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Benefits Administration shall make available to 
the Board such information and other assist-
ance as it may require to carry out its func-
tions. 
‘‘(10) CONTRACT AUTHORITY.—The Board may 
contract with and compensate government and pri-
vate agencies or persons to carry out its duties 
under this subsection, without regard to section 
3709 of the Revised Statutes (41 U.S.C. 5). 
‘‘(f) FUNDING.—There is authorized to be appro-
priated, in appropriate part from the Federal Hospital In-
surance Trust Fund and from the Federal Supplementary 
Medical Insurance Trust Fund (including the Medicare 
Prescription Drug Account), such sums as are necessary 
to carry out this section.’’. 
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by 
subsection (a) shall take effect on the date of the en-
actment of this Act. 
(2) DUTIES WITH RESPECT TO ELIGIBILITY DE-
TERMINATIONS
AND
ENROLLMENT.—The Adminis-
trator of the Medicare Benefits Administration shall 
carry out enrollment under title XVIII of the Social 
Security Act, make eligibility determinations under
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such title, and carry out parts C and E of such title 
for years beginning or after January 1, 2006. 
(3) TRANSITION.—Before the date the Adminis-
trator of the Medicare Benefits Administration is 
appointed and assumes responsibilities under this 
section and section 1807 of the Social Security Act, 
the Secretary of Health and Human Services shall 
provide for the conduct of any responsibilities of 
such Administrator that are otherwise provided 
under law. 
(c) 
MISCELLANEOUS
ADMINISTRATIVE
PROVI-
SIONS.—
(1) ADMINISTRATOR
AS
MEMBER
OF
THE 
BOARD
OF
TRUSTEES
OF
THE
MEDICARE
TRUST 
FUNDS.—Section 1817(b) and section 1841(b) (42 
U.S.C. 1395i(b), 1395t(b)) are each amended by 
striking ‘‘and the Secretary of Health and Human 
Services, all ex officio,’’ and inserting ‘‘the Secretary 
of Health and Human Services, and the Adminis-
trator of the Medicare Benefits Administration, all 
ex officio,’’. 
(2) INCREASE IN GRADE TO EXECUTIVE LEVEL 
III FOR THE ADMINISTRATOR OF THE CENTERS FOR 
MEDICARE & MEDICAID SERVICES; LEVEL FOR MEDI-
CARE BENEFITS ADMINISTRATOR.—
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(A) IN GENERAL.—Section 5314 of title 5, 
United States Code, by adding at the end the 
following: 
‘‘Administrator of the Centers for Medicare & 
Medicaid Services. 
‘‘Administrator of the Medicare Benefits Ad-
ministration.’’. 
(B) CONFORMING
AMENDMENT.—Section 
5315 of such title is amended by striking ‘‘Ad-
ministrator of the Health Care Financing Ad-
ministration.’’. 
(C) EFFECTIVE DATE.—The amendments 
made by this paragraph take effect on January 
1, 2004.
TITLE IX—REGULATORY REDUC-
TION AND CONTRACTING RE-
FORM 
Subtitle A—Regulatory Reform 
SEC. 901. CONSTRUCTION; DEFINITION OF SUPPLIER. 
(a) CONSTRUCTION.—Nothing in this title shall be 
construed—
(1) to compromise or affect existing legal rem-
edies for addressing fraud or abuse, whether it be 
criminal prosecution, civil enforcement, or adminis-
trative remedies, including under sections 3729
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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 division does not constitute 
consolidation of the Federal Hospital Insurance Trust 
Fund and the Federal Supplementary Medical Insurance 
Trust Fund or reflect any position on that issue. 
(b) DEFINITION OF SUPPLIER.—Section 1861 (42 
U.S.C. 1395x) is amended by inserting after subsection 
(c) the following new subsection: 
‘‘Supplier 
‘‘(d) The term ‘supplier’ means, unless the context 
otherwise requires, a physician or other practitioner, a fa-
cility, or other entity (other than a provider of services) 
that furnishes items or services under this title.’’. 
SEC. 902. ISSUANCE OF REGULATIONS. 
(a) 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:
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‘‘(3)(A) The Secretary, in consultation with the Di-
rector of the Office of Management and Budget, shall es-
tablish and publish a regular timeline for the publication 
of final regulations based on the previous publication of 
a proposed regulation or an interim final regulation. 
‘‘(B) Such timeline may vary among different regula-
tions based on differences in the complexity of the regula-
tion, the number and scope of comments received, and 
other relevant factors, but shall not be longer than 3 years 
except under exceptional circumstances. If the Secretary 
intends to vary such timeline with respect to the publica-
tion of a final regulation, the Secretary shall cause to have 
published in the Federal Register notice of the different 
timeline by not later than the timeline previously estab-
lished with respect to such regulation. Such notice shall 
include a brief explanation of the justification for such 
variation. 
‘‘(C) In the case of interim final regulations, upon 
the expiration of the regular timeline established under 
this paragraph for the publication of a final regulation 
after opportunity for public comment, the interim final 
regulation shall not continue in effect unless the Secretary 
publishes (at the end of the regular timeline and, if appli-
cable, at the end of each succeeding 1-year period) a notice 
of continuation of the regulation that includes an expla-
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nation of why the regular timeline (and any subsequent 
1-year extension) was not complied with. If such a notice 
is published, the regular timeline (or such timeline as pre-
viously extended under this paragraph) for publication of 
the final regulation shall be treated as having been ex-
tended for 1 additional year. 
‘‘(D) The Secretary shall annually submit to Con-
gress a report that describes the instances in which the 
Secretary failed to publish a final regulation within the 
applicable regular timeline under this paragraph and that 
provides an explanation for such failures.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. The Secretary shall provide 
for an appropriate transition to take into account 
the backlog of previously published interim final reg-
ulations. 
(b) LIMITATIONS ON NEW MATTER IN FINAL REGU-
LATIONS.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 
1395hh(a)), as amended by subsection (a), is 
amended by adding at the end the following new 
paragraph: 
‘‘(4) If the Secretary publishes a final regulation that 
includes a provision that is not a logical outgrowth of a
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previously published notice of proposed rulemaking or in-
terim final rule, such provision shall be treated as a pro-
posed regulation and shall not take effect until there is 
the further 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. 903. COMPLIANCE WITH CHANGES IN REGULATIONS 
AND POLICIES. 
(a) NO
RETROACTIVE
APPLICATION
OF
SUB-
STANTIVE CHANGES.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C. 
1395hh), as amended by section 902(a), is amended 
by adding at the end the following new subsection: 
‘‘(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 effective date 
of the change, unless the Secretary determines that—
‘‘(i) such retroactive application is necessary to 
comply with statutory requirements; or
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‘‘(ii) failure to apply the change retroactively 
would be contrary to the public interest.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to substantive changes 
issued on or after the date of the enactment of this 
Act. 
(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE 
CHANGES AFTER NOTICE.—
(1) IN
GENERAL.—Section 1871(e)(1), as 
added by subsection (a), is amended by adding at 
the end the following: 
‘‘(B)(i) Except as provided in clause (ii), a sub-
stantive change referred to in subparagraph (A) shall not 
become effective before the end of the 30-day period that 
begins on the date that the Secretary has issued or pub-
lished, as the case may be, the substantive change. 
‘‘(ii) The Secretary may provide for such a sub-
stantive change to take effect on a date that precedes the 
end of the 30-day period under clause (i) if the Secretary 
finds that waiver of such 30-day period is necessary to 
comply with statutory requirements or that the application 
of such 30-day period is contrary to the public interest. 
If the Secretary provides for an earlier effective date pur-
suant to this clause, the Secretary shall include in the 
issuance or publication of the substantive change a finding
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described in the first sentence, and a brief statement of 
the reasons for such finding. 
‘‘(C) No action shall be taken against a provider of 
services or supplier with respect to noncompliance with 
such a substantive change for items and services furnished 
before the effective date of such a change.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to compliance actions 
undertaken on or after the date of the enactment of 
this Act. 
(c) RELIANCE ON GUIDANCE.—
(1) IN GENERAL.—Section 1871(e), as added 
by subsection (a), is further amended by adding at 
the end the following new paragraph: 
‘‘(2)(A) If—
‘‘(i) a provider of services or supplier follows 
the written guidance (which may be transmitted 
electronically) provided by the Secretary or by a 
medicare contractor (as defined in section 1889(g)) 
acting within the scope of the contractor’s contract 
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;
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‘‘(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 sanction (including any penalty or requirement for 
repayment of any amount) 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 but shall not apply to any 
sanction for which notice was provided on or before 
the date of the enactment of this Act. 
SEC. 904. 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
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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 one 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 2(a), 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 2 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—
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‘‘(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 and the Medi-
care Provider 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. 911. 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.—
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‘‘(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—
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‘‘(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, 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-
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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-
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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 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 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)).
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‘‘(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 title, the Federal 
Acquisition Regulation applies to contracts under 
this title. 
‘‘(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
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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 five 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.
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‘‘(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.—In 
developing 
contract performance requirements, the Sec-
retary shall develop performance requirements 
applicable to functions described in subsection 
(a)(4). 
‘‘(B) CONSULTATION.—In developing such 
requirements, the Secretary may consult with 
providers of services and suppliers, organiza-
tions representing individuals entitled to bene-
fits under part A or enrolled under part B, or 
both, and organizations and agencies per-
forming functions necessary to carry out the 
purposes of this section with respect to such 
performance requirements.
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‘‘(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 developed 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-
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essary to assure the correctness and verification 
of the information and reports under subpara-
graph (A) and otherwise to carry out the pur-
poses of this title. 
‘‘(5) SURETY BOND.—A contract with a medi-
care administrative contractor under this section 
may require the medicare administrative contractor, 
and any of its officers or employees certifying pay-
ments or disbursing funds pursuant to the contract, 
or otherwise participating in carrying out the con-
tract, to give surety bond to the United States in 
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)(4)(B). 
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN 
DATA COLLECTION.—The Secretary may not require, 
as a condition of entering into, or renewing, a con-
tract under this section, that the medicare adminis-
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trative contractor match data obtained other than in 
its activities under this title with data used in the 
administration of this title for purposes of identi-
fying 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 the reck-
less disregard of the individual’s obligations or the 
intent by that individual to defraud the United 
States, be liable with respect to any payments cer-
tified by the individual under this section. 
‘‘(2) DISBURSING OFFICER.—No disbursing of-
ficer shall, in the absence of the reckless disregard 
of the officer’s obligations or the intent by that offi-
cer to defraud the United States, be liable with re-
spect to any payment by such officer under this sec-
tion if it was based upon an authorization (which 
meets the applicable requirements for such internal 
controls established by the Comptroller General) of 
a certifying officer designated as provided in para-
graph (1) of this subsection.
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‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE 
CONTRACTOR.—
‘‘(A) IN GENERAL.—No medicare administra-
tive contractor shall be liable to the United States 
for a payment by a certifying or disbursing officer 
unless, in connection with such payment, the medi-
care administrative contractor acted with reckless 
disregard of its obligations under its medicare ad-
ministrative contract or with intent to defraud the 
United States. 
‘‘(B) RELATIONSHIP TO FALSE CLAIMS ACT.—
Nothing in this subsection shall be construed to limit 
liability for conduct that would constitute a violation 
of sections 3729 through 3731 of title 31, United 
States Code (commonly known as the ‘False Claims 
Act’). 
‘‘(4) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (D), in the case of a medicare 
administrative contractor (or a person who is a 
director, officer, or employee of such a con-
tractor or who is engaged by the contractor to 
participate directly in the claims administration 
process) who is made a party to any judicial or 
administrative proceeding arising from or relat-
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ing directly to the claims administration process 
under this title, the Secretary may, to the ex-
tent the Secretary determines to be appropriate 
and as specified in the contract with the con-
tractor, indemnify the contractor and such per-
sons. 
‘‘(B) CONDITIONS.—The Secretary may 
not provide indemnification under subparagraph 
(A) insofar as the liability for such costs arises 
directly from conduct that is determined by the 
judicial proceeding or by the Secretary to be 
criminal in nature, fraudulent, or grossly neg-
ligent. If indemnification is provided by the Sec-
retary with respect to a contractor before a de-
termination that such costs arose directly from 
such conduct, the contractor shall reimburse the 
Secretary for costs of indemnification. 
‘‘(C) SCOPE
OF
INDEMNIFICATION.—In-
demnification by the Secretary under subpara-
graph (A) may include payment of judgments, 
settlements (subject to subparagraph (D)), 
awards, and costs (including reasonable legal 
expenses). 
‘‘(D) WRITTEN
APPROVAL
FOR
SETTLE-
MENTS.—A contractor or other person de-
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scribed in subparagraph (A) may not propose to 
negotiate a settlement or compromise of a pro-
ceeding described in such subparagraph without 
the prior written approval of the Secretary to 
negotiate such settlement or compromise. Any 
indemnification under subparagraph (A) with 
respect to amounts paid under a settlement or 
compromise of a proceeding described in such 
subparagraph are conditioned upon prior writ-
ten approval by the Secretary of the final settle-
ment or compromise. 
‘‘(E) CONSTRUCTION.—Nothing in this 
paragraph shall be construed—
‘‘(i) to change any common law immu-
nity that may be available to a medicare 
administrative contractor or person de-
scribed in subparagraph (A); or 
‘‘(ii) to permit the payment of costs 
not otherwise allowable, reasonable, or allo-
cable under the Federal Acquisition Regu-
lations.’’. 
(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
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(1), the Secretary shall consider inclusion of the per-
formance standards described in sections 1816(f)(2) 
of such Act (relating to timely processing of recon-
siderations and applications for exemptions) and sec-
tion 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 
enactment 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
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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);
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(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) by striking ‘‘will’’ the first place it 
appears in each of subparagraphs (A), (B), 
(F), (G), (H), and (L) and inserting 
‘‘shall’’; 
(iii) 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’’; 
(iv) by striking subparagraphs (C), 
(D), and (E);
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(v) in subparagraph (H)—
(I) by striking ‘‘if it makes deter-
minations or payments with respect to 
physicians’ services,’’ in the matter 
preceding clause (i); and 
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’ in clause (i); 
(vi) by striking subparagraph (I); 
(vii) in subparagraph (L), by striking 
the semicolon and inserting a period; 
(viii) in the first sentence, after sub-
paragraph (L), by striking ‘‘and shall con-
tain’’ and all that follows through the pe-
riod; and 
(ix) in the seventh sentence, by insert-
ing ‘‘medicare administrative contractor,’’ 
after ‘‘carrier,’’; and 
(D) by striking paragraph (5); 
(E) in paragraph (6)(D)(iv), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and 
(F) in paragraph (7), by striking ‘‘the car-
rier’’ and inserting ‘‘the Secretary’’ each place 
it appears.
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(4) Subsection (c) is amended—
(A) by striking paragraph (1); 
(B) in paragraph (2)(A), by striking ‘‘con-
tract under this section which provides for the 
disbursement of funds, as described in sub-
section (a)(1)(B),’’ and inserting ‘‘contract 
under section 1874A that provides for making 
payments under this part’’; 
(C) in paragraph (3)(A), by striking ‘‘sub-
section 
(a)(1)(B)’’ 
and 
inserting 
‘‘section 
1874A(a)(3)(B)’’; 
(D) in paragraph (4), in the matter pre-
ceding subparagraph (A), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’; and 
(E) by striking paragraphs (5) and (6). 
(5) Subsections (d), (e), and (f) are repealed. 
(6) Subsection (g) is amended by striking ‘‘car-
rier or carriers’’ and inserting ‘‘medicare administra-
tive contractor or contractors’’. 
(7) Subsection (h) is amended—
(A) in paragraph (2)—
(i) by striking ‘‘Each carrier having 
an agreement with the Secretary under
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subsection (a)’’ and inserting ‘‘The Sec-
retary’’; and 
(ii) by striking ‘‘Each such carrier’’ 
and inserting ‘‘The Secretary’’; 
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an 
agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘medicare ad-
ministrative contractor having a contract 
under section 1874A that provides for 
making payments under this part’’; and 
(ii) by striking ‘‘such carrier’’ and in-
serting ‘‘such contractor’’; 
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and insert-
ing ‘‘a medicare administrative contractor’’ 
each place it appears; and 
(ii) by striking ‘‘the carrier’’ and in-
serting ‘‘the contractor’’ each place it ap-
pears; and 
(D) in paragraphs (5)(A) and (5)(B)(iii), 
by striking ‘‘carriers’’ and inserting ‘‘medicare 
administrative contractors’’ each place it ap-
pears. 
(8) Subsection (l) is amended—
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(A) in paragraph (1)(A)(iii), by striking 
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and 
(B) in paragraph (2), by striking ‘‘carrier’’ 
and inserting ‘‘medicare administrative con-
tractor’’. 
(9) Subsection (p)(3)(A) is amended by striking 
‘‘carrier’’ and inserting ‘‘medicare administrative 
contractor’’. 
(10) Subsection (q)(1)(A) is amended by strik-
ing ‘‘carrier’’. 
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN
GENERAL.—Except as otherwise 
provided in this subsection, the amendments 
made by this section shall take effect on Octo-
ber 1, 2005, and the Secretary is authorized to 
take such steps before such date as may be nec-
essary to implement such amendments on a 
timely basis. 
(B) CONSTRUCTION
FOR
CURRENT
CON-
TRACTS.—Such amendments shall not apply to 
contracts in effect before the date specified 
under subparagraph (A) that continue to retain 
the terms and conditions in effect on such date
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(except as otherwise provided under this Act, 
other than under this section) until such date 
as the contract is let out for competitive bid-
ding under such amendments. 
(C) DEADLINE
FOR
COMPETITIVE
BID-
DING.—The Secretary shall provide for the let-
ting by competitive bidding of all contracts for 
functions of medicare administrative contrac-
tors for annual contract periods that begin on 
or after October 1, 2010. 
(D) WAIVER
OF
PROVIDER
NOMINATION 
PROVISIONS DURING TRANSITION.—During the 
period beginning on the date of the enactment 
of this Act and before the date specified under 
subparagraph (A), the Secretary may enter into 
new agreements under section 1816 of the So-
cial Security Act (42 U.S.C. 1395h) without re-
gard to any of the provider nomination provi-
sions of such section. 
(2) GENERAL
TRANSITION
RULES.—The Sec-
retary shall take such steps, consistent with para-
graph (1)(B) and (1)(C), as are necessary to provide 
for an appropriate transition from contracts under 
section 1816 and section 1842 of the Social Security
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Act (42 U.S.C. 1395h, 1395u) to contracts under 
section 1874A, as added by subsection (a)(1). 
(3) AUTHORIZING
CONTINUATION
OF
MIP 
FUNCTIONS
UNDER
CURRENT
CONTRACTS
AND 
AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—
The provisions contained in the exception in section 
1893(d)(2) of the Social Security Act (42 U.S.C. 
1395ddd(d)(2)) shall continue to apply notwith-
standing the amendments made by this section, and 
any reference in such provisions to an agreement or 
contract shall be deemed to include a contract under 
section 1874A of such Act, as inserted by subsection 
(a)(1), that continues the activities referred to in 
such provisions. 
(e) REFERENCES.—On and after the effective date 
provided under subsection (d)(1), any reference to a fiscal 
intermediary or carrier under title XI or XVIII of the So-
cial Security Act (or any regulation, manual instruction, 
interpretative rule, statement of policy, or guideline issued 
to carry out such titles) shall be deemed a reference to 
a medicare administrative contractor (as provided under 
section 1874A of the Social Security Act). 
(f) REPORTS ON IMPLEMENTATION.—
(1) PLAN FOR IMPLEMENTATION.—By not later 
than October 1, 2004, the Secretary shall submit a
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report to Congress and the Comptroller General of 
the United States that describes the plan for imple-
mentation of the amendments made by this section. 
The Comptroller General shall conduct an evaluation 
of such plan and shall submit to Congress, not later 
than 6 months after the date the report is received, 
a report on such evaluation and shall include in such 
report such recommendations as the Comptroller 
General deems appropriate. 
(2) STATUS OF IMPLEMENTATION.—The Sec-
retary shall submit a report to Congress not later 
than October 1, 2008, that describes the status of 
implementation of such amendments and that in-
cludes a description of the following: 
(A) The number of contracts that have 
been competitively bid as of such date. 
(B) The distribution of functions among 
contracts and contractors. 
(C) A timeline for complete transition to 
full competition. 
(D) A detailed description of how the Sec-
retary has modified oversight and management 
of medicare contractors to adapt to full com-
petition.
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SEC. 912. REQUIREMENTS FOR INFORMATION SECURITY 
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS. 
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 911(a)(1), is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) REQUIREMENTS
FOR
INFORMATION
SECU-
RITY.—
‘‘(1) DEVELOPMENT
OF
INFORMATION
SECU-
RITY
PROGRAM.—A medicare administrative con-
tractor that performs the functions referred to in 
subparagraphs (A) and (B) of subsection (a)(4) (re-
lating to determining and making payments) shall 
implement a contractor-wide information security 
program to provide information security for the op-
eration and assets of the contractor with respect to 
such functions under this title. An information secu-
rity program under this paragraph shall meet the re-
quirements for information security programs im-
posed on Federal agencies under paragraphs (1) 
through (8) of section 3544(b) of title 44, United 
States Code (other than the requirements under 
paragraphs (2)(D)(i), (5)(A), and (5)(B) of such 
section). 
‘‘(2) INDEPENDENT AUDITS.—
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‘‘(A) PERFORMANCE OF ANNUAL EVALUA-
TIONS.—Each year a medicare administrative 
contractor that performs the functions referred 
to in subparagraphs (A) and (B) of subsection 
(a)(4) (relating to determining and making pay-
ments) shall undergo an evaluation of the infor-
mation security of the contractor with respect 
to such functions under this title. The evalua-
tion shall—
‘‘(i) be performed by an entity that 
meets such requirements for independence 
as the Inspector General of the Depart-
ment of Health and Human Services may 
establish; and 
‘‘(ii) test the effectiveness of informa-
tion security control techniques of an ap-
propriate subset of the contractor’s infor-
mation systems (as defined in section 
3502(8) of title 44, United States Code) 
relating to such functions under this title 
and an assessment of compliance with the 
requirements of this subsection and related 
information security policies, procedures, 
standards and guidelines, including policies 
and procedures as may be prescribed by
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the Director of the Office of Management 
and Budget and applicable information se-
curity standards promulgated under sec-
tion 11331 of title 40, United States Code. 
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case 
of a medicare administrative contractor 
covered by this subsection that has not 
previously performed the functions referred 
to in subparagraphs (A) and (B) of sub-
section (a)(4) (relating to determining and 
making payments) as a fiscal intermediary 
or carrier under section 1816 or 1842, the 
first independent evaluation conducted 
pursuant subparagraph (A) shall be com-
pleted prior to commencing such functions. 
‘‘(ii) OTHER
CONTRACTORS.—In the 
case of a medicare administrative con-
tractor covered by this subsection that is 
not described in clause (i), the first inde-
pendent evaluation conducted pursuant 
subparagraph (A) shall be completed with-
in 1 year after the date the contractor
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commences functions referred to in clause 
(i) under this section. 
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) 
TO
THE
DEPARTMENT
OF 
HEALTH AND HUMAN SERVICES.—The re-
sults of independent evaluations under sub-
paragraph (A) shall be submitted promptly 
to the Inspector General of the Depart-
ment of Health and Human Services and 
to the Secretary. 
‘‘(ii) TO
CONGRESS.—The Inspector 
General of Department of Health and 
Human Services shall submit to Congress 
annual reports on the results of such eval-
uations, including assessments of the scope 
and sufficiency of such evaluations. 
‘‘(iii) AGENCY REPORTING.—The Sec-
retary shall address the results of such 
evaluations in reports required under sec-
tion 3544(c) of title 44, United States 
Code.’’. 
(b) APPLICATION
OF REQUIREMENTS
TO FISCAL 
INTERMEDIARIES AND CARRIERS.—
(1) IN
GENERAL.—The provisions of section 
1874A(e)(2) of the Social Security Act (other than
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subparagraph (B)), as added by subsection (a), shall 
apply to each fiscal intermediary under section 1816 
of the Social Security Act (42 U.S.C. 1395h) and 
each carrier under section 1842 of such Act (42 
U.S.C. 1395u) in the same manner as they apply to 
medicare administrative contractors under such pro-
visions. 
(2) DEADLINE FOR INITIAL EVALUATION.—In 
the case of such a fiscal intermediary or carrier with 
an agreement or contract under such respective sec-
tion in effect as of the date of the enactment of this 
Act, 
the 
first 
evaluation 
under 
section 
1874A(e)(2)(A) of the Social Security Act (as added 
by subsection (a)), pursuant to paragraph (1), shall 
be completed (and a report on the evaluation sub-
mitted to the Secretary) by not later than 1 year 
after such date. 
Subtitle C—Education and 
Outreach 
SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE. 
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—Title XVIII is amended by 
inserting after section 1888 the following new sec-
tion:
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‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE 
‘‘SEC. 1889. (a) COORDINATION
OF EDUCATION 
FUNDING.—The Secretary shall coordinate the edu-
cational activities provided through medicare contractors 
(as defined in subsection (g), including under section 
1893) in order to maximize the effectiveness of Federal 
education efforts for providers of services and suppliers.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. 
(3) REPORT.—Not later than October 1, 2004, 
the Secretary shall submit to Congress a report that 
includes a description and evaluation of the steps 
taken to coordinate the funding of provider edu-
cation under section 1889(a) of the Social Security 
Act, as added by paragraph (1). 
(b) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE.—
(1) IN GENERAL.—Section 1874A, as added by 
section 911(a)(1) and as amended by section 912(a), 
is amended by adding at the end the following new 
subsection: 
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—
The Secretary shall use specific claims payment error
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rates or similar methodology of medicare administrative 
contractors in the processing or reviewing of medicare 
claims in order to give such contractors an incentive to 
implement effective education and outreach programs for 
providers of services and suppliers.’’. 
(2) APPLICATION TO FISCAL INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(f) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under 
section 1816 of the Social Security Act (42 U.S.C. 
1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they 
apply to medicare administrative contractors under 
such provisions. 
(3) GAO REPORT ON ADEQUACY OF METHOD-
OLOGY.—Not later than October 1, 2004, the Comp-
troller General of the United States shall submit to 
Congress and to the Secretary a report on the ade-
quacy of the methodology under section 1874A(f) of 
the Social Security Act, as added by paragraph (1), 
and shall include in the report such recommenda-
tions as the Comptroller General determines appro-
priate with respect to the methodology. 
(4) REPORT ON USE OF METHODOLOGY IN AS-
SESSING
CONTRACTOR
PERFORMANCE.—Not later
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than October 1, 2004, the Secretary shall submit to 
Congress a report that describes how the Secretary 
intends to use such methodology in assessing medi-
care contractor performance in implementing effec-
tive education and outreach programs, including 
whether to use such methodology as a basis for per-
formance bonuses. The report shall include an anal-
ysis of the sources of identified errors and potential 
changes in systems of contractors and rules of the 
Secretary that could reduce claims error rates. 
(c) PROVISION OF ACCESS TO AND PROMPT RE-
SPONSES FROM MEDICARE ADMINISTRATIVE CONTRAC-
TORS.—
(1) IN GENERAL.—Section 1874A, as added by 
section 911(a)(1) and as amended by section 912(a) 
and subsection (b), is further amended by adding at 
the end the following new subsection: 
‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PRO-
VIDERS OF SERVICES AND SUPPLIERS.—
‘‘(1) COMMUNICATION
STRATEGY.—The Sec-
retary shall develop a strategy for communications 
with individuals entitled to benefits under part A or 
enrolled under part B, or both, and with providers 
of services and suppliers under this title.
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‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 
medicare administrative contractor shall, for those 
providers of services and suppliers which submit 
claims to the contractor for claims processing and 
for those individuals entitled to benefits under part 
A or enrolled under part B, or both, with respect to 
whom claims are submitted for claims processing, 
provide general written responses (which may be 
through electronic transmission) in a clear, concise, 
and accurate manner to inquiries of providers of 
services, suppliers and individuals entitled to bene-
fits under part A or enrolled under part B, or both, 
concerning the programs under this title within 45 
business days of the date of receipt of such inquiries. 
‘‘(3) RESPONSE
TO
TOLL-FREE
LINES.—The 
Secretary shall ensure that each medicare adminis-
trative contractor shall provide, for those providers 
of services and suppliers which submit claims to the 
contractor for claims processing and for those indi-
viduals entitled to benefits under part A or enrolled 
under part B, or both, with respect to whom claims 
are submitted for claims processing, a toll-free tele-
phone number at which such individuals, providers 
of services and suppliers may obtain information re-
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garding billing, coding, claims, coverage, and other 
appropriate information under this title. 
‘‘(4) 
MONITORING
OF
CONTRACTOR
RE-
SPONSES.—
‘‘(A) IN GENERAL.—Each medicare admin-
istrative contractor shall, consistent with stand-
ards developed by the Secretary under subpara-
graph (B)—
‘‘(i) maintain a system for identifying 
who provides the information referred to in 
paragraphs (2) and (3); and 
‘‘(ii) monitor the accuracy, consist-
ency, and timeliness of the information so 
provided. 
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN
GENERAL.—The Secretary 
shall establish and make public standards 
to monitor the accuracy, consistency, and 
timeliness of the information provided in 
response to written and telephone inquiries 
under this subsection. Such standards shall 
be consistent with the performance require-
ments established under subsection (b)(3). 
‘‘(ii) 
EVALUATION.—In 
conducting 
evaluations of individual medicare adminis-
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trative contractors, the Secretary shall 
take into account the results of the moni-
toring conducted under subparagraph (A) 
taking into account as performance re-
quirements 
the 
standards 
established 
under clause (i). The Secretary shall, in 
consultation 
with 
organizations 
rep-
resenting providers of services, suppliers, 
and individuals entitled to benefits under 
part A or enrolled under part B, or both, 
establish standards relating to the accu-
racy, consistency, and timeliness of the in-
formation so provided. 
‘‘(C) DIRECT
MONITORING.—Nothing in 
this paragraph shall be construed as preventing 
the Secretary from directly monitoring the ac-
curacy, consistency, and timeliness of the infor-
mation so provided.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect October 1, 2004. 
(3) APPLICATION TO FISCAL INTERMEDIARIES 
AND CARRIERS.—The provisions of section 1874A(g) 
of the Social Security Act, as added by paragraph 
(1), shall apply to each fiscal intermediary under 
section 1816 of the Social Security Act (42 U.S.C.
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1395h) and each carrier under section 1842 of such 
Act (42 U.S.C. 1395u) in the same manner as they 
apply to medicare administrative contractors under 
such provisions. 
(d) IMPROVED PROVIDER EDUCATION AND TRAIN-
ING.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a), is amended by adding at the end the 
following new subsections: 
‘‘(b) ENHANCED EDUCATION AND TRAINING.—
‘‘(1) ADDITIONAL RESOURCES.—There are au-
thorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund) $25,000,000 for each of fis-
cal years 2005 and 2006 and such sums as may be 
necessary for succeeding fiscal years. 
‘‘(2) USE.—The funds made available under 
paragraph (1) shall be used to increase the conduct 
by medicare contractors of education and training of 
providers of services and suppliers regarding billing, 
coding, and other appropriate items and may also be 
used to improve the accuracy, consistency, and time-
liness of contractor responses.
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‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI-
TIES FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare con-
tractor conducts education and training activities, it 
shall tailor such activities to meet the special needs 
of small providers of services or suppliers (as defined 
in paragraph (2)). 
‘‘(2) SMALL PROVIDER OF SERVICES OR SUP-
PLIER.—In this subsection, the term ‘small provider 
of services or supplier’ means—
‘‘(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
‘‘(B) a supplier with fewer than 10 full-
time-equivalent employees.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2004. 
(e) 
REQUIREMENT
TO
MAINTAIN
INTERNET 
SITES.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsection (d), is 
further amended by adding at the end the following 
new subsection: 
‘‘(d) INTERNET SITES; FAQS.—The Secretary, and 
each medicare contractor insofar as it provides services
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(including claims processing) for providers of services or 
suppliers, shall maintain an Internet site which—
‘‘(1) provides answers in an easily accessible 
format to frequently asked questions, and 
‘‘(2) includes other published materials of the 
contractor, 
that relate to providers of services and suppliers under the 
programs under this title (and title XI insofar as it relates 
to such programs).’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2004. 
(f) ADDITIONAL
PROVIDER
EDUCATION
PROVI-
SIONS.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsections (d) 
and (e), is further amended by adding at the end the 
following new subsections: 
‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDU-
CATION PROGRAM ACTIVITIES.—A medicare contractor 
may not use a record of attendance at (or failure to at-
tend) educational activities or other information gathered 
during an educational program conducted under this sec-
tion or otherwise by the Secretary to select or track pro-
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viders of services or suppliers for the purpose of con-
ducting any type of audit or prepayment review. 
‘‘(f) CONSTRUCTION.—Nothing in this section or sec-
tion 1893(g) shall be construed as providing for disclosure 
by a medicare contractor of information that would com-
promise pending law enforcement activities or reveal find-
ings of law enforcement-related audits. 
‘‘(g) DEFINITIONS.—For purposes of this section, the 
term ‘medicare contractor’ includes the following: 
‘‘(1) A medicare administrative contractor with 
a contract under section 1874A, including a fiscal 
intermediary with a contract under section 1816 and 
a carrier with a contract under section 1842. 
‘‘(2) An eligible entity with a contract under 
section 1893. 
Such term does not include, with respect to activities of 
a specific provider of services or supplier an entity that 
has no authority under this title or title IX with respect 
to such activities and such provider of services or sup-
plier.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act.
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SEC. 922. SMALL PROVIDER TECHNICAL ASSISTANCE DEM-
ONSTRATION PROGRAM. 
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary shall establish 
a demonstration program (in this section referred to 
as the ‘‘demonstration program’’) under which tech-
nical assistance described in paragraph (2) is made 
available, upon request and on a voluntary basis, to 
small providers of services or suppliers in order to 
improve compliance with the applicable requirements 
of the programs under medicare program under title 
XVIII of the Social Security Act (including provi-
sions of title XI of such Act insofar as they relate 
to such title and are not administered by the Office 
of the Inspector General of the Department of 
Health and Human Services). 
(2) FORMS OF TECHNICAL ASSISTANCE.—The 
technical assistance described in this paragraph is—
(A) evaluation and recommendations re-
garding billing and related systems; and 
(B) information and assistance regarding 
policies and procedures under the medicare pro-
gram, including coding and reimbursement. 
(3) SMALL PROVIDERS OF SERVICES OR SUP-
PLIERS.—In this section, the term ‘‘small providers 
of services or suppliers’’ means—
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(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
(B) a supplier with fewer than 10 full-
time-equivalent employees. 
(b) QUALIFICATION
OF
CONTRACTORS.—In con-
ducting the demonstration program, the Secretary shall 
enter into contracts with qualified organizations (such as 
peer review organizations or entities described in section 
1889(g)(2) of the Social Security Act, as inserted by sec-
tion 5(f)(1)) with appropriate expertise with billing sys-
tems of the full range of providers of services and sup-
pliers to provide the technical assistance. In awarding such 
contracts, the Secretary shall consider any prior investiga-
tions of the entity’s work by the Inspector General of De-
partment of Health and Human Services or the Comp-
troller General of the United States. 
(c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The 
technical assistance provided under the demonstration 
program shall include a direct and in-person examination 
of billing systems and internal controls of small providers 
of services or suppliers to determine program compliance 
and to suggest more efficient or effective means of achiev-
ing such compliance. 
(d) AVOIDANCE OF RECOVERY ACTIONS FOR PROB-
LEMS IDENTIFIED AS CORRECTED.—The Secretary shall
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provide that, absent evidence of fraud and notwith-
standing any other provision of law, any errors found in 
a compliance review for a small provider of services or sup-
plier that participates in the demonstration program shall 
not be subject to recovery action if the technical assistance 
personnel under the program determine that—
(1) the problem that is the subject of the com-
pliance review has been corrected to their satisfac-
tion within 30 days of the date of the visit by such 
personnel to the small provider of services or sup-
plier; and 
(2) such problem remains corrected for such pe-
riod as is appropriate. 
The previous sentence applies only to claims filed as part 
of the demonstration program and lasts only for the dura-
tion of such program and only as long as the small pro-
vider of services or supplier is a participant in such pro-
gram. 
(e) GAO EVALUATION.—Not later than 2 years after 
the date of the date the demonstration program is first 
implemented, the Comptroller General, in consultation 
with the Inspector General of the Department of Health 
and Human Services, shall conduct an evaluation of the 
demonstration program. The evaluation shall include a de-
termination of whether claims error rates are reduced for
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small providers of services or suppliers who participated 
in the program and the extent of improper payments made 
as a result of the demonstration program. The Comp-
troller General shall submit a report to the Secretary and 
the Congress on such evaluation and shall include in such 
report recommendations regarding the continuation or ex-
tension of the demonstration program. 
(f) FINANCIAL PARTICIPATION BY PROVIDERS.—The 
provision of technical assistance to a small provider of 
services or supplier under the demonstration program is 
conditioned upon the small provider of services or supplier 
paying an amount estimated (and disclosed in advance of 
a provider’s or supplier’s participation in the program) to 
be equal to 25 percent of the cost of the technical assist-
ance. 
(g) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance Trust 
Fund and the Federal Supplementary Medical Insurance 
Trust Fund) to carry out the demonstration program— 
(1) for fiscal year 2005, $1,000,000, and 
(2) for fiscal year 2006, $6,000,000.
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SEC. 923. MEDICARE PROVIDER OMBUDSMAN; MEDICARE 
BENEFICIARY OMBUDSMAN. 
(a) MEDICARE
PROVIDER
OMBUDSMAN.—Section 
1868 (42 U.S.C. 1395ee) is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’; 
(2) by inserting ‘‘PRACTICING PHYSICIANS AD-
VISORY COUNCIL.—(1)’’ after ‘‘(a)’’; 
(3) in paragraph (1), as so redesignated under 
paragraph (2), by striking ‘‘in this section’’ and in-
serting ‘‘in this subsection’’; 
(4) by redesignating subsections (b) and (c) as 
paragraphs (2) and (3), respectively; and 
(5) by adding at the end the following new sub-
section: 
‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—The Sec-
retary shall appoint within the Department of Health and 
Human Services a Medicare Provider Ombudsman. The 
Ombudsman shall—
‘‘(1) provide assistance, on a confidential basis, 
to providers of services and suppliers with respect to 
complaints, grievances, and requests for information 
concerning the programs under this title (including 
provisions of title XI insofar as they relate to this 
title and are not administered by the Office of the 
Inspector General of the Department of Health and
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Human Services) and in the resolution of unclear or 
conflicting guidance given by the Secretary and 
medicare contractors to such providers of services 
and suppliers regarding such programs and provi-
sions and requirements under this title and such 
provisions; and 
‘‘(2) submit recommendations to the Secretary 
for improvement in the administration of this title 
and such provisions, including—
‘‘(A) recommendations to respond to recur-
ring patterns of confusion in this title and such 
provisions (including recommendations regard-
ing suspending imposition of sanctions where 
there is widespread confusion in program ad-
ministration), and 
‘‘(B) recommendations to provide for an 
appropriate and consistent response (including 
not providing for audits) in cases of self-identi-
fied overpayments by providers of services and 
suppliers. 
The Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, but 
may identify issues and problems in payment or coverage 
policies.’’.
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(b) MEDICARE BENEFICIARY OMBUDSMAN.—Title 
XVIII, as previously amended, is amended by inserting 
after section 1809 the following new section: 
‘‘MEDICARE BENEFICIARY OMBUDSMAN 
‘‘SEC. 1810. (a) IN GENERAL.—The Secretary shall 
appoint within the Department of Health and Human 
Services a Medicare Beneficiary Ombudsman who shall 
have expertise and experience in the fields of health care 
and education of (and assistance to) individuals entitled 
to benefits under this title. 
‘‘(b) DUTIES.—The Medicare Beneficiary Ombuds-
man shall—
‘‘(1) receive complaints, grievances, and re-
quests for information submitted by individuals enti-
tled to benefits under part A or enrolled under part 
B, or both, with respect to any aspect of the medi-
care program; 
‘‘(2) provide assistance with respect to com-
plaints, grievances, and requests referred to in para-
graph (1), including—
‘‘(A) assistance in collecting relevant infor-
mation for such individuals, to seek an appeal 
of a decision or determination made by a fiscal 
intermediary, carrier, Medicare+Choice organi-
zation, or the Secretary;
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‘‘(B) assistance to such individuals with 
any problems arising from disenrollment from a 
Medicare+Choice plan under part C; and 
‘‘(C) assistance to such individuals in pre-
senting information under section 1860D–
2(b)(4)(D)(v); and 
‘‘(3) submit annual reports to Congress and the 
Secretary that describe the activities of the Office 
and that include such recommendations for improve-
ment in the administration of this title as the Om-
budsman determines appropriate. 
The Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, but 
may identify issues and problems in payment or coverage 
policies. 
‘‘(c) WORKING WITH HEALTH INSURANCE COUN-
SELING PROGRAMS.—To the extent possible, the Ombuds-
man shall work with health insurance counseling programs 
(receiving funding under section 4360 of Omnibus Budget 
Reconciliation Act of 1990) to facilitate the provision of 
information to individuals entitled to benefits under part 
A or enrolled under part B, or both regarding 
Medicare+Choice plans and changes to those plans. Noth-
ing in this subsection shall preclude further collaboration 
between the Ombudsman and such programs.’’.
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(c) DEADLINE FOR APPOINTMENT.—The Secretary 
shall appoint the Medicare Provider Ombudsman and the 
Medicare Beneficiary Ombudsman, under the amendments 
made by subsections (a) and (b), respectively, by not later 
than 1 year after the date of the enactment of this Act. 
(d) FUNDING.—There are authorized to be appro-
priated to the Secretary (in appropriate part from the 
Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund) to carry 
out the provisions of subsection (b) of section 1868 of the 
Social Security Act (relating to the Medicare Provider 
Ombudsman), as added by subsection (a)(5) and section 
1807 of such Act (relating to the Medicare Beneficiary 
Ombudsman), as added by subsection (b), such sums as 
are necessary for fiscal year 2004 and each succeeding fis-
cal year. 
(e) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–
MEDICARE).—
(1) PHONE TRIAGE SYSTEM; LISTING IN MEDI-
CARE HANDBOOK INSTEAD OF OTHER TOLL-FREE 
NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–
2(b)) is amended by adding at the end the following: 
‘‘The Secretary shall provide, through the toll-free 
number 1–800–MEDICARE, for a means by which 
individuals seeking information about, or assistance
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with, such programs who phone such toll-free num-
ber are transferred (without charge) to appropriate 
entities for the provision of such information or as-
sistance. Such toll-free number shall be the toll-free 
number listed for general information and assistance 
in the annual notice under subsection (a) instead of 
the listing of numbers of individual contractors.’’. 
(2) MONITORING ACCURACY.—
(A) STUDY.—The Comptroller General of 
the United States shall conduct a study to mon-
itor the accuracy and consistency of information 
provided to individuals entitled to benefits 
under part A or enrolled under part B, or both, 
through the toll-free number 1–800–MEDI-
CARE, including an assessment of whether the 
information provided is sufficient to answer 
questions of such individuals. In conducting the 
study, the Comptroller General shall examine 
the education and training of the individuals 
providing information through such number. 
(B) REPORT.—Not later than 1 year after 
the date of the enactment of this Act, the 
Comptroller General shall submit to Congress a 
report on the study conducted under subpara-
graph (A).
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SEC. 924. BENEFICIARY OUTREACH DEMONSTRATION PRO-
GRAM. 
(a) IN GENERAL.—The Secretary shall establish a 
demonstration program (in this section referred to as the 
‘‘demonstration program’’) under which medicare special-
ists employed by the Department of Health and Human 
Services provide advice and assistance to individuals enti-
tled to benefits under part A of title XVIII of the Social 
Security Act, or enrolled under part B of such title, or 
both, regarding the medicare program at the location of 
existing local offices of the Social Security Administration. 
(b) LOCATIONS.—
(1) IN GENERAL.—The demonstration program 
shall be conducted in at least 6 offices or areas. 
Subject to paragraph (2), in selecting such offices 
and areas, the Secretary shall provide preference for 
offices with a high volume of visits by individuals re-
ferred to in subsection (a). 
(2) ASSISTANCE FOR RURAL BENEFICIARIES.—
The Secretary shall provide for the selection of at 
least 2 rural areas to participate in the demonstra-
tion program. In conducting the demonstration pro-
gram in such rural areas, the Secretary shall provide 
for medicare specialists to travel among local offices 
in a rural area on a scheduled basis.
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(c) DURATION.—The demonstration program shall be 
conducted over a 3-year period. 
(d) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall provide 
for an evaluation of the demonstration program. 
Such evaluation shall include an analysis of—
(A) utilization of, and satisfaction of those 
individuals referred to in subsection (a) with, 
the assistance provided under the program; and 
(B) the cost-effectiveness of providing ben-
eficiary assistance through out-stationing medi-
care specialists at local offices of the Social Se-
curity Administration. 
(2) REPORT.—The Secretary shall submit to 
Congress a report on such evaluation and shall in-
clude in such report recommendations regarding the 
feasibility of permanently out-stationing medicare 
specialists at local offices of the Social Security Ad-
ministration. 
SEC. 925. INCLUSION OF ADDITIONAL INFORMATION IN NO-
TICES TO BENEFICIARIES ABOUT SKILLED 
NURSING FACILITY BENEFITS. 
(a) IN GENERAL.—The Secretary shall provide that 
in medicare beneficiary notices provided (under section 
1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a))
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with respect to the provision of post-hospital extended care 
services under part A of title XVIII of the Social Security 
Act, there shall be included information on the number 
of days of coverage of such services remaining under such 
part for the medicare beneficiary and spell of illness in-
volved. 
(b) EFFECTIVE DATE.—Subsection (a) shall apply to 
notices provided during calendar quarters beginning more 
than 6 months after the date of the enactment of this Act. 
SEC. 
926. 
INFORMATION 
ON 
MEDICARE-CERTIFIED 
SKILLED NURSING FACILITIES IN HOSPITAL 
DISCHARGE PLANS. 
(a) AVAILABILITY OF DATA.—The Secretary shall 
publicly provide information that enables hospital dis-
charge planners, medicare beneficiaries, and the public to 
identify skilled nursing facilities that are participating in 
the medicare program. 
(b) INCLUSION OF INFORMATION IN CERTAIN HOS-
PITAL DISCHARGE PLANS.—
(1) IN GENERAL.—Section 1861(ee)(2)(D) (42 
U.S.C. 1395x(ee)(2)(D)) is amended—
(A) by striking ‘‘hospice services’’ and in-
serting ‘‘hospice care and post-hospital ex-
tended care services’’; and
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(B) by inserting before the period at the 
end the following: ‘‘and, in the case of individ-
uals who are likely to need post-hospital ex-
tended care services, the availability of such 
services through facilities that participate in the 
program under this title and that serve the area 
in which the patient resides’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to discharge plans 
made on or after such date as the Secretary shall 
specify, but not later than 6 months after the date 
the Secretary provides for availability of information 
under subsection (a). 
Subtitle D—Appeals and Recovery 
SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE 
APPEALS. 
(a) TRANSITION PLAN.—
(1) IN GENERAL.—Not later than October 1, 
2004, the Commissioner of Social Security and the 
Secretary shall develop and transmit to Congress 
and the Comptroller General of the United States a 
plan under which the functions of administrative law 
judges responsible for hearing cases under title 
XVIII of the Social Security Act (and related provi-
sions in title XI of such Act) are transferred from
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the responsibility of the Commissioner and the So-
cial Security Administration to the Secretary and 
the Department of Health and Human Services. 
(2) GAO EVALUATION.—The Comptroller Gen-
eral of the United States shall evaluate the plan 
and, not later than the date that is 6 months after 
the date on which the plan is received by the Comp-
troller General, shall submit to Congress a report on 
such evaluation. 
(b) TRANSFER OF ADJUDICATION AUTHORITY.—
(1) IN
GENERAL.—Not earlier than July 1, 
2005, and not later than October 1, 2005, the Com-
missioner of Social Security and the Secretary shall 
implement the transition plan under subsection (a) 
and transfer the administrative law judge functions 
described in such subsection from the Social Secu-
rity Administration to the Secretary. 
(2) ASSURING INDEPENDENCE OF JUDGES.—
The Secretary shall assure the independence of ad-
ministrative law judges performing the administra-
tive law judge functions transferred under para-
graph (1) from the Centers for Medicare & Medicaid 
Services and its contractors. In order to assure such 
independence, the Secretary shall place such judges 
in an administrative office that is organizationally
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and functionally separate from such Centers. Such 
judges shall report to, and be under the general su-
pervision of, the Secretary, but shall not report to, 
or be subject to supervision by, another other officer 
of the Department. 
(3) GEOGRAPHIC
DISTRIBUTION.—The Sec-
retary shall provide for an appropriate geographic 
distribution of administrative law judges performing 
the administrative law judge functions transferred 
under paragraph (1) throughout the United States 
to ensure timely access to such judges. 
(4) 
HIRING
AUTHORITY.—Subject 
to 
the 
amounts provided in advance in appropriations Act, 
the Secretary shall have authority to hire adminis-
trative law judges to hear such cases, giving priority 
to those judges with prior experience in handling 
medicare appeals and in a manner consistent with 
paragraph (3), and to hire support staff for such 
judges. 
(5) FINANCING.—Amounts payable under law 
to the Commissioner for administrative law judges 
performing the administrative law judge functions 
transferred under paragraph (1) from the Federal 
Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund shall
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become payable to the Secretary for the functions so 
transferred. 
(6) SHARED RESOURCES.—The Secretary shall 
enter into such arrangements with the Commissioner 
as may be appropriate with respect to transferred 
functions of administrative law judges to share office 
space, support staff, and other resources, with ap-
propriate reimbursement from the Trust Funds de-
scribed in paragraph (5). 
(c) INCREASED FINANCIAL SUPPORT.—In addition to 
any amounts otherwise appropriated, to ensure timely ac-
tion on appeals before administrative law judges and the 
Departmental Appeals Board consistent with section 1869 
of the Social Security Act (as amended by section 521 of 
BIPA, 114 Stat. 2763A–534), there are authorized to be 
appropriated (in appropriate part from the Federal Hos-
pital Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund) to the Secretary 
such sums as are necessary for fiscal year 2005 and each 
subsequent fiscal year to—
(1) increase the number of administrative law 
judges (and their staffs) under subsection (b)(4); 
(2) improve education and training opportuni-
ties for administrative law judges (and their staffs); 
and
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(3) increase the staff of the Departmental Ap-
peals Board. 
(d) 
CONFORMING
AMENDMENT.—Section 
1869(f)(2)(A)(i) (42 U.S.C. 1395ff(f)(2)(A)(i)), as added 
by section 522(a) of BIPA (114 Stat. 2763A–543), is 
amended by striking ‘‘of the Social Security Administra-
tion’’. 
SEC. 932. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 
(a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—Sec-
tion 1869(b) (42 U.S.C. 1395ff(b)) as amended by BIPA, 
is amended—
(1) in paragraph (1)(A), by inserting ‘‘, subject 
to paragraph (2),’’ before ‘‘to judicial review of the 
Secretary’s final decision’’; 
(2) in paragraph (1)(F)—
(A) by striking clause (ii); 
(B) by striking ‘‘PROCEEDING’’ and all 
that follows through ‘‘DETERMINATION’’ and in-
serting ‘‘DETERMINATIONS
AND
RECONSIDER-
ATIONS’’; and 
(C) by redesignating subclauses (I) and 
(II) as clauses (i) and (ii) and by moving the 
indentation of such subclauses (and the matter 
that follows) 2 ems to the left; and
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sion of services as a reviewer under this sub-
section. 
‘‘(3) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by a qualified inde-
pendent contractor to a reviewer in connection with 
a review under this section shall not be contingent 
on the decision rendered by the reviewer. 
‘‘(4) LICENSURE
AND
EXPERTISE.—Each re-
viewing professional shall be—
‘‘(A) a physician (allopathic or osteopathic) 
who is appropriately credentialed or licensed in 
one or more States to deliver health care serv-
ices and has medical expertise in the field of 
practice that is appropriate for the items or 
services at issue; or 
‘‘(B) a health care professional who is le-
gally authorized in one or more States (in ac-
cordance with State law or the State regulatory 
mechanism provided by State law) to furnish 
the health care items or services at issue and 
has medical expertise in the field of practice 
that is appropriate for such items or services. 
‘‘(5) RELATED PARTY DEFINED.—For purposes 
of this section, the term ‘related party’ means, with 
respect to a case under this title involving a specific