To amend title XVIII of the Social Security Act to increase the minimum percentage increase under the Medicare+Choice program, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Equity and Access Act''.

SEC. 2. 2-YEAR INCREASE IN MINIMUM PERCENTAGE INCREASE.

    Section 1853(c)(1)(C) of the Social Security Act (42 U.S.C. 1395w-
23(c)(1)(C)) is amended--
            (1) in clause (iv), by striking ``and each succeeding 
        year'' and inserting ``and 2003''; and
            (2) by inserting at the end the following new clauses:
                            ``(v) For 2004 and 2005, 106.5 percent of 
                        the annual Medicare+Choice capitation rate 
                        under this paragraph for the area for the 
                        previous year.
                            ``(vi) For 2006 and each succeeding year, 
                        102 percent of the annual Medicare+Choice 
                        capitation rate under this paragraph for the 
                        area for the previous year.''.

SEC. 3. INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO 
              MEDICARE-ELIGIBLE BENEFICIARIES IN CALCULATION OF 
              MEDICARE+CHOICE PAYMENT RATES.

    Section 1853(c)(3) of the Social Security Act (42 U.S.C. 1395w-
23(c)(3)) is amended--
            (1) in subparagraph (A), by striking ``subparagraph (B)'' 
        and inserting ``subparagraphs (B) and (E)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Inclusion of costs of dod and va military 
                facility services to medicare-eligible beneficiaries.--
                In determining the area-specific Medicare+Choice 
                capitation rate under subparagraph (A) for a year 
                (beginning with 2004), the annual per capita rate of 
                payment for 1997 determined under section 1876(a)(1)(C) 
                shall be adjusted to include in the rate the 
                Secretary's estimate, on a per capita basis, of the 
                amount of additional payments that would have been made 
                in the area involved under this title if individuals 
                entitled to benefits under this title had not received 
                services from facilities of the Department of Defense 
                or the Department of Veterans Affairs.''.

SEC. 4. AVOIDING DUPLICATIVE STATE REGULATION.

    (a) In General.--Section 1856(b)(3) of the Social Security Act (42 
U.S.C. 1395w-26(b)(3)) is amended to read as follows:
            ``(3) Relation to state laws.--The standards established 
        under this subsection shall supersede any State law or 
        regulation (other than State licensing laws or State laws 
        relating to plan solvency) with respect to Medicare+Choice 
        plans which are offered by Medicare+Choice organizations under 
        this part.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 5. MEDICARE+CHOICE QUALITY PERFORMANCE PAYMENT INCENTIVE PROGRAM.

    (a) Establishment of Program.--
            (1) In general.--The Secretary of Health and Human Services 
        shall establish a program to provide financial incentive awards 
        to Medicare+Choice organizations offering Medicare+Choice plans 
        under part C of title XVIII of the Social Security Act that 
        demonstrate the provision of superior quality health care to 
        enrollees under the plan.
            (2) Period of program.--Awards under the program shall be 
        made during 2005 and 2006, and shall be based upon the most 
        recent available quality data.
    (b) Awards.--
            (1) In general.--Of the amounts provided for the program 
        under subsection (f) in each year, the Secretary shall 
        allocate--
                    (A) 75 percent of such amounts for National 
                Performance Quality Awards (described in subsection 
                (c)), and
                    (B) 25 percent of such amounts for State 
                Performance Quality Awards (described in subsection 
                (d)).
            (2) Limitations on Awards.--A Medicare+Choice organization 
        offering a Medicare+Choice plan may not receive both a National 
        and State Performance Quality Award in a year. No 
        Medicare+Choice organization offering a Medicare+Choice plan is 
        eligible for an award under this section unless it offers 
        benefits throughout the year in which the award is paid.
            (3) Amount of award.--The amount of an award to a 
        Medicare+Choice organization offering a Medicare+Choice plan 
        eligible for the award shall be determined by multiplying the 
        number of beneficiaries enrolled under the plan on the first 
        day of the year for which the award is paid times a uniform 
        dollar amount established by the Secretary. In no case may the 
        uniform dollar amount for a State Performance Quality Award 
        exceed the dollar amount for a National Performance Quality 
        Award for the year involved.
            (4) Use of Awards.--Financial incentives received under an 
        award under this section may only be used for the following 
        purposes:
                    (A) To reduce any beneficiary cost-sharing 
                applicable under the plan.
                    (B) To reduce any beneficiary premiums applicable 
                under the plan.
                    (C) To initiate, continue, or enhance a 
                comprehensive disease management program or health care 
                quality programs for beneficiaries.
                    (D) To enhance beneficiary benefits under the plan.
                    (E) To utilize the stabilization fund described in 
                section 1854(f)(2) of the Social Security Act (42 
                U.S.C. 1395w-24(f)(2)).
            (5) Comprehensive disease management program described.--A 
        comprehensive disease management program referred to in 
        paragraph (4)(C) is a comprehensive program to manage chronic 
        disease that includes the following:
                    (A) A population identification process.
                    (B) Evidence based practice guidelines.
                    (C) Collaborative practice models that include 
                physician and providers of support services.
                    (D) Patient self-management education which may 
                include primary prevention, behavior modification 
                programs, and compliance and surveillance.
                    (E) Process and outcome measurement, evaluation, 
                and management.
                    (F) Routine reporting among health care providers 
                concerned and procedures for feedback.
                    (G) Such other components that the Secretary 
                determines reasonably improve health care outcomes.
    (c) National Performance Quality Awards.--
            (1) In general.--The Secretary shall only award a National 
        Performance Quality Award to Medicare+Choice organizations with 
        respect to the Medicare+Choice plans offered by the 
        organizations that demonstrate superior quality in the health 
        care furnished to its enrollees.
            (2) Mandatory awards.--National Performance Quality Awards 
        shall be given to the Medicare+Choice organizations with 
        respect to the Medicare+Choice plans that receive ratings in 
        the top 25th percentile of all plans rated by the Secretary 
        pursuant to subsection (e).
    (d) State Performance Quality Awards.--
            (1) In general.--The Secretary shall only award a State 
        Performance Quality Award to Medicare+Choice organizations with 
        respect to the Medicare+Choice plans offered by the 
        organizations in that State that demonstrate the highest 
        quality in the health care furnished to its enrollees.
            (2) Requirement for 2 plans.--A State Performance Quality 
        Award may not be awarded in a State that has less than two 
        Medicare+Choice organizations offering Medicare+Choice plans.
            (3) Minimum rating required.--A State Performance Quality 
        Award shall be awarded to Medicare+Choice organizations 
        offering Medicare+Choice plans in a State that receive a rating 
        by the Secretary pursuant to subsection (e) in the 60th 
        percentile, or higher, of the national ranking of all eligible 
        plans.
            (4) Special consideration.--The Secretary may provide 
        special consideration to Medicare+Choice organizations offering 
        Medicare+Choice plans that serve predominantly rural areas or 
        that demonstrate significant quality care improvements.
    (e) Rating Methodology.--In determining which Medicare+Choice 
organization offering Medicare+Choice plans qualify for an award under 
this section, the Secretary shall develop a scoring and ranking system 
using--
            (1) the 2003 MCO standards and guideline methodology of the 
        National Committee for Quality Assurance for awarding total 
        HEDIS points (based on HEDIS and CAHPS measures) with an 
        adjustment to incorporate the following three HEDIS outcome 
        measures--
                    (A) cholesterol control after acute cardiovascular 
                events,
                    (B) HbA1c control for comprehensive diabetes care, 
                and
                    (C) cholesterol control for comprehensive diabetes 
                care), and
            (2) audited HEDIS outcomes and process measures and CAHPS 
        data as reported to the Department of Health and Human 
        Services.
    (f) Payment From Medicare Trust Funds.--The Secretary shall provide 
for the transfer from the Federal Hospital Insurance Trust Fund and the 
Federal Supplementary Insurance Trust Fund under title XVIII of the 
Social Security Act (42 U.S.C. 1395i, 1395t), in such proportions as 
the Secretary determines to be appropriate, of $500,000,000 for each of 
2005 and 2006 for the costs of carrying out the project under this 
section.

SEC. 6. INSTITUTE OF MEDICINE REPORT ON PAYMENT INCENTIVES AND 
              PERFORMANCE UNDER THE MEDICARE+CHOICE PROGRAM.

    (a) Study.--The Secretary of Health and Human Services shall enter 
into an arrangement with the Institute of Medicine of the National 
Academy of Sciences under which the Institute shall conduct a study on 
clinical outcomes, performance, and quality of care under the 
Medicare+Choice program under part C of title XVIII of the Social 
Security Act.
    (b) Matters Studied.--
            (1) In general.--In conducting the study under subsection 
        (a), the Institute shall review and evaluate the public and 
        private sector experience related to the establishment of 
        performance measures and payment incentives. The review shall 
        include an evaluation of the success, efficiency, and utility 
        of structural process and performance measurements, and 
        different methodologies that link performance to payment 
        incentives. The review shall include the use of incentives--
                    (A) aimed at plans and their enrollees;
                    (B) aimed at providers and their patients;
                    (C) to encourage consumers to purchase based on 
                quality and value; and
                    (D) to encourage multiple purchasers, providers, 
                beneficiaries, and plans within a community to work 
                together to improve performance.
            (2) Identification of options.--As part of the study, the 
        Institute shall identify options for providing incentives and 
        rewarding performance, improve quality, outcomes, and 
        efficiency in the delivery of programs and services under the 
        Medicare+Choice program, including--
                    (A) periodic updates of performance measurements to 
                continue rewarding outstanding performance and 
                encourage improvements;
                    (B) payments that vary by type of plan, such as 
                preferred provider organization plans and MSA plans;
                    (C) extension of incentives in the Medicare+Choice 
                program to the fee for service program under title 
                XVIII of the Social Security Act; and
                    (D) performance measures needed to implement 
                alternative methodologies to align payments with 
                performance.
    (c) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Institute shall submit to Congress and the 
Secretary a report on the study conducted under subsection (a).

Summary: Medicare Equity and Access Act - Amends part C (Medicare+Choice) of title XVIII (Medicare) of the Social Security Act to provide for: (1) a two-year increase in the minimum percentage increase used in the calculation of annual Medicare+Choice capitation rates; (2) inclusion in the calculation of Medicare+Choice payment rates of the costs of Department of Defense and Department of Veterans Affairs military facility services to Medicare-eligible beneficiaries; and (3) preemption of duplicative State regulation.Directs the Secretary of Health and Human Services to: (1) establish a program to provide financial incentive awards to Medicare+Choice organizations offering plans that demonstrate the provision of superior quality health care to enrollees; (2) only award a National Performance Quality Award to Medicare+Choice organizations for plans that demonstrate superior quality in health care; (3) only award a State Performance Quality Award to Medicare+Choice organizations for plans that demonstrate the highest quality in health care furnished in the State; and (4) enter into an arrangement for the Institute of Medicine of the National Academy of Sciences to study clinical outcomes, performance, and quality of care under the Medicare+Choice program.