Subtitle A Part 1
that the physician or provider of services or
renal dialysis facility will accept as payment in
full from the organization the amount that
would be payable to the physician or provider of
services or renal dialysis facility under part B
and from the individual under such part, if the
individual were not enrolled with such an orga-
nization under this part.
‘‘(B) NONPARTICIPATING PROVIDERS.—In
the case of physicians’ services described in sub-
paragraph (C) which are furnished by a
nonparticipating physician, the limitations on
actual charges for such services otherwise appli-
cable under part B (to services furnished by in-
dividuals not enrolled with a MedicarePlus or-
ganization under this section) shall apply in the
same manner as such limitations apply to serv-
ices furnished to individuals not enrolled with
such an organization.
‘‘(C) SERVICES
DESCRIBED.—The physi-
cians’ services or renal dialysis services de-
scribed in this subparagraph are physicians’
services or renal dialysis services which are fur-
nished to an enrollee of a MedicarePlus organi-
zation under this part by a physician, provider
Subtitle A Part 1
of services, or renal dialysis facility who is not
under a contract with the organization.
‘‘(4) PROTECTION FOR NEEDED SERVICES.—A
Medicare Choice organization that provides covered
services through a network of providers shall provide
coverage of services provided by a provider that is
not part of the network if the service cannot be pro-
vided by a provider that is part of the network and
the organization authorized the service directly or
through referral by the primary care physician who
is designated by the organization for the individual
involved.
‘‘(5) DEFINITION OF EMERGENCY SERVICES.—
In this subsection, the term ‘emergency services’
means, with respect to an individual enrolled with an
organization, covered inpatient and outpatient serv-
ices that—
‘‘(A) are furnished by an appropriate
source other than the organization,
‘‘(B) are needed immediately because of an
injury or sudden illness, and
‘‘(C) are needed because the time required
to reach the organization’s providers or suppli-
ers would have meant risk of serious damage to
the patient’s health.
Subtitle A Part 1
‘‘(c) CONFIDENTIALITY
AND ACCURACY
OF EN-
ROLLEE RECORDS.—Each Medicare Choice organization
shall establish procedures—
‘‘(1) to safeguard the privacy of individually
identifiable enrollee information, and
‘‘(2) to maintain accurate and timely medical
records for enrollees.
‘‘(d) QUALITY ASSURANCE PROGRAM.—
‘‘(1) IN GENERAL.—Each Medicare Choice or-
ganization must have arrangements, established in
accordance with regulations of the Secretary, for an
ongoing quality assurance program for health care
services it provides to such individuals.
‘‘(2) ELEMENTS OF PROGRAM.—The quality as-
surance program shall—
‘‘(A) stress health outcomes;
‘‘(B) provide for the establishment of writ-
ten protocols for utilization review, based on
current standards of medical practice;
‘‘(C) provide review by physicians and
other health care professionals of the process
followed in the provision of such health care
services;
Subtitle A Part 1
‘‘(D) monitors and evaluates high volume
and high risk services and the care of acute and
chronic conditions;
‘‘(E) evaluates the continuity and coordi-
nation of care that enrollees receive;
‘‘(F) has mechanisms to detect both under-
utilization and overutilization of services;
‘‘(G) after identifying areas for improve-
ment, establishes or alters practice parameters;
‘‘(H) takes action to improve quality and
assesses the effectiveness of such action
through systematic follow-up;
‘‘(I) makes available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage op-
tions (in such form and on such quality and
outcomes measures as the Secretary determines
to be appropriate);
‘‘(J) is evaluated on an ongoing basis as to
its effectiveness; and
‘‘(K) provide for external accreditation or
review, by a utilization and quality control peer
review organization under part B of title XI or
other qualified independent review organization,
of the quality of services furnished by the orga-
Subtitle A Part 1
nization meets professionally recognized stand-
ards of health care (including providing ade-
quate access of enrollees to services).
‘‘(3) EXCEPTION FOR CERTAIN FEE-FOR-SERV-
ICE PLANS.—Paragraph (1) and subsection (c)(2)
shall not apply in the case of a Medicare Choice or-
ganization in relation to a Medicare Choice product
to the extent the organization provides for coverage
of benefits without restrictions relating to utilization
and without regard to whether the provider has a
contract or other arrangement with the plan for the
provision of such benefits.
‘‘(4) TREATMENT
OF
ACCREDITATION.—The
Secretary shall provide that a Medicare Choice orga-
nization is deemed to meet the requirements of para-
graphs (1) and (2) of this subsection and subsection
(c) if the organization is accredited (and periodically
reaccredited) by a private organization under a proc-
ess that the Secretary has determined assures that
the organization meets standards that are no less
stringent than the standards established under sec-
tion 1856 to carry out this subsection and sub-
section (c).
‘‘(e) COVERAGE DETERMINATIONS.—
Subtitle A Part 1
‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A
Medicare Choice organization shall make determina-
tions regarding authorization requests for non-
emergency care on a timely basis, depending on the
urgency of the situation.
‘‘(2) APPEALS.—
‘‘(A) IN GENERAL.—Appeals from a deter-
mination of an organization denying coverage
shall be decided within 30 days of the date of
receipt of medical information, but not later
than 60 days after the date of the decision.
‘‘(B) PHYSICIAN
DECISION
ON
CERTAIN
APPEALS.—Appeal decisions relating to a deter-
mination to deny coverage based on a lack of
medical necessity shall be made only by a physi-
cian.
‘‘(C) EMERGENCY
CASES.—Appeals from
such a determination involving a life-threaten-
ing or emergency situation shall be decided on
an expedited basis.
‘‘(f) GRIEVANCES AND APPEALS.—
‘‘(1) GRIEVANCE MECHANISM.—Each Medicare
Choice organization must provide meaningful proce-
dures for hearing and resolving grievances between
the organization (including any entity or individual
Subtitle A Part 1
‘‘(3) COORDINATION
WITH
SECRETARY
OF
LABOR.—The Secretary shall consult with the Sec-
retary of Labor so as to ensure that the require-
ments of this subsection, as they apply in the case
of grievances referred to in paragraph (1) to which
section 503 of the Employee Retirement Income Se-
curity Act of 1974 applies, are applied in a manner
consistent with the requirements of such section
503.
‘‘(g) INFORMATION
ON ADVANCE DIRECTIVES.—
Each Medicare Choice organization shall meet the require-
ment of section 1866(f) (relating to maintaining written
policies and procedures respecting advance directives).
‘‘(h) APPROVAL OF MARKETING MATERIALS.—
‘‘(1) SUBMISSION.—Each Medicare Choice or-
ganization may not distribute marketing materials
unless—
‘‘(A) at least 45 days before the date of
distribution the organization has submitted the
material to the Secretary for review, and
‘‘(B) the Secretary has not disapproved the
distribution of such material.
‘‘(2) 
REVIEW.—The 
standards 
established
under section 1856 shall include guidelines for the
review of all such material submitted and under
Subtitle A Part 1
such guidelines the Secretary shall disapprove such
material if the material is materially inaccurate or
misleading or otherwise makes a material misrepre-
sentation.
‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—
In the case of material that is submitted under para-
graph (1)(A) to the Secretary or a regional office of
the Department of Health and Human Services and
the Secretary or the office has not disapproved the
distribution of marketing materials under paragraph
(1)(B) with respect to a Medicare Choice product in
an area, the Secretary is deemed not to have dis-
approved such distribution in all other areas covered
by the product and organization.
‘‘(4) PROHIBITION
OF
CERTAIN
MARKETING
PRACTICES.—Each Medicare Choice organization
shall conform to fair marketing standards in relation
to Medicare Choice products offered under this part,
included in the standards established under section
1856. Such standards shall include a prohibition
against an organization (or agent of such an organi-
zation) completing any portion of any election form
under section 1805 on behalf of any individual.
‘‘(i) ADDITIONAL STANDARDIZED INFORMATION ON
QUALITY, OUTCOMES, AND OTHER FACTORS.—
Subtitle A Part 1
‘‘(1) IN GENERAL.—In addition to any other in-
formation required to be provided under this part,
each Medicare Choice organization shall provide the
Secretary (at a time, not less frequently than annu-
ally, and in an electronic, standardized form and
manner specified by the Secretary) such information
as the Secretary determines to be necessary, consist-
ent with this part, to evaluate the performance of
the organization in providing benefits to enrollees.
‘‘(2) INFORMATION TO BE INCLUDED.—Subject
to paragraph (3), information to be provided under
this subsection shall include at least the following:
‘‘(A) Information on the characteristics of
enrollees that may affect their need for or use
of health services and the determination of risk-
adjusted payments under section 1855.
‘‘(B) Information on the types of treat-
ments and outcomes of treatments with respect
to the clinical health, functional status, and
well-being of enrollees.
‘‘(C) Information on health care expendi-
tures and the volume and prices of procedures.
‘‘(D) Information on the flexibility per-
mitted by plans to enrollees in their selection of
providers.
Subtitle A Part 1
‘‘(3) SPECIAL
TREATMENT.—The Secretary
may waive the provision of such information under
paragraph (2), or require such other information, as
the Secretary finds appropriate in the case of a
newly established Medicare Choice organization for
which such information is not available.
‘‘(j) DEMONSTRATION PROJECTS.—The Secretary
shall provide for demonstration projects to determine the
effectiveness, cost, and impact of alternative methods of
providing comparative information about the performance
of Medicare Choice organizations and products and the
performance of medicare supplemental policies in relation
to such products. Such projects shall include information
about health care outcomes resulting from coverage under
different products and policies.
‘‘PROVIDER-SPONSORED ORGANIZATIONS
‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZA-
TION DEFINED.—
‘‘(1) IN GENERAL.—In this part, the term ‘pro-
vider-sponsored organization’ means a public or pri-
vate entity that (in accordance with standards estab-
lished under subsection (b)) is a provider, or group
of affiliated providers, that provides a substantial
proportion (as defined by the Secretary under such
standards) of the health care items and services
Subtitle A Part 1
under the contract under this part directly through
the provider or affiliated group of providers.
‘‘(2) SUBSTANTIAL PROPORTION.—In defining
what is a ‘substantial proportion’ for purposes of
paragraph (1), the Secretary—
‘‘(A) shall take into account the need for
such an organization to assume responsibility
for a substantial proportion of services in order
to assure financial stability and the practical
difficulties in such an organization integrating
a very wide range of service providers; and
‘‘(B) may vary such proportion based upon
relevant differences among organizations, such
as their location in an urban or rural area.
‘‘(3) AFFILIATION.—For purposes of this sub-
section, a provider is ‘affiliated’ with another pro-
vider if, through contract, ownership, or otherwise—
‘‘(A) one provider, directly or indirectly,
controls, is controlled by, or is under common
control with the other,
‘‘(B) each provider is a participant in a
lawful combination under which each provider
shares, directly or indirectly, substantial finan-
cial risk in connection with their operations,
Subtitle A Part 1
‘‘(C) both providers are part of a con-
trolled group of corporations under section
1563 of the Internal Revenue Code of 1986, or
‘‘(D) both providers are part of an affili-
ated service group under section 414 of such
Code.
‘‘(4) CONTROL.—For purposes of paragraph
(3), control is presumed to exist if one party, di-
rectly or indirectly, owns, controls, or holds the
power to vote, or proxies for, not less than 51 per-
cent of the voting rights or governance rights of an-
other.
‘‘(b) PREEMPTION OF STATE INSURANCE LICENSING
REQUIREMENTS.—
‘‘(1) IN
GENERAL.—This section supersedes
any State law which—
‘‘(A) requires that a provider-sponsored or-
ganization meet requirements for insurers of
health services or health maintenance organiza-
tions doing business in the State with respect to
initial capitalization and establishment of finan-
cial reserves against insolvency, or
‘‘(B) imposes requirements that would
have the effect of prohibiting the organization
Subtitle A Part 1
‘‘(2) ANNUAL ANNOUNCEMENT.—The Secretary
shall annually determine, and shall announce (in a
manner intended to provide notice to interested par-
ties) not later than September 7 before the calendar
year concerned—
‘‘(A) the annual Medicare Choice capita-
tion rate for each payment area for the year,
and
‘‘(B) the factors to be used in adjusting
such rates under subsection (b) for payments
for months in that year.
‘‘(3) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (2) for a year, the
Secretary shall provide for notice to Medicare Choice
organizations of proposed changes to be made in the
methodology or benefit coverage assumptions from
the methodology and assumptions used in the pre-
vious announcement and shall provide such organi-
zations an opportunity to comment on such proposed
changes.
‘‘(4) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (2) for a year,
the Secretary shall include an explanation of the as-
sumptions (including any benefit coverage assump-
Subtitle A Part 1
tions) and changes in methodology used in the an-
nouncement in sufficient detail so that Medicare
Choice organizations can compute monthly adjusted
Medicare Choice capitation rates for classes of indi-
viduals located in each payment area which is in
whole or in part within the service area of such an
organization.
‘‘(b) MONTHLY ADJUSTED MEDICARE CHOICE CAPI-
TATION RATE.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the ‘monthly adjusted Medicare Choice capita-
tion rate’ under this subsection, for a month in a
year for an individual in a payment area (specified
under paragraph (3)) and in a class (established
under paragraph (4)), is 1⁄12 of the annual Medicare
Choice capitation rate specified in paragraph (2) for
that area for the year, adjusted to reflect the actuar-
ial value of benefits under this title with respect to
individuals in such class compared to the national
average for individuals in all classes.
‘‘(2) ANNUAL
MEDICARE
CHOICE
CAPITATION
RATES.—
‘‘(A) IN GENERAL.—For purposes of this
section, the annual Medicare Choice capitation
rate for a payment area for a year is equal to
Subtitle A Part 1
the annual Medicare Choice capitation rate for
the area for the previous year (or, in the case
of 1996, the average annual per capita rate of
payment described in section 1876(a)(1)(C) for
the area for 1995) increased by the per capita
growth rate for that area and year (as deter-
mined under subsection (c)).
‘‘(B) SPECIAL RULES FOR 1996.—
‘‘(i) FLOOR AT 85 PERCENT OF NA-
TIONAL
AVERAGE.—In no case shall the
annual Medicare Choice capitation rate for
a payment area for 1996 be less than 85
percent of the national average of such
rates for such year for all payment areas
(weighted to reflect the number of medi-
care beneficiaries in each such area).
‘‘(ii) REMOVAL
OF
MEDICAL
EDU-
CATION
AND
DISPROPORTIONATE
SHARE
HOSPITAL PAYMENTS FROM CALCULATION
OF
ADJUSTED
AVERAGE
PER
CAPITA
COST.—In determining the annual Medi-
care Choice capitation rate for 1996, the
average annual per capita rate of payment
described in section 1876(a)(1)(C) for
1995 shall be determined as though the
Subtitle A Part 1
Secretary had excluded from such rate any
amounts which the Secretary estimated
would have been payable under this title
during the year for—
‘‘(I) payment adjustments under
section 1886(d)(5)(F) for hospitals
serving a disproportionate share of
low-income patients; and
‘‘(II) the indirect costs of medical
education 
under 
section
1886(d)(5)(B) or for direct graduate
medical education costs under section
1886(h).
‘‘(3) PAYMENT AREA DEFINED.—
‘‘(A) IN
GENERAL.—In this section, the
term ‘payment area’ means—
‘‘(i) a metropolitan statistical area, or
‘‘(ii) all areas of a State outside of such an
area.
‘‘(B) SPECIAL
RULE
FOR
ESRD
BENE-
FICIARIES.—Such term means, in the case of
the population group described in paragraph
(5)(C), each State.
‘‘(4) CLASSES.—
Subtitle A Part 1
‘‘(A) IN GENERAL.—For purposes of this
section, the Secretary shall define appropriate
classes of enrollees, consistent with paragraph
(5), based on age, gender, welfare status, insti-
tutionalization, and such other factors as the
Secretary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary
may add to, modify, or substitute for such
classes, if such changes will improve the deter-
mination of actuarial equivalence.
‘‘(B) RESEARCH.—The Secretary shall
conduct such research as may be necessary to
provide for greater accuracy in the adjustment
of capitation rates under this subsection. Such
research may include research into the addition
or modification of classes under subparagraph
(A). The Secretary shall submit to Congress a
report on such research by not later than Janu-
ary 1, 1997.
‘‘(5) DIVISION OF MEDICARE POPULATION.—In
carrying out paragraph (4) and this section, the Sec-
retary shall recognize the following separate popu-
lation groups:
Subtitle A Part 1
‘‘(A) AGED.—Individuals 65 years of age
or older who are not described in subparagraph
(C).
‘‘(B) 
DISABLED.—Disabled 
individuals
who are under 65 years of age and not de-
scribed in subparagraph (C).
‘‘(C) INDIVIDUALS
WITH
END
STAGE
RENAL
DISEASE.—Individuals who are deter-
mined to have end stage renal disease.
‘‘(c) PER CAPITA GROWTH RATES.—
‘‘(1) FOR 1996.—
‘‘(A) IN GENERAL.—For purposes of this
section and subject to subparagraph (B), the
per capita growth rates for 1996, for a payment
area assigned to a service utilization cohort
under subsection (d), shall be the following:
‘‘(i) BELOW AVERAGE SERVICE UTILI-
ZATION COHORT.—For areas assigned to
the below average service utilization cohort,
11.5 percent.
‘‘(ii) ABOVE AVERAGE SERVICE UTILI-
ZATION COHORT.—For areas assigned to
the above average service utilization co-
hort, 6.4 percent.
Subtitle A Part 1
‘‘(iii) HIGHEST SERVICE UTILIZATION
COHORT.—For areas assigned to the high-
est service utilization cohort, 3.2 percent.
‘‘(B) BUDGET
NEUTRAL
ADJUSTMENT.—
The Secretary shall adjust the per capita
growth rates specified in subparagraph (A) for
all the areas by such uniform factor as may be
necessary to assure that the total capitation
payments under this section during 1996 are
the same as the amount such payments would
have been if the per capita growth rate for all
such areas for 1996 were equal to the national
average per capita growth rate, specified in
paragraph (3) for 1996.
‘‘(2) FOR SUBSEQUENT YEARS.—
‘‘(A) IN GENERAL.—For purposes of this
section and subject to subparagraph (B), the
Secretary shall compute a per capita growth
rate for each year after 1996, for each payment
area as assigned to a service utilization cohort
under subsection (d), consistent with the follow-
ing rules:
‘‘(i) BELOW AVERAGE SERVICE UTILI-
ZATION COHORT SET AT 143 PERCENT OF
NATIONAL AVERAGE PER CAPITA GROWTH
Subtitle A Part 1
RATE.—The per capita growth rate for
areas assigned to the below average service
utilization cohort for the year shall be 143
percent of the national average per capita
growth rate for the year (as specified
under paragraph (3)).
‘‘(ii) ABOVE AVERAGE SERVICE UTILI-
ZATION COHORT SET AT 80 PERCENT OF
NATIONAL AVERAGE PER CAPITA GROWTH
RATE.—The per capita growth rate for
areas assigned to the above average service
utilization cohort for the year shall be 80
percent of the national average per capita
growth rate for the year.
‘‘(iii) HIGHEST SERVICE UTILIZATION
COHORT SET AT 40 PERCENT OF NATIONAL
AVERAGE
PER
CAPITA
GROWTH
RATE.—
The per capita growth rate for areas as-
signed to the highest service utilization co-
hort for the year shall be 40 percent of the
national average per capita growth rate for
the year.
‘‘(B) AVERAGE PER CAPITA GROWTH RATE
AT
NATIONAL
AVERAGE
TO
ASSURE
BUDGET
NEUTRALITY.—The Secretary shall compute per
Subtitle A Part 1
capita growth rates for a year under subpara-
graph (A) in a manner so that the weighted av-
erage per capita growth rate for all areas for
the year (weighted to reflect the number of
medicare beneficiaries in each area) is equal to
the national average per capita growth rate
under paragraph (3) for the year.
‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH
RATES.—In this subsection, the ‘national average
per capita growth rate’ for—
‘‘(A) 1996 is 8.0 percent,
‘‘(B) 1997 is 7.5 percent,
‘‘(C) 1998 is 7.0 percent,
‘‘(D) 1999 is 7.0 percent,
‘‘(E) 2000 is 7.0 percent,
‘‘(F) 2001 is 7.0 percent,
‘‘(G) 2002 is 6.0 percent, and
‘‘(H) each subsequent year is 6.0 percent.
‘‘(d) ASSIGNMENT OF PAYMENT AREAS TO SERVICE
UTILIZATION COHORTS.—
‘‘(1) IN GENERAL.—For purposes of determin-
ing per capita growth rates under subsection (c) for
areas for a year, the Secretary shall assign each pay-
ment area to a service utilization cohort (based on
Subtitle A Part 1
the service utilization index value for that area de-
termined under paragraph (2)) as follows:
‘‘(A) BELOW AVERAGE SERVICE UTILIZA-
TION COHORT.—Areas with a service utilization
index value of less than 1.00 shall be assigned
to the below average service utilization cohort.
‘‘(B) ABOVE AVERAGE SERVICE UTILIZA-
TION COHORT.—Areas with a service utilization
index value of at least 1.00 but less than 1.20
shall be assigned to the above average service
utilization cohort.
‘‘(C) HIGHEST SERVICE UTILIZATION CO-
HORT.—Areas with a service utilization index
value of at least 1.20 shall be assigned to the
highest service utilization cohort.
‘‘(2) DETERMINATION OF SERVICE UTILIZATION
INDEX VALUES.—In order to determine the per cap-
ita growth rate for a payment area for each year
(beginning with 1996), the Secretary shall determine
for such area and year a service utilization index
value, which is equal to—
‘‘(A) the annual Medicare Choice capita-
tion rate under this section for the area for the
year in which the determination is made (or, in
the case of 1996, the average annual per capita
Subtitle A Part 1
rate 
of 
payment 
(described 
in 
section
1876(a)(1)(C)) for the area for 1995); divided
by
‘‘(B) the input-price-adjusted annual na-
tional Medicare Choice capitation rate (as de-
termined under paragraph (3)) for that area for
the year in which the determination is made.
‘‘(3) DETERMINATION
OF
INPUT-PRICE-AD-
JUSTED RATES.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), the ‘input-price-adjusted annual na-
tional Medicare Choice capitation rate’ for a
payment area for a year is equal to the sum,
for all the types of medicare services (as classi-
fied by the Secretary), of the product (for each
such type) of—
‘‘(i) the national standardized Medi-
care Choice capitation rate (determined
under subparagraph (B)) for the year,
‘‘(ii) the proportion of such rate for
the year which is attributable to such type
of services, and
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area
Subtitle A Part 1
compared to the national average input
price of such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or
updating) national payment rates for specific
areas and localities.
‘‘(B) NATIONAL STANDARDIZED MEDICARE
CHOICE CAPITATION RATE.—In this paragraph,
the ‘national standardized Medicare Choice
capitation rate’ for a year is equal to—
‘‘(i) the sum (for all payment areas)
of the product of (I) the annual Medicare
Choice capitation rate for that year for the
area under subsection (b)(2), and (II) the
average number of medicare beneficiaries
residing in that area in the year; divided
by
‘‘(ii) the total average number of med-
icare beneficiaries residing in all the pay-
ment areas for that year.
‘‘(C) SPECIAL RULES FOR 1996.—In apply-
ing this paragraph for 1996—
Subtitle A Part 1
‘‘(i) medicare services shall be divided
into 2 types of services: part A services
and part B services;
‘‘(ii) the proportions described in sub-
paragraph (A)(ii) for such types of services
shall be—
‘‘(I) for part A services, the ratio
(expressed as a percentage) of the av-
erage annual per capita rate of pay-
ment for the area for part A for 1995
to the total average annual per capita
rate of payment for the area for parts
A and B for 1995, and
‘‘(II) for part B services, 100
percent minus the ratio described in
subclause (I);
‘‘(iii) for the part A services, 70 per-
cent of payments attributable to such serv-
ices shall be adjusted by the index used
under section 1886(d)(3)(E) to adjust pay-
ment rates for relative hospital wage levels
for hospitals located in the payment area
involved;
‘‘(iv) for part B services—
Subtitle A Part 1
‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e)
used to adjust payment rates for phy-
sicians’ services furnished in the pay-
ment area, and
‘‘(II) of the remaining 34 percent
of the amount of such payments, 70
percent shall be adjusted by the index
described in clause (iii);
‘‘(v) the index values shall be com-
puted based only on the beneficiary popu-
lation described in subsection (b)(5)(A).
The Secretary may continue to apply the rules
described in this subparagraph (or similar
rules) for 1997.
‘‘(e) PAYMENT PROCESS.—
‘‘(1) IN GENERAL.—Subject to section 1859(f),
the Secretary shall make monthly payments under
this section in advance and in accordance with the
rate determined under subsection (a) to the plan for
each individual enrolled with a Medicare Choice or-
ganization under this part.
Subtitle A Part 1
‘‘(2) ADJUSTMENT
TO
REFLECT
NUMBER
OF
ENROLLEES.—
‘‘(A) IN GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween the actual number of individuals enrolled
with an organization under this part and the
number of such individuals estimated to be so
enrolled in determining the amount of the ad-
vance payment.
‘‘(B) SPECIAL
RULE
FOR
CERTAIN
EN-
ROLLEES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make retroactive
adjustments under subparagraph (A) to
take into account individuals enrolled dur-
ing the period beginning on the date on
which the individual enrolls with a Medi-
care Choice organization under a product
operated, sponsored, or contributed to by
the individual’s employer or former em-
ployer (or the employer or former employer
of the individual’s spouse) and ending on
the date on which the individual is enrolled
in the organization under this part, except
Subtitle A Part 1
that for purposes of making such retro-
active adjustments under this subpara-
graph, such period may not exceed 90
days.
‘‘(ii) 
EXCEPTION.—No 
adjustment
may be made under clause (i) with respect
to any individual who does not certify that
the organization provided the individual
with the disclosure statement described in
section 1853(a) at the time the individual
enrolled with the organization.
‘‘(f) PAYMENTS FROM TRUST FUND.—The payment
to a Medicare Choice organization under this section for
individuals enrolled under this part with the organization,
and payments to a Medicare Choice MSA under subsection
(f)(1)(B), shall be made from the Federal Hospital Insur-
ance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund in such proportion as the Secretary
determines reflects the relative weight that benefits under
part A and under part B represents of the actuarial value
of the total benefits under this title.
‘‘(g) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
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Subtitle A, Part 2
death, such spouse is not entitled to benefits
under title XVIII of the Social Security Act,
then after the date of such death—
‘‘(i) the Secretary of Health and
Human Services may not make any pay-
ments to such Medicare Choice MSA, other
than payments attributable to periods be-
fore such date,
‘‘(ii) in applying subsection (b)(2)
with respect to such Medicare Choice
MSA, references to the account holder
shall be treated as including references to
any dependent (as defined in section 152)
of such spouse and any subsequent spouse
of such spouse, and
‘‘(iii) in lieu of applying subsection
(d)(2), the rules of section 220(f)(2) shall
apply.
‘‘(2) TREATMENT IF DESIGNATED BENEFICIARY
IS NOT SPOUSE.—In the case of an account holder’s
interest in a Medicare Choice MSA which is payable
to (or for the benefit of) any person other than such
holder’s spouse upon the death of such holder—
‘‘(A) such account shall cease to be a Med-
icare Choice MSA as of the date of death, and