SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Fairness in Reimbursement 
Act of 2001''.

SEC. 2. IMPROVING FAIRNESS OF PAYMENTS TO PROVIDERS UNDER THE MEDICARE 
              FEE-FOR-SERVICE PROGRAM.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is 
amended by adding at the end the following new section:

 ``improving fairness of payments under the original medicare fee-for-
                            service program

    ``Sec. 1897. (a) Establishment of System.--Notwithstanding any 
other provision of law, the Secretary shall establish a system for 
making adjustments to the amount of payment made to entities and 
individuals for items and services provided under the original medicare 
fee-for-service program under parts A and B.
    ``(b) System Requirements.--
            ``(1) Adjustments.--Under the system described in 
        subsection (a), the Secretary (beginning in 2002) shall make 
        the following adjustments:
                    ``(A) Certain states above national average.--If a 
                State average per beneficiary amount for a year is 
                greater than 105 percent (or 110 percent in the case of 
                the determination made in 2001) of the national average 
                per beneficiary amount for such year, then the 
                Secretary shall reduce the amount of applicable 
                payments in such a manner as will result (as estimated 
                by the Secretary) in the State average per beneficiary 
                amount for the subsequent year being at 105 percent (or 
                110 percent in the case of payments made in 2002) of 
                the national average per beneficiary amount for such 
                subsequent year.
                    ``(B) Certain states below national average.--If a 
                State average per beneficiary amount for a year is less 
                than 95 percent (or 90 percent in the case of the 
                determination made in 2001) of the national average per 
                beneficiary amount for such year, then the Secretary 
                shall increase the amount of applicable payments in 
                such a manner as will result (as estimated by the 
                Secretary) in the State average per beneficiary amount 
                for the subsequent year being at 95 percent (or 90 
                percent in the case of payments made in 2002) of the 
                national average per beneficiary amount for such 
                subsequent year.
            ``(2) Determination of averages.--
                    ``(A) State average per beneficiary amount.--Each 
                year (beginning in 2001), the Secretary shall determine 
                a State average per beneficiary amount for each State 
                which shall be equal to the Secretary's estimate of the 
                average amount of expenditures under the original 
                medicare fee-for-service program under parts A and B 
                for the year for a beneficiary enrolled under such 
                parts that resides in the State
                    ``(B) National average per beneficiary amount.--
                Each year (beginning in 2001), the Secretary shall 
                determine the national average per beneficiary amount 
                which shall be equal to the average of the State 
                average per beneficiary amounts determined under 
                subparagraph (B) for the year.
            ``(3) Definitions.--In this section:
                    ``(A) Applicable payments.--The term `applicable 
                payments' means payments made to entities and 
                individuals for items and services provided under the 
                original medicare fee-for-service program under parts A 
                and B to beneficiaries enrolled under such parts that 
                reside in the State.
                    ``(B) State.--The term `State' has the meaning 
                given such term in section 210(h).
    ``(c) Beneficiaries Held Harmless.--The provisions of this section 
shall not effect--
            ``(1) the entitlement to items and services of a 
        beneficiary under this title, including the scope of such items 
        and services; or
            ``(2) any liability of the beneficiary with respect to such 
        items and services.
    ``(d) Regulations.--
            ``(1) In general.--The Secretary, in consultation with the 
        Medicare Payment Advisory Commission, shall promulgate 
        regulations to carry out this section.
            ``(2) Protecting rural communities.--In promulgating the 
        regulations pursuant to paragraph (1), the Secretary shall give 
        special consideration to rural areas.
    ``(e) Budget Neutrality.--The Secretary shall ensure that the 
provisions contained in this section do not cause the estimated amount 
of expenditures under this title for a year to increase or decrease 
from the estimated amount of expenditures under this title that would 
have been made in such year if this section had not been enacted.''.

SEC. 3. IMPROVING FAIRNESS OF PAYMENTS FOR PHYSICIANS' SERVICES UNDER 
              THE MEDICARE FEE-FOR-SERVICE PROGRAM.

    (a) Adjustment to Geographic Indices Under the Physician Fee 
Schedule.--Section 1848(e)(1) of the Social Security Act (42 U.S.C. 
1395w-4(e)(1)) is amended--
            (1) in subparagraph (A), by striking ``(B) and (C)'' and 
        inserting (B), (C), and (D)'' in the matter preceding clause 
        (i);
            (2) by redesignating subparagraph (D) as subparagraph (E); 
        and
            (3) by adding after subparagraph (C) the following new 
        subparagraph:
                    ``(D) Floor and ceiling on geographic indices.--If 
                any index established under clause (i), (ii), or (iii) 
                of subparagraph (A) or under subparagraph (B), after 
                application of the second sentence of subparagraph (C), 
                is--
                            ``(i) less that 0.950, the Secretary shall 
                        increase such index to 0.950; and
                            ``(ii) greater that 1.05, the Secretary 
                        shall reduce such index to 1.05.''.
    (b) Budget Neutrality Adjustment for Application of Floor and 
Ceiling on Geographic Adjustment.--Section 1848(d) of the Social 
Security Act (42 U.S.C. 1395w-4(d)) is amended--
            (1) in paragraph (1)(A), by striking ``The conversion'' and 
        inserting ``Subject to paragraph (5), the conversion''; and
            (2) by adding at the end the following new paragraph:
                    ``(5) Budget neutrality adjustment for application 
                of floor and ceiling on geographic adjustment.--Before 
                applying an update for a year under this subsection, 
                the Secretary shall (if necessary) provide for an 
                adjustment to the conversion factor for that year to 
                ensure that the aggregate payments under this part in 
                that year shall be equal to aggregate payments that 
                would have been made under such part in that year if 
                subsection (e)(1)(D) had not been enacted.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments for items and services provided on and after January 
1, 2002.
Output: Medicare Fairness in Reimbursement Act of 2001 - Amends title XVIII (Medicare) of the Social Security Act to instruct the Secretary of Health and Human Services to establish a system for making adjustments to payments for items and services provided under the original Medicare fee-for-service program, with specified formulae for States whose average per beneficiary amount is: (1) greater than 105 percent of the national average; or (2) less than 95 percent of the national average. Authorizes the Secretary to make specified related adjustments to geographic indices under the Medicare physician fee schedule in certain circumstances.