SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Uniformed Services 
Medicare Subvention Demonstration Project Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Establishment of demonstration project.
Sec. 4. Determination of reimbursement amounts.
Sec. 5. Reporting requirements.

SEC. 2. DEFINITIONS.

    For purposes of this Act:
            (1) Medicare-eligible covered military beneficiary.--The 
        term ``medicare-eligible covered military beneficiary'' means a 
        beneficiary under chapter 55 of title 10, United States Code, 
        who--
                    (A) is entitled to hospital insurance benefits 
                under part A of title XVIII of the Social Security Act 
                (42 U.S.C. 1395c et seq.);
                    (B) is enrolled in the supplementary medical 
                insurance program under part B of such title (42 U.S.C. 
                1395j et seq.); and
                    (C) resides within a geographic area designated 
                under section 3(b) as a location for the demonstration 
                project.
            (2) TRICARE program.--The term ``TRICARE program'' means 
        the managed health care program that is established by the 
        Secretary of Defense under the authority of chapter 55 of title 
        10, United States Code, principally section 1097 of such title, 
        and includes the competitive selection of contractors to 
        financially underwrite the delivery of health care services 
        under the Civilian Health and Medical Program of the Uniformed 
        Services.
            (3) Demonstration project.--The term ``demonstration 
        project'' means the uniformed services medicare subvention 
        demonstration project established under section 3.
            (4) Secretaries.--The term ``Secretaries'' means the 
        Secretary of Defense and the Secretary of Health and Human 
        Services acting jointly, except that in section 6, the term 
        means the Secretary of Veterans Affairs and the Secretary of 
        Health and Human Services acting jointly.

SEC. 3. ESTABLISHMENT OF DEMONSTRATION PROJECT.

    (a) Establishment Required.--The Secretary of Defense and the 
Secretary of Health and Human Services shall jointly establish a 
demonstration project to provide the Department of Defense with 
reimbursement, in accordance with section 4, from the medicare program 
under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
for health care services provided to medicare-eligible covered military 
beneficiaries who enroll in the demonstration project and receive the 
health care services through the managed care option of the TRICARE 
program.
    (b) Location of Project.--The Secretaries shall conduct the 
demonstration project in not more than five geographic areas of the 
United States designated by the Secretaries.
    (c) Duration.--The Secretaries shall conduct the demonstration 
project during the three-year period beginning on January 1, 1998.
    (d) Voluntary Enrollment; Effect of Enrollment.--Enrollment of 
medicare-eligible covered military beneficiaries in the demonstration 
project shall be voluntary, subject to the capacity and funding 
limitations specified in section 4. In the case of a medicare-eligible 
covered military beneficiary who enrolls in the demonstration project, 
payments may not be made under title XVIII of the Social Security Act 
(42 U.S.C. 1395 et seq.) other than for health care services provided 
through the demonstration project, except that the Secretaries may 
provide exceptions for emergencies or other situations as the 
Secretaries consider appropriate.
    (e) TRICARE Program Enrollment Fee Waiver.--The Secretary of 
Defense shall waive the enrollment fee applicable to any medicare-
eligible covered military beneficiary enrolled in the managed care 
option of the TRICARE program for whom reimbursement may be made under 
section 4.
    (f) Modification of TRICARE Contracts.--In carrying out the 
demonstration project, the Secretary of Defense may amend existing 
TRICARE program contracts to incorporate provisions applicable to 
medicare-eligible covered military beneficiaries enrolled in the 
demonstration project.
    (g) Cost Sharing.--The Secretary of Defense may establish cost 
sharing requirements for medicare-eligible covered military 
beneficiaries who enroll in the demonstration project.
    (h) Expansion of Demonstration Project.--The Secretaries shall 
include in the demonstration project a provision for expanding the 
demonstration project to incorporate health care services provided to 
medicare-eligible covered military beneficiaries under the fee-for-
service options of the TRICARE program if, in the report submitted 
under section 713 of the National Defense Authorization Act for Fiscal 
Year 1997 (Public Law 104-106; 110 Stat. 2591), the Secretaries 
determined that such expansion of the demonstration project is feasible 
and advisable.

SEC. 4. DETERMINATION OF REIMBURSEMENT AMOUNTS.

    (a) Reimbursement of Department of Defense.--
            (1) Basis of payments.--Monthly payments to the Department 
        of Defense under the demonstration project from the medicare 
        program under title XVIII of the Social Security Act (42 U.S.C. 
        1395 et seq.) shall be made on the basis that payments are made 
        under section 1876(a) of such Act (42 U.S.C. 1395mm(a)).
            (2) Amount of payments.--Subject to subsection (c), the 
        Secretary of Health and Human Services shall make payments to 
        the Department of Defense from the Federal Hospital Insurance 
        Trust Fund and the Federal Supplementary Medical Insurance 
        Trust Fund (allocated by the Secretary of Health and Human 
        Services between each trust fund based on the relative weight 
        that each trust fund contributes to the required payment) at a 
        per capita rate equal to 93 percent of the applicable adjusted 
        average per capita cost for each medicare-eligible covered 
        military beneficiary enrolled in the demonstration project in 
        excess of the number of such beneficiaries calculated under 
        subsection (b)(4) for the Department of Defense maintenance of 
        health care effort.
    (b) Maintenance of Defense Health Care Effort.--
            (1) Maintenance of effort required.--The Secretary of 
        Defense shall maintain the Department of Defense health care 
        efforts for medicare-eligible covered military beneficiaries so 
        as to avoid the imposition on the medicare program of the costs 
        of health care that medicare-eligible covered military 
        beneficiaries would be expected to receive from the Department 
        of Defense in the absence of the demonstration project.
            (2) Estimate of prior effort.--The Secretaries shall 
        estimate the amount expended by the Department of Defense for 
        fiscal year 1997 for providing health care items and services 
        (other than pharmaceuticals provided to outpatients) to 
        medicare-eligible covered military beneficiaries. Such amount 
        shall be adjusted for inflation after the first year of the 
        demonstration project, for differences between estimated and 
        actual amounts expended, and for changes in the Department of 
        Defense health care budget that exceed $100,000,000.
            (3) Distribution of effort.--The amount determined and 
        adjusted under paragraph (2) shall be divided into a portion 
        devoted to providing health care services to medicare-eligible 
        covered military beneficiaries who do not enroll in the 
        demonstration project (which of the total amount may not exceed 
        70 percent in the first year, 60 percent in the second year, 
        and 50 percent in the third year) and a portion devoted to 
        medicare-eligible covered military beneficiaries who are 
        enrolled in the demonstration project.
            (4) Target for defense effort.--The Secretaries shall 
        establish monthly targets for the number of medicare-eligible 
        covered military beneficiaries enrolled in the demonstration 
        project necessary to meet the maintenance of effort portion 
        devoted to such beneficiaries under paragraph (3).
    (c) Annual Limit on Use of Medicare Funds.--Annual medicare 
payments to the Department of Defense under subsection (a) for the 
demonstration project may not exceed $65,000,000.
    (d) Protection of Medicare Program Against Increased Costs.--
            (1) Purpose.--The purpose of this subsection is to protect 
        the medicare program against costs incurred in connection with 
        the provision of health care services to medicare-eligible 
        covered military beneficiaries enrolled in the demonstration 
        project that would not have been incurred by the medicare 
        program in the absence of the reimbursement requirement under 
        subsection (a).
            (2) Additional protections.--If the Secretaries determine 
        that the trust funds under title XVIII of the Social Security 
        Act (42 U.S.C. 1395 et seq.) still incur excess costs as a 
        result of the demonstration project, the Secretaries shall take 
        such steps as may be necessary to offset those excess costs 
        (and prevent future excess costs), including suspension or 
        termination of the demonstration project or adjustment of the 
        payment rate under subsection (a)(2).
    (e) Review by Comptroller General.--Not later than December 31 of 
each year in which the demonstration project is conducted, the 
Comptroller General shall determine and submit to the Secretaries and 
Congress a report on the extent, if any, to which the costs of the 
Secretary of Defense under the TRICARE program and the costs of the 
Secretary of Health and Human Services under the medicare program have 
increased as a result of the project.
    (f) Demonstration Project Adjustments Following Review.--Based on 
the review prepared under subsection (e), the Secretaries shall modify 
the demonstration project at the end of each year as provided in 
subsection (d)(2) to correct for any discrepancy between cost targets 
and actual spending under the demonstration project. The Secretaries 
shall provide for an annual reconciliation of payments to ensure that 
actual costs incurred by the Secretary of Defense to provide health 
care services to medicare-eligible covered military beneficiaries, 
exclusive of payments from the Secretary of Health and Human Services 
under subsection (a), met the maintenance of effort requirements under 
subsection (b).

SEC. 5. REPORTING REQUIREMENTS.

    Not later than 15 months after the establishment of the 
demonstration project, and then not later than 90 days after the end of 
the demonstration project, the Secretaries shall submit to Congress a 
report containing the following:
            (1) The number of medicare-eligible covered military 
        beneficiaries enrolling in the demonstration project instead of 
        receiving health benefits through another health insurance plan 
        (including through the medicare program).
            (2) An analysis of whether, and in what manner, easier 
        access to the military treatment system affects the number of 
        medicare-eligible covered military beneficiaries receiving 
        health benefits under the medicare program.
            (3) A list of the health insurance plans and programs that 
        were the primary payers for medicare-eligible covered military 
        beneficiaries during the year prior to their enrollment in the 
        demonstration project and the distribution of their previous 
        enrollment in such plans and programs.
            (4) An identification of cost-shifting (if any) among 
        medical care programs as a result of the demonstration project 
        and a description of the nature of any such cost-shifting.
            (5) An analysis of how the demonstration project affects 
        the overall accessibility of the military treatment system and 
        the amount of space available for point-of-service care and a 
        description of the unintended effects (if any) upon the normal 
        treatment priority system.
            (6) A description of the difficulties (if any) experienced 
        by the Department of Defense in managing the demonstration 
        project.
            (7) A description of the effects of the demonstration 
        project on military treatment facility readiness and training 
        and the probable effects of the project on overall Department 
        of Defense medical readiness and training.
            (8) A description of the effects that the demonstration 
        project, if permanent, would be expected to have on the overall 
        budget of the military health care system and the budgets of 
        individual military treatment facilities.
            (9) An analysis of whether the demonstration project 
        affects the cost to the Department of Defense of prescription 
        drugs or the accessibility, availability, and cost of such 
        drugs to program beneficiaries.
Output: Uniformed Services Medicare Subvention Demonstration Project Act - Directs the Secretaries of Defense and Health and Human Services (HHS) to jointly establish a demonstration project to provide the Department of Defense (DOD) with reimbursement, under provisions of title XVIII (Medicare) of the Social Security Act, for health services provided to Medicare-eligible covered military beneficiaries who participate in the project and receive such services through the managed care option of the TRICARE program (a DOD managed health care program).  Requires the project to be conducted during the three-year period beginning on January 1, 1998, in no more than five geographic regions designated by the Secretaries.  Makes project enrollment voluntary.  Requires the Secretary of Defense to waive the TRICARE enrollment fee for project participants for whom Medicare reimbursement may be made.  Requires inclusion in the project of a provision for expansion to incorporate health care services provided to such beneficiaries under the fee-for-services options of the TRICARE program if the Secretaries determine that such expansion is feasible and advisable. 
Directs the HHS Secretary to make monthly payments to DOD from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund representing appropriate reimbursement amounts.  Provides for the determination of such amounts. 
Directs the Secretary of Defense to:  (1) maintain the DOD health care efforts for Medicare-eligible covered military beneficiaries; (2) estimate the amount expended by DOD for FY 1997 for providing health care items and services to such beneficiaries; and (3) establish monthly targets for the number of such beneficiaries enrolled in the project necessary to meet DOD maintenance of health care efforts for such individuals.  Limits to $65 million the annual payments to DOD for the project. 
Requires the Comptroller General, for each project year, to submit to the Secretaries and the Congress a report on the extent to which costs under the TRICARE program and the Medicare program have increased as a result of the project.  Directs the Secretaries to modify the project at the end of each year to correct for any discrepancy between cost targets and actual spending under the project. 
Directs the Secretaries to submit to the Congress an interim and final report on various project aspects.