H. R. 1—317
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 estab-
lished by the Comptroller General of the United States) of
a certifying officer designated as provided in paragraph (1)
of this subsection.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE CONTRACTOR.—
‘‘(A) IN
GENERAL.—No medicare administrative con-
tractor shall be liable to the United States for a payment
by a certifying or disbursing officer unless, in connection
with such payment, the medicare administrative contractor
acted with reckless disregard of its obligations under its
medicare administrative contract or with intent to defraud
the United States.
‘‘(B) RELATIONSHIP TO FALSE CLAIMS ACT.—Nothing in
this subsection shall be construed to limit liability for con-
duct that would constitute a violation of sections 3729
through 3731 of title 31, United States Code.
‘‘(4) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN GENERAL.—Subject to subparagraphs (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 or who is engaged by the contractor
to participate directly in the claims administration process)
who is made a party to any judicial or administrative
proceeding arising from or 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, indem-
nify the contractor and such persons.
‘‘(B) CONDITIONS.—The Secretary may not provide
indemnification under subparagraph (A) insofar as the
liability for such costs arises directly from conduct that
is determined by the judicial proceeding or by the Secretary
to be criminal in nature, fraudulent, or grossly negligent.
If indemnification is provided by the Secretary with respect
to a contractor before a determination that such costs arose
directly from such conduct, the contractor shall reimburse
the Secretary for costs of indemnification.
‘‘(C) SCOPE OF INDEMNIFICATION.—Indemnification by
the Secretary under subparagraph (A) may include pay-
ment of judgments, settlements (subject to subparagraph
(D)), awards, and costs (including reasonable legal
expenses).
‘‘(D) WRITTEN APPROVAL FOR SETTLEMENTS OR COM-
PROMISES.—A contractor or other person described in
subparagraph (A) may not propose to negotiate a settlement
or compromise of a proceeding described in such subpara-
graph without the prior written approval of the Secretary
to negotiate such settlement or compromise. Any indem-
nification under subparagraph (A) with respect to amounts
paid under a settlement or compromise of a proceeding
described in such subparagraph are conditioned upon prior
written approval by the Secretary of the final settlement
or compromise.
‘‘(E) CONSTRUCTION.—Nothing in this paragraph shall
be construed—
H. R. 1—318
‘‘(i) to change any common law immunity that
may be available to a medicare administrative con-
tractor or person described in subparagraph (A); or
‘‘(ii) to permit the payment of costs not otherwise
allowable, reasonable, or allocable under the Federal
Acquisition Regulation.’’.
(2) CONSIDERATION OF INCORPORATION OF CURRENT LAW
STANDARDS.—In developing contract performance requirements
under section 1874A(b) of the Social Security Act, as inserted
by paragraph (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 (RELATING TO
FISCAL
INTERMEDIARIES).—Section 1816 (42 U.S.C. 1395h) is
amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART A’’.
(2) Subsection (a) is amended to read as 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 section’’ and inserting ‘‘contract
under section 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 administrative contractor under section
1874A with respect to the administration of this part’’;
and
(B) by striking ‘‘such agency or organization’’ and
inserting ‘‘such medicare administrative contractor’’ each
place it appears.
(7) Subsection (l) is repealed.
(c) CONFORMING AMENDMENTS TO SECTION 1842 (RELATING TO
CARRIERS).—Section 1842 (42 U.S.C. 1395u) is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART B’’.
(2) Subsection (a) is amended to read as 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)—
H. R. 1—319
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking ‘‘carriers’’ and
inserting ‘‘medicare administrative 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 matter before
clause (i), by striking ‘‘to the policyholders and sub-
scribers of the carrier’’ and inserting ‘‘to the policy-
holders and subscribers of the medicare administrative
contractor’’;
(iv) by striking subparagraphs (C), (D), and (E);
(v) in subparagraph (H)—
(I) by striking ‘‘if it makes determinations or
payments with respect to physicians’ services,’’ in
the matter preceding clause (i); and
(II) by striking ‘‘carrier’’ and inserting ‘‘medi-
care administrative contractor’’ 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 subparagraph (L),
by striking ‘‘and shall contain’’ and all that follows
through the period; and
(ix) in the seventh sentence, by inserting ‘‘medicare
administrative contractor,’’ after ‘‘carrier,’’;
(D) by striking paragraph (5);
(E) in paragraph (6)(D)(iv), by striking ‘‘carrier’’ and
inserting ‘‘medicare administrative contractor’’; and
(F) in paragraph (7), by striking ‘‘the carrier’’ and
inserting ‘‘the Secretary’’ each place it appears.
(4) Subsection (c) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2)(A), by striking ‘‘contract 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 ‘‘subsection
(a)(1)(B)’’ and inserting ‘‘section 1874A(a)(3)(B)’’;
(D) in paragraph (4), in the matter preceding subpara-
graph (A), by striking ‘‘carrier’’ and inserting ‘‘medicare
administrative contractor’’; and
(E) by striking paragraphs (5) and (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ‘‘carrier or car-
riers’’ and inserting ‘‘medicare administrative contractor or con-
tractors’’.
(7) Subsection (h) is amended—
(A) in paragraph (2)—
H. R. 1—320
(i) by striking ‘‘Each carrier having an agreement
with the Secretary under subsection (a)’’ and inserting
‘‘The Secretary’’; and
(ii) by striking ‘‘Each such carrier’’ and inserting
‘‘The Secretary’’;
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an agreement with
the Secretary under subsection (a)’’ and inserting
‘‘medicare administrative contractor having a contract
under section 1874A that provides for making pay-
ments under this part’’; and
(ii) by striking ‘‘such carrier’’ and inserting ‘‘such
contractor’’;
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and inserting ‘‘a medicare
administrative contractor’’ each place it appears; and
(ii) by striking ‘‘the carrier’’ and inserting ‘‘the
contractor’’ each place it appears; and
(D) in paragraphs (5)(A) and (5)(B)(iii), by striking
‘‘carriers’’ and inserting ‘‘medicare administrative contrac-
tors’’ each place it appears.
(8) Subsection (l) is amended—
(A) in paragraph (1)(A)(iii), by striking ‘‘carrier’’ and
inserting ‘‘medicare administrative contractor’’; and
(B) in paragraph (2), by striking ‘‘carrier’’ and inserting
‘‘medicare administrative contractor’’.
(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 provided in this
subsection, the amendments made by this section shall
take effect on October 1, 2005, and the Secretary is author-
ized to take such steps before such date as may be nec-
essary to implement such amendments on a timely basis.
(B) CONSTRUCTION
FOR
CURRENT
CONTRACTS.—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
(except 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
BIDDING.—The Sec-
retary shall provide for the letting by competitive bidding
of all contracts for functions of medicare administrative
contractors for annual contract periods that begin on or
after October 1, 2011.
(2) GENERAL TRANSITION RULES.—
(A) AUTHORITY
TO
CONTINUE
TO
ENTER
INTO
NEW
AGREEMENTS
AND
CONTRACTS
AND
WAIVER
OF
PROVIDER
NOMINATION
PROVISIONS
DURING
TRANSITION.—Prior to
October 1, 2005, the Secretary may, consistent with
subparagraph (B), continue to enter into agreements under
section 1816 and contracts under section 1842 of the Social
Security Act (42 U.S.C. 1395h, 1395u). The Secretary may
enter into new agreements under section 1816 prior to
H. R. 1—321
October 1, 2005, without regard to any of the provider
nomination provisions of such section.
(B) APPROPRIATE
TRANSITION.—The Secretary shall
take such steps as are necessary to provide for an appro-
priate transition from agreements under section 1816 and
contracts under section 1842 of the Social Security Act
(42 U.S.C. 1395h, 1395u) to contracts under section 1874A,
as added by subsection (a)(1).
(3) AUTHORIZING CONTINUATION OF MIP FUNCTIONS UNDER
CURRENT CONTRACTS AND AGREEMENTS AND UNDER TRANSITION
CONTRACTS.—Notwithstanding the amendments made by this
section, the provisions contained in the exception in section
1893(d)(2) of the Social Security Act (42 U.S.C. 1395ddd(d)(2))
shall continue to apply during the period that begins on the
date of the enactment of this Act and ends on October 1,
2011, 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 con-
tinues the activities referred to in such provisions.
(e) REFERENCES.—On and after the effective date provided
under subsection (d)(1), any reference to a fiscal intermediary or
carrier under title XI or XVIII of the Social Security Act (or any
regulation, manual instruction, interpretative rule, statement of
policy, or guideline issued to carry out such titles) shall be deemed
a reference to a medicare administrative contractor (as provided
under section 1874A of the Social Security Act).
(f) SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL.—Not
later than 6 months after the date of the enactment of this Act,
the Secretary shall submit to the appropriate committees of Con-
gress a legislative proposal providing for such technical and con-
forming amendments in the law as are required by the provisions
of this section.
(g) REPORTS ON IMPLEMENTATION.—
(1) PLAN FOR IMPLEMENTATION.—By not later than October
1, 2004, the Secretary shall submit a report to Congress and
the Comptroller General of the United States that describes
the plan for implementation 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 rec-
ommendations as the Comptroller General deems appropriate.
(2) STATUS
OF
IMPLEMENTATION.—The Secretary shall
submit a report to Congress not later than October 1, 2008,
that describes the status of implementation of such amend-
ments and that includes a description of the following:
(A) The number of contracts that have been competi-
tively bid as of such date.
(B) The distribution of functions among contracts and
contractors.
(C) A timeline for complete transition to full competi-
tion.
(D) A detailed description of how the Secretary has
modified oversight and management of medicare contrac-
tors to adapt to full competition.
H. R. 1—322
SEC. 912. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDI-
CARE ADMINISTRATIVE CONTRACTORS.
(a) IN GENERAL.—Section 1874A, as added by section 911(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 func-
tions referred to in subparagraphs (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 paragraphs (1) through
(8) of section 3544(b) of title 44, United States Code (other
than the requirements under paragraphs (2)(D)(i), (5)(A), and
(5)(B) of such section).
‘‘(2) INDEPENDENT AUDITS.—
‘‘(A) PERFORMANCE
OF
ANNUAL
EVALUATIONS.—Each
year a medicare administrative contractor that performs
the functions referred to in subparagraphs (A) and (B)
of subsection (a)(4) (relating to determining and making
payments) shall undergo an evaluation of the information
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 Gen-
eral of the Department of Health and Human Services
may establish; and
‘‘(ii) test the effectiveness of information security
control techniques of an appropriate subset of the con-
tractor’s information systems (as defined in section
3502(8) of title 44, United States Code) relating to
such functions under this title and an assessment of
compliance with the requirements of this subsection
and related information security policies, procedures,
standards and guidelines, including policies and proce-
dures as may be prescribed by the Director of the
Office of Management and Budget and applicable
information security standards promulgated under sec-
tion 11331 of title 40, United States Code.
‘‘(B) DEADLINE FOR INITIAL EVALUATION.—
‘‘(i) NEW CONTRACTORS.—In the case of a medicare
administrative contractor covered by this subsection
that has not previously performed the functions
referred to in subparagraphs (A) and (B) of subsection
(a)(4) (relating to determining and making payments)
as a fiscal intermediary or carrier under section 1816
or 1842, the first independent evaluation conducted
pursuant to subparagraph (A) shall be completed prior
to commencing such functions.
‘‘(ii) OTHER CONTRACTORS.—In the case of a medi-
care administrative contractor covered by this sub-
section that is not described in clause (i), the first
independent 
evaluation 
conducted 
pursuant 
to
subparagraph (A) shall be completed within 1 year
H. R. 1—323
after the date the contractor commences functions
referred to in clause (i) under this section.
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE DEPARTMENT OF HEALTH AND HUMAN
SERVICES.—The results of independent evaluations
under subparagraph (A) shall be submitted promptly
to the Inspector General of the Department of Health
and Human Services and to the Secretary.
‘‘(ii) TO CONGRESS.—The Inspector General of the
Department of Health and Human Services shall
submit to Congress annual reports on the results of
such evaluations, including assessments of the scope
and sufficiency of such evaluations.
‘‘(iii) AGENCY
REPORTING.—The Secretary shall
address the results of such evaluations in reports
required under section 3544(c) of title 44, United States
Code.’’.
(b) APPLICATION OF REQUIREMENTS TO FISCAL INTERMEDIARIES
AND CARRIERS.—
(1) IN GENERAL.—The provisions of section 1874A(e)(2) of
the Social Security Act (other than 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 provisions.
(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)), pursuant to paragraph (1), shall be completed (and a
report on the evaluation submitted to the Secretary) by not
later than 1 year after such date.
Subtitle C—Education and Outreach
SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—Title XVIII is amended by inserting after
section 1888 the following new section:
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE
‘‘SEC. 1889. (a) COORDINATION OF EDUCATION FUNDING.—The
Secretary shall coordinate the educational activities provided
through medicare contractors (as defined in subsection (g), including
under section 1893) in order to maximize the effectiveness of Federal
education efforts for providers of services and suppliers.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall take effect on the date of the enactment of this Act.
(3) REPORT.—Not later than October 1, 2004, the Secretary
shall submit to Congress a report that includes a description
and evaluation of the steps taken to coordinate the funding
of provider education under section 1889(a) of the Social Secu-
rity Act, as added by paragraph (1).
(b) INCENTIVES TO IMPROVE CONTRACTOR PERFORMANCE.—
H. R. 1—324
(1) IN
GENERAL.—Section 1874A, as added by section
911(a)(1) and as amended by section 912(a), is amended by
adding at the end the following new subsection:
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORMANCE
IN
PROVIDER EDUCATION
AND OUTREACH.—The Secretary shall use
specific claims payment error rates or similar methodology of medi-
care administrative contractors in the processing or reviewing of
medicare claims in order to give such contractors an incentive
to implement effective education and outreach programs for pro-
viders of services and suppliers.’’.
(2) APPLICATION
TO
FISCAL
INTERMEDIARIES
AND
CAR-
RIERS.—The provisions of section 1874A(f) of the Social Security
Act, as added by paragraph (1), shall apply to each fiscal
intermediary under section 1816 of the Social Security Act
(42 U.S.C. 1395h) and each carrier under section 1842 of such
Act (42 U.S.C. 1395u) in the same manner as they apply
to medicare administrative contractors under such provisions.
(3) GAO REPORT
ON
ADEQUACY
OF
METHODOLOGY.—Not
later than October 1, 2004, the Comptroller General of the
United States shall submit to Congress and to the Secretary
a report on the adequacy 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 ASSESSING CON-
TRACTOR PERFORMANCE.—Not later than October 1, 2004, the
Secretary shall submit to Congress a report that describes
how the Secretary intends 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 bonuses. 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 RESPONSES FROM
MEDICARE ADMINISTRATIVE CONTRACTORS.—
(1) IN
GENERAL.—Section 1874A, as added by section
911(a)(1) and as amended by section 912(a) and subsection
(b), is further amended by adding at the end the following
new subsection:
‘‘(g) COMMUNICATIONS
WITH
BENEFICIARIES, PROVIDERS
OF
SERVICES AND SUPPLIERS.—
‘‘(1) COMMUNICATION
STRATEGY.—The Secretary shall
develop a strategy for communications with individuals entitled
to benefits under part A or enrolled under part B, or both,
and with providers of services and suppliers under this title.
‘‘(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 gen-
eral written responses (which may be through electronic trans-
mission) in a clear, concise, and accurate manner to inquiries
of providers of services, suppliers, and individuals entitled to
H. R. 1—325
benefits under part A or enrolled under part B, or both, con-
cerning the programs under this title within 45 business days
of the date of receipt of such inquiries.
‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Secretary shall
ensure that each medicare administrative contractor shall pro-
vide, 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, a toll-free telephone number at which
such individuals, providers of services, and suppliers may
obtain information regarding billing, coding, claims, coverage,
and other appropriate information under this title.
‘‘(4) MONITORING OF CONTRACTOR RESPONSES.—
‘‘(A) IN GENERAL.—Each medicare administrative con-
tractor shall, consistent with standards developed by the
Secretary under subparagraph (B)—
‘‘(i) maintain a system for identifying who provides
the information referred to in paragraphs (2) and (3);
and
‘‘(ii) monitor the accuracy, consistency, and timeli-
ness of the information so provided.
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN
GENERAL.—The Secretary shall establish
and make public standards to monitor the accuracy,
consistency, and timeliness of the information provided
in response to written and telephone inquiries under
this subsection. Such standards shall be consistent
with the performance requirements established under
subsection (b)(3).
‘‘(ii) EVALUATION.—In conducting evaluations of
individual medicare administrative contractors, the
Secretary shall take into account the results of the
monitoring conducted under subparagraph (A) taking
into account as performance requirements the stand-
ards established under clause (i). The Secretary shall,
in consultation 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 pro-
vided.
‘‘(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.
‘‘(5) 
AUTHORIZATION
OF
APPROPRIATIONS.—There 
are
authorized to be appropriated such sums as are necessary to
carry out this subsection.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall take effect October 1, 2004.
(3) APPLICATION
TO
FISCAL
INTERMEDIARIES
AND
CAR-
RIERS.—The provisions of section 1874A(g) of the Social Security
Act, as added by paragraph (1), shall apply to each fiscal
intermediary under section 1816 of the Social Security Act
(42 U.S.C. 1395h) and each carrier under section 1842 of such