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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.
Output:
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.