this title to a func-
tion described in subsection (a)(4) and 
shall develop standards for measuring the 
extent to which a contractor has met such 
requirements. 
‘‘(ii) CONSULTATION.—In developing 
such performance requirements and stand-
ards for measurement, the Secretary shall 
consult with providers of services, organi-
zations 
representative 
of 
beneficiaries 
under this title, and organizations and 
agencies performing functions necessary to 
carry out the purposes of this section with 
respect to such performance requirements. 
‘‘(iii) PUBLICATION OF STANDARDS.—
The Secretary shall make such perform-
ance 
requirements 
and 
measurement 
standards available to the public. 
‘‘(B) CONSIDERATIONS.—The Secretary 
shall include, as one of the standards developed 
under subparagraph (A), provider and bene-
ficiary satisfaction levels.
‘‘(C) INCLUSION IN CONTRACTS.—All con-
tractor performance requirements shall be set 
forth in the contract between the Secretary and 
the appropriate medicare administrative con-
tractor. Such performance requirements—
‘‘(i) shall reflect the performance re-
quirements published under subparagraph 
(A), but may include additional perform-
ance requirements; 
‘‘(ii) shall be used for evaluating con-
tractor performance under the contract; 
and 
‘‘(iii) shall be consistent with the writ-
ten statement of work provided under the 
contract. 
‘‘(4) INFORMATION REQUIREMENTS.—The Sec-
retary shall not enter into a contract with a medi-
care administrative contractor under this section un-
less the contractor agrees—
‘‘(A) to furnish to the Secretary such time-
ly information and reports as the Secretary may 
find necessary in performing his functions 
under this title; and 
‘‘(B) to maintain such records and afford 
such access thereto as the Secretary finds nec-