231
Congress a report on the evaluation, and shall include in
the report the following:
(1) An analysis of the patient outcomes and costs
of furnishing care to the medicare beneficiaries par-
ticipating in the project as compared to such out-
comes and costs to beneficiaries receiving only home
health services for the same health conditions.
(2) Such recommendations regarding the exten-
sion, expansion, or termination of the project as the
Secretary determines appropriate.
(i) DEFINITIONS.—In this section:
(1) HOME HEALTH AGENCY.—The term ‘‘home
health agency’’ has the meaning given such term in
section 1861(o) of the Social Security Act (42 U.S.C.
1395x(o)).
(2) MEDICAL ADULT DAY CARE FACILITY.—The
term ‘‘medical adult day care facility’’ means a facil-
ity that—
(A) has been licensed or certified by a State
to furnish medical adult day care services in the
State for a continuous 2-year period;
(B) is engaged in providing skilled nursing
services and other therapeutic services directly or
under arrangement with a home health agency;
232
(C) meets such standards established by the
Secretary to assure quality of care and such
other requirements as the Secretary finds nec-
essary in the interest of the health and safety of
individuals who are furnished services in the fa-
cility; and
(D) provides medical adult day care serv-
ices.
(3) MEDICAL ADULT DAY CARE SERVICES.—The
term ‘‘medical adult day care services’’ means—
(A) home health service items and services
described in paragraphs (1) through (7) of sec-
tion 1861(m) furnished in a medical adult day
care facility;
(B) a program of supervised activities fur-
nished in a group setting in the facility that—
(i) meet such criteria as the Secretary
determines appropriate; and
(ii) is designed to promote physical
and mental health of the individuals; and
(C) such other services as the Secretary may
specify.
(4) MEDICARE BENEFICIARY.—The term ‘‘medi-
care beneficiary’’ means an individual entitled to
233
benefits under part A of this title, enrolled under part
B of this title, or both.
TITLE VII—MEDICARE BENEFITS
ADMINISTRATION
SEC. 701. ESTABLISHMENT OF MEDICARE BENEFITS ADMIN-
ISTRATION.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 105, is amended by inserting
after 1806 the following new section:
‘‘MEDICARE BENEFITS ADMINISTRATION
‘‘SEC. 1808. (a) ESTABLISHMENT.—There is estab-
lished within the Department of Health and Human Serv-
ices an agency to be known as the Medicare Benefits Admin-
istration.
‘‘(b) 
ADMINISTRATOR; 
DEPUTY
ADMINISTRATOR;
CHIEF ACTUARY.—
‘‘(1) ADMINISTRATOR.—
‘‘(A) IN GENERAL.—The Medicare Benefits
Administration shall be headed by an adminis-
trator to be known as the ‘Medicare Benefits Ad-
ministrator’ (in this section referred to as the
‘Administrator’) who shall be appointed by the
President, by and with the advice and consent of
the Senate. The Administrator shall be in direct
line of authority to the Secretary.
234
‘‘(B) COMPENSATION.—The Administrator
shall be paid at the rate of basic pay payable for
level III of the Executive Schedule under section
5314 of title 5, United States Code.
‘‘(C) TERM OF OFFICE.—The Administrator
shall be appointed for a term of 5 years. In any
case in which a successor does not take office at
the end of an Administrator’s term of office, that
Administrator may continue in office until the
entry upon office of such a successor. An Admin-
istrator appointed to a term of office after the
commencement of such term may serve under
such appointment only for the remainder of such
term.
‘‘(D) GENERAL AUTHORITY.—The Adminis-
trator shall be responsible for the exercise of all
powers and the discharge of all duties of the Ad-
ministration, and shall have authority and con-
trol over all personnel and activities thereof.
‘‘(E) RULEMAKING
AUTHORITY.—The Ad-
ministrator may prescribe such rules and regula-
tions as the Administrator determines necessary
or appropriate to carry out the functions of the
Administration. The regulations prescribed by
the Administrator shall be subject to the rule-
235
making procedures established under section 553
of title 5, United States Code.
‘‘(F) AUTHORITY TO ESTABLISH ORGANIZA-
TIONAL UNITS.—The Administrator may estab-
lish, alter, consolidate, or discontinue such orga-
nizational units or components within the Ad-
ministration as the Administrator considers nec-
essary or appropriate, except as specified in this
section.
‘‘(G) AUTHORITY TO DELEGATE.—The Ad-
ministrator may assign duties, and delegate, or
authorize successive redelegations of, authority to
act and to render decisions, to such officers and
employees of the Administration as the Adminis-
trator may find necessary. Within the limita-
tions of such delegations, redelegations, or as-
signments, all official acts and decisions of such
officers and employees shall have the same force
and effect as though performed or rendered by
the Administrator.
‘‘(2) DEPUTY ADMINISTRATOR.—
‘‘(A) IN GENERAL.—There shall be a Dep-
uty Administrator of the Medicare Benefits Ad-
ministration who shall be appointed by the
236
President, by and with the advice and consent of
the Senate.
‘‘(B) COMPENSATION.—The Deputy Admin-
istrator shall be paid at the rate of basic pay
payable for level IV of the Executive Schedule
under section 5315 of title 5, United States Code.
‘‘(C) TERM OF OFFICE.—The Deputy Ad-
ministrator shall be appointed for a term of 5
years. In any case in which a successor does not
take office at the end of a Deputy Administra-
tor’s term of office, such Deputy Administrator
may continue in office until the entry upon of-
fice of such a successor. A Deputy Administrator
appointed to a term of office after the commence-
ment of such term may serve under such ap-
pointment only for the remainder of such term.
‘‘(D) DUTIES.—The Deputy Administrator
shall perform such duties and exercise such pow-
ers as the Administrator shall from time to time
assign or delegate. The Deputy Administrator
shall be Acting Administrator of the Administra-
tion during the absence or disability of the Ad-
ministrator and, unless the President designates
another officer of the Government as Acting Ad-
237
ministrator, in the event of a vacancy in the of-
fice of the Administrator.
‘‘(3) CHIEF ACTUARY.—
‘‘(A) IN GENERAL.—There is established in
the Administration the position of Chief Actu-
ary. The Chief Actuary shall be appointed by,
and in direct line of authority to, the Adminis-
trator of such Administration. The Chief Actu-
ary shall be appointed from among individuals
who have demonstrated, by their education and
experience, superior expertise in the actuarial
sciences. The Chief Actuary may be removed only
for cause.
‘‘(B) COMPENSATION.—The Chief Actuary
shall be compensated at the highest rate of basic
pay for the Senior Executive Service under sec-
tion 5382(b) of title 5, United States Code.
‘‘(C) DUTIES.—The Chief Actuary shall ex-
ercise such duties as are appropriate for the of-
fice of the Chief Actuary and in accordance with
professional standards of actuarial independence.
‘‘(4) SECRETARIAL COORDINATION OF PROGRAM
ADMINISTRATION.—The Secretary shall ensure appro-
priate coordination between the Administrator and
the Administrator of the Centers for Medicare & Med-
238
icaid Services in carrying out the programs under
this title.
‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—
‘‘(1) DUTIES.—
‘‘(A) GENERAL
DUTIES.—The Adminis-
trator shall carry out parts C and D,
including—
‘‘(i) negotiating, entering into, and en-
forcing, contracts with plans for the offering
of Medicare+Choice plans under part C, in-
cluding the offering of qualified prescription
drug coverage under such plans; and
‘‘(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors for
the offering of prescription drug plans
under part D.
‘‘(B) OTHER DUTIES.—The Administrator
shall carry out any duty provided for under part
C or part D, including demonstration projects
carried out in part or in whole under such parts,
the programs of all-inclusive care for the elderly
(PACE program) under section 1894, the social
health maintenance organization (SHMO) dem-
onstration projects (referred to in section 4104(c)
of the Balanced Budget Act of 1997), and
239
through a Medicare+Choice project that dem-
onstrates the application of capitation payment
rates for frail elderly medicare beneficiaries
through the use of a interdisciplinary team and
through the provision of primary care services to
such beneficiaries by means of such a team at the
nursing facility involved).
‘‘(C) PRESCRIPTION DRUG CARD.—The Ad-
ministrator shall carry out section 1807 (relat-
ing to the medicare prescription drug discount
card endorsement program).
‘‘(D) NONINTERFERENCE.—In carrying out
its duties with respect to the provision of quali-
fied prescription drug coverage to beneficiaries
under this title, the Administrator may not—
‘‘(i) require a particular formulary or
institute a price structure for the reimburse-
ment of covered outpatient drugs;
‘‘(ii) interfere in any way with nego-
tiations 
between 
PDP 
sponsors 
and
Medicare+Choice organizations and drug
manufacturers, wholesalers, or other sup-
pliers of covered outpatient drugs; and
240
‘‘(iii) otherwise interfere with the com-
petitive nature of providing such coverage
through such sponsors and organizations.
‘‘(E) ANNUAL REPORTS.—Not later March
31 of each year, the Administrator shall submit
to Congress and the President a report on the
administration of parts C and D during the pre-
vious fiscal year.
‘‘(2) STAFF.—
‘‘(A) IN
GENERAL.—The Administrator,
with the approval of the Secretary, may employ,
without regard to chapter 31 of title 5, United
States Code, other than sections 3110 and 3112,
such officers and employees as are necessary to
administer the activities to be carried out
through the Medicare Benefits Administration.
The Administrator shall employ staff with ap-
propriate and necessary expertise in negotiating
contracts in the private sector.
‘‘(B) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN
GENERAL.—The staff of the
Medicare Benefits Administration shall,
subject to clause (ii), be paid without regard
to the provisions of chapter 51 (other than
241
section 5101) and chapter 53 (other than
section 5301) of such title (relating to clas-
sification and schedule pay rates).
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the rate of basic pay
payable for level IV of the Executive Sched-
ule under section 5315 of title 5, United
States Code.
‘‘(C) LIMITATION
ON
FULL-TIME
EQUIVA-
LENT STAFFING FOR CURRENT CMS FUNCTIONS
BEING TRANSFERRED.—The Administrator may
not employ under this paragraph a number of
full-time equivalent employees, to carry out func-
tions that were previously conducted by the Cen-
ters for Medicare & Medicaid Services and that
are conducted by the Administrator by reason of
this section, that exceeds the number of such full-
time equivalent employees authorized to be em-
ployed by the Centers for Medicare & Medicaid
Services to conduct such functions as of the date
of the enactment of this Act.
‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS OF
THE
CENTERS
FOR
MEDICARE
&
MEDICAID
SERV-
ICES.—
242
‘‘(A) IN GENERAL.—The Secretary, the Ad-
ministrator, and the Administrator of the Cen-
ters for Medicare & Medicaid Services shall es-
tablish an appropriate transition of responsi-
bility in order to redelegate the administration
of part C from the Secretary and the Adminis-
trator of the Centers for Medicare & Medicaid
Services to the Administrator as is appropriate
to carry out the purposes of this section.
‘‘(B) TRANSFER
OF
DATA
AND
INFORMA-
TION.—The Secretary shall ensure that the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services transfers to the Administrator of
the Medicare Benefits Administration such infor-
mation and data in the possession of the Admin-
istrator of the Centers for Medicare & Medicaid
Services as the Administrator of the Medicare
Benefits Administration requires to carry out the
duties described in paragraph (1).
‘‘(C) CONSTRUCTION.—Insofar as a respon-
sibility of the Secretary or the Administrator of
the Centers for Medicare & Medicaid Services is
redelegated to the Administrator under this sec-
tion, any reference to the Secretary or the Ad-
ministrator of the Centers for Medicare & Med-
243
icaid Services in this title or title XI with re-
spect to such responsibility is deemed to be a ref-
erence to the Administrator.
‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish within the Medicare Benefits Administration
an Office of Beneficiary Assistance to coordinate
functions relating to outreach and education of medi-
care beneficiaries under this title, including the func-
tions described in paragraph (2). The Office shall be
separate operating division within the Administra-
tion.
‘‘(2) DISSEMINATION OF INFORMATION ON BENE-
FITS AND APPEALS RIGHTS.—
‘‘(A) DISSEMINATION OF BENEFITS INFOR-
MATION.—The Office of Beneficiary Assistance
shall disseminate, directly or through contract, to
medicare beneficiaries, by mail, by posting on
the Internet site of the Medicare Benefits Admin-
istration and through a toll-free telephone num-
ber, information with respect to the following:
‘‘(i) Benefits, and limitations on pay-
ment (including cost-sharing, stop-loss pro-
visions, and formulary restrictions) under
parts C and D.
244
‘‘(ii) Benefits, and limitations on pay-
ment under parts A and B, including infor-
mation on medicare supplemental policies
under section 1882.
Such information shall be presented in a manner
so that medicare beneficiaries may compare ben-
efits under parts A, B, D, and medicare supple-
mental 
policies 
with 
benefits 
under
Medicare+Choice plans under part C.
‘‘(B) DISSEMINATION OF APPEALS RIGHTS
INFORMATION.—The Office of Beneficiary Assist-
ance shall disseminate to medicare beneficiaries
in the manner provided under subparagraph (A)
a description of procedural rights (including
grievance and appeals procedures) of bene-
ficiaries under the original medicare fee-for-serv-
ice program under parts A and B, the
Medicare+Choice program under part C, and
the Voluntary Prescription Drug Benefit Pro-
gram under part D.
‘‘(e) MEDICARE POLICY ADVISORY BOARD.—
‘‘(1) 
ESTABLISHMENT.—There 
is 
established
within the Medicare Benefits Administration the
Medicare Policy Advisory Board (in this section re-
ferred to the ‘Board’). The Board shall advise, consult
245
with, and make recommendations to the Adminis-
trator of the Medicare Benefits Administration with
respect to the administration of parts C and D, in-
cluding the review of payment policies under such
parts.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—With respect to matters
of the administration of parts C and D, the
Board shall submit to Congress and to the Ad-
ministrator of the Medicare Benefits Administra-
tion such reports as the Board determines appro-
priate. Each such report may contain such rec-
ommendations as the Board determines appro-
priate for legislative or administrative changes
to improve the administration of such parts, in-
cluding the topics described in subparagraph
(B). Each such report shall be published in the
Federal Register.
‘‘(B) TOPICS DESCRIBED.—Reports required
under subparagraph (A) may include the fol-
lowing topics:
‘‘(i) FOSTERING
COMPETITION.—Rec-
ommendations or proposals to increase com-
petition under parts C and D for services
furnished to medicare beneficiaries.
246
‘‘(ii) EDUCATION AND ENROLLMENT.—
Recommendations for the improvement to
efforts to provide medicare beneficiaries in-
formation and education on the program
under this title, and specifically parts C
and D, and the program for enrollment
under the title.
‘‘(iii) IMPLEMENTATION
OF
RISK-AD-
JUSTMENT.—Evaluation of the implementa-
tion under section 1853(a)(3)(C) of the risk
adjustment methodology to payment rates
under that section to Medicare+Choice or-
ganizations offering Medicare+Choice plans
that accounts for variations in per capita
costs based on health status and other demo-
graphic factors.
‘‘(iv) 
DISEASE
MANAGEMENT
PRO-
GRAMS.—Recommendations on the incorpo-
ration of disease management programs
under parts C and D.
‘‘(v) RURAL
ACCESS.—Recommenda-
tions to improve competition and access to
plans under parts C and D in rural areas.
‘‘(C) 
MAINTAINING
INDEPENDENCE
OF
BOARD.—The Board shall directly submit to
247
Congress reports required under subparagraph
(A). No officer or agency of the United States
may require the Board to submit to any officer
or agency of the United States for approval,
comments, or review, prior to the submission to
Congress of such reports.
‘‘(3) DUTY
OF
ADMINISTRATOR
OF
MEDICARE
BENEFITS ADMINISTRATION.—With respect to any re-
port submitted by the Board under paragraph (2)(A),
not later than 90 days after the report is submitted,
the Administrator of the Medicare Benefits Adminis-
tration shall submit to Congress and the President an
analysis of recommendations made by the Board in
such report. Each such analysis shall be published in
the Federal Register.
‘‘(4) MEMBERSHIP.—
‘‘(A) APPOINTMENT.—Subject to the suc-
ceeding provisions of this paragraph, the Board
shall consist of seven members to be appointed as
follows:
‘‘(i) Three members shall be appointed
by the President.
‘‘(ii) Two members shall be appointed
by the Speaker of the House of Representa-
tives, with the advice of the chairmen and
248
the ranking minority members of the Com-
mittees on Ways and Means and on Energy
and Commerce of the House of Representa-
tives.
‘‘(iii) Two members shall be appointed
by the President pro tempore of the Senate
with the advice of the chairman and the
ranking minority member of the Senate
Committee on Finance.
‘‘(B) QUALIFICATIONS.—The members shall
be chosen on the basis of their integrity, impar-
tiality, and good judgment, and shall be individ-
uals who are, by reason of their education and
experience in health care benefits management,
exceptionally qualified to perform the duties of
members of the Board.
‘‘(C) PROHIBITION ON INCLUSION OF FED-
ERAL EMPLOYEES.—No officer or employee of the
United States may serve as a member of the
Board.
‘‘(5) COMPENSATION.—Members of the Board
shall receive, for each day (including travel time) they
are engaged in the performance of the functions of the
board, compensation at rates not to exceed the daily
equivalent to the annual rate in effect for level IV of
249
the Executive Schedule under section 5315 of title 5,
United States Code.
‘‘(6) TERMS OF OFFICE.—
‘‘(A) IN GENERAL.—The term of office of
members of the Board shall be 3 years.
‘‘(B) TERMS OF INITIAL APPOINTEES.—As
designated by the President at the time of ap-
pointment, of the members first appointed—
‘‘(i) one shall be appointed for a term
of 1 year;
‘‘(ii) three shall be appointed for terms
of 2 years; and
‘‘(iii) three shall be appointed for
terms of 3 years.
‘‘(C) REAPPOINTMENTS.—Any person ap-
pointed as a member of the Board may not serve
for more than 8 years.
‘‘(D) VACANCY.—Any member appointed to
fill a vacancy occurring before the expiration of
the term for which the member’s predecessor was
appointed shall be appointed only for the re-
mainder of that term. A member may serve after
the expiration of that member’s term until a suc-
cessor has taken office. A vacancy in the Board
250
shall be filled in the manner in which the origi-
nal appointment was made.
‘‘(7) CHAIR.—The Chair of the Board shall be
elected by the members. The term of office of the Chair
shall be 3 years.
‘‘(8) MEETINGS.—The Board shall meet at the
call of the Chair, but in no event less than three times
during each fiscal year.
‘‘(9) DIRECTOR AND STAFF.—
‘‘(A) APPOINTMENT
OF
DIRECTOR.—The
Board shall have a Director who shall be ap-
pointed by the Chair.
‘‘(B) IN GENERAL.—With the approval of
the Board, the Director may appoint, without re-
gard to chapter 31 of title 5, United States Code,
such additional personnel as the Director con-
siders appropriate.
‘‘(C) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN GENERAL.—The Director and
staff of the Board shall, subject to clause
(ii), be paid without regard to the provi-
sions of chapter 51 and chapter 53 of such
title (relating to classification and schedule
pay rates).
251
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the rate of basic pay
payable for level IV of the Executive Sched-
ule under section 5315 of title 5, United
States Code.
‘‘(D) ASSISTANCE
FROM
THE
ADMINIS-
TRATOR OF THE MEDICARE BENEFITS ADMINIS-
TRATION.—The Administrator of the Medicare
Benefits Administration shall make available to
the Board such information and other assistance
as it may require to carry out its functions.
‘‘(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.—
252
(1) IN GENERAL.—The amendment made by sub-
section (a) shall take effect on the date of the enact-
ment of this Act.
(2) TIMING OF INITIAL APPOINTMENTS.—The Ad-
ministrator and Deputy Administrator of the Medi-
care Benefits Administration may not be appointed
before March 1, 2003.
(3) 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
such title, and carry out part C of such title for years
beginning or after January 1, 2005.
(4) TRANSITION.—Before the date the Adminis-
trator of the Medicare Benefits Administration is ap-
pointed and assumes responsibilities under this sec-
tion and section 1807 of the Social Security Act, the
Secretary of Health and Human Services shall pro-
vide for the conduct of any responsibilities of such
Administrator that are otherwise provided under law.
(c) MISCELLANEOUS ADMINISTRATIVE PROVISIONS.—
(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.
253
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 Administrator 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.—
(A) IN GENERAL.—Section 5314 of title 5,
United States Code, by adding at the end the fol-
lowing:
‘‘Administrator of the Centers for Medicare &
Medicaid Services .
‘‘Administrator of the Medicare Benefits Admin-
istration.’’.
(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, 2003.
254
TITLE 
VIII—REGULATORY 
RE-
DUCTION AND CONTRACTING
REFORM
Subtitle A—Regulatory Reform
SEC. 801. 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
through 3733 of title 31, United States Code (known
as the False Claims Act); or
(2) to prevent or impede the Department of
Health and Human Services in any way from its on-
going efforts to eliminate waste, fraud, and abuse in
the medicare program.
Furthermore, the consolidation of medicare administrative
contracting set forth in this Act does not constitute consoli-
dation 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:
255
‘‘Supplier
‘‘(d) The term ‘supplier’ means, unless the context oth-
erwise requires, a physician or other practitioner, a facility,
or other entity (other than a provider of services) that fur-
nishes items or services under this title.’’.
SEC. 802. ISSUANCE OF REGULATIONS.
(a) CONSOLIDATION OF PROMULGATION TO ONCE A
MONTH.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C.
1395hh) is amended by adding at the end the fol-
lowing new subsection:
‘‘(d)(1) Subject to paragraph (2), the Secretary shall
issue proposed or final (including interim final) regulations
to carry out this title only on one business day of every
month.
‘‘(2) The Secretary may issue a proposed or final regu-
lation described in paragraph (1) on any other day than
the day described in paragraph (1) if the Secretary—
‘‘(A) finds that issuance of such regulation on
another day is necessary to comply with requirements
under law; or
‘‘(B) finds that with respect to that regulation
the limitation of issuance on the date described in
paragraph (1) is contrary to the public interest.
256
If the Secretary makes a finding under this paragraph, the
Secretary shall include such finding, and brief statement
of the reasons for such finding, in the issuance of such regu-
lation.
‘‘(3) The Secretary shall coordinate issuance of new
regulations described in paragraph (1) relating to a cat-
egory of provider of services or suppliers based on an anal-
ysis of the collective impact of regulatory changes on that
category of providers or suppliers.’’.
(2) GAO REPORT ON PUBLICATION OF REGULA-
TIONS ON A QUARTERLY BASIS.—Not later than 3
years after the date of the enactment of this Act, the
Comptroller General of the United States shall submit
to Congress a report on the feasibility of requiring
that regulations described in section 1871(d) of the
Social Security Act be promulgated on a quarterly
basis rather than on a monthly basis.
(3) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to regulations promulgated
on or after the date that is 30 days after the date of
the enactment of this Act.
(b) REGULAR TIMELINE FOR PUBLICATION OF FINAL
RULES.—
257
(1) IN GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3)(A) The Secretary, in consultation with the Direc-
tor of the Office of Management and Budget, shall establish
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 publication 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 established with re-
spect 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 regula-
tion shall not continue in effect unless the Secretary pub-
lishes (at the end of the regular timeline and, if applicable,
258
at the end of each succeeding 1-year period) a notice of con-
tinuation of the regulation that includes an explanation of
why the regular timeline (and any subsequent 1-year exten-
sion) was not complied with. If such a notice is published,
the regular timeline (or such timeline as previously ex-
tended under this paragraph) for publication of the final
regulation shall be treated as having been extended for 1
additional year.
‘‘(D) The Secretary shall annually submit to Congress
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 en-
actment of this Act. The Secretary shall provide for
an appropriate transition to take into account the
backlog of previously published interim final regula-
tions.
(c) LIMITATIONS ON NEW MATTER IN FINAL REGULA-
TIONS.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)), as amended by subsection (b), is further
amended by adding at the end the following new
paragraph:
259
‘‘(4) If the Secretary publishes notice of proposed rule-
making relating to a regulation (including an interim final
regulation), insofar as such final regulation includes a pro-
vision that is not a logical outgrowth of such notice of pro-
posed rulemaking, that 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 publication
of the provision again as a final regulation.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to final regulations pub-
lished on or after the date of the enactment of this
Act.
SEC. 803. COMPLIANCE WITH CHANGES IN REGULATIONS
AND POLICIES.
(a) NO RETROACTIVE APPLICATION OF SUBSTANTIVE
CHANGES.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C.
1395hh), as amended by section 802(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—
260
‘‘(i) such retroactive application is necessary to
comply with statutory requirements; or
‘‘(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 substantive
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 published, as the
case may be, the substantive change.
‘‘(ii) The Secretary may provide for such a substantive
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 Sec-
retary provides for an earlier effective date pursuant to this
261
clause, the Secretary shall include in the issuance or publi-
cation of the substantive change a finding 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 un-
dertaken 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 elec-
tronically) provided by the Secretary or by a medi-
care 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;
262
‘‘(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 re-
payment of any amount) if the provider of services or sup-
plier 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 en-
actment of this Act but shall not apply to any sanc-
tion for which notice was provided on or before the
date of the enactment of this Act.
SEC. 804. REPORTS AND STUDIES RELATING TO REGU-
LATORY REFORM.
(a) GAO STUDY ON ADVISORY OPINION AUTHORITY.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study to determine the
feasibility and appropriateness of establishing in the
263
Secretary authority to provide legally binding advi-
sory opinions on appropriate interpretation and ap-
plication of regulations to carry out the medicare pro-
gram under title XVIII of the Social Security Act.
Such study shall examine the appropriate timeframe
for issuing such advisory opinions, as well as the need
for additional staff and funding to provide such opin-
ions.
(2) REPORT.—The Comptroller General shall
submit to Congress a report on the study conducted
under paragraph (1) by not later than January 1,
2004.
(b) REPORT ON LEGAL AND REGULATORY INCONSIST-
ENCIES.—Section 1871 (42 U.S.C. 1395hh), as amended by
section 803(a), is amended by adding at the end the fol-
lowing new subsection:
‘‘(f)(1) Not later than 2 years after the date of the en-
actment of this subsection, and every 2 years thereafter, the
Secretary shall submit to Congress a report with respect
to the administration of this title and areas of inconsistency
or conflict among the various provisions under law and reg-
ulation.
‘‘(2) In preparing a report under paragraph (1), the
Secretary shall collect—
264
‘‘(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 Medicare
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 inquiries.
‘‘(3) A report under paragraph (1) shall include a de-
scription of efforts by the Secretary to reduce such inconsist-
ency or conflicts, and recommendations for legislation or
administrative action that the Secretary determines appro-
priate to further reduce such inconsistency or conflicts.’’.
Subtitle B—Contracting Reform
SEC. 811. INCREASED FLEXIBILITY IN MEDICARE ADMINIS-
TRATION.
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE
ADMINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by in-
serting after section 1874 the following new section:
‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE
CONTRACTORS
‘‘SEC. 1874A. (a) AUTHORITY.—
‘‘(1) AUTHORITY TO ENTER INTO CONTRACTS.—
The Secretary may enter into contracts with any eli-
gible entity to serve as a medicare administrative
265
contractor with respect to the performance of any or
all of the functions described in paragraph (4) or
parts of those functions (or, to the extent provided in
a contract, to secure performance thereof by other en-
tities).
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is el-
igible to enter into a contract with respect to the per-
formance of a particular function described in para-
graph (4) only if—
‘‘(A) the entity has demonstrated capability
to carry out such function;
‘‘(B) the entity complies with such conflict
of interest standards as are generally applicable
to Federal acquisition and procurement;
‘‘(C) the entity has sufficient assets to fi-
nancially support the performance of such func-
tion; and
‘‘(D) the entity meets such other require-
ments as the Secretary may impose.
‘‘(3) MEDICARE
ADMINISTRATIVE
CONTRACTOR
DEFINED.—For purposes of this title and title XI—
‘‘(A) IN GENERAL.—The term ‘medicare ad-
ministrative contractor’ means an agency, orga-
nization, or other person with a contract under
this section.
266
‘‘(B) APPROPRIATE MEDICARE ADMINISTRA-
TIVE CONTRACTOR.—With respect to the perform-
ance of a particular function in relation to an
individual entitled to benefits under part A or
enrolled under part B, or both, a specific pro-
vider of services or supplier (or class of such pro-
viders of services or suppliers), the ‘appropriate’
medicare administrative contractor is the medi-
care administrative contractor that has a con-
tract under this section with respect to the per-
formance of that function in relation to that in-
dividual, provider of services or supplier or class
of provider of services or supplier.
‘‘(4) FUNCTIONS DESCRIBED.—The functions re-
ferred 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-
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 pur-
267
suant 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 ASSIST-
ANCE.—Providing education and outreach to in-
dividuals entitled to benefits under part A or en-
rolled under part B, or both, and providing as-
sistance to those individuals with specific issues,
concerns or problems.
‘‘(D) 
PROVIDER
CONSULTATIVE
SERV-
ICES.—Providing consultative services to institu-
tions, agencies, and other persons to enable them
to establish and maintain fiscal records nec-
essary for purposes of this title and otherwise to
qualify as providers of services or suppliers.
‘‘(E) COMMUNICATION WITH PROVIDERS.—
Communicating to providers of services and sup-
pliers any information or instructions furnished
to the medicare administrative contractor by the
Secretary, and facilitating communication be-
tween such providers and suppliers and the Sec-
retary.
268
‘‘(F) PROVIDER EDUCATION AND TECHNICAL
ASSISTANCE.—Performing the functions relating
to provider education, training, and technical
assistance.
‘‘(G) ADDITIONAL FUNCTIONS.—Performing
such other functions as are necessary to carry
out the purposes of this title.
‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
‘‘(A) NONDUPLICATION OF DUTIES.—In en-
tering into contracts under this section, the Sec-
retary shall assure that functions of medicare
administrative contractors in carrying out ac-
tivities 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 durable
medical equipment under section 1834(a)(15)).
‘‘(B) CONSTRUCTION.—An entity shall not
be treated as a medicare administrative con-
tractor merely by reason of having entered into
a contract with the Secretary under section
1893.
269
‘‘(6) APPLICATION
OF
FEDERAL
ACQUISITION
REGULATION.—Except to the extent inconsistent with
a specific requirement of this title, the Federal Acqui-
sition 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 provi-
sion of law requiring competition, if the medi-
care administrative contractor has met or ex-
ceeded the performance requirements applicable
with respect to the contract and contractor, ex-
cept that the Secretary shall provide for the ap-
plication of competitive procedures under such a
270
contract not less frequently than once every five
years.
‘‘(C) TRANSFER OF FUNCTIONS.—The Sec-
retary may transfer functions among medicare
administrative contractors consistent with the
provisions of this paragraph. The Secretary shall
ensure that performance quality is considered in
such transfers. The Secretary shall provide pub-
lic notice (whether in the Federal Register or
otherwise) of any such transfer (including a de-
scription of the functions so transferred, a de-
scription of the providers of services and sup-
pliers affected by such transfer, and contact in-
formation for the contractors involved).
‘‘(D) INCENTIVES FOR QUALITY.—The Sec-
retary shall provide incentives for medicare ad-
ministrative contractors to provide quality serv-
ice and to promote efficiency.
‘‘(2) COMPLIANCE
WITH
REQUIREMENTS.—No
contract under this section shall be entered into with
any medicare administrative contractor unless the
Secretary finds that such medicare administrative
contractor will perform its obligations under the con-
tract efficiently and effectively and will meet such re-
quirements as to financial responsibility, legal au-
271
thority, quality of services provided, and other mat-
ters as the Secretary finds pertinent.
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT OF SPECIFIC PERFORM-
ANCE
REQUIREMENTS.—In developing contract
performance requirements, the Secretary 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, organizations
representing individuals entitled to benefits
under part A or enrolled under part B, or both,
and organizations and agencies performing func-
tions necessary to carry out the purposes of this
section with respect to such performance require-
ments.
‘‘(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
272
(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 medicare
administrative contractor under this section unless
the contractor agrees—
‘‘(A) to furnish to the Secretary such timely
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-
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 payments or
273
disbursing funds pursuant to the contract, or other-
wise participating in carrying out the contract, to
give surety bond to the United States in such amount
as the Secretary may deem appropriate.
‘‘(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 Secretary
finds necessary or appropriate and may provide for
advances of funds to the medicare administrative con-
tractor for the making of payments by it under sub-
section (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-
trative contractor match data obtained other than in
its activities under this title with data used in the ad-
ministration of this title for purposes of identifying
situations in which the provisions of section 1862(b)
may apply.
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE ADMIN-
ISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as
274
a certifying officer shall, in the absence of gross neg-
ligence or intent to defraud the United States, be lia-
ble with respect to any payments certified by the in-
dividual under this section.
‘‘(2) DISBURSING OFFICER.—No disbursing offi-
cer shall, in the absence of gross negligence or intent
to defraud the United States, be liable with respect to
any payment by such officer under this section if it
was based upon an authorization (which meets the
applicable requirements for such internal controls es-
tablished by the Comptroller General) of a certifying
officer designated as provided in paragraph (1) of
this subsection.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE
CONTRACTOR.—No 
medicare 
administrative 
con-
tractor shall be liable to the United States for a pay-
ment by a certifying or disbursing officer unless in
connection with such payment or in the supervision
of or selection of such officer the medicare administra-
tive contractor acted with gross negligence.
‘‘(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 contractor
275
or who is engaged by the contractor to partici-
pate directly in the claims administration proc-
ess) who is made a party to any judicial or ad-
ministrative proceeding arising from or relating
directly to the claims administration process
under this title, the Secretary may, to the extent
the Secretary determines to be appropriate and
as specified in the contract with the contractor,
indemnify the contractor and such persons.
‘‘(B) CONDITIONS.—The Secretary may not
provide indemnification under subparagraph (A)
insofar as the liability for such costs arises di-
rectly from conduct that is determined by the ju-
dicial proceeding or by the Secretary to be crimi-
nal in nature, fraudulent, or grossly negligent. If
indemnification is provided by the Secretary
with respect to a contractor before a determina-
tion that such costs arose directly from such con-
duct, the contractor shall reimburse the Secretary
for costs of indemnification.
‘‘(C) SCOPE OF INDEMNIFICATION.—Indem-
nification by the Secretary under subparagraph
(A) may include payment of judgments, settle-
ments (subject to subparagraph (D)), awards,
and costs (including reasonable legal expenses).
276
‘‘(D) WRITTEN
APPROVAL
FOR
SETTLE-
MENTS.—A contractor or other person described
in subparagraph (A) may not propose to nego-
tiate a settlement or compromise of a proceeding
described in such subparagraph without the
prior written approval of the Secretary to nego-
tiate such settlement or compromise. Any indem-
nification under subparagraph (A) with respect
to amounts paid under a settlement or com-
promise of a proceeding described in such sub-
paragraph are conditioned upon prior written
approval by the Secretary of the final settlement
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 Regula-
tions.’’.
(2) CONSIDERATION OF INCORPORATION OF CUR-
RENT LAW STANDARDS.—In developing contract per-
277
formance requirements under section 1874A(b) of the
Social Security Act, as inserted by paragraph (1), the
Secretary shall consider inclusion of the performance
standards described in sections 1816(f)(2) of such Act
(relating to timely processing of reconsiderations and
applications 
for 
exemptions) 
and 
section
1842(b)(2)(B) of such Act (relating to timely review
of determinations and fair hearing requests), as such
sections were in effect before the date of the enactment
of this Act.
(b) CONFORMING AMENDMENTS TO SECTION 1816 (RE-
LATING 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 follows:
‘‘(a) The administration of this part shall be conducted
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
278
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 (RE-
LATING 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 follows:
‘‘(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.’’.
(3) Subsection (b) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2)—
279
(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 pol-
icyholders and subscribers of the carrier’’
and inserting ‘‘to the policyholders and sub-
scribers of the medicare administrative con-
tractor’’;
(iv) by striking subparagraphs (C),
(D), and (E);
(v) in subparagraph (H)—
280
(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.
(4) Subsection (c) is amended—
281
(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 subsection
(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 sub-
section (a)’’ and inserting ‘‘The Secretary’’;
and
282
(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 mak-
ing 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—
283
(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 striking
‘‘carrier’’.
(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made
by this section shall take effect on October 1,
2004, and the Secretary is authorized to take
such steps before such date as may be necessary
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 (ex-
284
cept as otherwise provided under this Act, other
than under this section) until such date as the
contract is let out for competitive bidding 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 contractors
for annual contract periods that begin on or
after October 1, 2009.
(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 sub-
paragraph (A), the Secretary may enter into
new agreements under section 1816 of the Social
Security Act (42 U.S.C. 1395h) without regard
to any of the provider nomination provisions 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
285
Act (42 U.S.C. 1395h, 1395u) to contracts under sec-
tion 1874A, as added by subsection (a)(1).
(3) AUTHORIZING CONTINUATION OF MIP FUNC-
TIONS
UNDER
CURRENT
CONTRACTS
AND
AGREE-
MENTS AND UNDER ROLLOVER CONTRACTS.—The pro-
visions 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 pro-
vided 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 an
appropriate medicare administrative contractor (as pro-
vided under section 1874A of the Social Security Act).
(f) REPORTS ON IMPLEMENTATION.—
(1) PLAN FOR IMPLEMENTATION.—By not later
than October 1, 2003, the Secretary shall submit a re-
286
port to Congress and the Comptroller General of the
United States that describes the plan for implementa-
tion 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 Gen-
eral deems appropriate.
(2) STATUS
OF
IMPLEMENTATION.—The Sec-
retary shall submit a report to Congress not later
than October 1, 2007, that describes the status of im-
plementation of such amendments and that includes
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 competi-
tion.
287
SEC. 812. REQUIREMENTS FOR INFORMATION SECURITY
FOR MEDICARE ADMINISTRATIVE CONTRAC-
TORS.
(a) IN GENERAL.—Section 1874A, as added by section
811(a)(1), is amended by adding at the end the following
new subsection:
‘‘(e) REQUIREMENTS FOR INFORMATION SECURITY.—
‘‘(1) DEVELOPMENT OF INFORMATION SECURITY
PROGRAM.—A medicare administrative contractor
that performs the functions referred to in subpara-
graphs (A) and (B) of subsection (a)(4) (relating to
determining and making payments) shall implement
a contractor-wide information security program to
provide information security for the operation and
assets of the contractor with respect to such functions
under this title. An information security program
under this paragraph shall meet the requirements for
information security programs imposed on Federal
agencies under section 3534(b)(2) of title 44, United
States Code (other than requirements under subpara-
graphs (B)(ii), (F)(iii), and (F)(iv) of such section).
‘‘(2) INDEPENDENT AUDITS.—
‘‘(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
288
(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 evaluation
shall—
‘‘(i) be performed by an entity that
meets such requirements for independence as
the Inspector General of the Department of
Health and Human Services may establish;
and
‘‘(ii) test the effectiveness of informa-
tion security control techniques for an ap-
propriate subset of the contractor’s informa-
tion systems (as defined in section 3502(8)
of title 44, United States Code) relating to
such functions under this title and an as-
sessment of compliance with the require-
ments of this subsection and related infor-
mation security policies, procedures, stand-
ards and guidelines.
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case
of a medicare administrative contractor
covered by this subsection that has not pre-
289
viously performed the functions referred to
in subparagraphs (A) and (B) of subsection
(a)(4) (relating to determining and making
payments) as a fiscal intermediary or car-
rier under section 1816 or 1842, the first
independent evaluation conducted pursuant
subparagraph (A) shall be completed 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 independent
evaluation conducted pursuant subpara-
graph (A) shall be completed within 1 year
after the date the contractor commences
functions referred to in clause (i) under this
section.
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE INSPECTOR GENERAL.—
The results of independent evaluations
under subparagraph (A) shall be submitted
promptly to the Inspector General of the
Department of Health and Human Services.
‘‘(ii) TO
CONGRESS.—The Inspector
General of Department of Health and
290
Human Services shall submit to Congress
annual reports on the results of such eval-
uations.’’.
(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
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 section 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)), pur-
suant to paragraph (1), shall be completed (and a re-
port on the evaluation submitted to the Secretary) by
not later than 1 year after such date.
291
Subtitle C—Education and
Outreach
SEC. 821. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE.
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—The Social Security Act is
amended by inserting after section 1888 the following
new section:
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE
‘‘SEC. 1889. (a) COORDINATION OF EDUCATION FUND-
ING.—The Secretary shall coordinate the educational activi-
ties 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 en-
actment of this Act.
(3) REPORT.—Not later than October 1, 2003,
the Secretary shall submit to Congress a report that
includes a description and evaluation of the steps
taken to coordinate the funding of provider education
under section 1889(a) of the Social Security Act, as
added by paragraph (1).
292
(b) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE.—
(1) IN GENERAL.—Section 1874A, as added by
section 811(a)(1) and as amended by section 812(a),
is amended by adding at the end the following new
subsection:
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE IN PROVIDER EDUCATION AND OUTREACH.—In order
to give medicare administrative contractors an incentive to
implement effective education and outreach programs for
providers of services and suppliers, the Secretary shall de-
velop and implement a methodology to measure the specific
claims payment error rates of such contractors in the proc-
essing or reviewing of medicare claims.’’.
(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 pro-
visions.
(3) GAO REPORT ON ADEQUACY OF METHOD-
OLOGY.—Not later than October 1, 2003, the Comp-
293
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 recommendations
as the Comptroller General determines appropriate
with respect to the methodology.
(4) REPORT ON USE OF METHODOLOGY IN AS-
SESSING
CONTRACTOR
PERFORMANCE.—Not later
than October 1, 2003, the Secretary shall submit to
Congress a report that describes how the Secretary in-
tends to use such methodology in assessing medicare
contractor performance in implementing effective edu-
cation and outreach programs, including whether to
use such methodology as a basis for performance bo-
nuses. The report shall include an analysis 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 811(a)(1) and as amended by section 812(a)
294
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 Secretary
shall develop a strategy for communications with in-
dividuals entitled to benefits under part A or enrolled
under part B, or both, and with providers of services
and suppliers under this title.
‘‘(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 elec-
tronic transmission) in a clear, concise, and accurate
manner to inquiries of providers of services, suppliers
and individuals entitled to benefits under part A or
enrolled under part B, or both, concerning the pro-
grams under this title within 45 business days of the
date of receipt of such inquiries.
‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Sec-
retary shall ensure that each medicare administrative
295
contractor shall provide, for those providers of services
and suppliers which submit claims to the contractor
for claims processing and for those individuals enti-
tled 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 telephone number at
which such individuals, providers of services and sup-
pliers may obtain information regarding billing, cod-
ing, claims, coverage, and other appropriate informa-
tion 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
296
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 admin-
istrative contractors, the Secretary shall
take into account the results of the moni-
toring conducted under subparagraph (A)
taking into account as performance require-
ments the standards established under
clause (i). The Secretary shall, in consulta-
tion with organizations representing pro-
viders of services, suppliers, and individuals
entitled to benefits under part A or enrolled
under part B, or both, establish standards
relating to the accuracy, consistency, and
timeliness of the information so provided.
‘‘(C) DIRECT MONITORING.—Nothing in this
paragraph shall be construed as preventing the
Secretary from directly monitoring the accuracy,
consistency, and timeliness of the information so
provided.’’.
297
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall take effect October 1, 2003.
(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 sec-
tion 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.
(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 fiscal
years 2004 and 2005 and such sums as may be nec-
essary for succeeding fiscal years.
298
‘‘(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 timeli-
ness of contractor responses.
‘‘(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, 2003.
(e) REQUIREMENT TO MAINTAIN INTERNET SITES.—
299
(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 (in-
cluding claims processing) for providers of services or sup-
pliers, shall maintain an Internet site which—
‘‘(1) provides answers in an easily accessible for-
mat 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, 2003.
(f) ADDITIONAL PROVIDER EDUCATION PROVISIONS.—
(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 fol-
lowing 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 attend)
300
educational activities or other information gathered during
an educational program conducted under this section or
otherwise by the Secretary to select or track providers of
services or suppliers for the purpose of conducting 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 sec-
tion 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 supplier.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall take effect on the date of the en-
actment of this Act.
301
SEC. 822. 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—
302
(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 conducting
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 section 5(f)(1)) with
appropriate expertise with billing systems of the full range
of providers of services and suppliers to provide the tech-
nical assistance. In awarding such contracts, the Secretary
shall consider any prior investigations of the entity’s work
by the Inspector General of Department of Health and
Human Services or the Comptroller General of the United
States.
(c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The
technical assistance provided under the demonstration pro-
gram 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 achieving such
compliance.
(d) AVOIDANCE OF RECOVERY ACTIONS FOR PROB-
LEMS IDENTIFIED AS CORRECTED.—The Secretary shall
303
provide that, absent evidence of fraud and notwithstanding
any other provision of law, any errors found in a compli-
ance review for a small provider of services or supplier that
participates in the demonstration program shall not be sub-
ject to recovery action if the technical assistance personnel
under the program determine that—
(1) the problem that is the subject of the compli-
ance review has been corrected to their satisfaction
within 30 days of the date of the visit by such per-
sonnel to the small provider of services or supplier;
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 provider
of services or supplier is a participant in such program.
(e) GAO EVALUATION.—Not later than 2 years after
the date of the date the demonstration program is first im-
plemented, the Comptroller General, in consultation with
the Inspector General of the Department of Health and
Human Services, shall conduct an evaluation of the dem-
onstration program. The evaluation shall include a deter-
mination of whether claims error rates are reduced for
small providers of services or suppliers who participated
304
in the program and the extent of improper payments made
as a result of the demonstration program. The Comptroller
General shall submit a report to the Secretary and the Con-
gress on such evaluation and shall include in such report
recommendations regarding the continuation or extension
of the demonstration program.
(f) FINANCIAL PARTICIPATION BY PROVIDERS.—The
provision of technical assistance to a small provider of serv-
ices or supplier under the demonstration program is condi-
tioned upon the small provider of services or supplier pay-
ing 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 assistance.
(g) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated to the Secretary (in appro-
priate 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 2004, $1,000,000, and
(2) for fiscal year 2005, $6,000,000.
SEC. 823. MEDICARE PROVIDER OMBUDSMAN; MEDICARE
BENEFICIARY OMBUDSMAN.
(a) MEDICARE PROVIDER OMBUDSMAN.—Section 1868
(42 U.S.C. 1395ee) is amended—
305
(1) by adding at the end of the heading the fol-
lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’;
(2) by inserting ‘‘PRACTICING PHYSICIANS ADVI-
SORY 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 In-
spector General of the Department of Health and
Human Services) and in the resolution of unclear or
conflicting guidance given by the Secretary and medi-
care contractors to such providers of services and sup-
306
pliers regarding such programs and provisions 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 ap-
propriate and consistent response (including not
providing for audits) in cases of self-identified
overpayments by providers of services and sup-
pliers.
The Ombudsman shall not serve as an advocate for any in-
creases in payments or new coverage of services, but may
identify issues and problems in payment or coverage poli-
cies.’’.
(b) MEDICARE
BENEFICIARY
OMBUDSMAN.—Title
XVIII, as amended by sections 105 and 701, is amended
by inserting after section 1808 the following new section:
307
‘‘MEDICARE BENEFICIARY OMBUDSMAN
‘‘SEC. 1809. (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 Ombudsman
shall—
‘‘(1) receive complaints, grievances, and requests
for information submitted by individuals entitled to
benefits under part A or enrolled under part B, or
both, with respect to any aspect of the medicare pro-
gram;
‘‘(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; and
‘‘(B) assistance to such individuals with
any problems arising from disenrollment from a
Medicare+Choice plan under part C; and
308
‘‘(3) submit annual reports to Congress and the
Secretary that describe the activities of the Office and
that include such recommendations for improvement
in the administration of this title as the Ombudsman
determines appropriate.
The Ombudsman shall not serve as an advocate for any in-
creases in payments or new coverage of services, but may
identify issues and problems in payment or coverage poli-
cies.
‘‘(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 in-
formation 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.’’.
(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.
309
(d) FUNDING.—There are authorized to be appro-
priated to the Secretary (in appropriate part from the Fed-
eral Hospital Insurance Trust Fund and the Federal Sup-
plementary 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 Ombuds-
man), as added by subsection (a)(5) and section 1809 of
such Act (relating to the Medicare Beneficiary Ombuds-
man), as added by subsection (b), such sums as are nec-
essary for fiscal year 2003 and each succeeding fiscal 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 with, such
programs who phone such toll-free number are trans-
ferred (without charge) to appropriate entities for the
provision of such information or assistance. Such toll-
free number shall be the toll-free number listed for
general information and assistance in the annual no-
310
tice 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-MEDICARE,
including an assessment of whether the informa-
tion 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 infor-
mation through such number.
(B) REPORT.—Not later than 1 year after
the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report
on the study conducted under subparagraph (A).
SEC. 824. 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
311
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. Sub-
ject to paragraph (2), in selecting such offices and
areas, the Secretary shall provide preference for offices
with a high volume of visits by individuals referred
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.
(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—
312
(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 bene-
ficiary assistance through out-stationing medi-
care specialists at local offices of the Social Secu-
rity 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.
Subtitle D—Appeals and Recovery
SEC. 831. TRANSFER OF RESPONSIBILITY FOR MEDICARE
APPEALS.
(a) TRANSITION PLAN.—
(1) IN
GENERAL.—Not later than October 1,
2003, 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 provisions in
title XI of such Act) are transferred from the responsi-
313
bility of the Commissioner and the Social 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 Comptroller Gen-
eral, shall submit to Congress a report on such eval-
uation.
(b) TRANSFER OF ADJUDICATION AUTHORITY.—
(1) IN GENERAL.—Not earlier than July 1, 2004,
and not later than October 1, 2004, the Commissioner
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 Security Administra-
tion to the Secretary.
(2) ASSURING INDEPENDENCE OF JUDGES.—The
Secretary shall assure the independence of adminis-
trative law judges performing the administrative law
judge functions transferred under paragraph (1) from
the Centers for Medicare & Medicaid Services and its
contractors.
(3) GEOGRAPHIC DISTRIBUTION.—The Secretary
shall provide for an appropriate geographic distribu-
314
tion of administrative law judges performing the ad-
ministrative 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 Sec-
retary shall have authority to hire administrative 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 per-
forming the administrative law judge functions trans-
ferred under paragraph (1) from the Federal Hospital
Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund shall become
payable to the Secretary for the functions so trans-
ferred.
(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 appro-
315
priate reimbursement from the Trust Funds described
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 ap-
propriated (in appropriate part from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund) to the Secretary such sums
as are necessary for fiscal year 2004 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
(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 Administration’’.
316
SEC. 832. 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 inserting
‘‘DETERMINATIONS
AND
RECONSIDERATIONS’’;
and
(C) by redesignating subclauses (I) and (II)
as clauses (i) and (ii) and by moving the inden-
tation of such subclauses (and the matter that
follows) 2 ems to the left; and
(3) by adding at the end the following new para-
graph:
‘‘(2) EXPEDITED
ACCESS
TO
JUDICIAL
RE-
VIEW.—
‘‘(A) IN GENERAL.—The Secretary shall es-
tablish a process under which a provider of serv-
ices or supplier that furnishes an item or service
or an individual entitled to benefits under part
A or enrolled under part B, or both, who has
317
filed an appeal under paragraph (1) may obtain
access to judicial review when a review panel
(described in subparagraph (D)), on its own mo-
tion or at the request of the appellant, deter-
mines that no entity in the administrative ap-
peals process has the authority to decide the
question of law or regulation relevant to the mat-
ters in controversy and that there is no material
issue of fact in dispute. The appellant may make
such request only once with respect to a question
of law or regulation in a case of an appeal.
‘‘(B) PROMPT DETERMINATIONS.—If, after
or coincident with appropriately filing a request
for an administrative hearing, the appellant re-
quests a determination by the appropriate review
panel that no review panel has the authority to
decide the question of law or regulations relevant
to the matters in controversy and that there is
no material issue of fact in dispute and if such
request is accompanied by the documents and
materials as the appropriate review panel shall
require for purposes of making such determina-
tion, such review panel shall make a determina-
tion on the request in writing within 60 days
after the date such review panel receives the re-
318
quest and such accompanying documents and
materials. Such a determination by such review
panel shall be considered a final decision and
not subject to review by the Secretary.
‘‘(C) ACCESS TO JUDICIAL REVIEW.—
‘‘(i) IN GENERAL.—If the appropriate
review panel—
‘‘(I) determines that there are no
material issues of fact in dispute and
that the only issue is one of law or reg-
ulation that no review panel has the
authority to decide; or
‘‘(II) fails to make such deter-
mination within the period provided
under subparagraph (B);
then the appellant may bring a civil action
as described in this subparagraph.
‘‘(ii) DEADLINE
FOR
FILING.—Such
action shall be filed, in the case described
in—
‘‘(I) clause (i)(I), within 60 days
of date of the determination described
in such subparagraph; or
‘‘(II) clause (i)(II), within 60
days of the end of the period provided
319
under subparagraph (B) for the deter-
mination.
‘‘(iii) VENUE.—Such action shall be
brought in the district court of the United
States for the judicial district in which the
appellant is located (or, in the case of an
action brought jointly by more than one ap-
plicant, the judicial district in which the
greatest number of applicants are located)
or in the district court for the District of
Columbia.
‘‘(iv) INTEREST ON AMOUNTS IN CON-
TROVERSY.—Where a provider of services or
supplier seeks judicial review pursuant to
this paragraph, the amount in controversy
shall be subject to annual interest beginning
on the first day of the first month beginning
after the 60-day period as determined pur-
suant to clause (ii) and equal to the rate of
interest on obligations issued for purchase
by the Federal Hospital Insurance Trust
Fund and by the Federal Supplementary
Medical Insurance Trust Fund for the
month in which the civil action authorized
under this paragraph is commenced, to be
320
awarded by the reviewing court in favor of
the prevailing party. No interest awarded
pursuant to the preceding sentence shall be
deemed income or cost for the purposes of
determining reimbursement due providers of
services or suppliers under this Act.
‘‘(D) REVIEW
PANELS.—For purposes of
this subsection, a ‘review panel’ is a panel con-
sisting of 3 members (who shall be administra-
tive law judges, members of the Departmental
Appeals Board, or qualified individuals associ-
ated with a qualified independent contractor (as
defined in subsection (c)(2)) or with another
independent entity) designated by the Secretary
for purposes of making determinations under
this paragraph.’’.
(b) APPLICATION TO PROVIDER AGREEMENT DETER-
MINATIONS.—Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1))
is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) An institution or agency described in subpara-
graph (A) that has filed for a hearing under subparagraph
(A) shall have expedited access to judicial review under this
321
subparagraph in the same manner as providers of services,
suppliers, and individuals entitled to benefits under part
A or enrolled under part B, or both, may obtain expedited
access to judicial review under the process established under
section 1869(b)(2). Nothing in this subparagraph shall be
construed to affect the application of any remedy imposed
under section 1819 during the pendency of an appeal under
this subparagraph.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to appeals filed on or after October 1,
2003.
(d) EXPEDITED
REVIEW
OF
CERTAIN
PROVIDER
AGREEMENT DETERMINATIONS.—
(1) TERMINATION AND CERTAIN OTHER IMME-
DIATE REMEDIES.—The Secretary shall develop and
implement a process to expedite proceedings under
sections 1866(h) of the Social Security Act (42 U.S.C.
1395cc(h)) in which the remedy of termination of
participation, or a remedy described in clause (i) or
(iii) of section 1819(h)(2)(B) of such Act (42 U.S.C.
1395i–3(h)(2)(B)) which is applied on an immediate
basis, has been imposed. Under such process priority
shall be provided in cases of termination.
(2) INCREASED FINANCIAL SUPPORT.—In addi-
tion to any amounts otherwise appropriated, to re-
322
duce by 50 percent the average time for administra-
tive determinations on appeals under section 1866(h)
of the Social Security Act (42 U.S.C. 1395cc(h)),
there are authorized to be appropriated (in appro-
priate part from the Federal Hospital Insurance
Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund) to the Secretary such addi-
tional sums for fiscal year 2004 and each subsequent
fiscal year as may be necessary. The purposes for
which such amounts are available include increasing
the number of administrative law judges (and their
staffs) and the appellate level staff at the Depart-
mental Appeals Board of the Department of Health
and Human Services and educating such judges and
staffs on long-term care issues.
SEC. 833. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) REQUIRING FULL AND EARLY PRESENTATION OF
EVIDENCE.—
(1) IN GENERAL.—Section 1869(b) (42 U.S.C.
1395ff(b)), as amended by BIPA and as amended by
section 832(a), is further amended by adding at the
end the following new paragraph:
‘‘(3) REQUIRING
FULL
AND
EARLY
PRESEN-
TATION OF EVIDENCE BY PROVIDERS.—A provider of
services or supplier may not introduce evidence in
323
any appeal under this section that was not presented
at the reconsideration conducted by the qualified
independent contractor under subsection (c), unless
there is good cause which precluded the introduction
of such evidence at or before that reconsideration.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall take effect on October 1, 2003.
(b) USE OF PATIENTS’ MEDICAL RECORDS.—Section
1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as amended
by BIPA, is amended by inserting ‘‘(including the medical
records of the individual involved)’’ after ‘‘clinical experi-
ence’’.
(c) NOTICE
REQUIREMENTS
FOR
MEDICARE
AP-
PEALS.—
(1) INITIAL
DETERMINATIONS
AND
REDETER-
MINATIONS.—Section 1869(a) (42 U.S.C. 1395ff(a)),
as amended by BIPA, is amended by adding at the
end the following new paragraph:
‘‘(4) REQUIREMENTS OF NOTICE OF DETERMINA-
TIONS AND REDETERMINATIONS.—A written notice of
a determination on an initial determination or on a
redetermination, insofar as such determination or re-
determination results in a denial of a claim for bene-
fits, shall include—
324
‘‘(A) the specific reasons for the determina-
tion, including—
‘‘(i) upon request, the provision of the
policy, manual, or regulation used in mak-
ing the determination; and
‘‘(ii) as appropriate in the case of a re-
determination, a summary of the clinical or
scientific evidence used in making the deter-
mination;
‘‘(B) the procedures for obtaining addi-
tional information concerning the determination
or redetermination; and
‘‘(C) notification of the right to seek a rede-
termination or otherwise appeal the determina-
tion and instructions on how to initiate such a
redetermination or appeal under this section.
The written notice on a redetermination shall be pro-
vided in printed form and written in a manner cal-
culated to be understood by the individual entitled to
benefits under part A or enrolled under part B, or
both.’’.
(2) RECONSIDERATIONS.—Section 1869(c)(3)(E)
(42 U.S.C. 1395ff(c)(3)(E)), as amended by BIPA, is
amended—
325
(A) by inserting ‘‘be written in a manner
calculated to be understood by the individual en-
titled to benefits under part A or enrolled under
part B, or both, and shall include (to the extent
appropriate)’’ after ‘‘in writing, ’’; and
(B) by inserting ‘‘and a notification of the
right to appeal such determination and instruc-
tions on how to initiate such appeal under this
section’’ after ‘‘such decision, ’’.
(3) APPEALS.—Section 1869(d) (42 U.S.C.
1395ff(d)), as amended by BIPA, is amended—
(A) in the heading, by inserting ‘‘; NOTICE’’
after ‘‘SECRETARY’’; and
(B) by adding at the end the following new
paragraph:
‘‘(4) NOTICE.—Notice of the decision of an ad-
ministrative law judge shall be in writing in a man-
ner calculated to be understood by the individual en-
titled to benefits under part A or enrolled under part
B, or both, and shall include—
‘‘(A) the specific reasons for the determina-
tion (including, to the extent appropriate, a
summary of the clinical or scientific evidence
used in making the determination);
326
‘‘(B) the procedures for obtaining addi-
tional information concerning the decision; and
‘‘(C) notification of the right to appeal the
decision and instructions on how to initiate such
an appeal under this section.’’.
(4) SUBMISSION OF RECORD FOR APPEAL.—Sec-
tion 1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by
striking ‘‘prepare’’ and inserting ‘‘submit’’ and by
striking ‘‘with respect to’’ and all that follows through
‘‘and relevant policies’’.
(d) QUALIFIED INDEPENDENT CONTRACTORS.—
(1) ELIGIBILITY REQUIREMENTS OF QUALIFIED
INDEPENDENT CONTRACTORS.—Section 1869(c)(3) (42
U.S.C. 1395ff(c)(3)), as amended by BIPA, is
amended—
(A) in subparagraph (A), by striking ‘‘suffi-
cient training and expertise in medical science
and legal matters’’ and inserting ‘‘sufficient
medical, legal, and other expertise (including
knowledge of the program under this title) and
sufficient staffing’’; and
(B) by adding at the end the following new
subparagraph:
‘‘(K) INDEPENDENCE REQUIREMENTS.—
327
‘‘(i) IN
GENERAL.—Subject to clause
(ii), a qualified independent contractor
shall not conduct any activities in a case
unless the entity—
‘‘(I) is not a related party (as de-
fined in subsection (g)(5));
‘‘(II) does not have a material fa-
milial, financial, or professional rela-
tionship with such a party in relation
to such case; and
‘‘(III) does not otherwise have a
conflict of interest with such a party.
‘‘(ii) EXCEPTION
FOR
REASONABLE
COMPENSATION.—Nothing in clause (i) shall
be construed to prohibit receipt by a quali-
fied independent contractor of compensation
from the Secretary for the conduct of activi-
ties under this section if the compensation
is provided consistent with clause (iii).
‘‘(iii) LIMITATIONS
ON
ENTITY
COM-
PENSATION.—Compensation provided by the
Secretary to a qualified independent con-
tractor in connection with reviews under
this section shall not be contingent on any
328
decision rendered by the contractor or by
any reviewing professional.’’.
(2) ELIGIBILITY
REQUIREMENTS
FOR
REVIEW-
ERS.—Section 1869 (42 U.S.C. 1395ff), as amended
by BIPA, is amended—
(A) by amending subsection (c)(3)(D) to
read as follows:
‘‘(D) QUALIFICATIONS
FOR
REVIEWERS.—
The requirements of subsection (g) shall be met
(relating to qualifications of reviewing profes-
sionals).’’; and
(B) by adding at the end the following new
subsection:
‘‘(g) QUALIFICATIONS OF REVIEWERS.—
‘‘(1) IN GENERAL.—In reviewing determinations
under this section, a qualified independent contractor
shall assure that—
‘‘(A) each individual conducting a review
shall meet the qualifications of paragraph (2);
‘‘(B) compensation provided by the con-
tractor to each such reviewer is consistent with
paragraph (3); and
‘‘(C) in the case of a review by a panel de-
scribed in subsection (c)(3)(B) composed of phy-
sicians or other health care professionals (each in
329
this subsection referred to as a ‘reviewing profes-
sional’), each reviewing professional meets the
qualifications described in paragraph (4) and,
where a claim is regarding the furnishing of
treatment by a physician (allopathic or osteo-
pathic) or the provision of items or services by
a physician (allopathic or osteopathic), each re-
viewing professional shall be a physician
(allopathic or osteopathic).
‘‘(2) INDEPENDENCE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each individual conducting a review
in a case shall—
‘‘(i) not be a related party (as defined
in paragraph (5));
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with
such a party in the case under review; and
‘‘(iii) not otherwise have a conflict of
interest with such a party.
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to—
‘‘(i) prohibit an individual, solely on
the basis of a participation agreement with
a fiscal intermediary, carrier, or other con-
330
tractor, from serving as a reviewing profes-
sional if—
‘‘(I) the individual is not involved
in the provision of items or services in
the case under review;
‘‘(II) the fact of such an agree-
ment is disclosed to the Secretary and
the individual entitled to benefits
under part A or enrolled under part B,
or both, (or authorized representative)
and neither party objects; and
‘‘(III) the individual is not an
employee of the intermediary, carrier,
or contractor and does not provide
services exclusively or primarily to or
on behalf of such intermediary, carrier,
or contractor;
‘‘(ii) prohibit an individual who has
staff privileges at the institution where the
treatment involved takes place from serving
as a reviewer merely on the basis of having
such staff privileges if the existence of such
privileges is disclosed to the Secretary and
such individual (or authorized representa-
tive), and neither party objects; or
331
‘‘(iii) prohibit receipt of compensation
by a reviewing professional from a con-
tractor if the compensation is provided con-
sistent with paragraph (3).
For purposes of this paragraph, the term ‘par-
ticipation agreement’ means an agreement relat-
ing to the provision of health care services by the
individual and does not include the provision of
services as a reviewer under this subsection.
‘‘(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 review-
ing professional shall be—
‘‘(A) a physician (allopathic or osteopathic)
who is appropriately credentialed or licensed in
one or more States to deliver health care services
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
332
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
individual entitled to benefits under part A or en-
rolled under part B, or both, any of the following:
‘‘(A) The Secretary, the medicare adminis-
trative contractor involved, or any fiduciary, of-
ficer, director, or employee of the Department of
Health and Human Services, or of such con-
tractor.
‘‘(B) The individual (or authorized rep-
resentative).
‘‘(C) The health care professional that pro-
vides the items or services involved in the case.
‘‘(D) The institution at which the items or
services (or treatment) involved in the case are
provided.
‘‘(E) The manufacturer of any drug or
other item that is included in the items or serv-
ices involved in the case.
333
‘‘(F) Any other party determined under any
regulations to have a substantial interest in the
case involved.’’.
(3) EFFECTIVE DATE.—The amendments made
by paragraphs (1) and (2) shall be effective as if in-
cluded in the enactment of the respective provisions of
subtitle C of title V of BIPA, (114 Stat. 2763A–534).
(4) TRANSITION.—In applying section 1869(g) of
the Social Security Act (as added by paragraph (2)),
any reference to a medicare administrative contractor
shall be deemed to include a reference to a fiscal
intermediary under section 1816 of the Social Secu-
rity Act (42 U.S.C. 1395h) and a carrier under sec-
tion 1842 of such Act (42 U.S.C. 1395u).
SEC. 834. PREPAYMENT REVIEW.
(a) IN GENERAL.—Section 1874A, as added by section
811(a)(1) and as amended by sections 812(b), 821(b)(1),
and 821(c)(1), is further amended by adding at the end the
following new subsection:
‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—
‘‘(1) CONDUCT
OF
RANDOM
PREPAYMENT
RE-
VIEW.—
‘‘(A) IN GENERAL.—A medicare adminis-
trative contractor may conduct random prepay-
ment review only to develop a contractor-wide or
334
program-wide claims payment error rates or
under such additional circumstances as may be
provided under regulations, developed in con-
sultation with providers of services and sup-
pliers.
‘‘(B) USE OF STANDARD PROTOCOLS WHEN
CONDUCTING
PREPAYMENT
REVIEWS.—When a
medicare administrative contractor conducts a
random prepayment review, the contractor may
conduct such review only in accordance with a
standard protocol for random prepayment audits
developed by the Secretary.
‘‘(C) 
CONSTRUCTION.—Nothing 
in 
this
paragraph shall be construed as preventing the
denial of payments for claims actually reviewed
under a random prepayment review.
‘‘(D) RANDOM PREPAYMENT REVIEW.—For
purposes of this subsection, the term ‘random
prepayment review’ means a demand for the
production of records or documentation absent
cause with respect to a claim.
‘‘(2) LIMITATIONS ON NON-RANDOM PREPAYMENT
REVIEW.—
‘‘(A) LIMITATIONS ON INITIATION OF NON-
RANDOM PREPAYMENT REVIEW.—A medicare ad-
335
ministrative contractor may not initiate non-
random prepayment review of a provider of serv-
ices or supplier based on the initial identifica-
tion by that provider of services or supplier of
an improper billing practice unless there is a
likelihood of sustained or high level of payment
error (as defined in subsection (i)(3)(A)).
‘‘(B) TERMINATION OF NON-RANDOM PRE-
PAYMENT
REVIEW.—The Secretary shall issue
regulations relating to the termination, includ-
ing termination dates, of non-random prepay-
ment review. Such regulations may vary such a
termination date based upon the differences in
the circumstances triggering prepayment re-
view.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendment made by subsection (a)
shall take effect 1 year after the date of the enactment
of this Act.
(2) DEADLINE FOR PROMULGATION OF CERTAIN
REGULATIONS.—The Secretary shall first issue regula-
tions under section 1874A(h) of the Social Security
Act, as added by subsection (a), by not later than 1
year after the date of the enactment of this Act.
336
(3) APPLICATION OF STANDARD PROTOCOLS FOR
RANDOM
PREPAYMENT
REVIEW.—Section
1874A(h)(1)(B) of the Social Security Act, as added
by subsection (a), shall apply to random prepayment
reviews conducted on or after such date (not later
than 1 year after the date of the enactment of this
Act) as the Secretary shall specify.
(c) APPLICATION TO FISCAL INTERMEDIARIES AND
CARRIERS.—The provisions of section 1874A(h) of the So-
cial Security Act, 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 sec-
tion 1842 of such Act (42 U.S.C. 1395u) in the same man-
ner as they apply to medicare administrative contractors
under such provisions.
SEC. 835. RECOVERY OF OVERPAYMENTS.
(a) IN GENERAL.—Section 1893 (42 U.S.C. 1395ddd)
is amended by adding at the end the following new sub-
section:
‘‘(f) RECOVERY OF OVERPAYMENTS.—
‘‘(1) USE OF REPAYMENT PLANS.—
‘‘(A) IN GENERAL.—If the repayment, with-
in 30 days by a provider of services or supplier,
of an overpayment under this title would con-
stitute a hardship (as defined in subparagraph
337
(B)), subject to subparagraph (C), upon request
of the provider of services or supplier the Sec-
retary shall enter into a plan with the provider
of services or supplier for the repayment
(through offset or otherwise) of such overpayment
over a period of at least 6 months but not longer
than 3 years (or not longer than 5 years in the
case of extreme hardship, as determined by the
Secretary). Interest shall accrue on the balance
through the period of repayment. Such plan shall
meet terms and conditions determined to be ap-
propriate by the Secretary.
‘‘(B) HARDSHIP.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the repayment of an
overpayment (or overpayments) within 30
days is deemed to constitute a hardship if—
‘‘(I) in the case of a provider of
services that files cost reports, the ag-
gregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of serv-
ices for the cost reporting period cov-
ered by the most recently submitted
cost report; or
338
‘‘(II) in the case of another pro-
vider of services or supplier, the aggre-
gate amount of the overpayments ex-
ceeds 10 percent of the amount paid
under this title to the provider of serv-
ices or supplier for the previous cal-
endar year.
‘‘(ii) RULE
OF
APPLICATION.—The
Secretary shall establish rules for the appli-
cation of this subparagraph in the case of a
provider of services or supplier that was not
paid under this title during the previous
year or was paid under this title only dur-
ing a portion of that year.
‘‘(iii) TREATMENT OF PREVIOUS OVER-
PAYMENTS.—If a provider of services or
supplier has entered into a repayment plan
under subparagraph (A) with respect to a
specific overpayment amount, such payment
amount under the repayment plan shall not
be taken into account under clause (i) with
respect to subsequent overpayment amounts.
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if—
339
‘‘(i) the Secretary has reason to suspect
that the provider of services or supplier
may file for bankruptcy or otherwise cease
to do business or discontinue participation
in the program under this title; or
‘‘(ii) there is an indication of fraud or
abuse committed against the program.
‘‘(D) IMMEDIATE COLLECTION IF VIOLATION
OF REPAYMENT PLAN.—If a provider of services
or supplier fails to make a payment in accord-
ance with a repayment plan under this para-
graph, the Secretary may immediately seek to
offset or otherwise recover the total balance out-
standing (including applicable interest) under
the repayment plan.
‘‘(E) RELATION TO NO FAULT PROVISION.—
Nothing in this paragraph shall be construed as
affecting the application of section 1870(c) (re-
lating to no adjustment in the cases of certain
overpayments).
‘‘(2) LIMITATION ON RECOUPMENT.—
‘‘(A) IN GENERAL.—In the case of a pro-
vider of services or supplier that is determined to
have received an overpayment under this title
and that seeks a reconsideration by a qualified
340
independent contractor on such determination
under section 1869(b)(1), the Secretary may not
take any action (or authorize any other person,
including any medicare contractor, as defined in
subparagraph (C)) to recoup the overpayment
until the date the decision on the reconsideration
has been rendered. If the provisions of section
1869(b)(1) (providing for such a reconsideration
by a qualified independent contractor) are not in
effect, in applying the previous sentence any ref-
erence to such a reconsideration shall be treated
as a reference to a redetermination by the fiscal
intermediary or carrier involved.
‘‘(B) COLLECTION WITH INTEREST.—Inso-
far as the determination on such appeal is
against the provider of services or supplier, in-
terest on the overpayment shall accrue on and
after the date of the original notice of overpay-
ment. Insofar as such determination against the
provider of services or supplier is later reversed,
the Secretary shall provide for repayment of the
amount recouped plus interest at the same rate
as would apply under the previous sentence for
the period in which the amount was recouped.
341
‘‘(C) MEDICARE
CONTRACTOR
DEFINED.—
For purposes of this subsection, the term ‘medi-
care contractor’ has the meaning given such term
in section 1889(g).
‘‘(3) LIMITATION ON USE OF EXTRAPOLATION.—
A medicare contractor may not use extrapolation to
determine overpayment amounts to be recovered by
recoupment, offset, or otherwise unless—
‘‘(A) there is a sustained or high level of
payment error (as defined by the Secretary by
regulation); or
‘‘(B) documented educational intervention
has failed to correct the payment error (as deter-
mined by the Secretary).
‘‘(4) PROVISION
OF
SUPPORTING
DOCUMENTA-
TION.—In the case of a provider of services or sup-
plier with respect to which amounts were previously
overpaid, a medicare contractor may request the peri-
odic production of records or supporting documenta-
tion for a limited sample of submitted claims to en-
sure that the previous practice is not continuing.
‘‘(5) CONSENT SETTLEMENT REFORMS.—
‘‘(A) IN GENERAL.—The Secretary may use
a consent settlement (as defined in subparagraph
(D)) to settle a projected overpayment.
342
‘‘(B) OPPORTUNITY TO SUBMIT ADDITIONAL
INFORMATION
BEFORE
CONSENT
SETTLEMENT
OFFER.—Before offering a provider of services or
supplier a consent settlement, the Secretary
shall—
‘‘(i) communicate to the provider of
services or supplier—
‘‘(I) that, based on a review of the
medical records requested by the Sec-
retary, a preliminary evaluation of
those records indicates that there would
be an overpayment;
‘‘(II) the nature of the problems
identified in such evaluation; and
‘‘(III) the steps that the provider
of services or supplier should take to
address the problems; and
‘‘(ii) provide for a 45-day period dur-
ing which the provider of services or sup-
plier may furnish additional information
concerning the medical records for the
claims that had been reviewed.
‘‘(C) CONSENT
SETTLEMENT
OFFER.—The
Secretary shall review any additional informa-
tion furnished by the provider of services or sup-
343
plier under subparagraph (B)(ii). Taking into
consideration such information, the Secretary
shall determine if there still appears to be an
overpayment. If so, the Secretary—
‘‘(i) shall provide notice of such deter-
mination to the provider of services or sup-
plier, including an explanation of the rea-
son for such determination; and
‘‘(ii) in order to resolve the overpay-
ment, may offer the provider of services or
supplier—
‘‘(I) the opportunity for a statis-
tically valid random sample; or
‘‘(II) a consent settlement.
The opportunity provided under clause (ii)(I)
does not waive any appeal rights with respect to
the alleged overpayment involved.
‘‘(D) CONSENT
SETTLEMENT
DEFINED.—
For purposes of this paragraph, the term ‘con-
sent settlement’ means an agreement between the
Secretary and a provider of services or supplier
whereby both parties agree to settle a projected
overpayment based on less than a statistically
valid sample of claims and the provider of serv-
344
ices or supplier agrees not to appeal the claims
involved.
‘‘(6) NOTICE OF OVER-UTILIZATION OF CODES.—
The Secretary shall establish, in consultation with or-
ganizations representing the classes of providers of
services and suppliers, a process under which the Sec-
retary provides for notice to classes of providers of
services and suppliers served by the contractor in
cases in which the contractor has identified that par-
ticular billing codes may be overutilized by that class
of providers of services or suppliers under the pro-
grams under this title (or provisions of title XI inso-
far as they relate to such programs).
‘‘(7) PAYMENT AUDITS.—
‘‘(A) WRITTEN NOTICE FOR POST-PAYMENT
AUDITS.—Subject to subparagraph (C), if a
medicare contractor decides to conduct a post-
payment audit of a provider of services or sup-
plier under this title, the contractor shall provide
the provider of services or supplier with written
notice (which may be in electronic form) of the
intent to conduct such an audit.
‘‘(B) EXPLANATION OF FINDINGS FOR ALL
AUDITS.—Subject to subparagraph (C), if a
medicare contractor audits a provider of services
345
or supplier under this title, the contractor
shall—
‘‘(i) give the provider of services or
supplier a full review and explanation of
the findings of the audit in a manner that
is understandable to the provider of services
or supplier and permits the development of
an appropriate corrective action plan;
‘‘(ii) inform the provider of services or
supplier of the appeal rights under this title
as well as consent settlement options (which
are at the discretion of the Secretary);
‘‘(iii) give the provider of services or
supplier an opportunity to provide addi-
tional information to the contractor; and
‘‘(iv) take into account information
provided, on a timely basis, by the provider
of services or supplier under clause (iii).
‘‘(C) EXCEPTION.—Subparagraphs (A) and
(B) shall not apply if the provision of notice or
findings would compromise pending law enforce-
ment activities, whether civil or criminal, or re-
veal findings of law enforcement-related audits.
‘‘(8) STANDARD METHODOLOGY FOR PROBE SAM-
PLING.—The Secretary shall establish a standard
346
methodology for medicare contractors to use in select-
ing a sample of claims for review in the case of an
abnormal billing pattern.’’.
(b) EFFECTIVE DATES AND DEADLINES.—
(1) 
USE
OF
REPAYMENT
PLANS.—Section
1893(f)(1) of the Social Security Act, as added by
subsection (a), shall apply to requests for repayment
plans made after the date of the enactment of this Act.
(2) 
LIMITATION
ON
RECOUPMENT.—Section
1893(f)(2) of the Social Security Act, as added by
subsection (a), shall apply to actions taken after the
date of the enactment of this Act.
(3) 
USE
OF
EXTRAPOLATION.—Section
1893(f)(3) of the Social Security Act, as added by
subsection (a), shall apply to statistically valid ran-
dom samples initiated after the date that is 1 year
after the date of the enactment of this Act.
(4) PROVISION
OF
SUPPORTING
DOCUMENTA-
TION.—Section 1893(f)(4) of the Social Security Act,
as added by subsection (a), shall take effect on the
date of the enactment of this Act.
(5) CONSENT SETTLEMENT.—Section 1893(f)(5)
of the Social Security Act, as added by subsection (a),
shall apply to consent settlements entered into after
the date of the enactment of this Act.
347
(6) NOTICE
OF
OVERUTILIZATION.—Not later
than 1 year after the date of the enactment of this
Act, the Secretary shall first establish the process for
notice of overutilization of billing codes under section
1893A(f)(6) of the Social Security Act, as added by
subsection (a).
(7) PAYMENT
AUDITS.—Section 1893A(f)(7) of
the Social Security Act, as added by subsection (a),
shall apply to audits initiated after the date of the
enactment of this Act.
(8) STANDARD
FOR
ABNORMAL
BILLING
PAT-
TERNS.—Not later than 1 year after the date of the
enactment of this Act, the Secretary shall first estab-
lish a standard methodology for selection of sample
claims for abnormal billing patterns under section
1893(f)(8) of the Social Security Act, as added by
subsection (a).
SEC. 836. PROVIDER ENROLLMENT PROCESS; RIGHT OF AP-
PEAL.
(a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc)
is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; ENROLLMENT PROCESSES’’; and
(2) by adding at the end the following new sub-
section:
348
‘‘(j) ENROLLMENT PROCESS FOR PROVIDERS OF SERV-
ICES AND SUPPLIERS.—
‘‘(1) ENROLLMENT PROCESS.—
‘‘(A) IN GENERAL.—The Secretary shall es-
tablish by regulation a process for the enrollment
of providers of services and suppliers under this
title.
‘‘(B) DEADLINES.—The Secretary shall es-
tablish by regulation procedures under which
there are deadlines for actions on applications
for enrollment (and, if applicable, renewal of en-
rollment). The Secretary shall monitor the per-
formance of medicare administrative contractors
in meeting the deadlines established under this
subparagraph.
‘‘(C) CONSULTATION
BEFORE
CHANGING
PROVIDER ENROLLMENT FORMS.—The Secretary
shall consult with providers of services and sup-
pliers before making changes in the provider en-
rollment forms required of such providers and
suppliers to be eligible to submit claims for
which payment may be made under this title.
‘‘(2) HEARING RIGHTS IN CASES OF DENIAL OR
NON-RENEWAL.—A provider of services or supplier
whose application to enroll (or, if applicable, to renew
349
enrollment) under this title is denied may have a
hearing and judicial review of such denial under the
procedures that apply under subsection (h)(1)(A) to a
provider of services that is dissatisfied with a deter-
mination by the Secretary.’’.
(b) EFFECTIVE DATES.—
(1) ENROLLMENT PROCESS.—The Secretary shall
provide for the establishment of the enrollment process
under section 1866(j)(1) of the Social Security Act, as
added by subsection (a)(2), within 6 months after the
date of the enactment of this Act.
(2) CONSULTATION.—Section 1866(j)(1)(C) of
the Social Security Act, as added by subsection
(a)(2), shall apply with respect to changes in provider
enrollment forms made on or after January 1, 2003.
(3) HEARING RIGHTS.—Section 1866(j)(2) of the
Social Security Act, as added by subsection (a)(2),
shall apply to denials occurring on or after such date
(not later than 1 year after the date of the enactment
of this Act) as the Secretary specifies.
SEC. 837. PROCESS FOR CORRECTION OF MINOR ERRORS
AND OMISSIONS ON CLAIMS WITHOUT PUR-
SUING APPEALS PROCESS.
The Secretary shall develop, in consultation with ap-
propriate medicare contractors (as defined in section
350
1889(g) of the Social Security Act, as inserted by section
821(a)(1)) and representatives of providers of services and
suppliers, a process whereby, in the case of minor errors
or omissions (as defined by the Secretary) that are detected
in the submission of claims under the programs under title
XVIII of such Act, a provider of services or supplier is given
an opportunity to correct such an error or omission without
the need to initiate an appeal. Such process shall include
the ability to resubmit corrected claims.
SEC. 838. PRIOR DETERMINATION PROCESS FOR CERTAIN
ITEMS 
AND 
SERVICES; 
ADVANCE 
BENE-
FICIARY NOTICES.
(a) IN GENERAL.—Section 1869 (42 U.S.C. 1395ff(b)),
as amended by sections 521 and 522 of BIPA and section
833(d)(2)(B), is further amended by adding at the end the
following new subsection:
‘‘(h) PRIOR DETERMINATION PROCESS FOR CERTAIN
ITEMS AND SERVICES.—
‘‘(1) ESTABLISHMENT OF PROCESS.—
‘‘(A) IN GENERAL.—With respect to a medi-
care administrative contractor that has a con-
tract under section 1874A that provides for mak-
ing payments under this title with respect to eli-
gible items and services described in subpara-
graph (C), the Secretary shall establish a prior
351
determination process that meets the require-
ments of this subsection and that shall be applied
by such contractor in the case of eligible request-
ers.
‘‘(B) ELIGIBLE REQUESTER.—For purposes
of this subsection, each of the following shall be
an eligible requester:
‘‘(i) A physician, but only with respect
to eligible items and services for which the
physician may be paid directly.
‘‘(ii) An individual entitled to benefits
under this title, but only with respect to an
item or service for which the individual re-
ceives, from the physician who may be paid
directly for the item or service, an advance
beneficiary notice under section 1879(a)
that payment may not be made (or may no
longer be made) for the item or service
under this title.
‘‘(C) ELIGIBLE ITEMS AND SERVICES.—For
purposes of this subsection and subject to para-
graph (2), eligible items and services are items
and services which are physicians’ services (as
defined in paragraph (4)(A) of section 1848(f)
352
for purposes of calculating the sustainable
growth rate under such section).
‘‘(2) SECRETARIAL FLEXIBILITY.—The Secretary
shall establish by regulation reasonable limits on the
categories of eligible items and services for which a
prior determination of coverage may be requested
under this subsection. In establishing such limits, the
Secretary may consider the dollar amount involved
with respect to the item or service, administrative
costs and burdens, and other relevant factors.
‘‘(3) REQUEST FOR PRIOR DETERMINATION.—
‘‘(A) IN GENERAL.—Subject to paragraph
(2), under the process established under this sub-
section an eligible requester may submit to the
contractor a request for a determination, before
the furnishing of an eligible item or service in-
volved as to whether the item or service is cov-
ered under this title consistent with the applica-
ble requirements of section 1862(a)(1)(A) (relat-
ing to medical necessity).
‘‘(B) ACCOMPANYING
DOCUMENTATION.—
The Secretary may require that the request be
accompanied by a description of the item or
service, supporting documentation relating to the
medical necessity for the item or service, and
353
any other appropriate documentation. In the
case of a request submitted by an eligible re-
quester who is described in paragraph (1)(B)(ii),
the Secretary may require that the request also
be accompanied by a copy of the advance bene-
ficiary notice involved.
‘‘(4) RESPONSE TO REQUEST.—
‘‘(A) IN GENERAL.—Under such process, the
contractor shall provide the eligible requester
with written notice of a determination as to
whether—
‘‘(i) the item or service is so covered;
‘‘(ii) the item or service is not so cov-
ered; or
‘‘(iii) the contractor lacks sufficient in-
formation to make a coverage determina-
tion.
If the contractor makes the determination de-
scribed in clause (iii), the contractor shall in-
clude in the notice a description of the addi-
tional information required to make the coverage
determination.
‘‘(B) DEADLINE TO RESPOND.—Such notice
shall be provided within the same time period as
the time period applicable to the contractor pro-
354
viding notice of initial determinations on a
claim for benefits under subsection (a)(2)(A).
‘‘(C) INFORMING BENEFICIARY IN CASE OF
PHYSICIAN REQUEST.—In the case of a request
in which an eligible requester is not the indi-
vidual described in paragraph (1)(B)(ii), the
process shall provide that the individual to
whom the item or service is proposed to be fur-
nished shall be informed of any determination
described in clause (ii) (relating to a determina-
tion of non-coverage) and the right (referred to
in paragraph (6)(B)) to obtain the item or serv-
ice and have a claim submitted for the item or
service.
‘‘(5) EFFECT OF DETERMINATIONS.—
‘‘(A) BINDING NATURE OF POSITIVE DETER-
MINATION.—If the contractor makes the deter-
mination described in paragraph (4)(A)(i), such
determination shall be binding on the contractor
in the absence of fraud or evidence of misrepre-
sentation of facts presented to the contractor.
‘‘(B) NOTICE AND RIGHT TO REDETERMINA-
TION IN CASE OF A DENIAL.—
355
‘‘(i) IN
GENERAL.—If the contractor
makes the determination described in para-
graph (4)(A)(ii)—
‘‘(I) the eligible requester has the
right to a redetermination by the con-
tractor on the determination that the
item or service is not so covered; and
‘‘(II) the contractor shall include
in notice under paragraph (4)(A) a
brief explanation of the basis for the
determination, including on what na-
tional or local coverage or noncoverage
determination (if any) the determina-
tion is based, and the right to such a
redetermination.
‘‘(ii) DEADLINE
FOR
REDETERMINA-
TIONS.—The contractor shall complete and
provide notice of such redetermination with-
in the same time period as the time period
applicable to the contractor providing notice
of redeterminations relating to a claim for
benefits under subsection (a)(3)(C)(ii).
‘‘(6) LIMITATION ON FURTHER REVIEW.—
‘‘(A) IN GENERAL.—Contractor determina-
tions described in paragraph (4)(A)(ii) or
356
(4)(A)(iii) (and redeterminations made under
paragraph (5)(B)), relating to pre-service claims
are not subject to further administrative appeal
or judicial review under this section or other-
wise.
‘‘(B) DECISION NOT TO SEEK PRIOR DETER-
MINATION OR NEGATIVE DETERMINATION DOES
NOT IMPACT RIGHT TO OBTAIN SERVICES, SEEK
REIMBURSEMENT, OR APPEAL RIGHTS.—Nothing
in this subsection shall be construed as affecting
the right of an individual who—
‘‘(i) decides not to seek a prior deter-
mination under this subsection with respect
to items or services; or
‘‘(ii) seeks such a determination and
has received a determination described in
paragraph (4)(A)(ii),
from receiving (and submitting a claim for) such
items services and from obtaining administrative
or judicial review respecting such claim under
the other applicable provisions of this section.
Failure to seek a prior determination under this
subsection with respect to items and services
shall not be taken into account in such adminis-
trative or judicial review.
357
‘‘(C) NO PRIOR DETERMINATION AFTER RE-
CEIPT OF SERVICES.—Once an individual is pro-
vided items and services, there shall be no prior
determination under this subsection with respect
to such items or services.’’.
(b) EFFECTIVE DATE; TRANSITION.—
(1) EFFECTIVE DATE.—The Secretary shall es-
tablish the prior determination process under the
amendment made by subsection (a) in such a manner
as to provide for the acceptance of requests for deter-
minations under such process filed not later than 18
months after the date of the enactment of this Act.
(2) TRANSITION.—During the period in which
the amendment made by subsection (a) has become ef-
fective but contracts are not provided under section
1874A of the Social Security Act with medicare ad-
ministrative contractors, any reference in section
1869(g) of such Act (as added by such amendment) to
such a contractor is deemed a reference to a fiscal
intermediary or carrier with an agreement under sec-
tion 1816, or contract under section 1842, respec-
tively, of such Act.
(3) LIMITATION ON APPLICATION TO SGR.—For
purposes of applying section 1848(f)(2)(D) of the So-
cial Security Act (42 U.S.C. 1395w–4(f)(2)(D)), the
358
amendment made by subsection (a) shall not be con-
sidered to be a change in law or regulation.
(c) PROVISIONS RELATING TO ADVANCE BENEFICIARY
NOTICES; REPORT ON PRIOR DETERMINATION PROCESS.—
(1) DATA COLLECTION.—The Secretary shall es-
tablish a process for the collection of information on
the instances in which an advance beneficiary notice
(as defined in paragraph (4)) has been provided and
on instances in which a beneficiary indicates on such
a notice that the beneficiary does not intend to seek
to have the item or service that is the subject of the
notice furnished.
(2) OUTREACH AND EDUCATION.—The Secretary
shall establish a program of outreach and education
for beneficiaries and providers of services and other
persons on the appropriate use of advance beneficiary
notices and coverage policies under the medicare pro-
gram.
(3) GAO REPORT REPORT ON USE OF ADVANCE
BENEFICIARY
NOTICES.—Not later than 18 months
after the date on which section 1869(g) of the Social
Security Act (as added by subsection (a)) takes effect,
the Comptroller General of the United States shall
submit to Congress a report on the use of advance
beneficiary notices under title XVIII of such Act.
359
Such report shall include information concerning the
providers of services and other persons that have pro-
vided such notices and the response of beneficiaries to
such notices.
(4) GAO REPORT ON USE OF PRIOR DETERMINA-
TION PROCESS.—Not later than 18 months after the
date on which section 1869(g) of the Social Security
Act (as added by subsection (a)) takes effect, the
Comptroller General of the United States shall submit
to Congress a report on the use of the prior deter-
mination process under such section. Such report
shall include—
(A) information concerning the types of
procedures for which a prior determination has
been sought, determinations made under the
process, and changes in receipt of services result-
ing from the application of such process; and
(B) an evaluation of whether the process
was useful for physicians (and other suppliers)
and beneficiaries, whether it was timely, and
whether the amount of information required was
burdensome to physicians and beneficiaries.
(5) ADVANCE BENEFICIARY NOTICE DEFINED.—
In this subsection, the term ‘‘advance beneficiary no-
tice’’ means a written notice provided under section
360
1879(a) of the Social Security Act (42 U.S.C.
1395pp(a)) to an individual entitled to benefits under
part A or B of title XVIII of such Act before items
or services are furnished under such part in cases
where a provider of services or other person that
would furnish the item or service believes that pay-
ment will not be made for some or all of such items
or services under such title.
Subtitle E—Miscellaneous
Provisions
SEC. 841. POLICY DEVELOPMENT REGARDING EVALUATION
AND MANAGEMENT (E & M) DOCUMENTATION
GUIDELINES.
(a) IN GENERAL.—The Secretary may not implement
any new documentation guidelines for evaluation and man-
agement physician services under the title XVIII of the So-
cial Security Act on or after the date of the enactment of
this Act unless the Secretary—
(1) has developed the guidelines in collaboration
with practicing physicians (including both generalists
and specialists) and provided for an assessment of the
proposed guidelines by the physician community;
(2) has established a plan that contains specific
goals, including a schedule, for improving the use of
such guidelines;
361
(3) has conducted appropriate and representative
pilot projects under subsection (b) to test modifica-
tions to the evaluation and management documenta-
tion guidelines;
(4) finds that the objectives described in sub-
section (c) will be met in the implementation of such
guidelines; and
(5) has established, and is implementing, a pro-
gram to educate physicians on the use of such guide-
lines and that includes appropriate outreach.
The Secretary shall make changes to the manner in which
existing evaluation and management documentation guide-
lines are implemented to reduce paperwork burdens on phy-
sicians.
(b) PILOT PROJECTS TO TEST EVALUATION AND MAN-
AGEMENT DOCUMENTATION GUIDELINES.—
(1) IN GENERAL.—The Secretary shall conduct
under this subsection appropriate and representative
pilot projects to test new evaluation and management
documentation guidelines referred to in subsection
(a).
(2) LENGTH
AND
CONSULTATION.—Each pilot
project under this subsection shall—
(A) be voluntary;
362
(B) be of sufficient length as determined by
the Secretary to allow for preparatory physician
and medicare contractor education, analysis,
and use and assessment of potential evaluation
and management guidelines; and
(C) be conducted, in development and
throughout the planning and operational stages
of the project, in consultation with practicing
physicians (including both generalists and spe-
cialists).
(3) RANGE OF PILOT PROJECTS.—Of the pilot
projects conducted under this subsection—
(A) at least one shall focus on a peer review
method by physicians (not employed by a medi-
care contractor) which evaluates medical record
information for claims submitted by physicians
identified as statistical outliers relative to defini-
tions published in the Current Procedures Ter-
minology (CPT) code book of the American Med-
ical Association;
(B) at least one shall focus on an alter-
native method to detailed guidelines based on
physician documentation of face to face encoun-
ter time with a patient;
363
(C) at least one shall be conducted for serv-
ices furnished in a rural area and at least one
for services furnished outside such an area; and
(D) at least one shall be conducted in a set-
ting where physicians bill under physicians’
services in teaching settings and at least one
shall be conducted in a setting other than a
teaching setting.
(4) BANNING OF TARGETING OF PILOT PROJECT
PARTICIPANTS.—Data collected under this subsection
shall not be used as the basis for overpayment de-
mands or post-payment audits. Such limitation ap-
plies only to claims filed as part of the pilot project
and lasts only for the duration of the pilot project
and only as long as the provider is a participant in
the pilot project.
(5) STUDY OF IMPACT.—Each pilot project shall
examine the effect of the new evaluation and manage-
ment documentation guidelines on—
(A) different types of physician practices,
including those with fewer than 10 full-time-
equivalent employees (including physicians); and
(B) the costs of physician compliance, in-
cluding education, implementation, auditing,
and monitoring.
364
(6) PERIODIC
REPORTS.—The Secretary shall
submit to Congress periodic reports on the pilot
projects under this subsection.
(c) OBJECTIVES FOR EVALUATION AND MANAGEMENT
GUIDELINES.—The objectives for modified evaluation and
management documentation guidelines developed by the
Secretary shall be to—
(1) identify clinically relevant documentation
needed to code accurately and assess coding levels ac-
curately;
(2) decrease the level of non-clinically pertinent
and burdensome documentation time and content in
the physician’s medical record;
(3) increase accuracy by reviewers; and
(4) educate both physicians and reviewers.
(d) STUDY OF SIMPLER, ALTERNATIVE SYSTEMS OF
DOCUMENTATION FOR PHYSICIAN CLAIMS.—
(1) STUDY.—The Secretary shall carry out a
study of the matters described in paragraph (2).
(2) MATTERS DESCRIBED.—The matters referred
to in paragraph (1) are—
(A) the development of a simpler, alter-
native system of requirements for documentation
accompanying claims for evaluation and man-
agement physician services for which payment is
365
made under title XVIII of the Social Security
Act; and
(B) consideration of systems other than cur-
rent coding and documentation requirements for
payment for such physician services.
(3) CONSULTATION
WITH
PRACTICING
PHYSI-
CIANS.—In designing and carrying out the study
under paragraph (1), the Secretary shall consult with
practicing physicians, including physicians who are
part of group practices and including both generalists
and specialists.
(4) APPLICATION OF HIPAA UNIFORM CODING RE-
QUIREMENTS.—In developing an alternative system
under paragraph (2), the Secretary shall consider re-
quirements of administrative simplification under
part C of title XI of the Social Security Act.
(5) REPORT TO CONGRESS.—(A) Not later than
October 1, 2004, the Secretary shall submit to Con-
gress a report on the results of the study conducted
under paragraph (1).
(B) The Medicare Payment Advisory Commis-
sion shall conduct an analysis of the results of the
study included in the report under subparagraph (A)
and shall submit a report on such analysis to Con-
gress.
366
(e) STUDY ON APPROPRIATE CODING OF CERTAIN EX-
TENDED OFFICE VISITS.—The Secretary shall conduct a
study of the appropriateness of coding in cases of extended
office visits in which there is no diagnosis made. Not later
than October 1, 2004, the Secretary shall submit a report
to Congress on such study and shall include recommenda-
tions on how to code appropriately for such visits in a man-
ner that takes into account the amount of time the physi-
cian spent with the patient.
(f) DEFINITIONS.—In this section—
(1) the term ‘‘rural area’’ has the meaning given
that term in section 1886(d)(2)(D) of the Social Secu-
rity Act, 42 U.S.C. 1395ww(d)(2)(D); and
(2) the term ‘‘teaching settings’’ are those set-
tings described in section 415.150 of title 42, Code of
Federal Regulations.
SEC. 842. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY
AND COVERAGE.
(a) IMPROVED COORDINATION BETWEEN FDA AND
CMS ON COVERAGE OF BREAKTHROUGH MEDICAL DE-
VICES.—
(1) IN GENERAL.—Upon request by an applicant
and to the extent feasible (as determined by the Sec-
retary), the Secretary shall, in the case of a class III
medical device that is subject to premarket approval
367
under section 515 of the Federal Food, Drug, and
Cosmetic Act, ensure the sharing of appropriate infor-
mation from the review for application for premarket
approval conducted by the Food and Drug Adminis-
tration for coverage decisions under title XVIII of the
Social Security Act.
(2) PUBLICATION OF PLAN.—Not later than 6
months after the date of the enactment of this Act, the
Secretary shall submit to appropriate Committees of
Congress a report that contains the plan for improv-
ing such coordination and for shortening the time lag
between the premarket approval by the Food and
Drug Administration and coding and coverage deci-
sions by the Centers for Medicare & Medicaid Serv-
ices.
(3) CONSTRUCTION.—Nothing in this subsection
shall be construed as changing the criteria for cov-
erage of a medical device under title XVIII of the So-
cial Security Act nor premarket approval by the Food
and Drug Administration and nothing in this sub-
section shall be construed to increase premarket ap-
proval application requirements under the Federal
Food, Drug, and Cosmetic Act.
(b) COUNCIL FOR TECHNOLOGY AND INNOVATION.—
Section 1868 (42 U.S.C. 1395ee), as amended by section
368
823(a), is amended by adding at the end the following new
subsection:
‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVATION.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish a Council for Technology and Innovation
within the Centers for Medicare & Medicaid Services
(in this section referred to as ‘CMS’).
‘‘(2) COMPOSITION.—The Council shall be com-
posed of senior CMS staff and clinicians and shall be
chaired by the Executive Coordinator for Technology
and Innovation (appointed or designated under para-
graph (4)).
‘‘(3) DUTIES.—The Council shall coordinate the
activities of coverage, coding, and payment processes
under this title with respect to new technologies and
procedures, including new drug therapies, and shall
coordinate the exchange of information on new tech-
nologies between CMS and other entities that make
similar decisions.
‘‘(4) EXECUTIVE
COORDINATOR
FOR
TECH-
NOLOGY AND INNOVATION.—The Secretary shall ap-
point (or designate) a noncareer appointee (as defined
in section 3132(a)(7) of title 5, United States Code)
who shall serve as the Executive Coordinator for Tech-
nology and Innovation. Such executive coordinator
369
shall report to the Administrator of CMS, shall chair
the Council, shall oversee the execution of its duties,
and shall serve as a single point of contact for outside
groups and entities regarding the coverage, coding,
and payment processes under this title.’’.
(c) GAO STUDY ON IMPROVEMENTS IN EXTERNAL
DATA COLLECTION FOR USE IN THE MEDICARE INPATIENT
PAYMENT SYSTEM.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study that analyzes
which external data can be collected in a shorter time
frame by the Centers for Medicare & Medicaid Serv-
ices for use in computing payments for inpatient hos-
pital services. The study may include an evaluation
of the feasibility and appropriateness of using of
quarterly samples or special surveys or any other
methods. The study shall include an analysis of
whether other executive agencies, such as the Bureau
of Labor Statistics in the Department of Commerce,
are best suited to collect this information.
(2) REPORT.—By not later than October 1,
2003, the Comptroller General shall submit a report
to Congress on the study under paragraph (1).
(d) IOM STUDY ON LOCAL COVERAGE DETERMINA-
TIONS.—
370
(1) STUDY.—The Secretary shall enter into an
arrangement with the Institute of Medicine of the Na-
tional Academy of Sciences under which the Institute
shall conduct a study on local coverage determina-
tions (including the application of local medical re-
view policies) under the medicare program under title
XVIII of the Social Security Act. Such study shall
examine—
(A) the consistency of the definitions used
in such determinations;
(B) the types of evidence on which such de-
terminations are based, including medical and
scientific evidence;
(C) the advantages and disadvantages of
local coverage decisionmaking, including the
flexibility it offers for ensuring timely patient
access to new medical technology for which data
are still be collected;
(D) the manner in which the local coverage
determination process is used to develop data
needed for a national coverage determination,
including the need for collection of such data
within a protocol and informed consent by indi-
viduals entitled to benefits under part A of title
371
XVIII of the Social Security Act, or enrolled
under part B of such title, or both; and
(E) the advantages and disadvantages of
maintaining local medicare contractor advisory
committees that can advise on local coverage de-
cisions based on an open, collaborative public
process.
(2) REPORT.—Such arrangement shall provide
that the Institute shall submit to the Secretary a re-
port on such study by not later than 3 years after the
date of the enactment of this Act. The Secretary shall
promptly transmit a copy of such report to Congress.
(e) METHODS FOR DETERMINING PAYMENT BASIS FOR
NEW LAB TESTS.—Section 1833(h) (42 U.S.C. 1395l(h))
is amended by adding at the end the following:
‘‘(8)(A) The Secretary shall establish by regulation
procedures for determining the basis for, and amount of,
payment under this subsection for any clinical diagnostic
laboratory test with respect to which a new or substantially
revised HCPCS code is assigned on or after January 1,
2004 (in this paragraph referred to as ‘new tests’).
‘‘(B) Determinations under subparagraph (A) shall be
made only after the Secretary—
‘‘(i) makes available to the public (through an
Internet site and other appropriate mechanisms) a
372
list that includes any such test for which establish-
ment of a payment amount under this subsection is
being considered for a year;
‘‘(ii) on the same day such list is made avail-
able, causes to have published in the Federal Register
notice of a meeting to receive comments and rec-
ommendations (and data on which recommendations
are based) from the public on the appropriate basis
under this subsection for establishing payment
amounts for the tests on such list;
‘‘(iii) not less than 30 days after publication of
such notice convenes a meeting, that includes rep-
resentatives of officials of the Centers for Medicare &
Medicaid Services involved in determining payment
amounts, to receive such comments and recommenda-
tions (and data on which the recommendations are
based);
‘‘(iv) taking into account the comments and rec-
ommendations (and accompanying data) received at
such meeting, develops and makes available to the
public (through an Internet site and other appro-
priate mechanisms) a list of proposed determinations
with respect to the appropriate basis for establishing
a payment amount under this subsection for each
such code, together with an explanation of the reasons
373
for each such determination, the data on which the
determinations are based, and a request for public
written comments on the proposed determination; and
‘‘(v) taking into account the comments received
during the public comment period, develops and
makes available to the public (through an Internet
site and other appropriate mechanisms) a list of final
determinations of the payment amounts for such tests
under this subsection, together with the rationale for
each such determination, the data on which the deter-
minations are based, and responses to comments and
suggestions received from the public.
‘‘(C) Under the procedures established pursuant to sub-
paragraph (A), the Secretary shall—
‘‘(i) set forth the criteria for making determina-
tions under subparagraph (A); and
‘‘(ii) make available to the public the data (other
than proprietary data) considered in making such de-
terminations.
‘‘(D) The Secretary may convene such further public
meetings to receive public comments on payment amounts
for new tests under this subsection as the Secretary deems
appropriate.
‘‘(E) For purposes of this paragraph:
374
‘‘(i) The term ‘HCPCS’ refers to the Health Care
Procedure Coding System.
‘‘(ii) A code shall be considered to be ‘substan-
tially revised’ if there is a substantive change to the
definition of the test or procedure to which the code
applies (such as a new analyte or a new methodology
for measuring an existing analyte-specific test).’’.
SEC. 843. TREATMENT OF HOSPITALS FOR CERTAIN SERV-
ICES UNDER MEDICARE SECONDARY PAYOR
(MSP) PROVISIONS.
(a) IN GENERAL.—The Secretary shall not require a
hospital (including a critical access hospital) to ask ques-
tions (or obtain information) relating to the application of
section 1862(b) of the Social Security Act (relating to medi-
care secondary payor provisions) in the case of reference
laboratory services described in subsection (b), if the Sec-
retary does not impose such requirement in the case of such
services furnished by an independent laboratory.
(b) 
REFERENCE
LABORATORY
SERVICES
DE-
SCRIBED.—Reference laboratory services described in this
subsection are clinical laboratory diagnostic tests (or the
interpretation of such tests, or both) furnished without a
face-to-face encounter between the individual entitled to
benefits under part A or enrolled under part B, or both,
375
and the hospital involved and in which the hospital submits
a claim only for such test or interpretation.
SEC. 844. EMTALA IMPROVEMENTS.
(a) PAYMENT FOR EMTALA-MANDATED SCREENING
AND STABILIZATION SERVICES.—
(1) IN
GENERAL.—Section 1862 (42 U.S.C.
1395y) is amended by inserting after subsection (c)
the following new subsection:
‘‘(d) For purposes of subsection (a)(1)(A), in the case
of any item or service that is required to be provided pursu-
ant to section 1867 to an individual who is entitled to bene-
fits under this title, determinations as to whether the item
or service is reasonable and necessary shall be made on the
basis of the information available to the treating physician
or practitioner (including the patient’s presenting symp-
toms or complaint) at the time the item or service was or-
dered or furnished by the physician or practitioner (and
not on the patient’s principal diagnosis). When making
such determinations with respect to such an item or service,
the Secretary shall not consider the frequency with which
the item or service was provided to the patient before or
after the time of the admission or visit.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to items and services fur-
nished on or after January 1, 2003.
376
(b) NOTIFICATION OF PROVIDERS WHEN EMTALA IN-
VESTIGATION CLOSED.—Section 1867(d) (42 U.S.C. 42
U.S.C. 1395dd(d)) is amended by adding at the end the
following new paragraph:
‘‘(4) NOTICE
UPON
CLOSING
AN
INVESTIGA-
TION.—The Secretary shall establish a procedure to
notify hospitals and physicians when an investigation
under this section is closed.’’.
(c) PRIOR REVIEW BY PEER REVIEW ORGANIZATIONS
IN EMTALA CASES INVOLVING TERMINATION OF PARTICI-
PATION.—
(1) IN GENERAL.—Section 1867(d)(3) (42 U.S.C.
1395dd(d)(3)) is amended—
(A) in the first sentence, by inserting ‘‘or in
terminating a hospital’s participation under this
title’’ after ‘‘in imposing sanctions under para-
graph (1)’’; and
(B) by adding at the end the following new
sentences: ‘‘Except in the case in which a delay
would jeopardize the health or safety of individ-
uals, the Secretary shall also request such a re-
view before making a compliance determination
as part of the process of terminating a hospital’s
participation under this title for violations re-
lated to the appropriateness of a medical screen-
377
ing examination, stabilizing treatment, or an
appropriate transfer as required by this section,
and shall provide a period of 5 days for such re-
view. The Secretary shall provide a copy of the
organization’s report to the hospital or physician
consistent with confidentiality requirements im-
posed on the organization under such part B.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to terminations of par-
ticipation initiated on or after the date of the enact-
ment of this Act.
SEC. 845. EMERGENCY MEDICAL TREATMENT AND LABOR
ACT (EMTALA) TECHNICAL ADVISORY GROUP.
(a) ESTABLISHMENT.—The Secretary shall establish a
Technical Advisory Group (in this section referred to as the
‘‘Advisory Group’’) to review issues related to the Emer-
gency Medical Treatment and Labor Act (EMTALA) and
its implementation. In this section, the term ‘‘EMTALA’’
refers to the provisions of section 1867 of the Social Security
Act (42 U.S.C. 1395dd).
(b) MEMBERSHIP.—The Advisory Group shall be com-
posed of 19 members, including the Administrator of the
Centers for Medicare & Medicaid Services and the Inspector
General of the Department of Health and Human Services
and of which—
378
(1) 4 shall be representatives of hospitals, includ-
ing at least one public hospital, that have experience
with the application of EMTALA and at least 2 of
which have not been cited for EMTALA violations;
(2) 7 shall be practicing physicians drawn from
the fields of emergency medicine, cardiology or
cardiothoracic surgery, orthopedic surgery, neuro-
surgery, obstetrics-gynecology, and psychiatry, with
not more than one physician from any particular
field;
(3) 2 shall represent patients;
(4) 2 shall be staff involved in EMTALA inves-
tigations from different regional offices of the Centers
for Medicare & Medicaid Services; and
(5) 1 shall be from a State survey office involved
in EMTALA investigations and 1 shall be from a
peer review organization, both of whom shall be from
areas other than the regions represented under para-
graph (4).
In selecting members described in paragraphs (1) through
(3), the Secretary shall consider qualified individuals nomi-
nated by organizations representing providers and patients.
(c) 
GENERAL
RESPONSIBILITIES.—The 
Advisory
Group—
(1) shall review EMTALA regulations;
379
(2) may provide advice and recommendations to
the Secretary with respect to those regulations and
their application to hospitals and physicians;
(3) shall solicit comments and recommendations
from hospitals, physicians, and the public regarding
the implementation of such regulations; and
(4) may disseminate information on the applica-
tion of such regulations to hospitals, physicians, and
the public.
(d) ADMINISTRATIVE MATTERS.—
(1) CHAIRPERSON.—The members of the Advi-
sory Group shall elect a member to serve as chair-
person of the Advisory Group for the life of the Advi-
sory Group.
(2) MEETINGS.—The Advisory Group shall first
meet at the direction of the Secretary. The Advisory
Group shall then meet twice per year and at such
other times as the Advisory Group may provide.
(e) TERMINATION.—The Advisory Group shall termi-
nate 30 months after the date of its first meeting.
(f) WAIVER OF ADMINISTRATIVE LIMITATION.—The
Secretary shall establish the Advisory Group notwith-
standing any limitation that may apply to the number of
advisory committees that may be established (within the
Department of Health and Human Services or otherwise).
380
SEC. 846. AUTHORIZING USE OF ARRANGEMENTS WITH
OTHER HOSPICE PROGRAMS TO PROVIDE
CORE HOSPICE SERVICES IN CERTAIN CIR-
CUMSTANCES.
(a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C.
1395x(dd)(5)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(D) In extraordinary, exigent, or other non-routine
circumstances, such as unanticipated periods of high pa-
tient loads, staffing shortages due to illness or other events,
or temporary travel of a patient outside a hospice pro-
gram’s service area, a hospice program may enter into ar-
rangements with another hospice program for the provision
by that other program of services described in paragraph
(2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II)
shall apply with respect to the services provided under such
arrangements.’’.
(b) 
CONFORMING
PAYMENT
PROVISION.—Section
1814(i) (42 U.S.C. 1395f(i)), as amended by section 421(b),
is amended by adding at the end the following new para-
graph:
‘‘(5) In the case of hospice care provided by a hospice
program under arrangements under section 1861(dd)(5)(D)
made by another hospice program, the hospice program that
made the arrangements shall bill and be paid for the hospice
care.’’.
381
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to hospice care provided on or after the
date of the enactment of this Act.
SEC. 847. APPLICATION OF OSHA BLOODBORNE PATHO-
GENS STANDARD TO CERTAIN HOSPITALS.
(a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc)
is amended—
(1) in subsection (a)(1)—
(A) in subparagraph (R), by striking ‘‘and’’
at the end;
(B) in subparagraph (S), by striking the
period at the end and inserting ‘‘, and’’; and
(C) by inserting after subparagraph (S) the
following new subparagraph:
‘‘(T) in the case of hospitals that are not other-
wise subject to the Occupational Safety and Health
Act of 1970, to comply with the Bloodborne Pathogens
standard under section 1910.1030 of title 29 of the
Code of Federal Regulations (or as subsequently redes-
ignated).’’; and
(2) by adding at the end of subsection (b) the fol-
lowing new paragraph:
‘‘(4)(A) A hospital that fails to comply with the re-
quirement of subsection (a)(1)(T) (relating to the
Bloodborne Pathogens standard) is subject to a civil money
382
penalty in an amount described in subparagraph (B), but
is not subject to termination of an agreement under this
section.
‘‘(B) The amount referred to in subparagraph (A) is
an amount that is similar to the amount of civil penalties
that may be imposed under section 17 of the Occupational
Safety and Health Act of 1970 for a violation of the
Bloodborne Pathogens standard referred to in subsection
(a)(1)(T) by a hospital that is subject to the provisions of
such Act.
‘‘(C) A civil money penalty under this paragraph shall
be imposed and collected in the same manner as civil money
penalties under subsection (a) of section 1128A are imposed
and collected under that section.’’.
(b) EFFECTIVE DATE.—The amendments made by this
subsection (a) shall apply to hospitals as of July 1, 2003.
SEC. 848. BIPA-RELATED TECHNICAL AMENDMENTS AND
CORRECTIONS.
(a) TECHNICAL AMENDMENTS RELATING TO ADVISORY
COMMITTEE UNDER BIPA SECTION 522.—(1) Subsection
(i) of section 1114 (42 U.S.C. 1314)—
(A) is transferred to section 1862 and added at
the end of such section; and
(B) is redesignated as subsection (j).
(2) Section 1862 (42 U.S.C. 1395y) is amended—
383
(A) in the last sentence of subsection (a), by
striking ‘‘established under section 1114(f)’’; and
(B) in subsection (j), as so transferred and
redesignated—
(i) by striking ‘‘under subsection (f)’’; and
(ii) by striking ‘‘section 1862(a)(1)’’ and
inserting ‘‘subsection (a)(1)’’.
(b) 
TERMINOLOGY
CORRECTIONS.—(1) 
Section
1869(c)(3)(I)(ii) (42 U.S.C. 1395ff(c)(3)(I)(ii)), as amend-
ed by section 521 of BIPA, is amended—
(A) in subclause (III), by striking ‘‘policy’’ and
inserting ‘‘determination’’; and
(B) in subclause (IV), by striking ‘‘medical re-
view policies’’ and inserting ‘‘coverage determina-
tions’’.
(2) 
Section 
1852(a)(2)(C) 
(42 
U.S.C. 
1395w–
22(a)(2)(C)) is amended by striking ‘‘policy’’ and ‘‘POLICY’’
and inserting ‘‘determination’’ each place it appears and
‘‘DETERMINATION’’, respectively.
(c) REFERENCE CORRECTIONS.—Section 1869(f)(4)
(42 U.S.C. 1395ff(f)(4)), as added by section 522 of BIPA,
is amended—
(1) in subparagraph (A)(iv), by striking ‘‘sub-
clause (I), (II), or (III)’’ and inserting ‘‘clause (i),
(ii), or (iii)’’;
384
(2) in subparagraph (B), by striking ‘‘clause
(i)(IV)’’ and ‘‘clause (i)(III)’’ and inserting ‘‘sub-
paragraph (A)(iv)’’ and ‘‘subparagraph (A)(iii)’’, re-
spectively; and
(3) in subparagraph (C), by striking ‘‘clause
(i)’’, ‘‘subclause (IV)’’ and ‘‘subparagraph (A)’’ and
inserting ‘‘subparagraph (A)’’, ‘‘clause (iv)’’ and
‘‘paragraph (1)(A)’’, respectively each place it ap-
pears.
(d) OTHER CORRECTIONS.—Effective as if included in
the enactment of section 521(c) of BIPA, section 1154(e)
(42 U.S.C. 1320c–3(e)) is amended by striking paragraph
(5).
(e) EFFECTIVE DATE.—Except as otherwise provided,
the amendments made by this section shall be effective as
if included in the enactment of BIPA.
SEC. 849. CONFORMING AUTHORITY TO WAIVE A PROGRAM
EXCLUSION.
The first sentence of section 1128(c)(3)(B) (42 U.S.C.
1320a–7(c)(3)(B)) is amended to read as follows: ‘‘Subject
to subparagraph (G), in the case of an exclusion under sub-
section (a), the minimum period of exclusion shall be not
less than five years, except that, upon the request of the ad-
ministrator of a Federal health care program (as defined
in section 1128B(f)) who determines that the exclusion
385
would impose a hardship on individuals entitled to benefits
under part A of title XVIII or enrolled under part B of
such title, or both, the Secretary may waive the exclusion
under subsection (a)(1), (a)(3), or (a)(4) with respect to
that program in the case of an individual or entity that
is the sole community physician or sole source of essential
specialized services in a community.’’.
SEC. 850. TREATMENT OF CERTAIN DENTAL CLAIMS.
(a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) is
amended by adding after subsection (g) the following new
subsection:
‘‘(h)(1) Subject to paragraph (2), a group health plan
(as defined in subsection (a)(1)(A)(v)) providing supple-
mental or secondary coverage to individuals also entitled
to services under this title shall not require a medicare
claims determination under this title for dental benefits spe-
cifically excluded under subsection (a)(12) as a condition
of making a claims determination for such benefits under
the group health plan.
‘‘(2) A group health plan may require a claims deter-
mination under this title in cases involving or appearing
to involve inpatient dental hospital services or dental serv-
ices expressly covered under this title pursuant to actions
taken by the Secretary.’’.
386
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date that is 60 days after
the date of the enactment of this Act.
SEC. 851. ANNUAL PUBLICATION OF LIST OF NATIONAL
COVERAGE DETERMINATIONS.
The Secretary shall provide, in an appropriate annual
publication available to the public, a list of national cov-
erage determinations made under title XVIII of the Social
Security Act in the previous year and information on how
to get more information with respect to such determina-
tions.
TITLE 
IX—MEDICAID, 
PUBLIC
HEALTH, AND OTHER HEALTH
PROVISIONS
Subtitle A—Medicaid Provisions
SEC. 901. NATIONAL BIPARTISAN COMMISSION ON THE FU-
TURE OF MEDICAID.
(a) ESTABLISHMENT.—There is established a commis-
sion to be known as the National Bipartisan Commission
on the Future of Medicaid (in this section referred to as
the ‘‘Commission’’).
(b) DUTIES OF THE COMMISSION.—The Commission
shall—
387
(1) review and analyze the long-term financial
condition of the medicaid program under title XIX of
the Social Security Act (42 U.S.C. 1396 et seq.);
(2) identify the factors that are causing, and the
consequences of, increases in costs under the medicaid
program, including—
(A) the impact of these cost increases upon
State budgets, funding for other State programs,
and levels of State taxes necessary to fund grow-
ing expenditures under the medicaid program;
(B) the financial obligations of the Federal
government arising from the Federal matching
requirement for expenditures under the medicaid
program; and
(C) the size and scope of the current pro-
gram and how the program has evolved over
time;
(3) analyze potential policies that will ensure
both the financial integrity of the medicaid program
and the provision of appropriate benefits under such
program;
(4) make recommendations for establishing in-
centives and structures to promote enhanced effi-
ciencies and ways of encouraging innovative State
policies under the medicaid program;
388
(5) make recommendations for establishing the
appropriate balance between benefits covered, pay-
ments to providers, State and Federal contributions
and, where appropriate, recipient cost-sharing obliga-
tions;
(6) make recommendations on the impact of pro-
moting increased utilization of competitive, private
enterprise models to contain program cost growth,
through enhanced utilization of private plans, phar-
macy benefit managers, and other methods currently
being used to contain private sector health-care costs;
(7) make recommendations on the financing of
prescription drug benefits currently covered under
medicaid programs, including analysis of the current
Federal manufacturer rebate program, its impact
upon both private market prices as well as those paid
by other government purchasers, recent State efforts to
negotiate additional supplemental manufacturer re-
bates and the ability of pharmacy benefit managers
to lower drug costs;
(8) review and analyze such other matters relat-
ing to the medicaid program as the Commission
deems appropriate; and
(9) analyze the impact of impending demo-
graphic changes upon medicaid benefits, including
389
long term care services, and make recommendations
for how best to appropriately divide State and Fed-
eral responsibilities for funding these benefits.
(c) MEMBERSHIP.—
(1) NUMBER AND APPOINTMENT.—The Commis-
sion shall be composed of 17 members, of whom—
(A) four shall be appointed by the Presi-
dent;
(B) six shall be appointed by the Majority
Leader of the Senate, in consultation with the
Minority Leader of the Senate, of whom not
more than 4 shall be of the same political party;
(C) six shall be appointed by the Speaker of
the House of Representatives, in consultation
with the Minority Leader of the House of Rep-
resentatives, of whom not more than 4 shall be
of the same political party; and
(D) one, who shall serve as Chairman of the
Commission, appointed jointly by the President,
Majority Leader of the Senate, and the Speaker
of the House of Representatives.
(2) DEADLINE FOR APPOINTMENT.—Members of
the Commission shall be appointed by not later than
December 1, 2002.
390
(3) TERMS OF APPOINTMENT.—The term of any
appointment under paragraph (1) to the Commission
shall be for the life of the Commission.
(4) MEETINGS.—The Commission shall meet at
the call of its Chairman or a majority of its members.
(5) QUORUM.—A quorum shall consist of 8 mem-
bers of the Commission, except that 4 members may
conduct a hearing under subsection (e).
(6) VACANCIES.—A vacancy on the Commission
shall be filled in the same manner in which the origi-
nal appointment was made not later than 30 days
after the Commission is given notice of the vacancy
and shall not affect the power of the remaining mem-
bers to execute the duties of the Commission.
(7) COMPENSATION.—Members of the Commis-
sion shall receive no additional pay, allowances, or
benefits by reason of their service on the Commission.
(8) EXPENSES.—Each member of the Commis-
sion shall receive travel expenses and per diem in lieu
of subsistence in accordance with sections 5702 and
5703 of title 5, United States Code.
(d) STAFF AND SUPPORT SERVICES.—
(1) EXECUTIVE DIRECTOR.—
(A) APPOINTMENT.—The Chairman shall
appoint an executive director of the Commission.
391
(B) COMPENSATION.—The executive director
shall be paid the rate of basic pay for level V of
the Executive Schedule.
(2) STAFF.—With the approval of the Commis-
sion, the executive director may appoint such per-
sonnel as the executive director considers appropriate.
(3) APPLICABILITY OF CIVIL SERVICE LAWS.—
The staff of the Commission shall be appointed with-
out regard to the provisions of title 5, United States
Code, governing appointments in the competitive serv-
ice, and shall be paid without regard to the provisions
of chapter 51 and subchapter III of chapter 53 of such
title (relating to classification and General Schedule
pay rates).
(4) EXPERTS AND CONSULTANTS.—With the ap-
proval of the Commission, the executive director may
procure temporary and intermittent services under
section 3109(b) of title 5, United States Code.
(5) PHYSICAL
FACILITIES.—The Administrator
of the General Services Administration shall locate
suitable office space for the operation of the Commis-
sion. The facilities shall serve as the headquarters of
the Commission and shall include all necessary equip-
ment and incidentals required for the proper func-
tioning of the Commission.
392
(e) POWERS OF COMMISSION.—
(1) HEARINGS AND OTHER ACTIVITIES.—For the
purpose of carrying out its duties, the Commission
may hold such hearings and undertake such other ac-
tivities as the Commission determines to be necessary
to carry out its duties.
(2) STUDIES BY GAO.—Upon the request of the
Commission, the Comptroller General shall conduct
such studies or investigations as the Commission de-
termines to be necessary to carry out its duties.
(3) COST ESTIMATES BY CONGRESSIONAL BUDG-
ET OFFICE AND OFFICE OF THE CHIEF ACTUARY OF
CMS.—
(A) The Director of the Congressional Budg-
et Office or the Chief Actuary of the Centers for
Medicare & Medicaid Services, or both, shall
provide to the Commission, upon the request of
the Commission, such cost estimates as the Com-
mission determines to be necessary to carry out
its duties.
(B) The Commission shall reimburse the
Director of the Congressional Budget Office for
expenses relating to the employment in the office
of the Director of such additional staff as may
be necessary for the Director to comply with re-
393
quests by the Commission under subparagraph
(A).
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon the
request of the Commission, the head of any Federal
agency is authorized to detail, without reimburse-
ment, any of the personnel of such agency to the Com-
mission to assist the Commission in carrying out its
duties. Any such detail shall not interrupt or other-
wise affect the civil service status or privileges of the
Federal employee.
(5) TECHNICAL ASSISTANCE.—Upon the request
of the Commission, the head of a Federal agency shall
provide such technical assistance to the Commission
as the Commission determines to be necessary to
carry out its duties.
(6) USE OF MAILS.—The Commission may use
the United States mails in the same manner and
under the same conditions as Federal agencies and
shall, for purposes of the frank, be considered a com-
mission of Congress as described in section 3215 of
title 39, United States Code.
(7) OBTAINING INFORMATION.—The Commission
may secure directly from any Federal agency infor-
mation necessary to enable it to carry out its duties,
if the information may be disclosed under section 552
394
of title 5, United States Code. Upon request of the
Chairman of the Commission, the head of such agency
shall furnish such information to the Commission.
(8) ADMINISTRATIVE SUPPORT SERVICES.—Upon
the request of the Commission, the Administrator of
General Services shall provide to the Commission on
a reimbursable basis such administrative support
services as the Commission may request.
(9) PRINTING.—For purposes of costs relating to
printing and binding, including the cost of personnel
detailed from the Government Printing Office, the
Commission shall be deemed to be a committee of the
Congress.
(f) REPORT.—Not later than March 1, 2004, the Com-
mission shall submit a report to the President and Congress
which shall contain a detailed statement of only those the
recommendations, findings, and conclusions of the Commis-
sion.
(g) TERMINATION.—The Commission shall terminate
30 days after the date of submission of the report required
in subsection (f).
(h) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated $1,500,000 to carry out this
section.
395
SEC. 902. GAO STUDY ON MEDICAID DRUG PAYMENT SYS-
TEM.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study on the reimbursement under
the medicaid program for covered outpatient drugs. Such
study shall examine—
(1) the extent to which such reimbursements for
a drug exceed the acquisition costs for that drug;
(2) the services and resources associated with dis-
pensing a prescription and any additional payments
available to compensate for expenses for these services
and resources; and
(3) efforts undertaken by States to change the
levels of such reimbursement and the price data they
use in effecting such change.
(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
subsection (a) and shall include in such report such rec-
ommendations for changes for legislative or administrative
action regarding medicaid reimbursement methodologies for
outpatient prescription drugs, and their application to the
medicare program, as the Comptroller General deems ap-
propriate.
396
Subtitle B—Internet Pharmacies
SEC. 911. FINDINGS.
The Congress finds as follows:
(1) Legitimate Internet sellers of prescription
drugs can offer substantial benefits to consumers.
These potential benefits include convenience, privacy,
valuable information, competitive prices, and person-
alized services.
(2) Unlawful Internet sellers of prescription
drugs may dispense inappropriate, contaminated,
counterfeit, or subpotent prescription drugs that could
put at risk the health and safety of consumers.
(3) Unlawful Internet sellers have exposed con-
sumers to significant health risks by knowingly filling
invalid prescriptions, such as prescriptions based
solely on an online questionnaire, or by dispensing
prescription drugs without any prescription.
(4) Consumers may have difficulty distin-
guishing legitimate from unlawful Internet sellers, as
well as foreign from domestic Internet sellers, of pre-
scription drugs.
397
SEC. 912. AMENDMENT TO FEDERAL FOOD, DRUG, AND COS-
METIC ACT.
(a) IN GENERAL.—Chapter V of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 351 et seq.) is amended
by inserting after section 503A the following:
‘‘SEC. 503B. INTERNET PRESCRIPTION DRUG SALES.
‘‘(a) DEFINITIONS.—For purposes of this section:
‘‘(1) CONSUMER.—The term ‘consumer’ means a
person (other than an entity licensed or otherwise au-
thorized under Federal or State law as a pharmacy
or to dispense or distribute prescription drugs) that
purchases or seeks to purchase prescription drugs
through the Internet.
‘‘(2) HOME PAGE.—The term ‘home page’ means
the entry point or main web page for an Internet site.
‘‘(3) INTERNET.—The term ‘Internet’ means col-
lectively the myriad of computer and telecommuni-
cations facilities, including equipment and operating
software, which comprise the interconnected world-
wide network of networks that employ the Trans-
mission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or
radio, including electronic mail.
‘‘(4) INTERSTATE INTERNET SELLER.—
398
‘‘(A) IN
GENERAL.—The term ‘interstate
Internet seller’ means a person whether in the
United States or abroad, that engages in, offers
to engage in, or causes the delivery or sale of a
prescription drug through the Internet and has
such drug delivered directly to the consumer via
the Postal Service, or any private or commercial
interstate carrier to a consumer in the United
States who is residing in a State other than the
State in which the seller’s place of business is lo-
cated. This definition excludes a person who only
delivers a prescription drug to a consumer, such
as an interstate carrier service.
‘‘(B) EXEMPTION.—With respect to the con-
sumer involved, the term ‘interstate Internet sell-
er’ does not include a person described in sub-
paragraph (A) whose place of business is located
within 75 miles of the consumer.
‘‘(5) LINK.—The term ‘link’ means either a tex-
tual or graphical marker on a web page that, when
clicked on, takes the consumer to another part of the
Internet, such as to another web page or a different
area on the same web page, or from an electronic mes-
sage to a web page.
399
‘‘(6) PHARMACY.—The term ‘pharmacy’ means
any place licensed or otherwise authorized as a phar-
macy under State law.
‘‘(7) PRESCRIBER.—The term ‘prescriber’ means
an individual, licensed or otherwise authorized under
applicable Federal and State law to issue prescrip-
tions for prescription drugs.
‘‘(8) PRESCRIPTION DRUG.—The term ‘prescrip-
tion drug’ means a drug under section 503(b)(1).
‘‘(9) VALID PRESCRIPTION.—The term ‘valid pre-
scription’ means a prescription that meets the re-
quirements of section 503(b)(1) and other applicable
Federal and State law.
‘‘(10) WEB SITE; SITE.—The terms ‘web site’ and
‘site’ mean a specific location on the Internet that is
determined by Internet protocol numbers or by a do-
main name.
‘‘(b) REQUIREMENTS
FOR
INTERSTATE
INTERNET
SELLERS.—
‘‘(1) IN GENERAL.—Each interstate Internet sell-
er shall comply with the requirements of this sub-
section with respect to the sale of, or the offer to sell,
prescription drugs through the Internet and shall at
all times display on its web site information in ac-
cordance with paragraph (2).
400
‘‘(2) WEB SITE DISCLOSURE INFORMATION.—An
interstate Internet seller shall post in a visible and
clear manner (as determined by regulation) on the
home page of its web site, or on a page directly linked
to such home page—
‘‘(A) the street address of the interstate
Internet seller’s place of business, and the tele-
phone number of such place of business;
‘‘(B) each State in which the interstate
Internet seller is licensed or otherwise authorized
as a pharmacy, or if the interstate Internet seller
is not licensed or otherwise authorized by a State
as a pharmacy, each State in which the inter-
state Internet seller is licensed or otherwise au-
thorized to dispense prescription drugs, and the
type of State license or authorization;
‘‘(C) in the case of an interstate Internet
seller that makes referrals to or solicits on behalf
of a prescriber, the name of each prescriber, the
street address of each such prescriber’s place of
business, the telephone number of such place of
business, each State in which each such pre-
scriber is licensed or otherwise authorized to pre-
scribe prescription drugs, and the type of such li-
cense or authorization; and
401
‘‘(D) a statement that the interstate Inter-
net seller will dispense prescription drugs only
upon a valid prescription.
‘‘(3) DATE OF POSTING.—Information required
to be posted under paragraph (2) shall be posted by
an interstate Internet seller—
‘‘(A) not later than 90 days after the effec-
tive date of this section if the web site of such
seller is in operation as of such date; or
‘‘(B) on the date of the first day of oper-
ation of such seller’s web site if such site goes
into operation after such date.
‘‘(4) QUALIFYING
STATEMENTS.—An interstate
Internet seller shall not indicate in any manner that
posting disclosure information on its web site sig-
nifies that the Federal Government has made any de-
termination on the legitimacy of the interstate Inter-
net seller or its business.
‘‘(5) 
DISCLOSURE
TO
STATE
LICENSING
BOARDS.—An interstate Internet seller licensed or
otherwise authorized to dispense prescription drugs in
accordance with applicable State law shall notify
each State entity that granted such licensure or au-
thorization that it is an interstate Internet seller, the
name of its business, the Internet address of its busi-
402
ness, the street address of its place of business, and the
telephone number of such place of business.
‘‘(6) REGULATIONS.—The Secretary is author-
ized to promulgate such regulations as are necessary
to carry out the provisions of this subsection. In
issuing such regulations, the Secretary—
‘‘(A) shall take into consideration disclosure
formats used by existing interstate Internet seller
certification programs; and
‘‘(B) shall in defining the term ‘place of
business’ include provisions providing that such
place is a single location at which employees of
the business perform job functions, and not a
post office box or similar locale.’’.
(b) PROHIBITED ACTS.—Section 301 of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 331) is amended
by adding at the end the following:
‘‘(bb) The failure to post information required under
section 503B(b)(2) or for knowingly making a materially
false statement when posting such information as required
under such section or violating section 503B(b)(4).’’.
SEC. 913. PUBLIC EDUCATION.
The Secretary of Health and Human Services shall en-
gage in activities to educate the public about the dangers
of purchasing prescription drugs from unlawful Internet
403
sources. The Secretary should educate the public about effec-
tive public and private sector consumer protection efforts,
as appropriate, with input from the public and private sec-
tors, as appropriate.
SEC. 914. STUDY REGARDING COORDINATION OF REGU-
LATORY ACTIVITIES.
Not later than 180 days after the date of enactment
of this Act, the Secretary of Health and Human Services,
after consultation with the Attorney General, shall submit
to Congress a report providing recommendations for coordi-
nating the activities of Federal agencies regarding inter-
state Internet sellers that operate from foreign countries and
for coordinating the activities of the Federal Government
with the activities of governments of foreign countries re-
garding such interstate Internet sellers.
SEC. 915. EFFECTIVE DATE.
The amendments made by this subtitle shall take effect
1 year after the date of enactment of this Act, except that
the authority of the Secretary of Health and Human Serv-
ices to commence the process of rulemaking is effective on
the date of enactment of this Act.
404
Subtitle C—Promotion of Electronic
Prescription
SEC. 921. PROGRAM OF GRANTS TO HEALTH CARE PRO-
VIDERS TO IMPLEMENT ELECTRONIC PRE-
SCRIPTION DRUG PROGRAMS.
Part P of title III of the Public Health Service Act
is amended by inserting after section 399N the following
new section:
‘‘SEC. 399O. GRANTS TO HEALTH CARE PROVIDERS TO IM-
PLEMENT ELECTRONIC PRESCRIPTION DRUG
PROGRAMS.
‘‘(a) IN GENERAL.—The Secretary is authorized to
make grants for the purpose of assisting health care pro-
viders who prescribe drugs and biologicals in implementing
electronic prescription programs described in section
1860C(d)(3) of the Social Security Act.
‘‘(b) APPLICATION.—No grant may be made under this
section except pursuant to a grant application that is sub-
mitted in a time, manner, and form approved by the Sec-
retary.
‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated for fiscal year 2004, such
sums as may be appropriate to carry out this section.’’.
405
Subtitle D—Treatment of Rare
Diseases
SEC. 931. NIH OFFICE OF RARE DISEASES AT NATIONAL IN-
STITUTES OF HEALTH.
Title IV of the Public Health Service Act (42 U.S.C.
281 et seq.), as amended by Public Law 107–84, is amended
by inserting after section 404E the following:
‘‘OFFICE OF RARE DISEASES
‘‘SEC. 404F. (a) ESTABLISHMENT.—There is estab-
lished within the Office of the Director of NIH an office
to be known as the Office of Rare Diseases (in this section
referred to as the ‘Office’), which shall be headed by a Direc-
tor (in this section referred to as the ‘Director’), appointed
by the Director of NIH.
‘‘(b) DUTIES.—
‘‘(1) IN GENERAL.—The Director of the Office
shall carry out the following:
‘‘(A) The Director shall recommend an
agenda for conducting and supporting research
on rare diseases through the national research
institutes and centers. The agenda shall provide
for a broad range of research and education ac-
tivities, including scientific workshops and
symposia to identify research opportunities for
rare diseases.
406
‘‘(B) The Director shall, with respect to rare
diseases, promote coordination and cooperation
among the national research institutes and cen-
ters and entities whose research is supported by
such institutes.
‘‘(C) The Director, in collaboration with the
directors of the other relevant institutes and cen-
ters of the National Institutes of Health, may
enter into cooperative agreements with and make
grants for regional centers of excellence on rare
diseases in accordance with section 404G.
‘‘(D) The Director shall promote the suffi-
cient allocation of the resources of the National
Institutes of Health for conducting and sup-
porting research on rare diseases.
‘‘(E) The Director shall promote and en-
courage the establishment of a centralized clear-
inghouse for rare and genetic disease informa-
tion that will provide understandable informa-
tion about these diseases to the public, medical
professionals, patients and families.
‘‘(F) The Director shall biennially prepare
a report that describes the research and edu-
cation activities on rare diseases being conducted
or supported through the national research insti-
407
tutes and centers, and that identifies particular
projects or types of projects that should in the fu-
ture be conducted or supported by the national
research institutes and centers or other entities
in the field of research on rare diseases.
‘‘(G) The Director shall prepare the NIH
Director’s annual report to Congress on rare dis-
ease research conducted by or supported through
the national research institutes and centers.
‘‘(2) PRINCIPAL
ADVISOR
REGARDING
ORPHAN
DISEASES.—With respect to rare diseases, the Director
shall serve as the principal advisor to the Director of
NIH and shall provide advice to other relevant agen-
cies. The Director shall provide liaison with national
and international patient, health and scientific orga-
nizations concerned with rare diseases.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘rare disease’ means any disease or condition that af-
fects less than 200,000 persons in the United States.
‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of carrying out this section, there are authorized
to be appropriated such sums as already have been appro-
priated for fiscal year 2002, and $4,000,000 for each of the
fiscal years 2003 through 2006.’’.
408
SEC. 932. RARE DISEASE REGIONAL CENTERS OF EXCEL-
LENCE.
Title IV of the Public Health Service Act (42 U.S.C.
281 et seq.), as amended by section 931, is further amended
by inserting after section 404F the following:
‘‘RARE DISEASE REGIONAL CENTERS OF EXCELLENCE
‘‘SEC. 404G. (a) COOPERATIVE AGREEMENTS
AND
GRANTS.—
‘‘(1) IN GENERAL.—The Director of the Office of
Rare Diseases (in this section referred to as the ‘Di-
rector’), in collaboration with the directors of the
other relevant institutes and centers of the National
Institutes of Health, may enter into cooperative agree-
ments with and make grants to public or private non-
profit entities to pay all or part of the cost of plan-
ning, establishing, or strengthening, and providing
basic operating support for regional centers of excel-
lence for clinical research into, training in, and dem-
onstration of diagnostic, prevention, control, and
treatment methods for rare diseases.
‘‘(2) POLICIES.—A cooperative agreement or
grant under paragraph (1) shall be entered into in
accordance with policies established by the Director of
NIH.
‘‘(b) COORDINATION WITH OTHER INSTITUTES.—The
Director shall coordinate the activities under this section
409
with similar activities conducted by other national research
institutes, centers and agencies of the National Institutes
of Health and by the Food and Drug Administration to
the extent that such institutes, centers and agencies have
responsibilities that are related to rare diseases.
‘‘(c) USES FOR FEDERAL PAYMENTS UNDER COOPER-
ATIVE AGREEMENTS OR GRANTS.—Federal payments made
under a cooperative agreement or grant under subsection
(a) may be used for—
‘‘(1) staffing, administrative, and other basic op-
erating costs, including such patient care costs as are
required for research;
‘‘(2) clinical training, including training for al-
lied health professionals, continuing education for
health professionals and allied health professions per-
sonnel, and information programs for the public with
respect to rare diseases; and
‘‘(3) clinical research and demonstration pro-
grams.
‘‘(d) PERIOD OF SUPPORT; ADDITIONAL PERIODS.—
Support of a center under subsection (a) may be for a pe-
riod of not to exceed 5 years. Such period may be extended
by the Director for additional periods of not more than 5
years if the operations of such center have been reviewed
by an appropriate technical and scientific peer review
410
group established by the Director and if such group has rec-
ommended to the Director that such period should be ex-
tended.
‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of carrying out this section, there are authorized
to be appropriated such sums as already have been appro-
priated for fiscal year 2002, and $20,000,000 for each of
the fiscal years 2003 through 2006.’’.
Subtitle E—Other Provisions
Relating to Drugs
SEC. 941. GAO STUDY REGARDING DIRECT-TO-CONSUMER
ADVERTISING OF PRESCRIPTION DRUGS.
(a) IN GENERAL.—The Comptroller General of the
United States shall conduct a study for the purpose of
determining—
(1) whether and to what extent there have been
increases in utilization rates of prescription drugs
that are attributable to guidance regarding direct-to-
consumer advertising of such drugs that has been
issued by the Food and Drug Administration under
section 502(n) of the Federal Food, Drug, and Cos-
metic Act; and
(2) if so, whether and to what extent such in-
creased utilization rates have resulted in increases in
411
the costs of public or private health plans, health in-
surance, or other health programs.
(b) CERTAIN DETERMINATIONS.—The study under
subsection (a) shall include determinations of the following:
(1) The extent to which advertisements referred
to in such subsection have resulted in effective con-
sumer education about the prescription drugs in-
volved, including an understanding of the risks of the
drugs relative to the benefits.
(2) The extent of consumer satisfaction with such
advertisements.
(3) The extent of physician satisfaction with the
advertisements, including determining whether physi-
cians believe that the advertisements interfere with the
exercise of their medical judgment by influencing con-
sumers to prefer advertised drugs over alternative
therapies.
(4) The extent to which the advertisements have
resulted in increases in health care costs for tax-
payers, for employers, or for consumers due to con-
sumer decisions to seek advertised drugs rather than
lower-costs alternative therapies.
(5) The extent to which the advertisements have
resulted in decreases in health care costs for tax-
payers, for employers, or for consumers due to de-
412
creased hospitalization rates, fewer physician visits
(not related to hospitalization), lower treatment costs,
or reduced instances of employee absences to care for
family members with diseases or disorders.
(c) REPORT.—Not later than two years after the date
of the enactment of this Act, the Comptroller General of the
United States shall submit to the Congress a report pro-
viding the findings of the study under subsection (a).
SEC. 942. CERTAIN HEALTH PROFESSIONS PROGRAMS RE-
GARDING PRACTICE OF PHARMACY.
Part E of title VII of the Public Health Service Act
(42 U.S.C. 294n et seq.) is amended by adding at the end
the following subpart:
‘‘Subpart 3—Pharmacist Workforce Programs
‘‘SEC. 771. PUBLIC SERVICE ANNOUNCEMENTS.
‘‘(a) PUBLIC SERVICE ANNOUNCEMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall develop
and issue public service announcements that advertise
and promote the pharmacist profession, highlight the
advantages and rewards of being a pharmacist, and
encourage individuals to enter the pharmacist profes-
sion.
‘‘(2) METHOD.—The public service announce-
ments described in subsection (a) shall be broadcast
through appropriate media outlets, including tele-
413
vision or radio, in a manner intended to reach as
wide and diverse an audience as possible.
‘‘(b) STATE AND LOCAL PUBLIC SERVICE ANNOUNCE-
MENTS.—
‘‘(1) IN GENERAL.—The Secretary shall award
grants to entities to support State and local adver-
tising campaigns through appropriate media outlets
to promote the pharmacist profession, highlight the
advantages and rewards of being a pharmacist, and
encourage individuals to enter the pharmacist profes-
sion.
‘‘(2) USE OF FUNDS.—An entity that receives a
grant under subsection (a) shall use funds received
through such grant to acquire local television and
radio time, place advertisements in local newspapers,
and post information on billboards or on the Internet,
in order to—
‘‘(A) advertise and promote the pharmacist
profession;
‘‘(B) promote pharmacist education pro-
grams;
‘‘(C) inform the public of public assistance
regarding such education programs;