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(determined under paragraph (4)) for the
fiscal year.
(iii) WAGE
ADJUSTMENT
FACTOR.—
The wage adjustment factor (determined
under paragraph (5)) for the State for the
fiscal year.
(iv) FEDERAL MATCHING RATE.—The
Federal matching rate (determined under
section 408(b)) for the fiscal year.
(C) LOW INCOME ALLOTMENT FACTOR.—
The low income allotment factor, specified in
this subparagraph, for a State for a fiscal year
is equal to the product of the following:
(i) NUMBER
OF
INDIVIDUALS
WITH
DISABILITIES.—The number of individuals
with disabilities in the State (determined
under paragraph (3)) for the fiscal year.
(ii) 10 PERCENT OF THE NATIONAL
PER CAPITA BUDGET.—10 percent of the
national average per capita budget amount
(determined under paragraph (4)) for the
fiscal year.
(iii) WAGE
ADJUSTMENT
FACTOR.—
The wage adjustment factor (determined
108
under paragraph (5)) for the State for the
fiscal year.
(iv) FEDERAL MATCHING RATE.—The
Federal matching rate (determined under
section 408(b)) for the fiscal year.
(v) LOW INCOME INDEX.—The low in-
come index (determined under paragraph
(6)) for the State for the preceding fiscal
year.
(3) NUMBER OF INDIVIDUALS WITH DISABIL-
ITIES.—The number of individuals with disabilities
in a State for a fiscal year shall be determined as
follows:
(A) BASE.—The Secretary shall determine
the number of individuals in the State by age,
sex, and income category, based on the 1990
decennial census, adjusted (as appropriate) by
the March 1994 current population survey.
(B) DISABILITY
PREVALENCE
LEVEL
BY
POPULATION CATEGORY.—The Secretary shall
determine, for each such age, sex, and income
category, the national average proportion of the
population of such category that represents in-
dividuals with disabilities. The Secretary may
109
conduct periodic surveys in order to determine
such proportions.
(C) BASE
DISABLED
POPULATION
IN
A
STATE.—The number of individuals with dis-
abilities in a State in 1994 is equal to the sum
of the products, for such age, sex, and income
category, of—
(i) the population of individuals in the
State in the category (determined under
subparagraph (A)), and
(ii) the national average proportion
for such category (determined under sub-
paragraph (B)).
(D) UPDATE.—The Secretary shall deter-
mine the number of individuals with disabilities
in a State in a fiscal year equal to the number
determined under subparagraph (C) for the
State increased (or decreased) by the percent-
age increase (or decrease) in the disabled popu-
lation of the State as determined under the cur-
rent population survey from 1994 to the year
before the fiscal year involved.
(4) NATIONAL PER CAPITA BUDGET AMOUNT.—
The national average per capita budget amount, for
a fiscal year, is—
110
(A) the total Federal budget specified
under subsection (a) for the fiscal year; divided
by
(B) the sum, for the fiscal year, of the
numbers of individuals with disabilities (deter-
mined under paragraph (3)) for all the States
for the fiscal year.
(5) WAGE
ADJUSTMENT
FACTOR.—The wage
adjustment factor, for a State for a fiscal year, is
equal to the ratio of—
(A) the average hourly wages for service
workers (other than household or protective
services) in the State, to
(B) the national average hourly wages for
service workers (other than household or protec-
tive services).
The hourly wages shall be determined under this
paragraph based on data from the most recent de-
cennial census for which such data are available.
(6) LOW
INCOME
INDEX.—The low income
index for each State for a fiscal year is the ratio, de-
termined for the preceding fiscal year, of—
(A) the percentage of the State’s popu-
lation that has income below 150 percent of the
poverty level, to
111
(B) the percentage of the population of the
United States that has income below 150 per-
cent of the poverty level.
Such percentages shall be based on data from the
most recent decennial census for which such data
are available, adjusted by data from the most recent
current population survey as determined appropriate
by the Secretary.
(c) STATE ENTITLEMENT.—This title constitutes
budget authority in advance of appropriations Acts, and
represents the obligation of the Federal Government to
provide for the payment to States of amounts described
in subsection (a).
TITLE V—REBASING MEDICARE
PAYMENT RATES
Subtitle A—Rehabilitation
Hospitals
SEC. 501. DEFINITION OF REHABILITATION HOSPITALS.
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section
1886(d)(1)(B) of the Social Security Act (42 U.S.C.
1395ww(d)(1)(B)) is amended to read as follows:
‘‘(ii) a rehabilitation hospital (as de-
fined by the Secretary) and including a
hospital that provides rehabilitation serv-
ices to patients at least 75 percent of
112
whom in any cost reporting period are de-
termined to require rehabilitation as a re-
sult of any of the following: stroke, spinal
cord injury, congenital deformity, amputa-
tion, major multiple trauma, fracture of
femur, brain injury, polyarthritis (includ-
ing rheumatoid arthritis), neurological dis-
orders, burns, chronic pain, cardiac condi-
tions, pulmonary conditions, or oncology,’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect October 1, 1994.
SEC. 502. PAYMENT RULES.
(a) IN GENERAL.—Section 1886(b)(3) of the Social
Security Act (42 U.S.C. 1395ww(b)(3)) is amended—
(1) in subparagraphs (A) and (B)(ii), by strik-
ing ‘‘and (E)’’ and inserting ‘‘(E), and (F)’’, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(F) Notwithstanding any other provision of this
title, for cost reporting periods beginning on and after Oc-
tober 1, 1994, in the case of a hospital described in clause
(ii) or (iv) of subsection (d)(1)(B) and not described in
subparagraph (G)(ii), and a rehabilitation unit as de-
scribed in such subsection, the term ‘target amount’
means—
113
‘‘(i) in the case of a hospital or distinct part
unit that is subject to a target amount in the first
such period, the allowable operating costs of inpa-
tient hospital services (as defined in subsection
(a)(4) for its cost reporting period ending on or be-
fore December 31, 1991 (in this subparagraph re-
ferred to as ‘the new base year’), increased by the
applicable percentage increases prescribed by sub-
section (b)(3)(B), except that (I) in no case shall
such target amount for any hospital or distinct part
unit be less than 70 percent of the national averages
for all such hospitals and distinct part units (as de-
termined by the Secretary) and (II) in no case shall
payment per discharge to a hospital in a cost report-
ing period beginning on or after October 1, 1994, be
less than the amount paid per discharge in the new
base year (including any payments pursuant to para-
graph (1)(A)) multiplied by the applicable percent-
age increase prescribed by subparagraph (B); and
‘‘(ii) in the case of a hospital or distinct part
unit that is not subject to a target amount in the
first such period, the allowable operating costs of in-
patient hospital services (as defined in subsection
(a)(4)) in the 12-month cost reporting period imme-
diately preceding the first period subject to a target
114
amount shall be increased by the applicable percent-
age increase prescribed by subparagraph (B), except
that in no case shall such target amount for any
hospital or unit be not less than 70 percent of the
national average for all such hospitals or distinct
part units (as determined by the Secretary) of the
type of hospital or distinct part unit for which it was
granted approval to participate under this title (as
determined by the Secretary).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to cost reporting periods begin-
ning on or after October 1, 1994.
SEC. 503. PAYMENT FOR OPERATING COSTS OF REHABILI-
TATION HOSPITALS.
(a) IN GENERAL.—Section 1886(d) of the Social Se-
curity Act (42 U.S.C. 1395ww(d)) is amended by adding
at the end the following new paragraph:
‘‘(11)(A) Notwithstanding section 1814(b), but sub-
ject to the provision of section 1813, the amount of the
payment with respect to the operating costs of inpatient
hospital services of a rehabilitation hospital or a distinct
part rehabilitation unit (in this paragraph referred to as
a ‘rehabilitation center’), as defined in subparagraph (B),
in cost reporting periods beginning on and after October
115
1, 1996, shall be determined in accordance with this para-
graph.
‘‘(B)(i) The Secretary—
‘‘(I) shall establish a classification of inpatient
hospital discharges of rehabilitation centers by func-
tional-related groups (in this paragraph referred to
as ‘FRGs’) to include impairment, age and func-
tional capability and such other factors as the Sec-
retary deems appropriate; and
‘‘(II) 
shall 
establish 
a 
methodology 
for
classifying specific discharges from a rehabilitation
center within these groups.
‘‘(ii) For each such functional-related group the Sec-
retary shall assign an appropriate weighting factor which
reflects the relative hospital resources used with respect
to discharges classified within that group compared to dis-
charges classified within other groups.
‘‘(iii) The Secretary shall, from time to time, adjust
the classifications and weighting factors established under
this clause as appropriate to reflect changes in treatment
patterns, technology and other factors which may change
the relative use of resources, except that any such adjust-
ments shall be made in a manner that assures that the
aggregate payments under this paragraph for discharges
in the fiscal year are not greater or less than those that
116
would have been made for discharges in the year without
such adjustment.
‘‘(C) The Secretary shall determine an FRG payment
rate for each rehabilitation center discharge for which
such rehabilitation center is entitled to receive payment
under this title. Such payment rate for cost reporting peri-
ods beginning on and after October 1, 1996, shall be the
average payment per discharge under this title for inpa-
tient operating costs of rehabilitation centers in the fiscal
year ending September 30, 1996, as estimated by the Sec-
retary, adjusted by—
‘‘(i) updating such per-discharge amount by the
applicable percentage increase provided by sub-
section (b)(3)(B)(iv)(IV),
‘‘(ii) variations among hospitals by area in the
average hospital wage index (as described in sub-
paragraph (H)),
‘‘(iii) the FRG weighting factor (as defined in
subparagraph (B)), and
‘‘(iv) for any hospital or distinct part unit that
serves a disproportionate number of low-income pa-
tients (as defined in paragraph (5)(F)(v), a factor
determined in accordance with subparagraph (F).
‘‘(D) The Secretary shall provide for an additional
payment to a rehabilitation center for any discharges in
117
a functional-related group, the length of stay of which ex-
ceeded the mean length of stay for discharges within that
group by a fixed number of days or exceeds such mean
length of stay by some fixed number of deviations, which-
ever is the fewer number of days.
‘‘(E) For cases which are not included in subpara-
graph (D), a rehabilitation center may request additional
payments in any case where charges, adjusted to cost, ex-
ceed a fixed multiple of the applicable FRG prospective
payment rate, or exceed such other fixed dollar amount,
whichever is greater, or exceed the FRG prospective pay-
ment rate plus a fixed dollar amount determined by the
Secretary.
‘‘(F) The Secretary may provide for such adjust-
ments to the payment amounts under this paragraph as
the Secretary deems appropriate to take into account the
unique circumstances of rehabilitation facilities located in
Alaska and Hawaii.
‘‘(G) The Secretary shall provide for publication in
the Federal Register, on or before September 1 before
each fiscal year (beginning with fiscal year 1996), of the
FRG weighting factors for such fiscal year and a descrip-
tion of the methodology and data used in computing the
adjusted FRG prospective payment rates under this para-
graph.
118
‘‘(H) The Secretary shall adjust the proportion (as
estimated by the Secretary from time-to-time) of rehabili-
tation centers’ costs which are attributable to wages and
wage-related costs, of the FRG prospective payment rates
computed under subparagraph (C) for area differences in
hospital wage levels by a factor (established by the Sec-
retary) reflecting the relative hospital wage level in the
geographic area of the rehabilitation center compared to
the national average hospital wage level. Not later than
October 1, 1997 (and at least every 12 months thereafter),
the Secretary shall update the factor under the preceding
sentence on the basis of a survey conducted by the Sec-
retary (and updated as appropriate) of the wages and
wage-related costs incurred in furnishing hospital services.
Any adjustments or updates made under this subpara-
graph for a fiscal year shall be made in a manner that
assures that the aggregated payments under this para-
graph in the fiscal year are not greater or less than those
that would have been made in the year without such ad-
justment.
‘‘(I) The determinations required by this paragraph
shall be made in a manner that assures that the aggre-
gated payments under this paragraph in the fiscal year
beginning October 1, 1996, and subsequent fiscal years
are not greater or less than those that would have been
119
made in any such year had this paragraph not been en-
acted.
‘‘(J) The Secretary also shall provide for an addi-
tional payment amount for rehabilitation centers with in-
direct costs of medical education in an amount computed
in the same manner as is such additional payment com-
puted for subsection (d) hospitals under paragraph
(5)(B).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to cost reporting periods begin-
ning on or after October 1, 1996.
Subtitle B—Long-Term Hospitals
SEC. 511. PAYMENT RULES.
(a) ASSIGNMENT OF NEW BASE YEAR FOR CER-
TIFIED LONG-STAY HOSPITALS SERVING A SIGNIFICANT
PROPORTION
OF
LOW-INCOME
PATIENTS.—Section
1886(b)(3) of the Social Security Act (42 U.S.C.
1395ww(b)(3)), as amended by section 502(a), is amend-
ed—
(1) in subparagraphs (A) and (B)(ii), by strik-
ing ‘‘and (F)’’ and inserting ‘‘(F), and (G)’’, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(G)(i) In the case of a hospital described in clause
(ii), the term ‘target amount’ means—
120
‘‘(I) with respect to the first 12-month cost re-
porting period in which this subparagraph is applied
to the hospital, the allowable operating costs of inpa-
tient hospital services (as defined in subsection
(a)(4)) recognized under this title for the hospital’s
fiscal year 1991 cost reporting period increased (in
a compound manner) by the sum of the applicable
percentage increases applied to such hospital under
this paragraph for cost reporting periods after the
hospital’s fiscal year 1991 cost reporting period and
up to and including such first 12-month cost report-
ing period; or
‘‘(II) with respect to a later cost reporting pe-
riod, subject to clause (iii), the target amount for
the preceding 12-month cost reporting period, in-
creased by the applicable percentage increase under
subparagraph (B)(ii) for the cost reporting period.
‘‘(ii) A hospital described in this clause is a hos-
pital—
‘‘(I) which is described in clause (iv) of sub-
section (d)(1)(B);
‘‘(II) which has not received the additional pay-
ment amount described in paragraph (1)(A) for at
least 2 consecutive years; and
121
‘‘(III) for which the sum of the amounts de-
scribed in subclauses (I) and (II) of subsection
(d)(5)(F)(vi) in the period described in clause (i) ex-
ceeds 25 percent.
‘‘(iii) Notwithstanding clause (i)(II), if, after July 1,
1995, a hospital is still described in clause (ii), there shall
be substituted for the base cost reporting period described
in clause (i)(I) a subsequent reporting period chosen by
the Secretary which shall be one of the fiscal years de-
scribed in clause (ii)(II) of the hospital, but only if such
substitution results in an increase in the target amount
for the hospital.
‘‘(iv) In making available to the hospital the pay-
ments described in section 1815(e)(2), the Secretary shall
take into account the enactment of this subparagraph,
and, effective as of the date of the enactment of this sub-
paragraph, shall increase such payments as if the target
amount of the hospital had been established pursuant to
this subparagraph as of such date.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsection (a) shall be effective with respect to cost
reporting periods beginning on or after July 1,
1993.
122
(2) SPECIAL RULE FOR HOSPITALS WITH EX-
CEPTION OR ADJUSTMENT REQUESTS PENDING.—In
the case of a hospital described in clause (iv) or (v)
of section 1886(d)(1)(B) of the Social Security Act
and that has filed a request for an exception or ad-
justment pursuant to section 1886(b)(4) of such Act
on or after October 1, 1990, and before June 1,
1993, the provisions of this section shall, at the op-
tion of the hospital, apply to the hospital for cost re-
porting periods during which and after such request
was filed.
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