To amend title XVIII of the Social Security Act to provide for national standardized payment amounts for inpatient hospital services furnished under the Medicare Program.

SECTION 1. ESTABLISHING A SINGLE STANDARDIZED AMOUNT UNDER MEDICARE 
              INPATIENT HOSPITAL PPS.

    (a) In General.--Section 1886(d)(3)(A) of the Social Security Act 
(42 U.S.C. 1395ww(d)(3)(A)) is amended--
            (1) in clause (iv), by inserting ``and ending on or before 
        September 30, 2001,'' after ``October 1, 1995,''; and
            (2) by redesignating clauses (v) and (vi) as clauses (vii) 
        and (viii), respectively, and inserting after clause (iv) the 
        following new clauses:
            ``(v) For discharges occurring in the fiscal year beginning 
        on October 1, 2001, the average standardized amount for 
        hospitals located in areas other than a large urban area shall 
        be equal to the average standardized amount for hospitals 
        located in a large urban area.
            ``(vi) For discharges occurring in a fiscal year beginning 
        on or after October 1, 2002, the Secretary shall compute an 
        average standardized amount for hospitals located in all areas 
        within the United States equal to the average standardized 
        amount computed under clause (v) or this clause for the 
        previous fiscal year increased by the applicable percentage 
        increase under subsection (b)(3)(B)(i) for the fiscal year 
        involved.''.
    (b) Conforming Amendments.--
            (1) Update factor.--Section 1886(b)(3)(B)(i)(XVII) of the 
        Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XVII)) is 
        amended by striking ``for hospitals in all areas,'' and 
        inserting ``for hospitals located in a large urban area,''.
            (2) Computing drg-specific rates.--
                    (A) In general.--Section 1886(d)(3)(D) of such Act 
                (42 U.S.C. 1395ww(d)(3)(D)) is amended--
                            (i) in the heading by striking ``in 
                        different areas'';
                            (ii) in the matter preceding clause (i)--
                                    (I) by inserting ``for fiscal years 
                                before fiscal year 1997'' before ``a 
                                regional DRG prospective payment rate 
                                for each region,''; and
                                    (II) by striking ``each of which 
                                is'';
                            (iii) in clause (i)--
                                    (I) by inserting ``for fiscal years 
                                before fiscal year 2002,'' after 
                                ``(i)''; and
                                    (II) by striking ``and'' at the 
                                end;
                            (iv) in clause (ii)--
                                    (I) by inserting ``for fiscal years 
                                before fiscal year 2002,'' after 
                                ``(ii)''; and
                                    (II) by striking the period at the 
                                end and inserting ``; and''; and
                            (v) by adding at the end the following new 
                        clause:
                    ``(iii) for a fiscal year beginning after fiscal 
                year 2001, for hospitals located in all areas, to the 
                product of--
                            ``(I) the applicable average standardized 
                        amount (computed under subparagraph (A)), 
                        reduced under subparagraph (B), and adjusted or 
                        reduced under subparagraph (C) for the fiscal 
                        year; and
                            ``(II) the weighting factor (determined 
                        under paragraph (4)(B)) for that diagnosis-
                        related group.''.
                    (B) Technical conforming sunset.--Section 
                1886(d)(3) of such Act (42 U.S.C. 1395ww(d)(3)) is 
                amended in the matter preceding subparagraph (A) by 
                inserting ``for fiscal years before fiscal year 1997'' 
                before ``a regional DRG prospective payment rate''.

SEC. 2. FLOOR ON AREA WAGE ADJUSTMENT FACTORS USED UNDER MEDICARE PPS 
              FOR INPATIENT AND OUTPATIENT HOSPITAL SERVICES.

    (a) Inpatient PPS.--Section 1886(d)(3)(E) of the Social Security 
Act (42 U.S.C. 1395ww(d)(3)(E)) is amended--
            (1) by inserting ``(i) In general.--'' before ``The 
        Secretary'', and adjusting the margin two ems to the right;
            (2) by striking ``The Secretary'' and inserting ``Subject 
        to clause (ii), the Secretary''; and
            (3) by adding at the end the following:
                    ``(ii) Floor on area wage adjustment factor.--
                Notwithstanding clause (i), in determining payments 
                under this subsection for discharges occurring on or 
                after October 1, 2001, the Secretary shall substitute a 
                factor of .925 for any factor that would otherwise 
                apply under such clause that is less than .925. Nothing 
                in this clause shall be construed as authorizing--
                            ``(I) the application of the last sentence 
                        of clause (i) to any substitution made pursuant 
                        to this clause, or
                            ``(II) the application of the preceding 
                        sentence of this clause to adjustments for area 
                        wage levels made under other payment systems 
                        established under this title (other than the 
                        payment system under section 1833(t)) to which 
                        the factors established under clause (i) 
                        apply.''.
    (b) Outpatient PPS.--Section 1833(t)(2) of the Social Security Act 
(42 U.S.C. 1395l(t)(2)) is amended by adding at the end the following: 
``For purposes of subparagraph (D) for items and services furnished on 
or after October 1, 2001, if the factors established under clause (i) 
of section 1886(d)(3)(E) are used to adjust for relative differences in 
labor and labor-related costs under the payment system established 
under this subsection, the provisions of clause (ii) of such section 
(relating to a floor on area wage adjustment factor) shall apply to 
such factors, as used in this subsection, in the same manner and to the 
same extent (including waiving the applicability of the requirement for 
such floor to be applied in a budget neutral manner) as they apply to 
factors under section 1886.''.

Summary: Amends title XVIII (Medicare) of the Social Security Act (SSA) to: (1) mandate a single national average standardized payment amount for inpatient hospital services furnished, regardless of whether in an urban or non-urban area, under the Medicare prospective payment system (PPS) for discharges occurring in FY 2002 and thereafter; and (2) establish a minimum factor of .925 as a floor for area wage adjustment factors used under the PPS for inpatient and outpatient hospital services.