To allow applications for the preferred provider organization (PPO) demonstration project under the Medicare+Choice program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Iowa Medicare PPO Demonstration Act 
of 2003''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds the following:
            (1) When the reimbursement system under the Medicare 
        program, which evolved into the Prospective Payment System, was 
        created in 1965, Iowa had pioneered in cost containment 
        techniques and therefore received lower initial reimbursement 
        rates. As inflation adjustments occurred over the years, the 
        differential between reimbursement rates in the various states 
        widened even though many medical costs are themselves similar.
            (2) Despite the fact that Iowa ranks first among all states 
        in percent of citizens over 85, and fourth in citizens over 65, 
        Medicare beneficiaries in Iowa access the health care system 
        less frequently and experience shorter hospitalizations than 
        residents of many other States.
            (3) The inflation in general health care costs for which 
        Iowa has been relatively undercompensated coupled with the 
        unique problems of serving a disproportionately aging 
        population in a decentralized rural setting has created a 
        crisis for Iowa's health care providers and the Medicare 
        beneficiaries they serve.
            (4) The inequity inherent in the Medicare reimbursement 
        differential is symbolized by the fact that Medicare 
        reimbursements per beneficiary for Iowa is $3414, the lowest in 
        the nation, while the figure for Louisiana, the highest, is 
        $8033, or about two and one half times as great.
            (5) The average cost of living in the two states taken as a 
        percent of that in the entire United States, by contrast, is 
        almost the same, 92.5 for Iowa and 97.4 for Louisiana.
            (6) If the inequity in Medicare reimbursements did not 
        exist, the modest cost of living differential which exists 
        between Iowa and states such as Louisiana would be even closer 
        than indicated by the statistics described in paragraph (5) 
        because health care spending represents approximately 12 
        percent of the Gross Domestic Product (GDP), and when an 
        entitlement program of Federal government, such as the Medicare 
        program, provides disproportionately more resources to 
        individuals in one State over another State, generalized 
        economic, and specific health care cost, differentials occur.
            (7) Because of low Medicare rates, Iowa counties, 
        particularly but not exclusively the smaller ones, are 
        experiencing shortages of doctors and other health care 
        providers, which in the near future could cause a significant 
        access to health care crisis for many Iowa citizens.
            (8) All citizens pay into Social Security under a uniform 
        set of national standards.
            (9) Simple fairness and equity in the delivery of 
        government services dictate that the differences in Medicare 
        reimbursement received by each of the several States should not 
        fall far below the differences in the cost of living therein.
            (10) Low payment rates and a shortage of providers 
        discourage Medicare+Choice organizations from offering plans in 
        rural areas, and this unavailability of a Medicare+Choice 
        option in such areas is unfair to Medicare residents who would 
        like to take advantage of the additional services and other 
        benefits offered through Medicare+Choice plans.
            (11) In order to encourage the establishment of 
        Medicare+Choice plans in rural States, the Medicare program 
        needs to provide incentives to States, insurers, and other 
        entities interested in sponsoring Medicare+Choice plans in such 
        States. Given Iowa's low Medicare reimbursement rate, it is 
        unlikely that any new health care delivery model can attract 
        sufficient providers unless current Medicare fee-for-service 
        payment rates for those providers are exceeded.
            (12) Preferred provider organizations are uniquely 
        positioned to provide improved care management and clinical 
        outcomes in part due to the wide-ranging involvement of health 
        care professionals at each stage of a patient-oriented care 
        process.
            (13) State governments should be encouraged to support and, 
        where appropriate, oversee the establishment of organizations 
        which make available health care services to individuals 
        residing in underserved areas in the State.
    (b) Purpose.--In order to insure that Iowa's health care facilities 
and providers have access to the most innovative reimbursement options 
available under the Medicare program, the Secretary of Health and Human 
Services may approve a demonstration project to test ways in which 
cooperative efforts among insurers, institutional providers of 
services, and health care professionals may provide better access to 
health care services for Medicare beneficiaries. The demonstration 
project would be designed to improve access to health care services 
through the Medicare+Choice program.

SEC. 3. CONSIDERATION OF APPLICATIONS FOR THE PREFERRED PROVIDER 
              ORGANIZATION (PPO) DEMONSTRATION PROJECT UNDER THE 
              MEDICARE+CHOICE PROGRAM.

    (a) In General.--The Secretary of Health and Human Services shall 
allow the receipt and approval of applications described in subsection 
(b) for a demonstration project conducted under section 402 of the 
Social Security Amendments of 1967 for participation of preferred 
provider organizations (PPOs) under the Medicare+Choice program under 
part C of title XVIII of the Social Security Act, with the 
understanding that the demonstration program could cause Medicare 
reimbursement in Iowa to rise to a level more in line with the average 
national Medicare reimbursement rate.
    (b) Application Described.--
            (1) In general.--An application described in this 
        subsection is an application by an appropriate insurer 
        domiciled and licensed to sell health insurance or health 
        benefits coverage in the State of Iowa (which for purposes of 
        this project shall include the Illinois, as well as the Iowa, 
        parts of the ``Quad Cities'') to offer a Medicare+Choice plan 
        in that State that meets the requirements described in 
        paragraph (2).
            (2) Annual plan requirements.--The requirements of a plan 
        for each contract year for which an application is granted 
        under paragraph (1) are as follows:
                    (A) All licensed physicians, hospitals, and 
                practitioners (as defined in section 1842(b)(18)(C) of 
                the Social Security Act) in the State are eligible to 
                be preferred providers under the insurer's network to 
                ensure that the health care needs of the Medicare 
                beneficiaries to be served by the network are met.
                    (B) Appropriate adjustments are made to the payment 
                rates to hospitals for indirect medical education costs 
                and for being a disproportionate share hospital in 
                manner similar to which such payment adjustments are 
                made under subparagraphs (B) and (F), respectively, of 
                section 1886(d)(5) of the Social Security Act.
                    (C) As a preferred provider, a provider of 
                services, physician, and health care practitioner shall 
                be reimbursed for services furnished to Medicare 
                beneficiaries at a rate no less than 110 percent of the 
                payment rate that would otherwise apply for the service 
                under part A or B, as the case may be.
                    (D) The Secretary provides partial underwriting of 
                the financial risk under the plan.
                    (E) The insurer should provide for health care 
                benefits in addition to those required under parts A 
                and B of such title (such as coverage of the costs of 
                some or all outpatient prescription drugs, hearing 
                aids, or eye glasses or reduced cost-sharing), after 
                taking into account costs of administration.
            (3) Additional payment for start up costs.--In addition to 
        payments made to the insurer under paragraph (2), the Secretary 
        may provide for a payment during the initial phase of the 
        project to reflect additional costs associated with the 
        establishment of preferred provider organizations under the 
        plan.
    (c) Period of Demonstration Project.--A demonstration project 
carried out under this section shall operate for a period of 5 years.
    (d) Advisory Board.--
            (1) Establishment.--As a part of the demonstration project 
        conducted under this section, the insurer shall provide for an 
        advisory board to review the appropriateness of proposed 
        payment rates and payment rate changes by the insurer for 
        services furnished by providers under the demonstration project 
        before such rates or changes take effect.
            (2) Composition.--The Board shall be composed of 7 members 
        with expertise in the field of health care as follows:
                    (A) The Attorney General of Iowa.
                    (B) 2 members appointed by the insurer upon the 
                recommendation of the Governor of Iowa.
                    (C) 2 members appointed by the insurer upon the 
                recommendation of the Iowa Hospital Association.
                    (D) 2 members appointed by the insurer upon the 
                recommendation of the Iowa Medical Society.
            (3) Terms of appointment.--The term of any appointment 
        under paragraph (2) shall be 5 years.
            (4) Meetings.--The advisory board shall meet at the call of 
        its chairman or a majority of its members.
            (5) Vacancies.--A vacancy on the advisory board shall be 
        filled in the same manner in which the original appointment was 
        made not later than 30 days after the advisory board is given 
        notice of the vacancy and shall not affect the power of the 
        remaining members to execute the duties of the advisory board .
            (6) Compensation.--Members of the advisory board shall 
        receive no additional pay, allowances, or benefits by reason of 
        their service.

Summary: Iowa Medicare PPO Demonstration Act of 2003 - Directs the Secretary of Health and Human Services to allow the receipt and approval of applications for a demonstration project conducted under the Social Security Amendments of 1967 for participation of preferred provider organizations under the Medicare+Choice program under part C of title XVIII of the Social Security Act, with the understanding that the demonstration program could cause Medicare reimbursement in Iowa to rise to a level more in line with the average national Medicare reimbursement rate.