[House Report 107-539]
[From the U.S. Government Publishing Office]
107th Congress Rept. 107-539
HOUSE OF REPRESENTATIVES
2d Session Part 1
_______________________________________________________________________
MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002
__________
R E P O R T
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
to accompany
H.R. 4954
A BILL TO AMEND TITLE XVIII OF THE SOCIAL SECURITY ACT TO PROVIDE FOR A
VOLUNTARY PROGRAM FOR PRESCRIPTION DRUG COVERAGE UNDER THE MEDICARE
PROGRAM
together with
DISSENTING AND ADDITIONAL VIEWS
June 26, 2002.--Ordered to be printed
__________
U.S. GOVERNMENT PRINTING OFFICE
80-346 WASHINGTON : 2002
107th Congress Rept. 107-539
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002
_______
June 26, 2002.--Ordered to be printed
_______
Mr. Thomas, from the Committee on Ways and Means, submitted the
following
R E P O R T
together with
DISSENTING AND ADDITIONAL VIEWS
[To accompany H.R. 4954]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 4954) to amend title XVIII of the Social Security
Act to provide for a voluntary program for prescription drug
coverage under the Medicare Program, to modernize and reform
payments and the regulatory structure of the Medicare Program,
and for other purposes, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
I. Summary and Background.........................................109
A. Purpose and Summary................................. 109
B. Background and Need for Legislation................. 109
C. Legislative History................................. 111
II. Explanation of the Bill........................................112
A. Medicare Prescription Drug Benefit.................. 112
B. Medicare+Choice Revitalization and Competition
Program............................................ 129
C. Rural Health Care Improvements...................... 137
D. Provisions Relating to Part A....................... 144
E. Provisions Relating to Part B....................... 151
F. Provisions Relating to Parts A and B................ 164
G. Medicare Benefits Administrator..................... 172
H. Regulatory Reduction and Contracting Reform......... 176
I. Medicaid and Public Health.......................... 221
III. Votes of the Committee.........................................224
IV. Budget Effects of the Bill.....................................230
A. Committee Estimate of Budgetary Effects............. 230
B. Statement Regarding New Budgetary Authority and Tax
Expenditures....................................... 231
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 231
V. Other Matters To Be Discussed Under the Rules of the House.....242
VI. Changes in Existing Law Made by the Bill, as Reported..........243
VII. Dissenting and Additional Views................................406
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; REFERENCES
TO BIPA AND SECRETARY; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Medicare
Modernization and Prescription Drug Act of 2002''.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this Act an amendment is expressed
in terms of an amendment to or repeal of a section or other provision,
the reference shall be considered to be made to that section or other
provision of the Social Security Act.
(c) BIPA; Secretary.--In this Act:
(1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000, as
enacted into law by section 1(a)(6) of Public Law 106-554.
(2) Secretary.--The term ``Secretary'' means the Secretary of
Health and Human Services.
(d) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; amendments to Social Security Act; references to
BIPA and Secretary; table of contents.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
Sec. 101. Establishment of a medicare prescription drug benefit.
``Part D--Voluntary Prescription Drug Benefit Program
``Sec. 1860A. Benefits; eligibility; enrollment; and coverage
period.
``Sec. 1860B. Requirements for qualified prescription drug
coverage.
``Sec. 1860C. Beneficiary protections for qualified
prescription drug coverage.
``Sec. 1860D. Requirements for prescription drug plan (PDP)
sponsors; contracts; establishment of
standards.
``Sec. 1860E. Process for beneficiaries to select qualified
prescription drug coverage.
``Sec. 1860F. Submission of bids.
``Sec. 1860G. Premium and cost-sharing subsidies for low-income
individuals.
``Sec. 1860H. Subsidies for all medicare beneficiaries for
qualified prescription drug coverage.
``Sec. 1860I. Medicare Prescription Drug Trust Fund.
``Sec. 1860J. Definitions; treatment of references to
provisions in part C.
Sec. 102. Offering of qualified prescription drug coverage under the
Medicare+Choice program.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap transition.
Sec. 105. Medicare prescription drug discount card endorsement program.
TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE
COMPETITION PROGRAM
Subtitle A--Medicare+Choice Revitalization
Sec. 201. Medicare+Choice improvements.
Sec. 202. Making permanent change in Medicare+Choice reporting
deadlines and annual, coordinated election period.
Sec. 203. Avoiding duplicative State regulation.
Sec. 204. Specialized Medicare+Choice plans for special needs
beneficiaries.
Sec. 205. Medicare MSAs.
Sec. 206. Extension of reasonable cost and SHMO contracts.
Sec. 207. Extension of municipal health service demonstration
projects.z
Subtitle B--Medicare+Choice Competition Program
Sec. 211. Medicare+Choice competition program.
Sec. 212. Demonstration program for competitive-demonstration areas.
Sec. 213. Conforming amendments.
TITLE III--RURAL HEALTH CARE IMPROVEMENTS
Sec. 301. Reference to full market basket increase for sole community
hospitals.
Sec. 302. Enhanced disproportionate share hospital (DSH) treatment for
rural hospitals and urban hospitals with fewer than 100 beds.
Sec. 303. 2-year phased-in increase in the standardized amount in rural
and small urban areas to achieve a single, uniform standardized amount.
Sec. 304. More frequent update in weights used in hospital market
basket.
Sec. 305. Improvements to critical access hospital program.
Sec. 306. Extension of temporary increase for home health services
furnished in a rural area.
Sec. 307. Reference to 10 percent increase in payment for hospice care
furnished in a frontier area and rural hospice demonstration project.
Sec. 308. Reference to priority for hospitals located in rural or small
urban areas in redistribution of unused graduate medical education
residencies.
Sec. 309. GAO study of geographic differences in payments for
physicians' services.
Sec. 310. Providing safe harbor for certain collaborative efforts that
benefit medically underserved populations.
Sec. 311. Relief for certain non-teaching hospitals.
TITLE IV--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
Sec. 401. Revision of acute care hospital payment updates.
Sec. 402. 2-year increase in level of adjustment for indirect costs of
medical education (IME).
Sec. 403. Recognition of new medical technologies under inpatient
hospital PPS.
Sec. 404. Phase-in of Federal rate for hospitals in Puerto Rico.
Sec. 405. Reference to provision relating to enhanced disproportionate
share hospital (DSH) payments for rural hospitals and urban hospitals
with fewer than 100 beds.
Sec. 406. Reference to provision relating to 2-year phased-in increase
in the standardized amount in rural and small urban areas to achieve a
single, uniform standardized amount.
Sec. 407. Reference to provision for more frequent updates in the
weights used in hospital market basket.
Sec. 408. Reference to provision making improvements to critical access
hospital program.
Subtitle B--Skilled Nursing Facility Services
Sec. 411. Payment for covered skilled nursing facility services.
Subtitle C--Hospice
Sec. 421. Coverage of hospice consultation services.
Sec. 422. 10 percent increase in payment for hospice care furnished in
a frontier area.
Sec. 423. Rural hospice demonstration project.
Subtitle D--Other Provisions
Sec. 431. Demonstration project for use of recovery audit contractors
for part A services.
TITLE V--PROVISIONS RELATING TO PART B
Subtitle A--Physicians' Services
Sec. 501. Revision of updates for physicians' services.
Sec. 502. Studies on access to physicians' services.
Sec. 503. MedPAC report on payment for physicians' services.
Sec. 504. 1-year extension of treatment of certain physician pathology
services under medicare.
Subtitle B--Other Services
Sec. 511. Competitive acquisition of certain items and services.
Sec. 512. Payment for ambulance services.
Sec. 513. 2-year extension of moratorium on therapy caps; provisions
relating to reports.
Sec. 514. Accelerated implementation of 20 percent coinsurance for
hospital outpatient department (OPD) services; other OPD provisions.
Sec. 515. Coverage of an initial preventive physical examination.
Sec. 516. Renal dialysis services.
Sec. 517. Improved payment for certain mammography services.
Sec. 518. Waiver of part B late enrollment penalty for certain military
retirees; special enrollment period.
Sec. 519. Coverage of cholesterol and blood lipid screening.
TITLE VI--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
Sec. 601. Elimination of 15 percent reduction in payment rates under
the prospective payment system.
Sec. 602. Establishment of reduced copayment for a home health service
episode of care for certain beneficiaries.
Sec. 603. Update in home health services.
Sec. 604. OASIS Task Force; suspension of certain OASIS data collection
requirements pending Task Force submittal of report.
Sec. 605. MedPAC study on medicare margins of home health agencies.
Subtitle B--Direct Graduate Medical Education
Sec. 611. Extension of update limitation on high cost programs.
Sec. 612. Redistribution of unused resident positions.
Subtitle C--Other Provisions
Sec. 621. Modifications to Medicare Payment Advisory Commission
(MedPAC).
Sec. 622. Demonstration project for disease management for certain
medicare beneficiaries with diabetes.
Sec. 623. Demonstration project for medical adult day care services.
TITLE VII--MEDICARE BENEFITS ADMINISTRATION
Sec. 701. Establishment of Medicare Benefits Administration.
TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM
Subtitle A--Regulatory Reform
Sec. 801. Construction; definition of supplier.
Sec. 802. Issuance of regulations.
Sec. 803. Compliance with changes in regulations and policies.
Sec. 804. Reports and studies relating to regulatory reform.
Subtitle B--Contracting Reform
Sec. 811. Increased flexibility in medicare administration.
Sec. 812. Requirements for information security for medicare
administrative contractors.
Subtitle C--Education and Outreach
Sec. 821. Provider education and technical assistance.
Sec. 822. Small provider technical assistance demonstration program.
Sec. 823. Medicare provider ombudsman; medicare beneficiary ombudsman.
Sec. 824. Beneficiary outreach demonstration program.
Subtitle D--Appeals and Recovery
Sec. 831. Transfer of responsibility for medicare appeals.
Sec. 832. Process for expedited access to review.
Sec. 833. Revisions to medicare appeals process.
Sec. 834. Prepayment review.
Sec. 835. Recovery of overpayments.
Sec. 836. Provider enrollment process; right of appeal.
Sec. 837. Process for correction of minor errors and omissions on
claims without pursuing appeals process.
Sec. 838. Prior determination process for certain items and services;
advance beneficiary notices.
Subtitle E--Miscellaneous Provisions
Sec. 841. Policy development regarding evaluation and management (E &
M) documentation guidelines.
Sec. 842. Improvement in oversight of technology and coverage.
Sec. 843. Treatment of hospitals for certain services under medicare
secondary payor (MSP) provisions.
Sec. 844. EMTALA improvements.
Sec. 845. Emergency Medical Treatment and Labor Act (EMTALA) Technical
Advisory Group.
Sec. 846. Authorizing use of arrangements with other hospice programs
to provide core hospice services in certain circumstances.
Sec. 847. Application of OSHA bloodborne pathogens standard to certain
hospitals.
Sec. 848. BIPA-related technical amendments and corrections.
Sec. 849. Conforming authority to waive a program exclusion.
Sec. 850. Treatment of certain dental claims.
Sec. 851. Annual publication of list of national coverage
determinations.
TITLE IX--MEDICAID, PUBLIC HEALTH, AND OTHER HEALTH PROVISIONS
Subtitle A--Medicaid Provisions
Sec. 901. National Bipartisan Commission on the Future of Medicaid.
Sec. 902. GAO study on medicaid drug payment system.
Subtitle B--Internet Pharmacies
Sec. 911. Findings.
Sec. 912. Amendment to Federal Food, Drug, and Cosmetic Act.
Sec. 913. Public education.
Sec. 914. Study regarding coordination of regulatory activities.
Sec. 915. Effective date.
Subtitle C--Promotion of Electronic Prescription
Sec. 921. Program of grants to health care providers to implement
electronic prescription drug programs.
Subtitle D--Treatment of Rare Diseases
Sec. 931. NIH Office of Rare Diseases at National Institutes of Health.
Sec. 932. Rare disease regional centers of excellence.
Subtitle E--Other Provisions Relating to Drugs
Sec. 941. GAO study regarding direct-to-consumer advertising of
prescription drugs.
Sec. 942. Certain health professions programs regarding practice of
pharmacy.
``Subpart 3--Pharmacist Workforce Programs
``Sec. 771. Public service announcements.
``Sec. 772. Demonstration project.
``Sec. 773. Information technology.
``Sec. 774. Authorization of appropriations.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
SEC. 101. ESTABLISHMENT OF A MEDICARE PRESCRIPTION DRUG BENEFIT.
(a) In General.--Title XVIII is amended--
(1) by redesignating part D as part E; and
(2) by inserting after part C the following new part:
``Part D--Voluntary Prescription Drug Benefit Program
``SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE PERIOD.
``(a) Provision of Qualified Prescription Drug Coverage Through
Enrollment in Plans.--Subject to the succeeding provisions of this
part, each individual who is entitled to benefits under part A or is
enrolled under part B is entitled to obtain qualified prescription drug
coverage (described in section 1860B(a)) as follows:
``(1) Medicare+choice plan.--If the individual is eligible to
enroll in a Medicare+Choice plan that provides qualified
prescription drug coverage under section 1851(j), the
individual may enroll in the plan and obtain coverage through
such plan.
``(2) Prescription drug plan.--If the individual is not
enrolled in a Medicare+Choice plan that provides qualified
prescription drug coverage, the individual may enroll under
this part in a prescription drug plan (as defined in section
1860J(a)(5)).
Such individuals shall have a choice of such plans under section
1860E(d).
``(b) General Election Procedures.--
``(1) In general.--An individual eligible to make an election
under subsection (a) may elect to enroll in a prescription drug
plan under this part, or elect the option of qualified
prescription drug coverage under a Medicare+Choice plan under
part C, and to change such election only in such manner and
form as may be prescribed by regulations of the Administrator
of the Medicare Benefits Administration (appointed under
section 1808(b)) (in this part referred to as the `Medicare
Benefits Administrator') and only during an election period
prescribed in or under this subsection.
``(2) Election periods.--
``(A) In general.--Except as provided in this
paragraph, the election periods under this subsection
shall be the same as the coverage election periods
under the Medicare+Choice program under section
1851(e), including--
``(i) annual coordinated election periods;
and
``(ii) special election periods.
In applying the last sentence of section 1851(e)(4)
(relating to discontinuance of a Medicare+Choice
election during the first year of eligibility) under
this subparagraph, in the case of an election described
in such section in which the individual had elected or
is provided qualified prescription drug coverage at the
time of such first enrollment, the individual shall be
permitted to enroll in a prescription drug plan under
this part at the time of the election of coverage under
the original fee-for-service plan.
``(B) Initial election periods.--
``(i) Individuals currently covered.--In the
case of an individual who is entitled to
benefits under part A or enrolled under part B
as of November 1, 2004, there shall be an
initial election period of 6 months beginning
on that date.
``(ii) Individual covered in future.--In the
case of an individual who is first entitled to
benefits under part A or enrolled under part B
after such date, there shall be an initial
election period which is the same as the
initial enrollment period under section
1837(d).
``(C) Additional special election periods.--The
Administrator shall establish special election
periods--
``(i) in cases of individuals who have and
involuntarily lose prescription drug coverage
described in subsection (c)(2)(C);
``(ii) in cases described in section 1837(h)
(relating to errors in enrollment), in the same
manner as such section applies to part B;
``(iii) in the case of an individual who
meets such exceptional conditions (including
conditions provided under section
1851(e)(4)(D)) as the Administrator may
provide; and
``(iv) in cases of individuals (as determined
by the Administrator) who become eligible for
prescription drug assistance under title XIX
under section 1935(d).
``(c) Guaranteed Issue; Community Rating; and Nondiscrimination.--
``(1) Guaranteed issue.--
``(A) In general.--An eligible individual who is
eligible to elect qualified prescription drug coverage
under a prescription drug plan or Medicare+Choice plan
at a time during which elections are accepted under
this part with respect to the plan shall not be denied
enrollment based on any health status-related factor
(described in section 2702(a)(1) of the Public Health
Service Act) or any other factor.
``(B) Medicare+choice limitations permitted.--The
provisions of paragraphs (2) and (3) (other than
subparagraph (C)(i), relating to default enrollment) of
section 1851(g) (relating to priority and limitation on
termination of election) shall apply to PDP sponsors
under this subsection.
``(2) Community-rated premium.--
``(A) In general.--In the case of an individual who
maintains (as determined under subparagraph (C))
continuous prescription drug coverage since the date
the individual first qualifies to elect prescription
drug coverage under this part, a PDP sponsor or
Medicare+Choice organization offering a prescription
drug plan or Medicare+Choice plan that provides
qualified prescription drug coverage and in which the
individual is enrolled may not deny, limit, or
condition the coverage or provision of covered
prescription drug benefits or increase the premium
under the plan based on any health status-related
factor described in section 2702(a)(1) of the Public
Health Service Act or any other factor.
``(B) Late enrollment penalty.--In the case of an
individual who does not maintain such continuous
prescription drug coverage (as described in
subparagraph (C)), a PDP sponsor or Medicare+Choice
organization may (notwithstanding any provision in this
title) adjust the premium otherwise applicable or
impose a pre-existing condition exclusion with respect
to qualified prescription drug coverage in a manner
that reflects additional actuarial risk involved. Such
a risk shall be established through an appropriate
actuarial opinion of the type described in
subparagraphs (A) through (C) of section 2103(c)(4).
``(C) Continuous prescription drug coverage.--An
individual is considered for purposes of this part to
be maintaining continuous prescription drug coverage on
and after the date the individual first qualifies to
elect prescription drug coverage under this part if the
individual establishes that as of such date the
individual is covered under any of the following
prescription drug coverage and before the date that is
the last day of the 63-day period that begins on the
date of termination of the particular prescription drug
coverage involved (regardless of whether the individual
subsequently obtains any of the following prescription
drug coverage):
``(i) Coverage under prescription drug plan
or medicare+choice plan.--Qualified
prescription drug coverage under a prescription
drug plan or under a Medicare+Choice plan.
``(ii) Medicaid prescription drug coverage.--
Prescription drug coverage under a medicaid
plan under title XIX, including through the
Program of All-inclusive Care for the Elderly
(PACE) under section 1934, through a social
health maintenance organization (referred to in
section 4104(c) of the Balanced Budget Act of
1997), or through a Medicare+Choice project
that demonstrates the application of capitation
payment rates for frail elderly medicare
beneficiaries through the use of a
interdisciplinary team and through the
provision of primary care services to such
beneficiaries by means of such a team at the
nursing facility involved.
``(iii) Prescription drug coverage under
group health plan.--Any outpatient prescription
drug coverage under a group health plan,
including a health benefits plan under the
Federal Employees Health Benefit Plan under
chapter 89 of title 5, United States Code, and
a qualified retiree prescription drug plan as
defined in section 1860H(f)(1), but only if
(subject to subparagraph (E)(ii)) the coverage
provides benefits at least equivalent to the
benefits under a qualified prescription drug
plan.
``(iv) Prescription drug coverage under
certain medigap policies.--Coverage under a
medicare supplemental policy under section 1882
that provides benefits for prescription drugs
(whether or not such coverage conforms to the
standards for packages of benefits under
section 1882(p)(1)), but only if the policy was
in effect on January 1, 2005, and if (subject
to subparagraph (E)(ii)) the coverage provides
benefits at least equivalent to the benefits
under a qualified prescription drug plan.
``(v) State pharmaceutical assistance
program.--Coverage of prescription drugs under
a State pharmaceutical assistance program, but
only if (subject to subparagraph (E)(ii)) the
coverage provides benefits at least equivalent
to the benefits under a qualified prescription
drug plan.
``(vi) Veterans' coverage of prescription
drugs.--Coverage of prescription drugs for
veterans under chapter 17 of title 38, United
States Code, but only if (subject to
subparagraph (E)(ii)) the coverage provides
benefits at least equivalent to the benefits
under a qualified prescription drug plan.
``(D) Certification.--For purposes of carrying out
this paragraph, the certifications of the type
described in sections 2701(e) of the Public Health
Service Act and in section 9801(e) of the Internal
Revenue Code shall also include a statement for the
period of coverage of whether the individual involved
had prescription drug coverage described in
subparagraph (C).
``(E) Disclosure.--
``(i) In general.--Each entity that offers
coverage of the type described in clause (iii),
(iv), (v), or (vi) of subparagraph (C) shall
provide for disclosure, consistent with
standards established by the Administrator, of
whether such coverage provides benefits at
least equivalent to the benefits under a
qualified prescription drug plan.
``(ii) Waiver of limitations.--An individual
may apply to the Administrator to waive the
requirement that coverage of such type provide
benefits at least equivalent to the benefits
under a qualified prescription drug plan, if
the individual establishes that the individual
was not adequately informed that such coverage
did not provide such level of benefits.
``(F) Construction.--Nothing in this section shall be
construed as preventing the disenrollment of an
individual from a prescription drug plan or a
Medicare+Choice plan based on the termination of an
election described in section 1851(g)(3), including for
non-payment of premiums or for other reasons specified
in subsection (d)(3), which takes into account a grace
period described in section 1851(g)(3)(B)(i).
``(3) Nondiscrimination.--A PDP sponsor offering a
prescription drug plan shall not establish a service area in a
manner that would discriminate based on health or economic
status of potential enrollees.
``(d) Effective Date of Elections.--
``(1) In general.--Except as provided in this section, the
Administrator shall provide that elections under subsection (b)
take effect at the same time as the Administrator provides that
similar elections under section 1851(e) take effect under
section 1851(f).
``(2) No election effective before 2005.--In no case shall
any election take effect before January 1, 2005.
``(3) Termination.--The Administrator shall provide for the
termination of an election in the case of--
``(A) termination of coverage under both part A and
part B; and
``(B) termination of elections described in section
1851(g)(3) (including failure to pay required
premiums).
``SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.
``(a) Requirements.--
``(1) In general.--For purposes of this part and part C, the
term `qualified prescription drug coverage' means either of the
following:
``(A) Standard coverage with access to negotiated
prices.--Standard coverage (as defined in subsection
(b)) and access to negotiated prices under subsection
(d).
``(B) Actuarially equivalent coverage with access to
negotiated prices.--Coverage of covered outpatient
drugs which meets the alternative coverage requirements
of subsection (c) and access to negotiated prices under
subsection (d), but only if it is approved by the
Administrator, as provided under subsection (c).
``(2) Permitting additional outpatient prescription drug
coverage.--
``(A) In general.--Subject to subparagraph (B),
nothing in this part shall be construed as preventing
qualified prescription drug coverage from including
coverage of covered outpatient drugs that exceeds the
coverage required under paragraph (1), but any such
additional coverage shall be limited to coverage of
covered outpatient drugs.
``(B) Disapproval authority.--The Administrator shall
review the offering of qualified prescription drug
coverage under this part or part C. If the
Administrator finds that, in the case of a qualified
prescription drug coverage under a prescription drug
plan or a Medicare+Choice plan, that the organization
or sponsor offering the coverage is engaged in
activities intended to discourage enrollment of classes
of eligible medicare beneficiaries obtaining coverage
through the plan on the basis of their higher
likelihood of utilizing prescription drug coverage, the
Administrator may terminate the contract with the
sponsor or organization under this part or part C.
``(3) Application of secondary payor provisions.--The
provisions of section 1852(a)(4) shall apply under this part in
the same manner as they apply under part C.
``(b) Standard Coverage.--For purposes of this part, the `standard
coverage' is coverage of covered outpatient drugs (as defined in
subsection (f)) that meets the following requirements:
``(1) Deductible.--The coverage has an annual deductible--
``(A) for 2005, that is equal to $250; or
``(B) for a subsequent year, that is equal to the
amount specified under this paragraph for the previous
year increased by the percentage specified in paragraph
(5) for the year involved.
Any amount determined under subparagraph (B) that is not a
multiple of $10 shall be rounded to the nearest multiple of
$10.
``(2) Limits on cost-sharing.--
``(A) In general.--The coverage has cost-sharing (for
costs above the annual deductible specified in
paragraph (1) and up to the initial coverage limit
under paragraph (3)) as follows:
``(i) First copayment range.--For costs above
the annual deductible specified in paragraph
(1) and up to amount specified in subparagraph
(C), the cost-sharing--
``(I) is equal to 20 percent; or
``(II) is actuarially equivalent
(using processes established under
subsection (e)) to an average expected
payment of 20 percent of such costs.
``(ii) Secondary copayment range.--For costs
above the amount specified in subparagraph (C)
and up to the initial coverage limit, the cost-
sharing--
``(I) is equal to 50 percent; or
``(II) is actuarially consistent
(using processes established under
subsection (e)) with an average
expected payment of 50 percent of such
costs.
``(B) Use of tiered copayments.--Nothing in this part
shall be construed as preventing a PDP sponsor from
applying tiered copayments, so long as such tiered
copayments are consistent with subparagraph (A).
``(C) Initial copayment threshold.--The amount
specified in this subparagraph--
``(i) for 2005, is equal to $1,000; or
``(ii) for a subsequent year, is equal to the
amount specified in this subparagraph for the
previous year, increased by the annual
percentage increase described in paragraph (5)
for the year involved.
Any amount determined under clause (ii) that is not a
multiple of $10 shall be rounded to the nearest
multiple of $10.
``(3) Initial coverage limit.--Subject to paragraph (4), the
coverage has an initial coverage limit on the maximum costs
that may be recognized for payment purposes--
``(A) for 2005, that is equal to $2,000; or
``(B) for a subsequent year, that is equal to the
amount specified in this paragraph for the previous
year, increased by the annual percentage increase
described in paragraph (5) for the year involved.
Any amount determined under subparagraph (B) that is not a
multiple of $25 shall be rounded to the nearest multiple of
$25.
``(4) Catastrophic protection.--
``(A) In general.--Notwithstanding paragraph (3), the
coverage provides benefits with no cost-sharing after
the individual has incurred costs (as described in
subparagraph (C)) for covered outpatient drugs in a
year equal to the annual out-of-pocket threshold
specified in subparagraph (B).
``(B) Annual out-of-pocket threshold.--For purposes
of this part, the `annual out-of-pocket threshold'
specified in this subparagraph--
``(i) for 2005, is equal to $3,800; or
``(ii) for a subsequent year, is equal to the
amount specified in this subparagraph for the
previous year, increased by the annual
percentage increase described in paragraph (5)
for the year involved.
Any amount determined under clause (ii) that is not a
multiple of $100 shall be rounded to the nearest
multiple of $100.
``(C) Application.--In applying subparagraph (A)--
``(i) incurred costs shall only include costs
incurred for the annual deductible (described
in paragraph (1)), cost-sharing (described in
paragraph (2)), and amounts for which benefits
are not provided because of the application of
the initial coverage limit described in
paragraph (3); and
``(ii) such costs shall be treated as
incurred only if they are paid by the
individual, under section 1860G, or under title
XIX and the individual is not reimbursed
(through insurance or otherwise) by another
person for such costs.
``(5) Annual percentage increase.--For purposes of this part,
the annual percentage increase specified in this paragraph for
a year is equal to the annual percentage increase in average
per capita aggregate expenditures for covered outpatient drugs
in the United States for medicare beneficiaries, as determined
by the Administrator for the 12-month period ending in July of
the previous year.
``(c) Alternative Coverage Requirements.--A prescription drug plan or
Medicare+Choice plan may provide a different prescription drug benefit
design from the standard coverage described in subsection (b) so long
as the Administrator determines (based on an actuarial analysis by the
Administrator) that the following requirements are met and the plan
applies for, and receives, the approval of the Administrator for such
benefit design:
``(1) Assuring at least actuarially equivalent coverage.--
``(A) Assuring equivalent value of total coverage.--
The actuarial value of the total coverage (as
determined under subsection (e)) is at least equal to
the actuarial value (as so determined) of standard
coverage.
``(B) Assuring equivalent unsubsidized value of
coverage.--The unsubsidized value of the coverage is at
least equal to the unsubsidized value of standard
coverage. For purposes of this subparagraph, the
unsubsidized value of coverage is the amount by which
the actuarial value of the coverage (as determined
under subsection (e)) exceeds the actuarial value of
the subsidy payments under section 1860H with respect
to such coverage.
``(C) Assuring standard payment for costs at initial
coverage limit.--The coverage is designed, based upon
an actuarially representative pattern of utilization
(as determined under subsection (e)), to provide for
the payment, with respect to costs incurred that are
equal to the initial coverage limit under subsection
(b)(3), of an amount equal to at least the sum of the
following products:
``(i) First copayment range.--The product
of--
``(I) the amount by which the initial
copayment threshold described in
subsection (b)(2)(C) exceeds the
deductible described in subsection
(b)(1); and
``(II) 100 percent minus the cost-
sharing percentage specified in
subsection (b)(2)(A)(i)(I).
``(ii) Secondary copayment range.--The
product of--
``(I) the amount by which the initial
coverage limit described in subsection
(b)(3) exceeds the initial copayment
threshold described in subsection
(b)(2)(C); and
``(II) 100 percent minus the cost-
sharing percentage specified in
subsection (b)(2)(A)(ii)(I).
``(2) Catastrophic protection.--The coverage provides for
beneficiaries the catastrophic protection described in
subsection (b)(4).
``(d) Access to Negotiated Prices.--
``(1) In general.--Under qualified prescription drug coverage
offered by a PDP sponsor or a Medicare+Choice organization, the
sponsor or organization shall provide beneficiaries with access
to negotiated prices (including applicable discounts) used for
payment for covered outpatient drugs, regardless of the fact
that no benefits may be payable under the coverage with respect
to such drugs because of the application of cost-sharing or an
initial coverage limit (described in subsection (b)(3)).
Insofar as a State elects to provide medical assistance under
title XIX for a drug based on the prices negotiated by a
prescription drug plan under this part, the requirements of
section 1927 shall not apply to such drugs. The prices
negotiated by a prescription drug plan under this part, by a
Medicare+Choice plan with respect to covered outpatient drugs,
or by a qualified retiree prescription drug plan (as defined in
section 1860H(f)(1)) with respect to such drugs on behalf of
individuals entitled to benefits under part A or enrolled under
part B, shall (notwithstanding any other provision of law) not
be taken into account for the purposes of establishing the best
price under section 1927(c)(1)(C).
``(2) Disclosure.--The PDP sponsor or Medicare+Choice
organization shall disclose to the Administrator (in a manner
specified by the Administrator) the extent to which discounts
or rebates made available to the sponsor or organization by a
manufacturer are passed through to enrollees through pharmacies
and other dispensers or otherwise. The provisions of section
1927(b)(3)(D) shall apply to information disclosed to the
Administrator under this paragraph in the same manner as such
provisions apply to information disclosed under such section.
``(e) Actuarial Valuation; Determination of Annual Percentage
Increases.--
``(1) Processes.--For purposes of this section, the
Administrator shall establish processes and methods--
``(A) for determining the actuarial valuation of
prescription drug coverage, including--
``(i) an actuarial valuation of standard
coverage and of the reinsurance subsidy
payments under section 1860H;
``(ii) the use of generally accepted
actuarial principles and methodologies; and
``(iii) applying the same methodology for
determinations of alternative coverage under
subsection (c) as is used with respect to
determinations of standard coverage under
subsection (b); and
``(B) for determining annual percentage increases
described in subsection (b)(5).
``(2) Use of outside actuaries.--Under the processes under
paragraph (1)(A), PDP sponsors and Medicare+Choice
organizations may use actuarial opinions certified by
independent, qualified actuaries to establish actuarial values,
but the Administrator shall determine whether such actuarial
values meet the requirements under subsection (c)(1).
``(f) Covered Outpatient Drugs Defined.--
``(1) In general.--Except as provided in this subsection, for
purposes of this part, the term `covered outpatient drug'
means--
``(A) a drug that may be dispensed only upon a
prescription and that is described in subparagraph
(A)(i) or (A)(ii) of section 1927(k)(2); or
``(B) a biological product described in clauses (i)
through (iii) of subparagraph (B) of such section or
insulin described in subparagraph (C) of such section,
and such term includes a vaccine licensed under section 351 of
the Public Health Service Act and any use of a covered
outpatient drug for a medically accepted indication (as defined
in section 1927(k)(6)).
``(2) Exclusions.--
``(A) In general.--Such term does not include drugs
or classes of drugs, or their medical uses, which may
be excluded from coverage or otherwise restricted under
section 1927(d)(2), other than subparagraph (E) thereof
(relating to smoking cessation agents), or under
section 1927(d)(3).
``(B) Avoidance of duplicate coverage.--A drug
prescribed for an individual that would otherwise be a
covered outpatient drug under this part shall not be so
considered if payment for such drug is available under
part A or B for an individual entitled to benefits
under part A and enrolled under part B.
``(3) Application of formulary restrictions.--A drug
prescribed for an individual that would otherwise be a covered
outpatient drug under this part shall not be so considered
under a plan if the plan excludes the drug under a formulary
and such exclusion is not successfully appealed under section
1860C(f)(2).
``(4) Application of general exclusion provisions.--A
prescription drug plan or Medicare+Choice plan may exclude from
qualified prescription drug coverage any covered outpatient
drug--
``(A) for which payment would not be made if section
1862(a) applied to part D; or
``(B) which are not prescribed in accordance with the
plan or this part.
Such exclusions are determinations subject to reconsideration
and appeal pursuant to section 1860C(f).
``SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.
``(a) Guaranteed Issue, Community-Rated Premiums, Access to
Negotiated Prices, and Nondiscrimination.--For provisions requiring
guaranteed issue, community-rated premiums, access to negotiated
prices, and nondiscrimination, see sections 1860A(c)(1), 1860A(c)(2),
1860B(d), and 1860F(b), respectively.
``(b) Dissemination of Information.--
``(1) General information.--A PDP sponsor shall disclose, in
a clear, accurate, and standardized form to each enrollee with
a prescription drug plan offered by the sponsor under this part
at the time of enrollment and at least annually thereafter, the
information described in section 1852(c)(1) relating to such
plan. Such information includes the following:
``(A) Access to covered outpatient drugs, including
access through pharmacy networks.
``(B) How any formulary used by the sponsor
functions.
``(C) Co-payments and deductible requirements,
including the identification of the tiered or other co-
payment level applicable to each drug (or class of
drugs).
``(D) Grievance and appeals procedures.
``(2) Disclosure upon request of general coverage,
utilization, and grievance information.--Upon request of an
individual eligible to enroll under a prescription drug plan,
the PDP sponsor shall provide the information described in
section 1852(c)(2) (other than subparagraph (D)) to such
individual.
``(3) Response to beneficiary questions.--Each PDP sponsor
offering a prescription drug plan shall have a mechanism for
providing specific information to enrollees upon request. The
sponsor shall make available on a timely basis, through an
Internet website and in writing upon request, information on
specific changes in its formulary.
``(4) Claims information.--Each PDP sponsor offering a
prescription drug plan must furnish to enrolled individuals in
a form easily understandable to such individuals an explanation
of benefits (in accordance with section 1806(a) or in a
comparable manner) and a notice of the benefits in relation to
initial coverage limit and annual out-of-pocket threshold for
the current year, whenever prescription drug benefits are
provided under this part (except that such notice need not be
provided more often than monthly).
``(c) Access to Covered Benefits.--
``(1) Assuring pharmacy access.--
``(A) In general.--The PDP sponsor of the
prescription drug plan shall secure the participation
in its network of a sufficient number of pharmacies
that dispense (other than by mail order) drugs directly
to patients to ensure convenient access (as determined
by the Administrator and including adequate emergency
access) for enrolled beneficiaries, in accordance with
standards established under section 1860D(e) that
ensure such convenient access.
``(B) Use of point-of-service system.--A PDP sponsor
shall establish an optional point-of-service method of
operation under which--
``(i) the plan provides access to any or all
pharmacies that are not participating
pharmacies in its network; and
``(ii) the plan may charge beneficiaries
through adjustments in premiums and copayments
any additional costs associated with the point-
of-service option.
The additional copayments so charged shall not count
toward the application of section 1860B(b).
``(2) Use of standardized technology.--
``(A) In general.--The PDP sponsor of a prescription
drug plan shall issue (and reissue, as appropriate)
such a card (or other technology) that may be used by
an enrolled beneficiary to assure access to negotiated
prices under section 1860B(d) for the purchase of
prescription drugs for which coverage is not otherwise
provided under the prescription drug plan.
``(B) Standards.--
``(i) Development.--The Administrator shall
provide for the development of national
standards relating to a standardized format for
the card or other technology referred to in
subparagraph (A). Such standards shall be
compatible with standards established under
part C of title XI.
``(ii) Application of advisory task force.--
The advisory task force established under
subsection (d)(3)(B)(ii) shall provide
recommendations to the Administrator under such
subsection regarding the standards developed
under clause (i).
``(3) Requirements on development and application of
formularies.--If a PDP sponsor of a prescription drug plan uses
a formulary, the following requirements must be met:
``(A) Pharmacy and therapeutic (p&t) committee.--The
sponsor must establish a pharmacy and therapeutic
committee that develops and reviews the formulary. Such
committee shall include at least one physician and at
least one pharmacist both with expertise in the care of
elderly or disabled persons and a majority of its
members shall consist of individuals who are a
physician or a pharmacist (or both).
``(B) Formulary development.--In developing and
reviewing the formulary, the committee shall base
clinical decisions on the strength of scientific
evidence and standards of practice, including assessing
peer-reviewed medical literature, such as randomized
clinical trials, pharmacoeconomic studies, outcomes
research data, and such other information as the
committee determines to be appropriate.
``(C) Inclusion of drugs in all therapeutic
categories.--The formulary must include drugs within
each therapeutic category and class of covered
outpatient drugs (although not necessarily for all
drugs within such categories and classes).
``(D) Provider education.--The committee shall
establish policies and procedures to educate and inform
health care providers concerning the formulary.
``(E) Notice before removing drugs from formulary.--
Any removal of a drug from a formulary shall take
effect only after appropriate notice is made available
to beneficiaries and physicians.
``(F) Grievances and appeals relating to application
of formularies.--For provisions relating to grievances
and appeals of coverage, see subsections (e) and (f).
``(d) Cost and Utilization Management; Quality Assurance; Medication
Therapy Management Program.--
``(1) In general.--The PDP sponsor shall have in place with
respect to covered outpatient drugs--
``(A) an effective cost and drug utilization
management program, including medically appropriate
incentives to use generic drugs and therapeutic
interchange, when appropriate;
``(B) quality assurance measures and systems to
reduce medical errors and adverse drug interactions,
including a medication therapy management program
described in paragraph (2) and for years beginning with
2006, an electronic prescription program described in
paragraph (3); and
``(C) a program to control fraud, abuse, and waste.
Nothing in this section shall be construed as impairing a PDP
sponsor from applying cost management tools (including
differential payments) under all methods of operation.
``(2) Medication therapy management program.--
``(A) In general.--A medication therapy management
program described in this paragraph is a program of
drug therapy management and medication administration
that is designed to assure, with respect to
beneficiaries with chronic diseases (such as diabetes,
asthma, hypertension, and congestive heart failure) or
multiple prescriptions, that covered outpatient drugs
under the prescription drug plan are appropriately used
to achieve therapeutic goals and reduce the risk of
adverse events, including adverse drug interactions.
``(B) Elements.--Such program may include--
``(i) enhanced beneficiary understanding of
such appropriate use through beneficiary
education, counseling, and other appropriate
means;
``(ii) increased beneficiary adherence with
prescription medication regimens through
medication refill reminders, special packaging,
and other appropriate means; and
``(iii) detection of patterns of overuse and
underuse of prescription drugs.
``(C) Development of program in cooperation with
licensed pharmacists.--The program shall be developed
in cooperation with licensed pharmacists and
physicians.
``(D) Considerations in pharmacy fees.--The PDP
sponsor of a prescription drug program shall take into
account, in establishing fees for pharmacists and
others providing services under the medication therapy
management program, the resources and time used in
implementing the program.
``(3) Electronic prescription program.--
``(A) In general.--An electronic prescription drug
program described in this paragraph is a program that
includes at least the following components, consistent
with national standards established under subparagraph
(B):
``(i) Electronic transmittal of
prescriptions.--Prescriptions are only received
electronically, except in emergency cases and
other exceptional circumstances recognized by
the Administrator.
``(ii) Provision of information to
prescribing health care professional.--The
program provides, upon transmittal of a
prescription by a prescribing health care
professional, for transmittal by the pharmacist
to the professional of information that
includes--
``(I) information (to the extent
available and feasible) on the drugs
being prescribed for that patient and
other information relating to the
medical history or condition of the
patient that may be relevant to the
appropriate prescription for that
patient;
``(II) cost-effective alternatives
(if any) for the use of the drug
prescribed; and
``(III) information on the drugs
included in the applicable formulary.
To the extent feasible, such program shall
permit the prescribing health care professional
to provide (and be provided) related
information on an interactive, real-time basis.
``(B) Standards.--
``(i) Development.--The Administrator shall
provide for the development of national
standards relating to the electronic
prescription drug program described in
subparagraph (A). Such standards shall be
compatible with standards established under
part C of title XI.
``(ii) Advisory task force.--In developing
such standards and the standards described in
subsection (c)(2)(B)(i) the Administrator shall
establish a task force that includes
representatives of physicians, hospitals,
pharmacists, and technology experts and
representatives of the Departments of Veterans
Affairs and Defense and other appropriate
Federal agencies to provide recommendations to
the Administrator on such standards, including
recommendations relating to the following:
``(I) The range of available
computerized prescribing software and
hardware and their costs to develop and
implement.
``(II) The extent to which such
systems reduce medication errors and
can be readily implemented by
physicians and hospitals.
``(III) Efforts to develop a common
software platform for computerized
prescribing.
``(IV) The cost of implementing such
systems in the range of hospital and
physician office settings, including
hardware, software, and training costs.
``(V) Implementation issues as they
relate to part C of title XI, and
current Federal and State prescribing
laws and regulations and their impact
on implementation of computerized
prescribing.
``(iii) Deadlines.--
``(I) The Administrator shall
constitute the task force under clause
(ii) by not later than April 1, 2003.
``(II) Such task force shall submit
recommendations to Administrator by not
later than January 1, 2004.
``(III) The Administrator shall
develop and promulgate the national
standards referred to in clause (ii) by
not later than January 1, 2005.
``(C) Reference to availability of grant funds.--
Grant funds are authorized under section 399O of the
Public Health Service Act to provide assistance to
health care providers in implementing electronic
prescription drug programs.
``(4) Treatment of accreditation.--Section 1852(e)(4)
(relating to treatment of accreditation) shall apply to
prescription drug plans under this part with respect to the
following requirements, in the same manner as they apply to
Medicare+Choice plans under part C with respect to the
requirements described in a clause of section 1852(e)(4)(B):
``(A) Paragraph (1) (including quality assurance),
including medication therapy management program under
paragraph (2).
``(B) Subsection (c)(1) (relating to access to
covered benefits).
``(C) Subsection (g) (relating to confidentiality and
accuracy of enrollee records).
``(5) Public disclosure of pharmaceutical prices for
equivalent drugs.--Each PDP sponsor shall provide that each
pharmacy or other dispenser that arranges for the dispensing of
a covered outpatient drug shall inform the beneficiary at the
time of purchase of the drug of any differential between the
price of the prescribed drug to the enrollee and the price of
the lowest cost generic drug covered under the plan that is
therapeutically equivalent and bioequivalent.
``(e) Grievance Mechanism, Coverage Determinations, and
Reconsiderations.--
``(1) In general.--Each PDP sponsor shall provide meaningful
procedures for hearing and resolving grievances between the
organization (including any entity or individual through which
the sponsor provides covered benefits) and enrollees with
prescription drug plans of the sponsor under this part in
accordance with section 1852(f).
``(2) Application of coverage determination and
reconsideration provisions.--A PDP sponsor shall meet the
requirements of paragraphs (1) through (3) of section 1852(g)
with respect to covered benefits under the prescription drug
plan it offers under this part in the same manner as such
requirements apply to a Medicare+Choice organization with
respect to benefits it offers under a Medicare+Choice plan
under part C.
``(3) Request for review of tiered formulary
determinations.--In the case of a prescription drug plan
offered by a PDP sponsor that provides for tiered cost-sharing
for drugs included within a formulary and provides lower cost-
sharing for preferred drugs included within the formulary, an
individual who is enrolled in the plan may request coverage of
a nonpreferred drug under the terms applicable for preferred
drugs if the prescribing physician determines that the
preferred drug for treatment of the same condition is not as
effective for the individual or has adverse effects for the
individual.
``(f) Appeals.--
``(1) In general.--Subject to paragraph (2), a PDP sponsor
shall meet the requirements of paragraphs (4) and (5) of
section 1852(g) with respect to drugs not included on any
formulary in the same manner as such requirements apply to a
Medicare+Choice organization with respect to benefits it offers
under a Medicare+Choice plan under part C.
``(2) Formulary determinations.--An individual who is
enrolled in a prescription drug plan offered by a PDP sponsor
may appeal to obtain coverage for a covered outpatient drug
that is not on a formulary of the sponsor if the prescribing
physician determines that the formulary drug for treatment of
the same condition is not as effective for the individual or
has adverse effects for the individual.
``(g) Confidentiality and Accuracy of Enrollee Records.--A PDP
sponsor shall meet the requirements of section 1852(h) with respect to
enrollees under this part in the same manner as such requirements apply
to a Medicare+Choice organization with respect to enrollees under part
C.
``SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) SPONSORS;
CONTRACTS; ESTABLISHMENT OF STANDARDS.
``(a) General Requirements.--Each PDP sponsor of a prescription drug
plan shall meet the following requirements:
``(1) Licensure.--Subject to subsection (c), the sponsor is
organized and licensed under State law as a risk-bearing entity
eligible to offer health insurance or health benefits coverage
in each State in which it offers a prescription drug plan.
``(2) Assumption of financial risk.--
``(A) In general.--Subject to subparagraph (B) and
section 1860E(d)(2), the entity assumes full financial
risk on a prospective basis for qualified prescription
drug coverage that it offers under a prescription drug
plan and that is not covered under section 1860H.
``(B) Reinsurance permitted.--The entity may obtain
insurance or make other arrangements for the cost of
coverage provided to any enrolled member under this
part.
``(3) Solvency for unlicensed sponsors.--In the case of a
sponsor that is not described in paragraph (1), the sponsor
shall meet solvency standards established by the Administrator
under subsection (d).
``(b) Contract Requirements.--
``(1) In general.--The Administrator shall not permit the
election under section 1860A of a prescription drug plan
offered by a PDP sponsor under this part, and the sponsor shall
not be eligible for payments under section 1860G or 1860H,
unless the Administrator has entered into a contract under this
subsection with the sponsor with respect to the offering of
such plan. Such a contract with a sponsor may cover more than
one prescription drug plan. Such contract shall provide that
the sponsor agrees to comply with the applicable requirements
and standards of this part and the terms and conditions of
payment as provided for in this part.
``(2) Negotiation regarding terms and conditions.--The
Administrator shall have the same authority to negotiate the
terms and conditions of prescription drug plans under this part
as the Director of the Office of Personnel Management has with
respect to health benefits plans under chapter 89 of title 5,
United States Code. In negotiating the terms and conditions
regarding premiums for which information is submitted under
section 1860F(a)(2), the Administrator shall take into account
the subsidy payments under section 1860H and the adjusted
community rate (as defined in section 1854(f)(3)) for the
benefits covered.
``(3) Incorporation of certain medicare+choice contract
requirements.--The following provisions of section 1857 shall
apply, subject to subsection (c)(5), to contracts under this
section in the same manner as they apply to contracts under
section 1857(a):
``(A) Minimum enrollment.--Paragraphs (1) and (3) of
section 1857(b).
``(B) Contract period and effectiveness.--Paragraphs
(1) through (3) and (5) of section 1857(c).
``(C) Protections against fraud and beneficiary
protections.--Section 1857(d).
``(D) Additional contract terms.--Section 1857(e);
except that in applying section 1857(e)(2) under this
part--
``(i) such section shall be applied
separately to costs relating to this part (from
costs under part C);
``(ii) in no case shall the amount of the fee
established under this subparagraph for a plan
exceed 20 percent of the maximum amount of the
fee that may be established under subparagraph
(B) of such section; and
``(iii) no fees shall be applied under this
subparagraph with respect to Medicare+Choice
plans.
``(E) Intermediate sanctions.--Section 1857(g).
``(F) Procedures for termination.--Section 1857(h).
``(4) Rules of application for intermediate sanctions.--In
applying paragraph (3)(E)--
``(A) the reference in section 1857(g)(1)(B) to
section 1854 is deemed a reference to this part; and
``(B) the reference in section 1857(g)(1)(F) to
section 1852(k)(2)(A)(ii) shall not be applied.
``(c) Waiver of Certain Requirements to Expand Choice.--
``(1) In general.--In the case of an entity that seeks to
offer a prescription drug plan in a State, the Administrator
shall waive the requirement of subsection (a)(1) that the
entity be licensed in that State if the Administrator
determines, based on the application and other evidence
presented to the Administrator, that any of the grounds for
approval of the application described in paragraph (2) has been
met.
``(2) Grounds for approval.--The grounds for approval under
this paragraph are the grounds for approval described in
subparagraph (B), (C), and (D) of section 1855(a)(2), and also
include the application by a State of any grounds other than
those required under Federal law.
``(3) Application of waiver procedures.--With respect to an
application for a waiver (or a waiver granted) under this
subsection, the provisions of subparagraphs (E), (F), and (G)
of section 1855(a)(2) shall apply.
``(4) Licensure does not substitute for or constitute
certification.--The fact that an entity is licensed in
accordance with subsection (a)(1) does not deem the entity to
meet other requirements imposed under this part for a PDP
sponsor.
``(5) References to certain provisions.--For purposes of this
subsection, in applying provisions of section 1855(a)(2) under
this subsection to prescription drug plans and PDP sponsors--
``(A) any reference to a waiver application under
section 1855 shall be treated as a reference to a
waiver application under paragraph (1); and
``(B) any reference to solvency standards shall be
treated as a reference to solvency standards
established under subsection (d).
``(d) Solvency Standards for Non-Licensed Sponsors.--
``(1) Establishment.--The Administrator shall establish, by
not later than October 1, 2003, financial solvency and capital
adequacy standards that an entity that does not meet the
requirements of subsection (a)(1) must meet to qualify as a PDP
sponsor under this part.
``(2) Compliance with standards.--Each PDP sponsor that is
not licensed by a State under subsection (a)(1) and for which a
waiver application has been approved under subsection (c) shall
meet solvency and capital adequacy standards established under
paragraph (1). The Administrator shall establish certification
procedures for such PDP sponsors with respect to such solvency
standards in the manner described in section 1855(c)(2).
``(e) Other Standards.--The Administrator shall establish by
regulation other standards (not described in subsection (d)) for PDP
sponsors and plans consistent with, and to carry out, this part. The
Administrator shall publish such regulations by October 1, 2003.
``(f) Relation to State Laws.--
``(1) In general.--The standards established under this part
shall supersede any State law or regulation (other than State
licensing laws or State laws relating to plan solvency, except
as provided in subsection (d)) with respect to prescription
drug plans which are offered by PDP sponsors under this part.
``(2) Prohibition of state imposition of premium taxes.--No
State may impose a premium tax or similar tax with respect to
premiums paid to PDP sponsors for prescription drug plans under
this part, or with respect to any payments made to such a
sponsor by the Administrator under this part.
``SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED
PRESCRIPTION DRUG COVERAGE.
``(a) In General.--The Administrator shall establish a process for
the selection of the prescription drug plan or Medicare+Choice plan
which offer qualified prescription drug coverage through which eligible
individuals elect qualified prescription drug coverage under this part.
``(b) Elements.--Such process shall include the following:
``(1) Annual, coordinated election periods, in which such
individuals can change the qualifying plans through which they
obtain coverage, in accordance with section 1860A(b)(2).
``(2) Active dissemination of information to promote an
informed selection among qualifying plans based upon price,
quality, and other features, in the manner described in (and in
coordination with) section 1851(d), including the provision of
annual comparative information, maintenance of a toll-free
hotline, and the use of non-Federal entities.
``(3) Coordination of elections through filing with a
Medicare+Choice organization or a PDP sponsor, in the manner
described in (and in coordination with) section 1851(c)(2).
``(c) Medicare+Choice Enrollee In Plan Offering Prescription Drug
Coverage May Only Obtain Benefits Through the Plan.--An individual who
is enrolled under a Medicare+Choice plan that offers qualified
prescription drug coverage may only elect to receive qualified
prescription drug coverage under this part through such plan.
``(d) Assuring Access to a Choice of Qualified Prescription Drug
Coverage.--
``(1) Choice of at least two plans in each area.--
``(A) In general.--The Administrator shall assure
that each individual who is entitled to benefits under
part A or enrolled under part B and who is residing in
an area in the United States has available, consistent
with subparagraph (B), a choice of enrollment in at
least two qualifying plans (as defined in paragraph
(5)) in the area in which the individual resides, at
least one of which is a prescription drug plan.
``(B) Requirement for different plan sponsors.--The
requirement in subparagraph (A) is not satisfied with
respect to an area if only one PDP sponsor or
Medicare+Choice organization offers all the qualifying
plans in the area.
``(2) Guaranteeing access to coverage.--In order to assure
access under paragraph (1) and consistent with paragraph (3),
the Administrator may provide financial incentives (including
partial underwriting of risk) for a PDP sponsor to expand the
service area under an existing prescription drug plan to
adjoining or additional areas or to establish such a plan
(including offering such a plan on a regional or nationwide
basis), but only so long as (and to the extent) necessary to
assure the access guaranteed under paragraph (1).
``(3) Limitation on authority.--In exercising authority under
this subsection, the Administrator--
``(A) shall not provide for the full underwriting of
financial risk for any PDP sponsor;
``(B) shall not provide for any underwriting of
financial risk for a public PDP sponsor with respect to
the offering of a nationwide prescription drug plan;
and
``(C) shall seek to maximize the assumption of
financial risk by PDP sponsors or Medicare+Choice
organizations.
``(4) Reports.--The Administrator shall, in each annual
report to Congress under section 1808(f), include information
on the exercise of authority under this subsection. The
Administrator also shall include such recommendations as may be
appropriate to minimize the exercise of such authority,
including minimizing the assumption of financial risk.
``(5) Qualifying plan defined.--For purposes of this
subsection, the term `qualifying plan' means a prescription
drug plan or a Medicare+Choice plan that includes qualified
prescription drug coverage.
``SEC. 1860F. SUBMISSION OF BIDS.
``(a) Submission of Bids and Related Information.--
``(1) In general.--Each PDP sponsor shall submit to the
Administrator information of the type described in paragraph
(2) in the same manner as information is submitted by a
Medicare+Choice organization under section 1854(a)(1).
``(2) Type of information.--The information described in this
paragraph is the following:
``(A) Information on the qualified prescription drug
coverage to be provided.
``(B) Information on the actuarial value of the
coverage.
``(C) Information on the bid for the coverage,
including an actuarial certification of--
``(i) the actuarial basis for such bid;
``(ii) the portion of such bid attributable
to benefits in excess of standard coverage; and
``(iii) the reduction in such bid resulting
from the subsidy payments provided under
section 1860H.
``(D) Such other information as the Administrator may
require to carry out this part.
``(3) Review.--The Administrator shall review the information
filed under paragraph (2) for the purpose of conducting
negotiations under section 1860D(b)(2).
``(b) Uniform Bid.--
``(1) In general.--The bid for a prescription drug plan under
this section may not vary among individuals enrolled in the
plan in the same service area.
``(2) Construction.--Nothing in paragraph (1) shall be
construed as preventing the imposition of a late enrollment
penalty under section 1860A(c)(2)(B).
``(c) Collection.--
``(1) Use at beneficiary's option of withholding from social
security payment and use of electronic funds transfer
mechanism.--In accordance with regulations, a PDP sponsor shall
permit each enrollee, at the enrollee's option, to make payment
of premiums through withholding from benefit payments in the
manner provided under section 1840 with respect to monthly
premiums under section 1839. In the case in which an enrollee
does not elect such option, a PDP sponsor may, in accordance
with regulations, encourage enrollees to make payment of the
premium established by the plan under this part through an
electronic funds transfer mechanism, such as automatic charges
of an account at a financial institution or a credit or debit
card account. All such amounts shall be credited to the
Medicare Prescription Drug Trust Fund.
``(2) Offsetting.--Reductions in premiums for coverage under
parts A and B as a result of a selection of a Medicare+Choice
plan may be used to reduce the premium otherwise imposed under
paragraph (1).
``(3) Payment of plans.--PDP plans shall receive payment
based on bid amounts in the same manner as Medicare+Choice
organizations receive payment based on bid amounts under
section 1853(a)(1)(A)(ii) except that such payment shall be
made from the Medicare Prescription Drug Trust Fund.
``(d) Acceptance of Benchmark Amount as Full Premium for Subsidized
Low-Income Individuals if No Standard (or Equivalent) Coverage in an
Area.--
``(1) In general.--If there is no standard prescription drug
coverage (as defined in paragraph (2)) offered in an area, in
the case of an individual who is eligible for a premium subsidy
under section 1860G and resides in the area, the PDP sponsor of
any prescription drug plan offered in the area (and any
Medicare+Choice organization that offers qualified prescription
drug coverage in the area) shall accept the benchmark bid
amount (under section 1860G(b)(2)) as payment in full for the
premium charge for qualified prescription drug coverage.
``(2) Standard prescription drug coverage defined.--For
purposes of this subsection, the term `standard prescription
drug coverage' means qualified prescription drug coverage that
is standard coverage or that has an actuarial value equivalent
to the actuarial value for standard coverage.
``SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME
INDIVIDUALS.
``(a) Income-Related Subsidies for Individuals With Income Below 175
Percent of Federal Poverty Level.--
``(1) Full premium subsidy and reduction of cost-sharing for
individuals with income below 150 percent of federal poverty
level.--In the case of a subsidy eligible individual (as
defined in paragraph (4)) who is determined to have income that
does not exceed 150 percent of the Federal poverty level, the
individual is entitled under this section--
``(A) to an income-related premium subsidy equal to
100 percent of the amount described in subsection
(b)(1); and
``(B) subject to subsection (c), to the substitution
for the beneficiary cost-sharing described in
paragraphs (1) and (2) of section 1860B(b) (up to the
initial coverage limit specified in paragraph (3) of
such section) of amounts that do not exceed $2 for a
multiple source or generic drug (as described in
section 1927(k)(7)(A)) and $5 for a non-preferred drug.
``(2) Sliding scale premium subsidy and reduction of cost-
sharing for individuals with income above 150, but below 175
percent, of federal poverty level.--In the case of a subsidy
eligible individual who is determined to have income that
exceeds 150 percent, but does not exceed 175 percent, of the
Federal poverty level, the individual is entitled under this
section to--
``(A) an income-related premium subsidy determined on
a linear sliding scale ranging from 100 percent of the
amount described in subsection (b)(1) for individuals
with incomes at 150 percent of such level to 0 percent
of such amount for individuals with incomes at 175
percent of such level; and
``(B) subject to subsection (c), to the substitution
for the beneficiary cost-sharing described in
paragraphs (1) and (2) of section 1860B(b) (up to the
initial coverage limit specified in paragraph (3) of
such section) of amounts that do not exceed $2 for a
multiple source or generic drug (as described in
section 1927(k)(7)(A)) and $5 for a non-preferred drug.
``(3) Construction.--Nothing in this section shall be
construed as preventing a PDP sponsor from reducing to 0 the
cost-sharing otherwise applicable to generic drugs.
``(4) Determination of eligibility.--
``(A) Subsidy eligible individual defined.--For
purposes of this section, subject to subparagraph (D),
the term `subsidy eligible individual' means an
individual who--
``(i) is eligible to elect, and has elected,
to obtain qualified prescription drug coverage
under this part;
``(ii) has income below 175 percent of the
Federal poverty line; and
``(iii) meets the resources requirement
described in section 1905(p)(1)(C).
``(B) Determinations.--The determination of whether
an individual residing in a State is a subsidy eligible
individual and the amount of such individual's income
shall be determined under the State medicaid plan for
the State under section 1935(a) or by the Social
Security Administration. In the case of a State that
does not operate such a medicaid plan (either under
title XIX or under a statewide waiver granted under
section 1115), such determination shall be made under
arrangements made by the Administrator. There are
authorized to be appropriated to the Social Security
Administration such sums as may be necessary for the
determination of eligibility under this subparagraph.
``(C) Income determinations.--For purposes of
applying this section--
``(i) income shall be determined in the
manner described in section 1905(p)(1)(B); and
``(ii) the term `Federal poverty line' means
the official poverty line (as defined by the
Office of Management and Budget, and revised
annually in accordance with section 673(2) of
the Omnibus Budget Reconciliation Act of 1981)
applicable to a family of the size involved.
``(D) Treatment of territorial residents.--In the
case of an individual who is not a resident of the 50
States or the District of Columbia, the individual is
not eligible to be a subsidy eligible individual but
may be eligible for financial assistance with
prescription drug expenses under section 1935(e).
``(E) Treatment of conforming medigap policies.--For
purposes of this section, the term `qualified
prescription drug coverage' includes a medicare
supplemental policy described in section 1860H(b)(4).
``(5) Indexing dollar amounts.--
``(A) For 2006.--The dollar amounts applied under
paragraphs (1)(B) and (2)(B) for 2006 shall be the
dollar amounts specified in such paragraph increased by
the annual percentage increase described in section
1860B(b)(5) for 2006.
``(B) For subsequent years.--The dollar amounts
applied under paragraphs (1)(B) and (2)(B) for a year
after 2006 shall be the amounts (under this paragraph)
applied under paragraph (1)(B) or (2)(B) for the
preceding year increased by the annual percentage
increase described in section 1860B(b)(5) (relating to
growth in medicare prescription drug costs per
beneficiary) for the year involved.
``(b) Premium Subsidy Amount.--
``(1) In general.--The premium subsidy amount described in
this subsection for an individual residing in an area is the
benchmark bid amount (as defined in paragraph (2)) for
qualified prescription drug coverage offered by the
prescription drug plan or the Medicare+Choice plan in which the
individual is enrolled.
``(2) Benchmark bid amount defined.--For purposes of this
subsection, the term `benchmark bid amount' means, with respect
to qualified prescription drug coverage offered under--
``(A) a prescription drug plan that--
``(i) provides standard coverage (or
alternative prescription drug coverage the
actuarial value is equivalent to that of
standard coverage), the bid amount for
enrollment under the plan under this part
(determined without regard to any subsidy under
this section or any late enrollment penalty
under section 1860A(c)(2)(B)); or
``(ii) provides alternative prescription drug
coverage the actuarial value of which is
greater than that of standard coverage, the bid
amount described in clause (i) multiplied by
the ratio of (I) the actuarial value of
standard coverage, to (II) the actuarial value
of the alternative coverage; or
``(B) a Medicare+Choice plan, the portion of the bid
amount that is attributable to statutory drug benefits
(described in section 1853(a)(1)(A)(ii)(II)).
``(c) Rules in Applying Cost-Sharing Subsidies.--
``(1) In general.--In applying subsections (a)(1)(B) and
(a)(2)(B), nothing in this part shall be construed as
preventing a plan or provider from waiving or reducing the
amount of cost-sharing otherwise applicable.
``(2) Limitation on charges.--In the case of an individual
receiving cost-sharing subsidies under subsection (a)(1)(B) or
(a)(2)(B), the PDP sponsor may not charge more than $5 per
prescription.
``(3) Application of indexing rules.--The provisions of
subsection (a)(4) shall apply to the dollar amount specified in
paragraph (2) in the same manner as they apply to the dollar
amounts specified in subsections (a)(1)(B) and (a)(2)(B).
``(d) Administration of Subsidy Program.--The Administrator shall
provide a process whereby, in the case of an individual who is
determined to be a subsidy eligible individual and who is enrolled in
prescription drug plan or is enrolled in a Medicare+Choice plan under
which qualified prescription drug coverage is provided--
``(1) the Administrator provides for a notification of the
PDP sponsor or Medicare+Choice organization involved that the
individual is eligible for a subsidy and the amount of the
subsidy under subsection (a);
``(2) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the amount of the
applicable subsidy and submits to the Administrator information
on the amount of such reduction; and
``(3) the Administrator periodically and on a timely basis
reimburses the sponsor or organization for the amount of such
reductions.
The reimbursement under paragraph (3) with respect to cost-sharing
subsidies may be computed on a capitated basis, taking into account the
actuarial value of the subsidies and with appropriate adjustments to
reflect differences in the risks actually involved.
``(e) Relation to Medicaid Program.--
``(1) In general.--For provisions providing for eligibility
determinations, and additional financing, under the medicaid
program, see section 1935.
``(2) Medicaid providing wrap around benefits.--The coverage
provided under this part is primary payor to benefits for
prescribed drugs provided under the medicaid program under
title XIX.
``(3) Coordination.--The Administrator shall develop and
implement a plan for the coordination of prescription drug
benefits under this part with the benefits provided under the
medicaid program under title XIX, with particular attention to
insuring coordination of payments and prevention of fraud and
abuse. In developing and implementing such plan, the
Administrator shall involve the Secretary, the States, the data
processing industry, pharmacists, and pharmaceutical
manufacturers, and other experts.
``SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES FOR QUALIFIED
PRESCRIPTION DRUG COVERAGE.
``(a) Subsidy Payment.--In order to reduce premium levels applicable
to qualified prescription drug coverage for all medicare beneficiaries
consistent with an overall subsidy level of 65 percent, to reduce
adverse selection among prescription drug plans and Medicare+Choice
plans that provide qualified prescription drug coverage, and to promote
the participation of PDP sponsors under this part, the Administrator
shall provide in accordance with this section for payment to a
qualifying entity (as defined in subsection (b)) of the following
subsidies:
``(1) Direct subsidy.--In the case of an individual enrolled
in a prescription drug plan, Medicare+Choice plan that provides
qualified prescription drug coverage, or qualified retiree
prescription drug plan, a direct subsidy equal to 35 percent of
the total payments made by a qualifying entity for standard
coverage under the respective plan.
``(2) Subsidy through reinsurance.--The reinsurance payment
amount (as defined in subsection (c)), which in the aggregate
is 30 percent of such total payments, for excess costs incurred
in providing qualified prescription drug coverage--
``(A) for individuals enrolled with a prescription
drug plan under this part;
``(B) for individuals enrolled with a Medicare+Choice
plan that provides qualified prescription drug
coverage; and
``(C) for individuals who are enrolled in a qualified
retiree prescription drug plan.
This section constitutes budget authority in advance of appropriations
Acts and represents the obligation of the Administrator to provide for
the payment of amounts provided under this section.
``(b) Qualifying Entity Defined.--For purposes of this section, the
term `qualifying entity' means any of the following that has entered
into an agreement with the Administrator to provide the Administrator
with such information as may be required to carry out this section:
``(1) A PDP sponsor offering a prescription drug plan under
this part.
``(2) A Medicare+Choice organization that provides qualified
prescription drug coverage under a Medicare+Choice plan under
part C.
``(3) The sponsor of a qualified retiree prescription drug
plan (as defined in subsection (f)).
``(c) Reinsurance Payment Amount.--
``(1) In general.--Subject to subsection (d)(1)(B) and
paragraph (4), the reinsurance payment amount under this
subsection for a qualifying covered individual (as defined in
subsection (g)(1)) for a coverage year (as defined in
subsection (g)(2)) is equal to the sum of the following:
``(A) For the portion of the individual's gross
covered prescription drug costs (as defined in
paragraph (3)) for the year that exceeds the initial
copayment threshold specified in section
1860B(b)(2)(C), but does not exceed the initial
coverage limit specified in section 1860B(b)(3), an
amount equal to 30 percent of the allowable costs (as
defined in paragraph (2)) attributable to such gross
covered prescription drug costs.
``(B) For the portion of the individual's gross
covered prescription drug costs for the year that
exceeds the annual out-of-pocket threshold specified in
1860B(b)(4)(B), an amount equal to 80 percent of the
allowable costs attributable to such gross covered
prescription drug costs.
``(2) Allowable costs.--For purposes of this section, the
term `allowable costs' means, with respect to gross covered
prescription drug costs under a plan described in subsection
(b) offered by a qualifying entity, the part of such costs that
are actually paid (net of average percentage rebates) under the
plan, but in no case more than the part of such costs that
would have been paid under the plan if the prescription drug
coverage under the plan were standard coverage.
``(3) Gross covered prescription drug costs.--For purposes of
this section, the term `gross covered prescription drug costs'
means, with respect to an enrollee with a qualifying entity
under a plan described in subsection (b) during a coverage
year, the costs incurred under the plan (including costs
attributable to administrative costs) for covered prescription
drugs dispensed during the year, including costs relating to
the deductible, whether paid by the enrollee or under the plan,
regardless of whether the coverage under the plan exceeds
standard coverage and regardless of when the payment for such
drugs is made.
``(4) Indexing dollar amounts.--
``(A) Amounts for 2005.--The dollar amounts applied
under paragraph (1) for 2005 shall be the dollar
amounts specified in such paragraph.
``(B) For 2006.--The dollar amounts applied under
paragraph (1) for 2006 shall be the dollar amounts
specified in such paragraph increased by the annual
percentage increase described in section 1860B(b)(5)
for 2006.
``(C) For subsequent years.--The dollar amounts
applied under paragraph (1) for a year after 2006 shall
be the amounts (under this paragraph) applied under
paragraph (1) for the preceding year increased by the
annual percentage increase described in section
1860B(b)(5) (relating to growth in medicare
prescription drug costs per beneficiary) for the year
involved.
``(D) Rounding.--Any amount, determined under the
preceding provisions of this paragraph for a year,
which is not a multiple of $10 shall be rounded to the
nearest multiple of $10.
``(d) Adjustment of Payments.--
``(1) Adjustment of reinsurance payments to assure 30 percent
level of subsidy through reinsurance.--
``(A) Estimation of payments.--The Administrator
shall estimate--
``(i) the total payments to be made (without
regard to this subsection) during a year under
subsections (a)(2) and (c); and
``(ii) the total payments to be made by
qualifying entities for standard coverage under
plans described in subsection (b) during the
year.
``(B) Adjustment.--The Administrator shall
proportionally adjust the payments made under
subsections (a)(2) and (c) for a coverage year in such
manner so that the total of the payments made under
such subsections for the year is equal to 30 percent of
the total payments described in subparagraph (A)(ii).
``(2) Risk adjustment for direct subsidies.--To the extent
the Administrator determines it appropriate to avoid risk
selection, the payments made for direct subsidies under
subsection (a)(1) are subject to adjustment based upon risk
factors specified by the Administrator. Any such risk
adjustment shall be designed in a manner as to not result in a
change in the aggregate payments made under such subsection.
``(e) Payment Methods.--
``(1) In general.--Payments under this section shall be based
on such a method as the Administrator determines. The
Administrator may establish a payment method by which interim
payments of amounts under this section are made during a year
based on the Administrator's best estimate of amounts that will
be payable after obtaining all of the information.
``(2) Source of payments.--Payments under this section shall
be made from the Medicare Prescription Drug Trust Fund.
``(f) Qualified Retiree Prescription Drug Plan Defined.--
``(1) In general.--For purposes of this section, the term
`qualified retiree prescription drug plan' means employment-
based retiree health coverage (as defined in paragraph (3)(A))
if, with respect to an individual enrolled (or eligible to be
enrolled) under this part who is covered under the plan, the
following requirements are met:
``(A) Assurance.--The sponsor of the plan shall
annually attest, and provide such assurances as the
Administrator may require, that the coverage meets or
exceeds the requirements for qualified prescription
drug coverage.
``(B) Audits.--The sponsor (and the plan) shall
maintain, and afford the Administrator access to, such
records as the Administrator may require for purposes
of audits and other oversight activities necessary to
ensure the adequacy of prescription drug coverage, and
the accuracy of payments made.
``(C) Provision of certification of prescription drug
coverage.--The sponsor of the plan shall provide for
issuance of certifications of the type described in
section 1860A(c)(2)(D).
``(2) Limitation on benefit eligibility.--No payment shall be
provided under this section with respect to an individual who
is enrolled under a qualified retiree prescription drug plan
unless the individual is--
``(A) enrolled under this part;
``(B) is covered under the plan; and
``(C) is eligible to obtain qualified prescription
drug coverage under section 1860A but did not elect
such coverage under this part (either through a
prescription drug plan or through a Medicare+Choice
plan).
``(3) Definitions.--As used in this section:
``(A) Employment-based retiree health coverage.--The
term `employment-based retiree health coverage' means
health insurance or other coverage of health care costs
for individuals enrolled under this part (or for such
individuals and their spouses and dependents) based on
their status as former employees or labor union
members.
``(B) Sponsor.--The term `sponsor' means a plan
sponsor, as defined in section 3(16)(B) of the Employee
Retirement Income Security Act of 1974.
``(g) General Definitions.--For purposes of this section:
``(1) Qualifying covered individual.--The term `qualifying
covered individual' means an individual who--
``(A) is enrolled with a prescription drug plan under
this part;
``(B) is enrolled with a Medicare+Choice plan that
provides qualified prescription drug coverage under
part C; or
``(C) is enrolled for benefits under this title and
is covered under a qualified retiree prescription drug
plan.
``(2) Coverage year.--The term `coverage year' means a
calendar year in which covered outpatient drugs are dispensed
if a claim for payment is made under the plan for such drugs,
regardless of when the claim is paid.
``SEC. 1860I. MEDICARE PRESCRIPTION DRUG TRUST FUND.
``(a) In General.--There is created on the books of the Treasury of
the United States a trust fund to be known as the `Medicare
Prescription Drug Trust Fund' (in this section referred to as the
`Trust Fund'). The Trust Fund shall consist of such gifts and bequests
as may be made as provided in section 201(i)(1), and such amounts as
may be deposited in, or appropriated to, such fund as provided in this
part. Except as otherwise provided in this section, the provisions of
subsections (b) through (i) of section 1841 shall apply to the Trust
Fund in the same manner as they apply to the Federal Supplementary
Medical Insurance Trust Fund under such section.
``(b) Payments From Trust Fund.--
``(1) In general.--The Managing Trustee shall pay from time
to time from the Trust Fund such amounts as the Administrator
certifies are necessary to make--
``(A) payments under section 1860G (relating to low-
income subsidy payments);
``(B) payments under section 1860H (relating to
subsidy payments); and
``(C) payments with respect to administrative
expenses under this part in accordance with section
201(g).
``(2) Transfers to medicaid account for increased
administrative costs.--The Managing Trustee shall transfer from
time to time from the Trust Fund to the Grants to States for
Medicaid account amounts the Administrator certifies are
attributable to increases in payment resulting from the
application of a higher Federal matching percentage under
section 1935(b).
``(c) Deposits Into Trust Fund.--
``(1) Low-income transfer.--There is hereby transferred to
the Trust Fund, from amounts appropriated for Grants to States
for Medicaid, amounts equivalent to the aggregate amount of the
reductions in payments under section 1903(a)(1) attributable to
the application of section 1935(c).
``(2) Appropriations to cover government contributions.--
There are authorized to be appropriated from time to time, out
of any moneys in the Treasury not otherwise appropriated, to
the Trust Fund, an amount equivalent to the amount of payments
made from the Trust Fund under subsection (b), reduced by the
amount transferred to the Trust Fund under paragraph (1).
``(d) Relation to Solvency Requirements.--Any provision of law that
relates to the solvency of the Trust Fund under this part shall take
into account the Trust Fund and amounts receivable by, or payable from,
the Trust Fund.
``SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO PROVISIONS IN
PART C.
``(a) Definitions.--For purposes of this part:
``(1) Covered outpatient drugs.--The term `covered outpatient
drugs' is defined in section 1860B(f).
``(2) Initial coverage limit.--The term `initial coverage
limit' means such limit as established under section
1860B(b)(3), or, in the case of coverage that is not standard
coverage, the comparable limit (if any) established under the
coverage.
``(3) Medicare prescription drug trust fund.--The term
`Medicare Prescription Drug Trust Fund' means the Trust Fund
created under section 1860I(a).
``(4) PDP sponsor.--The term `PDP sponsor' means an entity
that is certified under this part as meeting the requirements
and standards of this part for such a sponsor.
``(5) Prescription drug plan.--The term `prescription drug
plan' means health benefits coverage that--
``(A) is offered under a policy, contract, or plan by
a PDP sponsor pursuant to, and in accordance with, a
contract between the Administrator and the sponsor
under section 1860D(b);
``(B) provides qualified prescription drug coverage;
and
``(C) meets the applicable requirements of the
section 1860C for a prescription drug plan.
``(6) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' is defined in section
1860B(a).
``(7) Standard coverage.--The term `standard coverage' is
defined in section 1860B(b).
``(b) Application of Medicare+Choice Provisions Under This Part.--For
purposes of applying provisions of part C under this part with respect
to a prescription drug plan and a PDP sponsor, unless otherwise
provided in this part such provisions shall be applied as if--
``(1) any reference to a Medicare+Choice plan included a
reference to a prescription drug plan;
``(2) any reference to a provider-sponsored organization
included a reference to a PDP sponsor;
``(3) any reference to a contract under section 1857 included
a reference to a contract under section 1860D(b); and
``(4) any reference to part C included a reference to this
part.''.
(b) Additional Conforming Changes.--
(1) Conforming references to previous part d.--Any reference
in law (in effect before the date of the enactment of this Act)
to part D of title XVIII of the Social Security Act is deemed a
reference to part E of such title (as in effect after such
date).
(2) Conforming amendment permitting waiver of cost-sharing.--
Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is amended--
(A) by striking ``and'' at the end of subparagraph
(E);
(B) by striking the period at the end of subparagraph
(F) and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(G) the waiver or reduction of any cost-sharing imposed
under part D of title XVIII.''.
(3) Submission of legislative proposal.--Not later than 6
months after the date of the enactment of this Act, the
Secretary of Health and Human Services shall submit to the
appropriate committees of Congress a legislative proposal
providing for such technical and conforming amendments in the
law as are required by the provisions of this subtitle.
(c) Study on Transitioning Part B Prescription Drug Coverage.--Not
later than January 1, 2004, the Medicare Benefits Administrator shall
submit a report to Congress that makes recommendations regarding
methods for providing benefits under part D of title XVIII of the
Social Security Act for outpatient prescription drugs for which
benefits are provided under part B of such title.
SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE UNDER THE
MEDICARE+CHOICE PROGRAM.
(a) In General.--Section 1851 (42 U.S.C. 1395w-21) is amended by
adding at the end the following new subsection:
``(j) Availability of Prescription Drug Benefits.--
``(1) Offer of qualified prescription drug coverage.--
``(A) In general.--A Medicare+Choice organization may
not offer prescription drug coverage (other than that
required under parts A and B) to an enrollee under a
Medicare+Choice plan unless such drug coverage is at
least qualified prescription drug coverage and unless
the requirements of this subsection with respect to
such coverage are met.
``(B) Construction.--Nothing in this subsection shall
be construed as--
``(i) requiring a Medicare+Choice plan to
include coverage of qualified prescription drug
coverage; or
``(ii) permitting a Medicare+Choice
organization from providing such coverage to an
individual who has not elected such coverage
under section 1860A(b).
For purposes of this part, an individual who has not
elected qualified prescription drug coverage under
section 1860A(b) shall be treated as being ineligible
to enroll in a Medicare+Choice plan under this part
that offers such coverage.
``(2) Compliance with additional beneficiary protections.--
With respect to the offering of qualified prescription drug
coverage by a Medicare+Choice organization under a
Medicare+Choice plan, the organization and plan shall meet the
requirements of section 1860C, including requirements relating
to information dissemination and grievance and appeals, in the
same manner as they apply to a PDP sponsor and a prescription
drug plan under part D and shall submit to the Administrator
the information described in section 1860F(a)(2). The
Administrator shall waive such requirements to the extent the
Administrator determines that such requirements duplicate
requirements otherwise applicable to the organization or plan
under this part.
``(3) Availability of premium and cost-sharing subsidies for
low-income enrollees and direct and reinsurance subsidy
payments for organizations.--For provisions--
``(A) providing premium and cost-sharing subsidies to
low-income individuals receiving qualified prescription
drug coverage through a Medicare+Choice plan, see
section 1860G; and
``(B) providing a Medicare+Choice organization with
direct and insurance subsidy payments for providing
qualified prescription drug coverage under this part,
see section 1860H.
``(4) Transition in initial enrollment period.--
Notwithstanding any other provision of this part, the annual,
coordinated election period under subsection (e)(3)(B) for 2005
shall be the 6-month period beginning with November 2004.
``(5) Qualified prescription drug coverage; standard
coverage.--For purposes of this part, the terms `qualified
prescription drug coverage' and `standard coverage' have the
meanings given such terms in section 1860B.''.
(b) Conforming Amendments.--Section 1851 (42 U.S.C. 1395w-21) is
amended--
(1) in subsection (a)(1)--
(A) by inserting ``(other than qualified prescription
drug benefits)'' after ``benefits'';
(B) by striking the period at the end of subparagraph
(B) and inserting a comma; and
(C) by adding after and below subparagraph (B) the
following:
``and may elect qualified prescription drug coverage in
accordance with section 1860A.''; and
(2) in subsection (g)(1), by inserting ``and section
1860A(c)(2)(B)'' after ``in this subsection''.
(c) Effective Date.--The amendments made by this section apply to
coverage provided on or after January 1, 2005.
SEC. 103. MEDICAID AMENDMENTS.
(a) Determinations of Eligibility for Low-Income Subsidies.--
(1) Requirement.--Section 1902(a) (42 U.S.C. 1396a(a)) is
amended--
(A) by striking ``and'' at the end of paragraph (64);
(B) by striking the period at the end of paragraph
(65) and inserting ``; and''; and
(C) by inserting after paragraph (65) the following
new paragraph:
``(66) provide for making eligibility determinations under
section 1935(a).''.
(2) New section.--Title XIX is further amended--
(A) by redesignating section 1935 as section 1936;
and
(B) by inserting after section 1934 the following new
section:
``special provisions relating to medicare prescription drug benefit
``Sec. 1935. (a) Requirement for Making Eligibility Determinations
for Low-Income Subsidies.--As a condition of its State plan under this
title under section 1902(a)(66) and receipt of any Federal financial
assistance under section 1903(a), a State shall--
``(1) make determinations of eligibility for premium and
cost-sharing subsidies under (and in accordance with) section
1860G;
``(2) inform the Administrator of the Medicare Benefits
Administration of such determinations in cases in which such
eligibility is established; and
``(3) otherwise provide such Administrator with such
information as may be required to carry out part D of title
XVIII (including section 1860G).
``(b) Payments for Additional Administrative Costs.--
``(1) In general.--The amounts expended by a State in
carrying out subsection (a) are, subject to paragraph (2),
expenditures reimbursable under the appropriate paragraph of
section 1903(a); except that, notwithstanding any other
provision of such section, the applicable Federal matching
rates with respect to such expenditures under such section
shall be increased as follows (but in no case shall the rate as
so increased exceed 100 percent):
``(A) For expenditures attributable to costs incurred
during 2005, the otherwise applicable Federal matching
rate shall be increased by 10 percent of the percentage
otherwise payable (but for this subsection) by the
State.
``(B)(i) For expenditures attributable to costs
incurred during 2006 and each subsequent year through
2013, the otherwise applicable Federal matching rate
shall be increased by the applicable percent (as
defined in clause (ii)) of the percentage otherwise
payable (but for this subsection) by the State.
``(ii) For purposes of clause (i), the `applicable
percent' for--
``(I) 2006 is 20 percent; or
``(II) a subsequent year is the applicable
percent under this clause for the previous year
increased by 10 percentage points.
``(C) For expenditures attributable to costs incurred
after 2013, the otherwise applicable Federal matching
rate shall be increased to 100 percent.
``(2) Coordination.--The State shall provide the
Administrator with such information as may be necessary to
properly allocate administrative expenditures described in
paragraph (1) that may otherwise be made for similar
eligibility determinations.''.
(b) Phased-In Federal Assumption of Medicaid Responsibility for
Premium and Cost-Sharing Subsidies for Dually Eligible Individuals.--
(1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1))
is amended by inserting before the semicolon the following: ``,
reduced by the amount computed under section 1935(c)(1) for the
State and the quarter''.
(2) Amount described.--Section 1935, as inserted by
subsection (a)(2), is amended by adding at the end the
following new subsection:
``(c) Federal Assumption of Medicaid Prescription Drug Costs for
Dually-Eligible Beneficiaries.--
``(1) In general.--For purposes of section 1903(a)(1), for a
State that is one of the 50 States or the District of Columbia
for a calendar quarter in a year (beginning with 2005) the
amount computed under this subsection is equal to the product
of the following:
``(A) Medicare subsidies.--The total amount of
payments made in the quarter under section 1860G
(relating to premium and cost-sharing prescription drug
subsidies for low-income medicare beneficiaries) that
are attributable to individuals who are residents of
the State and are entitled to benefits with respect to
prescribed drugs under the State plan under this title
(including such a plan operating under a waiver under
section 1115).
``(B) State matching rate.--A proportion computed by
subtracting from 100 percent the Federal medical
assistance percentage (as defined in section 1905(b))
applicable to the State and the quarter.
``(C) Phase-out proportion.--The phase-out proportion
(as defined in paragraph (2)) for the quarter.
``(2) Phase-out proportion.--For purposes of paragraph
(1)(C), the `phase-out proportion' for a calendar quarter in--
``(A) 2005 is 90 percent;
``(B) a subsequent year before 2014, is the phase-out
proportion for calendar quarters in the previous year
decreased by 10 percentage points; or
``(C) a year after 2013 is 0 percent.''.
(c) Medicaid Providing Wrap-Around Benefits.--Section 1935, as so
inserted and amended, is further amended by adding at the end the
following new subsection:
``(d) Additional Provisions.--
``(1) Medicaid as secondary payor.--In the case of an
individual who is entitled to qualified prescription drug
coverage under a prescription drug plan under part D of title
XVIII (or under a Medicare+Choice plan under part C of such
title) and medical assistance for prescribed drugs under this
title, medical assistance shall continue to be provided under
this title for prescribed drugs to the extent payment is not
made under the prescription drug plan or the Medicare+Choice
plan selected by the individual.
``(2) Condition.--A State may require, as a condition for the
receipt of medical assistance under this title with respect to
prescription drug benefits for an individual eligible to obtain
qualified prescription drug coverage described in paragraph
(1), that the individual elect qualified prescription drug
coverage under section 1860A.''.
(d) Treatment of Territories.--
(1) In general.--Section 1935, as so inserted and amended, is
further amended--
(A) in subsection (a) in the matter preceding
paragraph (1), by inserting ``subject to subsection
(e)'' after ``section 1903(a)'';
(B) in subsection (c)(1), by inserting ``subject to
subsection (e)'' after ``1903(a)(1)''; and
(C) by adding at the end the following new
subsection:
``(e) Treatment of Territories.--
``(1) In general.--In the case of a State, other than the 50
States and the District of Columbia--
``(A) the previous provisions of this section shall
not apply to residents of such State; and
``(B) if the State establishes a plan described in
paragraph (2) (for providing medical assistance with
respect to the provision of prescription drugs to
medicare beneficiaries), the amount otherwise
determined under section 1108(f) (as increased under
section 1108(g)) for the State shall be increased by
the amount specified in paragraph (3).
``(2) Plan.--The plan described in this paragraph is a plan
that--
``(A) provides medical assistance with respect to the
provision of covered outpatient drugs (as defined in
section 1860B(f)) to low-income medicare beneficiaries;
and
``(B) assures that additional amounts received by the
State that are attributable to the operation of this
subsection are used only for such assistance.
``(3) Increased amount.--
``(A) In general.--The amount specified in this
paragraph for a State for a year is equal to the
product of--
``(i) the aggregate amount specified in
subparagraph (B); and
``(ii) the amount specified in section
1108(g)(1) for that State, divided by the sum
of the amounts specified in such section for
all such States.
``(B) Aggregate amount.--The aggregate amount
specified in this subparagraph for--
``(i) 2005, is equal to $20,000,000; or
``(ii) a subsequent year, is equal to the
aggregate amount specified in this subparagraph
for the previous year increased by annual
percentage increase specified in section
1860B(b)(5) for the year involved.
``(4) Report.--The Administrator shall submit to Congress a
report on the application of this subsection and may include in
the report such recommendations as the Administrator deems
appropriate.''.
(2) Conforming amendment.--Section 1108(f) (42 U.S.C.
1308(f)) is amended by inserting ``and section 1935(e)(1)(B)''
after ``Subject to subsection (g)''.
SEC. 104. MEDIGAP TRANSITION.
(a) In General.--Section 1882 (42 U.S.C. 1395ss) is amended by adding
at the end the following new subsection:
``(v) Coverage of Prescription Drugs.--
``(1) In general.--Notwithstanding any other provision of
law, except as provided in paragraph (3) no new medicare
supplemental policy that provides coverage of expenses for
prescription drugs may be issued under this section on or after
January 1, 2005, to an individual unless it replaces a medicare
supplemental policy that was issued to that individual and that
provided some coverage of expenses for prescription drugs.
``(2) Issuance of substitute policies if obtain prescription
drug coverage under part d.--
``(A) In general.--The issuer of a medicare
supplemental policy--
``(i) may not deny or condition the issuance
or effectiveness of a medicare supplemental
policy that has a benefit package classified as
`A', `B', `C', `D', `E', `F', or `G' (under the
standards established under subsection (p)(2))
and that is offered and is available for
issuance to new enrollees by such issuer;
``(ii) may not discriminate in the pricing of
such policy, because of health status, claims
experience, receipt of health care, or medical
condition; and
``(iii) may not impose an exclusion of
benefits based on a pre-existing condition
under such policy,
in the case of an individual described in subparagraph
(B) who seeks to enroll under the policy not later than
63 days after the date of the termination of enrollment
described in such paragraph and who submits evidence of
the date of termination or disenrollment along with the
application for such medicare supplemental policy.
``(B) Individual covered.--An individual described in
this subparagraph is an individual who--
``(i) enrolls in a prescription drug plan
under part D; and
``(ii) at the time of such enrollment was
enrolled and terminates enrollment in a
medicare supplemental policy which has a
benefit package classified as `H', `I', or `J'
under the standards referred to in subparagraph
(A)(i) or terminates enrollment in a policy to
which such standards do not apply but which
provides benefits for prescription drugs.
``(C) Enforcement.--The provisions of paragraph (4)
of subsection (s) shall apply with respect to the
requirements of this paragraph in the same manner as
they apply to the requirements of such subsection.
``(3) New standards.--In applying subsection (p)(1)(E)
(including permitting the NAIC to revise its model regulations
in response to changes in law) with respect to the change in
benefits resulting from title I of the Medicare Modernization
and Prescription Drug Act of 2002, with respect to policies
issued to individuals who are enrolled under part D, the
changes in standards shall only provide for substituting for
the benefit packages that included coverage for prescription
drugs two benefit packages that may provide for coverage of
cost-sharing with respect to qualified prescription drug
coverage under such part, except that such coverage may not
cover the prescription drug deductible under such part. The two
benefit packages shall be consistent with the following:
``(A) First new policy.--The policy described in this
subparagraph has the following benefits,
notwithstanding any other provision of this section
relating to a core benefit package:
``(i) Coverage of 50 percent of the cost-
sharing otherwise applicable, except coverage
of 100 percent of any cost-sharing otherwise
applicable for preventive benefits.
``(ii) No coverage of the part B deductible.
``(iii) Coverage for all hospital coinsurance
for long stays (as in the current core benefit
package).
``(iv) A limitation on annual out-of-pocket
expenditures to $4,000 in 2005 (or, in a
subsequent year, to such limitation for the
previous year increased by an appropriate
inflation adjustment specified by the
Secretary).
``(B) Second new policy.--The policy described in
this subparagraph has the same benefits as the policy
described in subparagraph (A), except as follows:
``(i) Substitute `75 percent' for `50
percent' in clause (i) of such subparagraph.
``(ii) Substitute `$2,000' for `$4,000' in
clause (iv) of such subparagraph.
``(4) Construction.--Any provision in this section or in a
medicare supplemental policy relating to guaranteed
renewability of coverage shall be deemed to have been met
through the offering of other coverage under this
subsection.''.
SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD ENDORSEMENT PROGRAM.
Title XVIII is amended by inserting after section 1806 the following
new section:
``medicare prescription drug discount card endorsement program
``Sec. 1807. (a) In General.--The Secretary (or the Medicare Benefits
Administrator pursuant to section 1808(c)(3)(C)) shall establish a
program--
``(1) to endorse prescription drug discount card programs
that meet the requirements of this section; and
``(2) to make available to medicare beneficiaries information
regarding such endorsed programs.
``(b) Requirements for Endorsement.--The Secretary may not endorse a
prescription drug discount card program under this section unless the
program meets the following requirements:
``(1) Savings to medicare beneficiaries.--The program passes
on to medicare beneficiaries who enroll in the program
discounts on prescription drugs, including discounts negotiated
with manufacturers.
``(2) Prohibition on application only to mail order.--The
program applies to drugs that are available other than solely
through mail order.
``(3) Beneficiary services.--The program provides
pharmaceutical support services, such as education and
counseling, and services to prevent adverse drug interactions.
``(4) Information.--The program makes available to medicare
beneficiaries through the Internet and otherwise information,
including information on enrollment fees, prices charged to
beneficiaries, and services offered under the program, that the
Secretary identifies as being necessary to provide for informed
choice by beneficiaries among endorsed programs.
``(5) Demonstrated experience.--The entity operating the
program has demonstrated experience and expertise in operating
such a program or a similar program.
``(6) Quality assurance.--The entity has in place adequate
procedures for assuring quality service under the program.
``(7) Additional beneficiary protections.--The program meets
such additional requirements as the Secretary identifies to
protect and promote the interest of medicare beneficiaries,
including requirements that ensure that beneficiaries are not
charged more than the lower of the negotiated retail price or
the usual and customary price.
``(c) Program Operation.--The Secretary shall operate the program
under this section consistent with the following:
``(1) Promotion of informed choice.--In order to promote
informed choice among endorsed prescription drug discount card
programs, the Secretary shall provide for the dissemination of
information which compares the costs and benefits of such
programs in a manner coordinated with the dissemination of
educational information on Medicare+Choice plans under part C.
``(2) Oversight.--The Secretary shall provide appropriate
oversight to ensure compliance of endorsed programs with the
requirements of this section, including verification of the
discounts and services provided.
``(3) Use of medicare toll-free number.--The Secretary shall
provide through the 1-800-medicare toll free telephone number
for the receipt and response to inquiries and complaints
concerning the program and programs endorsed under this
section.
``(4) Disqualification for abusive practices.--The Secretary
shall revoke the endorsement of a program that the Secretary
determines no longer meets the requirements of this section or
that has engaged in false or misleading marketing practices.
``(5) Enrollment practices.--A medicare beneficiary may not
be enrolled in more than one endorsed program at any time.
``(d) Transition.--The Secretary shall provide for an appropriate
transition and discontinuation of the program under this section at the
time prescription drug benefits first become available under part D.
``(e) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out the program
under this section.''.
TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE
COMPETITION PROGRAM
Subtitle A--Medicare+Choice Revitalization
SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.
(a) Equalizing Payments Between Fee-For-Service and
Medicare+Choice.--
(1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
23(c)(1)) is amended by adding at the end the following:
``(D) Based on 100 percent of fee-for-service
costs.--
``(i) In general.--For 2003 and 2004, the
adjusted average per capita cost for the year
involved, determined under section 1876(a)(4)
for the Medicare+Choice payment area for
services covered under parts A and B for
individuals entitled to benefits under part A
and enrolled under part B who are not enrolled
in a Medicare+Choice plan under this part for
the year, but adjusted to exclude costs
attributable to payments under section 1886(h).
``(ii) Inclusion of costs of va and dod
military facility services to medicare-eligible
beneficiaries.--In determining the adjusted
average per capita cost under clause (i) for a
year, such cost shall be adjusted to include
the Secretary's estimate, on a per capita
basis, of the amount of additional payments
that would have been made in the area involved
under this title if individuals entitled to
benefits under this title had not received
services from facilities of the Department of
Veterans Affairs or the Department of
Defense.''.
(2) Conforming amendment.--Such section is further amended,
in the matter before subparagraph (A), by striking ``or (C)''
and inserting ``(C), or (D)''.
(b) Revision of Blend.--
(1) Revision of national average used in calculation of
blend.--Section 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w-
23(c)(4)(B)(i)(II)) is amended by inserting ``who (with respect
to determinations for 2003 and for 2004) are enrolled in a
Medicare+Choice plan'' after ``the average number of medicare
beneficiaries''.
(2) Change in budget neutrality.--Section 1853(c) (42 U.S.C.
1395w-23(c)) is amended--
(A) in paragraph (1)(A), by inserting ``(for a year
before 2003)'' after ``multiplied''; and
(B) in paragraph (5), by inserting ``(before 2003)''
after ``for each year''.
(c) Revision in Minimum Percentage Increase for 2003 and 2004.--
Section 1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is amended by
striking clause (iv) and inserting the following:
``(iv) For 2002, 102 percent of the annual
Medicare+Choice capitation rate under this
paragraph for the area for 2001.
``(v) For 2003 and 2004, 103 percent of the
annual Medicare+Choice capitation rate under
this paragraph for the area for the previous
year.
``(vi) For 2005 and each succeeding year, 102
percent of the annual Medicare+Choice
capitation rate under this paragraph for the
area for the previous year.''.
(d) Inclusion of Costs of DOD and VA Military Facility Services to
Medicare-eligible Beneficiaries in Calculation of Medicare+Choice
Payment Rates.--Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)) is
amended--
(1) in subparagraph (A), by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (E)'', and
(2) by adding at the end the following new subparagraph:
``(E) Inclusion of costs of dod and va military
facility services to medicare-eligible beneficiaries.--
In determining the area-specific Medicare+Choice
capitation rate under subparagraph (A) for a year
(beginning with 2003), the annual per capita rate of
payment for 1997 determined under section 1876(a)(1)(C)
shall be adjusted to include in the rate the
Secretary's estimate, on a per capita basis, of the
amount of additional payments that would have been made
in the area involved under this title if individuals
entitled to benefits under this title had not received
services from facilities of the Department of Defense
or the Department of Veterans Affairs.''.
(e) Announcement of Revised Medicare+Choice Payment Rates.--Within 2
weeks after the date of the enactment of this Act, the Secretary shall
determine, and shall announce (in a manner intended to provide notice
to interested parties) Medicare+Choice capitation rates under section
1853 of the Social Security Act (42 U.S.C. 1395w-23) for 2003, revised
in accordance with the provisions of this section.
(f) MedPAC Study of AAPCC.--
(1) Study.--The Medicare Payment Advisory Commission shall
conduct a study that assesses the method used for determining
the adjusted average per capita cost (AAPCC) under section
1876(a)(4) of the Social Security Act (42 U.S.C. 1395mm(a)(4)).
Such study shall examine--
(A) the bases for variation in such costs between
different areas, including differences in input prices,
utilization, and practice patterns;
(B) the appropriate geographic area for payment under
the Medicare+Choice program under part C of title XVIII
of such Act; and
(C) the accuracy of risk adjustment methods in
reflecting differences in costs of providing care to
different groups of beneficiaries served under such
program.
(2) Report.--Not later than 9 months after the date of the
enactment of this Act, the Commission shall submit to Congress
a report on the study conducted under paragraph (1). Such
report shall include recommendations regarding changes in the
methods for computing the adjusted average per capita cost
among different areas.
(g) Report on Impact of Increased Financial Assistance to
Medicare+Choice Plans.--Not later than July 1, 2003, the Secretary of
Health and Human Services shall submit to Congress a report that
describes the impact of additional financing provided under this Act
and other Acts (including the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999 and BIPA) on the availability of
Medicare+Choice plans in different areas and its impact on lowering
premiums and increasing benefits under such plans.
SEC. 202. MAKING PERMANENT CHANGE IN MEDICARE+CHOICE REPORTING
DEADLINES AND ANNUAL, COORDINATED ELECTION PERIOD.
(a) Change in Reporting Deadline.--Section 1854(a)(1) (42 U.S.C.
1395w-24(a)(1)), as amended by section 532(b)(1) of the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002, is
amended by striking ``2002, 2003, and 2004 (or July 1 of each other
year)'' and inserting ``2002 and each subsequent year (or July 1 of
each year before 2002)''.
(b) Delay in Annual, Coordinated Election Period.--Section
1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by section
532(c)(1)(A) of the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002, is amended by striking ``and
after 2005, the month of November before such year and with respect to
2003, 2004, and 2005'' and inserting ``, the month of November before
such year and with respect to 2003 and any subsequent year''.
(c) Annual Announcement of Payment Rates.--Section 1853(b)(1) (42
U.S.C. 1395w-23(b)(1)), as amended by section 532(d)(1) of the Public
Health Security and Bioterrorism Preparedness and Response Act of 2002,
is amended by striking ``and after 2005 not later than March 1 before
the calendar year concerned and for 2004 and 2005'' and inserting ``not
later than March 1 before the calendar year concerned and for 2004 and
each subsequent year''.
(d) Requiring Provision of Available Information Comparing Plan
Options.--The first sentence of section 1851(d)(2)(A)(ii) (42 U.S.C.
1395w-21(d)(2)(A)(ii)) is amended by inserting before the period the
following: ``to the extent such information is available at the time of
preparation of materials for the mailing''.
SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.
(a) In General.--Section 1856(b)(3) (42 U.S.C. 1395w-26(b)(3)) is
amended to read as follows:
``(3) Relation to state laws.--The standards established
under this subsection shall supersede any State law or
regulation (other than State licensing laws or State laws
relating to plan solvency) with respect to Medicare+Choice
plans which are offered by Medicare+Choice organizations under
this part.''.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect on the date of the enactment of this Act.
SEC. 204. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS
BENEFICIARIES.
(a) Treatment as Coordinated Care Plan.--Section 1851(a)(2)(A) (42
U.S.C. 1395w-21(a)(2)(A)) is amended by adding at the end the following
new sentence: ``Specialized Medicare+Choice plans for special needs
beneficiaries (as defined in section 1859(b)(4)) may be any type of
coordinated care plan.''.
(b) Specialized Medicare+Choice Plan for Special Needs Beneficiaries
Defined.--Section 1859(b) (42 U.S.C. 1395w-29(b)) is amended by adding
at the end the following new paragraph:
``(4) Specialized medicare+choice plans for special needs
beneficiaries.--
``(A) In general.--The term `specialized
Medicare+Choice plan for special needs beneficiaries'
means a Medicare+Choice plan that exclusively serves
special needs beneficiaries (as defined in subparagraph
(B)).
``(B) Special needs beneficiary.--The term `special
needs beneficiary' means a Medicare+Choice eligible
individual who--
``(i) is institutionalized (as defined by the
Secretary);
``(ii) is entitled to medical assistance
under a State plan under title XIX; or
``(iii) meets such requirements as the
Secretary may determine would benefit from
enrollment in such a specialized
Medicare+Choice plan described in subparagraph
(A) for individuals with severe or disabling
chronic conditions.''.
(c) Restriction on Enrollment Permitted.--Section 1859 (42 U.S.C.
1395w-29) is amended by adding at the end the following new subsection:
``(f) Restriction on Enrollment for Specialized Medicare+Choice Plans
for Special Needs Beneficiaries.--In the case of a specialized
Medicare+Choice plan (as defined in subsection (b)(4)), notwithstanding
any other provision of this part and in accordance with regulations of
the Secretary and for periods before January 1, 2007, the plan may
restrict the enrollment of individuals under the plan to individuals
who are within one or more classes of special needs beneficiaries.''.
(d) Report to Congress.--Not later than December 31, 2005, the
Medicare Benefits Administrator shall submit to Congress a report that
assesses the impact of specialized Medicare+Choice plans for special
needs beneficiaries on the cost and quality of services provided to
enrollees. Such report shall include an assessment of the costs and
savings to the medicare program as a result of amendments made by
subsections (a), (b), and (c).
(e) Effective Dates.--
(1) In general.--The amendments made by subsections (a), (b),
and (c) shall take effect upon the date of the enactment of
this Act.
(2) Deadline for issuance of requirements for special needs
beneficiaries; transition.--No later than 6 months after the
date of the enactment of this Act, the Secretary of Health and
Human Services shall issue final regulations to establish
requirements for special needs beneficiaries under section
1859(b)(4)(B)(iii) of the Social Security Act, as added by
subsection (b).
SEC. 205. MEDICARE MSAS.
(a) Exemption from Reporting Enrollee Encounter Data.--
(1) In general.--Section 1852(e)(1) (42 U.S.C. 1395w-
22(e)(1)) is amended by inserting ``(other than MSA plans)''
after ``Medicare+Choice plans''.
(2) Conforming amendments.--Section 1852 (42 U.S.C. 1395w-22)
is amended--
(A) in subsection (c)(1)(I), by inserting before the
period at the end the following: ``if required under
such section''; and
(B) in subparagraphs (A) and (B) of subsection
(e)(2), by striking ``, a non-network MSA plan,'' and
``, non-network msa plans,'' each place it appears.
(b) Making Program Permanent and Eliminating Cap.--Section 1851(b)(4)
(42 U.S.C. 1395w-21(b)(4)) is amended--
(1) in the heading, by striking ``on a demonstration basis'';
(2) by striking the first sentence of subparagraph (A); and
(3) by striking the second sentence of subparagraph (C).
(c) Applying Limitations on Balance Billing.--Section 1852(k)(1) (42
U.S.C. 1395w-22(k)(1)) is amended by inserting ``or with an
organization offering a MSA plan'' after ``section 1851(a)(2)(A)''.
(d) Additional Amendment.--Section 1851(e)(5)(A) (42 U.S.C. 1395w-
21(e)(5)(A)) is amended--
(1) by adding ``or'' at the end of clause (i);
(2) by striking ``, or'' at the end of clause (ii) and
inserting a semicolon; and
(3) by striking clause (iii).
SEC. 206. EXTENSION OF REASONABLE COST AND SHMO CONTRACTS.
(a) Reasonable Cost Contracts.--
(1) In general.--Section 1876(h)(5)(C) (42 U.S.C.
1395mm(h)(5)(C)) is amended--
(A) by inserting ``(i)'' after ``(C)'';
(B) by inserting before the period the following: ``,
except (subject to clause (ii)) in the case of a
contract for an area which is not covered in the
service area of 1 or more coordinated care
Medicare+Choice plans under part C''; and
(C) by adding at the end the following new clause:
``(ii) In the case in which--
``(I) a reasonable cost reimbursement contract includes an
area in its service area as of a date that is after December
31, 2003;
``(II) such area is no longer included in such service area
after such date by reason of the operation of clause (i)
because of the inclusion of such area within the service area
of a Medicare+Choice plan; and
``(III) all Medicare+Choice plans subsequently terminate
coverage in such area;
such reasonable cost reimbursement contract may be extended and renewed
to cover such area (so long as it is not included in the service area
of any Medicare+Choice plan).''.
(2) Study.--The Medicare Benefits Administrator shall conduct
a study of an appropriate transition for plans offered under
reasonable cost contracts under section 1876 of the Social
Security Act on and after January 1, 2005. Such a transition
may take into account whether there are one or more coordinated
care Medicare+Choice plans being offered in the areas involved.
Not later than February 1, 2004, the Administrator shall submit
to Congress a report on such study and shall include
recommendations regarding any changes in the amendment made by
paragraph (1) as the Administrator determines to be
appropriate.
(b) Extension of Social Health Maintenance Organization (SHMO)
Demonstration Project.--
(1) In general.--Section 4018(b)(1) of the Omnibus Budget
Reconciliation Act of 1987 is amended by striking ``the date
that is 30 months after the date that the Secretary submits to
Congress the report described in section 4014(c) of the
Balanced Budget Act of 1997'' and inserting ``December 31,
2004''.
(2) SHMOs offering medicare+choice plans.--Nothing in such
section 4018 shall be construed as preventing a social health
maintenance organization from offering a Medicare+Choice plan
under part C of title XVIII of the Social Security Act.
SEC. 207. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION PROJECTS.
The last sentence of section 9215(a) of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (42 U.S.C. 1395b-1 note), as
previously amended, is amended by striking ``December 31, 2004, but
only with respect to'' and all that follows and inserting ``December
31, 2009, but only with respect to individuals who reside in the city
in which the project is operated and so long as the total number of
individuals participating in the project does not exceed the number of
such individuals participating as of January 1, 1996.''.
Subtitle B--Medicare+Choice Competition Program
SEC. 211. MEDICARE+CHOICE COMPETITION PROGRAM.
(a) Submission of Bid Amounts.--Section 1854 (42 U.S.C. 1395w-24) is
amended--
(1) in the heading by inserting ``and bid amounts'' after
``premiums'';
(2) in subsection (a)(1)(A)--
(A) by striking ``(A)'' and inserting ``(A)(i) if the
following year is before 2005,''; and
(B) by inserting before the semicolon at the end the
following: ``or (ii) if the following year is 2005 or
later, the information described in paragraph (6)(A)'';
and
(3) by adding at the end of subsection (a) the following:
``(6) Submission of bid amounts by medicare+choice
organizations.--
``(A) Information to be submitted.--The information
described in this subparagraph is as follows:
``(i) The monthly aggregate bid amount for
provision of all items and services under this
part and the actuarial basis for determining
such amount.
``(ii) The proportions of such bid amount
that are attributable to--
``(I) the provision of statutory non-
drug benefits (such portion referred to
in this part as the `unadjusted non-
drug monthly bid amount');
``(II) the provision of statutory
prescription drug benefits; and
``(III) the provision of non-
statutory benefits;
and the actuarial basis for determining such
proportions.
``(iii) Such additional information as the
Administrator may require to verify the
actuarial bases described in clauses (i) and
(ii).
``(B) Statutory benefits defined.--For purposes of
this part:
``(i) The term `statutory non-drug benefits'
means benefits under parts A and B.
``(ii) The term `statutory prescription drug
benefits' means benefits under part D.
``(iii) The term `statutory benefits' means
statutory prescription drug benefits and
statutory non-drug benefits.
``(C) Acceptance and negotiation of bid amounts.--The
Administrator has the authority to negotiate regarding
monthly bid amounts submitted under subparagraph (A)
(and the proportion described in subparagraph (A)(ii)).
The Administrator may reject such a bid amount or
proportion if the Administrator determines that such
amount or proportion is not supported by the actuarial
bases provided under subparagraph (A).''.
(b) Providing for Beneficiary Savings for Certain Plans.--
(1) In general.--Section 1854(b) (42 U.S.C. 1395w-24(b)) is
amended--
(A) by adding at the end of paragraph (1) the
following new subparagraph:
``(C) Beneficiary rebate rule.--
``(i) Requirement.--The Medicare+Choice plan
shall provide to the enrollee a monthly rebate
equal to 75 percent of the average per capita
savings (if any) described in paragraph (3)
applicable to the plan and year involved.
``(iii) Form of rebate.--A rebate required
under this subparagraph shall be provided--
``(I) through the crediting of the
amount of the rebate towards the
Medicare+Choice monthly supplementary
beneficiary premium or the premium
imposed for prescription drug coverage
under part D;
``(II) through a direct monthly
payment (through electronic funds
transfer or otherwise); or
``(III) through other means approved
by the Medicare Benefits Administrator,
or any combination thereof.''; and
(B) by adding at the end the following new paragraph:
``(3) Computation of average per capita monthly savings.--For
purposes of paragraph (1)(C)(i), the average per capita monthly
savings referred to in such paragraph for a Medicare+Choice
plan and year is computed as follows:
``(A) Determination of state-wide average risk
adjustment.--
``(i) In general.--The Medicare Benefits
Administrator shall determine, at the same time
rates are promulgated under section 1853(b)(1)
(beginning with 2005), for each State the
average of the risk adjustment factors to be
applied to enrollees under section
1853(a)(1)(A) in that State. In the case of a
State in which a Medicare+Choice plan was
offered in the previous year, the Administrator
may compute such average based upon risk
adjustment factors applied in that State in a
previous year.
``(ii) Treatment of new states.--In the case
of a State in which no Medicare+Choice plan was
offered in the previous year, the Administrator
shall estimate such average. In making such
estimate, the Administrator may use average
risk adjustment factors applied to comparable
States or applied on a national basis.
``(B) Determination of risk adjusted benchmark and
risk-adjusted bid.--For each Medicare+Choice plan
offered in a State, the Administrator shall--
``(i) adjust the fee-for-service area-
specific non-drug benchmark amount by the
applicable average risk adjustment factor
computed under subparagraph (A); and
``(ii) adjust the unadjusted non-drug monthly
bid amount by such applicable average risk
adjustment factor.
``(C) Determination of average per capita monthly
savings.--The average per capita monthly savings
described in this subparagraph is equal to the amount
(if any) by which--
``(i) the risk-adjusted benchmark amount
computed under subparagraph (B)(i), exceeds
``(ii) the risk-adjusted bid computed under
subparagraph (B)(ii).
``(D) Authority to determine risk adjustment for
areas other than states.--The Administrator may provide
for the determination and application of risk
adjustment factors under this paragraph on the basis of
areas other than States.''.
(2) Computation of fee-for-service area-specific non-drug
benchmark.--Section 1853 (42 U.S.C. 1395w-23) is amended by
adding at the end the following new subsection:
``(j) Computation of Fee-for-Service Area-Specific Non-Drug Benchmark
Amount.--For purposes of this part, the term `fee-for-service area-
specific non-drug benchmark amount' means, with respect to a
Medicare+Choice payment area for a month in a year, an amount equal to
the greater of the following (but in no case less than \1/12\ of the
rate computed under subsection (c)(1), without regard to subparagraph
(A), for the year):
``(1) Based on 100 percent of fee-for-service costs in the
area.--An amount equal to \1/12\ of 100 percent (for 2005
through 2007, or 95 percent for 2008 and years thereafter) of
the adjusted average per capita cost for the year involved,
determined under section 1876(a)(4) for the Medicare+Choice
payment area, for the area and the year involved, for services
covered under parts A and B for individuals entitled to
benefits under part A and enrolled under part B who are not
enrolled in a Medicare+Choice plan under this part for the
year, and adjusted to exclude from such cost the amount the
Medicare Benefits Administrator estimates is payable for costs
described in subclauses (I) and (II) of subsection (c)(3)(C)(i)
for the year involved and also adjusted in the manner described
in subsection (c)(1)(D)(ii) (relating to inclusion of costs of
VA and DOD military facility services to medicare-eligible
beneficiaries).
``(2) Minimum monthly amount.--The minimum amount specified
in this paragraph is the amount specified in subsection
(c)(1)(B)(iv) for the year involved.''.
(c) Payment of Plans Based on Bid Amounts.--
(1) In general.--Section 1853(a)(1)(A) (42 U.S.C. 1395w-23)
is amended by striking ``in an amount'' and all that follows
and inserting the following: ``in an amount determined as
follows:
``(i) Payment before 2005.--For years before
2005, the payment amount shall be equal to \1/
12\ of the annual Medicare+Choice capitation
rate (as calculated under subsection (c)) with
respect to that individual for that area,
reduced by the amount of any reduction elected
under section 1854(f )(1)(E) and adjusted under
clause (iii).
``(ii) Payment for statutory non-drug
benefits beginning with 2005.--For years
beginning with 2005--
``(I) Plans with bids below
benchmark.--In the case of a plan for
which there are average per capita
monthly savings described in section
1854(b)(3)(C), the payment under this
subsection is equal to the unadjusted
non-drug monthly bid amount, adjusted
under clause (iii), plus the amount of
the monthly rebate computed under
section 1854(b)(1)(C)(i) for that plan
and year.
``(II) Plans with bids at or above
benchmark.--In the case of a plan for
which there are no average per capita
monthly savings described in section
1854(b)(3)(C), the payment amount under
this subsection is equal to the fee-
for-service area-specific non-drug
benchmark amount, adjusted under clause
(iii).
``(iii) Demographic adjustment, including
adjustment for health status.--The
Administrator shall adjust the payment amount
under clause (i), the unadjusted non-drug
monthly bid amount under clause (ii)(I), and
the fee-for-service area-specific non-drug
benchmark amount under clause (ii)(II) for such
risk factors as age, disability status, gender,
institutional status, and such other factors as
the Administrator determines to be appropriate,
including adjustment for health status under
paragraph (3), so as to ensure actuarial
equivalence. The Administrator may add to,
modify, or substitute for such adjustment
factors if such changes will improve the
determination of actuarial equivalence.
``(iv) Reference to subsidy payment for
statutory drug benefits.--In the case in which
an enrollee is enrolled under part D, the
Medicare+Choice organization also is entitled
to a subsidy payment amount under section
1860H.''.
(d) Conforming Amendments.--
(1) Protection against beneficiary selection.--Section
1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by
adding at the end the following: ``The Administrator shall not
approve a plan of an organization if the Administrator
determines that the benefits are designed to substantially
discourage enrollment by certain Medicare+Choice eligible
individuals with the organization.''.
(2) Conforming amendment to premium terminology.--
Subparagraphs (A) and (B) of section 1854(b)(2) (42 U.S.C.
1395w-24(b)(2)) are amended to read as follows:
``(A) Medicare+Choice monthly basic beneficiary
premium.--The term `Medicare+Choice monthly basic
beneficiary premium' means, with respect to a
Medicare+Choice plan--
``(i) described in section
1853(a)(1)(A)(ii)(I) (relating to plans
providing rebates), zero; or
``(ii) described in section
1853(a)(1)(A)(ii)(II), the amount (if any) by
which the unadjusted non-drug monthly bid
amount exceeds the fee-for-service area-
specific non-drug benchmark amount.
``(B) Medicare+Choice monthly supplemental
beneficiary premium.--The term `Medicare+Choice monthly
supplemental beneficiary premium' means, with respect
to a Medicare+Choice plan, the portion of the aggregate
monthly bid amount submitted under clause (i) of
subsection (a)(6)(A) for the year that is attributable
under such section to the provision of nonstatutory
benefits.''.
(3) Requirement for uniform bid amounts.--Section 1854(c) (42
U.S.C. 1395w-24(c)) is amended to read as follows:
``(c) Uniform Bid Amounts.--The Medicare+Choice monthly bid amount
submitted under subsection (a)(6) of a Medicare+Choice organization
under this part may not vary among individuals enrolled in the plan.''.
(4) Permitting beneficiary rebates.--
(A) Section 1851(h)(4)(A) (42 U.S.C. 1395w-
21(h)(4)(A)) is amended by inserting ``except as
provided under section 1854(b)(1)(C)'' after ``or
otherwise''.
(B) Section 1854(d) (42 U.S.C. 1395w-24(d)) is
amended by inserting ``, except as provided under
subsection (b)(1)(C),'' after ``and may not provide''.
(e) Effective Date.--The amendments made by this section shall apply
to payments and premiums for months beginning with January 2005.
SEC. 212. DEMONSTRATION PROGRAM FOR COMPETITIVE-DEMONSTRATION AREAS.
(a) Identification of Competitive-Demonstration Areas for
Demonstration Program; Computation of Choice Non-Drug Benchmarks.--
Section 1853, as amended by section 211(b)(2), is amended by adding at
the end the following new subsection:
``(k) Establishment of Competitive Demonstration Program.--
``(1) Designation of competitive-demonstration areas as part
of program.--
``(A) In general.--For purposes of this part, the
Administrator shall establish a demonstration program
under which the Administrator designates
Medicare+Choice areas as competitive-demonstration
areas consistent with the following limitations:
``(i) Limitation on number of areas that may
be designated.--The Administrator may not
designate more than 4 areas as competitive-
demonstration areas.
``(ii) Limitation on period of designation of
any area.--The Administrator may not designate
any area as a competitive-demonstration area
for a period of more than 2 years.
The Administrator has the discretion to decide whether
or not to designate as a competitive-demonstration area
an area that qualifies for such designation.
``(B) Qualifications for designation.--For purposes
of this title, a Medicare+Choice area (which is a
metropolitan statistical area or other area with a
substantial number of Medicare+Choice enrollees) may
not be designated as a `competitive-demonstration area'
for a 2-year period beginning with a year unless the
Administrator determines, by such date before the
beginning of the year as the Administrator determines
appropriate, that--
``(i) there will be offered during the open
enrollment period under this part before the
beginning of the year at least 2
Medicare+Choice plans (in addition to the fee-
for-service program under parts A and B), each
offered by a different Medicare+Choice
organization; and
``(ii) during March of the previous year at
least 50 percent of the number of
Medicare+Choice eligible individuals who reside
in the area were enrolled in a Medicare+Choice
plan.
``(2) Choice non-drug benchmark amount.--For purposes of this
part, the term `choice non-drug benchmark amount' means, with
respect to a Medicare+Choice payment area for a month in a
year, the sum of the 2 components described in paragraph (3)
for the area and year. The Administrator shall compute such
benchmark amount for each competitive-demonstration area before
the beginning of each annual, coordinated election period under
section 1851(e)(3)(B) for each year (beginning with 2005) in
which it is designated as such an area.
``(3) 2 components.--For purposes of paragraph (2), the 2
components described in this paragraph for an area and a year
are the following:
``(A) Fee-for-service component weighted by national
fee-for-service market share.--The product of the
following:
``(i) National fee-for-service market
share.--The national fee-for-service market
share percentage (determined under paragraph
(5)) for the year.
``(ii) Fee-for-service area-specific non-drug
bid.--The fee-for-service area-specific non-
drug bid (as defined in paragraph (6)) for the
area and year.
``(B) M+C component weighted by national
medicare+choice market share.--The product of the
following:
``(i) National medicare+choice market
share.--1 minus the national fee-for-service
market share percentage for the year.
``(ii) Weighted average of plan bids in
area.--The weighted average of the plan bids
for the area and year (as determined under
paragraph (4)(A)).
``(4) Determination of weighted average bids for an area.--
``(A) In general.--For purposes of paragraph
(3)(B)(ii), the weighted average of plan bids for an
area and a year is the sum of the following products
for Medicare+Choice plans described in subparagraph (C)
in the area and year:
``(i) Proportion of each plan's enrollees in
the area.--The number of individuals described
in subparagraph (B), divided by the total
number of such individuals for all
Medicare+Choice plans described in subparagraph
(C) for that area and year.
``(ii) Monthly non-drug bid amount.--The
unadjusted non-drug monthly bid amount.
``(B) Counting of individuals.--The Administrator
shall count, for each Medicare+Choice plan described in
subparagraph (C) for an area and year, the number of
individuals who reside in the area and who were
enrolled under such plan under this part during March
of the previous year.
``(C) Exclusion of plans not offered in previous
year.--For an area and year, the Medicare+Choice plans
described in this subparagraph are plans that are
offered in the area and year and were offered in the
area in March of the previous year.
``(5) Computation of national fee-for-service market share
percentage.--The Administrator shall determine, for a year, the
proportion (in this subsection referred to as the `national
fee-for-service market share percentage') of Medicare+Choice
eligible individuals who during March of the previous year were
not enrolled in a Medicare+Choice plan.
``(6) Fee-for-service area-specific non-drug bid.--For
purposes of this part, the term `fee-for-service area-specific
non-drug bid' means, for an area and year, the amount described
in section 1853(j)(1) for the area and year, except that any
reference to a percent of less than 100 percent shall be deemed
a reference to 100 percent.''.
(b) Application of Choice Non-Drug Benchmark in Competitive-
Demonstration Areas.--
(1) In general.--Section 1854 is amended--
(A) in subsection (b)(1)(C)(i), as added by section
211(b)(1)(A), by striking ``(i) Requirement.--The'' and
inserting ``(i) Requirement for non-competitive-
demonstration areas.--In the case of a Medicare+Choice
payment area that is not a competitive-demonstration
area designated under section 1853(k)(1), the'';
(B) in subsection (b)(1)(C), as so added, by
inserting after clause (i) the following new clause:
``(ii) Requirement for competitive-
demonstration areas.--In the case of a
Medicare+Choice payment area that is designated
as a competitive-demonstration area under
section 1853(k)(1), if there are average per
capita monthly savings described in paragraph
(4) for a Medicare+Choice plan and year, the
Medicare+Choice plan shall provide to the
enrollee a monthly rebate equal to 75 percent
of such savings.'';
(C) by adding at the end of subsection (b), as
amended by section 211(b)(1), the following new
paragraph:
``(4) Computation of average per capita monthly savings for
competitive-demonstration areas.--For purposes of paragraph
(1)(C)(ii), the average per capita monthly savings referred to
in such paragraph for a Medicare+Choice plan and year shall be
computed in the same manner as the average per capita monthly
savings is computed under paragraph (3) except that the
reference to the fee-for-service area-specific non-drug
benchmark amount in paragraph (3)(B)(i) (or to the benchmark
amount as adjusted under paragraph (3)(C)(i)) is deemed to be a
reference to the choice non-drug benchmark amount (or such
amount as adjusted in the manner described in paragraph
(3)(B)(i)).''; and
(D) in subsection (d), as amended by section
211(d)(4), by inserting ``and subsection (b)(1)(D)''
after ``subsection (b)(1)(C)''.
(2) Conforming amendments.--
(A) Payment of plans.--Section 1853(a)(1)(A)(ii), as
amended by section 211(c)(1), is amended--
(i) in subclause (I), by inserting ``(or, in
the case of a competitive-demonstration area,
the choice non-drug benchmark amount)'' after
``unadjusted non-drug monthly bid amount''; and
(ii) in subclauses (I) and (II), by inserting
``(or, in the case of a competitive-
demonstration area, described in section
1854(b)(4))'' after ``section 1854(b)(3)(C)''.
(B) Definition of monthly basic premium.--Section
1854(b)(2)(A)(ii), as amended by section 211(d)(2), is
amended by inserting ``(or, in the case of a
competitive-demonstration area, the choice non-drug
benchmark amount)'' after ``benchmark amount''.
(c) Premium Adjustment.--Section 1839 (42 U.S.C. 1395r) is amended by
adding at the end the following new subsection:
``(h)(1) In the case of an individual who resides in a competitive-
demonstration area designated under section 1851(k)(1) and who is not
enrolled in a Medicare+Choice plan under part C, the monthly premium
otherwise applied under this part (determined without regard to
subsections (b) and (f) or any adjustment under this subsection) shall
be adjusted as follows: If the fee-for-service area-specific non-drug
bid (as defined in section 1853(k)(6)) for the Medicare+Choice area in
which the individual resides for a month--
``(A) does not exceed the choice non-drug benchmark (as
determined under section 1853(k)(2)) for such area, the amount
of the premium for the individual for the month shall be
reduced by an amount equal to 75 percent of the amount by which
such benchmark exceeds such fee-for-service bid; or
``(B) exceeds such choice non-drug benchmark, the amount of
the premium for the individual for the month shall be adjusted
to ensure that--
``(i) the sum of the amount of the adjusted premium
and the choice non-drug benchmark for the area, is
equal to
``(ii) the sum of the unadjusted premium plus amount
of the fee-for-service area-specific non-drug bid for
the area.
``(2) Nothing in this subsection shall be construed as preventing a
reduction under paragraph (1)(A) in the premium otherwise applicable
under this part to zero or from requiring the provision of a rebate to
the extent such premium would otherwise be required to be less than
zero.
``(3) The adjustment in the premium under this subsection shall be
effected in such manner as the Medicare Benefits Administrator
determines appropriate.
``(4) In order to carry out this subsection (insofar as it is
effected through the manner of collection of premiums under 1840(a)),
the Medicare Benefits Administrator shall transmit to the Commissioner
of Social Security--
``(A) at the beginning of each year, the name, social
security account number, and the amount of the adjustment (if
any) under this subsection for each individual enrolled under
this part for each month during the year; and
``(B) periodically throughout the year, information to update
the information previously transmitted under this paragraph for
the year.''.
(d) Conforming Amendment.--Section 1844(c) (42 U.S.C. 1395w(c)) is
amended by inserting ``and without regard to any premium adjustment
effected under section 1839(h)'' before the period at the end.
(e) Report on Demonstration Program.--Not later than 6 months after
the date on which the designation of the 4th competitive-demonstration
area under section 1851(k)(1) of the Social Security Act ends, the
Medicare Payment Advisory Commission shall submit to Congress a report
on the impact of the demonstration program under the amendments made by
this section, including such impact on premiums of medicare
beneficiaries, savings to the medicare program, and on adverse
selection.
(f) Effective Date.--The amendments made by this section shall apply
to payments and premiums for periods beginning on or after January 1,
2005.
SEC. 213. CONFORMING AMENDMENTS.
(a) Conforming Amendments Relating to Bids.--
(1) Section 1854 (42 U.S.C. 1395w-24) is amended--
(A) in the heading of subsection (a), by inserting
``and Bid Amounts'' after ``Premiums''; and
(B) in subsection (a)(5)(A), by inserting
``paragraphs (2), (3), and (4) of'' after ``filed
under''.
(b) Additional Conforming Amendments.--
(1) Annual determination and announcement of certain
factors.--Section 1853(b) (42 U.S.C. 1395w-23(b)) is amended--
(A) in paragraph (1), by striking ``the respective
calendar year'' and all that follows and inserting the
following: ``the calendar year concerned with respect
to each Medicare+Choice payment area, the following:
``(A) Pre-competition information.--For years before
2005, the following:
``(i) Medicare+choice capitation rates.--The
annual Medicare+Choice capitation rate for each
Medicare+Choice payment area for the year.
``(ii) Adjustment factors.--The risk and
other factors to be used in adjusting such
rates under subsection (a)(1)(A) for payments
for months in that year.
``(B) Competition information.--For years beginning
with 2005, the following:
``(i) Benchmarks.--The fee-for-service area-
specific non-drug benchmark under section
1853(j) and, if applicable, the choice non-drug
benchmark under section 1853(k)(2), for the
year involved and, if applicable, the national
fee-for-service market share percentage.
``(ii) Adjustment factors.--The adjustment
factors applied under section
1853(a)(1)(A)(iii) (relating to demographic
adjustment), section 1853(a)(1)(B) (relating to
adjustment for end-stage renal disease), and
section 1853(a)(3) (relating to health status
adjustment).
``(iii) Projected fee-for-service bid.--In
the case of a competitive area, the projected
fee-for-service area-specific non-drug bid (as
determined under subsection (k)(6)) for the
area.
``(iv) Individuals.--The number of
individuals counted under subsection (k)(4)(B)
and enrolled in each Medicare+Choice plan in
the area.''; and
(B) in paragraph (3), by striking ``in sufficient
detail'' and all that follows up to the period at the
end.
(2) Repeal of provisions relating to adjusted community rate
(acr).--
(A) In general.--Subsections (e) and (f) of section
1854 (42 U.S.C. 1395w-24) are repealed.
(B) Conforming amendment.--Section 1839(a)(2) (42
U.S.C. 1395r(a)(2)) is amended by striking ``, and to
reflect'' and all that follows and inserting a period.
(3) Prospective implementation of national coverage
determinations.--Section 1852(a)(5) (42 U.S.C. 1395w-22(a)(5))
is amended to read as follows:
``(5) Prospective implementation of national coverage
determinations.--The Secretary shall only implement a national
coverage determination that will result in a significant change
in the costs to a Medicare+Choice organization in a prospective
manner that applies to announcements made under section 1853(b)
after the date of the implementation of the determination.''.
(4) Permitting geographic adjustment to consolidate multiple
medicare+choice payment areas in a state into a single
statewide medicare+choice payment area.--Section 1853(d)(3) (42
U.S.C. 1395w-23(e)(3)) is amended--
(A) by amending clause (i) of subparagraph (A) to
read as follows:
``(i) to a single statewide Medicare+Choice
payment area,''; and
(B) by amending subparagraph (B) to read as follows:
``(B) Budget neutrality adjustment.--In the case of a
State requesting an adjustment under this paragraph,
the Medicare Benefits Administrator shall initially
(and annually thereafter) adjust the payment rates
otherwise established under this section for
Medicare+Choice payment areas in the State in a manner
so that the aggregate of the payments under this
section in the State shall not exceed the aggregate
payments that would have been made under this section
for Medicare+Choice payment areas in the State in the
absence of the adjustment under this paragraph.''.
(d) Effective Date.--The amendments made by this section shall apply
to payments and premiums for periods beginning on or after January 1,
2005.
TITLE III--RURAL HEALTH CARE IMPROVEMENTS
SEC. 301. REFERENCE TO FULL MARKET BASKET INCREASE FOR SOLE COMMUNITY
HOSPITALS.
For provision eliminating any reduction from full market basket in
the update for inpatient hospital services for sole community
hospitals, see section 401.
SEC. 302. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) TREATMENT FOR
RURAL HOSPITALS AND URBAN HOSPITALS WITH FEWER THAN
100 BEDS.
(a) Blending of Payment Amounts.--
(1) In general.--Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended by adding at the end the following
new clause:
``(xiv)(I) In the case of discharges in a fiscal year beginning on or
after October 1, 2002, subject to subclause (II), there shall be
substituted for the disproportionate share adjustment percentage
otherwise determined under clause (iv) (other than subclause (I)) or
under clause (viii), (x), (xi), (xii), or (xiii), the old blend
proportion (specified under subclause (III)) of the disproportionate
share adjustment percentage otherwise determined under the respective
clause and 100 percent minus such old blend proportion of the
disproportionate share adjustment percentage determined under clause
(vii) (relating to large, urban hospitals).
``(II) Under subclause (I), the disproportionate share adjustment
percentage shall not exceed 10 percent for a hospital that is not
classified as a rural referral center under subparagraph (C).
``(III) For purposes of subclause (I), the old blend proportion for
fiscal year 2003 is 80 percent, for each subsequent year (through 2006)
is the old blend proportion under this subclause for the previous year
minus 20 percentage points, and for each year beginning with 2007 is 0
percent.''.
(2) Conforming amendments.--Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended--
(A) in each of subclauses (II), (III), (IV), (V), and
(VI) of clause (iv), by inserting ``subject to clause
(xiv) and'' before ``for discharges occurring'';
(B) in clause (viii), by striking ``The formula'' and
inserting ``Subject to clause (xiv), the formula''; and
(C) in each of clauses (x), (xi), (xii), and (xiii),
by striking ``For purposes'' and inserting ``Subject to
clause (xiv), for purposes''.
(b) Effective Date.--The amendments made by this section shall apply
with respect to discharges occurring on or after October 1, 2002.
SEC. 303. 2-YEAR PHASED-IN INCREASE IN THE STANDARDIZED AMOUNT IN RURAL
AND SMALL URBAN AREAS TO ACHIEVE A SINGLE, UNIFORM
STANDARDIZED AMOUNT.
Section 1886(d)(3)(A)(iv) (42 U.S.C. 1395ww(d)(3)(A)(iv)) is
amended--
(1) by striking ``(iv) For discharges'' and inserting
``(iv)(I) Subject to the succeeding provisions of this clause,
for discharges''; and
(2) by adding at the end the following new subclauses:
``(II) For discharges occurring during fiscal year 2003, the
average standardized amount for hospitals located other than in
a large urban area shall be increased by \1/2\ of the
difference between the average standardized amount determined
under subclause (I) for hospitals located in large urban areas
for such fiscal year and such amount determined (without regard
to this subclause) for other hospitals for such fiscal year.
``(III) For discharges occurring in a fiscal year beginning
with fiscal year 2004, the Secretary shall compute an average
standardized amount for hospitals located in any area within
the United States and within each region equal to the average
standardized amount computed for the previous fiscal year under
this subparagraph for hospitals located in a large urban area
(or, beginning with fiscal year 2005, for hospitals located in
any area) increased by the applicable percentage increase under
subsection (b)(3)(B)(i).''.
SEC. 304. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL MARKET
BASKET.
(a) More Frequent Updates in Weights.--After revising the weights
used in the hospital market basket under section 1886(b)(3)(B)(iii) of
the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the
most current data available, the Secretary shall establish a frequency
for revising such weights in such market basket to reflect the most
current data available more frequently than once every 5 years.
(b) Report.--Not later than October 1, 2003, the Secretary shall
submit a report to Congress on the frequency established under
subsection (a), including an explanation of the reasons for, and
options considered, in determining such frequency.
SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.
(a) Reinstatement of Periodic Interim Payment (PIP).--Section
1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--
(1) by striking ``and'' at the end of subparagraph (C);
(2) by adding ``and'' at the end of subparagraph (D); and
(3) by inserting after subparagraph (D) the following new
subparagraph:
``(E) inpatient critical access hospital services;''.
(b) Condition for Application of Special Physician Payment
Adjustment.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is amended by
adding after and below subparagraph (B) the following:
``The Secretary may not require, as a condition for applying
subparagraph (B) with respect to a critical access hospital,
that each physician providing professional services in the
hospital must assign billing rights with respect to such
services, except that such subparagraph shall not apply to
those physicians who have not assigned such billing rights.''.
(c) Flexibility in Bed Limitation for Hospitals with Strong Seasonal
Census Fluctuations.--Section 1820 (42 U.S.C. 1395i-4) is amended--
(1) in subsection (c)(2)(B)(iii), by inserting ``subject to
paragraph (3)'' after ``(iii) provides'';
(2) by adding at the end of subsection (c) the following new
paragraph:
``(3) Increase in maximum number of beds for hospitals with
strong seasonal census fluctuations.--
``(A) In general.--In the case of a hospital that
demonstrates that it meets the standards established
under subparagraph (B), the bed limitations otherwise
applicable under paragraph (2)(B)(iii) and subsection
(f) shall be increased by 5 beds.
``(B) Standards.--The Secretary shall specify
standards for determining whether a critical access
hospital has sufficiently strong seasonal variations in
patient admissions to justify the increase in bed
limitation provided under subparagraph (A).''; and
(3) in subsection (f), by adding at the end the following new
sentence: ``The limitations in numbers of beds under the first
sentence are subject to adjustment under subsection (c)(3).''.
(d) 5-Year Extension of the Authorization for Appropriations for
Grant Program.--Section 1820(j) (42 U.S.C. 1395i-4(j)) is amended by
striking ``through 2002'' and inserting ``through 2007''.
(e) Prohibition of Retroactive Recoupment.--The Secretary shall not
recoup (or otherwise seek to recover) overpayments made for outpatient
critical access hospital services under part B of title XVIII of the
Social Security Act, for services furnished in cost reporting periods
that began before October 1, 2002, insofar as such overpayments are
attributable to payment being based on 80 percent of reasonable costs
(instead of 100 percent of reasonable costs minus 20 percent of
charges).
(f) Effective Dates.--
(1) Reinstatement of pip.--The amendments made by subsection
(a) shall apply to payments made on or after January 1, 2003.
(2) Physician payment adjustment condition.--The amendment
made by subsection (b) shall be effective as if included in the
enactment of section 403(d) of the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-
371).
(3) Flexibility in bed limitation.--The amendments made by
subsection (c) shall apply to designations made on or after
January 1, 2003, but shall not apply to critical access
hospitals that were designated as of such date.
SEC. 306. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH SERVICES
FURNISHED IN A RURAL AREA.
(a) In General.--Section 508(a) BIPA (114 Stat. 2763A-533) is
amended--
(1) by striking ``24-Month Increase Beginning April 1, 2001''
and inserting ``In General''; and
(2) by striking ``April 1, 2003'' and inserting ``January 1,
2005''.
(b) Conforming Amendment.--Section 547(c)(2) of BIPA (114 Stat.
2763A-553) is amended by striking ``the period beginning on April 1,
2001, and ending on September 30, 2002,'' and inserting ``a period
under such section''.
SEC. 307. REFERENCE TO 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE
FURNISHED IN A FRONTIER AREA AND RURAL HOSPICE
DEMONSTRATION PROJECT.
For--
(1) provision of 10 percent increase in payment for hospice
care furnished in a frontier area, see section 422; and
(2) provision of a rural hospice demonstration project, see
section 423.
SEC. 308. REFERENCE TO PRIORITY FOR HOSPITALS LOCATED IN RURAL OR SMALL
URBAN AREAS IN REDISTRIBUTION OF UNUSED GRADUATE
MEDICAL EDUCATION RESIDENCIES.
For provision providing priority for hospitals located in rural or
small urban areas in redistribution of unused graduate medical
education residencies, see section 612.
SEC. 309. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR
PHYSICIANS' SERVICES.
(a) Study.--The Comptroller General of the United States shall
conduct a study of differences in payment amounts under the physician
fee schedule under section 1848 of the Social Security Act (42 U.S.C.
1395w-4) for physicians' services in different geographic areas. Such
study shall include--
(1) an assessment of the validity of the geographic
adjustment factors used for each component of the fee schedule;
(2) an evaluation of the measures used for such adjustment,
including the frequency of revisions; and
(3) an evaluation of the methods used to determine
professional liability insurance costs used in computing the
malpractice component, including a review of increases in
professional liability insurance premiums and variation in such
increases by State and physician specialty and methods used to
update the geographic cost of practice index and relative
weights for the malpractice component.
(b) Report.--Not later than 1 year after the date of the enactment of
this Act, the Comptroller General shall submit to Congress a report on
the study conducted under subsection (a). The report shall include
recommendations regarding the use of more current data in computing
geographic cost of practice indices as well as the use of data directly
representative of physicians' costs (rather than proxy measures of such
costs).
SEC. 310. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE EFFORTS THAT
BENEFIT MEDICALLY UNDERSERVED POPULATIONS.
(a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7(b)(3)), as
amended by section 101(b)(2), is amended--
(1) in subparagraph (F), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (G), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(H) any remuneration between a public or nonprofit
private health center entity described under clause (i)
or (ii) of section 1905(l)(2)(B) and any individual or
entity providing goods, items, services, donations or
loans, or a combination thereof, to such health center
entity pursuant to a contract, lease, grant, loan, or
other agreement, if such agreement contributes to the
ability of the health center entity to maintain or
increase the availability, or enhance the quality, of
services provided to a medically underserved population
served by the health center entity.''.
(b) Rulemaking for Exception for Health Center Entity Arrangements.--
(1) Establishment.--
(A) In general.--The Secretary of Health and Human
Services (in this subsection referred to as the
``Secretary'') shall establish, on an expedited basis,
standards relating to the exception described in
section 1128B(b)(3)(H) of the Social Security Act, as
added by subsection (a), for health center entity
arrangements to the antikickback penalties.
(B) Factors to consider.--The Secretary shall
consider the following factors, among others, in
establishing standards relating to the exception for
health center entity arrangements under subparagraph
(A):
(i) Whether the arrangement between the
health center entity and the other party
results in savings of Federal grant funds or
increased revenues to the health center entity.
(ii) Whether the arrangement between the
health center entity and the other party
restricts or limits a patient's freedom of
choice.
(iii) Whether the arrangement between the
health center entity and the other party
protects a health care professional's
independent medical judgment regarding
medically appropriate treatment.
The Secretary may also include other standards and
criteria that are consistent with the intent of
Congress in enacting the exception established under
this section.
(2) Interim final effect.--No later than 180 days after the
date of enactment of this Act, the Secretary shall publish a
rule in the Federal Register consistent with the factors under
paragraph (1)(B). Such rule shall be effective and final
immediately on an interim basis, subject to such change and
revision, after public notice and opportunity (for a period of
not more than 60 days) for public comment, as is consistent
with this subsection.
SEC. 311. RELIEF FOR CERTAIN NON-TEACHING HOSPITALS.
(a) In General.--In the case of a non-teaching hospital that meets
the condition of subsection (b), for its cost reporting period
beginning in each of fiscal years 2003, 2004, and 2005 the amount of
payment made to the hospital under section 1886(d) of the Social
Security Act for discharges occurring during such fiscal year only
shall be increased as though the applicable percentage increase
(otherwise applicable to discharges occurring during such fiscal year
under section 1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B)(i)) had been increased by 5 percentage points. The
previous sentence shall be applied for each such fiscal year separately
without regard to its application in a previous fiscal year and shall
not affect payment for discharges for any hospital occurring during a
fiscal year after fiscal year 2005.
(b) Condition.--A non-teaching hospital meets the condition of this
paragraph if--
(1) it is located in a rural area and the amount of the
aggregate payments under subsection (d) of such section for
hospitals located in rural areas in the State for their cost
reporting periods beginning during fiscal year 1999 is less
than the aggregate allowable operating costs of inpatient
hospital services (as defined in section 1886(a)(4) of such
Act) for all subsection (d) hospitals in such areas in such
State with respect to such cost reporting periods; or
(2) it is located in an urban area and the amount of the
aggregate payments under subsection (d) of such section for
hospitals located in urban areas in the State for their cost
reporting periods beginning during fiscal year 1999 is less
than 103 percent of the aggregate allowable operating costs of
inpatient hospital services (as defined in section 1886(a)(4)
of such Act) for all subsection (d) hospitals in such areas in
such State with respect to such cost reporting periods.
The amounts under paragraphs (1) and (2) shall be determined by the
Secretary of Health and Human Services based on data of the Medicare
Payment Advisory Commission.
(c) Definitions.--For purposes of this section:
(1) Non-teaching hospital.--The term ``non-teaching
hospital'' means, for a cost reporting period, a subsection (d)
hospital (as defined in section 1886(d)(1)(B) of the Social
Security Act, 42 U.S.C. 1395ww(d)(1)(B))) that is not receiving
any additional payment under section 1886(d)(5)(B) of such Act
(42 U.S.C. 1395ww(d)(5)(B)) or a payment under section 1886(h)
of such Act (42 U.S.C. 1395ww(h)) for discharges occurring
during the period.
(2) Rural; urban.--The terms ``rural'' and ``urban'' have the
meanings given such terms for purposes of section 1886(d) of
the Social Security Act (42 U.S.C. 1395ww(d)).
TITLE IV--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
SEC. 401. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.
Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C.
1395ww(b)(3)(B)(i)) is amended to read as follows:
``(XVIII) for fiscal year 2003, the market basket percentage
increase for sole community hospitals and such increase minus
0.25 percentage points for other hospitals, and''.
SEC. 402. 2-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS OF
MEDICAL EDUCATION (IME).
Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is
amended--
(1) in subclause (VI) by striking ``and'' at the end;
(2) by redesignating subclause (VII) as subclause (IX);
(3) in subclause (IX) as so redesignated, by striking
``2002'' and inserting ``2004''; and
(4) by inserting after subclause (VI) the following new
subclause:
``(VII) during fiscal year 2003, `c' is equal to
1.47;
``(VIII) during fiscal year 2004, `c' is equal to
1.45; and''.
SEC. 403. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT
HOSPITAL PPS.
(a) Improving Timeliness of Data Collection.--Section 1886(d)(5)(K)
(42 U.S.C. 1395ww(d)(5)(K)) is amended by adding at the end the
following new clause:
``(vii) Under the mechanism under this subparagraph, the Secretary
shall provide for the addition of new diagnosis and procedure codes in
April 1 of each year, but the addition of such codes shall not require
the Secretary to adjust the payment (or diagnosis-related group
classification) under this subsection until the fiscal year that begins
after such date.''.
(b) Eligibility Standard.--
(1) Minimum period for recognition of new technologies.--
Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is
amended--
(A) by inserting ``(I)'' after ``(vi)''; and
(B) by adding at the end the following new subclause:
``(II) Under such criteria, a service or technology shall not be
denied treatment as a new service or technology on the basis of the
period of time in which the service or technology has been in use if
such period ends before the end of the 2-to-3-year period that begins
on the effective date of implementation of a code under ICD-9-CM (or a
successor coding methodology) that enables the identification of a
significant sample of specific discharges in which the service or
technology has been used.''.
(2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I)
(42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting
``(applying a threshold specified by the Secretary that is the
lesser of 50 percent of the national average standardized
amount for operating costs of inpatient hospital services for
all hospitals and all diagnosis-related groups or one standard
deviation for the diagnosis-related group involved)'' after
``is inadequate''.
(3) Criterion for substantial improvement.--Section
1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended
by paragraph (1), is further amended by adding at the end the
following subclause:
``(III) The Secretary shall by regulation provide for further
clarification of the criteria applied to determine whether a new
service or technology represents an advance in medical technology that
substantially improves the diagnosis or treatment of beneficiaries.
Under such criteria, in determining whether a new service or technology
represents an advance in medical technology that substantially improves
the diagnosis or treatment of beneficiaries, the Secretary shall deem a
service or technology as meeting such requirement if the service or
technology is a drug or biological that is designated under section 506
or 526 of the Federal Food, Drug, and Cosmetic Act, approved under
section 314.510 or 601.41 of title 21, Code of Federal Regulations, or
designated for priority review when the marketing application for such
drug or biological was filed or is a medical device for which an
exemption has been granted under section 520(m) of such Act, or for
which priority review has been provided under section 515(d)(5) of such
Act.''.
(4) Process for public input.--Section 1886(d)(5)(K) (42
U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is
amended--
(A) in clause (i), by adding at the end the
following: ``Such mechanism shall be modified to meet
the requirements of clause (viii).''; and
(B) by adding at the end the following new clause:
``(viii) The mechanism established pursuant to clause (i) shall be
adjusted to provide, before publication of a proposed rule, for public
input regarding whether a new service or technology not described in
the second sentence of clause (vi)(III) represents an advance in
medical technology that substantially improves the diagnosis or
treatment of beneficiaries as follows:
``(I) The Secretary shall make public and periodically update
a list of all the services and technologies for which an
application for additional payment under this subparagraph is
pending.
``(II) The Secretary shall accept comments, recommendations,
and data from the public regarding whether the service or
technology represents a substantial improvement.
``(III) The Secretary shall provide for a meeting at which
organizations representing hospitals, physicians, medicare
beneficiaries, manufacturers, and any other interested party
may present comments, recommendations, and data to the clinical
staff of the Centers for Medicare & Medicaid Services before
publication of a notice of proposed rulemaking regarding
whether service or technology represents a substantial
improvement.''.
(c) Preference for Use of DRG Adjustment.--Section 1886(d)(5)(K) (42
U.S.C. 1395ww(d)(5)(K)) is further amended by adding at the end the
following new clause:
``(ix) Before establishing any add-on payment under this subparagraph
with respect to a new technology, the Secretary shall seek to identify
one or more diagnosis-related groups associated with such technology,
based on similar clinical or anatomical characteristics and the cost of
the technology. Within such groups the Secretary shall assign an
eligible new technology into a diagnosis-related group where the
average costs of care most closely approximate the costs of care of
using the new technology. In such case, no add-on payment under this
subparagraph shall be made with respect to such new technology and this
clause shall not affect the application of paragraph (4)(C)(iii).''.
(d) Improvement in Payment for New Technology.--Section
1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) is amended
by inserting after ``the estimated average cost of such service or
technology'' the following: ``(based on the marginal rate applied to
costs under subparagraph (A))''.
(e) Effective Date.--
(1) In general.--The Secretary shall implement the amendments
made by this section so that they apply to classification for
fiscal years beginning with fiscal year 2004.
(2) Reconsiderations of applications for fiscal year 2003
that are denied.--In the case of an application for a
classification of a medical service or technology as a new
medical service or technology under section 1886(d)(5)(K) of
the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was
filed for fiscal year 2003 and that is denied--
(A) the Secretary shall automatically reconsider the
application as an application for fiscal year 2004
under the amendments made by this section; and
(B) the maximum time period otherwise permitted for
such classification of the service or technology shall
be extended by 12 months.
SEC. 404. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN PUERTO RICO.
Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``for discharges
beginning on or after October 1, 1997, 50 percent (and
for discharges between October 1, 1987, and September
30, 1997, 75 percent)'' and inserting ``the applicable
Puerto Rico percentage (specified in subparagraph
(E))''; and
(B) in clause (ii), by striking ``for discharges
beginning in a fiscal year beginning on or after
October 1, 1997, 50 percent (and for discharges between
October 1, 1987, and September 30, 1997, 25 percent)''
and inserting ``the applicable Federal percentage
(specified in subparagraph (E))''; and
(2) by adding at the end the following new subparagraph:
``(E) For purposes of subparagraph (A), for discharges occurring--
``(i) between October 1, 1987, and September 30, 1997, the
applicable Puerto Rico percentage is 75 percent and the
applicable Federal percentage is 25 percent;
``(ii) on or after October 1, 1997, and before October 1,
2003, the applicable Puerto Rico percentage is 50 percent and
the applicable Federal percentage is 50 percent;
``(iii) during fiscal year 2004, the applicable Puerto Rico
percentage is 45 percent and the applicable Federal percentage
is 55 percent;
``(iv) during fiscal year 2005, the applicable Puerto Rico
percentage is 40 percent and the applicable Federal percentage
is 60 percent;
``(v) during fiscal year 2006, the applicable Puerto Rico
percentage is 35 percent and the applicable Federal percentage
is 65 percent;
``(vi) during fiscal year 2007, the applicable Puerto Rico
percentage is 30 percent and the applicable Federal percentage
is 70 percent; and
``(vii) on or after October 1, 2007, the applicable Puerto
Rico percentage is 25 percent and the applicable Federal
percentage is 75 percent.''.
SEC. 405. REFERENCE TO PROVISION RELATING TO ENHANCED DISPROPORTIONATE
SHARE HOSPITAL (DSH) PAYMENTS FOR RURAL HOSPITALS
AND URBAN HOSPITALS WITH FEWER THAN 100 BEDS.
For provision enhancing disproportionate share hospital (DSH)
treatment for rural hospitals and urban hospitals with fewer than 100
beds, see section 302.
SEC. 406. REFERENCE TO PROVISION RELATING TO 2-YEAR PHASED-IN INCREASE
IN THE STANDARDIZED AMOUNT IN RURAL AND SMALL URBAN
AREAS TO ACHIEVE A SINGLE, UNIFORM STANDARDIZED
AMOUNT.
For provision phasing in over a 2-year period an increase in the
standardized amount for rural and small urban areas to achieve a
single, uniform, standardized amount, see section 303.
SEC. 407. REFERENCE TO PROVISION FOR MORE FREQUENT UPDATES IN THE
WEIGHTS USED IN HOSPITAL MARKET BASKET.
For provision providing for more frequent updates in the weights used
in hospital market basket, see section 304.
SEC. 408. REFERENCE TO PROVISION MAKING IMPROVEMENTS TO CRITICAL ACCESS
HOSPITAL PROGRAM.
For provision providing making improvements to critical access
hospital program, see section 305.
Subtitle B--Skilled Nursing Facility Services
SEC. 411. PAYMENT FOR COVERED SKILLED NURSING FACILITY SERVICES.
(a) Temporary Increase in Nursing Component of PPS Federal Rate.--
Section 312(a) of BIPA is amended by adding at the end the following
new sentence: ``The Secretary of Health and Human Services shall
increase by 12, 10, and 8 percent the nursing component of the case-mix
adjusted Federal prospective payment rate specified in Tables 3 and 4
of the final rule published in the Federal Register by the Health Care
Financing Administration on July 31, 2000 (65 Fed. Reg. 46770) and as
subsequently updated under section 1888(e)(4)(E)(ii) of the Social
Security Act (42 U.S.C. 1395yy(e)(4)(E)(ii)), effective for services
furnished during fiscal years 2003, 2004, and 2005, respectively.''.
(b) Adjustment to RUGs for AIDS Residents.--
(1) In general.--Paragraph (12) of section 1888(e) (42 U.S.C.
1395yy(e)) is amended to read as follows:
``(12) Adjustment for residents with aids.--
``(A) In general.--Subject to subparagraph (B), in
the case of a resident of a skilled nursing facility
who is afflicted with acquired immune deficiency
syndrome (AIDS), the per diem amount of payment
otherwise applicable shall be increased by 128 percent
to reflect increased costs associated with such
residents.
``(B) Sunset.--Subparagraph (A) shall not apply on
and after such date as the Secretary certifies that
there is an appropriate adjustment in the case mix
under paragraph (4)(G)(i) to compensate for the
increased costs associated with residents described in
such subparagraph.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to services furnished on or after October 1, 2003.
Subtitle C--Hospice
SEC. 421. COVERAGE OF HOSPICE CONSULTATION SERVICES.
(a) Coverage of Hospice Consultation Services.--Section 1812(a) (42
U.S.C. 1395d(a)) is amended--
(1) by striking ``and'' at the end of paragraph (3);
(2) by striking the period at the end of paragraph (4) and
inserting ``; and''; and
(3) by inserting after paragraph (4) the following new
paragraph:
``(5) for individuals who are terminally ill, have not made
an election under subsection (d)(1), and have not previously
received services under this paragraph, services that are
furnished by a physician who is either the medical director or
an employee of a hospice program and that consist of--
``(A) an evaluation of the individual's need for pain
and symptom management;
``(B) counseling the individual with respect to end-
of-life issues and care options; and
``(C) advising the individual regarding advanced care
planning.''.
(b) Payment.--Section 1814(i) (42 U.S.C. l395f(i)) is amended by
adding at the end the following new paragraph:
``(4) The amount paid to a hospice program with respect to the
services under section 1812(a)(5) for which payment may be made under
this part shall be equal to an amount equivalent to the amount
established for an office or other outpatient visit for evaluation and
management associated with presenting problems of moderate severity
under the fee schedule established under section 1848(b), other than
the portion of such amount attributable to the practice expense
component.''.
(c) Conforming Amendment.--Section 1861(dd)(2)(A)(i) (42 U.S.C.
1395x(dd)(2)(A)(i)) is amended by inserting before the comma at the end
the following: ``and services described in section 1812(a)(5)''.
(d) Effective Date.--The amendments made by this section shall apply
to services provided by a hospice program on or after January 1, 2004.
SEC. 422. 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE FURNISHED IN
A FRONTIER AREA.
(a) In General.--Section 1814(i)(1) (42 U.S.C. 1395f(i)(1)) is
amended by adding at the end the following new subparagraph:
``(D) With respect to hospice care furnished in a frontier area on or
after January 1, 2003, and before January 1, 2008, the payment rates
otherwise established for such care shall be increased by 10 percent.
For purposes of this subparagraph, the term `frontier area' means a
county in which the population density is less than 7 persons per
square mile.''.
(b) Report on Costs.--Not later than January 1, 2007, the Comptroller
General of the United States shall submit to Congress a report on the
costs of furnishing hospice care in frontier areas. Such report shall
include recommendations regarding the appropriateness of extending, and
modifying, the payment increase provided under the amendment made by
subsection (a).
SEC. 423. RURAL HOSPICE DEMONSTRATION PROJECT.
(a) In General.--The Secretary shall conduct a demonstration project
for the delivery of hospice care to medicare beneficiaries in rural
areas. Under the project medicare beneficiaries who are unable to
receive hospice care in the home for lack of an appropriate caregiver
are provided such care in a facility of 20 or fewer beds which offers,
within its walls, the full range of services provided by hospice
programs under section 1861(dd) of the Social Security Act (42 U.S.C.
1395x(dd)).
(b) Scope of Project.--The Secretary shall conduct the project under
this section with respect to no more than 3 hospice programs over a
period of not longer than 5 years each.
(c) Compliance with Conditions.--Under the demonstration project--
(1) the hospice program shall comply with otherwise
applicable requirements, except that it shall not be required
to offer services outside of the home or to meet the
requirements of section 1861(dd)(2)(A)(iii) of the Social
Security Act; and
(2) payments for hospice care shall be made at the rates
otherwise applicable to such care under title XVIII of such
Act.
The Secretary may require the program to comply with such additional
quality assurance standards for its provision of services in its
facility as the Secretary deems appropriate.
(d) Report.--Upon completion of the project, the Secretary shall
submit a report to Congress on the project and shall include in the
report recommendations regarding extension of such project to hospice
programs serving rural areas.
Subtitle D--Other Provisions
SEC. 431. DEMONSTRATION PROJECT FOR USE OF RECOVERY AUDIT CONTRACTORS.
(a) In General.--The Secretary of Health and Human Services shall
conduct a demonstration project under this section (in this section
referred to as the ``project'') to demonstrate the use of recovery
audit contractors under the Medicare Integrity Program in identifying
and recouping overpayments under the medicare program for services for
which payment is made under part A of title XVIII of the Social
Security Act. Under the project--
(1) payment may be made to such a contractor on a contingent
basis;
(2) a percentage of the amount recovered may be retained by
the Secretary and shall be available to the program management
account of the Centers for Medicare & Medicaid Services; and
(3) the Secretary shall examine the efficacy of such use with
respect to duplicative payments, accuracy of coding, and other
payment policies in which inaccurate payments arise.
(b) Scope and Duration.--The project shall cover at least 2 States
and at least 3 contractors and shall last for not longer than 3 years.
(c) Waiver.--The Secretary of Health and Human Services shall waive
such provisions of title XVIII of the Social Security Act as may be
necessary to provide for payment for services under the project in
accordance with subsection (a).
(d) Qualifications of Contractors.--
(1) In general.--The Secretary shall enter into a recovery
audit contract under this section with an entity only if the
entity has staff that has knowledge of and experience with the
payment rules and regulations under the medicare program or the
entity has or will contract with another entity that has such
knowledgeable and experienced staff.
(2) Ineligibility of certain contractors.--The Secretary may
not enter into a recovery audit contract under this section
with an entity to the extent that the entity is a fiscal
intermediary under section 1816 of the Social Security Act (42
U.S.C. 1395h), a carrier under section 1842 of such Act (42
U.S.C. 1395u), or a Medicare Administrative Contractor under
section 1874A of such Act.
(3) Preference for entities with demonstrated proficiency
with private insurers.--In awarding contracts to recovery audit
contractors under this section, the Secretary shall give
preference to those entities that the Secretary determines have
demonstrated proficiency in recovery audits with private
insurers or under the medicaid program under title XIX of such
Act.
(e) Report.--The Secretary of Health and Human Services shall submit
to Congress a report on the project not later than 6 months after the
date of its completion. Such reports shall include information on the
impact of the project on savings to the medicare program and
recommendations on the cost-effectiveness of extending or expanding the
project.
TITLE V--PROVISIONS RELATING TO PART B
Subtitle A--Physicians' Services
SEC. 501. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.
(a) Update for 2003 through 2005.--
(1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is
amended by adding at the end the following new paragraphs:
``(5) Update for 2003.--The update to the single conversion
factor established in paragraph (1)(C) for 2003 is 2 percent.
``(6) Special rules for update for 2004 and 2005.--The
following rules apply in determining the update adjustment
factors under paragraph (4)(B) for 2004 and 2005:
``(A) Use of 2002 data in determining allowable
costs.--
``(i) The reference in clause (ii)(I) of such
paragraph to April 1, 1996, is deemed to be a
reference to January 1, 2002.
``(ii) The allowed expenditures for 2002 is
deemed to be equal to the actual expenditures
for physicians' services furnished during 2002,
as estimated by the Secretary.
``(B) 1 percentage point increase in gdp under sgr.--
The annual average percentage growth in real gross
domestic product per capita under subsection (f)(2)(C)
for each of 2003, 2004, and 2005 is deemed to be
increased by 1 percentage point.''.
(2) Conforming amendment.--Paragraph (4)(B) of such section
is amended, in the matter before clause (i), by inserting ``and
paragraph (6)'' after ``subparagraph (D)''.
(3) Not treated as change in law and regulation in
sustainable growth rate determination.--The amendments made by
this subsection shall not be treated as a change in law for
purposes of applying section 1848(f)(2)(D) of the Social
Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
(b) Use of 10-Year Rolling Average in Computing Gross Domestic
Product.--
(1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
4(f)(2)(C)) is amended--
(A) by striking ``projected'' and inserting ``annual
average''; and
(B) by striking ``from the previous applicable period
to the applicable period involved'' and inserting
``during the 10-year period ending with the applicable
period involved''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to computations of the sustainable growth rate for
years beginning with 2002.
(c) Elimination of Transitional Adjustment.--Section 1848(d)(4)(F)
(42 U.S.C. 1395w-4(d)(4)(F)) is amended by striking ``subparagraph
(A)'' and all that follows and inserting ``subparagraph (A), for each
of 2001 and 2002, of -0.2 percent.''
SEC. 502. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.
(a) GAO Study on Beneficiary Access to Physicians' Services.--
(1) Study.--The Comptroller General of the United States
shall conduct a study on access of medicare beneficiaries to
physicians' services under the medicare program. The study
shall include--
(A) an assessment of the use by beneficiaries of such
services through an analysis of claims submitted by
physicians for such services under part B of the
medicare program;
(B) an examination of changes in the use by
beneficiaries of physicians' services over time;
(C) an examination of the extent to which physicians
are not accepting new medicare beneficiaries as
patients.
(2) Report.--Not later than 18 months after the date of the
enactment of this Act, the Comptroller General shall submit to
Congress a report on the study conducted under paragraph (1).
The report shall include a determination whether--
(A) data from claims submitted by physicians under
part B of the medicare program indicate potential
access problems for medicare beneficiaries in certain
geographic areas; and
(B) access by medicare beneficiaries to physicians'
services may have improved, remained constant, or
deteriorated over time.
(b) Study and Report on Supply of Physicians.--
(1) Study.--The Secretary shall request the Institute of
Medicine of the National Academy of Sciences to conduct a study
on the adequacy of the supply of physicians (including
specialists) in the United States and the factors that affect
such supply.
(2) Report to congress.--Not later than 2 years after the
date of enactment of this section, the Secretary shall submit
to Congress a report on the results of the study described in
paragraph (1), including any recommendations for legislation.
SEC. 503. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.
Not later than 1 year after the date of the enactment of this Act,
the Medicare Payment Advisory Commission shall submit to Congress a
report on the effect of refinements to the practice expense component
of payments for physicians' services in the case of services for which
there are no physician work relative value units, after the transition
to a full resource-based payment system in 2002, under section 1848 of
the Social Security Act (42 U.S.C. 1395w-4). Such report shall examine
the following matters by physician specialty:
(1) The effect of such refinements on payment for physicians'
services.
(2) The interaction of the practice expense component with
other components of and adjustments to payment for physicians'
services under such section.
(3) The appropriateness of the amount of compensation by
reason of such refinements.
(4) The effect of such refinements on access to care by
medicare beneficiaries to physicians' services.
(5) The effect of such refinements on physician participation
under the medicare program.
SEC. 504. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY
SERVICES UNDER MEDICARE.
Section 542(c) of BIPA is amended by striking ``2-year period'' and
inserting ``3-year period''.
Subtitle B--Other Services
SEC. 511. COMPETITIVE ACQUISITION OF CERTAIN ITEMS AND SERVICES.
(a) In General.--Section 1847 (42 U.S.C. 1395w-3) is amended to read
as follows:
``competitive acquisition of certain items and services
``Sec. 1847. (a) Establishment of Competitive Acquisition Programs.--
``(1) Implementation of programs.--
``(A) In general.--The Secretary shall establish and
implement programs under which competitive acquisition
areas are established throughout the United States for
contract award purposes for the furnishing under this
part of competitively priced items and services
(described in paragraph (2)) for which payment is made
under this part. Such areas may differ for different
items and services.
``(B) Phased-in implementation.--The programs shall
be phased-in among competitive acquisition areas over a
period of not longer than 3 years in a manner so that
the competition under the programs occurs in--
``(i) at least \1/3\ of such areas in 2004;
and
``(ii) at least \2/3\ of such areas in 2005.
``(C) Waiver of certain provisions.--In carrying out
the programs, the Secretary may waive such provisions
of the Federal Acquisition Regulation as are necessary
for the efficient implementation of this section, other
than provisions relating to confidentiality of
information and such other provisions as the Secretary
determines appropriate.
``(2) Items and services described.--The items and services
referred to in paragraph (1) are the following:
``(A) Durable medical equipment and inhalation drugs
used in connection with durable medical equipment.--
Covered items (as defined in section 1834(a)(13)) for
which payment is otherwise made under section 1834(a),
other than items used in infusion, and inhalation drugs
used in conjunction with durable medical equipment.
``(B) Off-the-shelf orthotics.--Orthotics (described
in section 1861(s)(9)) for which payment is otherwise
made under section 1834(h) which require minimal self-
adjustment for appropriate use and does not require
expertise in trimming, bending, molding, assembling, or
customizing to fit to the patient.
``(3) Exemption authority.--In carrying out the programs
under this section, the Secretary may exempt--
``(A) areas that are not competitive due to low
population density; and
``(B) items and services for which the application of
competitive acquisition is not likely to result in
significant savings.
``(b) Program Requirements.--
``(1) In general.--The Secretary shall conduct a competition
among entities supplying items and services described in
subsection (a)(2) for each competitive acquisition area in
which the program is implemented under subsection (a) with
respect to such items and services.
``(2) Conditions for awarding contract.--
``(A) In general.--The Secretary may not award a
contract to any entity under the competition conducted
in an competitive acquisition area pursuant to
paragraph (1) to furnish such items or services unless
the Secretary finds all of the following:
``(i) The entity meets quality and financial
standards specified by the Secretary or
developed by accreditation entities or
organizations recognized by the Secretary.
``(ii) The total amounts to be paid under the
contract (including costs associated with the
administration of the contract) are expected to
be less than the total amounts that would
otherwise be paid.
``(iii) Beneficiary access to a choice of
multiple suppliers in the area is maintained.
``(iv) Beneficiary liability is limited to
the applicable percentage of contract award
price.
``(B) Quality standards.--The quality standards
specified under subparagraph (A)(i) shall not be less
than the quality standards that would otherwise apply
if this section did not apply and shall include
consumer services standards. The Secretary shall
consult with an expert outside advisory panel composed
of an appropriate selection of representatives of
physicians, practitioners, and suppliers to review (and
advise the Secretary concerning) such quality
standards.
``(3) Contents of contract.--
``(A) In general.--A contract entered into with an
entity under the competition conducted pursuant to
paragraph (1) is subject to terms and conditions that
the Secretary may specify.
``(B) Term of contracts.--The Secretary shall rebid
contracts under this section not less often than once
every 3 years.
``(4) Limit on number of contractors.--
``(A) In general.--The Secretary may limit the number
of contractors in a competitive acquisition area to the
number needed to meet projected demand for items and
services covered under the contracts. In awarding
contracts, the Secretary shall take into account the
ability of bidding entities to furnish items or
services in sufficient quantities to meet the
anticipated needs of beneficiaries for such items or
services in the geographic area covered under the
contract on a timely basis.
``(B) Multiple winners.--The Secretary shall award
contracts to more than one entity submitting a bid in
each area for an item or service.
``(5) Participating contractors.--Payment shall not be made
for items and services described in subsection (a)(2) furnished
by a contractor and for which competition is conducted under
this section unless--
``(A) the contractor has submitted a bid for such
items and services under this section; and
``(B) the Secretary has awarded a contract to the
contractor for such items and services under this
section.
``(6) Authority to contract for education, outreach and
complaint services.--The Secretary may enter into a contract
with an appropriate entity to address complaints from
beneficiaries who receive items and services from an entity
with a contract under this section and to conduct appropriate
education of and outreach to such beneficiaries with respect to
the program.
``(c) Annual Reports.--The Secretary shall submit to Congress an
annual management report on the programs under this section. Each such
report shall include information on savings, reductions in cost-
sharing, access to items and services, and beneficiary satisfaction.
``(d) Demonstration Project for Clinical Laboratory Services.--
``(1) In general.--The Secretary shall conduct a
demonstration project on the application of competitive
acquisition under this section to clinical diagnostic
laboratory tests--
``(A) for which payment is otherwise made under
section 1833(h) or 1834(d)(1) (relating to colorectal
cancer screening tests); and
``(B) which are furnished without a face-to-face
encounter between the individual and the hospital or
physician ordering the tests.
``(2) Terms and conditions.--Such project shall be under the
same conditions as are applicable to items and services
described in subsection (a)(2).
``(3) Report.--The Secretary shall submit to Congress--
``(A) an initial report on the project not later than
December 31, 2004; and
``(B) such progress and final reports on the project
after such date as the Secretary determines
appropriate.''.
(b) Continuation of Certain Demonstration Projects.--Notwithstanding
the amendment made by subsection (a), with respect to demonstration
projects implemented by the Secretary under section 1847 of the Social
Security Act (42 U.S.C. 1395w-3) (relating to the establishment of
competitive acquisition areas) that was in effect on the day before the
date of the enactment of this Act, each such demonstration project may
continue under the same terms and conditions applicable under that
section as in effect on that date.
(c) Report on Differences in Payment for Laboratory Services.--Not
later than 18 months after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to Congress a
report that analyzes differences in reimbursement between public and
private payors for clinical diagnostic laboratory services.
SEC. 512. PAYMENT FOR AMBULANCE SERVICES.
(a) Phase-In Providing Floor Using Blend of Fee Schedule and Regional
Fee Schedules.--Section 1834(l) (42 U.S.C. 1395m(l)) is amended--
(1) in paragraph (2)(E), by inserting ``consistent with
paragraph (10)'' after ``in an efficient and fair manner'';
(2) by redesignating the paragraph (8) added by section
221(a) of BIPA as paragraph (9); and
(3) by adding at the end the following new paragraph:
``(10) Phase-in providing floor using blend of fee schedule
and regional fee schedules.--In carrying out the phase-in under
paragraph (2)(E) for each level of service furnished in a year
before January 1, 2007, the portion of the payment amount that
is based on the fee schedule shall not be less than the
following blended rate of the fee schedule under paragraph (1)
and of a regional fee schedule for the region involved:
``(A) For 2003, the blended rate shall be based 20
percent on the fee schedule under paragraph (1) and 80
percent on the regional fee schedule.
``(B) For 2004, the blended rate shall be based 40
percent on the fee schedule under paragraph (1) and 60
percent on the regional fee schedule.
``(C) For 2005, the blended rate shall be based 60
percent on the fee schedule under paragraph (1) and 40
percent on the regional fee schedule.
``(D) For 2006, the blended rate shall be based 80
percent on the fee schedule under paragraph (1) and 20
percent on the regional fee schedule.
For purposes of this paragraph, the Secretary shall establish a
regional fee schedule for each of the 9 Census divisions using
the methodology (used in establishing the fee schedule under
paragraph (1)) to calculate a regional conversion factor and a
regional mileage payment rate and using the same payment
adjustments and the same relative value units as used in the
fee schedule under such paragraph.''.
(b) Adjustment in Payment for Certain Long Trips.--Section 1834(l),
as amended by subsection (a), is further amended by adding at the end
the following new paragraph:
``(11) Adjustment in payment for certain long trips.--In the
case of ground ambulance services furnished on or after January
1, 2003, and before January 1, 2008, regardless of where the
transportation originates, the fee schedule established under
this subsection shall provide that, with respect to the payment
rate for mileage for a trip above 50 miles the per mile rate
otherwise established shall be increased by \1/4\ of the
payment per mile otherwise applicable to such miles.''.
(c) Effective Date.--The amendments made by this section shall apply
to ambulance services furnished on or after January 1, 2003.
SEC. 513. 2-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS; PROVISIONS
RELATING TO REPORTS.
(a) 2-Year Extension of Moratorium on Therapy Caps.--Section
1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by striking ``and 2002''
and inserting ``2002, 2003, and 2004''.
(b) Prompt Submission of Overdue Reports on Payment and Utilization
of Outpatient Therapy Services.--Not later than December 31, 2002, the
Secretary shall submit to Congress the reports required under section
4541(d)(2) of the Balanced Budget Act of 1997 (relating to alternatives
to a single annual dollar cap on outpatient therapy) and under section
221(d) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (relating to utilization patterns for outpatient therapy).
(c) Identification of Conditions and Diseases Justifying Waiver of
Therapy Cap.--
(1) Study.--The Secretary shall request the Institute of
Medicine of the National Academy of Sciences to identify
conditions or diseases that should justify conducting an
assessment of the need to waive the therapy caps under section
1833(g)(4) of the Social Security Act (42 U.S.C. 1395l(g)(4)).
(2) Reports to congress.--Not later than July 1, 2003, the
Secretary shall submit to Congress a preliminary report on the
conditions and diseases identified under paragraph (1) and not
later than September 1, 2003, a final report on the conditions
and diseases so identified.
(d) GAO Study of Patient Access to Physical Therapist Services.--
(1) Study.--The Comptroller General of the United States
shall conduct a study on access to physical therapist services
in States authorizing such services without a physician
referral and in States that require such a physician referral.
The study shall--
(A) examine the use of and referral patterns for
physical therapist services for patients age 50 and
older in States that authorize such services without a
physician referral and in States that require such a
physician referral;
(B) examine the use of and referral patterns for
physical therapist services for patients who are
medicare beneficiaries;
(C) examine the potential effect of prohibiting a
physician from referring patients to physical therapy
services owned by the physician and provided in the
physician's office;
(D) examine the delivery of physical therapists'
services within the facilities of Department of
Defense; and
(E) analyze the potential impact on medicare
beneficiaries and on expenditures under the medicare
program of eliminating the need for a physician
referral and physician certification for physical
therapist services under the medicare program.
(2) Report.--The Comptroller General shall submit to Congress
a report on the study conducted under paragraph (1) by not
later than 1 year after the date of the enactment of this Act.
SEC. 514. ACCELERATED IMPLEMENTATION OF 20 PERCENT COINSURANCE FOR
HOSPITAL OUTPATIENT DEPARTMENT (OPD) SERVICES;
OTHER OPD PROVISIONS.
(a) Accelerated Implementation of Coinsurance Reductions.--Section
1833(t)(8)(C)(ii) (42 U.S.C. 1395l(t)(8)(C)(ii)) is amended by striking
subclauses (III) through (V) and inserting the following:
``(III) For procedures performed in
2004, 45 percent.
``(IV) For procedures performed in
2005, 40 percent.
``(V) For procedures performed in
2006, 2007, 2008 and 2009, 35 percent.
``(VI) For procedures performed in
2010, 30 percent.
``(VII) For procedures performed in
2011, 25 percent.
``(VIII) For procedures performed in
2012 and thereafter, 20 percent.''.
(b) Treatment of Temperature Monitored Cryoablation.--
(1) In general.--Section 1833(t)(6)(A)(ii) (42 U.S.C.
1395l(t)(6)(A)(ii)) is amended by striking ``or temperature
monitored cryoablation''.
(2) Effective date.--The amendment made by paragraph (1)
applies to payment for services furnished on or after January
1, 2003.
SEC. 515. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL EXAMINATION.
(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), is
amended--
(1) in subparagraph (U), by striking ``and'' at the end;
(2) in subparagraph (V), by inserting ``and'' at the end; and
(3) by adding at the end the following new subparagraph:
``(W) an initial preventive physical examination (as
defined in subsection (ww));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended by
adding at the end the following new subsection:
``Initial Preventive Physical Examination
``(ww) The term `initial preventive physical examination' means
physicians' services consisting of a physical examination with the goal
of health promotion and disease detection and includes items and
services specified by the Secretary in regulations.''.
(c) Waiver of Deductible and Coinsurance.--
(1) Deductible.--The first sentence of section 1833(b) (42
U.S.C. 1395l(b)) is amended--
(A) by striking ``and'' before ``(6)'', and
(B) by inserting before the period at the end the
following: ``, and (7) such deductible shall not apply
with respect to an initial preventive physical
examination (as defined in section 1861(ww))''.
(2) Coinsurance.--Section 1833(a)(1) (42 U.S.C. 1395l(a)(1))
is amended--
(A) in clause (N), by inserting ``(or 100 percent in
the case of an initial preventive physical examination,
as defined in section 1861(ww))'' after ``80 percent'';
and
(B) in clause (O), by inserting ``(or 100 percent in
the case of an initial preventive physical examination,
as defined in section 1861(ww))'' after ``80 percent''.
(d) Payment as Physicians' Services.--Section 1848(j)(3) (42 U.S.C.
1395w-4(j)(3)) is amended by inserting ``(2)(W),'' after ``(2)(S),''.
(e) Other Conforming Amendments.--Section 1862(a) (42 U.S.C.
1395y(a)) is amended--
(1) in paragraph (1)--
(A) by striking ``and'' at the end of subparagraph
(H);
(B) by striking the semicolon at the end of
subparagraph (I) and inserting ``, and''; and
(C) by adding at the end the following new
subparagraph:
``(J) in the case of an initial preventive physical
examination, which is performed not later than 6 months after
the date the individual's first coverage period begins under
part B;''; and
(2) in paragraph (7), by striking ``or (H)'' and inserting
``(H), or (J)''.
(f) Effective Date.--The amendments made by this section shall apply
to services furnished on or after January 1, 2004, but only for
individuals whose coverage period begins on or after such date.
SEC. 516. RENAL DIALYSIS SERVICES.
(a) Report on Differences in Costs in Different Settings.--Not later
than 1 year after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to Congress a
report containing--
(1) an analysis of the differences in costs of providing
renal dialysis services under the medicare program in home
settings and in facility settings;
(2) an assessment of the percentage of overhead costs in home
settings and in facility settings; and
(3) an evaluation of whether the charges for home dialysis
supplies and equipment are reasonable and necessary.
(b) Restoring Composite Rate Exceptions for Pediatric Facilities.--
(1) In general.--Section 422(a)(2) of BIPA is amended--
(A) in subparagraph (A), by striking ``and (C)'' and
inserting ``, (C), and (D)'';
(B) in subparagraph (B), by striking ``In the case''
and inserting ``Subject to subparagraph (D), in the
case''; and
(C) by adding at the end the following new
subparagraph:
``(D) Inapplicability to pediatric facilities.--
Subparagraphs (A) and (B) shall not apply, as of
October 1, 2002, to pediatric facilities that do not
have an exception rate described in subparagraph (C) in
effect on such date. For purposes of this subparagraph,
the term `pediatric facility' means a renal facility at
least 50 percent of whose patients are individuals
under 18 years of age.''.
(2) Conforming amendment.--The fourth sentence of section
1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking
``The Secretary'' and inserting ``Subject to section 422(a)(2)
of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, the Secretary''.
(c) Increase in Renal Dialysis Composite Rate for Services Furnished
in 2004.--Notwithstanding any other provision of law, with respect to
payment under part B of title XVIII of the Social Security Act for
renal dialysis services furnished in 2004, the composite payment rate
otherwise established under section 1881(b)(7) of such Act (42 U.S.C.
1395rr(b)(7)) shall be increased by 1.2 percent.
SEC. 517. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.
(a) Exclusion from OPD Fee Schedule.--Section 1833(t)(1)(B)(iv) (42
U.S.C. 1395l(t)(1)(B)(iv)) is amended by inserting before the period at
the end the following: ``and does not include screening mammography (as
defined in section 1861(jj)) and unilateral and bilateral diagnostic
mammography''.
(b) Adjustment to Technical Component.--For diagnostic mammography
performed on or after January 1, 2004, for which payment is made under
the physician fee schedule under section 1848 of the Social Security
Act (42 U.S.C. 1395w-4), the Secretary, based on the most recent cost
data available, shall provide for an appropriate adjustment in the
payment amount for the technical component of the diagnostic
mammography.
(c) Effective Date.--The amendment made by subsection (a) shall apply
to mammography performed on or after January 1, 2004.
SEC. 518. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN MILITARY
RETIREES; SPECIAL ENROLLMENT PERIOD.
(a) Waiver of Penalty.--
(1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is
amended by adding at the end the following new sentence: ``No
increase in the premium shall be effected for a month in the
case of an individual who is 65 years of age or older, who
enrolls under this part during 2001, 2002, or 2003, and who
demonstrates to the Secretary before December 31, 2003, that
the individual is a covered beneficiary (as defined in section
1072(5) of title 10, United States Code). The Secretary of
Health and Human Services shall consult with the Secretary of
Defense in identifying individuals described in the previous
sentence.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to premiums for months beginning with January 2003.
The Secretary of Health and Human Services shall establish a
method for providing rebates of premium penalties paid for
months on or after January 2003 for which a penalty does not
apply under such amendment but for which a penalty was
previously collected.
(b) Medicare Part B Special Enrollment Period.--
(1) In general.--In the case of any individual who, as of the
date of the enactment of this Act, is 65 years of age or older,
is eligible to enroll but is not enrolled under part B of title
XVIII of the Social Security Act, and is a covered beneficiary
(as defined in section 1072(5) of title 10, United States
Code), the Secretary of Health and Human Services shall provide
for a special enrollment period during which the individual may
enroll under such part. Such period shall begin as soon as
possible after the date of the enactment of this Act and shall
end on December 31, 2003.
(2) Coverage period.--In the case of an individual who
enrolls during the special enrollment period provided under
paragraph (1), the coverage period under part B of title XVIII
of the Social Security Act shall begin on the first day of the
month following the month in which the individual enrolls.
SEC. 519. COVERAGE OF CHOLESTEROL AND BLOOD LIPID SCREENING.
(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as amended
by section 515(a), is amended--
(1) in subparagraph (V), by striking ``and'' at the end;
(2) in subparagraph (W), by inserting ``and'' at the end; and
(3) by adding at the end the following new subparagraph:
``(X) cholesterol and other blood lipid screening
tests (as defined in subsection (XX));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x), as amended
by section 515(b), is amended by adding at the end the following new
subsection:
``Cholesterol and Other Blood Lipid Screening Test
``(xx)(1) The term `cholesterol and other blood lipid screening test'
means diagnostic testing of cholesterol and other lipid levels of the
blood for the purpose of early detection of abnormal cholesterol and
other lipid levels.
``(2) The Secretary shall establish standards, in consultation with
appropriate organizations, regarding the frequency and type of
cholesterol and other blood lipid screening tests, except that such
frequency may not be more often than once every 2 years.''.
(c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), as
amended by section 515(e), is amended
(1) by striking ``and'' at the end of subparagraph (I);
(2) by striking the semicolon at the end of subparagraph (J)
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(K) in the case of a cholesterol and other blood lipid
screening test (as defined in section 1861(xx)(1)), which is
performed more frequently than is covered under section
1861(xx)(2).''.
(d) Effective Date.--The amendments made by this section shall apply
to tests furnished on or after January 1, 2004.
TITLE VI--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
SEC. 601. ELIMINATION OF 15 PERCENT REDUCTION IN PAYMENT RATES UNDER
THE PROSPECTIVE PAYMENT SYSTEM.
(a) In General.--Section 1895(b)(3)(A) (42 U.S.C. 1395fff(b)(3)(A))
is amended to read as follows:
``(A) Initial basis.--Under such system the Secretary
shall provide for computation of a standard prospective
payment amount (or amounts) as follows:
``(i) Such amount (or amounts) shall
initially be based on the most current audited
cost report data available to the Secretary and
shall be computed in a manner so that the total
amounts payable under the system for fiscal
year 2001 shall be equal to the total amount
that would have been made if the system had not
been in effect and if section 1861(v)(1)(L)(ix)
had not been enacted.
``(ii) For fiscal year 2002 and for the first
quarter of fiscal year 2003, such amount (or
amounts) shall be equal to the amount (or
amounts) determined under this paragraph for
the previous fiscal year, updated under
subparagraph (B).
``(iii) For 2003, such amount (or amounts)
shall be equal to the amount (or amounts)
determined under this paragraph for fiscal year
2002, updated under subparagraph (B) for 2003.
``(iv) For 2004 and each subsequent year,
such amount (or amounts) shall be equal to the
amount (or amounts) determined under this
paragraph for the previous year, updated under
subparagraph (B).
Each such amount shall be standardized in a manner that
eliminates the effect of variations in relative case
mix and area wage adjustments among different home
health agencies in a budget neutral manner consistent
with the case mix and wage level adjustments provided
under paragraph (4)(A). Under the system, the Secretary
may recognize regional differences or differences based
upon whether or not the services or agency are in an
urbanized area.''.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect as if included in the amendments made by section 501 of the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (as enacted into law by section 1(a)(6) of Public Law 106-554).
SEC. 602. ESTABLISHMENT OF REDUCED COPAYMENT FOR A HOME HEALTH SERVICE
EPISODE OF CARE FOR CERTAIN BENEFICIARIES.
(a) Part A.--
(1) In general.--Section 1813(a) (42 U.S.C. 1395e(a)) is
amended by adding at the end the following new paragraph:
``(5)(A)(i) Subject to clause (ii), the amount payable for home
health services furnished to the individual under this title for each
episode of care beginning in a year (beginning with 2003) shall be
reduced by a copayment equal to the copayment amount specified in
subparagraph (B)(ii) such year.
``(ii) The copayment under clause (i) shall not apply--
``(I) in the case of an individual who has been determined to
be a qualified medicare beneficiary (as defined in section
1905(p)(1)) or otherwise to be entitled to medical assistance
under section 1902(a)(10)(A) or 1902(a)(10)(C); and
``(II) in the case of an episode of care which consists of 4
or fewer visits.
``(B)(i) The Secretary shall estimate, before the beginning of each
year (beginning with 2003), the national average payment under this
title per episode for home health services projected for the year
involved.
``(ii) For each year the copayment amount under this clause is equal
to 1.5 percent of the national average payment estimated for the year
involved under clause (i). Any amount determined under the preceding
sentence which is not a multiple of $5 shall be rounded to the nearest
multiple of $5.
``(iii) There shall be no administrative or judicial review under
section 1869, 1878, or otherwise of the estimation of average payment
under clause (i).''.
(2) Timely implementation.--Unless the Secretary of Health
and Human Services otherwise provides on a timely basis, the
copayment amount specified under section 1813(a)(5)(B)(ii) of
the Social Security Act (as added by paragraph (1)) for 2003
shall be deemed to be $40.
(b) Conforming Provisions.--
(1) Section 1833(a)(2)(A) (42 U.S.C. 1395l(a)(2)(A)) is
amended by inserting ``less the copayment amount applicable
under section 1813(a)(5)'' after ``1895''.
(2) Section 1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i))
is amended--
(A) by striking ``or coinsurance'' and inserting ``,
coinsurance, or copayment''; and
(B) by striking ``or (a)(4)'' and inserting ``(a)(4),
or (a)(5)''.
SEC. 603. UPDATE IN HOME HEALTH SERVICES.
(a) Change to Calendar Year Update.--
(1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) is
amended--
(A) in paragraph (3)(B)(i)--
(i) by striking ``each fiscal year (beginning
with fiscal year 2002)'' and inserting ``fiscal
year 2002 and for each subsequent year
(beginning with 2003)''; and
(ii) by inserting ``or year'' after ``the
fiscal year'';
(B) in paragraph (3)(B)(ii)--
(i) in subclause (II), by striking ``fiscal
year'' and inserting ``year'' and by
redesignating such subclause as subclause
(III); and
(ii) in subclause (I), by striking ``each of
fiscal years 2002 and 2003'' and inserting the
following: ``fiscal year 2002, the home health
market basket percentage increase (as defined
in clause (iii)) minus 1.1 percentage points;
``(II) 2003'';
(C) in paragraph (3)(B)(iii), by inserting ``or
year'' after ``fiscal year'' each place it appears;
(D) in paragraph (3)(B)(iv)--
(i) by inserting ``or year'' after ``fiscal
year'' each place it appears; and
(ii) by inserting ``or years'' after ``fiscal
years''; and
(E) in paragraph (5), by inserting ``or year'' after
``fiscal year''.
(2) Transition rule.--The standard prospective payment amount
(or amounts) under section 1895(b)(3) of the Social Security
Act for the calendar quarter beginning on October 1, 2002,
shall be such amount (or amounts) for the previous calendar
quarter.
(b) Changes in Updates for 2003, 2004, and 2005.--Section
1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as amended by
subsection (a)(1)(B), is amended--
(1) in subclause (II), by striking ``the home health market
basket percentage increase (as defined in clause (iii)) minus
1.1 percentage points'' and inserting ``2.0 percentage
points'';
(2) by striking ``or'' at the end of subclause (II);
(3) by redesignating subclause (III) as subclause (V); and
(4) by inserting after subclause (II) the following new
subclause:
``(III) 2004, 1.1 percentage points;
``(IV) 2005, 2.7 percentage points;
or''.
(c) Payment Adjustment.--
(1) In general.--Section 1895(b)(5) (42 U.S.C. 1395fff(b)(5))
is amended by striking ``5 percent'' and inserting ``3
percent''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to years beginning with 2003.
SEC. 604. OASIS TASK FORCE; SUSPENSION OF CERTAIN OASIS DATA COLLECTION
REQUIREMENTS PENDING TASK FORCE SUBMITTAL OF
REPORT.
(a) Establishment.--The Secretary of Health and Human Services shall
establish and appoint a task force (to be known as the ``OASIS Task
Force'') to examine the data collection and reporting requirements
under OASIS. For purposes of this section, the term ``OASIS'' means the
Outcome and Assessment Information Set required by reason of section
4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 1395fff note).
(b) Composition.--The OASIS Task Force shall be composed of the
following:
(1) Staff of the Centers for Medicare & Medicaid Services
with expertise in post-acute care.
(2) Representatives of home health agencies.
(3) Health care professionals and research and health care
quality experts outside the Federal Government with expertise
in post-acute care.
(4) Advocates for individuals requiring home health services.
(c) Duties.--
(1) Review and recommendations.--The OASIS Task Force shall
review and make recommendations to the Secretary regarding
changes in OASIS to improve and simplify data collection for
purposes of--
(A) assessing the quality of home health services;
and
(B) providing consistency in classification of
patients into home health resource groups (HHRGs) for
payment under section 1895 of the Social Security Act
(42 U.S.C. 1395fff).
(2) Specific items.--In conducting the review under paragraph
(1), the OASIS Task Force shall specifically examine--
(A) the 41 outcome measures currently in use;
(B) the timing and frequency of data collection; and
(C) the collection of information on comorbidities
and clinical indicators.
(3) Report.--The OASIS Task Force shall submit a report to
the Secretary containing its findings and recommendations for
changes in OASIS by not later than 18 months after the date of
the enactment of this Act.
(d) Sunset.--The OASIS Task Force shall terminate 60 days after the
date on which the report is submitted under subsection (c)(2).
(e) Nonapplication of FACA.--The provisions of the Federal Advisory
Committee Act shall not apply to the OASIS Task Force.
(f) Suspension of OASIS Requirement for Collection of Data on Non-
Medicare and Non-Medicaid Patients Pending Task Force Report.--
(1) In general.--During the period described in paragraph
(2), the Secretary of Health and Human Services may not
require, under section 4602(e) of the Balanced Budget Act of
1997 or otherwise under OASIS, a home health agency to gather
or submit information that relates to an individual who is not
eligible for benefits under either title XVIII or title XIX of
the Social Security Act.
(2) Period of suspension.--The period described in this
paragraph--
(A) begins on January 1, 2003, and
(B) ends on the last day of the 2nd month beginning
after the date the report is submitted under subsection
(c)(2).
SEC. 605. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH AGENCIES.
(a) Study.--The Medicare Payment Advisory Commission shall conduct a
study of payment margins of home health agencies under the home health
prospective payment system under section 1895 of the Social Security
Act (42 U.S.C. 1395fff). Such study shall examine whether systematic
differences in payment margins are related to differences in case mix
(as measured by home health resource groups (HHRGs)) among such
agencies. The study shall use the partial or full-year cost reports
filed by home health agencies.
(b) Report.--Not later than 2 years after the date of the enactment
of this Act, the Commission shall submit to Congress a report on the
study under subsection (a).
Subtitle B--Direct Graduate Medical Education
SEC. 611. EXTENSION OF UPDATE LIMITATION ON HIGH COST PROGRAMS.
Section 1886(h)(2)(D)(iv) (42 U.S.C. 1395ww(h)(2)(D)(iv)) is
amended--
(1) in subclause (I)--
(A) by striking ``and 2002'' and inserting ``through
2012'';
(B) by striking ``during fiscal year 2001 or fiscal
year 2002'' and inserting ``during the period beginning
with fiscal year 2001 and ending with fiscal year
2012''; and
(C) by striking ``subject to subclause (III),'';
(2) by striking subclause (II); and
(3) in subclause (III)--
(A) by redesignating such subclause as subclause
(II); and
(B) by striking ``or (II)''.
SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.
(a) In General.--Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is
amended--
(1) in subparagraph (F)(i), by inserting ``subject to
subparagraph (I),'' after ``October 1, 1997,'';
(2) in subparagraph (H)(i), by inserting ``subject to
subparagraph (I),'' after ``subparagraphs (F) and (G),''; and
(3) by adding at the end the following new subparagraph:
``(I) Redistribution of unused resident positions.--
``(i) Reduction in limit based on unused
positions.--
``(I) In general.--If a hospital's
resident level (as defined in clause
(iii)(I)) is less than the otherwise
applicable resident limit (as defined
in clause (iii)(II)) for each of the
reference periods (as defined in
subclause (II)), effective for cost
reporting periods beginning on or after
January 1, 2003, the otherwise
applicable resident limit shall be
reduced by 75 percent of the difference
between such limit and the reference
resident level specified in subclause
(III) (or subclause (IV) if
applicable).
``(II) Reference periods defined.--In
this clause, the term `reference
periods' means, for a hospital, the 3
most recent consecutive cost reporting
periods of the hospital for which cost
reports have been settled (or, if not,
submitted) on or before September 30,
2001.
``(III) Reference resident level.--
Subject to subclause (IV), the
reference resident level specified in
this subclause for a hospital is the
highest resident level for the hospital
during any of the reference periods.
``(IV) Adjustment process.--Upon the
timely request of a hospital, the
Secretary may adjust the reference
resident level for a hospital to be the
resident level for the hospital for the
cost reporting period that includes
July 1, 2002.
``(ii) Redistribution.--
``(I) In general.--The Secretary is
authorized to increase the otherwise
applicable resident limits for
hospitals by an aggregate number
estimated by the Secretary that does
not exceed the aggregate reduction in
such limits attributable to clause (i)
(without taking into account any
adjustment under subclause (IV) of such
clause).
``(II) Effective date.--No increase
under subclause (I) shall be permitted
or taken into account for a hospital
for any portion of a cost reporting
period that occurs before July 1, 2003,
or before the date of the hospital's
application for an increase under this
clause. No such increase shall be
permitted for a hospital unless the
hospital has applied to the Secretary
for such increase by December 31, 2004.
``(III) Considerations in
redistribution.--In determining for
which hospitals the increase in the
otherwise applicable resident limit is
provided under subclause (I), the
Secretary shall take into account the
need for such an increase by specialty
and location involved, consistent with
subclause (IV).
``(IV) Priority for rural and small
urban areas.--In determining for which
hospitals and residency training
programs an increase in the otherwise
applicable resident limit is provided
under subclause (I), the Secretary
shall first distribute the increase to
programs of hospitals located in rural
areas or in urban areas that are not
large urban areas (as defined for
purposes of subsection (d)) on a first-
come-first-served basis (as determined
by the Secretary) based on a
demonstration that the hospital will
fill the positions made available under
this clause and not to exceed an
increase of 25 full-time equivalent
positions with respect to any hospital.
``(V) Application of locality
adjusted national average per resident
amount.--With respect to additional
residency positions in a hospital
attributable to the increase provided
under this clause, notwithstanding any
other provision of this subsection, the
approved FTE resident amount is deemed
to be equal to the locality adjusted
national average per resident amount
computed under subparagraph (E) for
that hospital.
``(VI) Construction.--Nothing in this
clause shall be construed as permitting
the redistribution of reductions in
residency positions attributable to
voluntary reduction programs under
paragraph (6) or as affecting the
ability of a hospital to establish new
medical residency training programs
under subparagraph (H).
``(iii) Resident level and limit defined.--In
this subparagraph:
``(I) Resident level.--The term
`resident level' means, with respect to
a hospital, the total number of full-
time equivalent residents, before the
application of weighting factors (as
determined under this paragraph), in
the fields of allopathic and
osteopathic medicine for the hospital.
``(II) Otherwise applicable resident
limit.--The term `otherwise applicable
resident limit' means, with respect to
a hospital, the limit otherwise
applicable under subparagraphs (F)(i)
and (H) on the resident level for the
hospital determined without regard to
this subparagraph.''.
(b) No Application of Increase to IME.--Section 1886(d)(5)(B)(v) (42
U.S.C. 1395ww(d)(5)(B)(v)) is amended by adding at the end the
following: ``The provisions of clause (i) of subparagraph (I) of
subsection (h)(4) shall apply with respect to the first sentence of
this clause in the same manner as it applies with respect to
subparagraph (F) of such subsection, but the provisions of clause (ii)
of such subparagraph shall not apply.''.
(c) Report on Extension of Applications Under Redistribution
Program.--Not later than July 1, 2004, the Secretary shall submit to
Congress a report containing recommendations regarding whether to
extend the deadline for applications for an increase in resident limits
under section 1886(h)(4)(I)(ii)(II) of the Social Security Act (as
added by subsection (a)).
Subtitle C--Other Provisions
SEC. 621. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY COMMISSION
(MEDPAC).
(a) Examination of Budget Consequences.--Section 1805(b) (42 U.S.C.
1395b-6(b)) is amended by adding at the end the following new
paragraph:
``(8) Examination of budget consequences.--Before making any
recommendations, the Commission shall examine the budget
consequences of such recommendations, directly or through
consultation with appropriate expert entities.''.
(b) Consideration of Efficient Provision of Services.--Section
1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is amended by
inserting ``the efficient provision of'' after ``expenditures for''.
(c) Additional Reports.--
(1) Data needs and sources.--The Medicare Payment Advisory
Commission shall conduct a study, and submit a report to
Congress by not later than June 1, 2003, on the need for
current data, and sources of current data available, to
determine the solvency and financial circumstances of hospitals
and other medicare providers of services. The Commission shall
examine data on uncompensated care, as well as the sahre of
uncompensated care accounted for by the expenses for treating
illegal aliens.
(2) Use of tax-related returns.--Using return information
provided under Form 990 of the Internal Revenue Service, the
Commission shall submit to Congress, by not later than June 1,
2003, a report on the following:
(A) Investments and capital financing of hospitals
participating under the medicare program and related
foundations.
(B) Access to capital financing for private and for
not-for-profit hospitals.
SEC. 622. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR CERTAIN
MEDICARE BENEFICIARIES WITH DIABETES.
(a) In General.--The Secretary of Health and Human Services shall
conduct a demonstration project under this section (in this section
referred to as the ``project'') to demonstrate the impact on costs and
health outcomes of applying disease management to certain medicare
beneficiaries with diagnosed diabetes. In no case may the number of
participants in the project exceed 30,000 at any time.
(b) Voluntary Participation.--
(1) Eligibility.--Medicare beneficiaries are eligible to
participate in the project only if--
(A) they are Hispanic, as determined by the
Secretary;
(B) they meet specific medical criteria demonstrating
the appropriate diagnosis and the advanced nature of
their disease;
(C) their physicians approve of participation in the
project; and
(D) they are not enrolled in a Medicare+Choice plan.
(2) Benefits.--A medicare beneficiary who is enrolled in the
project shall be eligible--
(A) for disease management services related to their
diabetes; and
(B) for payment for all costs for prescription drugs
without regard to whether or not they relate to the
diabetes, except that the project may provide for
modest cost-sharing with respect to prescription drug
coverage.
(c) Contracts With Disease Management Organizations.--
(1) In general.--The Secretary of Health and Human Services
shall carry out the project through contracts with up to three
disease management organizations. The Secretary shall not enter
into such a contract with an organization unless the
organization demonstrates that it can produce improved health
outcomes and reduce aggregate medicare expenditures consistent
with paragraph (2).
(2) Contract provisions.--Under such contracts--
(A) such an organization shall be required to provide
for prescription drug coverage described in subsection
(b)(2)(B);
(B) such an organization shall be paid a fee
negotiated and established by the Secretary in a manner
so that (taking into account savings in expenditures
under parts A and B of the medicare program under title
XVIII of the Social Security Act) there will be no net
increase, and to the extent practicable, there will be
a net reduction in expenditures under the medicare
program as a result of the project; and
(C) such an organization shall guarantee, through an
appropriate arrangement with a reinsurance company or
otherwise, the prohibition on net increases in
expenditures described in subparagraph (B).
(3) Payments.--Payments to such organizations shall be made
in appropriate proportion from the Trust Funds established
under title XVIII of the Social Security Act.
(d) Application of Medigap Protections to Demonstration Project
Enrollees.--(1) Subject to paragraph (2), the provisions of section
1882(s)(3) (other than clauses (i) through (iv) of subparagraph (B))
and 1882(s)(4) of the Social Security Act shall apply to enrollment
(and termination of enrollment) in the demonstration project under this
section, in the same manner as they apply to enrollment (and
termination of enrollment) with a Medicare+Choice organization in a
Medicare+Choice plan.
(2) In applying paragraph (1)--
(A) any reference in clause (v) or (vi) of section
1882(s)(3)(B) of such Act to 12 months is deemed a reference to
the period of the demonstration project; and
(B) the notification required under section 1882(s)(3)(D) of
such Act shall be provided in a manner specified by the
Secretary of Health and Human Services.
(e) Duration.--The project shall last for not longer than 3 years.
(f) Waiver.--The Secretary of Health and Human Services shall waive
such provisions of title XVIII of the Social Security Act as may be
necessary to provide for payment for services under the project in
accordance with subsection (c)(3).
(g) Report.--The Secretary of Health and Human Services shall submit
to Congress an interim report on the project not later than 2 years
after the date it is first implemented and a final report on the
project not later than 6 months after the date of its completion. Such
reports shall include information on the impact of the project on costs
and health outcomes and recommendations on the cost-effectiveness of
extending or expanding the project.
(h) Working Group on Medicare Disease Management Programs.--The
Secretary shall establish within the Department of Health and Human
Services a working group consisting of employees of the Department to
carry out the following:
(1) To oversee the project.
(2) To establish policy and criteria for medicare disease
management programs within the Department, including the
establishment of policy and criteria for such programs.
(3) To identify targeted medical conditions and targeted
individuals.
(4) To select areas in which such programs are carried out.
(5) To monitor health outcomes under such programs.
(6) To measure the effectiveness of such programs in meeting
any budget neutrality requirements.
(7) Otherwise to serve as a central focal point within the
Department for dissemination of information on medicare disease
management programs.
(i) GAO Study on Disease Management Programs.--The Comptroller
General of the United States shall conduct a study that compares
disease management programs under title XVIII of the Social Security
Act with such programs conducted in the private sector, including the
prevalence of such programs and programs for case management. The study
shall identify the cost-effectiveness of such programs and any savings
achieved by such programs. The Comptroller General shall submit a
report on such study to Congress by not later than 18 months after the
date of the enactment of this Act.
SEC. 623. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE SERVICES.
(a) Establishment.--Subject to the succeeding provisions of this
section, the Secretary of Health and Human Services shall establish a
demonstration project (in this section referred to as the
``demonstration project'') under which the Secretary shall, as part of
a plan of an episode of care for home health services established for a
medicare beneficiary, permit a home health agency, directly or under
arrangements with a medical adult day care facility, to provide medical
adult day care services as a substitute for a portion of home health
services that would otherwise be provided in the beneficiary's home.
(b) Payment.--
(1) In general.--The amount of payment for an episode of care
for home health services, a portion of which consists of
substitute medical adult day care services, under the
demonstration project shall be made at a rate equal to 95
percent of the amount that would otherwise apply for such home
health services under section 1895 of the Social Security Act
(42 u.s.c. 1395fff). In no case may a home health agency, or a
medical adult day care facility under arrangements with a home
health agency, separately charge a beneficiary for medical
adult day care services furnished under the plan of care.
(2) Budget neutrality for demonstration project.--
Notwithstanding any other provision of law, the Secretary shall
provide for an appropriate reduction in the aggregate amount of
additional payments made under section 1895 of the Social
Security Act (42 U.S.C. 1395fff) to reflect any increase in
amounts expended from the Trust Funds as a result of the
demonstration project conducted under this section.
(c) Demonstration Project Sites.--The project established under this
section shall be conducted in not more than 5 sites in States selected
by the Secretary that license or certify providers of services that
furnish medical adult day care services.
(d) Duration.--The Secretary shall conduct the demonstration project
for a period of 3 years.
(e) Voluntary Participation.--Participation of medicare beneficiaries
in the demonstration project shall be voluntary. The total number of
such beneficiaries that may participate in the project at any given
time may not exceed 15,000.
(f) Preference in Selecting Agencies.--In selecting home health
agencies to participate under the demonstration project, the Secretary
shall give preference to those agencies that--
(1) are currently licensed or certified to furnish medical
adult day care services; and
(2) have furnished medical adult day care services to
medicare beneficiaries for a continuous 2-year period before
the beginning of the demonstration project.
(g) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of the Social Security Act as may be necessary for the
purposes of carrying out the demonstration project, other than waiving
the requirement that an individual be homebound in order to be eligible
for benefits for home health services.
(h) Evaluation and Report.--The Secretary shall conduct an evaluation
of the clinical and cost effectiveness of the demonstration project.
Not later 30 months after the commencement of the project, the
Secretary shall submit to Congress a report on the evaluation, and
shall include in the report the following:
(1) An analysis of the patient outcomes and costs of
furnishing care to the medicare beneficiaries participating in
the project as compared to such outcomes and costs to
beneficiaries receiving only home health services for the same
health conditions.
(2) Such recommendations regarding the extension, expansion,
or termination of the project as the Secretary determines
appropriate.
(i) Definitions.--In this section:
(1) Home health agency.--The term ``home health agency'' has
the meaning given such term in section 1861(o) of the Social
Security Act (42 U.S.C. 1395x(o)).
(2) Medical adult day care facility.--The term ``medical
adult day care facility'' means a facility that--
(A) has been licensed or certified by a State to
furnish medical adult day care services in the State
for a continuous 2-year period;
(B) is engaged in providing skilled nursing services
and other therapeutic services directly or under
arrangement with a home health agency;
(C) meets such standards established by the Secretary
to assure quality of care and such other requirements
as the Secretary finds necessary in the interest of the
health and safety of individuals who are furnished
services in the facility; and
(D) provides medical adult day care services.
(3) Medical adult day care services.--The term ``medical
adult day care services'' means--
(A) home health service items and services described
in paragraphs (1) through (7) of section 1861(m)
furnished in a medical adult day care facility;
(B) a program of supervised activities furnished in a
group setting in the facility that--
(i) meet such criteria as the Secretary
determines appropriate; and
(ii) is designed to promote physical and
mental health of the individuals; and
(C) such other services as the Secretary may specify.
(4) Medicare beneficiary.--The term ``medicare beneficiary''
means an individual entitled to benefits under part A of this
title, enrolled under part B of this title, or both.
TITLE VII--MEDICARE BENEFITS ADMINISTRATION
SEC. 701. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as amended by
section 105, is amended by inserting after 1806 the following new
section:
``medicare benefits administration
``Sec. 1808. (a) Establishment.--There is established within the
Department of Health and Human Services an agency to be known as the
Medicare Benefits Administration.
``(b) Administrator; Deputy Administrator; Chief Actuary.--
``(1) Administrator.--
``(A) In general.--The Medicare Benefits
Administration shall be headed by an administrator to
be known as the `Medicare Benefits Administrator' (in
this section referred to as the `Administrator') who
shall be appointed by the President, by and with the
advice and consent of the Senate. The Administrator
shall be in direct line of authority to the Secretary.
``(B) Compensation.--The Administrator shall be paid
at the rate of basic pay payable for level III of the
Executive Schedule under section 5314 of title 5,
United States Code.
``(C) Term of office.--The Administrator shall be
appointed for a term of 5 years. In any case in which a
successor does not take office at the end of an
Administrator's term of office, that Administrator may
continue in office until the entry upon office of such
a successor. An Administrator appointed to a term of
office after the commencement of such term may serve
under such appointment only for the remainder of such
term.
``(D) General authority.--The Administrator shall be
responsible for the exercise of all powers and the
discharge of all duties of the Administration, and
shall have authority and control over all personnel and
activities thereof.
``(E) Rulemaking authority.--The Administrator may
prescribe such rules and regulations as the
Administrator determines necessary or appropriate to
carry out the functions of the Administration. The
regulations prescribed by the Administrator shall be
subject to the rulemaking procedures established under
section 553 of title 5, United States Code.
``(F) Authority to establish organizational units.--
The Administrator may establish, alter, consolidate, or
discontinue such organizational units or components
within the Administration as the Administrator
considers necessary or appropriate, except as specified
in this section.
``(G) Authority to delegate.--The Administrator may
assign duties, and delegate, or authorize successive
redelegations of, authority to act and to render
decisions, to such officers and employees of the
Administration as the Administrator may find necessary.
Within the limitations of such delegations,
redelegations, or assignments, all official acts and
decisions of such officers and employees shall have the
same force and effect as though performed or rendered
by the Administrator.
``(2) Deputy administrator.--
``(A) In general.--There shall be a Deputy
Administrator of the Medicare Benefits Administration
who shall be appointed by the President, by and with
the advice and consent of the Senate.
``(B) Compensation.--The Deputy Administrator shall
be paid at the rate of basic pay payable for level IV
of the Executive Schedule under section 5315 of title
5, United States Code.
``(C) Term of office.--The Deputy Administrator shall
be appointed for a term of 5 years. In any case in
which a successor does not take office at the end of a
Deputy Administrator's term of office, such Deputy
Administrator may continue in office until the entry
upon office of such a successor. A Deputy Administrator
appointed to a term of office after the commencement of
such term may serve under such appointment only for the
remainder of such term.
``(D) Duties.--The Deputy Administrator shall perform
such duties and exercise such powers as the
Administrator shall from time to time assign or
delegate. The Deputy Administrator shall be Acting
Administrator of the Administration during the absence
or disability of the Administrator and, unless the
President designates another officer of the Government
as Acting Administrator, in the event of a vacancy in
the office of the Administrator.
``(3) Chief actuary.--
``(A) In general.--There is established in the
Administration the position of Chief Actuary. The Chief
Actuary shall be appointed by, and in direct line of
authority to, the Administrator of such Administration.
The Chief Actuary shall be appointed from among
individuals who have demonstrated, by their education
and experience, superior expertise in the actuarial
sciences. The Chief Actuary may be removed only for
cause.
``(B) Compensation.--The Chief Actuary shall be
compensated at the highest rate of basic pay for the
Senior Executive Service under section 5382(b) of title
5, United States Code.
``(C) Duties.--The Chief Actuary shall exercise such
duties as are appropriate for the office of the Chief
Actuary and in accordance with professional standards
of actuarial independence.
``(4) Secretarial coordination of program administration.--
The Secretary shall ensure appropriate coordination between the
Administrator and the Administrator of the Centers for Medicare
& Medicaid Services in carrying out the programs under this
title.
``(c) Duties; Administrative Provisions.--
``(1) Duties.--
``(A) General duties.--The Administrator shall carry
out parts C and D, including--
``(i) negotiating, entering into, and
enforcing, contracts with plans for the
offering of Medicare+Choice plans under part C,
including the offering of qualified
prescription drug coverage under such plans;
and
``(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors for the
offering of prescription drug plans under part
D.
``(B) Other duties.--The Administrator shall carry
out any duty provided for under part C or part D,
including demonstration projects carried out in part or
in whole under such parts, the programs of all-
inclusive care for the elderly (PACE program) under
section 1894, the social health maintenance
organization (SHMO) demonstration projects (referred to
in section 4104(c) of the Balanced Budget Act of 1997),
and through a Medicare+Choice project that demonstrates
the application of capitation payment rates for frail
elderly medicare beneficiaries through the use of a
interdisciplinary team and through the provision of
primary care services to such beneficiaries by means of
such a team at the nursing facility involved).
``(C) Prescription drug card.--The Administrator
shall carry out section 1807 (relating to the medicare
prescription drug discount card endorsement program).
``(D) Noninterference.--In carrying out its duties
with respect to the provision of qualified prescription
drug coverage to beneficiaries under this title, the
Administrator may not--
``(i) require a particular formulary or
institute a price structure for the
reimbursement of covered outpatient drugs;
``(ii) interfere in any way with negotiations
between PDP sponsors and Medicare+Choice
organizations and drug manufacturers,
wholesalers, or other suppliers of covered
outpatient drugs; and
``(iii) otherwise interfere with the
competitive nature of providing such coverage
through such sponsors and organizations.
``(E) Annual reports.--Not later March 31 of each
year, the Administrator shall submit to Congress and
the President a report on the administration of parts C
and D during the previous fiscal year.
``(2) Staff.--
``(A) In general.--The Administrator, with the
approval of the Secretary, may employ, without regard
to chapter 31 of title 5, United States Code, other
than sections 3110 and 3112, such officers and
employees as are necessary to administer the activities
to be carried out through the Medicare Benefits
Administration. The Administrator shall employ staff
with appropriate and necessary expertise in negotiating
contracts in the private sector.
``(B) Flexibility with respect to compensation.--
``(i) In general.--The staff of the Medicare
Benefits Administration shall, subject to
clause (ii), be paid without regard to the
provisions of chapter 51 (other than section
5101) and chapter 53 (other than section 5301)
of such title (relating to classification and
schedule pay rates).
``(ii) Maximum rate.--In no case may the rate
of compensation determined under clause (i)
exceed the rate of basic pay payable for level
IV of the Executive Schedule under section 5315
of title 5, United States Code.
``(C) Limitation on full-time equivalent staffing for
current cms functions being transferred.--The
Administrator may not employ under this paragraph a
number of full-time equivalent employees, to carry out
functions that were previously conducted by the Centers
for Medicare & Medicaid Services and that are conducted
by the Administrator by reason of this section, that
exceeds the number of such full-time equivalent
employees authorized to be employed by the Centers for
Medicare & Medicaid Services to conduct such functions
as of the date of the enactment of this Act.
``(3) Redelegation of certain functions of the centers for
medicare & medicaid services.--
``(A) In general.--The Secretary, the Administrator,
and the Administrator of the Centers for Medicare &
Medicaid Services shall establish an appropriate
transition of responsibility in order to redelegate the
administration of part C from the Secretary and the
Administrator of the Centers for Medicare & Medicaid
Services to the Administrator as is appropriate to
carry out the purposes of this section.
``(B) Transfer of data and information.--The
Secretary shall ensure that the Administrator of the
Centers for Medicare & Medicaid Services transfers to
the Administrator of the Medicare Benefits
Administration such information and data in the
possession of the Administrator of the Centers for
Medicare & Medicaid Services as the Administrator of
the Medicare Benefits Administration requires to carry
out the duties described in paragraph (1).
``(C) Construction.--Insofar as a responsibility of
the Secretary or the Administrator of the Centers for
Medicare & Medicaid Services is redelegated to the
Administrator under this section, any reference to the
Secretary or the Administrator of the Centers for
Medicare & Medicaid Services in this title or title XI
with respect to such responsibility is deemed to be a
reference to the Administrator.
``(d) Office of Beneficiary Assistance.--
``(1) Establishment.--The Secretary shall establish within
the Medicare Benefits Administration an Office of Beneficiary
Assistance to coordinate functions relating to outreach and
education of medicare beneficiaries under this title, including
the functions described in paragraph (2). The Office shall be
separate operating division within the Administration.
``(2) Dissemination of information on benefits and appeals
rights.--
``(A) Dissemination of benefits information.--The
Office of Beneficiary Assistance shall disseminate,
directly or through contract, to medicare
beneficiaries, by mail, by posting on the Internet site
of the Medicare Benefits Administration and through a
toll-free telephone number, information with respect to
the following:
``(i) Benefits, and limitations on payment
(including cost-sharing, stop-loss provisions,
and formulary restrictions) under parts C and
D.
``(ii) Benefits, and limitations on payment
under parts A and B, including information on
medicare supplemental policies under section
1882.
Such information shall be presented in a manner so that
medicare beneficiaries may compare benefits under parts
A, B, D, and medicare supplemental policies with
benefits under Medicare+Choice plans under part C.
``(B) Dissemination of appeals rights information.--
The Office of Beneficiary Assistance shall disseminate
to medicare beneficiaries in the manner provided under
subparagraph (A) a description of procedural rights
(including grievance and appeals procedures) of
beneficiaries under the original medicare fee-for-
service program under parts A and B, the
Medicare+Choice program under part C, and the Voluntary
Prescription Drug Benefit Program under part D.
``(e) Medicare Policy Advisory Board.--
``(1) Establishment.--There is established within the
Medicare Benefits Administration the Medicare Policy Advisory
Board (in this section referred to the `Board'). The Board
shall advise, consult with, and make recommendations to the
Administrator of the Medicare Benefits Administration with
respect to the administration of parts C and D, including the
review of payment policies under such parts.
``(2) Reports.--
``(A) In general.--With respect to matters of the
administration of parts C and D, the Board shall submit
to Congress and to the Administrator of the Medicare
Benefits Administration such reports as the Board
determines appropriate. Each such report may contain
such recommendations as the Board determines
appropriate for legislative or administrative changes
to improve the administration of such parts, including
the topics described in subparagraph (B). Each such
report shall be published in the Federal Register.
``(B) Topics described.--Reports required under
subparagraph (A) may include the following topics:
``(i) Fostering competition.--Recommendations
or proposals to increase competition under
parts C and D for services furnished to
medicare beneficiaries.
``(ii) Education and enrollment.--
Recommendations for the improvement to efforts
to provide medicare beneficiaries information
and education on the program under this title,
and specifically parts C and D, and the program
for enrollment under the title.
``(iii) Implementation of risk-adjustment.--
Evaluation of the implementation under section
1853(a)(3)(C) of the risk adjustment
methodology to payment rates under that section
to Medicare+Choice organizations offering
Medicare+Choice plans that accounts for
variations in per capita costs based on health
status and other demographic factors.
``(iv) Disease management programs.--
Recommendations on the incorporation of disease
management programs under parts C and D.
``(v) Rural access.--Recommendations to
improve competition and access to plans under
parts C and D in rural areas.
``(C) Maintaining independence of board.--The Board
shall directly submit to Congress reports required
under subparagraph (A). No officer or agency of the
United States may require the Board to submit to any
officer or agency of the United States for approval,
comments, or review, prior to the submission to
Congress of such reports.
``(3) Duty of administrator of medicare benefits
administration.--With respect to any report submitted by the
Board under paragraph (2)(A), not later than 90 days after the
report is submitted, the Administrator of the Medicare Benefits
Administration shall submit to Congress and the President an
analysis of recommendations made by the Board in such report.
Each such analysis shall be published in the Federal Register.
``(4) Membership.--
``(A) Appointment.--Subject to the succeeding
provisions of this paragraph, the Board shall consist
of seven members to be appointed as follows:
``(i) Three members shall be appointed by the
President.
``(ii) Two members shall be appointed by the
Speaker of the House of Representatives, with
the advice of the chairmen and the ranking
minority members of the Committees on Ways and
Means and on Energy and Commerce of the House
of Representatives.
``(iii) Two members shall be appointed by the
President pro tempore of the Senate with the
advice of the chairman and the ranking minority
member of the Senate Committee on Finance.
``(B) Qualifications.--The members shall be chosen on
the basis of their integrity, impartiality, and good
judgment, and shall be individuals who are, by reason
of their education and experience in health care
benefits management, exceptionally qualified to perform
the duties of members of the Board.
``(C) Prohibition on inclusion of federal
employees.--No officer or employee of the United States
may serve as a member of the Board.
``(5) Compensation.--Members of the Board shall receive, for
each day (including travel time) they are engaged in the
performance of the functions of the board, compensation at
rates not to exceed the daily equivalent to the annual rate in
effect for level IV of the Executive Schedule under section
5315 of title 5, United States Code.
``(6) Terms of office.--
``(A) In general.--The term of office of members of
the Board shall be 3 years.
``(B) Terms of initial appointees.--As designated by
the President at the time of appointment, of the
members first appointed--
``(i) one shall be appointed for a term of 1
year;
``(ii) three shall be appointed for terms of
2 years; and
``(iii) three shall be appointed for terms of
3 years.
``(C) Reappointments.--Any person appointed as a
member of the Board may not serve for more than 8
years.
``(D) Vacancy.--Any member appointed to fill a
vacancy occurring before the expiration of the term for
which the member's predecessor was appointed shall be
appointed only for the remainder of that term. A member
may serve after the expiration of that member's term
until a successor has taken office. A vacancy in the
Board shall be filled in the manner in which the
original appointment was made.
``(7) Chair.--The Chair of the Board shall be elected by the
members. The term of office of the Chair shall be 3 years.
``(8) Meetings.--The Board shall meet at the call of the
Chair, but in no event less than three times during each fiscal
year.
``(9) Director and staff.--
``(A) Appointment of director.--The Board shall have
a Director who shall be appointed by the Chair.
``(B) In general.--With the approval of the Board,
the Director may appoint, without regard to chapter 31
of title 5, United States Code, such additional
personnel as the Director considers appropriate.
``(C) Flexibility with respect to compensation.--
``(i) In general.--The Director and staff of
the Board shall, subject to clause (ii), be
paid without regard to the provisions of
chapter 51 and chapter 53 of such title
(relating to classification and schedule pay
rates).
``(ii) Maximum rate.--In no case may the rate
of compensation determined under clause (i)
exceed the rate of basic pay payable for level
IV of the Executive Schedule under section 5315
of title 5, United States Code.
``(D) Assistance from the administrator of the
medicare benefits administration.--The Administrator of
the Medicare Benefits Administration shall make
available to the Board such information and other
assistance as it may require to carry out its
functions.
``(10) Contract authority.--The Board may contract with and
compensate government and private agencies or persons to carry
out its duties under this subsection, without regard to section
3709 of the Revised Statutes (41 U.S.C. 5).
``(f) Funding.--There is authorized to be appropriated, in
appropriate part from the Federal Hospital Insurance Trust Fund and
from the Federal Supplementary Medical Insurance Trust Fund (including
the Medicare Prescription Drug Account), such sums as are necessary to
carry out this section.''.
(b) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act.
(2) Timing of initial appointments.--The Administrator and
Deputy Administrator of the Medicare Benefits Administration
may not be appointed before March 1, 2003.
(3) Duties with respect to eligibility determinations and
enrollment.--The Administrator of the Medicare Benefits
Administration shall carry out enrollment under title XVIII of
the Social Security Act, make eligibility determinations under
such title, and carry out part C of such title for years
beginning or after January 1, 2005.
(4) Transition.--Before the date the Administrator of the
Medicare Benefits Administration is appointed and assumes
responsibilities under this section and section 1807 of the
Social Security Act, the Secretary of Health and Human Services
shall provide for the conduct of any responsibilities of such
Administrator that are otherwise provided under law.
(c) Miscellaneous Administrative Provisions.--
(1) Administrator as member of the board of trustees of the
medicare trust funds.--Section 1817(b) and section 1841(b) (42
U.S.C. 1395i(b), 1395t(b)) are each amended by striking ``and
the Secretary of Health and Human Services, all ex officio,''
and inserting ``the Secretary of Health and Human Services, and
the Administrator of the Medicare Benefits Administration, all
ex officio,''.
(2) Increase in grade to executive level iii for the
administrator of the centers for medicare & medicaid services;
level for medicare benefits administrator.--
(A) In general.--Section 5314 of title 5, United
States Code, by adding at the end the following:
``Administrator of the Centers for Medicare & Medicaid
Services .
``Administrator of the Medicare Benefits Administration.''.
(B) Conforming amendment.--Section 5315 of such title
is amended by striking ``Administrator of the Health
Care Financing Administration.''.
(C) Effective date.--The amendments made by this
paragraph take effect on January 1, 2003.
TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM
Subtitle A--Regulatory Reform
SEC. 801. CONSTRUCTION; DEFINITION OF SUPPLIER.
(a) Construction.--Nothing in this title shall be construed--
(1) to compromise or affect existing legal remedies for
addressing fraud or abuse, whether it be criminal prosecution,
civil enforcement, or administrative remedies, including under
sections 3729 through 3733 of title 31, United States Code
(known as the False Claims Act); or
(2) to prevent or impede the Department of Health and Human
Services in any way from its ongoing efforts to eliminate
waste, fraud, and abuse in the medicare program.
Furthermore, the consolidation of medicare administrative contracting
set forth in this Act does not constitute consolidation of the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund or reflect any position on that issue.
(b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) is
amended by inserting after subsection (c) the following new subsection:
``Supplier
``(d) The term `supplier' means, unless the context otherwise
requires, a physician or other practitioner, a facility, or other
entity (other than a provider of services) that furnishes items or
services under this title.''.
SEC. 802. ISSUANCE OF REGULATIONS.
(a) Consolidation of Promulgation to Once a Month.--
(1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended
by adding at the end the following new subsection:
``(d)(1) Subject to paragraph (2), the Secretary shall issue proposed
or final (including interim final) regulations to carry out this title
only on one business day of every month.
``(2) The Secretary may issue a proposed or final regulation
described in paragraph (1) on any other day than the day described in
paragraph (1) if the Secretary--
``(A) finds that issuance of such regulation on another day
is necessary to comply with requirements under law; or
``(B) finds that with respect to that regulation the
limitation of issuance on the date described in paragraph (1)
is contrary to the public interest.
If the Secretary makes a finding under this paragraph, the Secretary
shall include such finding, and brief statement of the reasons for such
finding, in the issuance of such regulation.
``(3) The Secretary shall coordinate issuance of new regulations
described in paragraph (1) relating to a category of provider of
services or suppliers based on an analysis of the collective impact of
regulatory changes on that category of providers or suppliers.''.
(2) GAO report on publication of regulations on a quarterly
basis.--Not later than 3 years after the date of the enactment
of this Act, the Comptroller General of the United States shall
submit to Congress a report on the feasibility of requiring
that regulations described in section 1871(d) of the Social
Security Act be promulgated on a quarterly basis rather than on
a monthly basis.
(3) Effective date.--The amendment made by paragraph (1)
shall apply to regulations promulgated on or after the date
that is 30 days after the date of the enactment of this Act.
(b) Regular Timeline for Publication of Final Rules.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is
amended by adding at the end the following new paragraph:
``(3)(A) The Secretary, in consultation with the Director of the
Office of Management and Budget, shall establish and publish a regular
timeline for the publication of final regulations based on the previous
publication of a proposed regulation or an interim final regulation.
``(B) Such timeline may vary among different regulations based on
differences in the complexity of the regulation, the number and scope
of comments received, and other relevant factors, but shall not be
longer than 3 years except under exceptional circumstances. If the
Secretary intends to vary such timeline with respect to the publication
of a final regulation, the Secretary shall cause to have published in
the Federal Register notice of the different timeline by not later than
the timeline previously established with respect to such regulation.
Such notice shall include a brief explanation of the justification for
such variation.
``(C) In the case of interim final regulations, upon the expiration
of the regular timeline established under this paragraph for the
publication of a final regulation after opportunity for public comment,
the interim final regulation shall not continue in effect unless the
Secretary publishes (at the end of the regular timeline and, if
applicable, at the end of each succeeding 1-year period) a notice of
continuation of the regulation that includes an explanation of why the
regular timeline (and any subsequent 1-year extension) was not complied
with. If such a notice is published, the regular timeline (or such
timeline as previously extended under this paragraph) for publication
of the final regulation shall be treated as having been extended for 1
additional year.
``(D) The Secretary shall annually submit to Congress a report that
describes the instances in which the Secretary failed to publish a
final regulation within the applicable regular timeline under this
paragraph and that provides an explanation for such failures.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act. The
Secretary shall provide for an appropriate transition to take
into account the backlog of previously published interim final
regulations.
(c) Limitations on New Matter in Final Regulations.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as
amended by subsection (b), is further amended by adding at the
end the following new paragraph:
``(4) If the Secretary publishes notice of proposed rulemaking
relating to a regulation (including an interim final regulation),
insofar as such final regulation includes a provision that is not a
logical outgrowth of such notice of proposed rulemaking, that provision
shall be treated as a proposed regulation and shall not take effect
until there is the further opportunity for public comment and a
publication of the provision again as a final regulation.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to final regulations published on or after the date
of the enactment of this Act.
SEC. 803. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES.
(a) No Retroactive Application of Substantive Changes.--
(1) In general.--Section 1871 (42 U.S.C. 1395hh), as amended
by section 802(a), is amended by adding at the end the
following new subsection:
``(e)(1)(A) A substantive change in regulations, manual instructions,
interpretative rules, statements of policy, or guidelines of general
applicability under this title shall not be applied (by extrapolation
or otherwise) retroactively to items and services furnished before the
effective date of the change, unless the Secretary determines that--
``(i) such retroactive application is necessary to comply
with statutory requirements; or
``(ii) failure to apply the change retroactively would be
contrary to the public interest.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to substantive changes issued on or after the date
of the enactment of this Act.
(b) Timeline for Compliance With Substantive Changes After Notice.--
(1) In general.--Section 1871(e)(1), as added by subsection
(a), is amended by adding at the end the following:
``(B)(i) Except as provided in clause (ii), a substantive change
referred to in subparagraph (A) shall not become effective before the
end of the 30-day period that begins on the date that the Secretary has
issued or published, as the case may be, the substantive change.
``(ii) The Secretary may provide for such a substantive change to
take effect on a date that precedes the end of the 30-day period under
clause (i) if the Secretary finds that waiver of such 30-day period is
necessary to comply with statutory requirements or that the application
of such 30-day period is contrary to the public interest. If the
Secretary provides for an earlier effective date pursuant to this
clause, the Secretary shall include in the issuance or publication of
the substantive change a finding described in the first sentence, and a
brief statement of the reasons for such finding.
``(C) No action shall be taken against a provider of services or
supplier with respect to noncompliance with such a substantive change
for items and services furnished before the effective date of such a
change.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to compliance actions undertaken on or after the
date of the enactment of this Act.
(c) Reliance on Guidance.--
(1) In general.--Section 1871(e), as added by subsection (a),
is further amended by adding at the end the following new
paragraph:
``(2)(A) If--
``(i) a provider of services or supplier follows the written
guidance (which may be transmitted electronically) provided by
the Secretary or by a medicare contractor (as defined in
section 1889(g)) acting within the scope of the contractor's
contract authority, with respect to the furnishing of items or
services and submission of a claim for benefits for such items
or services with respect to such provider or supplier;
``(ii) the Secretary determines that the provider of services
or supplier has accurately presented the circumstances relating
to such items, services, and claim to the contractor in
writing; and
``(iii) the guidance was in error;
the provider of services or supplier shall not be subject to any
sanction (including any penalty or requirement for repayment of any
amount) if the provider of services or supplier reasonably relied on
such guidance.
``(B) Subparagraph (A) shall not be construed as preventing the
recoupment or repayment (without any additional penalty) relating to an
overpayment insofar as the overpayment was solely the result of a
clerical or technical operational error.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act but
shall not apply to any sanction for which notice was provided
on or before the date of the enactment of this Act.
SEC. 804. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.
(a) GAO Study on Advisory Opinion Authority.--
(1) Study.--The Comptroller General of the United States
shall conduct a study to determine the feasibility and
appropriateness of establishing in the Secretary authority to
provide legally binding advisory opinions on appropriate
interpretation and application of regulations to carry out the
medicare program under title XVIII of the Social Security Act.
Such study shall examine the appropriate timeframe for issuing
such advisory opinions, as well as the need for additional
staff and funding to provide such opinions.
(2) Report.--The Comptroller General shall submit to Congress
a report on the study conducted under paragraph (1) by not
later than January 1, 2004.
(b) Report on Legal and Regulatory Inconsistencies.--Section 1871 (42
U.S.C. 1395hh), as amended by section 803(a), is amended by adding at
the end the following new subsection:
``(f)(1) Not later than 2 years after the date of the enactment of
this subsection, and every 2 years thereafter, the Secretary shall
submit to Congress a report with respect to the administration of this
title and areas of inconsistency or conflict among the various
provisions under law and regulation.
``(2) In preparing a report under paragraph (1), the Secretary shall
collect--
``(A) information from individuals entitled to benefits under
part A or enrolled under part B, or both, providers of
services, and suppliers and from the Medicare Beneficiary
Ombudsman and the Medicare Provider Ombudsman with respect to
such areas of inconsistency and conflict; and
``(B) information from medicare contractors that tracks the
nature of written and telephone inquiries.
``(3) A report under paragraph (1) shall include a description of
efforts by the Secretary to reduce such inconsistency or conflicts, and
recommendations for legislation or administrative action that the
Secretary determines appropriate to further reduce such inconsistency
or conflicts.''.
Subtitle B--Contracting Reform
SEC. 811. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.
(a) Consolidation and Flexibility in Medicare Administration.--
(1) In general.--Title XVIII is amended by inserting after
section 1874 the following new section:
``contracts with medicare administrative contractors
``Sec. 1874A. (a) Authority.--
``(1) Authority to enter into contracts.--The Secretary may
enter into contracts with any eligible entity to serve as a
medicare administrative contractor with respect to the
performance of any or all of the functions described in
paragraph (4) or parts of those functions (or, to the extent
provided in a contract, to secure performance thereof by other
entities).
``(2) Eligibility of entities.--An entity is eligible to
enter into a contract with respect to the performance of a
particular function described in paragraph (4) only if--
``(A) the entity has demonstrated capability to carry
out such function;
``(B) the entity complies with such conflict of
interest standards as are generally applicable to
Federal acquisition and procurement;
``(C) the entity has sufficient assets to financially
support the performance of such function; and
``(D) the entity meets such other requirements as the
Secretary may impose.
``(3) Medicare administrative contractor defined.--For
purposes of this title and title XI--
``(A) In general.--The term `medicare administrative
contractor' means an agency, organization, or other
person with a contract under this section.
``(B) Appropriate medicare administrative
contractor.--With respect to the performance of a
particular function in relation to an individual
entitled to benefits under part A or enrolled under
part B, or both, a specific provider of services or
supplier (or class of such providers of services or
suppliers), the `appropriate' medicare administrative
contractor is the medicare administrative contractor
that has a contract under this section with respect to
the performance of that function in relation to that
individual, provider of services or supplier or class
of provider of services or supplier.
``(4) Functions described.--The functions referred to in
paragraphs (1) and (2) are payment functions, provider services
functions, and functions relating to services furnished to
individuals entitled to benefits under part A or enrolled under
part B, or both, as follows:
``(A) Determination of payment amounts.--Determining
(subject to the provisions of section 1878 and to such
review by the Secretary as may be provided for by the
contracts) the amount of the payments required pursuant
to this title to be made to providers of services,
suppliers and individuals.
``(B) Making payments.--Making payments described in
subparagraph (A) (including receipt, disbursement, and
accounting for funds in making such payments).
``(C) Beneficiary education and assistance.--
Providing education and outreach to individuals
entitled to benefits under part A or enrolled under
part B, or both, and providing assistance to those
individuals with specific issues, concerns or problems.
``(D) Provider consultative services.--Providing
consultative services to institutions, agencies, and
other persons to enable them to establish and maintain
fiscal records necessary for purposes of this title and
otherwise to qualify as providers of services or
suppliers.
``(E) Communication with providers.--Communicating to
providers of services and suppliers any information or
instructions furnished to the medicare administrative
contractor by the Secretary, and facilitating
communication between such providers and suppliers and
the Secretary.
``(F) Provider education and technical assistance.--
Performing the functions relating to provider
education, training, and technical assistance.
``(G) Additional functions.--Performing such other
functions as are necessary to carry out the purposes of
this title.
``(5) Relationship to mip contracts.--
``(A) Nonduplication of duties.--In entering into
contracts under this section, the Secretary shall
assure that functions of medicare administrative
contractors in carrying out activities under parts A
and B do not duplicate activities carried out under the
Medicare Integrity Program under section 1893. The
previous sentence shall not apply with respect to the
activity described in section 1893(b)(5) (relating to
prior authorization of certain items of durable medical
equipment under section 1834(a)(15)).
``(B) Construction.--An entity shall not be treated
as a medicare administrative contractor merely by
reason of having entered into a contract with the
Secretary under section 1893.
``(6) Application of federal acquisition regulation.--Except
to the extent inconsistent with a specific requirement of this
title, the Federal Acquisition Regulation applies to contracts
under this title.
``(b) Contracting Requirements.--
``(1) Use of competitive procedures.--
``(A) In general.--Except as provided in laws with
general applicability to Federal acquisition and
procurement or in subparagraph (B), the Secretary shall
use competitive procedures when entering into contracts
with medicare administrative contractors under this
section, taking into account performance quality as
well as price and other factors.
``(B) Renewal of contracts.--The Secretary may renew
a contract with a medicare administrative contractor
under this section from term to term without regard to
section 5 of title 41, United States Code, or any other
provision of law requiring competition, if the medicare
administrative contractor has met or exceeded the
performance requirements applicable with respect to the
contract and contractor, except that the Secretary
shall provide for the application of competitive
procedures under such a contract not less frequently
than once every five years.
``(C) Transfer of functions.--The Secretary may
transfer functions among medicare administrative
contractors consistent with the provisions of this
paragraph. The Secretary shall ensure that performance
quality is considered in such transfers. The Secretary
shall provide public notice (whether in the Federal
Register or otherwise) of any such transfer (including
a description of the functions so transferred, a
description of the providers of services and suppliers
affected by such transfer, and contact information for
the contractors involved).
``(D) Incentives for quality.--The Secretary shall
provide incentives for medicare administrative
contractors to provide quality service and to promote
efficiency.
``(2) Compliance with requirements.--No contract under this
section shall be entered into with any medicare administrative
contractor unless the Secretary finds that such medicare
administrative contractor will perform its obligations under
the contract efficiently and effectively and will meet such
requirements as to financial responsibility, legal authority,
quality of services provided, and other matters as the
Secretary finds pertinent.
``(3) Performance requirements.--
``(A) Development of specific performance
requirements.--In developing contract performance
requirements, the Secretary shall develop performance
requirements applicable to functions described in
subsection (a)(4).
``(B) Consultation.-- In developing such
requirements, the Secretary may consult with providers
of services and suppliers, organizations representing
individuals entitled to benefits under part A or
enrolled under part B, or both, and organizations and
agencies performing functions necessary to carry out
the purposes of this section with respect to such
performance requirements.
``(C) Inclusion in contracts.--All contractor
performance requirements shall be set forth in the
contract between the Secretary and the appropriate
medicare administrative contractor. Such performance
requirements--
``(i) shall reflect the performance
requirements developed under subparagraph (A),
but may include additional performance
requirements;
``(ii) shall be used for evaluating
contractor performance under the contract; and
``(iii) shall be consistent with the written
statement of work provided under the contract.
``(4) Information requirements.--The Secretary shall not
enter into a contract with a medicare administrative contractor
under this section unless the contractor agrees--
``(A) to furnish to the Secretary such timely
information and reports as the Secretary may find
necessary in performing his functions under this title;
and
``(B) to maintain such records and afford such access
thereto as the Secretary finds necessary to assure the
correctness and verification of the information and
reports under subparagraph (A) and otherwise to carry
out the purposes of this title.
``(5) Surety bond.--A contract with a medicare administrative
contractor under this section may require the medicare
administrative contractor, and any of its officers or employees
certifying payments or disbursing funds pursuant to the
contract, or otherwise participating in carrying out the
contract, to give surety bond to the United States in such
amount as the Secretary may deem appropriate.
``(c) Terms and Conditions.--
``(1) In general.--A contract with any medicare
administrative contractor under this section may contain such
terms and conditions as the Secretary finds necessary or
appropriate and may provide for advances of funds to the
medicare administrative contractor for the making of payments
by it under subsection (a)(4)(B).
``(2) Prohibition on mandates for certain data collection.--
The Secretary may not require, as a condition of entering into,
or renewing, a contract under this section, that the medicare
administrative contractor match data obtained other than in its
activities under this title with data used in the
administration of this title for purposes of identifying
situations in which the provisions of section 1862(b) may
apply.
``(d) Limitation on Liability of Medicare Administrative Contractors
and Certain Officers.--
``(1) Certifying officer.--No individual designated pursuant
to a contract under this section as a certifying officer shall,
in the absence of gross negligence or intent to defraud the
United States, be liable with respect to any payments certified
by the individual under this section.
``(2) Disbursing officer.--No disbursing officer shall, in
the absence of gross negligence or intent to defraud the United
States, be liable with respect to any payment by such officer
under this section if it was based upon an authorization (which
meets the applicable requirements for such internal controls
established by the Comptroller General) of a certifying officer
designated as provided in paragraph (1) of this subsection.
``(3) Liability of medicare administrative contractor.--No
medicare administrative contractor shall be liable to the
United States for a payment by a certifying or disbursing
officer unless in connection with such payment or in the
supervision of or selection of such officer the medicare
administrative contractor acted with gross negligence.
``(4) Indemnification by secretary.--
``(A) In general.--Subject to subparagraphs (B) and
(D), in the case of a medicare administrative
contractor (or a person who is a director, officer, or
employee of such a contractor or who is engaged by the
contractor to participate directly in the claims
administration process) who is made a party to any
judicial or administrative proceeding arising from or
relating directly to the claims administration process
under this title, the Secretary may, to the extent the
Secretary determines to be appropriate and as specified
in the contract with the contractor, indemnify the
contractor and such persons.
``(B) Conditions.--The Secretary may not provide
indemnification under subparagraph (A) insofar as the
liability for such costs arises directly from conduct
that is determined by the judicial proceeding or by the
Secretary to be criminal in nature, fraudulent, or
grossly negligent. If indemnification is provided by
the Secretary with respect to a contractor before a
determination that such costs arose directly from such
conduct, the contractor shall reimburse the Secretary
for costs of indemnification.
``(C) Scope of indemnification.--Indemnification by
the Secretary under subparagraph (A) may include
payment of judgments, settlements (subject to
subparagraph (D)), awards, and costs (including
reasonable legal expenses).
``(D) Written approval for settlements.--A contractor
or other person described in subparagraph (A) may not
propose to negotiate a settlement or compromise of a
proceeding described in such subparagraph without the
prior written approval of the Secretary to negotiate
such settlement or compromise. Any indemnification
under subparagraph (A) with respect to amounts paid
under a settlement or compromise of a proceeding
described in such subparagraph are conditioned upon
prior written approval by the Secretary of the final
settlement or compromise.
``(E) Construction.--Nothing in this paragraph shall
be construed--
``(i) to change any common law immunity that
may be available to a medicare administrative
contractor or person described in subparagraph
(A); or
``(ii) to permit the payment of costs not
otherwise allowable, reasonable, or allocable
under the Federal Acquisition Regulations.''.
(2) Consideration of incorporation of current law
standards.--In developing contract performance requirements
under section 1874A(b) of the Social Security Act, as inserted
by paragraph (1), the Secretary shall consider inclusion of the
performance standards described in sections 1816(f)(2) of such
Act (relating to timely processing of reconsiderations and
applications for exemptions) and section 1842(b)(2)(B) of such
Act (relating to timely review of determinations and fair
hearing requests), as such sections were in effect before the
date of the enactment of this Act.
(b) Conforming Amendments to Section 1816 (Relating to Fiscal
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:
``provisions relating to the administration of part a''.
(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended--
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and (3)(A), by
striking ``agreement under this section'' and inserting
``contract under section 1874A that provides for making
payments under this part''.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended--
(A) by striking ``An agreement with an agency or
organization under this section'' and inserting ``A
contract with a medicare administrative contractor
under section 1874A with respect to the administration
of this part''; and
(B) by striking ``such agency or organization'' and
inserting ``such medicare administrative contractor''
each place it appears.
(7) Subsection (l) is repealed.
(c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
(1) The heading is amended to read as follows:
``provisions relating to the administration of part b''.
(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)--
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking
``carriers'' and inserting ``medicare
administrative contractors''; and
(iii) by striking subparagraphs (D) and (E);
(C) in paragraph (3)--
(i) in the matter before subparagraph (A), by
striking ``Each such contract shall provide
that the carrier'' and inserting ``The
Secretary'';
(ii) by striking ``will'' the first place it
appears in each of subparagraphs (A), (B), (F),
(G), (H), and (L) and inserting ``shall'';
(iii) in subparagraph (B), in the matter
before clause (i), by striking ``to the
policyholders and subscribers of the carrier''
and inserting ``to the policyholders and
subscribers of the medicare administrative
contractor'';
(iv) by striking subparagraphs (C), (D), and
(E);
(v) in subparagraph (H)--
(I) by striking ``if it makes
determinations or payments with respect
to physicians' services,'' in the
matter preceding clause (i); and
(II) by striking ``carrier'' and
inserting ``medicare administrative
contractor'' in clause (i);
(vi) by striking subparagraph (I);
(vii) in subparagraph (L), by striking the
semicolon and inserting a period;
(viii) in the first sentence, after
subparagraph (L), by striking ``and shall
contain'' and all that follows through the
period; and
(ix) in the seventh sentence, by inserting
``medicare administrative contractor,'' after
``carrier,''; and
(D) by striking paragraph (5);
(E) in paragraph (6)(D)(iv), by striking ``carrier''
and inserting ``medicare administrative contractor'';
and
(F) in paragraph (7), by striking ``the carrier'' and
inserting ``the Secretary'' each place it appears.
(4) Subsection (c) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)(A), by striking ``contract under
this section which provides for the disbursement of
funds, as described in subsection (a)(1)(B),'' and
inserting ``contract under section 1874A that provides
for making payments under this part'';
(C) in paragraph (3)(A), by striking ``subsection
(a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
(D) in paragraph (4), in the matter preceding
subparagraph (A), by striking ``carrier'' and inserting
``medicare administrative contractor''; and
(E) by striking paragraphs (5) and (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ``carrier or
carriers'' and inserting ``medicare administrative contractor
or contractors''.
(7) Subsection (h) is amended--
(A) in paragraph (2)--
(i) by striking ``Each carrier having an
agreement with the Secretary under subsection
(a)'' and inserting ``The Secretary''; and
(ii) by striking ``Each such carrier'' and
inserting ``The Secretary'';
(B) in paragraph (3)(A)--
(i) by striking ``a carrier having an
agreement with the Secretary under subsection
(a)'' and inserting ``medicare administrative
contractor having a contract under section
1874A that provides for making payments under
this part''; and
(ii) by striking ``such carrier'' and
inserting ``such contractor'';
(C) in paragraph (3)(B)--
(i) by striking ``a carrier'' and inserting
``a medicare administrative contractor'' each
place it appears; and
(ii) by striking ``the carrier'' and
inserting ``the contractor'' each place it
appears; and
(D) in paragraphs (5)(A) and (5)(B)(iii), by striking
``carriers'' and inserting ``medicare administrative
contractors'' each place it appears.
(8) Subsection (l) is amended--
(A) in paragraph (1)(A)(iii), by striking ``carrier''
and inserting ``medicare administrative contractor'';
and
(B) in paragraph (2), by striking ``carrier'' and
inserting ``medicare administrative contractor''.
(9) Subsection (p)(3)(A) is amended by striking ``carrier''
and inserting ``medicare administrative contractor''.
(10) Subsection (q)(1)(A) is amended by striking ``carrier''.
(d) Effective Date; Transition Rule.--
(1) Effective date.--
(A) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall
take effect on October 1, 2004, and the Secretary is
authorized to take such steps before such date as may
be necessary to implement such amendments on a timely
basis.
(B) Construction for current contracts.--Such
amendments shall not apply to contracts in effect
before the date specified under subparagraph (A) that
continue to retain the terms and conditions in effect
on such date (except as otherwise provided under this
Act, other than under this section) until such date as
the contract is let out for competitive bidding under
such amendments.
(C) Deadline for competitive bidding.--The Secretary
shall provide for the letting by competitive bidding of
all contracts for functions of medicare administrative
contractors for annual contract periods that begin on
or after October 1, 2009.
(D) Waiver of provider nomination provisions during
transition.--During the period beginning on the date of
the enactment of this Act and before the date specified
under subparagraph (A), the Secretary may enter into
new agreements under section 1816 of the Social
Security Act (42 U.S.C. 1395h) without regard to any of
the provider nomination provisions of such section.
(2) General transition rules.--The Secretary shall take such
steps, consistent with paragraph (1)(B) and (1)(C), as are
necessary to provide for an appropriate transition from
contracts under section 1816 and section 1842 of the Social
Security Act (42 U.S.C. 1395h, 1395u) to contracts under
section 1874A, as added by subsection (a)(1).
(3) Authorizing continuation of mip functions under current
contracts and agreements and under rollover contracts.--The
provisions contained in the exception in section 1893(d)(2) of
the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall
continue to apply notwithstanding the amendments made by this
section, and any reference in such provisions to an agreement
or contract shall be deemed to include a contract under section
1874A of such Act, as inserted by subsection (a)(1), that
continues the activities referred to in such provisions.
(e) References.--On and after the effective date provided under
subsection (d)(1), any reference to a fiscal intermediary or carrier
under title XI or XVIII of the Social Security Act (or any regulation,
manual instruction, interpretative rule, statement of policy, or
guideline issued to carry out such titles) shall be deemed a reference
to an appropriate medicare administrative contractor (as provided under
section 1874A of the Social Security Act).
(f) Reports on Implementation.--
(1) Plan for implementation.--By not later than October 1,
2003, the Secretary shall submit a report to Congress and the
Comptroller General of the United States that describes the
plan for implementation of the amendments made by this section.
The Comptroller General shall conduct an evaluation of such
plan and shall submit to Congress, not later than 6 months
after the date the report is received, a report on such
evaluation and shall include in such report such
recommendations as the Comptroller General deems appropriate.
(2) Status of implementation.--The Secretary shall submit a
report to Congress not later than October 1, 2007, that
describes the status of implementation of such amendments and
that includes a description of the following:
(A) The number of contracts that have been
competitively bid as of such date.
(B) The distribution of functions among contracts and
contractors.
(C) A timeline for complete transition to full
competition.
(D) A detailed description of how the Secretary has
modified oversight and management of medicare
contractors to adapt to full competition.
SEC. 812. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE
ADMINISTRATIVE CONTRACTORS.
(a) In General.--Section 1874A, as added by section 811(a)(1), is
amended by adding at the end the following new subsection:
``(e) Requirements for Information Security.--
``(1) Development of information security program.--A
medicare administrative contractor that performs the functions
referred to in subparagraphs (A) and (B) of subsection (a)(4)
(relating to determining and making payments) shall implement a
contractor-wide information security program to provide
information security for the operation and assets of the
contractor with respect to such functions under this title. An
information security program under this paragraph shall meet
the requirements for information security programs imposed on
Federal agencies under section 3534(b)(2) of title 44, United
States Code (other than requirements under subparagraphs
(B)(ii), (F)(iii), and (F)(iv) of such section).
``(2) Independent audits.--
``(A) Performance of annual evaluations.--Each year a
medicare administrative contractor that performs the
functions referred to in subparagraphs (A) and (B) of
subsection (a)(4) (relating to determining and making
payments) shall undergo an evaluation of the
information security of the contractor with respect to
such functions under this title. The evaluation shall--
``(i) be performed by an entity that meets
such requirements for independence as the
Inspector General of the Department of Health
and Human Services may establish; and
``(ii) test the effectiveness of information
security control techniques for an appropriate
subset of the contractor's information systems
(as defined in section 3502(8) of title 44,
United States Code) relating to such functions
under this title and an assessment of
compliance with the requirements of this
subsection and related information security
policies, procedures, standards and guidelines.
``(B) Deadline for initial evaluation.--
``(i) New contractors.--In the case of a
medicare administrative contractor covered by
this subsection that has not previously
performed the functions referred to in
subparagraphs (A) and (B) of subsection (a)(4)
(relating to determining and making payments)
as a fiscal intermediary or carrier under
section 1816 or 1842, the first independent
evaluation conducted pursuant subparagraph (A)
shall be completed prior to commencing such
functions.
``(ii) Other contractors.--In the case of a
medicare administrative contractor covered by
this subsection that is not described in clause
(i), the first independent evaluation conducted
pursuant subparagraph (A) shall be completed
within 1 year after the date the contractor
commences functions referred to in clause (i)
under this section.
``(C) Reports on evaluations.--
``(i) To the inspector general.--The results
of independent evaluations under subparagraph
(A) shall be submitted promptly to the
Inspector General of the Department of Health
and Human Services.
``(ii) To congress.--The Inspector General of
Department of Health and Human Services shall
submit to Congress annual reports on the
results of such evaluations.''.
(b) Application of Requirements to Fiscal Intermediaries and
Carriers.--
(1) In general.--The provisions of section 1874A(e)(2) of the
Social Security Act (other than subparagraph (B)), as added by
subsection (a), shall apply to each fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C. 1395h) and
each carrier under section 1842 of such Act (42 U.S.C. 1395u)
in the same manner as they apply to medicare administrative
contractors under such provisions.
(2) Deadline for initial evaluation.--In the case of such a
fiscal intermediary or carrier with an agreement or contract
under such respective section in effect as of the date of the
enactment of this Act, the first evaluation under section
1874A(e)(2)(A) of the Social Security Act (as added by
subsection (a)), pursuant to paragraph (1), shall be completed
(and a report on the evaluation submitted to the Secretary) by
not later than 1 year after such date.
Subtitle C--Education and Outreach
SEC. 821. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.
(a) Coordination of Education Funding.--
(1) In general.--The Social Security Act is amended by
inserting after section 1888 the following new section:
``provider education and technical assistance
``Sec. 1889. (a) Coordination of Education Funding.--The Secretary
shall coordinate the educational activities provided through medicare
contractors (as defined in subsection (g), including under section
1893) in order to maximize the effectiveness of Federal education
efforts for providers of services and suppliers.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.
(3) Report.--Not later than October 1, 2003, the Secretary
shall submit to Congress a report that includes a description
and evaluation of the steps taken to coordinate the funding of
provider education under section 1889(a) of the Social Security
Act, as added by paragraph (1).
(b) Incentives To Improve Contractor Performance.--
(1) In general.--Section 1874A, as added by section 811(a)(1)
and as amended by section 812(a), is amended by adding at the
end the following new subsection:
``(f) Incentives To Improve Contractor Performance in Provider
Education and Outreach.--In order to give medicare administrative
contractors an incentive to implement effective education and outreach
programs for providers of services and suppliers, the Secretary shall
develop and implement a methodology to measure the specific claims
payment error rates of such contractors in the processing or reviewing
of medicare claims.''.
(2) Application to fiscal intermediaries and carriers.--The
provisions of section 1874A(f) of the Social Security Act, as
added by paragraph (1), shall apply to each fiscal intermediary
under section 1816 of the Social Security Act (42 U.S.C. 1395h)
and each carrier under section 1842 of such Act (42 U.S.C.
1395u) in the same manner as they apply to medicare
administrative contractors under such provisions.
(3) GAO report on adequacy of methodology.--Not later than
October 1, 2003, the Comptroller General of the United States
shall submit to Congress and to the Secretary a report on the
adequacy of the methodology under section 1874A(f) of the
Social Security Act, as added by paragraph (1), and shall
include in the report such recommendations as the Comptroller
General determines appropriate with respect to the methodology.
(4) Report on use of methodology in assessing contractor
performance.--Not later than October 1, 2003, the Secretary
shall submit to Congress a report that describes how the
Secretary intends to use such methodology in assessing medicare
contractor performance in implementing effective education and
outreach programs, including whether to use such methodology as
a basis for performance bonuses. The report shall include an
analysis of the sources of identified errors and potential
changes in systems of contractors and rules of the Secretary
that could reduce claims error rates.
(c) Provision of Access to and Prompt Responses From Medicare
Administrative Contractors.--
(1) In general.--Section 1874A, as added by section 811(a)(1)
and as amended by section 812(a) and subsection (b), is further
amended by adding at the end the following new subsection:
``(g) Communications with Beneficiaries, Providers of Services and
Suppliers.--
``(1) Communication strategy.--The Secretary shall develop a
strategy for communications with individuals entitled to
benefits under part A or enrolled under part B, or both, and
with providers of services and suppliers under this title.
``(2) Response to written inquiries.--Each medicare
administrative contractor shall, for those providers of
services and suppliers which submit claims to the contractor
for claims processing and for those individuals entitled to
benefits under part A or enrolled under part B, or both, with
respect to whom claims are submitted for claims processing,
provide general written responses (which may be through
electronic transmission) in a clear, concise, and accurate
manner to inquiries of providers of services, suppliers and
individuals entitled to benefits under part A or enrolled under
part B, or both, concerning the programs under this title
within 45 business days of the date of receipt of such
inquiries.
``(3) Response to toll-free lines.--The Secretary shall
ensure that each medicare administrative contractor shall
provide, for those providers of services and suppliers which
submit claims to the contractor for claims processing and for
those individuals entitled to benefits under part A or enrolled
under part B, or both, with respect to whom claims are
submitted for claims processing, a toll-free telephone number
at which such individuals, providers of services and suppliers
may obtain information regarding billing, coding, claims,
coverage, and other appropriate information under this title.
``(4) Monitoring of contractor responses.--
``(A) In general.--Each medicare administrative
contractor shall, consistent with standards developed
by the Secretary under subparagraph (B)--
``(i) maintain a system for identifying who
provides the information referred to in
paragraphs (2) and (3); and
``(ii) monitor the accuracy, consistency, and
timeliness of the information so provided.
``(B) Development of standards.--
``(i) In general.--The Secretary shall
establish and make public standards to monitor
the accuracy, consistency, and timeliness of
the information provided in response to written
and telephone inquiries under this subsection.
Such standards shall be consistent with the
performance requirements established under
subsection (b)(3).
``(ii) Evaluation.--In conducting evaluations
of individual medicare administrative
contractors, the Secretary shall take into
account the results of the monitoring conducted
under subparagraph (A) taking into account as
performance requirements the standards
established under clause (i). The Secretary
shall, in consultation with organizations
representing providers of services, suppliers,
and individuals entitled to benefits under part
A or enrolled under part B, or both, establish
standards relating to the accuracy,
consistency, and timeliness of the information
so provided.
``(C) Direct monitoring.--Nothing in this paragraph
shall be construed as preventing the Secretary from
directly monitoring the accuracy, consistency, and
timeliness of the information so provided.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect October 1, 2003.
(3) Application to fiscal intermediaries and carriers.--The
provisions of section 1874A(g) of the Social Security Act, as
added by paragraph (1), shall apply to each fiscal intermediary
under section 1816 of the Social Security Act (42 U.S.C. 1395h)
and each carrier under section 1842 of such Act (42 U.S.C.
1395u) in the same manner as they apply to medicare
administrative contractors under such provisions.
(d) Improved Provider Education and Training.--
(1) In general.--Section 1889, as added by subsection (a), is
amended by adding at the end the following new subsections:
``(b) Enhanced Education and Training.--
``(1) Additional resources.--There are authorized to be
appropriated to the Secretary (in appropriate part from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund) $25,000,000 for
each of fiscal years 2004 and 2005 and such sums as may be
necessary for succeeding fiscal years.
``(2) Use.--The funds made available under paragraph (1)
shall be used to increase the conduct by medicare contractors
of education and training of providers of services and
suppliers regarding billing, coding, and other appropriate
items and may also be used to improve the accuracy,
consistency, and timeliness of contractor responses.
``(c) Tailoring Education and Training Activities for Small Providers
or Suppliers.--
``(1) In general.--Insofar as a medicare contractor conducts
education and training activities, it shall tailor such
activities to meet the special needs of small providers of
services or suppliers (as defined in paragraph (2)).
``(2) Small provider of services or supplier.--In this
subsection, the term `small provider of services or supplier'
means--
``(A) a provider of services with fewer than 25 full-
time-equivalent employees; or
``(B) a supplier with fewer than 10 full-time-
equivalent employees.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on October 1, 2003.
(e) Requirement To Maintain Internet Sites.--
(1) In general.--Section 1889, as added by subsection (a) and
as amended by subsection (d), is further amended by adding at
the end the following new subsection:
``(d) Internet Sites; FAQs.--The Secretary, and each medicare
contractor insofar as it provides services (including claims
processing) for providers of services or suppliers, shall maintain an
Internet site which--
``(1) provides answers in an easily accessible format to
frequently asked questions, and
``(2) includes other published materials of the contractor,
that relate to providers of services and suppliers under the programs
under this title (and title XI insofar as it relates to such
programs).''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on October 1, 2003.
(f) Additional Provider Education Provisions.--
(1) In general.--Section 1889, as added by subsection (a) and
as amended by subsections (d) and (e), is further amended by
adding at the end the following new subsections:
``(e) Encouragement of Participation in Education Program
Activities.--A medicare contractor may not use a record of attendance
at (or failure to attend) educational activities or other information
gathered during an educational program conducted under this section or
otherwise by the Secretary to select or track providers of services or
suppliers for the purpose of conducting any type of audit or prepayment
review.
``(f) Construction.--Nothing in this section or section 1893(g) shall
be construed as providing for disclosure by a medicare contractor of
information that would compromise pending law enforcement activities or
reveal findings of law enforcement-related audits.
``(g) Definitions.--For purposes of this section, the term `medicare
contractor' includes the following:
``(1) A medicare administrative contractor with a contract
under section 1874A, including a fiscal intermediary with a
contract under section 1816 and a carrier with a contract under
section 1842.
``(2) An eligible entity with a contract under section 1893.
Such term does not include, with respect to activities of a specific
provider of services or supplier an entity that has no authority under
this title or title IX with respect to such activities and such
provider of services or supplier.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.
SEC. 822. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION PROGRAM.
(a) Establishment.--
(1) In general.--The Secretary shall establish a
demonstration program (in this section referred to as the
``demonstration program'') under which technical assistance
described in paragraph (2) is made available, upon request and
on a voluntary basis, to small providers of services or
suppliers in order to improve compliance with the applicable
requirements of the programs under medicare program under title
XVIII of the Social Security Act (including provisions of title
XI of such Act insofar as they relate to such title and are not
administered by the Office of the Inspector General of the
Department of Health and Human Services).
(2) Forms of technical assistance.--The technical assistance
described in this paragraph is--
(A) evaluation and recommendations regarding billing
and related systems; and
(B) information and assistance regarding policies and
procedures under the medicare program, including coding
and reimbursement.
(3) Small providers of services or suppliers.--In this
section, the term ``small providers of services or suppliers''
means--
(A) a provider of services with fewer than 25 full-
time-equivalent employees; or
(B) a supplier with fewer than 10 full-time-
equivalent employees.
(b) Qualification of Contractors.--In conducting the demonstration
program, the Secretary shall enter into contracts with qualified
organizations (such as peer review organizations or entities described
in section 1889(g)(2) of the Social Security Act, as inserted by
section 5(f)(1)) with appropriate expertise with billing systems of the
full range of providers of services and suppliers to provide the
technical assistance. In awarding such contracts, the Secretary shall
consider any prior investigations of the entity's work by the Inspector
General of Department of Health and Human Services or the Comptroller
General of the United States.
(c) Description of Technical Assistance.--The technical assistance
provided under the demonstration program shall include a direct and in-
person examination of billing systems and internal controls of small
providers of services or suppliers to determine program compliance and
to suggest more efficient or effective means of achieving such
compliance.
(d) Avoidance of Recovery Actions for Problems Identified as
Corrected.--The Secretary shall provide that, absent evidence of fraud
and notwithstanding any other provision of law, any errors found in a
compliance review for a small provider of services or supplier that
participates in the demonstration program shall not be subject to
recovery action if the technical assistance personnel under the program
determine that--
(1) the problem that is the subject of the compliance review
has been corrected to their satisfaction within 30 days of the
date of the visit by such personnel to the small provider of
services or supplier; and
(2) such problem remains corrected for such period as is
appropriate.
The previous sentence applies only to claims filed as part of the
demonstration program and lasts only for the duration of such program
and only as long as the small provider of services or supplier is a
participant in such program.
(e) GAO Evaluation.--Not later than 2 years after the date of the
date the demonstration program is first implemented, the Comptroller
General, in consultation with the Inspector General of the Department
of Health and Human Services, shall conduct an evaluation of the
demonstration program. The evaluation shall include a determination of
whether claims error rates are reduced for small providers of services
or suppliers who participated in the program and the extent of improper
payments made as a result of the demonstration program. The Comptroller
General shall submit a report to the Secretary and the Congress on such
evaluation and shall include in such report recommendations regarding
the continuation or extension of the demonstration program.
(f) Financial Participation by Providers.--The provision of technical
assistance to a small provider of services or supplier under the
demonstration program is conditioned upon the small provider of
services or supplier paying an amount estimated (and disclosed in
advance of a provider's or supplier's participation in the program) to
be equal to 25 percent of the cost of the technical assistance.
(g) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary (in appropriate part from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund) to carry out the demonstration program--
(1) for fiscal year 2004, $1,000,000, and
(2) for fiscal year 2005, $6,000,000.
SEC. 823. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY OMBUDSMAN.
(a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 1395ee) is
amended--
(1) by adding at the end of the heading the following: ``;
medicare provider ombudsman'';
(2) by inserting ``Practicing Physicians Advisory Council.--
(1)'' after ``(a)'';
(3) in paragraph (1), as so redesignated under paragraph (2),
by striking ``in this section'' and inserting ``in this
subsection'';
(4) by redesignating subsections (b) and (c) as paragraphs
(2) and (3), respectively; and
(5) by adding at the end the following new subsection:
``(b) Medicare Provider Ombudsman.--The Secretary shall appoint
within the Department of Health and Human Services a Medicare Provider
Ombudsman. The Ombudsman shall--
``(1) provide assistance, on a confidential basis, to
providers of services and suppliers with respect to complaints,
grievances, and requests for information concerning the
programs under this title (including provisions of title XI
insofar as they relate to this title and are not administered
by the Office of the Inspector General of the Department of
Health and Human Services) and in the resolution of unclear or
conflicting guidance given by the Secretary and medicare
contractors to such providers of services and suppliers
regarding such programs and provisions and requirements under
this title and such provisions; and
``(2) submit recommendations to the Secretary for improvement
in the administration of this title and such provisions,
including--
``(A) recommendations to respond to recurring
patterns of confusion in this title and such provisions
(including recommendations regarding suspending
imposition of sanctions where there is widespread
confusion in program administration), and
``(B) recommendations to provide for an appropriate
and consistent response (including not providing for
audits) in cases of self-identified overpayments by
providers of services and suppliers.
The Ombudsman shall not serve as an advocate for any increases in
payments or new coverage of services, but may identify issues and
problems in payment or coverage policies.''.
(b) Medicare Beneficiary Ombudsman.--Title XVIII, as amended by
sections 105 and 701, is amended by inserting after section 1808 the
following new section:
``medicare beneficiary ombudsman
``Sec. 1809. (a) In General.--The Secretary shall appoint within the
Department of Health and Human Services a Medicare Beneficiary
Ombudsman who shall have expertise and experience in the fields of
health care and education of (and assistance to) individuals entitled
to benefits under this title.
``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
``(1) receive complaints, grievances, and requests for
information submitted by individuals entitled to benefits under
part A or enrolled under part B, or both, with respect to any
aspect of the medicare program;
``(2) provide assistance with respect to complaints,
grievances, and requests referred to in paragraph (1),
including--
``(A) assistance in collecting relevant information
for such individuals, to seek an appeal of a decision
or determination made by a fiscal intermediary,
carrier, Medicare+Choice organization, or the
Secretary; and
``(B) assistance to such individuals with any
problems arising from disenrollment from a
Medicare+Choice plan under part C; and
``(3) submit annual reports to Congress and the Secretary
that describe the activities of the Office and that include
such recommendations for improvement in the administration of
this title as the Ombudsman determines appropriate.
The Ombudsman shall not serve as an advocate for any increases in
payments or new coverage of services, but may identify issues and
problems in payment or coverage policies.
``(c) Working with Health Insurance Counseling Programs.--To the
extent possible, the Ombudsman shall work with health insurance
counseling programs (receiving funding under section 4360 of Omnibus
Budget Reconciliation Act of 1990) to facilitate the provision of
information to individuals entitled to benefits under part A or
enrolled under part B, or both regarding Medicare+Choice plans and
changes to those plans. Nothing in this subsection shall preclude
further collaboration between the Ombudsman and such programs.''.
(c) Deadline for Appointment.--The Secretary shall appoint the
Medicare Provider Ombudsman and the Medicare Beneficiary Ombudsman,
under the amendments made by subsections (a) and (b), respectively, by
not later than 1 year after the date of the enactment of this Act.
(d) Funding.--There are authorized to be appropriated to the
Secretary (in appropriate part from the Federal Hospital Insurance
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund)
to carry out the provisions of subsection (b) of section 1868 of the
Social Security Act (relating to the Medicare Provider Ombudsman), as
added by subsection (a)(5) and section 1809 of such Act (relating to
the Medicare Beneficiary Ombudsman), as added by subsection (b), such
sums as are necessary for fiscal year 2003 and each succeeding fiscal
year.
(e) Use of Central, Toll-Free Number (1-800-MEDICARE).--
(1) Phone triage system; listing in medicare handbook instead
of other toll-free numbers.--Section 1804(b) (42 U.S.C. 1395b-
2(b)) is amended by adding at the end the following: ``The
Secretary shall provide, through the toll-free number 1-800-
MEDICARE, for a means by which individuals seeking information
about, or assistance with, such programs who phone such toll-
free number are transferred (without charge) to appropriate
entities for the provision of such information or assistance.
Such toll-free number shall be the toll-free number listed for
general information and assistance in the annual notice under
subsection (a) instead of the listing of numbers of individual
contractors.''.
(2) Monitoring accuracy.--
(A) Study.--The Comptroller General of the United
States shall conduct a study to monitor the accuracy
and consistency of information provided to individuals
entitled to benefits under part A or enrolled under
part B, or both, through the toll-free number 1-800-
MEDICARE, including an assessment of whether the
information provided is sufficient to answer questions
of such individuals. In conducting the study, the
Comptroller General shall examine the education and
training of the individuals providing information
through such number.
(B) Report.--Not later than 1 year after the date of
the enactment of this Act, the Comptroller General
shall submit to Congress a report on the study
conducted under subparagraph (A).
SEC. 824. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.
(a) In General.--The Secretary shall establish a demonstration
program (in this section referred to as the ``demonstration program'')
under which medicare specialists employed by the Department of Health
and Human Services provide advice and assistance to individuals
entitled to benefits under part A of title XVIII of the Social Security
Act, or enrolled under part B of such title, or both, regarding the
medicare program at the location of existing local offices of the
Social Security Administration.
(b) Locations.--
(1) In general.--The demonstration program shall be conducted
in at least 6 offices or areas. Subject to paragraph (2), in
selecting such offices and areas, the Secretary shall provide
preference for offices with a high volume of visits by
individuals referred to in subsection (a).
(2) Assistance for rural beneficiaries.--The Secretary shall
provide for the selection of at least 2 rural areas to
participate in the demonstration program. In conducting the
demonstration program in such rural areas, the Secretary shall
provide for medicare specialists to travel among local offices
in a rural area on a scheduled basis.
(c) Duration.--The demonstration program shall be conducted over a 3-
year period.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall provide for an
evaluation of the demonstration program. Such evaluation shall
include an analysis of--
(A) utilization of, and satisfaction of those
individuals referred to in subsection (a) with, the
assistance provided under the program; and
(B) the cost-effectiveness of providing beneficiary
assistance through out-stationing medicare specialists
at local offices of the Social Security Administration.
(2) Report.--The Secretary shall submit to Congress a report
on such evaluation and shall include in such report
recommendations regarding the feasibility of permanently out-
stationing medicare specialists at local offices of the Social
Security Administration.
Subtitle D--Appeals and Recovery
SEC. 831. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.
(a) Transition Plan.--
(1) In general.--Not later than October 1, 2003, the
Commissioner of Social Security and the Secretary shall develop
and transmit to Congress and the Comptroller General of the
United States a plan under which the functions of
administrative law judges responsible for hearing cases under
title XVIII of the Social Security Act (and related provisions
in title XI of such Act) are transferred from the
responsibility of the Commissioner and the Social Security
Administration to the Secretary and the Department of Health
and Human Services.
(2) GAO evaluation.--The Comptroller General of the United
States shall evaluate the plan and, not later than the date
that is 6 months after the date on which the plan is received
by the Comptroller General, shall submit to Congress a report
on such evaluation.
(b) Transfer of Adjudication Authority.--
(1) In general.--Not earlier than July 1, 2004, and not later
than October 1, 2004, the Commissioner of Social Security and
the Secretary shall implement the transition plan under
subsection (a) and transfer the administrative law judge
functions described in such subsection from the Social Security
Administration to the Secretary.
(2) Assuring independence of judges.--The Secretary shall
assure the independence of administrative law judges performing
the administrative law judge functions transferred under
paragraph (1) from the Centers for Medicare & Medicaid Services
and its contractors.
(3) Geographic distribution.--The Secretary shall provide for
an appropriate geographic distribution of administrative law
judges performing the administrative law judge functions
transferred under paragraph (1) throughout the United States to
ensure timely access to such judges.
(4) Hiring authority.--Subject to the amounts provided in
advance in appropriations Act, the Secretary shall have
authority to hire administrative law judges to hear such cases,
giving priority to those judges with prior experience in
handling medicare appeals and in a manner consistent with
paragraph (3), and to hire support staff for such judges.
(5) Financing.--Amounts payable under law to the Commissioner
for administrative law judges performing the administrative law
judge functions transferred under paragraph (1) from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund shall become payable
to the Secretary for the functions so transferred.
(6) Shared resources.--The Secretary shall enter into such
arrangements with the Commissioner as may be appropriate with
respect to transferred functions of administrative law judges
to share office space, support staff, and other resources, with
appropriate reimbursement from the Trust Funds described in
paragraph (5).
(c) Increased Financial Support.--In addition to any amounts
otherwise appropriated, to ensure timely action on appeals before
administrative law judges and the Departmental Appeals Board consistent
with section 1869 of the Social Security Act (as amended by section 521
of BIPA, 114 Stat. 2763A-534), there are authorized to be appropriated
(in appropriate part from the Federal Hospital Insurance Trust Fund and
the Federal Supplementary Medical Insurance Trust Fund) to the
Secretary such sums as are necessary for fiscal year 2004 and each
subsequent fiscal year to--
(1) increase the number of administrative law judges (and
their staffs) under subsection (b)(4);
(2) improve education and training opportunities for
administrative law judges (and their staffs); and
(3) increase the staff of the Departmental Appeals Board.
(d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 U.S.C.
1395ff(f)(2)(A)(i)), as added by section 522(a) of BIPA (114 Stat.
2763A-543), is amended by striking ``of the Social Security
Administration''.
SEC. 832. PROCESS FOR EXPEDITED ACCESS TO REVIEW.
(a) Expedited Access to Judicial Review.--Section 1869(b) (42 U.S.C.
1395ff(b)) as amended by BIPA, is amended--
(1) in paragraph (1)(A), by inserting ``, subject to
paragraph (2),'' before ``to judicial review of the Secretary's
final decision'';
(2) in paragraph (1)(F)--
(A) by striking clause (ii);
(B) by striking ``proceeding'' and all that follows
through ``determination'' and inserting
``determinations and reconsiderations''; and
(C) by redesignating subclauses (I) and (II) as
clauses (i) and (ii) and by moving the indentation of
such subclauses (and the matter that follows) 2 ems to
the left; and
(3) by adding at the end the following new paragraph:
``(2) Expedited access to judicial review.--
``(A) In general.--The Secretary shall establish a
process under which a provider of services or supplier
that furnishes an item or service or an individual
entitled to benefits under part A or enrolled under
part B, or both, who has filed an appeal under
paragraph (1) may obtain access to judicial review when
a review panel (described in subparagraph (D)), on its
own motion or at the request of the appellant,
determines that no entity in the administrative appeals
process has the authority to decide the question of law
or regulation relevant to the matters in controversy
and that there is no material issue of fact in dispute.
The appellant may make such request only once with
respect to a question of law or regulation in a case of
an appeal.
``(B) Prompt determinations.--If, after or coincident
with appropriately filing a request for an
administrative hearing, the appellant requests a
determination by the appropriate review panel that no
review panel has the authority to decide the question
of law or regulations relevant to the matters in
controversy and that there is no material issue of fact
in dispute and if such request is accompanied by the
documents and materials as the appropriate review panel
shall require for purposes of making such
determination, such review panel shall make a
determination on the request in writing within 60 days
after the date such review panel receives the request
and such accompanying documents and materials. Such a
determination by such review panel shall be considered
a final decision and not subject to review by the
Secretary.
``(C) Access to judicial review.--
``(i) In general.--If the appropriate review
panel--
``(I) determines that there are no
material issues of fact in dispute and
that the only issue is one of law or
regulation that no review panel has the
authority to decide; or
``(II) fails to make such
determination within the period
provided under subparagraph (B);
then the appellant may bring a civil action as
described in this subparagraph.
``(ii) Deadline for filing.--Such action
shall be filed, in the case described in--
``(I) clause (i)(I), within 60 days
of date of the determination described
in such subparagraph; or
``(II) clause (i)(II), within 60 days
of the end of the period provided under
subparagraph (B) for the determination.
``(iii) Venue.--Such action shall be brought
in the district court of the United States for
the judicial district in which the appellant is
located (or, in the case of an action brought
jointly by more than one applicant, the
judicial district in which the greatest number
of applicants are located) or in the district
court for the District of Columbia.
``(iv) Interest on amounts in controversy.--
Where a provider of services or supplier seeks
judicial review pursuant to this paragraph, the
amount in controversy shall be subject to
annual interest beginning on the first day of
the first month beginning after the 60-day
period as determined pursuant to clause (ii)
and equal to the rate of interest on
obligations issued for purchase by the Federal
Hospital Insurance Trust Fund and by the
Federal Supplementary Medical Insurance Trust
Fund for the month in which the civil action
authorized under this paragraph is commenced,
to be awarded by the reviewing court in favor
of the prevailing party. No interest awarded
pursuant to the preceding sentence shall be
deemed income or cost for the purposes of
determining reimbursement due providers of
services or suppliers under this Act.
``(D) Review panels.--For purposes of this
subsection, a `review panel' is a panel consisting of 3
members (who shall be administrative law judges,
members of the Departmental Appeals Board, or qualified
individuals associated with a qualified independent
contractor (as defined in subsection (c)(2)) or with
another independent entity) designated by the Secretary
for purposes of making determinations under this
paragraph.''.
(b) Application to Provider Agreement Determinations.--Section
1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
(1) by inserting ``(A)'' after ``(h)(1)''; and
(2) by adding at the end the following new subparagraph:
``(B) An institution or agency described in subparagraph (A) that has
filed for a hearing under subparagraph (A) shall have expedited access
to judicial review under this subparagraph in the same manner as
providers of services, suppliers, and individuals entitled to benefits
under part A or enrolled under part B, or both, may obtain expedited
access to judicial review under the process established under section
1869(b)(2). Nothing in this subparagraph shall be construed to affect
the application of any remedy imposed under section 1819 during the
pendency of an appeal under this subparagraph.''.
(c) Effective Date.--The amendments made by this section shall apply
to appeals filed on or after October 1, 2003.
(d) Expedited Review of Certain Provider Agreement Determinations.--
(1) Termination and certain other immediate remedies.--The
Secretary shall develop and implement a process to expedite
proceedings under sections 1866(h) of the Social Security Act
(42 U.S.C. 1395cc(h)) in which the remedy of termination of
participation, or a remedy described in clause (i) or (iii) of
section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-3(h)(2)(B))
which is applied on an immediate basis, has been imposed. Under
such process priority shall be provided in cases of
termination.
(2) Increased financial support.--In addition to any amounts
otherwise appropriated, to reduce by 50 percent the average
time for administrative determinations on appeals under section
1866(h) of the Social Security Act (42 U.S.C. 1395cc(h)), there
are authorized to be appropriated (in appropriate part from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund) to the Secretary
such additional sums for fiscal year 2004 and each subsequent
fiscal year as may be necessary. The purposes for which such
amounts are available include increasing the number of
administrative law judges (and their staffs) and the appellate
level staff at the Departmental Appeals Board of the Department
of Health and Human Services and educating such judges and
staffs on long-term care issues.
SEC. 833. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) Requiring Full and Early Presentation of Evidence.--
(1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as
amended by BIPA and as amended by section 832(a), is further
amended by adding at the end the following new paragraph:
``(3) Requiring full and early presentation of evidence by
providers.--A provider of services or supplier may not
introduce evidence in any appeal under this section that was
not presented at the reconsideration conducted by the qualified
independent contractor under subsection (c), unless there is
good cause which precluded the introduction of such evidence at
or before that reconsideration.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on October 1, 2003.
(b) Use of Patients' Medical Records.--Section 1869(c)(3)(B)(i) (42
U.S.C. 1395ff(c)(3)(B)(i)), as amended by BIPA, is amended by inserting
``(including the medical records of the individual involved)'' after
``clinical experience''.
(c) Notice Requirements for Medicare Appeals.--
(1) Initial determinations and redeterminations.--Section
1869(a) (42 U.S.C. 1395ff(a)), as amended by BIPA, is amended
by adding at the end the following new paragraph:
``(4) Requirements of notice of determinations and
redeterminations.--A written notice of a determination on an
initial determination or on a redetermination, insofar as such
determination or redetermination results in a denial of a claim
for benefits, shall include--
``(A) the specific reasons for the determination,
including--
``(i) upon request, the provision of the
policy, manual, or regulation used in making
the determination; and
``(ii) as appropriate in the case of a
redetermination, a summary of the clinical or
scientific evidence used in making the
determination;
``(B) the procedures for obtaining additional
information concerning the determination or
redetermination; and
``(C) notification of the right to seek a
redetermination or otherwise appeal the determination
and instructions on how to initiate such a
redetermination or appeal under this section.
The written notice on a redetermination shall be provided in
printed form and written in a manner calculated to be
understood by the individual entitled to benefits under part A
or enrolled under part B, or both.''.
(2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C.
1395ff(c)(3)(E)), as amended by BIPA, is amended--
(A) by inserting ``be written in a manner calculated
to be understood by the individual entitled to benefits
under part A or enrolled under part B, or both, and
shall include (to the extent appropriate)'' after ``in
writing, ''; and
(B) by inserting ``and a notification of the right to
appeal such determination and instructions on how to
initiate such appeal under this section'' after ``such
decision, ''.
(3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)), as
amended by BIPA, is amended--
(A) in the heading, by inserting ``; Notice'' after
``Secretary''; and
(B) by adding at the end the following new paragraph:
``(4) Notice.--Notice of the decision of an administrative
law judge shall be in writing in a manner calculated to be
understood by the individual entitled to benefits under part A
or enrolled under part B, or both, and shall include--
``(A) the specific reasons for the determination
(including, to the extent appropriate, a summary of the
clinical or scientific evidence used in making the
determination);
``(B) the procedures for obtaining additional
information concerning the decision; and
``(C) notification of the right to appeal the
decision and instructions on how to initiate such an
appeal under this section.''.
(4) Submission of record for appeal.--Section
1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by striking
``prepare'' and inserting ``submit'' and by striking ``with
respect to'' and all that follows through ``and relevant
policies''.
(d) Qualified Independent Contractors.--
(1) Eligibility requirements of qualified independent
contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)), as
amended by BIPA, is amended--
(A) in subparagraph (A), by striking ``sufficient
training and expertise in medical science and legal
matters'' and inserting ``sufficient medical, legal,
and other expertise (including knowledge of the program
under this title) and sufficient staffing''; and
(B) by adding at the end the following new
subparagraph:
``(K) Independence requirements.--
``(i) In general.--Subject to clause (ii), a
qualified independent contractor shall not
conduct any activities in a case unless the
entity--
``(I) is not a related party (as
defined in subsection (g)(5));
``(II) does not have a material
familial, financial, or professional
relationship with such a party in
relation to such case; and
``(III) does not otherwise have a
conflict of interest with such a party.
``(ii) Exception for reasonable
compensation.--Nothing in clause (i) shall be
construed to prohibit receipt by a qualified
independent contractor of compensation from the
Secretary for the conduct of activities under
this section if the compensation is provided
consistent with clause (iii).
``(iii) Limitations on entity compensation.--
Compensation provided by the Secretary to a
qualified independent contractor in connection
with reviews under this section shall not be
contingent on any decision rendered by the
contractor or by any reviewing professional.''.
(2) Eligibility requirements for reviewers.--Section 1869 (42
U.S.C. 1395ff), as amended by BIPA, is amended--
(A) by amending subsection (c)(3)(D) to read as
follows:
``(D) Qualifications for reviewers.--The requirements
of subsection (g) shall be met (relating to
qualifications of reviewing professionals).''; and
(B) by adding at the end the following new
subsection:
``(g) Qualifications of Reviewers.--
``(1) In general.--In reviewing determinations under this
section, a qualified independent contractor shall assure that--
``(A) each individual conducting a review shall meet
the qualifications of paragraph (2);
``(B) compensation provided by the contractor to each
such reviewer is consistent with paragraph (3); and
``(C) in the case of a review by a panel described in
subsection (c)(3)(B) composed of physicians or other
health care professionals (each in this subsection
referred to as a `reviewing professional'), each
reviewing professional meets the qualifications
described in paragraph (4) and, where a claim is
regarding the furnishing of treatment by a physician
(allopathic or osteopathic) or the provision of items
or services by a physician (allopathic or osteopathic),
each reviewing professional shall be a physician
(allopathic or osteopathic).
``(2) Independence.--
``(A) In general.--Subject to subparagraph (B), each
individual conducting a review in a case shall--
``(i) not be a related party (as defined in
paragraph (5));
``(ii) not have a material familial,
financial, or professional relationship with
such a party in the case under review; and
``(iii) not otherwise have a conflict of
interest with such a party.
``(B) Exception.--Nothing in subparagraph (A) shall
be construed to--
``(i) prohibit an individual, solely on the
basis of a participation agreement with a
fiscal intermediary, carrier, or other
contractor, from serving as a reviewing
professional if--
``(I) the individual is not involved
in the provision of items or services
in the case under review;
``(II) the fact of such an agreement
is disclosed to the Secretary and the
individual entitled to benefits under
part A or enrolled under part B, or
both, (or authorized representative)
and neither party objects; and
``(III) the individual is not an
employee of the intermediary, carrier,
or contractor and does not provide
services exclusively or primarily to or
on behalf of such intermediary,
carrier, or contractor;
``(ii) prohibit an individual who has staff
privileges at the institution where the
treatment involved takes place from serving as
a reviewer merely on the basis of having such
staff privileges if the existence of such
privileges is disclosed to the Secretary and
such individual (or authorized representative),
and neither party objects; or
``(iii) prohibit receipt of compensation by a
reviewing professional from a contractor if the
compensation is provided consistent with
paragraph (3).
For purposes of this paragraph, the term `participation
agreement' means an agreement relating to the provision
of health care services by the individual and does not
include the provision of services as a reviewer under
this subsection.
``(3) Limitations on reviewer compensation.--Compensation
provided by a qualified independent contractor to a reviewer in
connection with a review under this section shall not be
contingent on the decision rendered by the reviewer.
``(4) Licensure and expertise.--Each reviewing professional
shall be--
``(A) a physician (allopathic or osteopathic) who is
appropriately credentialed or licensed in one or more
States to deliver health care services and has medical
expertise in the field of practice that is appropriate
for the items or services at issue; or
``(B) a health care professional who is legally
authorized in one or more States (in accordance with
State law or the State regulatory mechanism provided by
State law) to furnish the health care items or services
at issue and has medical expertise in the field of
practice that is appropriate for such items or
services.
``(5) Related party defined.--For purposes of this section,
the term `related party' means, with respect to a case under
this title involving a specific individual entitled to benefits
under part A or enrolled under part B, or both, any of the
following:
``(A) The Secretary, the medicare administrative
contractor involved, or any fiduciary, officer,
director, or employee of the Department of Health and
Human Services, or of such contractor.
``(B) The individual (or authorized representative).
``(C) The health care professional that provides the
items or services involved in the case.
``(D) The institution at which the items or services
(or treatment) involved in the case are provided.
``(E) The manufacturer of any drug or other item that
is included in the items or services involved in the
case.
``(F) Any other party determined under any
regulations to have a substantial interest in the case
involved.''.
(3) Effective date.--The amendments made by paragraphs (1)
and (2) shall be effective as if included in the enactment of
the respective provisions of subtitle C of title V of BIPA,
(114 Stat. 2763A-534).
(4) Transition.--In applying section 1869(g) of the Social
Security Act (as added by paragraph (2)), any reference to a
medicare administrative contractor shall be deemed to include a
reference to a fiscal intermediary under section 1816 of the
Social Security Act (42 U.S.C. 1395h) and a carrier under
section 1842 of such Act (42 U.S.C. 1395u).
SEC. 834. PREPAYMENT REVIEW.
(a) In General.--Section 1874A, as added by section 811(a)(1) and as
amended by sections 812(b), 821(b)(1), and 821(c)(1), is further
amended by adding at the end the following new subsection:
``(h) Conduct of Prepayment Review.--
``(1) Conduct of random prepayment review.--
``(A) In general.--A medicare administrative
contractor may conduct random prepayment review only to
develop a contractor-wide or program-wide claims
payment error rates or under such additional
circumstances as may be provided under regulations,
developed in consultation with providers of services
and suppliers.
``(B) Use of standard protocols when conducting
prepayment reviews.--When a medicare administrative
contractor conducts a random prepayment review, the
contractor may conduct such review only in accordance
with a standard protocol for random prepayment audits
developed by the Secretary.
``(C) Construction.--Nothing in this paragraph shall
be construed as preventing the denial of payments for
claims actually reviewed under a random prepayment
review.
``(D) Random prepayment review.--For purposes of this
subsection, the term `random prepayment review' means a
demand for the production of records or documentation
absent cause with respect to a claim.
``(2) Limitations on non-random prepayment review.--
``(A) Limitations on initiation of non-random
prepayment review.--A medicare administrative
contractor may not initiate non-random prepayment
review of a provider of services or supplier based on
the initial identification by that provider of services
or supplier of an improper billing practice unless
there is a likelihood of sustained or high level of
payment error (as defined in subsection (i)(3)(A)).
``(B) Termination of non-random prepayment review.--
The Secretary shall issue regulations relating to the
termination, including termination dates, of non-random
prepayment review. Such regulations may vary such a
termination date based upon the differences in the
circumstances triggering prepayment review.''.
(b) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendment made by subsection (a) shall take effect 1 year after
the date of the enactment of this Act.
(2) Deadline for promulgation of certain regulations.--The
Secretary shall first issue regulations under section 1874A(h)
of the Social Security Act, as added by subsection (a), by not
later than 1 year after the date of the enactment of this Act.
(3) Application of standard protocols for random prepayment
review.--Section 1874A(h)(1)(B) of the Social Security Act, as
added by subsection (a), shall apply to random prepayment
reviews conducted on or after such date (not later than 1 year
after the date of the enactment of this Act) as the Secretary
shall specify.
(c) Application to Fiscal Intermediaries and Carriers.--The
provisions of section 1874A(h) of the Social Security Act, as added by
subsection (a), shall apply to each fiscal intermediary under section
1816 of the Social Security Act (42 U.S.C. 1395h) and each carrier
under section 1842 of such Act (42 U.S.C. 1395u) in the same manner as
they apply to medicare administrative contractors under such
provisions.
SEC. 835. RECOVERY OF OVERPAYMENTS.
(a) In General.--Section 1893 (42 U.S.C. 1395ddd) is amended by
adding at the end the following new subsection:
``(f) Recovery of Overpayments.--
``(1) Use of repayment plans.--
``(A) In general.--If the repayment, within 30 days
by a provider of services or supplier, of an
overpayment under this title would constitute a
hardship (as defined in subparagraph (B)), subject to
subparagraph (C), upon request of the provider of
services or supplier the Secretary shall enter into a
plan with the provider of services or supplier for the
repayment (through offset or otherwise) of such
overpayment over a period of at least 6 months but not
longer than 3 years (or not longer than 5 years in the
case of extreme hardship, as determined by the
Secretary). Interest shall accrue on the balance
through the period of repayment. Such plan shall meet
terms and conditions determined to be appropriate by
the Secretary.
``(B) Hardship.--
``(i) In general.--For purposes of
subparagraph (A), the repayment of an
overpayment (or overpayments) within 30 days is
deemed to constitute a hardship if--
``(I) in the case of a provider of
services that files cost reports, the
aggregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of
services for the cost reporting period
covered by the most recently submitted
cost report; or
``(II) in the case of another
provider of services or supplier, the
aggregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of
services or supplier for the previous
calendar year.
``(ii) Rule of application.--The Secretary
shall establish rules for the application of
this subparagraph in the case of a provider of
services or supplier that was not paid under
this title during the previous year or was paid
under this title only during a portion of that
year.
``(iii) Treatment of previous overpayments.--
If a provider of services or supplier has
entered into a repayment plan under
subparagraph (A) with respect to a specific
overpayment amount, such payment amount under
the repayment plan shall not be taken into
account under clause (i) with respect to
subsequent overpayment amounts.
``(C) Exceptions.--Subparagraph (A) shall not apply
if--
``(i) the Secretary has reason to suspect
that the provider of services or supplier may
file for bankruptcy or otherwise cease to do
business or discontinue participation in the
program under this title; or
``(ii) there is an indication of fraud or
abuse committed against the program.
``(D) Immediate collection if violation of repayment
plan.--If a provider of services or supplier fails to
make a payment in accordance with a repayment plan
under this paragraph, the Secretary may immediately
seek to offset or otherwise recover the total balance
outstanding (including applicable interest) under the
repayment plan.
``(E) Relation to no fault provision.--Nothing in
this paragraph shall be construed as affecting the
application of section 1870(c) (relating to no
adjustment in the cases of certain overpayments).
``(2) Limitation on recoupment.--
``(A) In general.--In the case of a provider of
services or supplier that is determined to have
received an overpayment under this title and that seeks
a reconsideration by a qualified independent contractor
on such determination under section 1869(b)(1), the
Secretary may not take any action (or authorize any
other person, including any medicare contractor, as
defined in subparagraph (C)) to recoup the overpayment
until the date the decision on the reconsideration has
been rendered. If the provisions of section 1869(b)(1)
(providing for such a reconsideration by a qualified
independent contractor) are not in effect, in applying
the previous sentence any reference to such a
reconsideration shall be treated as a reference to a
redetermination by the fiscal intermediary or carrier
involved.
``(B) Collection with interest.--Insofar as the
determination on such appeal is against the provider of
services or supplier, interest on the overpayment shall
accrue on and after the date of the original notice of
overpayment. Insofar as such determination against the
provider of services or supplier is later reversed, the
Secretary shall provide for repayment of the amount
recouped plus interest at the same rate as would apply
under the previous sentence for the period in which the
amount was recouped.
``(C) Medicare contractor defined.--For purposes of
this subsection, the term `medicare contractor' has the
meaning given such term in section 1889(g).
``(3) Limitation on use of extrapolation.--A medicare
contractor may not use extrapolation to determine overpayment
amounts to be recovered by recoupment, offset, or otherwise
unless--
``(A) there is a sustained or high level of payment
error (as defined by the Secretary by regulation); or
``(B) documented educational intervention has failed
to correct the payment error (as determined by the
Secretary).
``(4) Provision of supporting documentation.--In the case of
a provider of services or supplier with respect to which
amounts were previously overpaid, a medicare contractor may
request the periodic production of records or supporting
documentation for a limited sample of submitted claims to
ensure that the previous practice is not continuing.
``(5) Consent settlement reforms.--
``(A) In general.--The Secretary may use a consent
settlement (as defined in subparagraph (D)) to settle a
projected overpayment.
``(B) Opportunity to submit additional information
before consent settlement offer.--Before offering a
provider of services or supplier a consent settlement,
the Secretary shall--
``(i) communicate to the provider of services
or supplier--
``(I) that, based on a review of the
medical records requested by the
Secretary, a preliminary evaluation of
those records indicates that there
would be an overpayment;
``(II) the nature of the problems
identified in such evaluation; and
``(III) the steps that the provider
of services or supplier should take to
address the problems; and
``(ii) provide for a 45-day period during
which the provider of services or supplier may
furnish additional information concerning the
medical records for the claims that had been
reviewed.
``(C) Consent settlement offer.--The Secretary shall
review any additional information furnished by the
provider of services or supplier under subparagraph
(B)(ii). Taking into consideration such information,
the Secretary shall determine if there still appears to
be an overpayment. If so, the Secretary--
``(i) shall provide notice of such
determination to the provider of services or
supplier, including an explanation of the
reason for such determination; and
``(ii) in order to resolve the overpayment,
may offer the provider of services or
supplier--
``(I) the opportunity for a
statistically valid random sample; or
``(II) a consent settlement.
The opportunity provided under clause (ii)(I) does not
waive any appeal rights with respect to the alleged
overpayment involved.
``(D) Consent settlement defined.--For purposes of
this paragraph, the term `consent settlement' means an
agreement between the Secretary and a provider of
services or supplier whereby both parties agree to
settle a projected overpayment based on less than a
statistically valid sample of claims and the provider
of services or supplier agrees not to appeal the claims
involved.
``(6) Notice of over-utilization of codes.--The Secretary
shall establish, in consultation with organizations
representing the classes of providers of services and
suppliers, a process under which the Secretary provides for
notice to classes of providers of services and suppliers served
by the contractor in cases in which the contractor has
identified that particular billing codes may be overutilized by
that class of providers of services or suppliers under the
programs under this title (or provisions of title XI insofar as
they relate to such programs).
``(7) Payment audits.--
``(A) Written notice for post-payment audits.--
Subject to subparagraph (C), if a medicare contractor
decides to conduct a post-payment audit of a provider
of services or supplier under this title, the
contractor shall provide the provider of services or
supplier with written notice (which may be in
electronic form) of the intent to conduct such an
audit.
``(B) Explanation of findings for all audits.--
Subject to subparagraph (C), if a medicare contractor
audits a provider of services or supplier under this
title, the contractor shall--
``(i) give the provider of services or
supplier a full review and explanation of the
findings of the audit in a manner that is
understandable to the provider of services or
supplier and permits the development of an
appropriate corrective action plan;
``(ii) inform the provider of services or
supplier of the appeal rights under this title
as well as consent settlement options (which
are at the discretion of the Secretary);
``(iii) give the provider of services or
supplier an opportunity to provide additional
information to the contractor; and
``(iv) take into account information
provided, on a timely basis, by the provider of
services or supplier under clause (iii).
``(C) Exception.--Subparagraphs (A) and (B) shall not
apply if the provision of notice or findings would
compromise pending law enforcement activities, whether
civil or criminal, or reveal findings of law
enforcement-related audits.
``(8) Standard methodology for probe sampling.--The Secretary
shall establish a standard methodology for medicare contractors
to use in selecting a sample of claims for review in the case
of an abnormal billing pattern.''.
(b) Effective Dates and Deadlines.--
(1) Use of repayment plans.--Section 1893(f)(1) of the Social
Security Act, as added by subsection (a), shall apply to
requests for repayment plans made after the date of the
enactment of this Act.
(2) Limitation on recoupment.--Section 1893(f)(2) of the
Social Security Act, as added by subsection (a), shall apply to
actions taken after the date of the enactment of this Act.
(3) Use of extrapolation.--Section 1893(f)(3) of the Social
Security Act, as added by subsection (a), shall apply to
statistically valid random samples initiated after the date
that is 1 year after the date of the enactment of this Act.
(4) Provision of supporting documentation.--Section
1893(f)(4) of the Social Security Act, as added by subsection
(a), shall take effect on the date of the enactment of this
Act.
(5) Consent settlement.--Section 1893(f)(5) of the Social
Security Act, as added by subsection (a), shall apply to
consent settlements entered into after the date of the
enactment of this Act.
(6) Notice of overutilization.--Not later than 1 year after
the date of the enactment of this Act, the Secretary shall
first establish the process for notice of overutilization of
billing codes under section 1893A(f)(6) of the Social Security
Act, as added by subsection (a).
(7) Payment audits.--Section 1893A(f)(7) of the Social
Security Act, as added by subsection (a), shall apply to audits
initiated after the date of the enactment of this Act.
(8) Standard for abnormal billing patterns.--Not later than 1
year after the date of the enactment of this Act, the Secretary
shall first establish a standard methodology for selection of
sample claims for abnormal billing patterns under section
1893(f)(8) of the Social Security Act, as added by subsection
(a).
SEC. 836. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.
(a) In General.--Section 1866 (42 U.S.C. 1395cc) is amended--
(1) by adding at the end of the heading the following: ``;
enrollment processes''; and
(2) by adding at the end the following new subsection:
``(j) Enrollment Process for Providers of Services and Suppliers.--
``(1) Enrollment process.--
``(A) In general.--The Secretary shall establish by
regulation a process for the enrollment of providers of
services and suppliers under this title.
``(B) Deadlines.--The Secretary shall establish by
regulation procedures under which there are deadlines
for actions on applications for enrollment (and, if
applicable, renewal of enrollment). The Secretary shall
monitor the performance of medicare administrative
contractors in meeting the deadlines established under
this subparagraph.
``(C) Consultation before changing provider
enrollment forms.--The Secretary shall consult with
providers of services and suppliers before making
changes in the provider enrollment forms required of
such providers and suppliers to be eligible to submit
claims for which payment may be made under this title.
``(2) Hearing rights in cases of denial or non-renewal.--A
provider of services or supplier whose application to enroll
(or, if applicable, to renew enrollment) under this title is
denied may have a hearing and judicial review of such denial
under the procedures that apply under subsection (h)(1)(A) to a
provider of services that is dissatisfied with a determination
by the Secretary.''.
(b) Effective Dates.--
(1) Enrollment process.--The Secretary shall provide for the
establishment of the enrollment process under section
1866(j)(1) of the Social Security Act, as added by subsection
(a)(2), within 6 months after the date of the enactment of this
Act.
(2) Consultation.--Section 1866(j)(1)(C) of the Social
Security Act, as added by subsection (a)(2), shall apply with
respect to changes in provider enrollment forms made on or
after January 1, 2003.
(3) Hearing rights.--Section 1866(j)(2) of the Social
Security Act, as added by subsection (a)(2), shall apply to
denials occurring on or after such date (not later than 1 year
after the date of the enactment of this Act) as the Secretary
specifies.
SEC. 837. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS ON
CLAIMS WITHOUT PURSUING APPEALS PROCESS.
The Secretary shall develop, in consultation with appropriate
medicare contractors (as defined in section 1889(g) of the Social
Security Act, as inserted by section 821(a)(1)) and representatives of
providers of services and suppliers, a process whereby, in the case of
minor errors or omissions (as defined by the Secretary) that are
detected in the submission of claims under the programs under title
XVIII of such Act, a provider of services or supplier is given an
opportunity to correct such an error or omission without the need to
initiate an appeal. Such process shall include the ability to resubmit
corrected claims.
SEC. 838. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND SERVICES;
ADVANCE BENEFICIARY NOTICES.
(a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as amended by
sections 521 and 522 of BIPA and section 833(d)(2)(B), is further
amended by adding at the end the following new subsection:
``(h) Prior Determination Process for Certain Items and Services.--
``(1) Establishment of process.--
``(A) In general.--With respect to a medicare
administrative contractor that has a contract under
section 1874A that provides for making payments under
this title with respect to eligible items and services
described in subparagraph (C), the Secretary shall
establish a prior determination process that meets the
requirements of this subsection and that shall be
applied by such contractor in the case of eligible
requesters.
``(B) Eligible requester.--For purposes of this
subsection, each of the following shall be an eligible
requester:
``(i) A physician, but only with respect to
eligible items and services for which the
physician may be paid directly.
``(ii) An individual entitled to benefits
under this title, but only with respect to an
item or service for which the individual
receives, from the physician who may be paid
directly for the item or service, an advance
beneficiary notice under section 1879(a) that
payment may not be made (or may no longer be
made) for the item or service under this title.
``(C) Eligible items and services.--For purposes of
this subsection and subject to paragraph (2), eligible
items and services are items and services which are
physicians' services (as defined in paragraph (4)(A) of
section 1848(f) for purposes of calculating the
sustainable growth rate under such section).
``(2) Secretarial flexibility.--The Secretary shall establish
by regulation reasonable limits on the categories of eligible
items and services for which a prior determination of coverage
may be requested under this subsection. In establishing such
limits, the Secretary may consider the dollar amount involved
with respect to the item or service, administrative costs and
burdens, and other relevant factors.
``(3) Request for prior determination.--
``(A) In general.--Subject to paragraph (2), under
the process established under this subsection an
eligible requester may submit to the contractor a
request for a determination, before the furnishing of
an eligible item or service involved as to whether the
item or service is covered under this title consistent
with the applicable requirements of section
1862(a)(1)(A) (relating to medical necessity).
``(B) Accompanying documentation.--The Secretary may
require that the request be accompanied by a
description of the item or service, supporting
documentation relating to the medical necessity for the
item or service, and any other appropriate
documentation. In the case of a request submitted by an
eligible requester who is described in paragraph
(1)(B)(ii), the Secretary may require that the request
also be accompanied by a copy of the advance
beneficiary notice involved.
``(4) Response to request.--
``(A) In general.--Under such process, the contractor
shall provide the eligible requester with written
notice of a determination as to whether--
``(i) the item or service is so covered;
``(ii) the item or service is not so covered;
or
``(iii) the contractor lacks sufficient
information to make a coverage determination.
If the contractor makes the determination described in
clause (iii), the contractor shall include in the
notice a description of the additional information
required to make the coverage determination.
``(B) Deadline to respond.--Such notice shall be
provided within the same time period as the time period
applicable to the contractor providing notice of
initial determinations on a claim for benefits under
subsection (a)(2)(A).
``(C) Informing beneficiary in case of physician
request.--In the case of a request in which an eligible
requester is not the individual described in paragraph
(1)(B)(ii), the process shall provide that the
individual to whom the item or service is proposed to
be furnished shall be informed of any determination
described in clause (ii) (relating to a determination
of non-coverage) and the right (referred to in
paragraph (6)(B)) to obtain the item or service and
have a claim submitted for the item or service.
``(5) Effect of determinations.--
``(A) Binding nature of positive determination.--If
the contractor makes the determination described in
paragraph (4)(A)(i), such determination shall be
binding on the contractor in the absence of fraud or
evidence of misrepresentation of facts presented to the
contractor.
``(B) Notice and right to redetermination in case of
a denial.--
``(i) In general.--If the contractor makes
the determination described in paragraph
(4)(A)(ii)--
``(I) the eligible requester has the
right to a redetermination by the
contractor on the determination that
the item or service is not so covered;
and
``(II) the contractor shall include
in notice under paragraph (4)(A) a
brief explanation of the basis for the
determination, including on what
national or local coverage or
noncoverage determination (if any) the
determination is based, and the right
to such a redetermination.
``(ii) Deadline for redeterminations.--The
contractor shall complete and provide notice of
such redetermination within the same time
period as the time period applicable to the
contractor providing notice of redeterminations
relating to a claim for benefits under
subsection (a)(3)(C)(ii).
``(6) Limitation on further review.--
``(A) In general.--Contractor determinations
described in paragraph (4)(A)(ii) or (4)(A)(iii) (and
redeterminations made under paragraph (5)(B)), relating
to pre-service claims are not subject to further
administrative appeal or judicial review under this
section or otherwise.
``(B) Decision not to seek prior determination or
negative determination does not impact right to obtain
services, seek reimbursement, or appeal rights.--
Nothing in this subsection shall be construed as
affecting the right of an individual who--
``(i) decides not to seek a prior
determination under this subsection with
respect to items or services; or
``(ii) seeks such a determination and has
received a determination described in paragraph
(4)(A)(ii),
from receiving (and submitting a claim for) such items
services and from obtaining administrative or judicial
review respecting such claim under the other applicable
provisions of this section. Failure to seek a prior
determination under this subsection with respect to
items and services shall not be taken into account in
such administrative or judicial review.
``(C) No prior determination after receipt of
services.--Once an individual is provided items and
services, there shall be no prior determination under
this subsection with respect to such items or
services.''.
(b) Effective Date; Transition.--
(1) Effective date.--The Secretary shall establish the prior
determination process under the amendment made by subsection
(a) in such a manner as to provide for the acceptance of
requests for determinations under such process filed not later
than 18 months after the date of the enactment of this Act.
(2) Transition.--During the period in which the amendment
made by subsection (a) has become effective but contracts are
not provided under section 1874A of the Social Security Act
with medicare administrative contractors, any reference in
section 1869(g) of such Act (as added by such amendment) to
such a contractor is deemed a reference to a fiscal
intermediary or carrier with an agreement under section 1816,
or contract under section 1842, respectively, of such Act.
(3) Limitation on application to sgr.--For purposes of
applying section 1848(f)(2)(D) of the Social Security Act (42
U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection (a)
shall not be considered to be a change in law or regulation.
(c) Provisions Relating to Advance Beneficiary Notices; Report on
Prior Determination Process.--
(1) Data collection.--The Secretary shall establish a process
for the collection of information on the instances in which an
advance beneficiary notice (as defined in paragraph (4)) has
been provided and on instances in which a beneficiary indicates
on such a notice that the beneficiary does not intend to seek
to have the item or service that is the subject of the notice
furnished.
(2) Outreach and education.--The Secretary shall establish a
program of outreach and education for beneficiaries and
providers of services and other persons on the appropriate use
of advance beneficiary notices and coverage policies under the
medicare program.
(3) GAO report report on use of advance beneficiary
notices.--Not later than 18 months after the date on which
section 1869(g) of the Social Security Act (as added by
subsection (a)) takes effect, the Comptroller General of the
United States shall submit to Congress a report on the use of
advance beneficiary notices under title XVIII of such Act. Such
report shall include information concerning the providers of
services and other persons that have provided such notices and
the response of beneficiaries to such notices.
(4) GAO report on use of prior determination process.--Not
later than 18 months after the date on which section 1869(g) of
the Social Security Act (as added by subsection (a)) takes
effect, the Comptroller General of the United States shall
submit to Congress a report on the use of the prior
determination process under such section. Such report shall
include--
(A) information concerning the types of procedures
for which a prior determination has been sought,
determinations made under the process, and changes in
receipt of services resulting from the application of
such process; and
(B) an evaluation of whether the process was useful
for physicians (and other suppliers) and beneficiaries,
whether it was timely, and whether the amount of
information required was burdensome to physicians and
beneficiaries.
(5) Advance beneficiary notice defined.--In this subsection,
the term ``advance beneficiary notice'' means a written notice
provided under section 1879(a) of the Social Security Act (42
U.S.C. 1395pp(a)) to an individual entitled to benefits under
part A or B of title XVIII of such Act before items or services
are furnished under such part in cases where a provider of
services or other person that would furnish the item or service
believes that payment will not be made for some or all of such
items or services under such title.
Subtitle E--Miscellaneous Provisions
SEC. 841. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E &
M) DOCUMENTATION GUIDELINES.
(a) In General.--The Secretary may not implement any new
documentation guidelines for evaluation and management physician
services under the title XVIII of the Social Security Act on or after
the date of the enactment of this Act unless the Secretary--
(1) has developed the guidelines in collaboration with
practicing physicians (including both generalists and
specialists) and provided for an assessment of the proposed
guidelines by the physician community;
(2) has established a plan that contains specific goals,
including a schedule, for improving the use of such guidelines;
(3) has conducted appropriate and representative pilot
projects under subsection (b) to test modifications to the
evaluation and management documentation guidelines;
(4) finds that the objectives described in subsection (c)
will be met in the implementation of such guidelines; and
(5) has established, and is implementing, a program to
educate physicians on the use of such guidelines and that
includes appropriate outreach.
The Secretary shall make changes to the manner in which existing
evaluation and management documentation guidelines are implemented to
reduce paperwork burdens on physicians.
(b) Pilot Projects to Test Evaluation and Management Documentation
Guidelines.--
(1) In general.--The Secretary shall conduct under this
subsection appropriate and representative pilot projects to
test new evaluation and management documentation guidelines
referred to in subsection (a).
(2) Length and consultation.--Each pilot project under this
subsection shall--
(A) be voluntary;
(B) be of sufficient length as determined by the
Secretary to allow for preparatory physician and
medicare contractor education, analysis, and use and
assessment of potential evaluation and management
guidelines; and
(C) be conducted, in development and throughout the
planning and operational stages of the project, in
consultation with practicing physicians (including both
generalists and specialists).
(3) Range of pilot projects.--Of the pilot projects conducted
under this subsection--
(A) at least one shall focus on a peer review method
by physicians (not employed by a medicare contractor)
which evaluates medical record information for claims
submitted by physicians identified as statistical
outliers relative to definitions published in the
Current Procedures Terminology (CPT) code book of the
American Medical Association;
(B) at least one shall focus on an alternative method
to detailed guidelines based on physician documentation
of face to face encounter time with a patient;
(C) at least one shall be conducted for services
furnished in a rural area and at least one for services
furnished outside such an area; and
(D) at least one shall be conducted in a setting
where physicians bill under physicians' services in
teaching settings and at least one shall be conducted
in a setting other than a teaching setting.
(4) Banning of targeting of pilot project participants.--Data
collected under this subsection shall not be used as the basis
for overpayment demands or post-payment audits. Such limitation
applies only to claims filed as part of the pilot project and
lasts only for the duration of the pilot project and only as
long as the provider is a participant in the pilot project.
(5) Study of impact.--Each pilot project shall examine the
effect of the new evaluation and management documentation
guidelines on--
(A) different types of physician practices, including
those with fewer than 10 full-time-equivalent employees
(including physicians); and
(B) the costs of physician compliance, including
education, implementation, auditing, and monitoring.
(6) Periodic reports.--The Secretary shall submit to Congress
periodic reports on the pilot projects under this subsection.
(c) Objectives for Evaluation and Management Guidelines.--The
objectives for modified evaluation and management documentation
guidelines developed by the Secretary shall be to--
(1) identify clinically relevant documentation needed to code
accurately and assess coding levels accurately;
(2) decrease the level of non-clinically pertinent and
burdensome documentation time and content in the physician's
medical record;
(3) increase accuracy by reviewers; and
(4) educate both physicians and reviewers.
(d) Study of Simpler, Alternative Systems of Documentation for
Physician Claims.--
(1) Study.--The Secretary shall carry out a study of the
matters described in paragraph (2).
(2) Matters described.--The matters referred to in paragraph
(1) are--
(A) the development of a simpler, alternative system
of requirements for documentation accompanying claims
for evaluation and management physician services for
which payment is made under title XVIII of the Social
Security Act; and
(B) consideration of systems other than current
coding and documentation requirements for payment for
such physician services.
(3) Consultation with practicing physicians.--In designing
and carrying out the study under paragraph (1), the Secretary
shall consult with practicing physicians, including physicians
who are part of group practices and including both generalists
and specialists.
(4) Application of hipaa uniform coding requirements.--In
developing an alternative system under paragraph (2), the
Secretary shall consider requirements of administrative
simplification under part C of title XI of the Social Security
Act.
(5) Report to congress.--(A) Not later than October 1, 2004,
the Secretary shall submit to Congress a report on the results
of the study conducted under paragraph (1).
(B) The Medicare Payment Advisory Commission shall conduct an
analysis of the results of the study included in the report
under subparagraph (A) and shall submit a report on such
analysis to Congress.
(e) Study on Appropriate Coding of Certain Extended Office Visits.--
The Secretary shall conduct a study of the appropriateness of coding in
cases of extended office visits in which there is no diagnosis made.
Not later than October 1, 2004, the Secretary shall submit a report to
Congress on such study and shall include recommendations on how to code
appropriately for such visits in a manner that takes into account the
amount of time the physician spent with the patient.
(f) Definitions.--In this section--
(1) the term ``rural area'' has the meaning given that term
in section 1886(d)(2)(D) of the Social Security Act, 42 U.S.C.
1395ww(d)(2)(D); and
(2) the term ``teaching settings'' are those settings
described in section 415.150 of title 42, Code of Federal
Regulations.
SEC. 842. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.
(a) Improved Coordination Between FDA and CMS on Coverage of
Breakthrough Medical Devices.--
(1) In general.--Upon request by an applicant and to the
extent feasible (as determined by the Secretary), the Secretary
shall, in the case of a class III medical device that is
subject to premarket approval under section 515 of the Federal
Food, Drug, and Cosmetic Act, ensure the sharing of appropriate
information from the review for application for premarket
approval conducted by the Food and Drug Administration for
coverage decisions under title XVIII of the Social Security
Act.
(2) Publication of plan.--Not later than 6 months after the
date of the enactment of this Act, the Secretary shall submit
to appropriate Committees of Congress a report that contains
the plan for improving such coordination and for shortening the
time lag between the premarket approval by the Food and Drug
Administration and coding and coverage decisions by the Centers
for Medicare & Medicaid Services.
(3) Construction.--Nothing in this subsection shall be
construed as changing the criteria for coverage of a medical
device under title XVIII of the Social Security Act nor
premarket approval by the Food and Drug Administration and
nothing in this subsection shall be construed to increase
premarket approval application requirements under the Federal
Food, Drug, and Cosmetic Act.
(b) Council for Technology and Innovation.--Section 1868 (42 U.S.C.
1395ee), as amended by section 823(a), is amended by adding at the end
the following new subsection:
``(c) Council for Technology and Innovation.--
``(1) Establishment.--The Secretary shall establish a Council
for Technology and Innovation within the Centers for Medicare &
Medicaid Services (in this section referred to as `CMS').
``(2) Composition.--The Council shall be composed of senior
CMS staff and clinicians and shall be chaired by the Executive
Coordinator for Technology and Innovation (appointed or
designated under paragraph (4)).
``(3) Duties.--The Council shall coordinate the activities of
coverage, coding, and payment processes under this title with
respect to new technologies and procedures, including new drug
therapies, and shall coordinate the exchange of information on
new technologies between CMS and other entities that make
similar decisions.
``(4) Executive coordinator for technology and innovation.--
The Secretary shall appoint (or designate) a noncareer
appointee (as defined in section 3132(a)(7) of title 5, United
States Code) who shall serve as the Executive Coordinator for
Technology and Innovation. Such executive coordinator shall
report to the Administrator of CMS, shall chair the Council,
shall oversee the execution of its duties, and shall serve as a
single point of contact for outside groups and entities
regarding the coverage, coding, and payment processes under
this title.''.
(c) GAO Study on Improvements in External Data Collection for Use in
the Medicare Inpatient Payment System.--
(1) Study.--The Comptroller General of the United States
shall conduct a study that analyzes which external data can be
collected in a shorter time frame by the Centers for Medicare &
Medicaid Services for use in computing payments for inpatient
hospital services. The study may include an evaluation of the
feasibility and appropriateness of using of quarterly samples
or special surveys or any other methods. The study shall
include an analysis of whether other executive agencies, such
as the Bureau of Labor Statistics in the Department of
Commerce, are best suited to collect this information.
(2) Report.--By not later than October 1, 2003, the
Comptroller General shall submit a report to Congress on the
study under paragraph (1).
(d) IOM Study on Local Coverage Determinations.--
(1) Study.--The Secretary shall enter into an arrangement
with the Institute of Medicine of the National Academy of
Sciences under which the Institute shall conduct a study on
local coverage determinations (including the application of
local medical review policies) under the medicare program under
title XVIII of the Social Security Act. Such study shall
examine--
(A) the consistency of the definitions used in such
determinations;
(B) the types of evidence on which such
determinations are based, including medical and
scientific evidence;
(C) the advantages and disadvantages of local
coverage decisionmaking, including the flexibility it
offers for ensuring timely patient access to new
medical technology for which data are still be
collected;
(D) the manner in which the local coverage
determination process is used to develop data needed
for a national coverage determination, including the
need for collection of such data within a protocol and
informed consent by individuals entitled to benefits
under part A of title XVIII of the Social Security Act,
or enrolled under part B of such title, or both; and
(E) the advantages and disadvantages of maintaining
local medicare contractor advisory committees that can
advise on local coverage decisions based on an open,
collaborative public process.
(2) Report.--Such arrangement shall provide that the
Institute shall submit to the Secretary a report on such study
by not later than 3 years after the date of the enactment of
this Act. The Secretary shall promptly transmit a copy of such
report to Congress.
(e) Methods for Determining Payment Basis For New Lab Tests.--Section
1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end the
following:
``(8)(A) The Secretary shall establish by regulation procedures for
determining the basis for, and amount of, payment under this subsection
for any clinical diagnostic laboratory test with respect to which a new
or substantially revised HCPCS code is assigned on or after January 1,
2004 (in this paragraph referred to as `new tests').
``(B) Determinations under subparagraph (A) shall be made only after
the Secretary--
``(i) makes available to the public (through an Internet site
and other appropriate mechanisms) a list that includes any such
test for which establishment of a payment amount under this
subsection is being considered for a year;
``(ii) on the same day such list is made available, causes to
have published in the Federal Register notice of a meeting to
receive comments and recommendations (and data on which
recommendations are based) from the public on the appropriate
basis under this subsection for establishing payment amounts
for the tests on such list;
``(iii) not less than 30 days after publication of such
notice convenes a meeting, that includes representatives of
officials of the Centers for Medicare & Medicaid Services
involved in determining payment amounts, to receive such
comments and recommendations (and data on which the
recommendations are based);
``(iv) taking into account the comments and recommendations
(and accompanying data) received at such meeting, develops and
makes available to the public (through an Internet site and
other appropriate mechanisms) a list of proposed determinations
with respect to the appropriate basis for establishing a
payment amount under this subsection for each such code,
together with an explanation of the reasons for each such
determination, the data on which the determinations are based,
and a request for public written comments on the proposed
determination; and
``(v) taking into account the comments received during the
public comment period, develops and makes available to the
public (through an Internet site and other appropriate
mechanisms) a list of final determinations of the payment
amounts for such tests under this subsection, together with the
rationale for each such determination, the data on which the
determinations are based, and responses to comments and
suggestions received from the public.
``(C) Under the procedures established pursuant to subparagraph (A),
the Secretary shall--
``(i) set forth the criteria for making determinations under
subparagraph (A); and
``(ii) make available to the public the data (other than
proprietary data) considered in making such determinations.
``(D) The Secretary may convene such further public meetings to
receive public comments on payment amounts for new tests under this
subsection as the Secretary deems appropriate.
``(E) For purposes of this paragraph:
``(i) The term `HCPCS' refers to the Health Care Procedure
Coding System.
``(ii) A code shall be considered to be `substantially
revised' if there is a substantive change to the definition of
the test or procedure to which the code applies (such as a new
analyte or a new methodology for measuring an existing analyte-
specific test).''.
SEC. 843. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER MEDICARE
SECONDARY PAYOR (MSP) PROVISIONS.
(a) In General.--The Secretary shall not require a hospital
(including a critical access hospital) to ask questions (or obtain
information) relating to the application of section 1862(b) of the
Social Security Act (relating to medicare secondary payor provisions)
in the case of reference laboratory services described in subsection
(b), if the Secretary does not impose such requirement in the case of
such services furnished by an independent laboratory.
(b) Reference Laboratory Services Described.--Reference laboratory
services described in this subsection are clinical laboratory
diagnostic tests (or the interpretation of such tests, or both)
furnished without a face-to-face encounter between the individual
entitled to benefits under part A or enrolled under part B, or both,
and the hospital involved and in which the hospital submits a claim
only for such test or interpretation.
SEC. 844. EMTALA IMPROVEMENTS.
(a) Payment for EMTALA-Mandated Screening and Stabilization
Services.--
(1) In general.--Section 1862 (42 U.S.C. 1395y) is amended by
inserting after subsection (c) the following new subsection:
``(d) For purposes of subsection (a)(1)(A), in the case of any item
or service that is required to be provided pursuant to section 1867 to
an individual who is entitled to benefits under this title,
determinations as to whether the item or service is reasonable and
necessary shall be made on the basis of the information available to
the treating physician or practitioner (including the patient's
presenting symptoms or complaint) at the time the item or service was
ordered or furnished by the physician or practitioner (and not on the
patient's principal diagnosis). When making such determinations with
respect to such an item or service, the Secretary shall not consider
the frequency with which the item or service was provided to the
patient before or after the time of the admission or visit.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to items and services furnished on or after January
1, 2003.
(b) Notification of Providers When EMTALA Investigation Closed.--
Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is amended by adding at
the end the following new paragraph:
``(4) Notice upon closing an investigation.--The Secretary
shall establish a procedure to notify hospitals and physicians
when an investigation under this section is closed.''.
(c) Prior Review by Peer Review Organizations in EMTALA Cases
Involving Termination of Participation.--
(1) In general.--Section 1867(d)(3) (42 U.S.C. 1395dd(d)(3))
is amended--
(A) in the first sentence, by inserting ``or in
terminating a hospital's participation under this
title'' after ``in imposing sanctions under paragraph
(1)''; and
(B) by adding at the end the following new sentences:
``Except in the case in which a delay would jeopardize
the health or safety of individuals, the Secretary
shall also request such a review before making a
compliance determination as part of the process of
terminating a hospital's participation under this title
for violations related to the appropriateness of a
medical screening examination, stabilizing treatment,
or an appropriate transfer as required by this section,
and shall provide a period of 5 days for such review.
The Secretary shall provide a copy of the
organization's report to the hospital or physician
consistent with confidentiality requirements imposed on
the organization under such part B.''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to terminations of participation initiated on or
after the date of the enactment of this Act.
SEC. 845. EMERGENCY MEDICAL TREATMENT AND LABOR ACT (EMTALA) TECHNICAL
ADVISORY GROUP.
(a) Establishment.--The Secretary shall establish a Technical
Advisory Group (in this section referred to as the ``Advisory Group'')
to review issues related to the Emergency Medical Treatment and Labor
Act (EMTALA) and its implementation. In this section, the term
``EMTALA'' refers to the provisions of section 1867 of the Social
Security Act (42 U.S.C. 1395dd).
(b) Membership.--The Advisory Group shall be composed of 19 members,
including the Administrator of the Centers for Medicare & Medicaid
Services and the Inspector General of the Department of Health and
Human Services and of which--
(1) 4 shall be representatives of hospitals, including at
least one public hospital, that have experience with the
application of EMTALA and at least 2 of which have not been
cited for EMTALA violations;
(2) 7 shall be practicing physicians drawn from the fields of
emergency medicine, cardiology or cardiothoracic surgery,
orthopedic surgery, neurosurgery, obstetrics-gynecology, and
psychiatry, with not more than one physician from any
particular field;
(3) 2 shall represent patients;
(4) 2 shall be staff involved in EMTALA investigations from
different regional offices of the Centers for Medicare &
Medicaid Services; and
(5) 1 shall be from a State survey office involved in EMTALA
investigations and 1 shall be from a peer review organization,
both of whom shall be from areas other than the regions
represented under paragraph (4).
In selecting members described in paragraphs (1) through (3), the
Secretary shall consider qualified individuals nominated by
organizations representing providers and patients.
(c) General Responsibilities.--The Advisory Group--
(1) shall review EMTALA regulations;
(2) may provide advice and recommendations to the Secretary
with respect to those regulations and their application to
hospitals and physicians;
(3) shall solicit comments and recommendations from
hospitals, physicians, and the public regarding the
implementation of such regulations; and
(4) may disseminate information on the application of such
regulations to hospitals, physicians, and the public.
(d) Administrative Matters.--
(1) Chairperson.--The members of the Advisory Group shall
elect a member to serve as chairperson of the Advisory Group
for the life of the Advisory Group.
(2) Meetings.--The Advisory Group shall first meet at the
direction of the Secretary. The Advisory Group shall then meet
twice per year and at such other times as the Advisory Group
may provide.
(e) Termination.--The Advisory Group shall terminate 30 months after
the date of its first meeting.
(f) Waiver of Administrative Limitation.--The Secretary shall
establish the Advisory Group notwithstanding any limitation that may
apply to the number of advisory committees that may be established
(within the Department of Health and Human Services or otherwise).
SEC. 846. AUTHORIZING USE OF ARRANGEMENTS WITH OTHER HOSPICE PROGRAMS
TO PROVIDE CORE HOSPICE SERVICES IN CERTAIN
CIRCUMSTANCES.
(a) In General.--Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is
amended by adding at the end the following new subparagraph:
``(D) In extraordinary, exigent, or other non-routine circumstances,
such as unanticipated periods of high patient loads, staffing shortages
due to illness or other events, or temporary travel of a patient
outside a hospice program's service area, a hospice program may enter
into arrangements with another hospice program for the provision by
that other program of services described in paragraph (2)(A)(ii)(I).
The provisions of paragraph (2)(A)(ii)(II) shall apply with respect to
the services provided under such arrangements.''.
(b) Conforming Payment Provision.--Section 1814(i) (42 U.S.C.
1395f(i)), as amended by section 421(b), is amended by adding at the
end the following new paragraph:
``(5) In the case of hospice care provided by a hospice program under
arrangements under section 1861(dd)(5)(D) made by another hospice
program, the hospice program that made the arrangements shall bill and
be paid for the hospice care.''.
(c) Effective Date.--The amendments made by this section shall apply
to hospice care provided on or after the date of the enactment of this
Act.
SEC. 847. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD TO CERTAIN
HOSPITALS.
(a) In General.--Section 1866 (42 U.S.C. 1395cc) is amended--
(1) in subsection (a)(1)--
(A) in subparagraph (R), by striking ``and'' at the
end;
(B) in subparagraph (S), by striking the period at
the end and inserting ``, and''; and
(C) by inserting after subparagraph (S) the following
new subparagraph:
``(T) in the case of hospitals that are not otherwise subject
to the Occupational Safety and Health Act of 1970, to comply
with the Bloodborne Pathogens standard under section 1910.1030
of title 29 of the Code of Federal Regulations (or as
subsequently redesignated).''; and
(2) by adding at the end of subsection (b) the following new
paragraph:
``(4)(A) A hospital that fails to comply with the requirement of
subsection (a)(1)(T) (relating to the Bloodborne Pathogens standard) is
subject to a civil money penalty in an amount described in subparagraph
(B), but is not subject to termination of an agreement under this
section.
``(B) The amount referred to in subparagraph (A) is an amount that is
similar to the amount of civil penalties that may be imposed under
section 17 of the Occupational Safety and Health Act of 1970 for a
violation of the Bloodborne Pathogens standard referred to in
subsection (a)(1)(T) by a hospital that is subject to the provisions of
such Act.
``(C) A civil money penalty under this paragraph shall be imposed and
collected in the same manner as civil money penalties under subsection
(a) of section 1128A are imposed and collected under that section.''.
(b) Effective Date.--The amendments made by this subsection (a) shall
apply to hospitals as of July 1, 2003.
SEC. 848. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.
(a) Technical Amendments Relating to Advisory Committee under BIPA
Section 522.--(1) Subsection (i) of section 1114 (42 U.S.C. 1314)--
(A) is transferred to section 1862 and added at the end of
such section; and
(B) is redesignated as subsection (j).
(2) Section 1862 (42 U.S.C. 1395y) is amended--
(A) in the last sentence of subsection (a), by striking
``established under section 1114(f)''; and
(B) in subsection (j), as so transferred and redesignated--
(i) by striking ``under subsection (f)''; and
(ii) by striking ``section 1862(a)(1)'' and inserting
``subsection (a)(1)''.
(b) Terminology Corrections.--(1) Section 1869(c)(3)(I)(ii) (42
U.S.C. 1395ff(c)(3)(I)(ii)), as amended by section 521 of BIPA, is
amended--
(A) in subclause (III), by striking ``policy'' and inserting
``determination''; and
(B) in subclause (IV), by striking ``medical review
policies'' and inserting ``coverage determinations''.
(2) Section 1852(a)(2)(C) (42 U.S.C. 1395w-22(a)(2)(C)) is amended by
striking ``policy'' and ``policy'' and inserting ``determination'' each
place it appears and ``determination'', respectively.
(c) Reference Corrections.--Section 1869(f)(4) (42 U.S.C.
1395ff(f)(4)), as added by section 522 of BIPA, is amended--
(1) in subparagraph (A)(iv), by striking ``subclause (I),
(II), or (III)'' and inserting ``clause (i), (ii), or (iii)'';
(2) in subparagraph (B), by striking ``clause (i)(IV)'' and
``clause (i)(III)'' and inserting ``subparagraph (A)(iv)'' and
``subparagraph (A)(iii)'', respectively; and
(3) in subparagraph (C), by striking ``clause (i)'',
``subclause (IV)'' and ``subparagraph (A)'' and inserting
``subparagraph (A)'', ``clause (iv)'' and ``paragraph (1)(A)'',
respectively each place it appears.
(d) Other Corrections.--Effective as if included in the enactment of
section 521(c) of BIPA, section 1154(e) (42 U.S.C. 1320c-3(e)) is
amended by striking paragraph (5).
(e) Effective Date.--Except as otherwise provided, the amendments
made by this section shall be effective as if included in the enactment
of BIPA.
SEC. 849. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.
The first sentence of section 1128(c)(3)(B) (42 U.S.C. 1320a-
7(c)(3)(B)) is amended to read as follows: ``Subject to subparagraph
(G), in the case of an exclusion under subsection (a), the minimum
period of exclusion shall be not less than five years, except that,
upon the request of the administrator of a Federal health care program
(as defined in section 1128B(f)) who determines that the exclusion
would impose a hardship on individuals entitled to benefits under part
A of title XVIII or enrolled under part B of such title, or both, the
Secretary may waive the exclusion under subsection (a)(1), (a)(3), or
(a)(4) with respect to that program in the case of an individual or
entity that is the sole community physician or sole source of essential
specialized services in a community.''.
SEC. 850. TREATMENT OF CERTAIN DENTAL CLAIMS.
(a) In General.--Section 1862 (42 U.S.C. 1395y) is amended by adding
after subsection (g) the following new subsection:
``(h)(1) Subject to paragraph (2), a group health plan (as defined in
subsection (a)(1)(A)(v)) providing supplemental or secondary coverage
to individuals also entitled to services under this title shall not
require a medicare claims determination under this title for dental
benefits specifically excluded under subsection (a)(12) as a condition
of making a claims determination for such benefits under the group
health plan.
``(2) A group health plan may require a claims determination under
this title in cases involving or appearing to involve inpatient dental
hospital services or dental services expressly covered under this title
pursuant to actions taken by the Secretary.''.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect on the date that is 60 days after the date of the enactment of
this Act.
SEC. 851. ANNUAL PUBLICATION OF LIST OF NATIONAL COVERAGE
DETERMINATIONS.
The Secretary shall provide, in an appropriate annual publication
available to the public, a list of national coverage determinations
made under title XVIII of the Social Security Act in the previous year
and information on how to get more information with respect to such
determinations.
TITLE IX--MEDICAID, PUBLIC HEALTH, AND OTHER HEALTH PROVISIONS
Subtitle A--Medicaid Provisions
SEC. 901. NATIONAL BIPARTISAN COMMISSION ON THE FUTURE OF MEDICAID.
(a) Establishment.--There is established a commission to be known as
the National Bipartisan Commission on the Future of Medicaid (in this
section referred to as the ``Commission'').
(b) Duties of the Commission.--The Commission shall--
(1) review and analyze the long-term financial condition of
the medicaid program under title XIX of the Social Security Act
(42 U.S.C. 1396 et seq.);
(2) identify the factors that are causing, and the
consequences of, increases in costs under the medicaid program,
including--
(A) the impact of these cost increases upon State
budgets, funding for other State programs, and levels
of State taxes necessary to fund growing expenditures
under the medicaid program;
(B) the financial obligations of the Federal
government arising from the Federal matching
requirement for expenditures under the medicaid
program; and
(C) the size and scope of the current program and how
the program has evolved over time;
(3) analyze potential policies that will ensure both the
financial integrity of the medicaid program and the provision
of appropriate benefits under such program;
(4) make recommendations for establishing incentives and
structures to promote enhanced efficiencies and ways of
encouraging innovative State policies under the medicaid
program;
(5) make recommendations for establishing the appropriate
balance between benefits covered, payments to providers, State
and Federal contributions and, where appropriate, recipient
cost-sharing obligations;
(6) make recommendations on the impact of promoting increased
utilization of competitive, private enterprise models to
contain program cost growth, through enhanced utilization of
private plans, pharmacy benefit managers, and other methods
currently being used to contain private sector health-care
costs;
(7) make recommendations on the financing of prescription
drug benefits currently covered under medicaid programs,
including analysis of the current Federal manufacturer rebate
program, its impact upon both private market prices as well as
those paid by other government purchasers, recent State efforts
to negotiate additional supplemental manufacturer rebates and
the ability of pharmacy benefit managers to lower drug costs;
(8) review and analyze such other matters relating to the
medicaid program as the Commission deems appropriate; and
(9) analyze the impact of impending demographic changes upon
medicaid benefits, including long term care services, and make
recommendations for how best to appropriately divide State and
Federal responsibilities for funding these benefits.
(c) Membership.--
(1) Number and appointment.--The Commission shall be composed
of 17 members, of whom--
(A) four shall be appointed by the President;
(B) six shall be appointed by the Majority Leader of
the Senate, in consultation with the Minority Leader of
the Senate, of whom not more than 4 shall be of the
same political party;
(C) six shall be appointed by the Speaker of the
House of Representatives, in consultation with the
Minority Leader of the House of Representatives, of
whom not more than 4 shall be of the same political
party; and
(D) one, who shall serve as Chairman of the
Commission, appointed jointly by the President,
Majority Leader of the Senate, and the Speaker of the
House of Representatives.
(2) Deadline for appointment.--Members of the Commission
shall be appointed by not later than December 1, 2002.
(3) Terms of appointment.--The term of any appointment under
paragraph (1) to the Commission shall be for the life of the
Commission.
(4) Meetings.--The Commission shall meet at the call of its
Chairman or a majority of its members.
(5) Quorum.--A quorum shall consist of 8 members of the
Commission, except that 4 members may conduct a hearing under
subsection (e).
(6) Vacancies.--A vacancy on the Commission shall be filled
in the same manner in which the original appointment was made
not later than 30 days after the Commission is given notice of
the vacancy and shall not affect the power of the remaining
members to execute the duties of the Commission.
(7) Compensation.--Members of the Commission shall receive no
additional pay, allowances, or benefits by reason of their
service on the Commission.
(8) Expenses.--Each member of the Commission shall receive
travel expenses and per diem in lieu of subsistence in
accordance with sections 5702 and 5703 of title 5, United
States Code.
(d) Staff and Support Services.--
(1) Executive director.--
(A) Appointment.--The Chairman shall appoint an
executive director of the Commission.
(B) Compensation.--The executive director shall be
paid the rate of basic pay for level V of the Executive
Schedule.
(2) Staff.--With the approval of the Commission, the
executive director may appoint such personnel as the executive
director considers appropriate.
(3) Applicability of civil service laws.--The staff of the
Commission shall be appointed without regard to the provisions
of title 5, United States Code, governing appointments in the
competitive service, and shall be paid without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of
such title (relating to classification and General Schedule pay
rates).
(4) Experts and consultants.--With the approval of the
Commission, the executive director may procure temporary and
intermittent services under section 3109(b) of title 5, United
States Code.
(5) Physical facilities.--The Administrator of the General
Services Administration shall locate suitable office space for
the operation of the Commission. The facilities shall serve as
the headquarters of the Commission and shall include all
necessary equipment and incidentals required for the proper
functioning of the Commission.
(e) Powers of Commission.--
(1) Hearings and other activities.--For the purpose of
carrying out its duties, the Commission may hold such hearings
and undertake such other activities as the Commission
determines to be necessary to carry out its duties.
(2) Studies by gao.--Upon the request of the Commission, the
Comptroller General shall conduct such studies or
investigations as the Commission determines to be necessary to
carry out its duties.
(3) Cost estimates by congressional budget office and office
of the chief actuary of cms.--
(A) The Director of the Congressional Budget Office
or the Chief Actuary of the Centers for Medicare &
Medicaid Services, or both, shall provide to the
Commission, upon the request of the Commission, such
cost estimates as the Commission determines to be
necessary to carry out its duties.
(B) The Commission shall reimburse the Director of
the Congressional Budget Office for expenses relating
to the employment in the office of the Director of such
additional staff as may be necessary for the Director
to comply with requests by the Commission under
subparagraph (A).
(4) Detail of federal employees.--Upon the request of the
Commission, the head of any Federal agency is authorized to
detail, without reimbursement, any of the personnel of such
agency to the Commission to assist the Commission in carrying
out its duties. Any such detail shall not interrupt or
otherwise affect the civil service status or privileges of the
Federal employee.
(5) Technical assistance.--Upon the request of the
Commission, the head of a Federal agency shall provide such
technical assistance to the Commission as the Commission
determines to be necessary to carry out its duties.
(6) Use of mails.--The Commission may use the United States
mails in the same manner and under the same conditions as
Federal agencies and shall, for purposes of the frank, be
considered a commission of Congress as described in section
3215 of title 39, United States Code.
(7) Obtaining information.--The Commission may secure
directly from any Federal agency information necessary to
enable it to carry out its duties, if the information may be
disclosed under section 552 of title 5, United States Code.
Upon request of the Chairman of the Commission, the head of
such agency shall furnish such information to the Commission.
(8) Administrative support services.--Upon the request of the
Commission, the Administrator of General Services shall provide
to the Commission on a reimbursable basis such administrative
support services as the Commission may request.
(9) Printing.--For purposes of costs relating to printing and
binding, including the cost of personnel detailed from the
Government Printing Office, the Commission shall be deemed to
be a committee of the Congress.
(f) Report.--Not later than March 1, 2004, the Commission shall
submit a report to the President and Congress which shall contain a
detailed statement of only those the recommendations, findings, and
conclusions of the Commission.
(g) Termination.--The Commission shall terminate 30 days after the
date of submission of the report required in subsection (f).
(h) Authorization of Appropriations.--There are authorized to be
appropriated $1,500,000 to carry out this section.
SEC. 902. GAO STUDY ON MEDICAID DRUG PAYMENT SYSTEM.
(a) Study.--The Comptroller General of the United States shall
conduct a study on the reimbursement under the medicaid program for
covered outpatient drugs. Such study shall examine--
(1) the extent to which such reimbursements for a drug exceed
the acquisition costs for that drug;
(2) the services and resources associated with dispensing a
prescription and any additional payments available to
compensate for expenses for these services and resources; and
(3) efforts undertaken by States to change the levels of such
reimbursement and the price data they use in effecting such
change.
(b) Report.--Not later than 1 year after the date of the enactment of
this Act, the Comptroller General shall submit to Congress a report on
the study conducted under subsection (a) and shall include in such
report such recommendations for changes for legislative or
administrative action regarding medicaid reimbursement methodologies
for outpatient prescription drugs, and their application to the
medicare program, as the Comptroller General deems appropriate.
Subtitle B--Internet Pharmacies
SEC. 911. FINDINGS.
The Congress finds as follows:
(1) Legitimate Internet sellers of prescription drugs can
offer substantial benefits to consumers. These potential
benefits include convenience, privacy, valuable information,
competitive prices, and personalized services.
(2) Unlawful Internet sellers of prescription drugs may
dispense inappropriate, contaminated, counterfeit, or subpotent
prescription drugs that could put at risk the health and safety
of consumers.
(3) Unlawful Internet sellers have exposed consumers to
significant health risks by knowingly filling invalid
prescriptions, such as prescriptions based solely on an online
questionnaire, or by dispensing prescription drugs without any
prescription.
(4) Consumers may have difficulty distinguishing legitimate
from unlawful Internet sellers, as well as foreign from
domestic Internet sellers, of prescription drugs.
SEC. 912. AMENDMENT TO FEDERAL FOOD, DRUG, AND COSMETIC ACT.
(a) In General.--Chapter V of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 351 et seq.) is amended by inserting after section 503A
the following:
``SEC. 503B. INTERNET PRESCRIPTION DRUG SALES.
``(a) Definitions.--For purposes of this section:
``(1) Consumer.--The term `consumer' means a person (other
than an entity licensed or otherwise authorized under Federal
or State law as a pharmacy or to dispense or distribute
prescription drugs) that purchases or seeks to purchase
prescription drugs through the Internet.
``(2) Home page.--The term `home page' means the entry point
or main web page for an Internet site.
``(3) Internet.--The term `Internet' means collectively the
myriad of computer and telecommunications facilities, including
equipment and operating software, which comprise the
interconnected worldwide network of networks that employ the
Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio,
including electronic mail.
``(4) Interstate internet seller.--
``(A) In general.--The term `interstate Internet
seller' means a person whether in the United States or
abroad, that engages in, offers to engage in, or causes
the delivery or sale of a prescription drug through the
Internet and has such drug delivered directly to the
consumer via the Postal Service, or any private or
commercial interstate carrier to a consumer in the
United States who is residing in a State other than the
State in which the seller's place of business is
located. This definition excludes a person who only
delivers a prescription drug to a consumer, such as an
interstate carrier service.
``(B) Exemption.--With respect to the consumer
involved, the term `interstate Internet seller' does
not include a person described in subparagraph (A)
whose place of business is located within 75 miles of
the consumer.
``(5) Link.--The term `link' means either a textual or
graphical marker on a web page that, when clicked on, takes the
consumer to another part of the Internet, such as to another
web page or a different area on the same web page, or from an
electronic message to a web page.
``(6) Pharmacy.--The term `pharmacy' means any place licensed
or otherwise authorized as a pharmacy under State law.
``(7) Prescriber.--The term `prescriber' means an individual,
licensed or otherwise authorized under applicable Federal and
State law to issue prescriptions for prescription drugs.
``(8) Prescription drug.--The term `prescription drug' means
a drug under section 503(b)(1).
``(9) Valid prescription.--The term `valid prescription'
means a prescription that meets the requirements of section
503(b)(1) and other applicable Federal and State law.
``(10) Web site; site.--The terms `web site' and `site' mean
a specific location on the Internet that is determined by
Internet protocol numbers or by a domain name.
``(b) Requirements for Interstate Internet Sellers.--
``(1) In general.--Each interstate Internet seller shall
comply with the requirements of this subsection with respect to
the sale of, or the offer to sell, prescription drugs through
the Internet and shall at all times display on its web site
information in accordance with paragraph (2).
``(2) Web site disclosure information.--An interstate
Internet seller shall post in a visible and clear manner (as
determined by regulation) on the home page of its web site, or
on a page directly linked to such home page--
``(A) the street address of the interstate Internet
seller's place of business, and the telephone number of
such place of business;
``(B) each State in which the interstate Internet
seller is licensed or otherwise authorized as a
pharmacy, or if the interstate Internet seller is not
licensed or otherwise authorized by a State as a
pharmacy, each State in which the interstate Internet
seller is licensed or otherwise authorized to dispense
prescription drugs, and the type of State license or
authorization;
``(C) in the case of an interstate Internet seller
that makes referrals to or solicits on behalf of a
prescriber, the name of each prescriber, the street
address of each such prescriber's place of business,
the telephone number of such place of business, each
State in which each such prescriber is licensed or
otherwise authorized to prescribe prescription drugs,
and the type of such license or authorization; and
``(D) a statement that the interstate Internet seller
will dispense prescription drugs only upon a valid
prescription.
``(3) Date of posting.--Information required to be posted
under paragraph (2) shall be posted by an interstate Internet
seller--
``(A) not later than 90 days after the effective date
of this section if the web site of such seller is in
operation as of such date; or
``(B) on the date of the first day of operation of
such seller's web site if such site goes into operation
after such date.
``(4) Qualifying statements.--An interstate Internet seller
shall not indicate in any manner that posting disclosure
information on its web site signifies that the Federal
Government has made any determination on the legitimacy of the
interstate Internet seller or its business.
``(5) Disclosure to state licensing boards.--An interstate
Internet seller licensed or otherwise authorized to dispense
prescription drugs in accordance with applicable State law
shall notify each State entity that granted such licensure or
authorization that it is an interstate Internet seller, the
name of its business, the Internet address of its business, the
street address of its place of business, and the telephone
number of such place of business.
``(6) Regulations.--The Secretary is authorized to promulgate
such regulations as are necessary to carry out the provisions
of this subsection. In issuing such regulations, the
Secretary--
``(A) shall take into consideration disclosure
formats used by existing interstate Internet seller
certification programs; and
``(B) shall in defining the term `place of business'
include provisions providing that such place is a
single location at which employees of the business
perform job functions, and not a post office box or
similar locale.''.
(b) Prohibited Acts.--Section 301 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 331) is amended by adding at the end the
following:
``(bb) The failure to post information required under section
503B(b)(2) or for knowingly making a materially false statement when
posting such information as required under such section or violating
section 503B(b)(4).''.
SEC. 913. PUBLIC EDUCATION.
The Secretary of Health and Human Services shall engage in activities
to educate the public about the dangers of purchasing prescription
drugs from unlawful Internet sources. The Secretary should educate the
public about effective public and private sector consumer protection
efforts, as appropriate, with input from the public and private
sectors, as appropriate.
SEC. 914. STUDY REGARDING COORDINATION OF REGULATORY ACTIVITIES.
Not later than 180 days after the date of enactment of this Act, the
Secretary of Health and Human Services, after consultation with the
Attorney General, shall submit to Congress a report providing
recommendations for coordinating the activities of Federal agencies
regarding interstate Internet sellers that operate from foreign
countries and for coordinating the activities of the Federal Government
with the activities of governments of foreign countries regarding such
interstate Internet sellers.
SEC. 915. EFFECTIVE DATE.
The amendments made by this subtitle shall take effect 1 year after
the date of enactment of this Act, except that the authority of the
Secretary of Health and Human Services to commence the process of
rulemaking is effective on the date of enactment of this Act.
Subtitle C--Promotion of Electronic Prescription
SEC. 921. PROGRAM OF GRANTS TO HEALTH CARE PROVIDERS TO IMPLEMENT
ELECTRONIC PRESCRIPTION DRUG PROGRAMS.
Part P of title III of the Public Health Service Act is amended by
inserting after section 399N the following new section:
``SEC. 399O. GRANTS TO HEALTH CARE PROVIDERS TO IMPLEMENT ELECTRONIC
PRESCRIPTION DRUG PROGRAMS.
``(a) In General.--The Secretary is authorized to make grants for the
purpose of assisting health care providers who prescribe drugs and
biologicals in implementing electronic prescription programs described
in section 1860C(d)(3) of the Social Security Act.
``(b) Application.--No grant may be made under this section except
pursuant to a grant application that is submitted in a time, manner,
and form approved by the Secretary.
``(c) Authorization of Appropriations.--There are authorized to be
appropriated for fiscal year 2004, such sums as may be appropriate to
carry out this section.''.
Subtitle D--Treatment of Rare Diseases
SEC. 931. NIH OFFICE OF RARE DISEASES AT NATIONAL INSTITUTES OF HEALTH.
Title IV of the Public Health Service Act (42 U.S.C. 281 et seq.), as
amended by Public Law 107-84, is amended by inserting after section
404E the following:
``office of rare diseases
``Sec. 404F. (a) Establishment.--There is established within the
Office of the Director of NIH an office to be known as the Office of
Rare Diseases (in this section referred to as the `Office'), which
shall be headed by a Director (in this section referred to as the
`Director'), appointed by the Director of NIH.
``(b) Duties.--
``(1) In general.--The Director of the Office shall carry out
the following:
``(A) The Director shall recommend an agenda for
conducting and supporting research on rare diseases
through the national research institutes and centers.
The agenda shall provide for a broad range of research
and education activities, including scientific
workshops and symposia to identify research
opportunities for rare diseases.
``(B) The Director shall, with respect to rare
diseases, promote coordination and cooperation among
the national research institutes and centers and
entities whose research is supported by such
institutes.
``(C) The Director, in collaboration with the
directors of the other relevant institutes and centers
of the National Institutes of Health, may enter into
cooperative agreements with and make grants for
regional centers of excellence on rare diseases in
accordance with section 404G.
``(D) The Director shall promote the sufficient
allocation of the resources of the National Institutes
of Health for conducting and supporting research on
rare diseases.
``(E) The Director shall promote and encourage the
establishment of a centralized clearinghouse for rare
and genetic disease information that will provide
understandable information about these diseases to the
public, medical professionals, patients and families.
``(F) The Director shall biennially prepare a report
that describes the research and education activities on
rare diseases being conducted or supported through the
national research institutes and centers, and that
identifies particular projects or types of projects
that should in the future be conducted or supported by
the national research institutes and centers or other
entities in the field of research on rare diseases.
``(G) The Director shall prepare the NIH Director's
annual report to Congress on rare disease research
conducted by or supported through the national research
institutes and centers.
``(2) Principal advisor regarding orphan diseases.--With
respect to rare diseases, the Director shall serve as the
principal advisor to the Director of NIH and shall provide
advice to other relevant agencies. The Director shall provide
liaison with national and international patient, health and
scientific organizations concerned with rare diseases.
``(c) Definition.--For purposes of this section, the term `rare
disease' means any disease or condition that affects less than 200,000
persons in the United States.
``(d) Authorization of Appropriations.--For the purpose of carrying
out this section, there are authorized to be appropriated such sums as
already have been appropriated for fiscal year 2002, and $4,000,000 for
each of the fiscal years 2003 through 2006.''.
SEC. 932. RARE DISEASE REGIONAL CENTERS OF EXCELLENCE.
Title IV of the Public Health Service Act (42 U.S.C. 281 et seq.), as
amended by section 931, is further amended by inserting after section
404F the following:
``rare disease regional centers of excellence
``Sec. 404G. (a) Cooperative Agreements and Grants.--
``(1) In general.--The Director of the Office of Rare
Diseases (in this section referred to as the `Director'), in
collaboration with the directors of the other relevant
institutes and centers of the National Institutes of Health,
may enter into cooperative agreements with and make grants to
public or private nonprofit entities to pay all or part of the
cost of planning, establishing, or strengthening, and providing
basic operating support for regional centers of excellence for
clinical research into, training in, and demonstration of
diagnostic, prevention, control, and treatment methods for rare
diseases.
``(2) Policies.--A cooperative agreement or grant under
paragraph (1) shall be entered into in accordance with policies
established by the Director of NIH.
``(b) Coordination With Other Institutes.--The Director shall
coordinate the activities under this section with similar activities
conducted by other national research institutes, centers and agencies
of the National Institutes of Health and by the Food and Drug
Administration to the extent that such institutes, centers and agencies
have responsibilities that are related to rare diseases.
``(c) Uses for Federal Payments Under Cooperative Agreements or
Grants.--Federal payments made under a cooperative agreement or grant
under subsection (a) may be used for--
``(1) staffing, administrative, and other basic operating
costs, including such patient care costs as are required for
research;
``(2) clinical training, including training for allied health
professionals, continuing education for health professionals
and allied health professions personnel, and information
programs for the public with respect to rare diseases; and
``(3) clinical research and demonstration programs.
``(d) Period of Support; Additional Periods.--Support of a center
under subsection (a) may be for a period of not to exceed 5 years. Such
period may be extended by the Director for additional periods of not
more than 5 years if the operations of such center have been reviewed
by an appropriate technical and scientific peer review group
established by the Director and if such group has recommended to the
Director that such period should be extended.
``(e) Authorization of Appropriations.--For the purpose of carrying
out this section, there are authorized to be appropriated such sums as
already have been appropriated for fiscal year 2002, and $20,000,000
for each of the fiscal years 2003 through 2006.''.
Subtitle E--Other Provisions Relating to Drugs
SEC. 941. GAO STUDY REGARDING DIRECT-TO-CONSUMER ADVERTISING OF
PRESCRIPTION DRUGS.
(a) In General.--The Comptroller General of the United States shall
conduct a study for the purpose of determining--
(1) whether and to what extent there have been increases in
utilization rates of prescription drugs that are attributable
to guidance regarding direct-to-consumer advertising of such
drugs that has been issued by the Food and Drug Administration
under section 502(n) of the Federal Food, Drug, and Cosmetic
Act; and
(2) if so, whether and to what extent such increased
utilization rates have resulted in increases in the costs of
public or private health plans, health insurance, or other
health programs.
(b) Certain Determinations.--The study under subsection (a) shall
include determinations of the following:
(1) The extent to which advertisements referred to in such
subsection have resulted in effective consumer education about
the prescription drugs involved, including an understanding of
the risks of the drugs relative to the benefits.
(2) The extent of consumer satisfaction with such
advertisements.
(3) The extent of physician satisfaction with the
advertisements, including determining whether physicians
believe that the advertisements interfere with the exercise of
their medical judgment by influencing consumers to prefer
advertised drugs over alternative therapies.
(4) The extent to which the advertisements have resulted in
increases in health care costs for taxpayers, for employers, or
for consumers due to consumer decisions to seek advertised
drugs rather than lower-costs alternative therapies.
(5) The extent to which the advertisements have resulted in
decreases in health care costs for taxpayers, for employers, or
for consumers due to decreased hospitalization rates, fewer
physician visits (not related to hospitalization), lower
treatment costs, or reduced instances of employee absences to
care for family members with diseases or disorders.
(c) Report.--Not later than two years after the date of the enactment
of this Act, the Comptroller General of the United States shall submit
to the Congress a report providing the findings of the study under
subsection (a).
SEC. 942. CERTAIN HEALTH PROFESSIONS PROGRAMS REGARDING PRACTICE OF
PHARMACY.
Part E of title VII of the Public Health Service Act (42 U.S.C. 294n
et seq.) is amended by adding at the end the following subpart:
``Subpart 3--Pharmacist Workforce Programs
``SEC. 771. PUBLIC SERVICE ANNOUNCEMENTS.
``(a) Public Service Announcements.--
``(1) In general.--The Secretary shall develop and issue
public service announcements that advertise and promote the
pharmacist profession, highlight the advantages and rewards of
being a pharmacist, and encourage individuals to enter the
pharmacist profession.
``(2) Method.--The public service announcements described in
subsection (a) shall be broadcast through appropriate media
outlets, including television or radio, in a manner intended to
reach as wide and diverse an audience as possible.
``(b) State and Local Public Service Announcements.--
``(1) In general.--The Secretary shall award grants to
entities to support State and local advertising campaigns
through appropriate media outlets to promote the pharmacist
profession, highlight the advantages and rewards of being a
pharmacist, and encourage individuals to enter the pharmacist
profession.
``(2) Use of funds.--An entity that receives a grant under
subsection (a) shall use funds received through such grant to
acquire local television and radio time, place advertisements
in local newspapers, and post information on billboards or on
the Internet, in order to--
``(A) advertise and promote the pharmacist
profession;
``(B) promote pharmacist education programs;
``(C) inform the public of public assistance
regarding such education programs;
``(D) highlight individuals in the community that are
presently practicing as pharmacists to recruit new
pharmacists; and
``(E) provide any other information to recruit
individuals for the pharmacist profession.
``(3) Method.--The campaigns described in subsection (a)
shall be broadcast on television or radio, placed in newspapers
as advertisements, or posted on billboards or the Internet, in
a manner intended to reach as wide and diverse an audience as
possible.
``SEC. 772. DEMONSTRATION PROJECT.
``(a) In General.--The Secretary shall establish a demonstration
project to enhance the participation of individuals who are pharmacists
in the National Health Service Corps Loan Repayment Program described
in section 338B.
``(b) Services.--Services that may be provided by pharmacists
pursuant to the demonstration project established under this section
include medication therapy management services to assure that
medications are used appropriately by patients, to enhance patients'
understanding of the appropriate use of medications, to increase
patients' adherence to prescription medication regimens, to reduce the
risk of adverse events associated with medications, and to reduce the
need for other costly medical services through better management of
medication therapy. Such services may include case management, disease
management, drug therapy management, patient training and education,
counseling, drug therapy problem resolution, medication administration,
the provision of special packaging, or other services that enhance the
use of prescription medications.
``(c) Procedure.--The Secretary may not provide assistance to an
individual under this section unless the individual agrees to comply
with all requirements described in sections 338B and 338D.
``(d) Limitations.--The demonstration project described in this
section shall provide for the participation of--
``(1) individuals to provide services in rural and urban
areas; and
``(2) enough individuals to allow the Secretary to properly
analyze the effectiveness of such project.
``(e) Designations.--The demonstration project described in this
section, and any pharmacists who are selected to participate in such
project, shall not be considered by the Secretary in the designation of
a health professional shortage area under section 332 during fiscal
years 2003 through 2005.
``(f) Rule of Construction.--This section shall not be construed to
require any State to participate in the project described in this
section.
``(g) Report.--The Secretary shall prepare and submit a report on the
project to--
``(1) the Committee on Health, Education, Labor, and Pensions
of the Senate;
``(2) the Subcommittee on Labor, Health and Human Services,
and Education of the Committee on Appropriations of the Senate;
``(3) the Committee on Energy and Commerce of the House of
Representatives; and
``(4) the Subcommittee on Labor, Health and Human Services,
and Education of the Committee on Appropriations of the House
of Representatives.
``SEC. 773. INFORMATION TECHNOLOGY.
``(a) Grants and Contracts.--The Secretary may make awards of grants
or contracts to qualifying schools of pharmacy for the purpose of
assisting such schools in acquiring and installing computer-based
systems to provide pharmaceutical education. Education provided through
such systems may be graduate education, professional education, or
continuing education. The computer-based systems may be designed to
provide on-site education, or education at remote sites (commonly
referred to as distance learning), or both.
``(b) Qualifying School of Pharmacy.--For purposes of this section,
the term `qualifying school of pharmacy' means a school of pharmacy (as
defined in section 799B) that requires students to serve in a clinical
rotation in which pharmacist services are part of the curriculum.
``SEC. 774. AUTHORIZATION OF APPROPRIATIONS.
``For the purpose of carrying out this subpart, there are authorized
to be appropriated such sums as may be necessary for each of the fiscal
years 2003 through 2006.''.
I. INTRODUCTION
A. Purpose and Summary and,
B. Background and Need for Legislation
Thirty-seven years ago Congress enacted the Medicare
program to help provide health care to our nation's seniors.
Medicare has improved and lengthened the lives of millions of
people. In recent years, Congress successively slowed
Medicare's growth rate and added new preventive benefits to
keep seniors healthier. Yet Medicare has still not met its true
promise because it remains mired in a rigid administrative
structure, which can only change when Congress enacts a law.
When Medicare was enacted, there were few prescription
drugs, and most care was delivered in hospitals. Consequently,
prescription drugs were not covered under Medicare. While about
two-thirds of seniors have some prescription drug coverage
through former employers, Medicare+Choice organizations,
Medicaid, state pharmacy assistance programs and Medigap, that
coverage has been declining and is often inadequate. Many other
seniors lack prescription drug coverage and the bargaining
power to reduce the price of drugs.
Prescription drugs are an integral part of healthcare
today. They prevent and manage diseases and are less invasive
and costly than alternative health care options (e.g. surgery,
hospitalization, nursing home admissions, etc.) Most private
health plans voluntarily integrated prescription drugs into
their benefits. Nobody today with a blank sheet of paper would
design a seniors health care program that excluded prescription
drugs. Yet, the absence of a prescription drug benefit
epitomizes how Medicare has not kept pace with modern medicine.
While a Medicare prescription drug benefit is long overdue, it
is not the only problem afflicting a program so many of us
cherish and want to strengthen.
Medicare's irrational and unpredictable payments to
physicians are just one example of what is wrong with
reimbursement policy in the Medicare program. While health
costs are escalating, under the current Sustainable Growth Rate
formula, payments to physicians are being substantially
reduced. Failure to change the law would result in nearly a 20
percent cut in physician reimbursement over the next several
years. Patients' access to physicians will suffer and the
doctors Medicare beneficiaries rely on will only become more
demoralized. Similarly, rural hospitals continue to struggle
and are not paid equitably in comparison to large urban
hospitals. In addition, numerous Medicare+Choice plans are
withdrawing from the program and are substantially cutting
benefits because government payments are not related to the
actual costs of health care.
At the same time Medicare is arguably overpaying for other
services, such as durable medical equipment. Recently, the
Office of Inspector General documented that taxpayers and
Medicare beneficiaries are paying millions more for durable
medical equipment than other programs, such as the Federal
Employee Health Benefit Plan.
In addition, the health care professionals that serve
Medicare beneficiaries are being crushed by more than 130,000
pages of overly burdensome regulations--four times more than
those governing the Internal Revenue Code. This hampers their
ability to provide quality care to seniors, and it must be
changed.
This bill addresses all of these issues and more.
First and foremost, it provides a voluntary, affordable
prescription drug benefit as an entitlement to all
beneficiaries. The proposal is within the $350 billion
allocated under the budget resolution and there are no
gimmicks, such as a sunset that terminates the program after
five years of operation, as has been suggested by the Senate.
The bill provides a markedly more generous than the benefit the
House passed just two years ago. First, the subsidy has been
increased from 35 percent to 65 percent. Second, the front-end
coverage has been improved from a 50-50 cost share, to 80-20
cost-share, which is similar to employer provided coverage.
Third, the catastrophic protection has been lowered from $6,000
in out-of-pocket costs to $3,800. Finally, the bill does more
for the low-income--those who need help most. It provides low-
income individuals additional assistance with their premiums
and cost sharing up to 175 percent of poverty, as opposed to
150 percent. It is important to note 175 percent of poverty in
2005, when this program is up and running is $17,575 for an
individual and $22,624 for a couple.
The prescription drug benefit is delivered through
competing private sector entities, which already deliver
pharmaceutical benefits for millions of people, including every
Member of Congress. The bill permits and encourages these plans
to utilize private sector tools to aggressively negotiate lower
prices and provide better service for beneficiaries. By
exempting prices negotiated for Medicare beneficiaries from the
Medicaid ``best price'' provision, the bill encourages steep
discounting by pharmaceutical manufacturers, saving taxpayers
and beneficiaries over $15 billion. The private sector delivery
is backed up by a government guarantee that all seniors in
every area of the country must be covered. Indeed, the
Congressional Budget Office and the CMS Office of the Actuary
predicts that more than 95 percent of seniors will voluntarily
sign up for this benefit.
More than 57 different provider and patient groups have
endorsed this legislation because it modernizes irrational
reimbursements and burdensome regulatory structures, which
undermine the quality and accessibility of care. The bill
reforms physician payments, addresses inequities between rural
and large urban hospitals, stabilizes the Medicare+Choice
program, permanently repeals the 15 percent home health cut
that has been hanging like a guillotine over home health
agencies, and improves payments for skilled nursing facilities
and dialysis centers.. More importantly, the legislation sets
Medicare on a path of more rational pricing, determined by the
market place rather than by government edict, by moving durable
medical equipment, the Medicare+Choice program, and its
contractors, to a competitive system, making Medicare more
efficient over the long-term.
In addition, the bill includes the bipartisan Johnson-Stark
regulatory and contracting reform bill that reduces unnecessary
regulation and modernizes how Medicare selects its contractors.
The Johnson-Stark Regulatory and Contracting Reform Act of
2001, which the House of Representatives unanimously passed in
December 2001, has failed to even receive a hearing in the
Senate.
The bill also establishes a new Medicare Benefits
Administration to manage and oversee the Medicare+Choice and
prescription drug benefits, parts C and D of the Medicare
program. Creation of the MBA eliminates the inherent conflict
of interest of requiring the government-run fee-for-service
plan to regulate competing private plans.
Finally, the bill provides clear improvements for
beneficiaries by reducing excessive beneficiary cost-sharing
charges for hospital outpatient settings by nearly $10 billion
and for the first time covering physicals and cholesterol
screening to keep seniors healthy and diagnose problems before
they become serious.
C. Legislative History
In the 106th Congress, the House of Representatives passed
the ``Rx 2000'' bill (H.R. 4680), which would create a
prescription drug benefit in Medicare. However, President
Clinton opposed that legislation and the Senate failed to act
on Medicare prescription drugs.
LEGISLATIVE HEARINGS
During the 107th Congress, the Committee on Ways and Means
or its Subcommittee on Health held 16 hearings exploring how
Medicare should be strengthened and modernized. These hearings,
which examined all aspects of the Medicare program, included
expert testimony from academics and beneficiary and provider
representatives.
February 28, 2001 Perspectives on Medicare Reform
March 14, 2001 Administration's Health and Welfare Priorities
March 15, 2001 Bringing Regulatory Relief to Beneficiaries and
Providers
March 20, 2001 Medicare Solvency
March 27, 2001 Laying the Groundwork for a Rx Drug Benefit
May 1, 2001 Medicare+Choice: Lessons for Reform
May 9, 2001 Strengthening Medicare: Modernizing Beneficiary
Cost Sharing
June 12, 2001 Rural Health Care in Medicare
July 19, 2001 Administration's Principles to Strengthen and
Modernize Medicare
September 25, 2001 H.R. 2768, Medicare Regulatory and
Contracting Reform Act
December 4, 2001 Status of the Medicare+Choice Program
February 28, 2002 Reforming Physician Payments
March 7, 2002 Health Quality and Medical Errors
March 14, 2002 Medicare Supplemental Insurance
April 16, 2002 Promoting Disease Management in Medicare
April 17, 2002 Integrating Prescription Drugs into Medicare
In October 2001, the Ways and Means Committee unanimously
approved the Medicare Regulatory and Contracting Reform Act
(H.R. 2768), sponsored by Representatives Nancy Johnson and
Pete Stark. After resolving differences with the Energy and
Commerce Committee, that bill was unanimously approved by the
House of Representatives in December 2001, but not taken up by
the Senate. That legislation constitutes Title VIII of the
Medicare Modernization and Prescription Drug Act of 2002.
The House-passed Budget Resolution (H. Con. Res. 353)
allocated $350 billion over 10 years for Medicare
modernization, prescription drugs and adjustments to provider
reimbursements.
H.R. 4954, ``The Medicare Modernization and Prescription
Drug Act of 2002,'' was introduced by Health Subcommittee
Chairman Nancy Johnson on June 18 2002 (after being released to
the public June 14) and jointly referred to the Ways and Means
and Energy and Commerce Committee. It was marked up by the Full
Committee June 18, 2002 and approved 22-16 after accepting
several amendments, including the Thomas amendment in the
nature of a substitute.
The reported bill has nine titles:
Title I: Establishment of a Medicare
Prescription Drug Benefit
Title II: Medicare+Choice Revitalization and
Medicare+Choice Competition Program.
Title III: Rural Health Care Improvements
Title IV: Provisions Relating to Part A
Title V: Provisions Relating to Part B
Title VI: Provisions Relating to Part A and
B
Title VII: Medicare Benefits Administration
Title VIII: Regulatory Reduction and
Contracting Reform
Title IX: Medicaid, Public Health and Other
Provisions
II. EXPLANATION OF PROVISIONS
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
Section 101. Establishment of a Medicare Prescription Drug Benefit
CURRENT LAW
Medicare does not cover most outpatient prescription drugs.
Beneficiaries who are inpatients of hospitals or skilled
nursing facilities may receive drugs as part of their
treatment. Medicare payments made to the facilities cover these
costs. Medicare also makes payments to physicians for drugs or
biologicals that are not usually self-administered. This means
that coverage is generally limited to drugs or biologicals
administered by injection. However, if the injection is
generally self-administered (e.g., insulin), it is not covered.
Despite the general limitation on coverage for outpatient
drugs, the law specifically authorizes coverage for the
following: (1) drugs used in immunosuppressive therapy (such as
cyclosporin) following discharge from a hospital for a Medicare
covered organ transplant; (2) erythropoietin (EPO) for the
treatment of anemia for persons with chronic renal failure who
are on dialysis; (3) drugs taken orally during cancer
chemotherapy providing they have the same active ingredients
and are used for the same indications as chemotherapy drugs
which would be covered if they were not self-administered and
were administered as incident to a physician's professional
service; and (4) hemophilia clotting factors for hemophilia
patients competent to use such factors to control bleeding
without medical supervision, and items related to the
administration of such factors. The program also pays for
supplies (including drugs) that are necessary for the effective
use of covered durable medical equipment, including those,
which must be put directly into the equipment (e.g., tumor
chemotherapy agents used with an infusion pump). Medicare also
covers pneumococcal pneumonia vaccines, hepatitis B vaccines,
and influenza virus vaccines.
EXPLANATION OF PROVISION
The provision would establish a new Voluntary Prescription
Drug Benefit Program under a new Part D of Title XVIII of the
Social Security Act.
New Section 1860A. Benefits; Eligibility; Enrollment; and Coverage
Period
The new Section 1860A would specify that each individual
entitled to Medicare Part A and enrolled in Medicare Part B
would be entitled to obtain qualified prescription drug
coverage. An individual enrolled in a Medicare+Choice (M+C)
plan providing qualified prescription drug coverage could
obtain coverage through the plan. An individual not enrolled in
a M+C plan providing qualified prescription drug coverage could
enroll under Part D in a new prescription drug plan (PDP). The
provision would specify that an individual eligible to make an
election to enroll in a PDP, or with a M+C with qualified drug
coverage, would do so in accordance with regulations issued by
the Administrator of the new Medicare Benefits Administration
(MBA). Enrollments and changes in enrollment could occur only
during a specified election period. The election periods would
generally be the same as those established for M+C, including
annual coordinated election periods and special election
periods. An individual discontinuing a M+C election during the
first year ofeligibility would be permitted to enroll in a PDP
at the same time as the election of coverage under the original fee-
for-service plan.
The provision would establish initial election periods. A
six-month election period, beginning on November 1, 2004, would
be established for persons enrolled under Part B on that date.
For persons first enrolling in Part B after that date, an
initial election period, which is the same as that for initial
part B enrollment, would be established. The Administrator
would be required to establish special election periods for
persons in special circumstances. Specifically these would
apply to: persons having and involuntarily losing prescription
drug coverage; in cases of enrollment delays or non-enrollment
attributable to government action; in the case of an individual
meeting exceptional circumstances specified by the
Administrator (including circumstances identified by the
Administrator for M+C enrollment); and in cases of individuals
who become eligible for Medicaid drug coverage.
The provision would establish guaranteed issue and
community-rating requirements. The provision would specify that
individuals electing qualified prescription drug coverage under
a PDP plan or M+C could not be denied enrollment based on
health status or other factors. Existing M+C provisions
relating to priority enrollment (where capacity limits have
been reached) and limitations on terminations of elections
would apply to PDP sponsors.
The provision would specify that PDP sponsors and M+C
organizations providing qualified prescription drug coverage
could not deny, limit, or condition the coverage or provision
of benefits or increase the premium based on any health-related
status factor in the case of persons who maintained continuous
prescription drug coverage since the date they first qualified
to elect drug coverage under Part D. Individuals who did not
maintain continuous coverage could be subject to an adjusted
premium or a pre-existing condition exclusion in a manner
reflecting the additional actuarial risk involved. Such risk
would be established through an appropriate actuarial opinion.
The provision would specify that an individual is
considered to have had continuous prescription drug coverage if
the individual establishes that he or she has had coverage
under one of the following (and coverage in one plan occurs no
more than 63 days after termination of coverage in another
plan): (1) qualified prescription drug coverage under a PDP or
M+C plan; (2) Medicaid prescription drug coverage; (3)
prescription drug coverage under a group health plan, but only
if benefits are at least equivalent to benefits under a
qualified PDP; (4) prescription drug coverage under a Medigap
plan, but only if the policy was in effect on January 1, 2005,
and only if the benefits are at least equivalent to benefits
under a qualified PDP; (5) state pharmaceutical assistance
program, but only if benefits are at least equivalent to
benefits under a qualified PDP; and (6) veterans coverage for
prescription drugs, but only if benefits are at least
equivalent to benefits under a qualified PDP. Individuals could
apply to the Administrator to waive the requirement that such
coverage be at least equivalent to benefits under a qualified
prescription drug plan. They could make such application if
they could establish that they were not adequately informed
that the coverage did not provide such level of coverage.
The provision would prohibit PDP sponsors from establishing
a service area in a manner that would discriminate based on the
health or economic status of potential enrollees.
The provision would provide that elections would take
effect at the same time that elections take effect for M+C
plans. However, no election could take effect before January 1,
2005. The Secretary would provide for the termination of an
election in the case of termination of Part B coverage or
termination of an election by the M+C for cause (including
failure to pay the required premium).
New Section 1860B. Requirements for Qualified Prescription Drug
Coverage
The new Section 1860B specifies the requirements for
qualified prescription drug coverage. Qualified coverage is
defined as either a standard coverage or actuarially equivalent
coverage. The Administrator would have to approve plans as
actuarially equivalent and meeting the requirements of this
part. In either standard coverage or actuarially equivalent
coverage, access would have to be provided to negotiated
prices.
For 2005, standard coverage would be defined as having a
$250 deductible; 20 percent cost-sharing up to the initial co-
payment threshold ($1,000) 50 percent cost-sharing for costs
above the initial co-payment threshold up to the $2,000 initial
coverage limit and catastrophic coverage at $3,800. Once the
beneficiary reached the catastrophic level (a stop loss at
limit), full coverage would be provided. Beginning in 2006, the
annual dollar amounts would be increased by the annual
percentage increase in average per capita aggregate
expenditures for covered outpatient drugs for Medicare
beneficiaries for the 12-month period ending in July of the
previous year.
Plans may offer alternate coverage if the plan meets the
following five criteria: (1) the entire benefit is actuarially
equivalent to the standard benefit; (2) costs up to the initial
co-payment threshold, from the $250 deductible to $1000, are
actuarially consistent with an average expected 20 percent
cost-sharing for costs up to the initial co-payment threshold;
(3) for costs above $1000 threshold up to the initial coverage
limit ($2,000), are actuarially consistent with an average
expected 50 percent cost-sharing for costs up to the initial
coverage threshold; (4) the plan must offer the identical
catastrophic benefit ($3,800); and (5) the unsubsidized value
of the standard benefit equals the unsubsidized value of an
alternative benefit.
The provision would specify incurred costs that would count
toward meeting the deductible, initial coverage limit, and
amounts for which benefits are not provided because of
application of the initial coverage limits. Costs would be
treated as incurred costs only if they were paid by the
individual, paid on behalf of a low-income individual under the
subsidy provisions, or paid under the Medicaid program.
Both standard coverage and actuarially equivalent coverage
would have to offer access to negotiated prices, even when no
benefits were payable because of the application of cost
sharing or an initial coverage limit. Insofar as a state
elected to use these negotiated prices for its Medicaid
program, the Medicaid drug payment provisions would not apply.
The PDP sponsor or M+C organization would be required to
disclose to the Administrator the extent to which manufacturer
discounts or rebates were made available to the sponsor or
organization and passed through to enrollees through pharmacies
and other dispensers. Manufacturers would be required to
disclose pricing information to the Administrator under the
same conditions currently required for Medicaid. In order to
encourage significant discounting for pharmaceutical
manufacturers, Medicaid best price requirements would not apply
with respect to covered prescription drugs provided to Medicare
beneficiaries. This provision removes the arbitrary floor
price, which as numerous studies documents has led to
discounting by pharmaceutical manufacturers. More competitive
negotiation between Medicare PDPs, Medicare+Choice
organizations, retiree employee plans could commence with
pharmaceutical manufacturers.
Qualified prescription drug coverage could include coverage
exceeding that specified for standard coverage or actuarially
equivalent coverage. However, any additional coverage would be
limited to covered outpatient drugs. The Administrator could
terminate a contract with a PDP sponsor or M+C organization if
a determination was made that the sponsor or organizations
engaged in activities intended to discourage enrollment of
classes of eligible Medicare beneficiaries obtaining coverage
through the plan on the basis of their higher likelihood of
utilizing prescription drug coverage.
Covered outpatient drugs would be defined to include: (1) a
drug which may only be dispensed subject to a prescription and
which is described in subparagraph (A)(i) or (A)(ii) of Section
1927(k) of the Social Security Act (relating to drugs covered
under Medicaid); (2) a biological product described in
paragraph (b) of such subsection; (3) insulin described in
subparagraph C of such section; and (4) prescription smoking
cessation agents otherwise excluded under Medicaid. The
definition includes any use of a covered outpatient drug for a
medically accepted indication. Drugs that could be paid for
under Medicare Part A or B would not be covered under Part D. A
plan could elect to exclude a drug which would otherwise be
covered, if the drug was excluded under the formulary and the
exclusion was not successfully appealed under the new Section
1660C. In addition, a PDP or M+C plan could exclude from
coverage, subject to reconsideration and appeals provisions,
any drug that would not meet Medicare's definition of medically
necessary or was not prescribed in accordance with the plan or
Part D.
New Section 1860C. Beneficiary Protections for Qualified Prescription
Drug Coverage
The New Section 1860C would specify required beneficiary
protections. Plans would have to comply with guaranteed issue
and community-rated premium requirements specified in the New
Section 1860A and the non-discrimination provisions specified
in the new Section 1860F.
PDP plan sponsors would be required to disclose, to each
enrolling beneficiary, information about the plan's benefit
structure. The plan would have to disclose information on: (1)
access to covered drugs, including access through pharmacy
networks; (2) how any formulary used by the sponsor functions;
(3) co-payment and deductible requirements (including any
applicable tiered co-payment requirements; and (4) grievance
and appeals procedures. In addition, as is the case for M+C,
beneficiaries would have the right to obtain more detailed plan
information. Plans would be required to have a mechanism for
providing specific information to enrollees on request. The
sponsor would be required to make available, through an
Internet web site and, on request, in writing, information on
specific changes in the formulary. Plans would be required to
furnish to enrollees, at least monthly, a detailed explanation
of benefits when drug benefits were provided.
Plans would be required to secure the participation in its
network of a sufficient number of pharmacies that distribute
drugs directly to patients to make access to covered benefits
convenient for enrollees. Mail order only pharmacies would not
count towards meeting this requirement. Medicare, not the plan,
must certify this requirement. The PDP sponsor would be
required to establish an optional point-of-service method of
operation under which the plan provides access to any or all
pharmacies that are not participating pharmacies in its
network. Plans could charge beneficiaries, through adjustments
in premiums or co-payments, additional costs associated with
the point of service option.
The PDP sponsor would be required to issue (and reissue as
appropriate) a card or other technology that may be used by an
enrolled beneficiary to assure access to negotiated prices for
drugs when coverage is not otherwise provided under the plan.
Plans are not required to establish formularies, however,
the provision would specify that if a plan used a formulary, it
would have to meet certain requirements. It would be required
to establish a pharmaceutical and therapeutics committee to
develop and review the formulary. The committee would include
at least one physician and one pharmacist with expertise in the
care of elderly or disabled persons and majority of members
would be physicians or pharmacists. The committee would be
required, when developing and reviewing the formulary, to base
clinical decisions on the strength of scientific evidence and
standards of practice. This would include assessing peer-
reviewed medical literature, such as randomized clinical
trials, pharmacoeconomic studies, outcomes research data, and
such other information the committee determined appropriate.
The formulary would have to include drugs within each
therapeutic category and class of covered outpatient drugs,
although not necessarily all drugs within such categories or
classes. The committee would be required to establish policies
and procedures to educate and inform health care providers
concerning the formulary. Any removal of a drug from the
formulary could not occur until appropriate notice had been
provided to beneficiaries and physicians. The PDP sponsor would
be required to have, as part of its appeals process, a process
for appeals of coverage denials based on application of the
formulary.
The PDP sponsor would be required to have an effective cost
and drug utilization management program, quality assurance
measures including a medication therapy management program.
Beginning in 2006, prescriptions must be transmitted
electronically. Utilization management programs would be
required to include medically appropriate incentives to use
generic drugs and therapeutic interchange where appropriate.
Medication therapy management programs would be designed to
assure, for beneficiaries with chronic diseases or multiple
prescriptions, that drugs under the plan were appropriately
used to achieve therapeutic goals and reduce the risk of
adverse events, including adverse drug interactions. The
program would be developed in cooperation with licensed
pharmacists and physicians. The PDP sponsor would be required,
when establishing fees for pharmacists and other providers, to
take into account the resources and time associated with the
medication therapy management program.
Each PDP sponsor would ensure that enrolled beneficiaries
were informed at the time of purchase, of any price
differential between their prescribed drug and the price of the
lowest cost generic drug covered under the plan that was
therapeutically equivalent and bioequivalent.
The electronic prescription drug program would have to be
consistent with national standards developed by the
Administrator. It would be required to provide for electronic
transmittal of prescriptions (except in emergencies and
exceptional cases) and for provision of information to the
prescribing health professional. To the extent feasible, the
program would permit the prescribing health professional to
provide, and be provided, information on an interactive real-
time basis. Grants would be authorized under the Public Health
Service Act to assist health care professionals in implementing
electronic prescription drug programs.
The electronic prescribing standards would be compatible
with those established for the administrative simplification
program established under title XI of the Social Security Act.
The Administrator would establish an advisory task force that
included representatives of physicians, hospitals, pharmacists,
and technology experts, Department of Veterans Affairs,
Department of Defense and other appropriate Federal agencies.
The task force would provide recommendations to the
Administrator on standards including recommendations relating
to: (1) range of available computerized prescribing software
and hardware and their costs to develop and implement; (2)
extent to which such systems reduce medication errors and can
be readily implemented by physicians and hospitals; (3) efforts
to develop a common software platform for computerized
prescribing; (4) cost of implementing such systems in hospital
and physician office settings; and (5) implementation issues as
they relate to administrative simplification requirements and
current Federal and state prescribing laws and regulations and
their impact on implementation and computerized prescribing.
The Administrator would be required to establish the task force
by April 1, 2003. It would be required to submit
recommendations to the Administrator by January 1, 2004. The
Administrator would be required to promulgate national
standards by January 1, 2005.
Each PDP sponsor would be required to have meaningful
procedures for the hearing and resolving of any grievances
between the organization (including any entity or individual
through which the organization provides covered benefits) and
enrollees. Enrollees would be afforded access to expedited
determinations and reconsiderations, in the same manner
afforded under M+C. A beneficiary in a plan that provided for
tiered cost-sharing could request coverage of a non-preferred
drug on the same conditions applicable to preferred drugs, if
the prescribing physician determined that the preferred drug
was not as effective for the enrollee or had adverse effects
for the enrollee.
In general, PDP plan sponsors would be required to meet the
requirements for independent review of coverage denials and
appeals in the same manner that such requirements apply to M+C
plans. An individual enrolled in a PDP plan could appeal to
obtain coverage for a drug not on the formulary if the
prescribing physician determined that the formulary drug for
treatment of the same condition was not as effective for the
individual or had adverse effects for the individual. The PDP
sponsor would be required to meet requirements related to
confidentiality and accuracy of enrollee records in the same
manner that such requirements apply to M+C plans.
New Section 1860D. Requirements for Prescription Drug Plan (PDP)
Sponsors; Contracts; Establishment of Standards
New Section 1860D would specify organizational plan
requirements for entities seeking to become PDP plan sponsors.
In general, the section would require PDP sponsors to be
licensed under state law as a risk bearing entity eligible to
offer health benefits or health insurance coverage in each
state in which it offers a prescription drug plan.
Alternatively it could meet solvency standards established by
the Administrator for entities not licensed by the state. Plans
would be required to assume full financial risk on a
prospective basis for covered benefits except: (1) as covered
by federal reinsurance payments for high cost enrollees; or (2)
as covered by federal incentive payments to encourage plans to
expand service areas for existing plans or establish new plans.
The entity could obtain reinsurance to cover the risk of
providing benefits.
PDP plan sponsors would be required to enter into a
contract with the Administrator under which the sponsor agrees
to comply both with the applicable requirements and standards
and the terms and conditions of payment. The contract could
cover more than one plan. The Administrator would have the same
authority to negotiate the terms and conditions of the plans as
the Director of Personnel Management has with respect to
Federal Employee Health Benefits (FEHB) plans. The
Administrator would be required to take into account
reinsurance subsidy payments and the adjusted community rate
for covered benefits in negotiating the terms and conditions
regarding premiums.
The new section would incorporate, by reference, many of
the contract requirements applicable to M+C plans including
minimum enrollment, contract periods, allowable audits to
protect against fraud and abuse, intermediate sanctions, and
contract terminations. Pro rata user fees could be established
to help finance enrollment activities; in no case could the
amount of the fee exceed 20 percent of the maximum fee
permitted for a M+C plan.
The new Section would permit the Administrator to waive the
state licensure requirement under circumstances similar to
those permitted under Part C for provider sponsored
organizations. In such cases, plans would be required to meet
financial solvency and capital adequacy standards established
by the Administrator. The Administrator would be given
authority to establish by regulation additional standards as
deemed appropriate to implement Part D and would be required to
publish such regulations by October 1, 2003.
The standards established under Part D would supersede any
state law or regulation (other than state licensing laws or
laws relating to plan solvency). In addition, states would be
prohibited from imposing premium taxes or similar taxes with
respect to premiums paid to PDP sponsors or payments made to
such sponsors by the Administrator.
New Section 1860E. Process for Beneficiaries to Select Qualified
Prescription Drug Coverage
The new Section 1860E would require the Administrator to
establish a process for the selection of a PDP plan or a
Medicare+Choice plan that provided qualified prescription drug
coverage. The process would include the conduct of annual
coordinated electionperiods under which individuals could
change the qualifying plans through which they obtained coverage. The
process would also include the active dissemination of information to
promote an informed selection among qualifying plans (based on price,
quality, and other features) in a manner consistent with and in
coordination with the dissemination of information under M+C. Further,
the process would provide for the coordination of elections through
filing with a M+C organization or a PDP sponsor in a manner consistent
with that provided under M+C.
The section would specify that a Medicare+Choice enrollee
in a M+C plan offering qualified prescription drug coverage
could only elect to receive such coverage through the plan.
The Administrator would assure that all eligible
individuals residing in the U.S. would have a choice of
enrollment in at least two qualifying plan options (at least
one of which was a PDP) in their area of residence. The
requirement would not be satisfied if only one PDP sponsor or
M+C organization offered all the qualifying plans in the area.
If necessary to ensure such access, the Administrator would be
authorized to provide financial incentives, including the
partial underwriting of risk, for a PDP sponsor to expand its
service area under an existing prescription drug plan to
adjoining or additional areas, or to establish such a plan,
including offering such plan on a regional or nationwide basis.
The assistance would be available only so long as, and to the
extent, necessary to assure the guaranteed access. However, the
Administrator could never provide for the full underwriting of
financial risk for any PDP sponsor, nor could the Administrator
provide for any assumption of financial risk for a public PDP
sponsor offering a nationwide drug plan. Additionally, the
Administrator would be directed to seek to maximize the
assumption of financial risk by PDP sponsors and M+C
organizations. The Administrator would be required to report to
Congress annually on the exercise of this authority and
recommendations to minimize the exercise of such authority.
New Section 1860F. Submission of Bids
Each PDP sponsor must submit to the Administrator specified
information in the same manner as such information is submitted
by M+C organizations. The information to be submitted would be
information on the qualified drug coverage to be provided, the
actuarial value of the coverage, and information on the bid for
the coverage. The PDP sponsor would have to include an
actuarial certification of: (1) the actuarial basis for the
bid; (2) the portion of the bid attributable to benefits in
excess of the standard coverage; (3) the reduction in the bid
resulting from reinsurance subsidies; and (4) such other
information required by the Administrator. The Administrator
would review and approve the submitted information for purposes
of conducting negotiations with the plan.
The bid for a PDP could not vary among individuals enrolled
in the plan in the same service area, provided they were not
subject to late enrollment penalties. A PDP Plan must permit an
enrollee the option of withholding their premium from Social
Security. Additionally it could encourage enrollees to make
payment of the premium through an electronic funds transfer
mechanism or withholding their premium from Social Security.
The amount would be credited to the Medicare Prescription Drug
Trust Fund. Reductions in Part B premiums attributable to
enrollment in M+C plans could be used to reduce the premium
otherwise applicable. PDP plans would receive payment based on
the bid amount in the same manner applicable for M+C except
that payment would be made from the Medicare Prescription Drug
Trust Fund.
Under certain conditions, the PDP sponsor of any plan in an
area would be required to accept, for an individual eligible
for a premium subsidy, the benchmark amount (as defined in new
Section 1860G) as payment in full for the premium for qualified
prescription coverage; this requirement would apply if there
was no standard coverage available in the area. M+C plans would
be required to accept the benchmark amount under the same
conditions.
New Section 1860G. Premium and Cost-Sharing Subsidies for Low-Income
Individuals
The New Section 1860G would provide income-related
subsidies for low-income individuals. Low-income persons would
receive a premium subsidy based on the value of standard
coverage. Individuals with incomes below 150 percent of poverty
would have a subsidy equal to 100 percent of the value of
standard drug coverage provided under the plan. Beginning in
2006, these amounts would be increased by the percentage
increase in per capita beneficiary drug costs. For individuals
between 150 percent and 175 percent of poverty, there would be
a sliding scale premium subsidy ranging from 100 percent of
such value at 150 percent of poverty to 0 percent of such value
at 175 percent of poverty. For both groups, beneficiary cost-
sharing for spending up to the initial coverage limit would be
reduced to an amount not to exceed $2 for a multiple source or
generic drug and $5 for a non-preferred drug. PDPs cannot
charge individuals receiving cost-sharing subsidies more than
$5 per prescription. PDPs could reduce to zero the cost sharing
otherwise applicable for generic drugs.
A beneficiary would have the option of having State
Medicaid plans or Social Security offices determine whether an
individual was eligible for the subsidy and the amount of the
subsidy. Funds would be authorized to fund the new
responsibility for the Social Security offices. The
Administrator would make the determination if the state did not
operate such a plan (or a state waiver program under Section
1115 of the Social Security Act). Individuals not in the 50
states or the District of Columbia could not be subsidy
eligible individuals but could be eligible for financial
assistance with drug costs under new Section 1935(e) added by
Section 103.
The premium subsidy amount would be defined as the
benchmark bid amount for the qualified prescription drug
coverage that the beneficiary selects whether offered by a PDP
plan or a M+C plan in the area. The benchmark bid amount for a
PDP plan means the bid amount for enrollment under the plan
(without regard to any subsidies or late enrollment penalties)
for enrollment in a plan-providing standard converge (or
alternative coverage if the actuarial value is equivalent). If
a plan provides alternative coverage with a higher actuarial
value than that for standard coverage, the benchmark amount
would bear the same ratio to the total bid as the actuarial
value of standard coverage was to the actuarial value of
alternative coverage. The benchmark amount for M+C plans would
be the portion of the bid attributable to standard drug
coverage.
The Administrator would provide a process whereby the
Administrator would notify the PDP sponsor or M+C organization
that an individual is eligible for a subsidy and the amount of
the subsidy. The sponsor or organization would reduce the
premiums or cost-sharing otherwise imposed by the amount of the
subsidy. The Administrator would periodically, and on a timely
basis, reimburse the sponsor or organization for the amount of
the reductions. Part D benefits would be primary to any
coverage available under Medicaid.
The Administrator would be required to develop and
implement a plan for the coordination of Part D benefits and
Medicaid benefits. Particular attention would be given to
coordination of payments and preventing fraud and abuse. The
Administrator would be required to involve the Secretary, the
States, the data processing industry, pharmacists,
pharmaceutical manufacturers, and other experts in the
development and administration of the plan.
Section 1860H. Subsidies for All Medicare Beneficiaries for Qualified
Prescription Drug Coverage
New Section 1860H would provide for subsidy payments to
qualifying entities. The Payments would reduce premiums for all
beneficiaries, reduce adverse selection among plans, and
promote the participation of PDP sponsors. Such payments would
be made as direct subsidies or through reinsurance, and
together create an average combined 65 percent subsidy. The
section would constitute budget authority in advance of
appropriations and represent the obligation of the
Administrator to provide for subsidy payments specified under
the section.
Direct subsidies would be made for individuals enrolled in
a PDP, M+C plan, or qualified retiree prescription drug plan
equal to a percentage, specified by the Administrator of the
actuarial value of standard coverage provided under the plan
and totaling 35 percent.
Reinsurance payments totaling 30 percent of the standard
benefit would be made for specified costs incurred in providing
prescription drug coverage for individuals enrolled in either a
PDP plan, a M+C plan providing qualified prescription drug
coverage, or a qualified retiree drug plan. The Administrator
would provide for reinsurance payments to PDP sponsors, M+C
plans providing qualified prescription drug coverage, and
qualified retiree drug plans. Reinsurance payments would be
provided for 30 percent of an individual's allowable drug costs
over the initial coverage limit ($1,000 in 2005) but not over
the initial coverage limit ($2,000 in 2005). Reinsurance, not
to exceed 80 percent would also be provided for costs over the
out-of-pocket limit ($3,800 in 2005).
For purposes of calculating reinsurance payments, allowable
costs would be defined as the portion of gross covered
prescription drug costs that are actually paid by the plan, but
in no case be more than the part of such costs that would have
been paid by the plan if the drug coverage under the plan were
standard coverage. Gross covered drug costs would be defined as
costs (including administrative costs) incurred under the plan
for covered prescription drugs dispensed during the year,
including costs related to the deductible, whether paid by the
enrollee or the plan, regardless of whether coverage under the
plan exceeded standard coverage and regardless of when the
payment for the drugs was made.
The Administrator would be required to estimate the total
subsidy payments that would be made during the year and total
benefit payments that would be expected to be made by
qualifying entities for standard coverage during the year. The
Administrator would proportionately adjust payments such that:
(1) total subsidy payments during the year were equal to 65
percent of total payments made by qualifying plans for standard
coverage during the year; and (2) the ratio of total payments
for direct subsidies to total reinsurance payments for the year
is 35 to 30. The Administrator could adjust direct subsidy
payments in order to avoid risk selection, but may not make any
adjustment that would reduce the aggregate subsidy. The payment
method would be determined by the Administrator who could use
an interim payment system based on estimates. Payments would be
made from the Medicare Prescription Drug Trust Fund.
``Qualified retiree prescription drug plans'' would be
defined as employment-based retiree health coverage meeting
certain requirements. The sponsor of the plan would be required
to annually attest to the Administrator (and to provide such
assurances as required by the Administrator) that the coverage
meets requirements for qualified coverage. The sponsor (and the
plan) would be required to maintain and provide access to
records needed to ensure the adequacy of coverage and the
accuracy of payments made. Further, the sponsor would be
required to provide certifications of coverage. Payment could
not be made for an individual unless: the individual was
covered under the retiree plan, entitled to enroll under a PDP
or M+C plan with prescription drug coverage but elected not to.
Payments could not be made for persons covered under the
Medicare a secondary payer program.
New Section 1860I. Medicare Prescription Drug Trust Fund
New Section 1860I would create a Medicare Prescription Drug
Trust Fund. Requirements applicable to the Part B trust fund
would apply in the same manner to the Drug Trust Fund as they
apply to the Part B Trust Fund. The Managing Trustee would pay
from the account, from time to time, low-income subsidy
payments, subsidy payments, and payments for administrative
expenses. The Managing Trustee would transfer, from time to
time, to the Medicaid account amounts attributable to allowable
increases in administrative costs associated with identifying
and qualifying beneficiaries eligible for low-income subsidies.
Amounts deposited into the Trust Fund would include the federal
amount which would otherwise be payable by Medicaid except for
the fact that Medicaid becomes the secondary payer of drug
benefits for the dual eligibles. The provision would authorize
appropriations to the Trust Fund an amount equal to the amount
of payments from the Trust Fund reduced by the amount
transferred to the Trust Fund.
The provision would specify that any provision of law
relating to the solvency of the Trust Fund would take into
account the Fund and the amounts received by, or payable from,
the Fund.
New Section 1860J. Definitions; Treatment of References to Provisions
in Part C
New section 1860J would include definitions of terms and
specify how cross references to Part C would be applied. It
would further provide that any reduction or waiver of cost-
sharing would not be in violation of kickback and similar
prohibitions. The section would further require the
Administrator to submit a report to Congress by January 1,
2004, that makes recommendations regarding providing benefits
under Part D.
EFFECTIVE DATE
Enactment.
Section 102. Offering of Qualified Prescription Drug Coverage Under the
Medicare+Choice Program
CURRENT LAW
Under current law, Medicare+Choice plans may elect to offer
prescription drug coverage under Part C. The extent of these
benefits varies and is not subject to any explicit
standardization requirements. However, as with all
Medicare+Choice benefit specifics, the financing and design of
such benefits must meet the approval of the Secretary under the
adjusted community rate (ACR) approval process. Generally,
plans offering drugs must either finance such benefits from the
differences between the applicable county payment rate and
their costs in providing Medicare's basic benefits, or by
assessing beneficiaries who enroll in the plan supplemental
premiums.
EXPLANATION OF PROVISION
The provision would specify that a M+C plan could not offer
drug coverage (other than that already required under Medicare)
unless the coverage was at least qualified prescription drug
coverage. No M+C organization would be required to offer such
coverage. An individual not electing qualified prescription
drug coverage under Part D would be treated as ineligible to
enroll in a M+C plan offering such coverage.
The organization would be required to meet beneficiary
protections outlined in the new Section 1860C, including
requirements relating to information dissemination and
grievance and appeals. The organization would also be required
to submit the same information required of PDP sponsors when
submitting a bid. The Administrator could waive such
requirements to the extent the Administrator determined they
were duplicative of requirements otherwise applicable to the
organization or plan.
EFFECTIVE DATE
Applies to coverage provided on or after January 1, 2005.
Section 103. Medicaid Amendments
CURRENT LAW
Some low-income aged and disabled Medicare beneficiaries
are also eligible for full or partial coverage under Medicaid.
Within broad federal guidelines, each state sets its own
eligibility criteria, including income eligibility standards.
Persons meeting the state standards are entitled to coverage
under Medicaid. Persons entitled to Medicaid protection
generally have all of their health care expenses met by a
combination of Medicare and Medicaid. For these dual eligibles,
Medicare pays first for services both programs cover. Medicaid
picks up Medicare cost-sharing charges and provides protection
against the costs of services generally not covered by
Medicare, including prescription drugs. State Medicaid programs
have the option to include prescription drugs in their Medicaid
benefit packages. All states include drugs for at least some of
their Medicaid beneficiaries and many offer it to all program
recipients entitled to full Medicaid benefits.
Federal law specifies several population groups that are
entitled to more limited Medicaid protection. These are
qualified Medicare beneficiaries (QMBs), specified low-income
beneficiaries (SLIMBs), and certain qualified individuals. QMBs
are aged or disabled persons with incomes at or below the
federal poverty level and assets below $4,000 for an individual
and $6,000 for a couple. QMBs are entitled to have their
Medicare cost-sharing charges, including the Part B premium,
paid by the federal-state Medicaid program. SLIMBs are persons
who meet the QMB criteria, except that their income is over the
QMB limit; the SLIMB limit is 120 percent of the federal
poverty level. Medicaid protection for SLIMBs is limited to
payment of the Medicare Part B premium. QMBs and SLIMBs are not
entitled to Medicaid's prescription drug benefit unless they
are also entitled to full Medicaid coverage under their state's
Medicaid program.
Qualifying individuals (QIs) are never entitled to Medicaid
drug coverage (because, by definition, they are not eligible
for full Medicaid benefits). QI-1s are persons who meet the QMB
criteria, except that their income is between 120 percent and
135 percent of poverty. Medicaid protection for QI-1s is
limited to payment of the monthly Medicare Part B premium. QI-
2s are persons who meet the QMB criteria, except that their
income is between 135 percent and 175 percent of poverty.
Medicaid protection for QI-2s is limited to payment of that
portion of the Part B premium attributable to the gradual
transfer of some home health visits from Medicare Part A to
Medicare Part B. Expenditures under the QI-1 and QI-2 programs
are paid for 100 percent by the federal government (from the
Part B trust fund) up to the state's allocation level. A state
is only required to cover the number of persons which would
bring its spending on these population groups in a year up to
its allocation level. Any expenditure beyond that level is paid
by the state. Assistance under the QI-1 and QI-2 programs is
available for the period January 1, 1998 to December 31, 2002.
EXPLANATION OF PROVISION
Section 103 would add a new Section 1935 to the Social
Security Act entitled a Special Provisions Relating to Medicare
Prescription Drug Benefit. The provision requires states, as a
condition of receiving federal Medicaid assistance, to make
eligibility determinations for low-income premium and cost-
sharing subsidies. Individuals could qualify for low-income
subsidies at Social Security offices as well. The provision
would provide for the phased-in federal assumption of
associated administrative costs. In 2005, the federal matching
rate would be increased by 10 percent and in 2006 by 20
percent. In each subsequent year the percent would be increased
by ten percentage points (but in no case could the rate exceed
100 percent). Beginning in 2013, the federal matching rate
would be100 percent. The state would be required to provide the
Administrator with the appropriate information needed to properly
allocate administrative expenditures that may be made for similar
eligibility determinations.
The provision would provide for the federal phase-in of the
costs of premiums and cost-sharing subsidies for dual eligibles
(i.e. persons eligible for Medicare and full Medicaid benefits,
including drugs). Over a 10-year period the federal matching
rate for these costs would be increased to cover 100 percent of
what would otherwise be state costs. States would be required
to maintain Medicaid benefits as a wrap around to Medicare
benefits for dual eligibles; states could require that these
persons elect Part D drug coverage.
Territories would be able to get additional Medicaid funds,
beginning at $20 million in 2005 and increasing in subsequent
years by the annual percentage increase in prescription drug
costs for Medicare beneficiaries. In order to obtain these
funds, territories would be required to formulate a plan on how
they would dedicate the funds to assist low-income Medicare
beneficiaries in obtaining covered outpatient prescription
drugs. The Administrator would be required to report to
Congress on the application of the law in the territories.
EFFECTIVE DATE
Enactment.
Section 104. Medigap Transition
CURRENT LAW
Most beneficiaries have some health insurance coverage in
addition to basic Medicare benefits. Some individuals obtain
private supplementary coverage through an individually-
purchased policy, commonly referred to as a Medigap policy.
Beneficiaries with Medigap insurance typically have coverage
for Medicare's deductibles and coinsurance; they may also have
coverage for some items and services not covered by Medicare.
Individuals generally select from one of 10 standardized plans,
though not all 10 plans are offered in all states. The 10 plans
are known as Plans A through Plan J. Plan A covers a basic
package of benefits. Each of the other nine plans includes the
basic benefits plus a different combination of additional
benefits. Plan J is the most comprehensive. Plans H, I, and J
offer some drug coverage.
The law provided for the development by the National
Association of Insurance Commissioners (NAIC) of standardized
benefit packages. It also provides for modifications of such
packages when Medicare benefit changes are enacted.
All insurers offering Medigap policies are required to
offer open enrollment for 6 months from the date a person first
enrolls in Medicare Part B (generally when the enrollee turns
65). The law also guarantees issuance of specified Medigap
policies for certain persons whose previous supplementary
coverage was terminated. Guaranteed issue also applies to
certain persons who elect to try out a managed care option
under the Medicare+Choice plan program.
EXPLANATION OF PROVISION
The provision would prohibit, effective January 1, 2005,
the issuance of new Medigap policies with prescription drug
coverage. The prohibition would not apply to policies replacing
another policy with drug coverage. Further, it would not apply
to policies meeting new standards, as outlined below.
The provision would guarantee issuance of a substitute
Medigap policy for persons, enrolling in Part D, who at the
time of such enrollment were enrolled in and terminated
enrollment in a Medigap policy H, I, or J. The guaranteed
enrollment would be for any of the Plans A through Plan G. The
guarantee would apply for enrollments occurring in the new
Medigap plan within 63 days of termination of enrollment in a
Medigap drug Plan H, I, or J. The insurer could not impose an
exclusion based on a pre-existing condition for such
individuals. Further, the insurer would be prohibited from
discriminating in the pricing of such policy on the basis of
the individual's health status, claims experience, receipt of
health care or medical condition.
The provision would provide for the development by the NAIC
of two new standardized Medigap plans and would outline the
standards for these policies. The first new policy would have
the following benefits (notwithstanding other provisions of law
relating to core benefits): (1) coverage of 50 percent of the
cost-sharing otherwise applicable (except coverage of 100
percent cost-sharing applicable for preventive benefits); (2)
no coverage of the Part B deductible; (3) coverage of all
hospital coinsurance for long stays (as in current core
package); and (4) a limitation on annual out-of-pocket costs of
$4,000 in 2005 (increased in future years by an appropriate
inflation adjustment as specified by the Secretary). The second
new policy would have the same benefit structure as the first
new policy, except that: (1) coverage would be provided for 75
percent, rather than 50 percent, of cost-sharing otherwise
applicable; and (2) the limitation on out-of-pocket costs would
be $2,000, rather than $4,000. Both policies could provide for
coverage of Part D cost sharing; however, neither policy could
cover the Part D deductible. Medigap cost sharing of qualified
prescription drug expenses would be limited to the two new
policies.
EFFECTIVE DATE
Enactment.
Section 105. Medicare Prescription Drug Discount Card Endorsement
Program
CURRENT LAW
On July 12, 2001, the President announced a new national
drug discount card program for Medicare beneficiaries. Under
this program, CMS would endorse drug card programs meeting
certain requirements. This program was viewed as an interim
step until a legislative reform package, including both a drug
benefit and other Medicare reforms, was enacted. Implementation
of the drug discount card program was delayed by court action.
However, CMS was allowed to proceed with rule making. On March
6, 2002, CMS issued proposed rule making.
EXPLANATION OF PROVISION
The provision would provide the authority for the Secretary
to initiate an endorsed prescription drug discount program to
provide immediate savings for beneficiaries and to establish
the infrastructure to later deliver the full funded
prescription drug program. The program would have to pass on to
enrollees' discounts on drugs, including discounts negotiated
with manufacturers. The program could not be limited to mail
order drugs. It would have to provide pharmaceutical support
services, such as education and counseling, and services to
prevent adverse drug interactions. It would have to provide,
through the Internet and otherwise, information to enrollees
that the Secretary identified as being necessary to provide for
informed choice by beneficiaries among endorsed programs. This
would include information on enrollment fees, prices charged to
beneficiaries, and services offered under the program. The
entity operating the program would have to demonstrate
experience and expertise in operating such a program or a
similar program. Further, the program would be required to meet
additional requirements identified by the Secretary to protect
and promote the interest of Medicare beneficiaries, including
requirements that assure that beneficiaries were not charged
more than the lower of the negotiated retail price or the usual
and customary price.
The Secretary would provide for the dissemination of
information, which compared the costs and benefits of such
programs. This activity would be coordinated with the
dissemination of educational information on M+C plans. The
Secretary would provide appropriate oversight to ensure
compliance of endorsed programs with the requirements of
Section 105, including verification of discounts and services.
The Secretary would be required to provide, through the use of
the Medicare toll free number, for the receipt and response to
inquiries and complaints. The Secretary would be required to
revoke the endorsement of any program the Secretary deemed no
longer met requirements or engaged in false or misleading
marketing practices. The provision would specify that a
beneficiary could only be enrolled in one endorsed program at a
time.
The provision would provide that the Secretary would
provide for an appropriate transition and discontinuance of the
endorsement program at the time benefits first become available
under Part D.
EFFECTIVE DATE
Enactment.
TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE
COMPETITION PROGRAM
Subtitle A--Medicare+Choice Revitalization
Section 201. Medicare+Choice Improvements
CURRENT LAW
Under current law, Medicare+Choice (M+C) plans are paid an
administered monthly payment amount, called the M+C payment
rate, for each enrollee. The per capita rate for a payment area
is set at the highest of three amounts, calculated according to
formulas established in statute. The three amounts are:
A minimum payment (or floor) rate,
A rate calculated as a blend of an area-
specific (local) rate and a national rate or,
A rate reflecting a minimum increase from the
previous year's rate.
Each year, the three payment amounts are updated by
formulas set in statute. Both the floor and the blend are
updated each year by a measure of growth in program spending,
the national growth percentage. The third payment amount, the
minimum increase, is updated annually by an additional 2
percent over the previous year's amount.
After preliminary M+C payment rates are determined for each
payment area (typically a county), a budget neutrality
adjustment is required by law to determine final payment rates.
This adjustment is made so that estimated total M+C payments in
a given year will be equal to the total payments that would be
made if payments were based solely on area-specific rates. The
budget neutrality adjustment may only be applied to the blended
rates because rates cannot be reduced below the floor or
minimum increase amounts. The blend payment is also adjusted to
remove the costs of direct and indirect graduate medical
education. The blend payment amount is based on a weighted
average of local and national rates for all Medicare
beneficiaries.
EXPLANATION OF PROVISION
This provision would make changes to the M+C payment
amounts for 2003 and 2004 to stabilize the program. The
capitation rate for an M+C payment area would be based on the
largest of 4 amounts, by adding a fee-for-service rate. If
higher than other M+C payment rates, plans would be paid based
on100 percent of fee-for-service (FFS) costs, as calculated by
the adjusted average per capita cost (AAPCC) for that year, for
a payment area, including costs for only the fee-for-service
beneficiaries and not the costs for those enrolled in an M+C
plan. The AAPCC would be adjusted to include an estimate of the
additional Medicare payments that would have been made if
Medicare beneficiaries had not used facilities of the
Department of Veterans Affairs (VA) and the Department of
Defense (DOD) for Medicare-covered benefits.
This provision would make adjustments to the calculation of
the blend payment in 2003 and 2004: (1) the national average
used in the calculation of the blend would be revised, to
reflect only M+C enrollees, rather than all beneficiaries; and
(2) the area-specific rate component of the blend would be
modified to include an estimate of the additional payments that
would have been made if Medicare beneficiaries had not received
Medicare covered benefits from facilities of the VA and the
DOD. Both of these modifications would increase the blend rate.
Budget neutrality would be permanently eliminated, so that
plans would receive a blend rate, if that rate were the highest
rate.
For 2003 and 2004, the minimum percentage increase would be
3 percent above the previous year's amount instead of 2 percent
under current law. This provision would guarantee that all
plans receive at least a 3 percent increase.
Within two weeks after enactment, the Secretary would be
required to determine and announce the new M+C payments rates,
as revised by this Section.
MedPAC would be required to conduct a study to assess the
method for determining the AAPCC, including information on the
appropriate geographic area, variation in cost between
different areas, and the accuracy of risk adjustment. This
study must be submitted within 9 months of enactment.
The Secretary would be required to submit a report to
Congress describing the impact of additional financing provided
under this Act and other Acts (including the Balanced Budget
Refinement Act (BBRA) of 1999 and the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA))
on the availability of Medicare+Choice plans in different areas
and its impact on lowering premiums and increasing benefits
under such plans.
EFFECTIVE DATE
Enactment.
Section 202. Making Permanent Change in Medicare+Choice Reporting
Deadlines and Annual, Coordinated Election Period
CURRENT LAW
Prior to enactment of the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (P.L. 107-
188), the Centers for Medicare and Medicaid Services (CMS) was
required to announce the annual Medicare+Choice (M+C) payment
rates, which would be applicable on January 1st of the
following year, by no later than March 1 of each year. Each M+C
organization was required to submit to the Secretary of HHS,
for each of its M+C plans, specific information about the
adjusted community rate (ACR), M+C premiums, cost sharing, and
additional benefits (if any) no later than July 1 of each year,
also for the following year. The Secretary then reviewed this
information and approved or disapproved the M+C plan premiums,
cost-sharing amounts, and benefits. Medicare beneficiaries
could also make or change elections to an M+C plan each
November, during the annual coordinated election period.
P.L. 107-188 made a number of temporary changes. First, CMS
moved its annual announcement of M+C payment rates from no
later than March 1 to no later than the 2nd Monday in May,
effective for 2003 and 2004. P.L. 107-188 also temporarily
moved the deadline for plans to submit information about ACRs,
M+C premiums, cost sharing, and additional benefits (if any)
from no later than July 1 to no later than the 2nd Monday in
September in 2002, 2003, and 2004. It also changed the annual
coordinated election period from the month of November to
November 15th through December 31 in 2002, 2003, and 2004.
EXPLANATION OF PROVISION
This provision would permanently extend the deadline
changes that were temporarily changed by P.L. 107-188. CMS
would make its annual announcement of payment rates no later
than the 2nd Monday in May of each year. The deadline for plans
to submit their information would be no later than the 2nd
Monday in September. The annual coordinated election period
would take place from November 15th through December 31 of each
year.
EFFECTIVE DATE
Enactment.
Section 203. Avoiding Duplicative State Regulation
CURRENT LAW
Medicare law currently preempts State law or regulation
from applying to M+C plans to the extent they are inconsistent
with federal requirements imposed on M+C plans, and
specifically, relating to benefit requirements, the inclusion
or treatment of providers, and coverage determinations
(including related appeals and grievance processes).
EXPLANATION OF PROVISION
This provision would clarify that Federal standards would
supersede any State law or regulation (other than State
licensing laws or State laws relating to plan solvency), with
respect to M+C plans offered by M+C organizations.
EFFECTIVE DATE
Enactment.
Section 204. Specialized Medicare+Choice Plans for Special Needs
Beneficiaries
CURRENT LAW
One model for providing a specialized M+C plan, EverCare,
operates as a demonstration program. EverCare is designed to
study the effectiveness of managing acute-careneeds of nursing
home residents by pairing physicians and geriatric nurse practitioners
(who function as primary Medicare care givers and case managers).
EverCare receives a fixed capitated payment, based on a percentage of
the AAPCC, for all nursing home resident Medicare enrollees. There are
6 demonstration sites, for a total enrollment of about 10,000
individuals.
EXPLANATION OF PROVISION
This provision would allow specialized plans for special
needs beneficiaries (such as the EverCare demonstration) to
become any type of M+C coordinated care plan. Special needs
beneficiaries would be defined as those M+C eligible
individuals who are institutionalized, entitled to Medicaid, or
meet requirements determined by the Secretary. Enrollment in
specialized M+C plans could be limited to special needs
beneficiaries until January 1, 2007. The Medicare Benefits
Administrator would be required to report to Congress by
December 31, 2005 providing an assessment of the impact of
these plans. The Secretary would be required to issue final
regulations establishing requirements for special needs
beneficiaries within 6 months after enactment of this
legislation.
EFFECTIVE DATE
Enactment.
Section 205. Medicare MSAs
CURRENT LAW
The Balanced Budget Act authorized a demonstration to test
the feasibility of medical savings accounts for the Medicare
program. The M+C option is a combination of a health insurance
plan with a large deductible and an M+C MSA. Contributions to
an M+C MSA may be made annually from the enrollee's capitation
rate after the plan's insurance premium has been paid. These
contributions, as well as account earnings, are exempt from
taxes. Withdrawals used to pay unreimbursed enrollee medical
expenses (that are deductible under the Internal Revenue Code)
are not taxed. New enrollment is not allowed after 2003 or
after the number of enrollees reaches 390,000.
EXPLANATION OF PROVISION
This provision would permanently extend Medicare MSAs and
remove the enrollment cap. It would eliminate the requirement
that Medicare MSA plans report on enrollee encounters since
MSAs are not plans, but bank accounts. Non-contract providers
furnishing services to enrollees of MSAs would be subject to
the same balanced billing limitations as non-contract providers
furnishing services to enrollees of coordinated care plans.
EFFECTIVE DATE
Enactment.
Section 206. Extension of Reasonable Cost and SHMO Contracts
CURRENT LAW
Reasonable Cost Contracts. Medicare reimburses cost-based
plans for the actual cost of furnishing covered services, less
the estimated value of beneficiary cost sharing. Following the
enactment of BBA 97, the Secretary was prohibited from entering
into new cost reimbursement contracts, except with
organizations that had provided only Part B services.
Reasonable cost contracts may apply to expand service areas
through September 1, 2003. The Secretary cannot extend or renew
a reasonable cost reimbursement contract for any period beyond
December 31, 2004.
SHMOs. The Deficit Reduction Act of 1984 required the
Secretary to grant 3-year waivers for demonstrations of social
health maintenance organizations (SHMOs) which provide
integrated health and long-term care services on a prepaid,
capitated payment basis. The waivers have been extended on
several occasions since then, and the Omnibus Budget
Reconciliation Act of 1990 authorized a second generation of
projects. BBA 97 extended waivers for SHMOs through December
31, 2000, and expanded the number of persons who can be served
per site from 12,000 to 36,000. BBRA 99 extended the SHMO
waivers until 18 months after the Secretary submits a report
with a plan for integration and transition of SHMOs into an
option under M+C. BIPA extended SHMO waivers until 30 months
after the Secretary submits a report with a plan for
integration and transition of SHMOs into an option under the
M+C program. This 30-month extension supersedes the 18-month
extension in BBRA 99.
EXPLANATION OF PROVISION
Reasonable Cost Contracts. This provision would allow a
reasonable cost contract to be extended or renewed beyond
December 31, 2004 if there were no coordinated care M+C plans
in its service area. A cost contract could convert to an M+C
plan to serve its previously served area. The cost contract
could continue to operate in parts of its service area without
M+C coordinated care plans. A cost contract could re-enter a
previously served area if all other coordinated care M+C plans
in the area terminated their contracts. The Medicare Benefits
Administrator shall submit a report to Congress no later than
February 1, 2004 on an appropriate transition for cost contract
plans.
SHMOs. The provisions would extend the waivers permitting
operation of SHMOs through December 31, 2004. Nothing would
prevent a SHMO from offering an M+C plan.
EFFECTIVE DATE
Enactment.
Section 207. Extension of Municipal Health Service Demonstration
Projects
CURRENT LAW
The Medicare Municipal Health Services demonstration
projects to improve access to primary care services have been
extended: through December 2000 by the BBA 97; through 2002 by
the BBRA 99; and through 2004 by the BIPA of 2000.
EXPLANATION OF PROVISION
This provision would extend the Medicare Municipal Health
Services demonstration projects through December 31, 2009, but
only with respect to individuals who reside in the city in
which the project is operated. The total number of participants
could not exceed the number participating as of January 1,
1996.
EFFECTIVE DATE
Enactment.
Subtitle B--Medicare+Choice Competition Program
Section 211. Medicare+Choice Competition Program
CURRENT LAW
See Section 201 explanation of current law.
EXPLANATION OF PROVISION
Beginning in 2005, a new M+C payment system would be
established based on competitive bidding for the provision of
all items and services. Plans would compete for enrollees based
on cost and quality of care. Beneficiaries and the government
would save when beneficiaries enroll in plans that provide
efficient care.
The provision would establish a benchmark amount for each
payment area and a procedure for plans to develop a bid amount.
Additionally, enrollees would be eligible for rebates, under
certain circumstances.
The bid amount would indicate the proportion of the bid
attributable to the provision of: (1) statutory non-drug
benefits, (2) statutory prescription drug benefits, and (3)
non-statutory benefits. Plans would be required to submit this
information and the actuarial bases for determining these
amounts, as well as other information that the Administrator
may require to verify the actuarial bases. The bid amount could
not vary by enrollees within a plan.
The Administrator would have authority to negotiate monthly
bid amounts (including portions of the bid), and may reject a
bid amount, or a portion of it, that is not supported by the
actuarial bases provided by the plan.
The fee-for-service area-specific non-drug benchmark
(benchmark) amount would be set at the larger of 100 percent of
the FFS costs (95 percent for 2008 and thereafter), the minimum
update, or the minimum monthly amount (i.e., floor). FFS costs
would be set at the AAPCC for that year, for a payment area
(including costs for only the fee-for-service beneficiaries and
not the costs for those enrolled in an M+C plan) adjusted to
include estimated costs for VA and DOD services to Medicare-
eligible beneficiaries.
Both the benchmark and the bids would be risk adjusted
based on statewide assumptions, or based on a determination by
the Administrator.
If the risk adjusted benchmark exceeded the risk adjusted
bid (for statutory non-drug benefits), beneficiaries would
qualify for rebates of 75 percent of the difference in the form
of: (1) a credit towards their M+C monthly supplementary
beneficiary premium, or the premium imposed for prescription
drug coverage; (2) a direct monthly payment; (3) other means
approved by the Secretary; or (4) some combination. The
government would retain the remaining 25 percent of the
savings. If the monthly bid exceeded the benchmark, enrollees
would pay an M+C monthly basic beneficiary premium, equal to
the amount by which the monthly bid exceeded the benchmark.
Plans would be paid based on their bid amounts. For plans
with bids below the benchmark, their payment would be the bid
amount, risk adjusted for demographic and health status
factors, plus the rebate amount. The risk adjustment procedure
would not be changed from current law. The rebate amount would
be distributed to the plan's enrollees by one of the approved
methods, as discussed above. For plans with bids at or above
the benchmark, their payments would equal the benchmark amount,
risk adjusted for demographic and health status factors.
EFFECTIVE DATE
Effective for payments and premiums for months beginning
with January 2005.
Section 212. Demonstration Program for Competitive-Demonstration Areas
CURRENT LAW
See Section 201 explanation of current law.
EXPLANATION OF PROVISION
This provision would establish a demonstration program for
competitive-demonstration areas, defined as: (1) metropolitan
statistical areas or areas with a substantial number of M+C
enrollees; (2) with at least 2 M+C plans offered by different
organizations; and (3) with at least 50 percent of M+C
eligibles enrolled in an M+C plan. The demonstration program
would be limited to a maximum of 4 sites and no area could be
designated as a competitive-demonstration area for more than 2
years. The Administrator would have discretion to decide
whether or not to designate a qualified area as a competitive-
demonstration area.
For each competitive-demonstration area, the Administrator
shall annually determine the choice non-drug benchmark amount,
defined as the sum of the weighted FFS and M+C components. The
weighted FFS component would be calculated by multiplying the
national fee-for-service (FFS) market share for the year
(defined as the nationwide proportion of M+C eligibles during
March of the previous year who were not enrolled in an M+C
plan) by the FFS area-specific non-drug bid (set at the AAPCC
for that year, for a payment area (including costs for only the
fee-for-service beneficiaries and not the costs for those
enrolled in an M+C plan) adjusted to include estimated costs
for VA and DOD services to Medicare-eligible beneficiaries).
The M+C component would be calculated by multiplying 1 minus
the national FFS market share for the year by the weighted
average of plan bids for the area and year. The weighted
average of plan bids would equal the sum of the proportion of
each plan's enrollees in the area times the unadjusted monthly
non-drug bid amount, as calculated for each plan.
If the choice risk adjusted benchmark exceeded the risk
adjusted bid (for statutory non-drug benefits), beneficiaries
would qualify for rebates for 75 percent of the difference in
the form of: (1) a credit towards their M+C monthly
supplementary beneficiary premium, or the premium imposed for
prescription drug coverage; (2) a direct monthly payment; (3)
other means approved by the Secretary; or (4) some combination.
If instead, the monthly bid exceeded the benchmark, enrollees
would pay the amount by which the monthly bid exceeded the
benchmark.
Plans would be paid based on their bid amounts. For plans
with bids below the choice benchmark, their payment would be
the bid amount, risk adjusted for demographic and health status
factors, plus the rebate amount for beneficiaries. Plans would
be responsible for passing rebates through to beneficiaries as
outlined above. For plans with bids at or above the choice
benchmark, their payments would equal the benchmark amount,
risk adjusted for demographic and health status factors.
Effective for payments and premiums for months beginning with January
2005
No later than 6 months after the designation of the 4th
competitive-demonstration area, the Medicare Benefits
Administrator would be required to submit a report to Congress
on the impact of this demonstration program on Medicare
beneficiaries, savings to the Medicare program, and adverse
selection issues.
EFFECTIVE DATE
Effective January 1, 2005.
Section 213. Conforming Amendments
CURRENT LAW
National Coverage Determinations. If National Coverage
Determinations (NCDs) occur during a contract year, such
changes shall not apply to the M+C plan until the following
contract year. If the NCD provides for coverage of additional
benefits or coverage under additional circumstances, the M+C
payment rate shall not apply to payment for such benefits until
the following contract year.
EXPLANATION OF PROVISION
National Coverage Determinations. The provision would allow
the Secretary to implement a national coverage determination
that will result in a significant change in the cost to an M+C
organization only in a prospective manner.
Consolidation of M+C Payment Areas. The chief executive
officer of a State may request that the Medicare Benefit
Administrator make a geographic adjustment to an M+C payment
area, changing the payment area from a county-based system to a
single statewide M+C payment area, or a metropolitan-based
system. Any adjustment to the geographic payment area must
ensure that aggregate payments after geographic adjustment
would equal payments that would have been made without the
geographic adjustment.
EFFECTIVE DATE
Enactment.
TITLE III--RURAL HEALTH CARE IMPROVEMENTS
Section 301. Reference to Full Market Basket Increase for Sole
Community Hospitals
CURRENT LAW
Each year, Medicare's operating payments to hospitals are
increased or updated by a factor that is determined in part by
the projected increase in the hospital market basket index
(MB). Sole community hospitals (SCH) receive special treatment
under the inpatient hospital prospective payment system (PPS).
A SCH can elect to be paid on the basis of its updated
hospital-specific amount if that results in greater Medicare
reimbursement than payment based on the federal amount.
Currently, the update factor is set at MB-0.55 percentage
points for FY2002 and FY2003 and at the MBI for subsequent
years.
EXPLANATION OF PROVISION
The provision would eliminate the reduction from the MB
update specified in Section 401(a) for SCHs for FY2003.
EFFECTIVE DATE
Upon enactment.
Section 302. Enhanced Disproportionate Share Hospital (DSH) Treatment
for Rural and Urban Hospitals with Fewer than 100 Beds
CURRENT LAW
Medicare makes additional payments to certain acute
hospitals that serve a large number of low-income Medicare and
Medicaid patients. As specified by BIPA, all hospitals are
eligible to receive disproportionate share hospital (DSH)
payments when their DSH percentage or threshold amount exceeds
15 percent starting with discharges occurring on or after April
1, 2001. BIPA modified the payment formulas to create the same
eligibility threshold for across all hospitals. Still,
different formulas are used to establish a hospital's DSH
payment, depending upon the hospital's location, number of beds
and status as a rural referral center or sole community
hospital. BIPA also increased the DSH payment but a small urban
or rural hospital receives 5.25 percent while large (100 beds
and more) urban hospitals and large rural hospitals (500 beds
and more) receive a higher adjustment.
EXPLANATION OF PROVISION
Starting for discharges on or after October 1, 2002,
hospitals (other than urban hospitals with a 100 or more beds
or certain public hospitals) would receive payments based on a
blend of their current DSH adjustment and the current DSH
adjustment for large urban hospitals. However, the new DSH
adjustment would not exceed 10 percent for any hospital that
was not classified as a RRC. A hospital's new DSH adjustment
would be calculated using 80 percent of the existing DSH
adjustment in FY2003; 60 percent in FY2004; 40 percent in
FY2005; 20 percent in FY2006; and 0 percent in FY2007 and
subsequently.
EFFECTIVE DATE
The amendment would apply to discharges occurring on or
after October 1, 2002.
Section 303. 2-Year Phased-in Increase of Small Urban Standardized
Amount to Achieve a Single, Uniform Standardized Amount
CURRENT LAW
Medicare pays for inpatient services in acute hospitals in
large urban areas using a standardized amount (or base rate)
that is 1.6 percent larger than the standardized amount used to
reimburse hospitals in other areas (both rural areas and
smaller urban areas).
EXPLANATION OF PROVISION
For discharges occurring in FY2003, the average
standardized amount for hospitals in other areas would be
increased by half the difference between the current amount and
the larger standardized amount paid to hospitals in large urban
areas. For discharges occurring in FY2004, the Secretary would
compute one standardized amount for all hospitals, increase
this amount by the applicable update, and use this amount to
pay all hospitals.
EFFECTIVE DATE
Upon enactment.
Section 304. More Frequent Update in Weights Used in Hospital Market
Basket (MB)
CURRENT LAW
Medicare's payment amounts are increased annually using an
update factor composed in part by the projected increase in the
hospital MB. The market basket index is a fixed-weight hospital
input price index which measures the average change in the
price of goods and services hospitals purchased to furnish
inpatient care. The Centers for Medicare and Medicaid Services
(CMS) periodically revises the cost category weights,
reevaluates the price proxies for such categories, and rebases
(or changes the base period) for the MB. The MB used through
FY2002 was last rebased in 1997 and reflected data from FY1992.
As discussed in its May, 2002 proposed regulation, CMS has
developed a revised and rebased MB using 1997 data for use in
the FY2003 Medicare hospital payment rates.
EXPLANATION OF PROVISION
The provision would direct the Secretary to revise the MB
cost weights to reflect the most currently available data and
to establish a schedule for revising the cost weights more
often than once every 5 years. The Secretary would be required
to submit a report to Congress by October 1, 2004 on the
reasons for and the options considered in establishing such a
schedule.
EFFECTIVE DATE
Upon enactment.
Section 305. Improvement to the Critical Access Hospital Program
(a) Reinstatement of Periodic Interim Payment (PIP)
CURRENT LAW
Eligible hospitals, skilled nursing facilities, and
hospices, which meet certain requirements, receive Medicare
periodic interim payments (PIP) every 2 weeks; these payments
are based on estimated annual costs without regard to the
submission of individual claims. At the end of the year, a
settlement is made to account for any differences between the
PIP payments and actual payments.
EXPLANATION OF PROVISION
Starting with payments made on or after January 1, 2003,
eligible critical access hospitals (CAHs) would be able to
receive payments made on a PIP basis for inpatient services.
EFFECTIVE DATE
As established in subsection (e), this provision would be
effective starting with payments made on or after January 1,
2003.
(b) Condition for Application of Special Physician Payment
Adjustment
CURRENT LAW
For cost reporting periods starting on or after October 1,
2000, CAHs can elect to be paid for outpatient services using
cost-based reimbursement for its facility fee and at 115
percent of the fee schedule for professional.
EXPLANATION OF PROVISION
The provision would preclude the Secretary from requiring
that all physicians providing services in a CAH assign their
billing rights to the entity for the CAH to be able to be paid
on the basis of 115 percent of the fee schedule for the
professional services providedby the physicians. However, a CAH
would not receive payment based on 115 percent of the fee schedule for
any individual physician who did not assign billing rights to the CAH.
EFFECTIVE DATE
As established in subsection (e), this provision would be
effective as if included in BBRA.
(c) Flexibility in Bed Limitation For Hospitals with Strong
Seasonal Census Fluctuations
CURRENT LAW
CAHs are limited-service hospitals that provide 24-hour
emergency care services with no more than 15 acute care beds or
up 25 beds, including 10 swing beds, in limited cases. CAHs may
not have patient stays that are, on average, more than 96-hours
long.
EXPLANATION OF PROVISION
The Secretary would be required to specify standards for
determining whether a CAH has strong seasonal variations
created by influenza outbreaks, tourism, or seasonal industries
such as logging or agriculture in patient admissions that would
justify a 5-bed increase in the number of inpatient acute beds
it can maintain (and still retain its classification as a CAH).
EFFECTIVE DATE
As established in subsection (e), this provision would
apply to designations made on or after January 1, 2003, but
would not apply to CAHs that were designated prior to
enactment.
(d) 5-Year Extension of the Authorization for
Appropriations for Grant Program
CURRENT LAW
The Rural Hospital Flexibility Grant Program that awards
grants to (1) states for rural health care planning and
implementation activities, rural network development, and CAH
designations and to (2) hospitals that have applied to be CAHs
to implement data systems required under BBA 97 expires in
FY2002.
EXPLANATION OF PROVISION
The provision would extend the grant program that affords
for annual appropriations from the Medicare's Federal Hospital
Insurance Trust Fund of $25 million through FY2007.
EFFECTIVE DATE
Upon enactment.
(e) Prohibition of Retroactive Recoupment
CURRENT LAW
Critical Access Hospitals are paid based on estimated
annual costs without regard to the submission of individual
claims. At the end of the year, a settlement is made.
EXPLANATION OF PROVISION
Starting with payments made for cost reports opening prior
to October 1, 2002, the Secretary could not recoup overpayments
made for outpatient services related to payment based on 80
percent of reasonable costs (instead of 100% of reasonable
costs minus 20 percent of charges.)
EFFECTIVE DATE
Upon enactment.
(f) Effective Dates
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Subsection (a) concerning PIP payments would be effective
starting with payments made on or after January 1, 2003;
subsection (b) concerning physician payment would be effective
as if included in BBRA.; and subsection (c) concerning the CAH
bed limit would apply to designations made on or after January
1, 2003.
Sec. 306. Extension of Temporary Increase for Home Health Services
Furnished in a Rural Area
CURRENT LAW
The Medicare home health PPS was implemented on October 1,
2000. It provides a standardized payment for a 60-day episode
of care furnished to a Medicare beneficiary, with the payment
adjusted to reflect the type and intensity of care furnished
and area wages as measured by the hospital wage index. BIPA
2000 increased PPS payments by 10 percent for home health
services furnished in the home of beneficiaries living in rural
areas. The increased payments are effective during the 2-year
period beginning April 1, 2001 through March 31, 2003, without
regard to budget neutrality for the overall home health PPS.
The temporary additional payment is not included in the base
for determination of payment updates.
EXPLANATION OF PROVISION
The provision would extend through December 31, 2004, the
10 percent additional payment for home health care furnished to
beneficiaries residing in rural areas.
EFFECTIVE DATE
Enactment.
Sec. 307. Reference to 10 Percent Increase in Payment for Hospice Care
Furnished in a Frontier Area
The provision would provide a cross reference to Section
422 of the bill.
Section 308. Reference to Priority for Hospitals Located in Rural or
Small Urban Areas in Redistribution of Unused Graduate Medical
Education Residencies
CURRENT LAW
With certain exceptions, Medicare limits the total number
of paid residency positions in a hospital's approved teaching
programs that are reimbursed based on the number that were
reported by the hospital for the cost reporting period ending
in calendar year 1996. For example, hospitals that established
new training programs before August 5, 1997 are partially
exempt from the payment cap. Other exceptions apply to certain
hospitals including those with new programs established after
that date. Hospitals in rural areas (and urban hospitals
operating training programs in rural areas) can be reimbursed
for 130 percent of the number of residents allowed by their
cap. The cap is calculated as a 3-year rolling average, that
is, the resident count will be based on the average of the
resident count in the current year and the 2 preceding years.
EXPLANATION OF PROVISION
Section 612 of this legislation would establish that
hospitals located in rural or small urban areas would have
priority for redistribution of unused graduate medical
education residency payments. This provision will help attract
physicians to rural and underserved areas.
EFFECTIVE DATE
Upon enactment.
Section 309. GAO Study of Geographic Differences in Payments for
Physician Services
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
GAO would be required to study geographic differences in
payment amounts in the physician fee schedule including: (1) an
assessment of the validity of each component of the geographic
adjustment factors; (2) an evaluation of the measures and the
frequency with which they are revised; (3) an evaluation of the
methods used to establish the costs of professional liability
insurance including the variation between physician specialties
and among different states, the update to the geographic cost
of practice index, and the relative weighs for the malpractice
component. The study, including recommendations concerning data
and use of price proxies, would be due to Congress within 1
year of enactment.
EFFECTIVE DATE
Upon enactment.
Section 310. Providing Safe Harbor for Certain Collaborative Efforts
that Benefit Medically Underserved Populations
CURRENT LAW
People who knowingly and willfully offer or pay a kickback,
a bribe, or rebate to directly or indirectly to induce
referrals or the provision of services under a Federal program
may be subject to financial penalties and imprisonment. Certain
exceptions or safe harbors that are not considered violations
of the anti-kickback statute have been established.
EXPLANATION OF PROVISION
Remuneration in the form of a contract, lease, grant, loan
or other agreement between a public or non-profit private
health center and an individual or entity providing goods or
services to the health center would not be a violation of the
anti-kickback statute if such an agreement would contribute to
the ability of the health center to maintain or increase the
availability or quality of services provided to a medically
underserved population. The Secretary would be required to
establish standards, on an expedited basis, related to this
safe harbor that would consider whether the arrangement (1)
resulted in savings of Federal grant funds or increased
revenues to the health center; (2) restricts or limits a
patient's freedom of choice; and (3) protects a health care
professional's independence regarding the provision of
medically appropriate treatment. The Secretary would also be
able to include other standards that are consistent with
Congressional intent. The Secretary would be required to
publish an interim final rule in the Federal Register no later
than 180 days from enactment that would establish these
standards. The rule would be effective immediately, subject to
change after a 30-day opportunity for public comment.
EFFECTIVE DATE
Upon enactment.
Section 311. Relief for Certain Non-Teaching Hospitals
CURRENT LAW
Section 4401(b) of the Balanced Budget Act of 1997 provided
for temporary relief for certain non teaching and non
disproportionate share hospitals located in states where
operating costs exceeded operating payments in 1995. This
provision expired in 1999.
EXPLANATION OF PROVISION
This provision provides for a temporary three-year
adjustment for non-teaching hospitals in areas where the
Medicare inpatient margin is markedly different and lower than
the rest of the nation's hospitals. Specifically, in states
where the average aggregate rural Medicare inpatient margin for
these hospitals is negative, the Medicare inpatient payments
are adjusted upwards by 5 percent for 3 years. In states where
the average aggregate inpatient margin over all urban hospitals
is less than 3 percent, the Medicare inpatient payments are
adjusted upwards by 5 percent for 3 years. The calculation of
the margin by the Medicare Payment Advisory Commission using
data from the Healthcare Cost Reporting Information System
(HCRIS) as of 2001 Q1, including Medicare inpatient payments in
the numerator, and the allowable costs for all hospitals paid
under the prospective payment system in the denominator for
each of the two area groupings for each state in 1999. For sole
community hospitals, the additional increase is on the hospital
specific or Federal rate.
EFFECTIVE DATE
Upon enactment.
TITLE IV--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
Section 401. Revision of Acute Care Hospital Payment Updates
CURRENT LAW
Each year, Medicare's operating payments to hospitals are
increased or updated by a factor that is determined in part by
the projected increase in the hospital market basket index
(MBI). Sole community hospitals (SCH) receive special treatment
under the inpatient hospital prospective payment system (PPS).
A SCH can elect to be paid on the basis of its updated
hospital-specific amount if that results in greater Medicare
reimbursement than payment based on the federal amount.
Currently, the update factor is set at MB-0.55 percentage
points for FY2002 and FY2003 and at the MB for subsequent
years.
EXPLANATION OF PROVISION
For FY2003, the hospital update factor would be MB-0.25 for
all hospitals except SCHs that would receive an update factor
of the full MB. The Secretary is directed to compile and
clarify the procedures and policies for billing for blood and
blood costs in the hospital inpatient setting as well as the
operation of the collection of the blood deductible. The
Secretary is also directed to permit hospitals to correct their
wage index data for purposes of FY 2003 payment because of the
change in policy included in the Benefit Improvement and
Protection Act provision which permitted reclassification based
on three prior years of data. This correction should be
incorporated into the mid-year correction after review of the
new applications by the Medicare Geographic Classification
Board.
EFFECTIVE DATE
Upon enactment.
Section 402. 2-Year Increase in Level of Adjustment for Indirect Costs
of Medical Education (IME)
CURRENT LAW
Medicare makes additional payments to teaching hospitals
for indirect medical education (IME), which is a subsidy based
in part on the extra clinical and diagnostic costs for
residents providing care. The Balanced Budget Act of 1997 (BBA
97) reduced the IME adjustment from the existing 7.7 percent
increase (for each 10 percent increase in a hospital's ratio of
interns and residents to beds) in FY1997 to 7.0 percent in
FY1998; to 6.5 percent in FY1999; to 6.0 percent in FY2000; and
to 5.5 percent in FY2001 and subsequent years. These percentage
IME adjustments were subsequently modified by the Balanced
Budget Refinement Act of 1999 (BBRA) and the Benefits
Improvement and Protection Act of 2000 (BIPA). Currently, the
IME adjustment is set at 6.5 percent in FY2002 and 5.5 percent
for FY20003 and subsequently.
EXPLANATION OF PROVISION
This provision would set the IME adjustment to 6 percent in
FY2003, 5.9 percent in FY2004 and 5.5 percent for FY2005.
EFFECTIVE DATE
Upon enactment.
Section 403. Recognition of New Medical Technologies Under Inpatient
Hospital PPS
CURRENT LAW
BIPA established that Medicare's inpatient hospital payment
system should include a mechanism to recognize the costs of new
medical services and technologies for discharges beginning on
or after October 1, 2001. The additional hospital payments can
be made by the means of a new technology groups, an add-on
payment, a payment adjustment, or other mechanism, but cannot
be a separate fee schedule and must be budget-neutral. A
medical service or technology will be considered to be new if
it meets criteria established by the Secretary after notice and
the opportunity for public comment.
CMS published the final regulation implementing these
provisions on September 7, 2001. This regulation changed the
meeting schedule for decisions on the creation and
implementation of new billing codes. (ICD-9-CM codes). The
regulation also established that technology that provided a
substantial improvement to existing treatments would qualify
for additional payments. The add-on payment for eligible new
technology would occur when the standard diagnosis related
group (DRG) payment was inadequate; as measured by the
threshold, which was established as one standard deviation
above the mean standardized DRG. In these cases, the add-on
payment for new technology would be the lesser of (a) 50
percent of the costs of the new technology or (b) 50 percent of
the amount by which the costs exceeded the standard DRG
payment; however if the new technology payments are estimated
to exceed the budgeted target amount of 1 percent of the total
operating inpatient payments, the add-on payments are reduced
prospectively.
EXPLANATION OF PROVISION
The Secretary would be required to add new diagnosis and
procedure codes on April 1 of each year that would not be
required to affect Medicare's payment or DRG classification
until the following fiscal year. The Secretary would not be
able to deny a service or technology treatment as a new
technology because the service (or technology) has been in use
prior to the 2- to 3-year period before it was issued a billing
code and a sample of specific discharges where the service has
been used can be identified.
When establishing whether DRG payments are inadequate, the
Secretary would be required to apply a threshold that is 50
percent of the national standardized amount for all hospitals
and all DRGS or one standard deviation for the DRG involved.
The Secretary would be required to provide additional
clarification in regulation on the criteria used to determine
whether a new service represents a substantial improvement on
existing treatment. The Secretary would be required to deem
that a technology provides substantial improvement on an
existing treatment if the technology in question is a drug or
biological that is designated under section 506 (fast track
product) or 526 (drugs for rare diseases and conditions) of the
Federal Food, Drug, and Cosmetic Act, approved under section
314.510 or 601.41 of Title 21, Code of Federal Regulations,
designated for priority review when the marketing application
was filed, is a medical device for which an exemption has been
granted under section 520(m) of such Act, for which priority or
expedited review has been provided under section 515(d)(5)
(breakthrough technology). For other technologies that may be
substantial improvements, the Secretary would be required to:
(1) maintain and update a public list of pending applications
for specific services and technologies to be evaluated for
eligibility for additional payment; (2) accept comments
recommendations and data from the public regarding whether a
service or technology represents a substantial improvement; and
(3) provide for a meeting at which organizations representing
physicians, beneficiaries, manufacturers or other interested
parties may present comments, recommendations, and data to the
clinical staff of CMS regarding whether a service or technology
represents a substantial improvement. These actions would occur
prior to the publication of the proposed regulation. Before
establishing an additional payment as the appropriate
reimbursement mechanism, the Secretary would be directed to
determine if instead one or more DRGs can be identified and
assign the technology to that DRG, taking into account similar
clinical or anatomical characteristics and the relative cost of
the technology. The Secretary would assign an eligible
technology into a DRG where the average cost of care most
closely approximates the cost of the new technology. In such a
case, no additional payment would be made and the other
provisions of the new technology payment policy would not
apply; the application of the budget neutrality requirement
with respect to annual DRG reclassifications and recalculation
of associated DRG weights would not be affected. Otherwise, the
Secretary would be required to calculate additional payments
based on the marginal rate associated with inpatient outlier
cases.
EFFECTIVE DATE
These provisions would be effective for classifications
beginning in FY2004. The Secretary would be directed to
automatically reconsider an application as a new technology
that was denied for FY2003 as a FY2004 application under these
new provisions. If such an application is granted, the maximum
time period otherwise permitted for such classification as a
new technology would be extended by 12 months.
Section 404. Phase-in of Federal Rate for Hospitals in Puerto Rico
CURRENT LAW
Under Medicare's prospective payment system for inpatient
services, a separate standardized amount is used to establish
payments for discharges from short-term general hospitals in
Puerto Rico. BBA 97 provides for an adjustment of the Puerto
Rico rate from a blended amount based on 25 percent of the
federal national amount and 75 percent of the local amount to a
blended amount based on a 50/50 split between national and
local amounts.
EXPLANATION OF PROVISION
Hospitals in Puerto Rico would receive Medicare payments
based on a 50/50 between federal and local amounts through
October 1, 2003. From FY2004 though FY2007, an increasing
amount of the payment rate would be based on federal national
rates as follows: during FY2004, payment would be 55 percent
national and 45 percent local; changing to 60 percent national
and 40 percent local during FY2005; 65 percent national and 35
percent local during FY2006; 70 percent national and 30 percent
local during FY2007 and 75 percent national and 25 percent
local for FY2007 and subsequently.
EFFECTIVE DATE
Upon enactment.
Section 405. Reference to Provision Relating to Enhanced
Disproportionate Share Hospital (DSH) Payments for Rural
Hospitals and Urban Hospitals With Fewer than 100 Beds
CURRENT LAW
As explained in Section 302, Medicare makes additional
payments to certain acute hospitals that serve a
disproportionate share of low-income Medicare and Medicaid
patients.
EXPLANATION OF PROVISION
The provision that would increase the adjustment for rural
hospitals and under 100 bed urban hospitals that serve a
disproportionate share of low-income Medicare and Medicaid
patients is included in Section 302.
EFFECTIVE DATE
Upon enactment.
Section 406. Reference to Provision Relating to 2-Year Phased-in
Increase in the Standardized Amount in Rural and Small Urban
Areas to Achieve a Single, Uniform Standardized Amount
CURRENT LAW
Medicare pays for inpatient services in acute hospitals in
large urban areas using a standardized amount that is 1.6
percent larger than the standardized amount used to reimburse
hospitals in other areas (both rural areas and smaller urban
areas).
EXPLANATION OF PROVISION
The provision that would increase the standardized amount
for other areas to the standardized amount paid to hospitals in
large urban areas over a 2-year period is included in Section
303.
EFFECTIVE DATE
Upon enactment.
Section 407. Reference to Provision for More Frequent Updates in the
Weights Used in the Hospital Market Basket
CURRENT LAW
As discussed in Section 304, Medicare's standardized
amounts, which serve as the basis of its payment per discharge
from acute hospital, are increased annually using an update
factor, which is determined, in part by the projected increase
in the hospital market basket index (MBI).
EXPLANATION OF PROVISION
The provision that would require more frequent updates in
the hospital market basket is included in Section 304.
EFFECTIVE DATE
Upon enactment.
Subtitle B--Skilled Nursing Facility Services
Sec. 411. Payments for Covered Skilled Nursing Facility Services
CURRENT LAW
Medicare uses a system of daily rates to pay for care in a
SNF. There are 44 daily rate categories, known as resource
utilization groups (RUGS), and each group reflects a different
mix and intensity of services, such as skilled nursing care
and/or various therapy and other services. BIPA 2000 provided
for a temporary bonus payment that increased the skilled
nursing care component of each RUG by 16.66 percent over and
above the RUG rates for SNF care. The Balanced Budget
Retirement Act also included for temporary increases for
certain rates, pending a refinement by CMS of these payments.
In Spring 2002, CMS announced it would not refine the RUGs
under the BBRA provision, thereby increasing payment to SNFs by
$1 billion per year.
EXPLANATION OF PROVISION
The provision would retain the increase in the nursing
component of each RUG at 12 percent, 10 percent, and 8 percent,
respectively for FY 2003, 2004 and 2005. These increases are
over and above the rates for SNF care as specified in Tables 3
and 4 of the final rule published in the Federal Register on
July 31, 2000, and as subsequently updated under section
1888(e)(4)(E)(ii) of the Act. The increase would apply to SNF
services furnished on or after October 1, 2002, and before
October 1, 2005.
The provision would also increase by 128 percent the RUG
payment for a SNF resident with acquired immune deficiency
syndrome (AIDS). The 128 percent increase shall not apply on or
after such date as the Secretary certifies that there is an
appropriate change to the SNF case mix adjustment to compensate
for increased costs associated with caring for residents with
AIDS. The provision would be effective October 1, 2002.
EFFECTIVE DATE
Applies to services furnished on or after October 1, 2003.
Subtitle C--Hospice
Section 421. Coverage of Hospice Consultation Services
CURRENT LAW
Current law authorizes coverage of hospice services, in
lieu of certain other Medicare benefits, for individuals who
elect such coverage.
EXPLANATION OF PROVISION
The provision would authorize coverage of certain
physicians' services for certain terminally ill individuals.
Persons entitled to these services would be individuals who had
not elected the hospice benefit and had not previously received
these physicians' services. Covered services would be those
furnished by a physician who is either the medical director or
employee of a hospice program. Services would include
evaluating the individual's need for pain and symptom
management, counseling the individual with respect to end-of-
life issues and care options, and advising the individual
regarding advanced care planning. Payment for such services
would equal the amount established for a similar service of
moderate complexity under the physician fee schedule, excluding
the practice expense component.
EFFECTIVE DATE
Applies to consultation services provided by a hospice
program on or after January 1, 2004.
Sec. 422. 10 Percent Increases in Payment for Hospice Care Furnished in
a Frontier Area
CURRENT LAW
Medicare pays for hospice care for terminally ill
beneficiaries at daily rates that differ depending on the level
of care, i.e., routine home care, continuous home care,
inpatient respite care, and general inpatient care. The labor
components of the rates are adjusted by the hospital wage index
to reflect differences in area wage levels. BBRA 1999
temporarily increased payment rates for FY 2001 and FY 2002 by
0.5 percent and 0.75 percent respectively. BIPA 2000 increased
Medicare daily payment rates for hospice care furnished on or
after April 1, 2001, and during FY 2001 by 5 percent over the
rates in effect in FY 2000.
EXPLANATION OF PROVISION
The provision would increase by 10 percent the Medicare
daily payment rate for hospice care furnished in a frontier
area on or after January 1, 2003, and before January 1, 2008. A
frontier area would be defined as a county in which the
population density is less than 7 persons per square mile. The
GAO would be required to submit a report to Congress, not later
than January 1, 2007, on the costs of furnishing hospice care
in frontier areas. The report would include recommendations
regarding the appropriateness of extending, and modifying, the
payment increase provided under this section.
EFFECTIVE DATE
Upon enactment.
Section 423. Rural Hospice Demonstration Project
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The provision would require the Secretary to conduct a
demonstration project for the delivery of hospice care for
beneficiaries in rural areas. Under the project, beneficiaries
who were unable to receive hospice care in the home for lack of
an appropriate caregiver would be provided such care in a
facility of 20 or fewer beds which offered, within its walls,
the full range of covered Medicare hospice benefits. The
project could cover no more than three hospice programs over a
period of 5 years each. In general, the program would comply
with requirements otherwise applicable for hospices except that
it would not be required to offer services outside the home nor
be subject to the limitation on inpatient days. Payments would
be made at the rates otherwise applicable. The Secretary would
be required, upon completion of the project in five years, to
submit a report to the Congress. The report would include
recommendations regarding extension of such project to programs
serving rural areas. However, the Congress believes that this
does not preclude the Secretary of Health and Human Services
usual authority to continue or expand demonstrations.
EFFECTIVE DATE
Upon Enactment.
Subtitle D--Other Provisions
Section 431. Demonstration Project for Use of Recovery Audit
Contractors
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to conduct a demonstration
project which would examine the use of recovery audit
contractors under the Medicare Integrity Program where (1) the
contractor could receive payment on a contingent basis; (2) the
Secretary could retain a percentage of the amount recovered for
the CMS program management account; and (3) the Secretary would
examine the efficacy of such use with respect to duplicate
payments and coding accuracy as well as other payment policies
where inaccurate payments may arise. The project would cover at
least 2 states and 3 contractors for no longer than 3 years.
The Secretary would be able to waive Medicare statutory
provisions to pay for the contractors' services. The Secretary
would not be able to enter into a recovery audit contract with
an entity that is a fiscal intermediary, carrier, or Medicare
Administrative Contractor. The Secretary would be required to
show preference to contracting with entities that have
employees with demonstrated proficiency in recovery audits with
private insurers or Medicaid programs and have knowledge of
Medicare's laws and regulations. Within 6 months of completion,
the Secretary would be required to submit a report to Congress
on the project's cost savings and include any recommendations
on the cost-effectiveness of extending or expanding the
project.
EFFECTIVE DATE
Upon enactment.
TITLE V--PROVISIONS RELATING TO MEDICARE PART B
Subtitle A--Provisions Relating to Physicians' Services
Section 501. Revisions of Updates for Physicians Services
CURRENT LAW
Medicare pays for services of physicians and certain non-
physician practitioners on the basis of a fee schedule. The fee
schedule, in place since 1992, was intended to relate payments
for a given service to the actual resources used in providing
that service. The fee schedule assigns relative values to
services. These relative values reflect physician work (i.e.,
the time, skill, and intensity it takes to provide the
service), practice expenses, and malpractice costs. The
relative values are adjusted for geographic variations in
costs. The adjusted relative values are then converted into a
dollar payment amount by a conversion factor. The conversion
factor for 2001 was $38.2581. The conversion factor for 2002
dropped 5.4 percent to $36.1992.
The law provides a specific formula for calculating the
annual update to the conversion factor. Several factors enter
into the calculation of the formula. These include: (1) the
sustainable growth rate (SGR), which is essentially a target
for Medicare spending growth for physicians' services; (2) the
Medicare economic index (MEI), which measures inflation in the
inputs needed to produce physicians' services; and (3) an
adjustment that modifies the update, which would otherwise be
allowed by the MEI, to bring spending in line with the SGR
target. The SGR target is not a limit on expenditures. Rather,
the fee schedule update reflects the success or failure in
meeting the target. If expenditures exceed the target, the
update for a future year is reduced. If expenditures fall short
of the target, the update for a future year is increased.
The annual percentage update to the conversion factor
equals the MEI, subject to an adjustment (known as the update
adjustment factor) to match target spending for physicians'
services under the SGR system. (During a transition period,
2001-2005, an additional adjustment is made to achieve budget
neutrality.) The update adjustment sets the conversion factor
at a level so that projected spending for the year will meet
allowed spending by the end of the year. Allowed spending for
the year is calculated using the SGR. However, in no case can
the update adjustment factor be less than minus 7 percent or
more than plus 3 percent.
The update adjustment factor is the sum of: (1) the prior
year adjustment component, and (2) the cumulative adjustment
component. The prior year adjustment component is determined
by: (1) computing the difference between allowed expenditures
for physicians' services for the prior year and the amount of
actual expenditures for that year; (2) dividing this amount by
the actual expenditures for that year; and (3) multiplying that
amount by 0.75. The cumulative adjustment component is
determined by: (1) computing the difference between allowed
expenditures for physicians' services from April 1, 1996
through the end of the prior year and the amount of actual
expenditures during such period; (2) dividing that difference
by actual expenditures for the prior year as increased by the
SGR for the year for which the update adjustment factor is to
be determined; and (3) multiplying that amount by 0.33. Use of
both the prior year adjustment component and the cumulative
adjustment component allows any deviation between cumulative
actual expenditures and cumulative allowed expenditures to be
corrected over several years rather than a single year.
The law also specifies a formula for calculating the SGR.
It is based on changes in four factors: (1) estimated changes
in input prices for physician services; (2) estimated change in
the average number of Part B enrollees (excluding
Medicare+Choice beneficiaries); (3) estimated projected growth
in real gross domestic product (GDP) per capita; and (4)
estimated change in expenditures due to changes in law or
regulations. By November 1 of each year, (using the best data
available as of September (1), CMS is required to publish the
SGRs for three time periods in the Federal Register. These
periods are the upcoming year, the current year, and the
preceding year. For example, by November 1, 2002, CMS is to
publish an estimate of the SGR for CY2003, a revision of the
CY2002 SGR estimated in 2001 and a revision of the CY2001 SGR
first estimated 2 years earlier and revised 1 year earlier.
The -5.4 percent negative update adjustment factor for 2002
reflected the application of the SGR system. Four items had
particular importance for the 2002 calculation. First, allowed
expenditures under the SGR system declined from earlier
estimates, in part because GDP growth was lower than
anticipated. Second, claims data for physicians services in the
first half of 2001 showed higher than expected spending over
the period and raised estimates for all of 2001. Third, certain
technical errors in the calculations for previous years (which
raised the updates in those years) further reduced the 2002
update. Fourth, underestimates of both the number of fee-for-
service beneficiaries, by over one million, and the growth in
GDP in 1998 and 1999 resulted in a reduction in cumulative SGR
targets. CMS estimates that under current law, the updates for
2003 to 2006 would also be negative, at -5.7 percent in 2003,
-5.7 percent in 2004, -2.8 percent in 2005, and -0.1 percent in
2006.
If CMS were to revise the SGR targets to reflect accurate
data for the number of fee-for-service beneficiaries and GDP in
1998 and 1999, CMS projects that the updates would be positive
from 2003 to 2012. The updates would be 1.0 percent in 2003,
1.4 percent in 2004, 2.3 percent in 2005, and positive, but
less than 1.0 percent from 2006 through 2012. CMS claims that
it lacks authority to make changes to the 1998 and 1999 SGR
targets administratively, despite the fact that these changes
would replace the erroneous data currently used in the
calculations.
EXPLANATION OF PROVISION
The provision would provide for use of a 10-year rolling
average GDP in setting updates, to reduce variations in SGR
targets due to variations in economic growth. This change would
be permanent.
The provision would set the update at 2 percent in 2003,
instead of the projected -5.7 percent.
The SGR formula for 2004 and 2005 would be modified to
produce updates estimated at approximately 2 percent each year.
First, the provision would replace GDP with GDP + 1 percent
when computing updates for 2003 and 2004. The 10-year rolling
average GDP would be calculated, and then this average would be
increased by 1 percentage point. This provision would recognize
that growth in health care expenditures typically exceeds
growth in the economy, and would adopt CMS' long-range
projected rate of growth in Medicare.
Second, the provision would re-set the base for the SGR
system such that the 2002 SGR target would equal 2002 actual
expenditures. Re-setting the target would correct the formula
for all past projection errors, including errors produced by
underestimating the number of fee-for-service beneficiaries in
1998 and 1999 by one million, and not accounting for all
expenditures generated by national coverage decisions.
Third, the provision would remove transitional adjustments
for budget neutrality, equal to -0.2 percent in 2003, -0.2
percent in 2004, and +0.8 percent in 2005.
Under this provision, the SGR system would revert to
current law in 2006, with the exception of continued use of the
10-year rolling average GDP. This provision would not be
considered a change in law and regulation when calculating the
SGR.
EFFECTIVE DATE
Enactment.
Section 502. Studies on Access to Physicians' Services
CURRENT LAW
Periodic analyses by the Physician Payment Review
Commission, and subsequently MedPAC, as well as CMS showed that
access to physicians' services generally remained good for most
beneficiaries through 1999. Detailed data are not available for
a subsequent period; however, several surveys have shown a
decline in the percentage of physicians accepting new Medicare
patients.
EXPLANATION OF PROVISION
The provision would require the GAO to conduct a study on
access of Medicare beneficiaries to physicians' services under
Medicare. The study would include an assessment of
beneficiaries' use of services through an analysis of claims
data. It would also examine changes in use of physicians'
services over time. Further, it would examine the extent to
which physicians are not accepting new Medicare patients.
Within 18 months of enactment, GAO would be required to submit
a report to Congress on this study. The report would include a
determination whether data from claims submitted by physicians
indicate potential access problems for beneficiaries in certain
geographic areas. The report would also include a determination
whether access by beneficiaries to physicians' services has
improved, remained constant, or deteriorated over time.
The provision would require the Secretary to request the
Institute of Medicine to conduct a study on the adequacy of the
supply of physicians (including specialists) in the country and
the factors that affect supply. The Secretary would be required
to submit a report to Congress, within two years of enactment,
on the results of the study.
EFFECTIVE DATE
Enactment.
Section 503. MedPAC Report on Payment for Physicians' Services
CURRENT LAW
Medicare pays for physicians' services on the basis of a
fee schedule. The fee schedule assigns relative values to
services. These relative values reflect physician work,
practice expenses and malpractice expenses. Resource-based
practice expense relative values were phased-in beginning in
1999. Beginning in 2002, the values were totally resource-
based.
Certain services have a professional component and a
technical component. The technical component does not include a
relative value for physician work. A global value includes both
the professional and technical components. The physician must
bill for the global value if the physician furnishes both the
professional component and the technical component.
EXPLANATION OF PROVISION
The provision would require MedPAC to report to Congress on
the effects of refinements to the practice expense component in
the case of services for which there are no physician work
relative value units. The report is to examine the following by
specialty: (1) the effects of refinements on payments for
physicians' services; (2) interaction of the practice expense
component with other components of and adjustments to payment
for physicians' services; (3) appropriateness of the amount of
compensation by reason of such refinements; (4) effect of such
refinements on access to physicians' services by Medicare
beneficiaries; and (5) effect of such refinements on physician
participation under the Medicare program. The report would be
due within one year of enactment.
EFFECTIVE DATE
Upon enactment.
Section 504. 1-Year Extension of Treatment of Certain Physician
Pathology Services Under Medicare.
CURRENT LAW
The Beneficiary Improvement and Protection Act of 2000
allowed the continuation of separate billing and payment for
the technical component of pathology services furnished by an
independent laboratory for 2001 and 2002. The relationship was
only for those hospitals that had an arrangement with an
independent laboratory in effect of July 1999.
EXPLANATION OF PROVISION
This provision extends the BIPA provision for an additional
year.
EFFECTIVE DATE
Upon enactment.
Section 511. Competitive Acquisition of Certain Items and Services.
CURRENT LAW
BBA 97 authorized the Secretary to conduct up to 5
demonstration projects to test competitive bidding as a way for
Medicare to price and pay for Part B services other than
physician services. The Secretary was required to establish up
to 3 competitive acquisition areas for this purpose. Medicare
implemented the first competitive bidding demonstration for
durable medical equipment, prosthetics, orthotics, and supplies
(DMEPOS) in Polk County, Florida. Multiple suppliers were
selected through a competitive bidding process in the Spring of
1999 in five product categories: oxygen equipment and supplies,
hospital beds and accessories, enteral nutrition products and
supplies, urological supplies, and surgical dressings. Payments
under this demonstration began on October 1, 1999, and
demonstration prices remained in effect through September 30,
2001.
Medicare implemented a second DMEPOS competitive bidding
demonstration in the San Antonio, Texas area (Bexar, Comal, and
Guadalupe counties) on February 1, 2001. Multiple suppliers
were selected through a competitive bidding process to provide
the following product categories: oxygen equipment and
supplies, hospital beds and accessories, manual wheelchairs and
accessories, general orthotic devices, and nebulizer inhalation
drugs. The demonstration prices in the San Antonio, Texas area
will remain in effect until December 31, 2002.
Another round of competitive bidding was implemented in
Polk County in October 2001. Multiple suppliers were selected
through a competitive bidding process to provide the following
product categories: oxygen equipment and supplies, hospital
beds and accessories, urological supplies, and surgical
dressings. Demonstration prices are to remain in effect through
September 30, 2002.
EXPLANATION OF PROVISION
This provision requires the Secretary to establish and
implement programs under which competitive acquisition areas
were established throughout the United States. The areas could
differ for different items and services. The programs would be
phased-in over a period of not longer than 3 years with
competition under the programs occurring in at least \1/3\ of
the areas in 2004 and at least \2/3\ of the areas in 2005. In
carrying out the programs, the Secretary would be permitted to
waive provisions of the Federal Acquisition Regulation as
necessary for efficient implementation, other than provisions
relating to confidentiality of information furnished by bidders
or other provisions the Secretary determines are appropriate.
The provision would specify the items and services covered
under the competitive acquisition programs as: (1) durable
medical equipment as well as inhalation drugs paid for by
Medicare, except for products used in infusion; and (2)
orthotics paid for by Medicare which require minimal self-
adjustment for appropriate use and does not require expertise
in trimming, bending, molding, assembling, or customizing to
fit the patient.
The Secretary would be permitted to exempt areas that were
not competitive due to low population density. The Secretary
would also be able to exempt items and services for which the
application of competitive acquisition was not likely to result
in significant savings.
The provision would establish program requirements. The
Secretary would be required to conduct a competition among
entities supplying covered items and services for each
competitive acquisition area in which the program was
implemented for such items and services. The Secretary could
not award a contract to an entity unless the Secretary made the
following findings: (1) the entity met quality and financial
standards specified by the Secretary or was automatically
deemed to meet standards by accreditation entities or
organizations recognized by the Secretary; (2) total amounts to
be paid under the contract (including administrative costs)
were expected to be less than what would otherwise be paid; (3)
beneficiary access to a choice of multiple providers was
maintained; and (4) beneficiary liability was limited to the
applicable percentage of the contract award price. The
specified quality standards could not be less than those that
would otherwise apply and would include consumer services
standards. The Secretary would be required to consult with an
expert outside advisory panel composed of an appropriate
selection of physicians, practitioners, and suppliers. The
panel would review and advise the Secretary concerning quality
standards.
The provision would provide that the Secretary would
specify the terms and conditions of the contract. The Secretary
would be required to rebid contracts at least once every 3
years (2 years are preferred as feasible.) The Secretary could
limit the number of contractors in an area to the number needed
to meet projected demand for the items and services covered
under the contract. The Secretary would be required to take
into account the ability of bidding entities to furnish the
items and services in sufficient quantities to meet anticipated
beneficiary needs in the geographic area covered by the
contract on a timely basis. The Secretary would award contracts
to more than one entity submitting a bid in each area for an
item or service. Payments could not be made for services
provided by a contractor in a competition area unless the
contractor had submitted a bid and the Secretary had awarded a
contract to the entity. The Secretary would be authorized to
award a contract to an appropriate entity for education,
outreach, and complaint services.
The Secretary would be required to submit an annual
management report to the Congress, which would include
information on savings, reductions in beneficiary co-payments,
access to items and services, and beneficiary satisfaction.
The provision would require the Secretary to conduct a
demonstration project on the application of competitive
acquisition to clinical diagnostic laboratory tests (including
colorectal cancer screening tests) that are furnished without a
face-to-face encounter between the individual and entity
furnishing the test. The project would be under the same terms
and conditions applicable to durable medical equipment and off
the shelf orthotics. The Secretary would be required to submit
to the Congress an initial report on the project not later
thanDecember 31, 2004. The Secretary would also submit progress and
final reports as deemed appropriate.
The provision would specify that any competitive
acquisition demonstration project in effect on the day before
enactment could continue under the same terms and conditions
that were applicable to that project on that date.
The provision would require the GAO to submit a report to
Congress that analyses differences in reimbursement between
public and private payors for clinical diagnostic laboratory
services. The report would be due within 18 months of
enactment.
EFFECTIVE DATE
Enactment.
Section 512. Payment for Ambulance Services
CURRENT LAW
Payments for ambulance services under Medicare have
traditionally been based on reasonable charges for independent
suppliers and reasonable costs for provider-based services. The
BBA 97 provided for the replacement of these payment
methodologies with a national fee schedule. The Secretary was
required to phase-in the fee schedule in an efficient and fair
manner. The fee schedule became effective April 1, 2002. By
regulation, it is to be phased-in over the April 2002-January
2006 period. Under the phase-in schedule, a gradually
decreasing portion of the payment is to be based on the
previously existing payment (reasonable charges or reasonable
costs) received by each ambulance and a gradually increasing
percentage is to be based on the national fee schedule. In
2002, the blend is 80 percent of ambulance specific payments
and 20 percent of the fee schedule. In 2003, the blend is 60
percent of ambulance specific payments and 40 percent of the
fee schedule. In 2004, the blend is 40 percent of ambulance
specific payments and 20 percent of the fee schedule. In 2005,
the blend is 20 percent of ambulance specific payments and 80
percent of the fee schedule. Beginning in 2006, the payment is
to be based entirely on the fee schedule.
The fee schedule payment amount equals a base rate for the
level of service plus payment for mileage and applicable
adjustment factors. Additional mileage payments are made in
rural areas. BIPA increased payment for rural ambulance mileage
greater than 17 miles and up to 50 miles by at least one-half
of the additional payment per mile established under the fee
schedule for the first 17 miles of transport for services
provided before January 1, 2004.
EXPLANATION OF PROVISION
The provision would substitute a new phase-in methodology
for the ambulance fee schedule amount portion of the phase-in
and lengthens the phase-in schedule. Under the provision, the
national part phase-in calculation would be based on a blend of
the national fee schedule (geographically adjusted) and a
regional fee schedule (geographically adjusted) or, if higher,
the current phase-in is retained. The regional fee schedule
would be established by the Secretary for each of the 9 Census
regions using the methodology used for calculating the regional
conversion factor and regional mileage rate used for the
national fee schedule. It would also use the same payment
adjustments and the same relative value units as used for the
national fee schedule.
In effect, the regional fee schedules would be based on the
same methodology and data used to construct the national fee
schedule. Essentially these fee schedules represent the
national fee schedule broken out into 9 separate fee schedules.
For example, to construct the national fee schedule, CMS used
1998 data and created a national conversion factor. To
construct the regional fee schedules, CMS will use the 1998
data used to create the national fee schedule but will break it
out region by region. Using the 1998 data for each region, CMS
will create a conversion factor for each region. Some of the
conversion factors will be lower than the national conversion
factor and some will be higher. CMS will also use the 1998 data
for each region to create a loaded mileage base rate for each
region.
Under the provision, the regional conversion factor for
each region would be adjusted in the same way the national
conversion factor is adjusted--the relative value units will be
used with each regional conversion factor to create a regional
base payment rate for each level of service. The payment for a
given service under the national fee schedule would be compared
with the payment under the appropriate regional fee schedule.
In 2003, the blended rate would be based on 20 percent of
the national fee schedule and 80 percent of the regional fee
schedule. In 2004, the blended rate would be based on 40
percent of the national fee schedule and 60 percent of the
regional fee schedule. In 2005, the blended rate would be based
on 60 percent of the national fee schedule and 40 percent of
the regional fee schedule. In 2006, the blended rate would be
based on 80 percent of the national fee schedule and 20 percent
of the regional fee schedule. Beginning in 2007, the payment
would be based entirely on the national fee schedule. The
ambulance specific reasonable charges part of the phase-in is
unaffected by this calculation.
The provision would increase mileage payments for certain
ground ambulance trips furnished on or after January 1, 2003,
and before January 1, 2008. Payments for trips above 50 miles
would be increased by at least one-quarter of the amount
otherwise established under the fee schedule. This increase
would apply regardless of where the transportation originated.
EFFECTIVE DATE
Applies to ambulance services furnished on or after January
1, 2003.
Section 513. 2-Year Extension of Moratorium on Therapy Caps; Provisions
Relating to Reports
CURRENT LAW
BBA 97 established annual payment limits per beneficiary
for all outpatient therapy services provided by non-hospital
providers. The limits applied to services provided by
independent therapists as well as to those provided by
comprehensive outpatient rehabilitation facilities (CORFs) and
other rehabilitation agencies. The limits did not apply to
outpatient therapy services provided by hospitals.
There were two per beneficiary limits. The first was a
$1,500 per beneficiary annual cap for all outpatient physical
therapy services and speech language pathology services. The
second was a $1,500 per beneficiary annual cap for all
outpatient occupational therapy services. Beginning in 2002,
the amount would increase by the Medicare Economic Index (MEI),
rounded to the nearest multiple of $10.
BBRA 99 suspended application of the therapy limits in 2000
and 2001. BIPA extended the suspension through 2002. The limits
are scheduled to go into effect in 2003.
BBA 97 required the Secretary to report to Congress by
January 1, 2001, on recommendations on a revised coverage
policy of outpatient physical therapy and occupational therapy
services based on a classification of individuals by diagnostic
category and prior use of services, in both inpatient and
outpatient settings, in place of uniform dollar limitations.
The BBRA 99 revised requirements for the BBA 97 report to
include recommendations, and required a new study on
utilization of therapy services. BBRA 99 required the Secretary
to report to Congress on utilization of therapy services by
June 30, 2001.
Medicare provides that therapy patients must be under the
care of a physician. The physician or therapist must develop a
plan of treatment, and the physician must periodically review
the plan.
EXPLANATION OF PROVISION
The provision extends the moratorium on application of the
therapy caps for an additional two years, through 2004. It
would also require the Secretary to submit the reports required
by BBA 97 and BBRA 99 by December 31, 2002.
The provision would require the Secretary to request the
Institute of Medicine to identify conditions or diseases that
should justify conducting an assessment of the need to waive
the therapy caps. The Secretary would be required to submit to
Congress a preliminary report on the conditions and diseases
identified by July 1, 2003, and a final report by September 1,
2003.
The provision would require the GAO to conduct a study on
access to physical therapist services in states authorizing
access to such services without a physicianreferral compared to
states that require such a physician referral. The study would: (1)
examine the use of and referral patterns for physical therapist
services for patients age 50 and older in states that authorize such
services without a physician referral and in states that require such a
referral; (2) examine the use of and referral patterns for physical
therapist services for patients who are Medicare beneficiaries; (3)
examine the potential effect of prohibiting a physician from referring
patients to physical therapy services owned by the physician and
provided in the physician's office; (4) examine the physical therapist
services within the facilities of the Department of Defense; and (5)
analyze the potential impact on beneficiaries and on Medicare
expenditures of eliminating the need for a physician referral and
physician certification for physical therapist services under the
Medicare program. The GAO would be required to submit a report to
Congress on the study within one year of enactment.
EFFECTIVE DATE
Enactment.
Section 514. Accelerated Implementation of 20 Percent Coinsurance for
Hospital Outpatient Department (OPD) Services; Other OPD
Provisions
CURRENT LAW
BBA 97 provided for the implementation of a prospective
payment system (PPS) for hospital outpatient department (OPD)
services. This system was implemented August 2000. Under the
system, services that are similar clinically and in terms of
resource utilization are arranged into groups according to
ambulatory payment classifications (APCs). A payment amount is
established for each group and is the same for each service in
the group. The payments cover hospital facility and
nonphysician personnel costs with adjustments for geographic
location of the facility and area wages.
Before implementation of the PPS, beneficiary coinsurance
was generally based on 20 percent of the hospital's charges,
while the Medicare program based its payments on the hospital's
costs. Over time, hospitals' charges grew more quickly than
costs in part due to an error in the formula correct by the
Balanced Budget Act; as a result the share paid by
beneficiaries grew to about 50 percent. BBA 97 provided for a
gradual decrease in the portion paid by beneficiaries. Under
the new payment system, coinsurance is set at 20 percent of
historical national median charges for all services in the
group. For all APC groups with coinsurance rates above 20
percent of the payment amount, the dollar amounts are frozen
until the coinsurance represents 20 percent of payment. MedPAC
estimated this process could take multiple decades for certain
services.
BBRA 99 limited the coinsurance by placing a dollar cap on
the coinsurance for a given service equal to the inpatient
hospital deductible. BIPA established an additional coinsurance
reduction policy. A cap was placed on coinsurance liability for
a single service. Starting April 1, 2001, the cap was 57
percent of the total payment amount for the service. This cap
is 55 percent in 2002 and 2003. It is reduced by 5 percentage
points each year over the 2004-2006 period until the limit is
40 percent for each service. During this period, the BBA 97
provision decreasing coinsurance continues to apply as the
underlying process.
The law provides for transitional pass-through payments for
additional costs of innovative medical devices, drugs, and
biologicals.
EXPLANATION OF PROVISION
The provision would modify the BIPA provision to accelerate
the reductions in coinsurance, saving Medicare beneficiaries
$9.7 billion in reduced co-payments over ten years. The per
service coinsurance cap would be 45 percent in 2004, 40 percent
in 2005, 35 percent in 2006-2009, 30 percent in 2010, 25
percent in 2011, and 20 percent in 2012 and thereafter. Thus,
by 2012, the coinsurance would be 20 percent for all services.
The provision would remove temperature-monitored
cryoablation from the list of cancer therapy drugs and
biologicals entitled to pass-through payments.
EFFECTIVE DATE
Enactment, except provision dealing with temperature-
monitored cryoablation applies to payments for services
furnished on or after January 1, 2003.
Section 515. Coverage of an Initial Preventive Physical Examination
CURRENT LAW
Medicare covers a number of preventive services. However,
it does not cover routine physical examinations.
EXPLANATION OF PROVISION
The provision would authorize coverage of a free initial
preventive physical examination. The physical examination would
be defined as physicians' services consisting of a physical
examination with the goal of health promotion and disease
detection. It would include items and services specified by the
Secretary in regulations. A covered initial preventive physical
examination would be one performed not later than six months
after the individual's initial coverage date under Part B.
The initial preventive physical examination would not be
subject to the Part B deductible and would require no
beneficiary coinsurance. Therefore, the beneficiary would pay
nothing for the initial preventive physical examination.
Initial preventive physical exams would be included in the
definition of physicians' services for purposes of the
physicians' fee schedule.
EFFECTIVE DATE
Applies to services furnished on or after January 1, 2004
for individuals whose coverage begins on or after such date.
Section 516. Renal Dialysis Services
CURRENT LAW
Dialysis facilities providing care to beneficiaries with
end-stage renal disease (ESRD) receive a fixed prospective
payment amount for each dialysis treatment. BBRA 99 updated the
composite rate by 1.2 percent for dialysis services furnished
in 2000 and 1.2 percent for services furnished in 2001. BIPA
provided for a 2.4 percent increase in 2001, in lieu of the 1.2
percent provided under BBRA. BIPA specified that the increase
would be implemented through the application of two composite
rates in 2001, in order to avoid retroactive processing of
claims caused by the January 1, 2001 effective date. For
services furnished from January-March 2001, the 1.2 percent
increase specified under BBRA applied; for the remainder of the
year a 2.79 percent transition increase applied. Effective
January 1, 2002, the composite rates reverted to the December
31, 2000 rate, increased by 2.4 percent.
BIPA prohibited exceptions to the composite rates, except
in the case of facilities that had exceptions for their 2000
rates or who applied for exceptions during the first 6 months
of 2001.
A small proportion of ESRD patients use home dialysis.
Currently, the payment system does not vary rates by different
methods of treatment.
EXPLANATION OF PROVISION
The provision would increase the composite rate 1.2 percent
for services furnished in 2004. The provision would specify
that the prohibition on exceptions to the composite rate would
not apply to pediatric facilities that, as of October 1, 2002,
did not have an exception rate as of that date. Pediatric
facilities would be defined as a renal facility at least 50
percent of whose patients were under age 18.
The provision would require the General Accounting Office
of the Department of Health and Human Services to submit a
report to Congress within one year of enactment. The report
would be required to contain: (1) an analysis of the
differences in costs of providing renal dialysis services in
home settings and facility settings; (2) an assessment of the
percentage of overhead costs in home settings and facility
settings; and (3) an evaluation of whether the charges for home
dialysis equipment and supplies were reasonable and necessary
as well as the analysis of patient characteristics, outcomes
(time spent waiting for transplantation), quality of life
measures by modality.
EFFECTIVE DATE
Enactment.
Section 517. Improved Payment for Certain Mammography Services
CURRENT LAW
The Medicare physician fee schedule includes codes and
amounts which apply to mammography procedures performed in
physicians' offices and freestanding diagnostic imaging
centers, and to payment for a physician's professional
interpretation of a mammography performed in any setting. The
Medicare hospital outpatient prospective payment system applies
to the non-physician (i.e., facility) component of procedures
furnished in hospital outpatient departments. The rates for the
non-physician component of mammography differ, depending on the
site of care and applicable payment system. Screening
mammography services receive the same reimbursement from
Medicare whether provided in a freestanding diagnostic imaging
center, physician's office, or hospital outpatient department.
EXPLANATION OF PROVISION
The payment amount for the facility component for hospital
outpatient services for screening mammography and unilateral
and bilateral diagnostic mammography would be made under the
physician fee schedule. The Secretary would appropriately
adjust the payment amount for the technical component for
diagnostic mammography performed on or after January 1, 2004,
paid under the physician fee schedule, based on the most recent
cost data available.
EFFECTIVE DATE
Applies to mammography performed on or after January 1,
2004.
Section 518. Waiver of Part B Late Enrollment Penalty for Certain
Military Retirees
CURRENT LAW
Medicare charges a 10 percent penalty on the Part B premium
for every year that enrollment is delayed after a beneficiary
first becomes eligible for Part B. Beneficiaries may enroll in
Part B upon initial eligibility for Part B (beginning 3 months
before they turn 65, for a period of 7 months), or during an
annual general open enrollment period, which occurs from
January 1 through March 31 each year. A beneficiary can delay
enrollment in Part B without penalty if the beneficiary or
spouse is working and has group health insurance coverage
through his or her employer or union. Such a beneficiary may
enroll in Part B during a special enrollment period, which
includes any time the beneficiary is still covered by the group
health plan through the current or active employment, or within
8 months following the month that the health plan coverage ends
or employment ends, whichever occurs first.
The Floyd A. Spence National Defense Authorization Act for
FY 2001 opened TRICARE to Medicare-eligible military retirees
for the first time, allowing them to keep their military health
benefits past the age of 65. This TRICARE For Life benefit
became available on January 1, 2001, and provides wrap-around
coverage like Medigap. For services payable by both Medicare
and TRICARE, Medicare is the primary payer; TRICARE pays all
remaining out-of-pocket expenses. Military retirees, Medicare-
eligible family members, and certain former spouses are
eligible. They must be enrolled in Medicare Part B to join the
TRICARE program.
EXPLANATION OF PROVISION
This provision would waive the Part B late enrollment
penalty, beginning in January 2003, for all individuals age 65
and over who are covered beneficiaries under the TRICARE For
Life program, and who enroll in Part B between January 1, 2001
and December 31, 2003. The Secretary would consult with the
Secretary of Defense in identifying individuals eligible for
the waiver. The Secretary would establish a method for
providing rebates of premium penalties paid for months on or
after January 2003 for which a penalty would not apply, but for
which a penalty was previously collected.
The provision would create a continuous open enrollment
period through the end of 2003 to allow military retirees to
enroll in Part B immediately. Part B coverage would begin on
the first day of the month following the month of enrollment.
EFFECTIVE DATE
Enactment.
Section 519. Coverage of Cholesterol and Blood Lipid Screening
CURRENT LAW
Medicare currently covers cholesterol and other blood lipid
testing for patients who already suffer from known disease such
as heart disease, stroke, or other disorders associated with
elevated cholesterol levels. Medicare does not cover
cholesterol and blood lipid screening for beneficiaries without
these diseases.
EXPLANATION OF PROVISION
Medicare would cover diagnostic testing of cholesterol and
other blood lipid levels for early detection of abnormal
cholesterol and other lipid levels. The Secretary would
establish standards, in consultation with appropriate
organizations, regarding the frequency and type of cholesterol
and other blood lipid screening tests, except such frequency
may not be more often than once every two years.
EFFECTIVE DATE
Applies to tests furnished on or after January 1, 2004.
TITLE VI--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
Sec. 601. Elimination of 15 Percent Reduction in Payment Rates Under
the Prospective Payment System
CURRENT LAW
In the first year of the home health PPS (FY 2001),
payments to home health agencies were to be calculated so that,
in that year, Medicare total spending for home health care
would be the same as it would have been had the previous
payment system remained in effect, but with the cost of the
previous system calculated to include a 15 percent cut to
limits on payments per visit and per beneficiary. However,
Congress postponed the adjustment to PPS rates based on the 15
percent cut to October 1, 2002, 2 years after the previous
payment system had ended.
EXPLANATION OF PROVISION
The provision would eliminate the adjustment to PPS rates
based on the 15 percent reduction in the per visit and per
beneficiary limits, effective for episodes of home health care
concluding on or after October 1, 2001. In addition, the
provision would continue to specify that the Secretary could
include in the PPS recognition of regional differences or
differences based on whether or not home health care services
were furnished in an urbanized area or the home health agency
was located in an urbanized area.
EFFECTIVE DATE
Takes effect as if included in amendments made by BIPA.
Sec. 602. Establishment of Reduced Copayment for a Home Health Service
Episode of Care for Certain Beneficiaries
CURRENT LAW
Current law does not require beneficiaries to pay any cost
sharing, such as a deductible or coinsurance, when they use
home health services. CMS and GAO have recently documented
increased consumption of home health services, exceeding 30
percent a year and very profitable margins of 35 percent or
more.
EXPLANATION OF PROVISION
The provision would establish, beginning with 2003, a
beneficiary co-payment for each 60-day episode of care. The co-
payment would be 1.5 percent of the national average payment
per episode in a calendar year as projected by the Secretary
before the beginning of the year. (Administrative and judicial
review of the average amounts would be prohibited.) The co-
payment would be rounded to the nearest multiple of $5. Unless
theSecretary determines otherwise on a timely basis, the co-
payment in 2003 would be $40. Qualified Medicare beneficiaries (low
income beneficiaries for whom Medicaid pays the Medicare premiums,
deductibles, and coinsurance), persons dually eligible for both
Medicare and Medicaid, and beneficiaries receiving 4 or fewer home
health visits in an episode of care would be excluded from the co-
payment requirement.
EFFECTIVE DATE
Enactment.
Sec. 603. Update in Home Health Services
CURRENT LAW
Under current law, home health PPS amounts are updated
annually by the increase in the home health market basket index
minus 1.1 percentage points in FY 2002 and FY 2003 and by the
full increase in the market basket index in subsequent years.
Current law also provides payments to home health agencies
for a outlier of home health patients (those for whom care is
unusually costly) over and above the PPS amount, but the total
amount of the additional payment or payment adjustments in a
fiscal year may not exceed 5 percent of the total payments
projected or estimated to be made in such year.
EXPLANATION OF PROVISION
The provision would change the implementation updates to
the home health PPS amounts from the start of a fiscal year to
the start of a calendar year. It would increase payments by 2.0
percentage points at the start of 2003; by 1.1 percentage point
for 2004; and by the increase in the home health market basket
index minus 0.8 percentage point for 2005.
The provision would limit the total amount of outlier
payments or payment adjustments for home health care in a
fiscal year to no more than 3 percent of total projected
payments, beginning in 2003.
EFFECTIVE DATE
Applies to years beginning with 2003.
Section 604. OASIS Task Force; Suspension of Certain Oasis Data
Collection Requirements Pending Task Force Submittal of Report
CURRENT LAW
BBA 97 authorized the Secretary to require all home health
agencies to submit additional information that the Secretary
considered necessary for development of a reliable case mix
system. The Secretary has implemented an Outcome and Assessment
Information Set (OASIS). Home health agencies are required to
collect OASIS data and report information to their State survey
agency.
EXPLANATION OF PROVISION
The provision would require the secretary to establish and
appoint a task force, known as the OASIS Task Force. The task
force would be required to examine the data collection and
reporting requirements under OASIS. It would be composed of
staff from the Centers for Medicare and Medicaid Services with
expertise in post-acute care; representatives of home health
agencies, health care professionals and research and health
quality experts outside the Federal government with experience
in post-acute care, and advocates for individuals requiring
home health services.
The task force would review and make recommendations to the
Secretary regarding changes in OASIS to improve and simplify
data collection for the purposes of assessing the quality of
home health services and providing consistency in payment for
such services under the prospective payment system. The task
force would report its findings and recommendations to the
Secretary within 18 months of enactment and would terminate 60
days after submission of the report. The task force would not
be subject to the provisions of the Federal Advisory Committee
Act.
The provision would prohibit the Secretary from requiring
home health agencies to gather or submit information on persons
not eligible for Medicare or Medicaid benefits for the period
beginning January 1, 2003 and ending on the last day of the
second month following submission of the task force report.
EFFECTIVE DATE
Enactment.
Section 605. MedPAC Study on Medicare Margins of Home Health Agencies
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The provision would require MedPAC to conduct a study of
payment margins of home health agencies under the prospective
payment system. The study would examine whether systematic
differences in payment margins are related to differences in
case mix, as measured by home health resource groups (HHRGs).
MedPAC would be required to submit a report on the study to
Congress, within two years of enactment.
EFFECTIVE DATE
Enactment.
Subtitle B--Direct Graduate Medical Education
Section 611. Extension of Update Limitation on High Cost Programs
CURRENT LAW
Medicare pays hospitals for its share of direct graduate
medical education (DGME) costs in approved programs using a
count of the hospital's number of full-time equivalent
residents and a hospital-specific historic cost per resident,
updated for inflation. This historical cost based methodology
resulted in inequities across hospitals with some hospitals
receiving close to $200,000 per resident while others received
less than $20,000 per resident. BBRA changed Medicare's
methodology for calculating DGME payments to teaching hospitals
to incorporate the concept of a national average amount
adjusted by the physician geographic adjustment factor.
Starting in FY2001, hospitals received no less than 70 percent
of a geographically adjusted national average amount. Hospitals
with per resident amounts above 140 percent of the
geographically adjusted national average amount had payments
frozen at current levels for FY2001 and FY2002, and in FY2003-
FY2005 would receive an update equal to the Consumer Price
Index (CPI) increase minus 2 percentage points. Hospitals with
per resident amounts between 70 percent and 140 percent of the
geographically adjusted national average would continue to
receive payments based on their hospital-specific per resident
amounts updated for inflation.
EXPLANATION OF PROVISION
Hospitals with per resident amounts above 140 percent of
the geographically adjusted national average amount in FY2001
or FY2002 would receive that payment amount through FY 2012.
EFFECTIVE DATE
Upon enactment.
Section 612. Redistribution of Unused Resident Positions
CURRENT LAW
Medicare's graduate medical education payment to teaching
hospital is based on its updated cost per resident, the number
of approved full-time-equivalent (FTE) residents, and
Medicare's share of inpatient days in the hospital. Medicare
counts residents in their initial residency period (the lesser
of the minimum number of years required for board eligibility
in the physician's specialty or 5 years) as 1.0 FTE. Residents
whose training has extended beyond their initial residency
period count as 0.5 FTE. Residents in certain specialties are
allowed additional years in their initial residency period.
Residents who are graduates from foreign medical schools do not
count unless they pass certain exams. Medicare limits the total
number of residents in a hospital's approved teaching programs
that are reimbursed based on the number that were reported by
the hospital for the cost reportingperiod ending in calendar
year 1996. Hospitals that established new training programs before
August 5, 1997 are partially exempt from the cap. Other exceptions
apply to certain hospitals including those with new programs
established after that date. Hospitals in rural areas (and non-rural
hospitals operating training programs in rural areas) can be reimbursed
for 130 percent of the number of residents allowed by their cap. The
cap is calculated as a 3-year rolling average, that is, the resident
count will be based on the average of the resident count in the current
year and the 2 preceding years.
EXPLANATION OF PROVISION
The Secretary will determine if a teaching hospital's
current number of residents (reference level) is less than
applicable resident limit. If so, 25 percent of the unused
residency payments would be retained by the hospital and 75
percent redistributed. The resident reference level would be
the highest number of allopathic and osteopathic resident
positions (before the application of any weighting factors) for
the hospital during the reference period. A hospital's
reference period would be the 3 most recent consecutive cost
reporting periods for which a hospital's cost reports have been
settled (or in the absence of such settled cost reports,
submitted reports) on or before September 30, 2001. The
Secretary would be able to adjust a hospital's resident
reference level, upon the timely request for such an
adjustment, for the cost reporting period that includes July 1,
2002. The Secretary should also consult with the appropriate
experts in graduate medical education and training such as the
American Medical Association, the American Osteopathic
Association, the Association of American Medical Colleges, the
American Association of Colleges of Osteopathic Medicine and
other groups as the Secretary deems appropriate.
The Secretary would be authorized to increase the
applicable resident limits for other hospitals. No increase
would be permitted for any portion of cost reporting period
that occurs before July 1, 2003 or before the date of a
hospital's application for such an increase. No increase would
be permitted unless the hospital has applied for such an
increase by December 1, 2004. The Secretary would first
distribute the increased resident count to programs in
hospitals located in rural areas and hospitals that are not in
large urban areas on a first-come-first-served basis. The
hospital would have to demonstrate that the resident positions
would be filled; not more than 25 positions would be given to
any hospitals. These hospitals would be reimbursed for DGME for
the increase in resident positions at the locality adjusted
national average per resident amount rather than continuing the
historically inequitable cost based methodology. A hospital's
indirect medical education (IME) limit would be treated in the
same way as changes to the aggregate limit except any resulting
increase in resident counts would not affect a hospital's IME
payments.
These provisions would not apply to reductions in residency
programs that occurred as part of the voluntary reduction
program or would affect the ability of certain hospitals to
establish new medical residency training programs. The
Secretary would be required to submit a report to Congress no
later than July 1, 2004 that recommends whether to extend the
application deadline for increases in resident limits.
EFFECTIVE DATE
Upon enactment.
Subtitle C--Other Provisions
Section 621. Modifications to Medicare Payment Advisory Commission
(MedPAC)
CURRENT LAW
The Medicare Payment Advisory Commission (MedPAC) is
required to review Medicare payment policies, make
recommendations, and issue annual reports with respect to the
Medicare +Choice program, Medicare's fee-for-service, and the
interaction of these policies with the overall health care
delivery system. MedPAC is composed of 17 members appointed by
the Comptroller General to include individuals who are
nationally recognized for their expertise in health finance and
economics, actuarial science, health facility management,
health plans and other related fields and who will provide a
mix of broad geographic representation and a balance between
rural and urban interests. Commission members include but are
not limited to physicians, health professionals, employers, and
other individuals skilled in health services and health
economics research. Representatives of the elderly and
consumers are also included in MedPAC. Individuals who are
directly involved in the provision or management of the
delivery of Medicare covered items or services are not to
constitute a majority of the Commission.
EXPLANATION OF PROVISION
MedPAC would be required to examine the budget consequences
of its recommendations prior to issuing such recommendations,
either directly or by consulting appropriate expert entities.
MedPAC would be required to submit 2 reports to Congress no
later than June 1, 2003 on: (1) the need and availability of
data to determine the financial circumstances, including
solvency, of hospitals and other Medicare providers; the report
should also include an analysis of the advantages or
disadvantages of the current TEFRA acute care payment system in
the Virgin Islands compared to the Medicare prospective payment
system; and (2) the investments and capital financing of
participating hospitals and related foundations which would be
based on data from Form 990 of the Internal Revenue Service.
EFFECTIVE DATE
Upon enactment.
Section 622. Demonstration Project for Disease Management for Certain
Medicare Beneficiaries with Diabetes
CURRENT LAW
BIPA required the Secretary to conduct a demonstration
project targeting certain Medicare fee-for-service
beneficiaries with diagnosed, advanced stage congestive heart
failure, diabetes, or coronary heart disease to examine the
impact on costs and health outcomes of applying disease
management services, supplemented with prescription drug
coverage. No more than 30,000 beneficiaries may participate at
any time and the project must result in a net reduction in
aggregate Medicare expenditures. CMS published a notice
requesting proposals for this project on February 22, 2002.
EXPLANATION OF PROVISION
The Secretary would be required to conduct a demonstration
project, for up to 3 years, to examine the impact on costs and
health outcomes of applying disease management to Hispanic
Medicare beneficiaries who are diagnosed with diabetes. No more
than 30,000 beneficiaries would be able to participate at any
time. The beneficiaries would meet specified medical criteria,
would have their physicians approve their participation in the
project and would not be enrolled in a Medicare+Choice plan.
These participants would be eligible for disease management
services related to their diabetes and, except for modest cost
sharing provided for by the project, would have all their
prescription drug costs covered without regard to whether the
drugs relate to the diabetes. The Secretary would carry out the
project through contracts with up to 3 disease management
organizations that have demonstrated improved health outcomes
and reduced aggregate expenditures with such programs. Under
the contracts, the organizations would be required to provide
prescription drug coverage, would be paid a fee negotiated by
the Secretary so that Medicare expenditures would not increase
but rather, to the extent practicable, would decrease. The
organization would be required to guarantee that Medicare
expenditures would not increase through an appropriate
arrangement with a reinsurance company. Payments to these
organizations would be made in appropriate proportion from the
Medicare trust funds.
The Secretary would be required to establish a working
group of employees of the Department of Health and Human
Services to become the focal point of all disease management
programs in the agency. Specifically, the working group would:
(1) oversee the new diabetes disease management project; (2)
establish policy and criteria for Medicare disease management
programs; (3) identify targeted medical conditions and
individuals; (4) select areas for disease management programs;
(5) monitor health outcomes under the programs; (6) measure the
effectiveness of such programs with respect to budget
neutrality requirements; and (7) serve as a focal point for
dissemination of information on all CMS run disease management
programs. Participants would be offered certain protections for
the period of the demonstration project that are afforded to
Medicare beneficiaries enrolled in Medicare+Choice plans with
respect to their existing Medicare supplemental insurance
policies. The Secretary would be required to waive Medicare
provisions as necessary to provide for payment for the disease
management program.
The Secretary would be required to submit an interim report
to Congress on the project no later than 2 years after the date
it is first implemented; a final report would be due 6 months
after its completion. These reports would include information
on the impact of the project on costs and health outcomes as
well as recommendations on the cost-effectiveness of extending
or expanding the project.
GAO would be required to submit a report to Congress that
compares Medicare's disease management programs with those
conducted in the private sectors and identifies the cost
effectiveness of such programs. The report would be due no
later than 18 months from the date of enactment.
EFFECTIVE DATE
Upon enactment.
Section 623. Demonstration Project for Medical Adult Day Care
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Subject to earlier provisions, the Secretary would be
required to establish a demonstration project under which a
home health agency, directly or under arrangement with a
medical adult day care facility, provide medical adult day care
services as a substitute for a portion of home health services
otherwise provided in a beneficiary's home. Such services would
have to be provided as part of a plan for an episode of care
for home health services established for a beneficiary. Payment
for the episode would equal 95 percent of the amount that would
otherwise apply. In no case would the agency or facility be
able to charge the beneficiary separately for the medical adult
day care services. The Secretary would reduce payments made
under the home health prospective payment system to offset any
amounts spent on the demonstration project. The 3-year
demonstration project would be conducted in states that license
or certify providers of medical adult day care services, as
selected by the Secretary. Participation of up to 15,000
Medicare beneficiaries would be on a voluntary basis.
When selecting participants, the Secretary would give
preference to home health agencies that are currently licensed
or certified to furnish medical adult day care services; The
Secretary would define licensure to apply both directly or
under common ownership and control. A medical adult day care
facility would (1) have been licensed or certified by a State
to furnish medical adult day care services for a continuous 2-
year period; (2) have been engaged in providing skilled nursing
services or other therapeutic services directly or under
arrangement with a home health agency; and (3) would meet
quality standards and other requirements as established by the
Secretary. The Secretary would be able to waive necessary
Medicare requirements except that beneficiaries must be
homebound in order to be eligible for home health services.
The Secretary would be required to evaluate the project's
clinical and cost effectiveness and submit a report to Congress
no later than 30 months after its commencement. The report
would include: (1) an analysis of patient outcomes and
comparative costs relative to beneficiaries who receive only
home health services for the same health conditions and (2)
recommendations concerning the extension, expansion, or
termination of the project.
EFFECTIVE DATE
Upon enactment.
TITLE VII--MEDICARE BENEFITS ADMINISTRATION
Section 701. Establishment of Medicare Benefits Administration
CURRENT LAW
The Medicare statute requires that the Administrator of the
Health Care Financing Administration (HCFA, now known as CMS)
be appointed by the President with the advice and consent of
the Senate. The HCFA Administrator is paid at level III of the
Executive Schedule.
The Medicare statute requires that the HCFA administrator
appoint a Chief Actuary who reports directly to such
administrator and is paid at the highest rate of basic pay for
the Senior Executive Service. To be appointed as actuary, an
individual must possess demonstrated experience and superior
expertise in actuarial sciences, exercise duties that are
appropriate to the office, and act in accordance with
professional standards of actuarial independence. The Medicare
statute specifies certain responsibilities for this position
with respect to the Medicare+Choice program. Specifically,
annual Medicare+Choice capitation rates are computed and
published by the Secretary, through the Chief Actuary of HCFA;
adjustments to the Medicare+Choice payment rates that reflect
changes in coverage are based on an cost analysis by the CMS'
Chief Actuary; and the assumptions and data in the adjusted
community rating submitted by Medicare+Choice plans are
reviewed and assessed by CMS' Chief Actuary. The Chief Actuary
may be removed only for cause.
EXPLANATION OF PROVISION
The Medicare Benefits Administration (MBA) would be an
agency established within HHS that would be headed by an
Administrator appointed by the President with the advice and
consent of the Senate for a 5-year term. If a successor is not
appointed immediately, the existing Administrator would
continue in office. When the subsequent administrator was
appointed, that person would serve as Administrator only for
the remainder of the term. The Administrator who would be paid
at level III of the Executive Schedule would report directly to
the Secretary. The Secretary would ensure appropriate
coordination between the Administrators of MBA and CMS.
The Administrator would be (1) responsible for all the
duties of the MBA; (2) would have control over all related
personnel and activities; (3) able to establish alter
consolidate or discontinue organizational units except as
further specified; (4) able to assign duties and delegate the
authority to act to such officers and employees of MBA (these
actions, within the limitation of such delegations, shall have
the same force as if performed by the Administrator); and (5)
able to prescribe necessary rules and regulations to carry out
the functions of the MBA (subject to the rulemaking procedures
of the section 553 of Title 5 of the United States Code, the
Administrative Procedure Act).
The Deputy Administrator of MBA who would be paid at level
IV of the Executive Schedule would be appointed by the
President with the advice and consent of the Senate for a 5-
year term. If a successor is not appointed immediately, the
existing Deputy Administrator would continue in office. The
subsequent deputy administrator would serve in that capacity
only for the remainder of the term. The Deputy would perform
duties as assigned by the Administrator and would act as Acting
Administrator during any absence or disability, unless the
President designates another officer of the Government as
Acting Administrator in the event of a vacancy in that office.
The MBA Administrator would appoint a Chief Actuary who
reports directly to such administrator and is paid at the
highest rate of basic pay for the Senior Executive Service. To
be appointed as Chief Actuary, an individual must possess
demonstrated experience and superior expertise in actuarial
sciences, exercise duties that are appropriate to the office,
and act in accordance with professional standards of actuarial
independence. The Chief Actuary would be able to be removed
only for cause.
The MBA Administrator would be responsible for carrying out
the duties associated with Parts C and D of Medicare including
(1) negotiating, entering into, and enforcing Medicare+Choice
contracts, including prescription drug coverage; (2)
negotiating, entering into, and enforcing contracts with PDP
sponsors for prescription drug coverage; (3) other duties
provided for under Parts C or D, including certain
demonstration projects; and (4) other duties relating to the
Medicare prescription drug discount cared endorsement program.
In carrying out the duties with respect to prescription drug
coverage, the Administrator may not (1) require a particular
formulary or institute a price structure for reimbursement of
covered outpatient drugs; (2) interfere with negotiations
between PDP sponsors and Medicare+Choice organizations, drug
manufacturers, wholesalers, or other suppliers of outpatient
drugs; and (3) interfere with the competitive nature of
providing coverage through such sponsors and organizations. The
Administrator would be required to submit to Congress a report
on the administration of Parts C and D by March 31st of each
year.
The MBA Administrator would be able to hire employees and
officers with the necessary expertise to negotiate private
sector contracts without regard to chapter 31 of Title 5 (other
than 3110 and 3112) of the United States Code (relating to
hiring of federal personnel and other employment matters) with
the approval of the Secretary. The MBA staff would be paid
without regard to the provisions of chapters 51 (other than
5101) and 53 (other than 5301) of Title 5 of the United States
Code (relating to classification and pay schedules), but in no
case would these employees receive more than the basic pay for
level IV of the Executive Schedule. The MBA Administrator would
not be able to employ more FTE's to perform a specific function
than were previously used by CMS on the date of enactment to
perform that function.
The Secretary and the Administrators of CMS and MBA would
establish an appropriate transition of responsibility to
redelegate the administration of Medicare Part C from CMS to
MBA. The Secretary would ensure that the CMS Administrator
transfer necessary data and information to the MBA
Administrator. To the extent that a responsibility is
transferred from the Secretary or from CMS to the MBA
Administrator, any statutory reference with respect to such a
responsibility is deemed to be a reference to the MBA
Administrator.
The Secretary would be required to establish an Office of
Beneficiary Assistance as a separate operating division within
the MBA to (1) make Medicare eligibilitydeterminations, and (2)
enroll Medicare beneficiaries. The Office of Beneficiary Assistance
would disseminate information on benefits and payment limitations
(including cost-sharing requirements, stop-loss provisions, and
formulary restrictions) under Parts C and D as well as benefits and
payment limitations (including information on Medicare supplemental
plans) under Parts A and B. The information would be disseminated by
mail, through an internet site, and through a toll free telephone
number in a way so that beneficiaries would be able to compare benefits
under Parts A, B, D and supplemental insurance with benefits offered by
Medicare +Choice plans. Information on the grievance and appeals
procedures for all parts of Medicare would be disseminated as well.
A Medicare Policy Advisory Board would be established
within the MBA to advice, consult with, and make
recommendations to the MBA Administrator with respect to Parts
C and D. The Board would consist of 7 members who serve a 3-
year term and who are appointed as follows: 3 members would be
appointed by the President; 2 members would be appointed by the
Speaker of the House with the advice of the chairmen and
ranking minority members of the committees of jurisdiction and
2 members would be appointed by the President pro tempore of
the Senate with the advice of chairman and ranking minority
member of the committee of jurisdiction. The members would be
chosen on the basis of their integrity, objectivity, and
judgment as well as their experience with healthcare benefits
management. No officer or employee of the United States would
be able to serve on the Board. Board members would be
compensated for each day of work (including time spent
traveling) at a rates equal to level IV of the Executive
Schedule.
The terms of the initial appointees would be established on
a staggered basis. As designated by the President at time of
appointment, 1 member would have a 1-year term; 3 members would
have a 2-year term; and 3 members would have a 3-year term. No
individual would be able to serve on the Board for more than 8
years. Any individual appointed to fill a vacancy on the Board
would serve for the remainder of the term. A Board member would
be able to serve after the expiration of that member's term
until a successor is appointed. A vacancy in the Board would be
filled in the manner in which the original appointment was
made.
The Chair of the Board would be elected by the members to
serve 3 years. The Board would meet at least 3 times during
each fiscal year at the call of the chair. The Board would have
a Director who would be appointed by the Chair. The Director
would be able to appoint personnel, without regard to chapter
31 of Title 5 U.S.C., but with the Board's approval. The staff
would be paid without regard to the provisions of chapters 51
and 53 of Title 5 U.S.C. (relating to classification and pay
schedules), but in no case would these employees receive more
than the basic pay for level IV of the Executive Schedule.
The Board would submit reports to Congress and the MBA
Administrator that would contain recommendations for
legislative or administrative changes to improve administration
in such areas as fostering competition, beneficiary education,
risk-adjustment methods, disease management programs, and
access in rural areas. The Board would submit these reports
directly to Congress without prior review and approval to any
federal officer or agency. No later than 90 days after a report
is submitted, the MBA Administrator would be required to submit
an analysis of the Board's recommendations to Congress and the
President. This analysis would also be published in the Federal
Register.
The MBA Administrator would be required to make necessary
information available to the Board. The Board would be able to
contract with and compensate government and private agencies
without regard to sections 3709 of the Revised Statutes (41
U.S.C. 5). Necessary sums would be authorized to be
appropriated from the Medicare trust funds, including the
Medicare Prescription Drug Account.
The MBA Administrator would become an ex-officio member of
the Board of Trustees of the Medicare Trust Funds. The
Administrator of CMS would be paid at level III of the
Executive Schedule.
EFFECTIVE DATES
The Administrator and Deputy Administrator would be
appointed on or after March 1, 2003. The MBA Administrator
would be responsible for Medicare enrollment and eligibility
determinations beginning on or after January 1, 2005. Before
the MBA Administrator would be appointed, the Secretary would
provide for the conduct of any of the Administrator's
responsibilities that are otherwise provided for under law. On
January 1, 2003, the MBA Administrator would become an ex-
officio member of the Board of Trustees of the Medicare Trust
Funds. The Administrator of CMS would be paid at level III of
the Executive Schedule, effective on January 1, 2003.
TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM
Section 801. Construction; Definition of Supplier
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
None of the provisions shall be construed to (1) compromise
the existing legal remedies for addressing Medicare fraud or
abuse with respect to criminal prosecution, civil enforcement,
or administrative remedies, including those established by the
False Claims Act or (2) prevent the Department of Health and
Human Services (HHS) from its ongoing efforts to eliminate
waste, fraud, and abuse in Medicare. Also, consolidation of
Medicare's administrative contracting functions (as provided
for in this bill) would not consolidate the Federal Hospital
Insurance Trust Fund, which pays for Part A, services and the
Federal Supplementary Medical Insurance Trust fund, which pays
for Part B services. The bill notes that this administrative
consolidation does not reflect any position on that issue.
The term ``supplier'' refers to a physician or other
practitioner, a facility, or other entity (other than a
provider of services) that furnishes items or services under
title XVIII of the Social Security Act.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Committees are committed to extending needed regulatory
relief to providers and suppliers while at the same time
protecting taxpayers from waste, fraud and abuse.
Subtitle A--Regulatory Reform
Section 802. Issuance of Regulations
(a) Consolidation of Promulgation to Once a Month
CURRENT LAW
The Secretary is required to prescribe regulations that are
necessary to administer Parts A and B of the Medicare program.
No rule, requirement or policy statement (other than a national
coverage determination) that establishes or changes a
substantive legal standard that determines Medicare's scope of
benefits, level of payment, or eligibility of individuals,
entities or organizations to receive benefits or furnish
services can take effect unless it is promulgated by
regulation. The Secretary must publish a proposed regulation in
the Federal Register, with at least 60 days to solicit public
comment, before issuing the final regulation with the following
exceptions:(1) the statute permits the regulation to be issued
in interim final form or provides for a shorter public comment period;
(2) the statutory deadline for implementation of a provision is less
than 150 days after the date of enactment of the statute containing the
provision; (3) under the good cause exception contained in the rule-
making provision of Title 5 of the United States Code, notice and
public comment procedures are deemed impracticable, unnecessary or
contrary to the public interest. The Secretary must publish in the
Federal Register no less frequently than every three months a list of
all manual instructions, interpretative rules, statements of policy,
and guidelines which are promulgated to carry out Medicare's law.
EXPLANATION OF PROVISIONS
The Secretary would be required to issue proposed or final
regulations (including interim final regulations) on one
business day of every month, unless the Secretary finds that
publication on other dates is required to comply with Medicare
law or that this restriction is contrary to the public
interest. In such instances, the Secretary would be required to
include an explanation of such a finding when the regulations
are issued. The Secretary would be required to coordinate the
issuance of new regulations relating to a category of provider
or supplier based on an analysis of the collective impact of
the regulatory changes on such category. No later than three
years after enactment, the Comptroller General of the US
General Accounting Office would be required to report to
Congress on the feasibility of issuing regulations only on one
day in each calendar quarter.
EFFECTIVE DATE
The provisions would apply to regulations issued 30 days
after enactment.
REASON FOR CHANGE
The volume of Medicare regulations issued by CMS can be
difficult for health care providers and suppliers, particularly
small providers and suppliers, to monitor. By requiring
regulations to be released on a certain date, providers and
suppliers will be better able to keep informed of program
changes. The Secretary may stagger the notice and comment
periods of regulations issued on the same day, so that the
comment deadlines for these regulations do not occur
simultaneously, in order to ensure that interested parties have
the opportunity to comment on multiple regulations.
The collective impact provision ensures that the Department
will consider the overall impact of any changes it is making on
categories of providers and suppliers. If the Department
determines that many changes affecting a particular category of
providers or suppliers are underway, the Department should
consult with representatives of that category to determine
whether providers and suppliers would be better able to make
the systems changes needed to accommodate those changes if all
the new regulations were released simultaneously or staggered.
Because of the burden implementing multiple regulations
simultaneously can cause, the Secretary needs to coordinate new
regulations based on an analysis of the collective impact the
regulatory changes will have on any given category of provider
or supplier.
(b) Regular Timeline for Publication of Final Rules
CURRENT LAW
See above. The Secretary must publish in the Federal
Register no less frequently than every three months, a list of
all manual instructions, interpretative rules, statements of
policy, and guidelines which are promulgated to carry out
Medicare's law.
EXPLANATION OF PROVISIONS
The Secretary, in consultation with the Director of the
Office of Management and Budget, would establish and publish a
regular timeline for the publication of final regulations based
on the previous publication of a proposed regulation or an
interim final regulation. The timeline may vary by regulation
due to complexity, number and scope of comments received and
other factors, but would not be longer than three years unless
there are exceptional circumstances. If the Secretary intends
to vary a regulation's timeline, a notice of the different
timeline would be required to be published in the Federal
Register. This notice would include a brief explanation of the
justification for such variation. If the timeline established
for an interim final regulation expires without promulgation of
a final regulation (including the public comment period), the
interim final regulation would not remain in effect unless the
Secretary publishes a notice of continuation that includes an
explanation for not complying with the deadlines. This
provision applies to the regular timelines and any subsequent
1-year extension to the timeline. If a notice of continuation
is published, the regular timeline or the timeline as
previously extended would be extended for 1 additional year.
The Secretary would be required to submit a report to Congress
that describes and explains the instances where the final
regulation was not published within the applicable timeline.
EFFECTIVE DATE
Upon enactment. The Secretary would be required to provide
for a transition period for previously published interim final
regulations.
REASON FOR CHANGE
Numerous regulations have been issued by CMS as interim
final regulations and never finalized. This injects an element
of uncertainty into the regulation in question, and it
precludes the ability of CMS to incorporate changes based on
comments received by interested parties into a final
regulation. The provision ensures that proposed regulations
will move through the process of finalization in a predictable
and timely manner with input from affected parties.
(c) Limitation on New Matter in Final Regulations
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
A provision in a final regulation that is not a logical
outgrowth of the proposed regulation (including an interim
final regulation) would be treated as a proposed regulation and
would not take effect without a separate public comment period
followed by its publication as a final regulation.
EFFECTIVE DATE
Final regulations published on or after enactment.
REASON FOR CHANGE
The provision ensures that interested parties will be given
an opportunity to comment on issues addressed in regulations
before they take effect. The Committees recognize that proposed
regulations for annual payment updates for providers and
suppliers include proposed overall payment updates, and that
specific payment amounts for specific codes or specific payment
areas are not typically included until final rules. The
Committees do not intend to change past custom to recognize
such details in final rules as a ``logical outgrowth'' of
proposed rules. It is the Committees' intent that if the
Secretary publishes a final rulemaking document which includes
a provision that is not a logical outgrowth of a previously
published notice of proposed rulemaking, such provision will
not take effect until there is further opportunity for public
comment and a publication of the provision again as a final
regulation.
Section 803. Compliance with Changes in Regulations and Policies
(a) No Retroactive Application of Substantive Changes
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
A substantive change in a regulatory or a subregulatory
issuance would not be applied retroactively to items or
services, unless the Secretary determines that retroactive
application (1) would be necessary to comply with statutory
requirements; or (2) would be beneficial to the public
interest.
EFFECTIVE DATE
For substantive changes issued on or after enactment.
REASON FOR CHANGE
This provision will ensure that Medicare's rules are not
generally applied retroactively.
(b) Timeline for Compliance with Substantive Changes after
Notice
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
A substantive change would not become effective before 30
days after the date the change is issued or published. The
Secretary would be able to waive the 30-day period to comply
with statutory requirements or if such waiver is in the public
interest. If an earlier date is established, the Secretary
would be required to include a brief explanation of such
finding in the issuance or publication of the substantive
change. No compliance action would be permitted against a
provider or supplier for goods and services furnished before
the effective date of the substantive change.
EFFECTIVE DATE
For compliance actions undertaken on or after enactment.
REASON FOR CHANGE
This provision will ensure providers and suppliers have
sufficient time to make any changes to systems needed to comply
with changes in regulations.
(c) Reliance on Guidance
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
(1) The provider or supplier follows written guidance
(which may be transmitted electronically) provided by the
Secretary or a Medicare contractor when furnishing an item or
service and submitting a claim; (2) the Secretary finds that
the circumstances relating to the furnished items and services
have been accurately presented in writing to the contractor;
(3) the guidance is inaccurate. A provider or supplier who
reasonably relied on erroneous guidance would not be subject to
any sanction or penalties, including repayment. This provision
would not prevent recoupment or repayment (without additional
penalty) if the overpayment was solely the result of a clerical
or technical operational error.
EFFECTIVE DATE
Upon enactment, but would not apply to sanctions where
notice was provided on or before enactment.
REASON FOR CHANGE
This provision will ensure that providers and suppliers
who, in good faith based, on the information received from
contractors, will not be vulnerable to recovery if it turns out
that the contractor was in error. Providers should be able to
rely on the directions or guidance provided by their Medicare
contractors.
Section 804. Reports and Studies Relating to Regulatory Reform
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
The legislation has two studies in this area. First, the
Comptroller General of the United States (GAO) would be
required to conduct a study to determine the appropriateness
and feasibility of providing the authority to the Secretary to
issue legally binding advisory opinions on the interpretation
and application of Medicare regulations. The study would
examine the appropriate time frame for issuing the decisions as
well as the need for additional staff and funding. GAO would
submit the study to Congress by January 1, 2004.
Second, the Secretary would be required to report to
Congress on the administration of the Medicare program and
inconsistencies among existing Medicare statutory or regulatory
provisions. The report would include (1) information from
beneficiaries, providers, suppliers, Medicare Beneficiary and
Provider Ombudsmen (established in this legislation), and
Medicare contractors; (2) descriptions of efforts to reduce
inconsistencies; and (3) recommendations from the Secretary for
appropriate legislation or administrative actions. The report
would be due no later than two years after enactment and every
two thereafter.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Committees are interested in receiving additional
information regarding both advisory opinions and
inconsistencies in Medicare regulations.
Subtitle B--Contracting Reform
Section 811. Increased Flexibility in Medicare Administration.
(a) Consolidation and Flexibility in Medicare
Administration
CURRENT LAW
Section 1816 of the Social Security Act authorizes the
Secretary to establish agreements with fiscal intermediaries
nominated by different provider associations to make Medicare
payments for health care services furnished by institutional
providers. Section 1842 of the Act authorizes the Secretary to
enter into contracts with health insurers (or carriers) to make
Medicare payments to physicians, practitioners and other health
care suppliers. Section 1834(a)(12) of the Act authorizes
separate regional carriers for the payment of durable medical
equipment (DME) claims. Section 1893 authorizes the Secretary
to contract for certain program safeguard activities under the
Medicare Integrity Program (MIP).
Certain terms and conditions of the contracting agreements
for fiscal intermediaries and carriers are specified in the
Medicare statute. Medicare regulations coupled with long-
standing agency practices have further limited the way that
contracts for claims administration services can be
established. Specifically, the contracts are awarded without
full and open competition; generally must cover the range of
claims processing and related activities; cannot be terminated
without cause and without the opportunity for a public hearing;
and incorporate cost-based, not performance-based,
reimbursement methods with no incentive bonuses.
Certain functions and responsibilities of the fiscal
intermediaries and carriers are specified in the statute as
well. The Secretary may not require that carriers or
intermediaries match data obtained in its other activities with
Medicare data in order to identify beneficiaries who have other
insurance coverage as part of the Medicare Secondary Payer
(MSP) program. With the exception of prior authorization of DME
claims, an entity may not perform activities (or receive
related payments) under a claims processing contract to the
extent that the activities are carried out pursuant to a MIP
contract. Performance standards with respect to the timeliness
of reviews, fair hearings, reconsiderations and exemption
decisions are established as well.
A Medicare contract with an intermediary or carrier may
require any of its employees certifying or making payments
provide a surety bond to the United States in an amount
established by the Secretary. Neither the contractor nor the
contractor's employee who certifies the amount of Medicare
payments is liable for erroneous payments in the absence of
gross negligence or intent to defraud the United States.
Neither the contractor nor the contractor's employee who
disburses payments is liable for erroneous payments in the
absence of gross negligence or intent to defraud the United
States, if such payments are based upon a voucher signed by the
certifying employee.
EXPLANATION OF PROVISIONS
The legislation would add Section 1874A to the Social
Security Act to permit the Secretary to enter into contracts
with any entity to serve as a Medicare administrative
contractor. These contractors would perform or secure the
performance (through subcontracting) of some or all of the
following tasks: determine payment amounts; make payments;
educate and assist beneficiaries; provide consultative
services; communicate with providers and suppliers; educate and
offer technical assistance to providers; and perform additional
functions as necessary. An entity eligible to enter into a
contract with respect to the performance of a particular
function as an entity would (1) have demonstrated capability to
carry out such function; (2) comply with conflict of interest
standards that are generally applicable under Federal
acquisition and procurement; (3) have sufficient assets to
financially support the performance of such functions and (4)
meet other requirements imposed by the Secretary. The claims
processing jurisdiction of Medicare administrative contractor
would be determined by the scope of the contract awarded to the
entity. Specifically, the Medicare administrative contractor
that would perform a particular function is the entity that has
the contract to perform that function for any given
beneficiary, any given provider or supplier, or class of same.
The Federal Acquisition Rules (FAR) would apply to Medicare
administration contracts except to the extent it is
inconsistent with a specific Medicare requirement. The
Secretary would be required to use competitive procedures when
entering into a Medicare administrative contract and would take
into account performance quality, price, and other factors. The
Secretary would be able to renew a contract for up to five
years without regard to statutory requirements concerning
competitive contracting if the entity has met or exceeded
specified performance standards. The Secretary would be able to
transfer functions among contractors consistent with these
provisions. The Secretary would be required to (1) ensure that
performance quality is considered in such transfers and (2)
provide notice of such transfer (in the Federal Register or
otherwise) that describes the transferred functions, the
affected providers and suppliers, and includes contractor
contact information.
The Secretary would be required to (1) provide incentives
for the Medicare administrative contractors to provide
efficient, high-quality services; and (2) develop performance
standards with respect to each of the payment, provider
service, and beneficiary service functions required of the
contractors. In developing the performance standards, the
Secretary would be able to consult with providers and
suppliers, organizations representing Medicare beneficiaries,
and Medicare contractors. In developing the performance
requirements for Medicare administrative contractors, the
Secretary may include satisfaction of beneficiaries as a
standard for measuring performance. The Secretary would be
required to contract only with those entities that will (1)
perform efficiently andeffectively; (2) meet standards for
financial responsibility, legal authority and service quality among
other pertinent matters; (3) agree to furnish timely and necessary
data; and (4) maintain and provide access to necessary records and
data.
The performance requirements would be (1) set forth in the
contract between the Secretary and the appropriate Medicare
contractor; (2) used to evaluate contractor performance; and
(3) consistent with the contract's written statement of work.
The statement of work and contract are public documents. A
Medicare administrative contract would contain provisions
deemed necessary by the Secretary and may provide for advances
of Medicare funds for the purposes of making payments to
providers and suppliers. In developing contract performance
requirements for Medicare administrative contractors, the
Secretary would be required to consider the inclusion of the
existing standards in effect for timeliness of reviews,
reconsiderations and exemption decisions.
The existing MSP provision would apply: the Secretary would
not be able to require contractors to match their data with
Medicare data for the purposes of the identifying beneficiaries
with other insurance coverage. The Secretary would assure that
the activities of the Medicare administrative contractors do
not duplicate the Medicare Integrity Program (MIP) functions
except with respect to the prior authorization of durable
medical equipment. An entity with a MIP contract would not be
treated as a Medicare administrative contractor, simply because
it has a MIP contract.
A Medicare administrative contractor and any of its
employees certifying or disbursing payments may be required to
provide a surety bond to the United States in an amount
established by the Secretary. It is the intent of Congress that
the definition of a surety bond in this instance includes
fidelity bonds and the Secretary has the authority to request
fidelity bonds. The contractor's employee who disburses
payments is not liable for erroneous payments in the absence of
gross negligence or intent to defraud the United States, if
such payments are based upon an authorization from the
certifying employee and the authorization meets the internal
control standards established by GAO. The contractor is not
liable for payments made by its certifying or disbursing
officers unless in connection with such payments or in the
supervision or selection of such officers the contractor acted
with gross negligence.
The Secretary would be able to indemnify a Medicare
administrative contractor, subcontractor, or employee who is
made a party to any judicial or administrative proceeding
arising from the claims administration process to an
appropriate extent as determined by the Secretary and specified
in the contract. Indemnification in this case may include
payment of judgments, certain settlements, awards and costs
(including reasonable legal expenses). Settlement proposals
would not be negotiated or compromised without prior written
approval by the Secretary. The Secretary would not be able to
provide any indemnification if the liability arises directly
from conduct that is determined in the proceeding or by the
Secretary to be criminal in nature, fraudulent, or grossly
negligent. If indemnification is provided before such
determination is made and the contractor's conduct is found to
be, the contractor would reimburse the Secretary for these
costs. The provisions would not change common law immunity
available to the Medicare contractor or other party, or permit
the payment of costs not otherwise allowable, reasonable or
allocable under the Federal Acquisition Regulation.
EFFECTIVE DATE
See subsection (d).
REASON FOR CHANGE
Medicare's current contracting represents an antiquated,
inefficient, and closed system based on cozy relationships
between the government, contractors and providers.
Medicare contracting is antiquated because contractors may
not provide service for the entire Medicare program, or
particular functions within the program; rather Fiscal
Intermediaries administer claims for facilities and carriers
administer claims for all other providers. It has failed to
keep pace with integrated claims administration practices in
the private sector.
Medicare contracting is inefficient because Medicare does
not award contracts through competitive procedures, but rather
on provider nomination.
Medicare contracting is closed. All but one of the
contractors today have been with Medicare since the program's
inception 36 years ago, and only insurers can provide
contracting services.
This provision permits greater flexibility in contracting
for administrative services between the Secretary and the
Medicare contractors (entities that process claims under part A
and part B of the Medicare program), including the flexibility
to separately contract for all or parts of the contractor
functions. The Secretary also may contract with a wider range
of entities, so that the most efficient and effective
contractor can be selected.
These amendments require the Secretary to contract
competitively at least once every five years for the
administration of benefits under parts A and B. In conjunction
with the elimination of cost contracts, it is intended to
create incentives for improved service to beneficiaries and to
providers of services and suppliers.
(b) Conforming Amendments to Section 1816 (Relating to
Fiscal Intermediaries)
CURRENT LAW
Section 1816 of the Social Security Act establishes the
provider nomination process, the contracting specifications,
and performance standards for fiscal intermediaries that
currently contract with Medicare to process claims and perform
other related administrative activities for institutional
providers.
EXPLANATION OF PROVISIONS
The provisions establish that the activities of fiscal
intermediaries in administering Medicare would be conducted
through contracts with Medicare administrative contractors as
set forth in subsection (a). The provider nomination process
and contracting specifications would be repealed. Certain
performance standards with respect to the processing of clean
claims would be retained. Certain annual reporting requirements
concerning the contractor's overpayment recovery efforts would
be retained.
EFFECTIVE DATE
See subsection (d).
REASON FOR CHANGE
These amendments provide a basis for a unified contracting
system for the administration of parts A and B, identical to
the recent Congressionally mandated structure of the Medicare
Integrity Program contractors. Consolidation of contracting
duties as set forth in this legislation does not constitute
consolidation of the Hospital Insurance and Medical
Supplementary Insurance Trust Funds, or reflect any position on
that issue. In addition, the elimination of provider
nomination, which hospitals have rarely been allowed to
exercise in recent years, is essential for bringing full and
open competition into the contracting functions of the Medicare
program.
(c) Conforming Amendments to Section 1842 (Relating to
Carriers)
CURRENT LAW
Section 1842 of the Social Security Act establishes that
carriers will be used to administer certain Medicare benefits
as well as the contracting requirements and certain performance
standards for those activities.
EXPLANATION OF PROVISIONS
The provisions would establish that the activities of
carriers administering Medicare would be conducted through
contracts with Medicare administrative contractors as set forth
in subsection (a). Certain instructions including those
pertaining to nursing facilities payments, claims assignment,
physician participation, overpayment recoveries and billing by
suppliers would be retained. Certain performance standards with
respect to the processing of clean claims would be retained.
Contracting specifications and other conforming changes would
be established. The Secretary, not the contractor, would be
responsible for taking necessary actions to assure that
reasonable payments are made, for those made on both a cost and
charge basis. The Secretary, not the contractor, would be
responsible for maintaining a toll-free telephone number for
beneficiaries to obtain information on participating suppliers.
Since the Carrier fair hearing requirement were eliminated in
BIPA, the requirements for the hearing are eliminated to
conform with existing law. Certain annual reporting
requirements concerning the contractor's overpayment recovery
efforts would be retained.
The Committee directs the Secretary's attention to the
provision of the Balanced Budget Act of 1997 requiring CMS to
designate no more than five regional carriers to process
laboratory claims.This provision was passed in order to
streamline the processing of laboratory claims and was to be
implemented by July 1, 1999, but CMS has taken no action to date. In
consultation with the clinical laboratory industry, CMS may consider
other potential solutions, including the designation of a single
contractor to process all claims of laboratory entities operating in
more than one state. CMS is directed to report back to the Committee on
Ways and Means and the Committee on Energy and Commerce within three
months detailing the action it has taken to implement this directive.
EFFECTIVE DATE
See subsection (d).
REASON FOR CHANGE
The provision establishes a basis for a unified contracting
system, identical to the structure implemented for the Medicare
Integrity Program contractors. It is important to note,
however, that consolidation of contracting duties as set forth
in this legislation does not constitute consolidation of the
Hospital Insurance and Medical Supplementary Insurance Trust
Funds, or reflect any position on that issue. In addition, the
Secretary would have the flexibility to choose the best
contractor(s) to provide telephone information on suppliers,
which is intended to reduce administrative costs and improve
quality. Since the carrier fair hearing requirement was
eliminated in previous legislation, the requirements for the
hearing are eliminated in order to conform with existing law.
(d) Effective Date; Transition Rule
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
Except as otherwise provided in this subsection, the
provisions in this section would be effective October 1, 2004.
The Secretary would be authorized to take necessary actions
prior to that date in order to implement these amendments on a
timely basis to transition from the contracts established under
sections 1816 and 1842 of the Social Security Act to those
established under the new section 1874A created by this
legislation. The transition would be consistent with the
requirement that the administrative contracts be competitively
bid by October 1, 2009. The requirement that MIP contracts be
awarded on a competitive basis would continue to apply and
would not be affected by the provisions in this section. The
MIP contracting exception that allows agreements according to
current law would be deemed to be a contract established under
the new authority of 1874A and would continue existing
activities. The Secretary has the authority to recognize the
appropriate termination costs of the current contractors during
the transition from cost contracts to competitively bid
contracts.
(e) References
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
After this section becomes effective, any reference to
fiscal intermediary or carrier would be considered a reference
to the appropriate Medicare administrative contractor.
(f) Reports on Implementation
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
The Secretary would submit an implementation plan to
Congress and GAO no later than October 1, 2003. GAO would
evaluate the plan and include appropriate recommendations no
later than six months after the plan is received. No later than
October 1, 2007, the Secretary would be required to submit a
status report to Congress including (1) the number of contracts
that have been competitively bid; (2) the distribution of
functions among contracts and contractors; (3) a timeline for
complete transition to full competition; and (4) a detailed
description of changes to contractor oversight and management.
EFFECTIVE DATES
Upon enactment.
Section 812. Requirements for Information Security
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
Medicare administrative contractors that determine and make
payments would be required to implement a contractor-wide
information security program that meets the requirements
imposed on Federal agencies to ensure the security, integrity,
confidentiality, authenticity, and availability of operational
data and systems supporting operations. An annual audit of the
information security at each Medicare administrative
contractor: (1) would be performed by an independent entity
that meets the independence requirements specified by the
Inspector General (OIG) in HHS; and (2) would test the
effectiveness of the information security techniques for an
appropriate subset of the contractor's systems. An audit of new
contractors (those that have not been fiscal intermediaries or
carriers) would be required prior to the start of their
performing Medicare payment functions. An audit of existing
contractors (those that are now fiscal intermediaries and
carriers) would be required to be completed within one year
from enactment. The results of the audits would be reported
promptly to the OIG, which will submit a report annually to
Congress. These provisions would be equally applicable to
fiscal intermediaries and carriers as to Medicare
administrative contractors.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The increased reliance by the Federal government on the
Internet and related telecommunications technologies has
resulted in enhanced inter-connectivity and interdependencies
associated with Federal computer systems and between federal
and private computer systems. Over the past several years, this
inter-connectivity or Anetworking@ has resulted in increased
security vulnerabilities that have put at greater risk computer
systems and data that are critical to ensuring national and
economic security and public health and welfare, including
sensitive, non-public information that is collected and
maintained by CMS and its business partners.
On May 23, 2001, the Committee on Energy and Commerce held
a hearing to investigate the extent to which sensitive, non-
public information related to collecting and processing
Medicare claims was adequately secure on the computer networks
operated by CMS and its business partners, including Medicare
contractors. That investigation revealed significant
weaknesses, which the agency has been working to address. Some
of the computer security concerns identified include weak
password management, inadequate access controls, excessive user
privileges, improper network configurations, and inadequate
testing of critical systems. In addition, the OIG conducted
assessments of financial controls--including electronic data
processing controls--at CMS and its major Medicare contractors,
and, in every year since 1997, the OIG has identified computer
security controls to be a material weakness at both CMS and the
Medicare contractors reviewed.
Section 812 is intended to assist CMS in identifying and
working with contractors to address potential security
deficiencies in order to ensure that sensitive, non-public
information related to the processing of Medicare claims is
adequately secure from unauthorized access, misuse, or
destruction.
Subtitle C--Education and Outreach
Section 821. Provider Education and Technical Assistance
(a) Coordination of Education Funding
CURRENT LAW
Medicare's provider education activities are funded through
the program management appropriation and through the Education
and Training component of the Medicare Integrity Program (MIP).
Both claims processing contractors (fiscal intermediaries and
carriers) and MIP contractors may undertake provider education
activities.
EXPLANATION OF PROVISIONS
The provision would add Section 1889 to the Social Security
Act which would require the Secretary to (1) coordinate the
educational activities provided through the Medicare
administrative and MIP contractors and (2) to submit an
evaluation to Congress, no later than October 1, 2003, on
actions taken to coordinate the funding of provider education.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This provision is intended to ensure that federal spending
on provider education is coordinated and used as efficiently as
possible to maximize the value obtained from the investment. It
is not intended to change the proportion of Medicare Integrity
Program funds spent on provider education.
(b) Incentives to Improve Contractor Performance
CURRENT LAW
No specific statutory provision. Since FY1996, as part of
the audit required by the Chief Financial Officers Act, an
estimate of improper payments in Medicare fee-for-service has
been established annually. As a recent initiative, CMS is
implementing a comprehensive error rate testing program to
produce national, contractor specific, benefit category
specific and provider specific paid claim error rates.
EXPLANATION OF PROVISIONS
The Secretary would be required to develop and implement a
methodology to measure the specific claims payment error rates
at each Medicare administrative contractor. This methodology
would apply to existing fiscal intermediaries and carriers in
the same manner as it applies to Medicare administrative
contractors. No later than October 1, 2003, GAO would submit to
Congress and to the Secretary a report on the adequacy of the
methodology, including recommendations as appropriate. No later
than October 1, 2003, the Secretary would be required to report
to Congress on (1) the use of the claims error rate methodology
in assessing the effectiveness of contractors' provider
education and outreach programs and (2) whether methodology
should be used as a basis of contractors' performance bonuses.
EFFECTIVE DATE
As specified.
REASON FOR CHANGE
This provision would ensure that the Department monitors
contractor performance for claims payment error rates, and it
would identify best practices for provider education--all with
the goal of reducing payment errors and helping providers and
suppliers better comply with program requirements. It is the
Committees' intent that, in consultation with representatives
of providers and suppliers, the Secretary shall identify and
encourage best practices developed by contractors for educating
providers and suppliers.
(c) Provision of Access to and Prompt Responses from
Medicare Administrative Contractors
CURRENT LAW
No specific statutory provision. Statutory provisions
generally instruct carriers to assist providers and others who
furnish services in developing procedures relating to
utilization practices and to serve as a channel of
communication relating information on program administration.
Fiscal intermediaries are generally instructed to (1) provide
consultative services to institutions and other agencies to
enable them to establish and maintain fiscal records necessary
for program participation and payment and (2) serve as a center
for any information as well as a channel for communication with
providers.
EXPLANATION OF PROVISIONS
The Secretary would be required to develop a communication
strategy with beneficiaries, providers and suppliers. Each
Medicare administrative contractor would be required to (1)
provide general written responses (which may be through
electronic transmission) in a clear, concise and accurate
manner to written inquiries from beneficiaries, providers and
suppliers within 45 business days; (2) provide a toll-free
telephone number where these interested parties may obtain
billing, coding, claims, coverage and other appropriate
Medicare information; (3) maintain a system for identifying
which employee provided both the written and oral information;
and (4) monitor the accuracy, consistency, and timeliness of
the information provided. The Secretary would be required to
establish and make public the standards used to monitor the
accuracy, consistency, and timeliness of information provided
in response to written and telephone inquiries. The standards
would be developed in consultation with provider, supplier, and
beneficiary organizations and would be consistent with the
contractors' performance requirements. The Secretary would be
able to directly monitor the quality of the information so
provided. These provisions would also apply to existing fiscal
intermediaries and carriers.
EFFECTIVE DATE
By October 1, 2003.
REASON FOR CHANGE
This provision is intended to improve contractor
accountability to make contractors more responsive to providers
and suppliers, and to increase the accuracy and reliability of
the information provided in response to the questions received.
(d) Improved Provider Education and Training
CURRENT LAW
In FY2000, $54.8 million was spent on provider education
and training activities: about $43 million came from the
program management appropriation and about $12 million came
from the Provider Education and Training component of MIP. In
FY2001, about $57.3 million was budgeted for these activities.
EXPLANATION OF PROVISIONS
The provisions would authorize $25 million in Medicare
appropriations in FY2004 and FY2005 and such funds as necessary
in subsequent years to increase provider education and training
and to improve the accuracy and quality of contractor
responses. The Committees intend for this amount to be provided
in addition to current funding levels. Starting on October 1,
2003, the contractors' training activities would accommodate
the special needs of small providers and suppliers. The
provision defines a small provider as an institution with fewer
than 25 full-time equivalents (FTEs) and a non-facility based
provider or supplier with fewer than 10 FTEs.
EFFECTIVE DATE
Upon enactment and as specified.
REASON FOR CHANGE
This provision acknowledges that contractors are being
instructed to significantly improve their provider education
and training efforts, and accordingly authorizes new funds to
be available for those purposes.
(e) Requirement to Maintain Internet Sites
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
The Secretary and each contractor would be required to
maintain an Internet site that provides answers to frequently
asked questions in an easily accessible format as well as other
materials published by the contractor.
EFFECTIVE DATE
By October 1, 2003.
REASON FOR CHANGE
This provision will facilitate greater ease of provider and
supplier access to information provided by Medicare's
contractors.
(f) Additional Provider Education Provisions
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
A Medicare contractor would not be able to use attendance
records at educational programs or information gathered during
these programs to select or track candidates for audit or
prepayment review. Nothing in the proposed legislation would
require Medicare administrative contractors to disclose
information that would compromise pending law enforcement
activities or reveal findings of law enforcement-related
audits.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This provision addresses a concern raised by providers and
suppliers that their participation in educational forums has
been used to trigger audits. Participation in educational
forums should be encouraged not discouraged.
Nothing in this section or section 1893(g) shall be
construed as preventing the disclosure by a Medicare contractor
of information on attendance at education activities for law
enforcement purposes. Nothing in this section or section
1893(g) shall be construed as providing for the disclosure by a
Medicare contractor of the claims processing screens or
computer edits used for identifying claims that will be subject
to review.
Section 822. Small Provider Technical Assistance Demonstration Program
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a
demonstration program and contract with qualified entities to
offer technical assistance, when requested and on a voluntary
basis, to small providers or suppliers. Small providers and
suppliers would be those institutional providers with less than
25 full-time equivalents (FTEs) or suppliers with less than 10
FTEs. Technical assistance would include direct, in-person
examination of billing systems and internal controls by
qualified entities such as peer review organizations or other
entities. In awarding these contracts, the Secretary would be
required to consider any prior investigations of the entity's
work by the Office of the Inspector General (OIG) in HHS or the
GAO. Participating providers and suppliers would be required to
pay an amount estimated and disclosed in advance that would
equal 25 percent of the cost of the technical assistance they
received. Absent indications of fraud, errors found in the
review would not be subject to recovery if the problem is
corrected within 30 days of the on-site visit and remains
corrected for an appropriate period. However, this protection
would only apply to claims filed as part of the demonstration
project, would last only for the duration of the project and
only as long as the provider or supplier was participating in
the project. GAO, in consultation with the OIG, would be
required to evaluate and recommend continuation of the
demonstration project no later than two years after its
implementation. The evaluation would include a determination of
whether claims error rates were reduced for providers and
suppliers who participated in the program. The provision would
authorize $1 million in FY2004 and $6 million in FY2005 of
appropriations from the Medicare Trust Funds to carry out
demonstration project.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Many large providers and suppliers have contracts with
private consulting firms to help them navigate their
interactions with the Medicare program. This type of assistance
can be prohibitively expensive for small providers and
suppliers--but they too are required to comply with complex
program rules and regulations. This provision creates a new
demonstration program to facilitate small provider and supplier
access to expert technical assistance. The demonstration will
also test whether encouraging technical assistance on the front
end to help providers and suppliers play by the rules can save
the program money in the long term by promoting greater program
compliance.
Section 303. Medicare Provider Ombudsman; Medicare Beneficiary
Ombudsman.
(a) Medicare Provider Ombudsman
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to appoint a Medicare
Provider Ombudsman within HHS to (1) to resolve unclear
guidance and provide confidential assistance to providers and
suppliers regarding complaints or questions about the Medicare
program including peer review and administrative requirements;
and (2) recommend changes to improve program administration.
The Ombudsman would not advocate any increases in payments or
expanded coverage, but would identify issues and problems in
current payment and coverage policies.
EFFECTIVE DATE
One year after enactment.
REASON FOR CHANGE
Providers are currently confronted with a morass of
bureaucracy and regulation, with no clear individual to assist
them. The new ombudsman will help providers navigate Medicare's
complicated rules and regulations.
The Medicare Provider Ombudsman shall make recommendations
to the Secretary concerning how to respond to recurring
patterns of confusion in the Medicare program. Such a
recommendation may include calling for the suspension of the
imposition of provider sanctions (except those sanctions
relating to the quality of care) where there is widespread
confusion in program administration. Nothing in this section
shall be construed as allowing for the suspension of provider
sanctions relating to the quality of care, regardless of
whether widespread confusion in the Medicare program exists.
(b) Medicare Beneficiary Ombudsman
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS.
The Secretary would be required to appoint a Medicare
Beneficiary Ombudsman within HHS from individuals with health
care expertise, advocacy, and education of Medicare
beneficiaries. The ombudsman would (1) receive complaints,
grievances, and requests for information from Medicare
beneficiaries; (2) provide assistance with respect to those
complaints, grievances and requests, including assistance to
beneficiaries who appeal claims determinations or those
affected by the decisions of Medicare+Choice organizations to
leave Medicare; and (3) submit an annual report to Congress and
the Secretary describing activities and recommending changes to
improve program administration. The Ombudsman would not
advocate any increases in payments or expanded coverage, but
would identify issues and problems in current payment and
coverage policies.
To the extent possible, the Beneficiary Ombudsman would
work with the Health Insurance Counseling Programs authorized
under Section 4360 of OBRA 1990, to facilitate the provision of
information to Medicare beneficiaries regarding Medicare+Choice
plans and any changes related to those plans. In addition,
nothing in this section would preclude further collaboration,
as appropriate, between the Beneficiary Ombudsman and these
programs.
EFFECTIVE DATE
Once year after enactment.
REASON FOR CHANGE
Beneficiaries confront a morass of bureaucracy and
regulation, with no clear individual to assist them. This new
ombudsman will help beneficiaries navigate Medicare's
complicated rules and regulations.
(c) Funding
CURRENT LAW
No provision
EXPLANATION OF PROVISIONS
The provision would authorize appropriations of necessary
sums in FY2003 and subsequently from the appropriate Medicare
Trust Funds for the Ombudsman programs.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Committees acknowledge that implementing these new
functions will have a cost and accordingly authorize necessary
appropriations.
(d) Use of Central Toll Free Number (1-800 MEDICARE)
CURRENT LAW
The Secretary is required to prepare and distribute an
annual notice explaining Medicare benefits and limitations to
coverage to Medicare beneficiaries. The Secretary is also
required to provide information via a toll-free telephone
number.
EXPLANATION OF PROVISIONS
The Secretary would be required to establish a toll-free
number (1-800-MEDICARE), which will transfer individuals with
questions or seeking help to theappropriate entities. The
transfer would occur with no charge. This toll-free number would be the
general information and assistance number listed on the annual notice
provided to beneficiaries. GAO would be required to (1) monitor the
adequacy, accuracy, and consistency of the information provided to
Medicare beneficiaries through the toll-free 1-800 MEDICARE number and
(2) examine the education and training of those providing the
information through the toll-free number. GAO would be required to
submit a report to Congress no later than one year from enactment.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The beneficiary handbook currently provides many pages of
phone numbers, which can be very confusing for beneficiaries,
rather than a single number that then can triage and transfer
beneficiaries to the appropriate person or entity. This
provision will promote better access to information for
beneficiaries.
Section 824. Beneficiary Outreach Demonstration Program
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a 3-year
demonstration project where Medicare specialists who are HHS
employees are placed in at least six SSA offices to advise and
assist Medicare beneficiaries. The SSA offices would be those
with a high-volume of visits by Medicare beneficiaries; at
least two of which would be in rural areas. In the rural SSA
offices, the Secretary would provide for the Medicare
specialists to travel among local offices on a scheduled basis.
The Secretary would be required to (1) evaluate the project
with respect to beneficiary utilization, beneficiary
satisfaction, and cost-effectiveness and (2) recommend whether
the demonstration should be established on a permanent basis.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This provision makes Medicare experts available in six
Social Security Administration offices to assist beneficiaries
and answer their questions. The demonstration will test whether
such outsourced Medicare specialists improve beneficiary
utilization and understanding of the program, and beneficiary
satisfaction.
Subtitle D--Appeals and Recovery
Section 831. Transfer of Responsibility for Medicare Appeals
CURRENT LAW
Medicare beneficiaries and, in certain circumstances,
providers and suppliers of health care services may appeal
claims that are denied or payments that are reduced. Section
1869 of the Social Security Act, which covers the Medicare
claims appeals process, was amended by BIPA in its entirety,
but the BIPA provisions are not yet effective. Generally,
parties who have been denied coverage of an item or service
have the right to appeal that decision through a series of
administrative appeals and then into federal district court if
the amounts of disputed claims in question meet certain
thresholds at each step of the appeals process. A hearing by an
administrative law judge (ALJ) in the Social Security
Administration (SSA) with review by the Department Appeals
Board (DAB) are components of the administrative appeals
process.
EXPLANATION OF PROVISIONS
By October 1, 2003, the Commissioner of SSA and the
Secretary would develop a plan to transfer the functions of the
administrative law judges (ALJs) who are responsible for
hearing Medicare and Medicare related cases from SSA to HHS.
The plan would be transmitted to Congress and GAO no later than
October 1, 2003. The GAO would evaluate the plan and submit a
report to Congress within 6 months of receiving the plan. The
Secretary and the Commissioner of SSA would implement the
transition plan and transfer the ALJ functions no earlier than
July 1, 2004 and no later than October 1, 2004. The Secretary
would (1) assure the ALJ's independence from the Centers of
Medicare and Medicaid Services (CMS); and (2) locate the ALJs
with an appropriate geographic distribution to ensure access.
Subject to appropriations, the Secretary would be permitted to
hire ALJs and support staff with priority given to ALJs with
experience in handling Medicare appeals. Amounts previously
paid to SSA for the ALJs performing the ALJ functions would be
payable to the Secretary for the transferred functions. The
Secretary would be permitted to enter into arrangements with
SSA to share office space, support staff, and other resources
with appropriate reimbursement from the Medicare trust funds.
Increased appropriations would be permitted to increase the
number of ALJs and support staff; improve education and
training for ALJs and their staff; and increase DAB staff.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Office of Inspector General has identified moving the
functions of the Medicare Administrative Law Judges to the
Department of Health and Human Services as an important
priority in improving the appeals system. This provision makes
that transition and increases the emphasis on providing
training Administrative Law Judges and their staffs to increase
their expertise in Medicare's rules and regulations. The SSA
Commissioner and the Secretary are instructed to work together
on the transition plans in order to assure that the transition
does not adversely affect the SSA ALJ appeals system.
The transition plan shall include information on the
following:
Workload--The number of such administrative
law judges and support staff required now and in the
future to hear and decide such cases in a timely
manner, taking into account the current and anticipated
claims volume, appeals, number of beneficiaries, and
statutory changes;
Cost Projections--Funding levels required
under this subsection to hear such cases in a timely
manner;
Transition Timetable--A timetable for the
transition;
Regulations--The establishment of specific
regulations to govern the appeals process;
Case Tracking--The development of a unified
case tracking system that will facilitate the
maintenance and transfer of case specific data across
both the fee-for-service and managed care components of
the Medicare program;
Feasibility of Precedential Authority--The
feasibility of developing a process to give binding,
precedential authority to decisions of the Departmental
Appeals Board in the Department of Health and Human
Services that address broad legal issues; and,
Access to Administrative Law Judges--The
feasibility of filing appeals with administrative law
judges electronically, and the feasibility of
conducting hearings using tele- or videoconference
technologies.
Section 832. Process for Expedited Access to Judicial Review
(a) Expedited Access to Judicial Review
CURRENT LAW
Section 521 of BIPA (which is not yet implemented) amends
Section 1869 to establish deadlines for filing appeals and for
making decisions in the Medicare appeals process. Generally, an
initial determination is to be completed no later than 45 days
from the date a claim for benefits is received; an individual
dissatisfied with an initial determination is entitled to a
redetermination by a carrier or fiscal intermediary if
requested within 120 days of the determination date. The
redetermination is to be completed no later than 30 days from
the request date. The Secretary may reopen or revise any
initial determination or reconsidered determination under
guidelines established by regulation.
An individual dissatisfied with the redetermination is
entitled to reconsideration by a qualified independent
contractor (QIC) if the request is initiated within 180 days of
the notice of the adverse redetermination. With certain
exceptions, a QIC reconsideration decision is to be
completedwithin 30 days from the date a timely request has been filed.
After a QIC's reconsideration, if the remaining contested amount is
greater than $100, an individual is entitled to a hearing by an
administrative law judge and then a review by the DAB. Both the ALJ
hearing and the DAB review are to be completed within 90 days of a
timely filed request for such an action.
If the dispute is not satisfactorily resolved and the
contested amounts are greater than $1,000, the individual is
entitled to judicial review of the decision. Under certain
circumstances, a beneficiary is entitled to an expedited
determination with accelerated deadlines. BIPA also provides
for an expedited hearing under Section 1869, where the moving
party alleges that no material issues of fact are in dispute;
the Secretary makes an expedited determination as to whether
any such facts are in dispute and, if not, renders a decision
expeditiously.
EXPLANATION OF PROVISIONS
The Secretary would establish an appeals process for a
provider, supplier, or beneficiary, which permits access to
judicial review when a review panel determines that no entity
in the administrative appeals process has authority to decide
the question of law or regulation in controversy and where
material facts are not in dispute. The appellant would be able
to make such request only once with respect to a question of
law or regulation for a specific dispute. If the appellant
requests this determination and submits appropriate supporting
documentation, the review panel would make this determination
in writing no later than 60 days after the receiving the
request. A review panel would consist of a panel of three
members who are ALJs, members of the DAB, or qualified
individuals associated with a QIC or other independent entity
designated by the Secretary to make these determinations. The
determination by the review panel would be considered a final
decision and not subject to review by the Secretary. Given such
a determination or a failure to make the determination within
the 60-day deadline, the appellant would be able to request
judicial review before a civil court. The filing deadline for
this civil action would be within 60 days of the determination
or within 60 days of the end of the deadline to make such
determination. The venue for judicial review would be the U.S.
District Court where the appellant is located, or where the
greatest number of appellants are located, or in the district
court for the District of Columbia. The amount in controversy
would be subject to annual interest beginning on the first day
of the first month beginning after the 60-day deadline for
filing. Interest would be equal to the rate of interest on
obligations issued for purchase by the Medicare trust funds
effective for the month that the civil action is authorized to
commence. The interest payments would not be deemed to be
Medicare reimbursement.
EFFECTIVE DATE
See section (c).
(b) Application to Provider Agreement Determinations
CURRENT LAW
Section 1866(h) of the Social Security Act provides for a
hearing and for judicial review of that hearing for any
institution or agency dissatisfied with a determination that it
is not a provider (or that it can no longer be a provider).
EXPLANATION OF PROVISIONS
An agency or institution's appeal concerning program
participation under Section 1866 would have access to expedited
judicial review under Section 1869 provisions. This provision
would not be construed to affect remedies applied to assure
quality of care in skilled nursing facilities (under Section
1819) while such appeals are pending.
(c) Effective Date
EXPLANATION OF PROVISION
Amendments in the section would apply to appeals filed on
or after October 1, 2003.
REASON FOR CHANGE
The provisions in 402 (a-c) on expedited access to judicial
review ensure that if a review board certifies that there are
no material facts in dispute and that the appeals process does
not have authority to resolve the question at issue, the
provider, supplier, or beneficiary may take their case to court
in an expedited manner. This will facilitate more prompt
resolution of challenges to the underlying validity of CMS
regulations and determinations. To the extent that any part of
an appeal poses a factual dispute that is being adjudicated
before an administrative tribunal, this provision would not
authorize the severance of the legal issues from the underlying
factual dispute.
(d) Expedited Review of Certain Provider Agreement
Determinations
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
The Secretary would develop and implement a process under
1866(h) to expedite provider agreement determinations including
those instances where participation is terminated or other
sanctions (including denials of new admissions or appointment
of temporary management) against skilled nursing facilities
have been imposed. Priority would be given to termination of
provider agreements. Increased appropriations from the Medicare
trust funds in FY2003 and subsequently would be authorized in
order to (1) reduce the average time for administrative
determinations on provider participation appeals by 50 percent;
(2) increase the number of ALJs and their staff; and (3)
educate the ALJs and their staff on long term care issues.
EFFECTIVE DATE
Upon enactment.
Section 833. Revisions to Medicare Appeals Process
(a) Requiring Full and Early Presentation of Evidence
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
A provider or supplier would not be able to introduce
evidence that was not presented at reconsideration conducted by
the QIC unless a good cause precluded its introduction at or
before that reconsideration.
EFFECTIVE DATE
On or before October 1, 2003.
REASON FOR CHANGE
The Office of Inspector General identified this change as a
priority to promote more expeditious resolution of appeals of
denied claims. This provision requires prompt introduction of
evidence relevant to a provider appeal. When deciding whether
there is good cause to introduce new evidence, the adjudicator
should ensure, after consideration of the totality of the
circumstances, that disallowing the introduction of such new
evidence would unfairly prejudice the case. The totality of the
circumstances may include, but is not limited to, the
following: evidence is not yet available; the appellant was not
represented at a lower level of appeal; the appellant was not
aware of her rights; or the appellant did not understand the
proceeding.
(b) Use of Patients' Medical Records
CURRENT LAW
BIPA established QIC reconsiderations as part of the
Medicare's administrative review process. To reconsider whether
a service is reasonable and necessary, a QIC will employ panel
of physicians or other appropriate health care professionals to
review the facts and the circumstances of the initial
determination. The QIC reconsideration is to be based on
applicable information, including clinical experience, and
medical, technical, and scientific evidence.
EXPLANATION OF PROVISIONS
Medical records of the individual involved in the appeal
would be included as part of the applicable information used by
QICs in their reconsideration process.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
In the determination of whether an item or service is
reasonable and necessary for an individual, a beneficiary's
medical records should be considered with other relevant
information.
(c) Notice Requirements for Medicare Appeals
CURRENT LAW
Section 521 of BIPA (which is not yet implemented) amends
Section 1869 appeals process in its entirety, but did not
establish specific notice requirements for each part of
Medicare appeals process.
EXPLANATION OF PROVISIONS
The provisions would establish that a written notice of an
initial determination associated with a claims denial be
provided. The notice would include: (1) the reason for the
denial and, upon request, the policy, manual or regulation used
to make the decision; (2) the procedures for obtaining
additional information concerning the determination; and (3)
the notification of appeal rights and associated instructions.
The provisions would amend the existing requirement that a
reconsideration decision be written and establish that the
decision would have to be provided in printed form and written
in a manner that could be understood by the beneficiary; the
notice would include: as appropriate, a summary of the clinical
or scientific evidence used to make the decision; upon request,
the policy manual or regulation used to make the decision; and
a detailed explanation of the decision to the extent
appropriate. The requirement that the reconsideration decision
include a notice of appeal rights and relevant instructions
would also be established.
Comparable requirements would be extended to ALJ decisions.
These decisions would have to be written in an understandable
manner and include the specific reasons for the decision, an
appropriate summary of the evidence, the procedures for
obtaining additional information about the decision, and a
notification of appeal rights and instructions.
The current requirements that a QIC prepare documentation
and an explanation of the issues for an appeal to an ALJ would
be modified: a QIC would be required to submit the information
required in an appeal of a Medicare contractor's decision to
the ALJ.
REASON FOR CHANGE
Currently, Medicare only provides beneficiaries with a
brief statement about the initial determination of her claim on
the Medicare Summary Notice. This provision provides additional
information to beneficiaries (or providers who appeal on their
behalf) about Medicare's denial of their claim for benefits;
the reasons for the denial, and the rights to further appeal so
that beneficiaries can have a clear and concise understanding
of decisions affecting their medical care.
(d) Qualified Independent Contractors
CURRENT LAW
BIPA established Qualified Independent Contractor (QIC)
reconsiderations as part of Medicare's administrative review
process. A QIC is an entity or organization that is independent
of any organization under contract with the Secretary that
makes initial determinations and that meets the established
requirements for sufficient training and expertise in medical
science and legal matters to make such reconsiderations. QIC
reviews include consideration of the facts and circumstances by
a panel of physicians or appropriate health professionals. No
physician or health care professional employed by a QIC may
review determinations regarding services provided to a patient,
if directly responsible for furnishing the services to that
patient. Review of home health care services is also prohibited
by physicians and other professionals who have a significant
direct or indirect financial interest in the agency or
institution providing the care. This prohibition extends to
physicians and professionals who have family members with such
significant financial interests.
EXPLANATION OF PROVISIONS
To qualify as a QIC, an entity would be required to have
sufficient medical, legal and other expertise, including
knowledge of the Medicare program as well as sufficient
professional qualifications, independence and staffing to make
reconsideration decisions. A QIC would be required to assure
that reviewers meet qualification and compensation
requirements. If a reconsideration request indicates that the
item or service was furnished by a physician, each reviewing
professional should be a physician. Entities and their
professional reviewers would have to meet independence
requirements and may not: (1) be a related party; (2) have a
material familial, financial, or professional relationships
with a related party; or (3) have a conflict of interest with
respect to a related party. QIC's compensation would not be
contingent on any decision by the QIC or by any reviewing
professional. A reviewer's compensation would not be contingent
on any decision rendered by the reviewer. In this context, a
related party to a Medicare case involving an individual
beneficiary is (1) the Secretary, the Medicare administrative
contractor involved, any fiduciary, officer, director or
employee of HHS or such Medicare contractor; (2) the individual
or authorized representative; (3) the health professional,
institution or entity that provides or manufactures the item or
service involved in the case; and (4) any other party with
substantial interest in the case, as defined by regulation.
Individuals affiliated with a fiscal intermediary, carrier
or other contractor would be able to act as a QIC reviewer if
(1) a individual is not involved with the provision of the item
or service of the case; (2) individual is not an employee of
the Medicare contractor and does not provide services
exclusively or primarily to or on behalf of the contractor; and
(3) the fact of the relationship is disclosed to the Secretary
and the Medicare beneficiary or authorized representative who
do not object. Individuals with staff privileges at the
institution where treatment occurs would be able to serve as a
reviewer if the affiliation is disclosed and there is no
objection. Each reviewing professional shall be a allopathic or
osteopathic physician or health care professional who is
legally authorized to furnish items and services that are the
subject of review in one or more states; and has medical
expertise in the appropriate field for the case.
EFFECTIVE DATE
As if included in BIPA.
REASON FOR CHANGE
The BIPA 2000 law laid out broad provisions for revision of
the Medicare appeals process. These provisions strengthen the
appeals process by enhancing the criteria related to the
independence and expertise of the reviewers and review
entities.
Section 834. Prepayment Review
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
Medicare administrative contractors would be able to
conduct random prepayment reviews in order to develop
contractor-wide or program-wide claims payment error rates or
under additional circumstances as established by regulations
that are developed in consultation with providers and
suppliers. Medicare administrative contractors would be
permitted to conduct random prepayment reviews in accordance
with a standard protocol developed by the Secretary. The
Secretary would not be able to initiate non-random prepayment
review based on the initial identification by a provider or
supplier of an improper billing practice unless there is a
likelihood of sustained or high level of payment error. The
Secretary would be required to issue regulations relating to
the termination, including termination dates, of non-random
prepayment review. Such regulations may vary such a termination
date based upon the differences in the circumstances triggering
prepayment reviews. No provision would prevent the denial of
payment for claims actually reviewed under random prepayment
review. These provisions would be applied to fiscal
intermediaries and carriers.
EFFECTIVE DATE
No later than one year from enactment. The Secretary would
be required to issue regulations before that deadline; the
random prepayment review protocols would apply to reviews after
a date specified by the Secretary (but no later than one year
from enactment.)
REASON FOR CHANGE
These provisions build greater consistency and
predictability into Medicare's rules for prepayment review,
while protecting program integrity.
Section 835. Recovery of Overpayments
CURRENT LAW
No provision with respect to repayment plans. Section
1833(j) of the Social Security Act provides that interest
accrues on underpayments or overpayments starting within 30
days of the date of the final determination of the accurate
payment amount.
EXPLANATION OF PROVISIONS
Subject to certain qualifications, in circumstances where
refund of an overpayment within 30 days would constitute a
hardship, providers and suppliers on request would be allowed
to repay the overpayment amount (by offset or otherwise) over a
period of at least six months up to three years when their
obligation exceeds a ten percent threshold of their annual
payments from Medicare. The Secretary would be able to
establish a repayment period of up to five years in cases of
extreme hardship. Interest would accrue on the balance through
the repayment period. The Secretary would be required to
establish a process under which newly-participating providers
and suppliers could qualify for a repayment plan under this
hardship provision. Previous overpayment amounts already
included in an ongoing repayment plans would not be included in
the calculation of the hardship threshold. The Secretary would
be allowed to seek immediate collection if payments are not
made as scheduled. Exceptions to this provision would be
permitted in cases where the Secretary has reason to suspect
that bankruptcy may be declared or that the provider or
supplier may otherwise cease to do business or discontinue
participating in the Medicare program, or where fraud or abuse
against Medicare is indicated. This provision would not affect
the application of existing no-fault provisions, which preclude
recovery under certain circumstances where incorrect payment
has been made to an individual who is without fault or where
the recovery would decrease payments to another person who is
without fault.
Upon enactment, the Secretary would not be able to initiate
any recovery action if the provider or supplier has sought a
reconsideration of the Medicare overpayment by a qualified
independent contractor (QIC) until the date of the
reconsideration decision. If QIC's are not yet in place, the
recovery would not be initiated until the date of a
redetermination decision by a fiscal intermediary or a carrier.
If monies have been offset or repaid, the Secretary would
return those amounts plus applicable interest if the original
overpayment determination is reversed. If such an overpayment
determination is upheld, interest would accrue beginning on the
date of the original overpayment notice; the interest amount
would be the rate otherwise applicable for Medicare
overpayments.
Not later than one year after enactment, a Medicare
contractor would not be able to use extrapolation to make
overpayment determinations initiated after the date of
enactment, unless, as determined by the Secretary, a sustained
or high level of payment error exists or a documented
educational intervention did not correct the payment error.
Where providers and suppliers have previously been
overpaid, Medicare contractors would be able to require
periodic production of records or supporting documentation for
a limited sample of submitted claims to ensure that a previous
practice has been discontinued.
The Secretary would be able to use a consent settlement to
resolve a projected overpayment. Before entering into any
consent settlements after the date of enactment, the Secretary
would be required to communicate to a provider or supplier that
based on a preliminary evaluation of a medical records review,
an overpayment may exist; the nature of the identified
problems; and the necessary steps to address the problem. The
Secretary would provide 45-days where additional information
may be submitted concerning the claims for which the medical
records have been reviewed. After considering the additional
information, the Secretary would provide notice and explanation
of any remaining overpayment determination and would offer the
opportunity for a statistically valid random sample (which
would not waive appeal rights) or a consent settlement (based
on a smaller sample with a waiver of appeal rights) to resolve
the overpayment amounts.
Not later than one year after enactment, the Secretary
would be required to establish, in consultation with health
care associations, a process where classes of providers and
suppliers are notified that their Medicare contractor has
identified specific billing codes that may be over-utilized.
For audits initiated after enactment, Medicare contractors
would be required to provide a written notice (which may be in
electronic form) of the intent to conduct a post-payment audit
to those selected as audit candidates. Medicare contractors
would be required to provide those who have been audited a full
review and understandable explanation of the findings that: (1)
permits the development of an appropriate corrective action
plan; (2) provides information on appeal rights as well as
consent settlements (which are at the discretion of the
Secretary); and (3) provides for an opportunity to supply
additional information to the contractor. Medicare contractors
would be required to take into account the information provided
on a timely basis. The provisions requiring notice of audit and
findings would not apply if pending law enforcement activities
would be compromised or findings of law enforcement-related
audits would be revealed.
Not later than one year after enactment, the Secretary
would be required to establish a standard methodology for
Medicare contractors to use in selecting a claims sample for a
review of abnormal billing patterns.
These provisions would apply to Medicare administrative
contractors including fiscal intermediaries and carriers as
well as those eligible entities with MIP contracts.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
These provisions build greater consistency and
predictability into Medicare's rules for recovery of
overpayments, while protecting program integrity.
Section 836. Provider Enrollment Process; Right of Appeal
CURRENT LAW
Providers and, to some extent suppliers, have access to
certain appeal mechanisms if their application to participate
in Medicare is denied or terminated. Section 1866(h) of the
Social Security Act provides for a hearing and for judicial
review of that hearing for any institution or agency
dissatisfied with a determination that it is not a provider (or
that it can no longer be a provider). There is no statutory
provision extending such judicial appeal rights to suppliers.
Sections 1128(a) and (b) of the Act provide for the exclusion
of certain individuals or entities because of the conviction of
crimes related to their participation in Medicare; Section
1128(f) provides for hearing and judicial review for
exclusions. In 1999, the Health Care Financing Administration
(HCFA- now the Centers for Medicare and Medicaid Services or
CMS) published a proposed regulation that would revise existing
Medicare Part B administrative appeals procedures and extend
them to all suppliers not currently covered.
EXPLANATION OF PROVISION
The Secretary would be required to (1) establish by
regulation an enrollment process for providers and suppliers
which would include deadlines for actions on enrollment
applications within six months of enactment; (2) monitor the
performance of Medicare administrative contractors in meeting
the deadlines: (3) consult with providers and suppliers in
making changes to the enrollment forms made on or after January
1, 2003. In establishing an enrollment process for providers
and suppliers, the Secretary would build upon existing Medicare
practice.
Providers and suppliers whose application to enroll or
reenroll has been denied and who are dissatisfied with the
determination would be entitled to a hearing and judicial
review of the determination under the procedures that currently
apply to providers. This provision would apply to denials after
a date specified by the Secretary, which could not be later
than one year from enactment.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This provision gives providers and suppliers an opportunity
to appeal denials of their applications to participate in the
Medicare program.
Section 837. Process for Correction of Minor Errors and Omissions on
Claims Without Pursuing Appeals Process
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to develop, in consultation
with appropriate Medicare contractors and health care
associations, a process where minor claims errors and omissions
can be corrected and resubmitted without appealing the claims
denial.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Many of the providers and suppliers who testified before
the Subcommittee or contacted members directly emphasized the
need to create a process in which they could correct claims
that were denied because they were incomplete or contained
minor errors without having to pursue a formal appeal. This
provision instructs the Secretary to create such a process,
which will alleviate pressure on the appeals system. The
Committees would be concerned, however, if this process were to
become an incentive for providers to knowingly or negligently
submit incomplete information.
The Committees intend that the process for correction of
minor errors and omissions on claims cover both the submission
of prepayment and post-payment review claims. For example, if
in the case of a home health claim, the physician has signed
the plan of care and/or physician's order but has not dated it,
the claim shall be returned to the home health agency and may
be resubmitted by the home health agency with any incomplete or
missing information without having to appeal the claim.
Section 838. Prior Determination Process for Certain Items and
Services; Advance Beneficiary Notices
CURRENT LAW
Medicare law prohibits payment for items and services that
are not medically reasonable and necessary for the diagnosis or
treatment of an illness or an injury. Under certain
circumstances, however, Medicare will pay for noncovered
services that have been provided if both the beneficiary and
the provider of the services did not know and could not have
reasonably been expected to know that Medicare payment would
not be made for these services.
However, in most circumstances either the beneficiary or
the provider will be liable in the event that Medicare does not
cover an item or service. There are detailed rules on
beneficiary and provider liability in the statute. A provider
may be held liable for providing uncovered services, if, for
example, specific requirements are published by the Medicare
contractor or the provider has received a denial or reduction
of payment on the same or similar service. In cases where the
provider believes that the service may not be covered as
reasonable and necessary, the provider may limit his liability
by providing an acceptable advance notice of Medicare's
possible denial of payment to the patient. The notice must be
given in writing, in advance of providing the service; include
the patient's name, date and description of service as well as
reasons why the service would not be covered; and must be
signed and dated by the patient to indicate that the
beneficiary will assume financial liability for the service if
Medicare payment is denied or reduced. Currently, when there is
a question about coverage, there is no way for a beneficiary or
provider to find out in advance whether or not Medicare will
cover that item or service for that particular beneficiary.
EXPLANATION OF PROVISIONS
The Secretary would be required to establish a process
through regulation where physicians and beneficiaries can
establish whether Medicare covers certain items and services
before such services are provided. An eligible requestor would
be either a physician or a Medicare beneficiary who receives an
advance beneficiary notice (ABN) from a physician. Eligible
items and services for review are those physicians' services
under 1848(f)(4)(A) for which a physician may be paid directly.
The provisions would establish: (1) such prior determinations
would be binding on the Medicare contractor, absent fraud or
misrepresentation of facts; (2) the right to redetermination in
the case of a denial; (3) the applicability of existing
deadlines with respect to those redeterminations; (4)
contractors' prior determinations (and redeterminations) are
not subject to further administrative or judicial review; and
(5) an individual retains all rights to usual administrative or
judicial review after receiving the service or receiving a
determination that a service would not be covered. This section
also requires that whenever a physician requests a pre-service
determination (or redetermination), beneficiaries must still
receive notices that include information explaining the
beneficiary's right to receive the service and request access
to the appeals process under section 1869. The calculation of
the sustainable growth rate for physician updates is modified
so that the increase in utilization from this provision is
included. These provisions would not affect a Medicare
beneficiary's rights in any future appeal or judicial action.
The Secretary must establish the process to allow for the
processing of such requests beginning 18 months after
enactment. The Secretary would be required to collect data on
the advance determinations and to establish a beneficiary and
provider outreach and education program. GAO is required to
report on the use of the advance beneficiary notice and prior
determination process within 18 months of its implementation.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Committees believe that when there is a question of
whether Medicare will cover certain care for a beneficiary, the
beneficiary should have the right to find out what will be
covered before getting the service and risking financial
liability. Doctors also should be able to make such a request
on behalf of a particular patient. This provision is
particularly important for seniors and disabled individuals who
tend to be risk adverse and live on fixed incomes.
Subtitle E--Miscellaneous Provisions
Section 841. Policy Development Regarding Evaluation and Management
(E&M) Documentation Guidelines
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would not be permitted to implement any new
documentation guidelines on or after enactment for evaluation
and management (E&M) physician services unless the guidelines
(1) are developed in collaboration with practicing physicians
(both generalists and specialists) after assessment by the
physician community; (2) based on a plan with deadlines for
improving use of E&M codes; (3) are developed after completion
of the pilot projects to test modifications to the codes; (4)
are found to meet the desired objectives; and (5) are preceded
the establishment of an appropriate outreach and education of
the physician community. The Secretary would make changes to
existing E&M guidelines to reduce paperwork burdens on
physicians. The Secretary would be required to modify E&M
guidelines to (1) identify clinically relevant documentation:
(2) decrease non-clinically pertinent documentation; (3)
increase the reviewers' accuracy; and (4) educate the
physicians and the reviewers.
The provisions would establish different pilot projects in
specified settings that would be (1) conducted on a voluntary
basis in consultation with practicing physicians (both
generalists and specialists); (2) be of sufficient length to
educate physicians and contractors on E&M guidelines and (3)
allow for an assessment of E&M guidelines and their use. A
range of different projects would be established and include at
least one project that (1) uses a physician peer review method;
(2) uses an alternative method based on face-to-face encounter
time with the patient; (3) is in a rural area; (4) is outside a
rural area; and (5) involves physicians billing in a teaching
setting and non-teaching setting. The projects would examine
the effect of modified E&M guidelines on different types of
physician practices in terms of the cost of compliance. Data
collected under these projects would not be the basis for
overpayment demands or post-payment audits. This protection
would apply to claims filed as part of the project, would last
the duration of the project., and would last for as long as the
provider participated in the project. The Secretary, in
consultation with practicing physicians including those in
groups practices as well as generalists and specialists, would
be required to evaluate the development of alternative E&M
documentation systems with respect to administrative
simplification requirements and report results of the study to
Congress by October 1, 2004. The Medicare Payment Advisory
Commission would conduct an analysis of the results of this
study and submit a report to Congress.
The Secretary would be required to conduct a study of the
appropriate coding of extended office visits where no diagnosis
is made and submit a report with recommendations to Congress no
later than October 1, 2004.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This provision is designed to promote greater consultation
with practicing physicians with regard to the complicated
evaluation and management and coding requirements governing
Medicare payment for physician services.
Section 842. Improvement in Oversight of Technology and Coverage
(a) Improved Coordination Between FDA and CMS on Coverage
of Breakthrough Medical Devices
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Upon request and to the extent feasible, the Secretary
would be required to ensure that appropriate information from
the review for application for premarket approval of class III
medical devices conducted by the FDA for coverage decisions.
Within 6 months of enactment, the Secretary would be required
to submit a report to the appropriate Congressional committees
on the implementation plan to shorten the delay between FDA's
premarket approval and Medicare's coding and coverage
decisions. This provision would not change Medicare's coverage
nor FDA's premarket approval criteria. Nothing in this
subsection will be construed to lengthen the time for premarket
approval under the FFDCA.
EFFECTIVE DATE
Upon enactment
REASON FOR CHANGE.
After the FDA pre-market approval, the Medicare program
does a second evaluation of breakthrough technologies to
determine effectiveness and cost of those technologies compared
to existing technologies. The review is necessary and
appropriate, but it can take months between FDA approval and
the availability of new technology for Medicare beneficiaries.
By coordinating FDA and CMS approval of breakthrough medical
devices, where feasible, this provision is intended to
facilitate a more efficient process for the coverage of certain
new technology by the Medicare program.
(b) Council for Technology and Innovation
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary is required to establish a Council for
Technology and Innovation within the Centers for Medicare and
Medicaid Services (CMS). The council would be composed of
senior CMS staff with an Executive Coordinator, who is
designated or appointed by the Secretary and reports to the CMS
administrator. The Chairperson would serve as a single point of
contact for outside groups and entities regarding Medicare
coverage, coding, and payment processes. The Council would
coordinate Medicare's coverage, coding, and payment processes
as well as information exchange with other entities with
respect to new technologies and procedures, including drug
therapies.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
CMS personnel responsible for coverage, coding and payment
of medical innovation are often not well coordinated. This
provision creates a focal point for technology and innovation
within the Centers for Medicare and Medicaid Services by
creating a Council to coordinate across the different Centers
and Offices with responsibilities in this area. The Executive
Coordinator also provides a single point of contact for outside
groups, similar to recent initiatives launched by the Secretary
for specific issues and types of providers.
(c) GAO Study on Improvements in External Data Collection
for Use in the Medicare Inpatient Payment System
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
GAO would be required to conduct a study analyzing which
external data can be collected by CMS for use in computing
Medicare's inpatient hospital payments. The study may include
an evaluation of the feasibility and appropriateness of using
quarterly samples or special surveys among other methods. The
study would include an analysis of whether other agencies, such
as the Bureau of Labor Statistics in the Department of
Commerce, are best suited to collect this information. The
report would be submitted to Congress no later than October 1,
2003.
EFFECTIVE DATE
Upon enactment.
(d) IOM Study on Local Coverage Determinations
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to arrange for a study by
the Institute of Medicine (IOM) that would examine Medicare's
local coverage determinations. The study would examine: (1) the
consistency of definitions used in the determinations; (2) the
types of evidence that are the basis of the determinations; (3)
the advantages and disadvantages of local coverage
decisionmaking and of maintaining local Medicare contractor
advisory committees; and (4) the manner in which local coverage
decisions are used to develop data to support national coverage
determinations. The IOM study would be due to the Secretary no
later than 3 years after enactment when it would be promptly
transmitted to Congress.
EFFECTIVE DATE
Upon enactment.
(e) Methods For Determining Payment Basis for New Lab Tests
CURRENT LAW
Outpatient clinical diagnostic laboratory tests are paid on
the basis of area wide fee schedules. The law establishes cap
on the payment amounts, which is currently set at 74 percent of
the median for all fee schedules for that test. The cap is set
at 100 percent of the median for tests performed after January
1, 2001 that the Secretary determines are new tests for which
no limitation amount has previously been established.
EXPLANATION OF PROVISIONS
The Secretary would be required to establish procedures (by
regulation) for determining the basis and amount of payments
for new clinical diagnostic laboratory tests. New laboratory
tests would be defined as those assigned a new Health Care
Procedure Coding System (HCPCS) code on or after January 1,
2004. The Secretary, as part of this procedure, would be
required to (1) provide a list (on an Internet site or other
appropriate venue) of tests for which payments are being
established in that year; (2) publish a notice of a meeting in
the Federal Register on the day the list becomes available; (3)
hold the public meeting no earlier than 30 days after the
notice to receive public comments and recommendations; (4) take
into account the comments, recommendations and accompanying
data in both proposed and final payment determinations. The
Secretary would set forth the criteria for making these
determinations; make public the available data considered in
making such determinations; and could convene other public
meetings as necessary.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Secretary of Health and Human Services is required to
establish by regulation an open process for any clinical
diagnostic laboratory test. Under the regulations, the
Secretary shall develop criteria for use in determining whether
a laboratory test should be established through gap-filling or
cross-walking to an existing code. When existing services are
not sufficient and gap filling must be used, the criteria shall
explain the basis of the data, the collection of the data, and
the methodology for computing the rate.
The intent of Congress is to open the process to allow CMS
to have access to information from beneficiaries, physicians,
health care experts and laboratories. Using the information it
receives through this new process, CMS shall develop and make
available to the public the information used to arrive at a
final determination. The information will include the rationale
for each such determination, the data on which the
determination is based, and responses to public comments.
Section 843. Treatment of Hospitals for Certain Services Under the
Medicare Secondary Payor (MSP) Provisions
CURRENT LAW
In certain instances when a beneficiary has other insurance
coverage, Medicare becomes the secondary insurance. Medicare
Secondary Payor is the Medicare program's coordination of
benefits with other insurers. Section 1862(b)(6) of the Social
Security Act requires an entity furnishing a Part B service to
obtain information from the beneficiary on whether other
insurance coverage is available.
EXPLANATION OF PROVISION
The Secretary would not require a hospital or a critical
access hospital to ask questions or obtain information relating
to the Medicare secondary payor provisions in the case of
reference laboratory services if the same requirements are not
imposed upon those provided by an independent laboratory.
Reference laboratory services would be those clinical
laboratory diagnostic tests and interpretations of same that
are furnished without a face-to-face encounter between the
beneficiary and the hospital where the hospital submits a claim
for the services.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Hospitals would not have to directly contact each
beneficiary on their retirement date, black lung status and
other insurance information for reference laboratory services.
While current law provisions for a claim containing valid
insurance information are maintained, this provision is
intended to reduce the amount of paperwork and regulatory
burden related to the provision of these reference laboratory
services by hospital-based entities.
Section 844. EMTALA Improvements
CURRENT LAW
Medicare requires participating hospitals that operate an
emergency room to provide necessary screening and stabilization
services to a patient in order to determine whether an
emergency medical situation exist prior to asking about
insurance status of the patient.
Hospitals that are found to be in violation of EMTALA
requirements may face civil monetary penalties and termination
of their provider agreement. After a state investigation of an
EMTALA complaint, the CMS Regional Office may ask their local
peer review organization (PRO) to perform a 5-day review to
obtain additional medical expertise. This review is
discretionary. However, prior to imposing a civil monetary
penalty, the Secretary is required to request that a PRO assess
whether the involved beneficiary had an emergency condition,
which had not been stabilized and provide a report on its
findings. Except in the case where a delay would jeopardize the
health or safety of individuals, the Secretary provides 60-day
period for the requested PRO review.
EXPLANATION OF PROVISIONS
Emergency room services provided to screen and stabilize a
Medicare beneficiary furnished after January 1, 2003, would be
evaluated as reasonable and necessary on the basis of the
information available to the treating physician or practitioner
at the time the services were ordered; this would include the
patient's presenting symptoms or complaint and not the
patient's principal diagnosis. The Secretary would not be able
to consider the frequency with which the item or service was
provided to the patient before the time of admission or visit.
The Secretary shall also not count the provision of the item or
service during such an admission or visit when considering the
frequency with which the item or service is furnished on
subsequent occasions.
The Secretary would be required to establish a procedure to
notify hospitals and physician when an EMTALA investigation is
closed.
Except in the case where a delay would jeopardize the
health and safety of individuals, the Secretary would be
required to request a PRO review before making a compliance
determination that would terminate a hospital's Medicare
participation because of EMTALA violation. The current period
of review for the discretionary review--5 business days--would
apply for such review. The Secretary shall provide a copy of
the report on its findings to the hospital or physician,
consistent with existing confidentiality requirements. This
provision would apply to terminations initiated on or after
enactment.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Providers have reported that some Medicare contractors are
looking at final diagnoses (not presenting symptoms) in
applying local medical review policies (LMRPs) that match
particular tests to particular diagnoses--if a test does not
match a listed diagnosis, payment is denied. Other claims are
reportedly being denied based on LMRPs that set frequency
limits for certain tests--if the test's use in the emergency
room exceeds a frequency limit, payment is denied. In its
January 2001 report entitled AThe Emergency Medical Treatment
and Labor Act: The Enforcement Process,@ the OIG recommended
that CMS ensure that peer review occurs before a provider is
terminated from the Medicare program for an EMTALA violation.
This section implements that recommendation, making the current
discretionary PRO review process mandatory in cases that
involve a question of medical judgment.
Section 845. Emergency Medical Treatment and Active Labor (EMTALA) Task
Force
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a 19-member
technical advisory group under specified requirements to review
issues related to the Emergency Medical Treatment and Labor Act
(EMTALA). The advisory group would be comprised of: the CMS
Administrator; the OIG; four hospital representatives who have
EMTALA experience, (including one person from a public hospital
and two of whom have not experienced EMTALA violations) seven
practicing physicians with EMTALA experience; two patient
representatives; two regional CMS staff involved in EMTALA
investigations; one representative from a State survey
organization and one representative from a PRO. The Secretary
would select qualified individuals who are nominated by
organizations representing providers and patients.
The advisory group would be required to (1) elect a member
to serve as chairperson; (2) schedule its first meeting at the
direction of the Secretary and meet at least twice a year
subsequently; and (3) terminate 30 months after the date of its
first meeting. The advisory group would review EMTALA
regulations; provide advice and recommendations to the
Secretary; solicit public comments from interested parties; and
disseminate information on the application of the EMTALA
regulations.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
In its January 2001 report entitled The Emergency Medical
Treatment and Labor Act: The Enforcement Process, the OIG
recommended that CMS establish an EMTALA technical advisory
group that includes all EMTALA stakeholders to help the agency
resolve any emerging issues related to implementation of the
law. Some of these current issues include specialists who
refuse to service on call panels and inconsistencies between
Stat and Federal law governing emergency medical services. In
its June 2001 report entitled Emergency Care: EMTALA
Implementations and Enforcement Issues, the GAO also concluded
that the establishment of a technical advisory group could help
CMS work with hospitals and physicians to achieve the goals of
EMTALA and avoid creating unnecessary burdens for providers.
This section implements the OIG recommendation, establishing a
19-member technical advisory group within HHS.
Section 846. Authorizing Use of Arrangements with Other Hospice
Programs to Provide the Core Hospice Services in Certain
Circumstances
CURRENT LAW
Hospice programs are not permitted to use services provided
under arrangement to deliver hospice services. Under
arrangement services are permitted for providers delivering
Part A and Part B hospital services as well as skilled nursing
services. However, the originating hospital or skilled nursing
facility is required to bill for the service and be responsible
for the quality of care delivered by the subcontractor.
EXPLANATION OF PROVISION
Hospice programs may enter into arrangements with another
certified hospice program to provide services. The provision
for under arrangement services is limited to extraordinary or
non-routine circumstances, such as unanticipated periods of
staffing shortages. The originating hospice program continues
to bear the legal responsibility for billing and maintaining
quality of care.
EFFECTIVE DATE
For hospice care provided after enactment.
REASON FOR CHANGE
Hospice programs would be allowed to use personnel from
other hospice programs to provide services to hospice patients.
The program is given the flexibility so that a hospice program
could continue to serve a patient if he or she was temporarily
out of the area due to travel. Otherwise, the provision of the
care to the patient might be delayed by the paperwork and
requirements in starting up a new service at another agency. It
is the intent of Congress that the originating hospice
maintains control over the billing and quality of care.
Section 847. Application of OSHA Bloodborne Pathogens Standards to
Certain Hospitals
CURRENT LAW
Section 1866 establishes certain conditions of
participation that providers must meet in order to participate
in Medicare.
EXPLANATION OF PROVISION
Public hospitals that are not otherwise subject to the
Occupational Safety and Health Act of 1970 would be required to
comply with the Bloodborne Pathogens standard under section
1910.1030 of title 29 of the Code of Federal Regulations. A
hospital that fails to comply with the requirement would be
subject to a civil monetary penalty, but would not be
terminated from participating in Medicare.
EFFECTIVE DATE
Applies to hospitals as of July 1, 2003.
REASON FOR CHANGE
Last year, Congress enacted legislation that requires
hospitals to utilize safe needles. However, that legislation
only applies to non-government hospitals. Twenty-four states
have similar requirements on public hospitals. This provision
would protect the health and safety of health care workers in
those facilities by requiring public hospitals in the other 26
states and the District of Columbia to comply with this
important standard.
Section 848. BIPA-Related Technical Amendments and Corrections
CURRENT LAW
BIPA established an advisory process for national coverage
determinations where panels of experts formed by advisory
committees could forward their recommendations directly to the
Secretary without prior approval of the advisory committee or
the Executive Committee.
EXPLANATION OF PROVISION
This provision makes technical corrections related to the
Medicare Coverage Advisory Committee by transferring the
provisions from Title 11 to Title 18 and by removing incorrect
cross references to the establishment authority.
EFFECTIVE DATE
As if included in BIPA.
Section 849. Conforming Authority to Waive A Program Exclusion
CURRENT LAW
The Secretary is required to exclude individuals and
entities from participation in Federal Health Programs who are
(1) convicted of a criminal offense related to health care
delivery under Medicare or under State health programs; (2)
convicted of a criminal offense related to patient abuse or
neglect under Federal or State law; (3) convicted of a felony
relating to fraud, theft, or financial misconduct relating to a
health care program financed or operated by the Federal, State
or local government; or (4) convicted of a felony related to a
controlled substance. At the request of a state, the Secretary
is permitted to waive a program exclusion with respect to
Medicare or Medicaid, but only for exclusions described in (1)
above.
EXPLANATION OF PROVISIONS
The Administrator of a Federal health program would be
permitted to request a waiver of a program exclusion if the
exclusion of a sole community physician or source of
specialized services in a community would impose a hardship.
This conforming change would extend the same waiver authority
currently in Medicare and Medicaid to federal health programs.
In addition, waivers could be requested for Medicare, Medicaid,
and federal health programs with respect to all exclusions
except those related to patient abuse or neglect.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This technical correction was requested by the Office of
Inspector General.
Section 850. Treatment of Certain Dental Claims
CURRENT LAW
Under current law, providers of services and suppliers
submitting claims to Medicare must be enrolled in the Medicare
program. However, certain services are specifically excluded
from coverage under Medicare. Under current law, no payment may
be made under part A or part B of the Medicare program for any
services in connection with the care, treatment, filling,
removal, or replacement of teeth or structures directly
supporting teeth, except in the case of inpatient hospital
services associated with the provision of these dental services
if the individual's underlying medical condition and clinical
status or the severity of the dental service require
hospitalization.
EXPLANATION OF PROVISION
This provision would prohibit group health plans from
requiring a Medicare claims determination for dental benefits
that are specifically excluded from Medicare coverage as a
condition of making a determination for coverage under the
group health plan. In so doing, this provision would ensure
that dentists would not have to submit claims to the Medicare
program (and thus enroll in the Medicare program) when the
services they are providing are clearly those that are
categorically excluded from coverage. In those cases that
involve or appear to involve inpatient hospital services or
dental services expressly covered by Medicare, a group health
plan may require the claim to be first submitted to the
Medicare program.
EFFECTIVE DATE
60 days after enactment.
REASON FOR CHANGE
The Committees are concerned about private insurers
requiring dentists to submit claims to Medicare for non-covered
services before making a determination for coverage under the
group health plan. Because of this requirement, dentists have
been forced to enroll in the Medicare program to submit claims
for services that are categorically excluded from Medicare
coverage. Dentists view Medicare's enrollment application
process as overly burdensome, particularly in light of the fact
that most dental services are not covered by Medicare. This
provision would alleviate the enrollment burden placed on
dentists providing services clearly excluded from Medicare
coverage, consistent with the overarching goal of this
legislation to reduce regulatory burdens.
Section 851. Annual Publication of List on National Coverage
Determinations
CURRENT LAW
No provision.
EXPLANATION OF PROVISIONS
The Secretary would be required to provide, in an annual
report that will be publicly available, a list of Medicare's
national coverage determinations made in the previous year and
include information on how to learn more about such
determinations.
EFFECTIVE DATE
Upon enactment.
Clarifications and Instructions to the Secretary
First, the Committee is pleased that the Secretary has
published a notice of proposed rulemaking to provide Medicare
payment for clinical psychology internship training programs
that would not qualify under Medicare's existing provider-
operated criteria. The Committee notes that Congress has
consistently urged the Secretary to initiate payment for the
training of clinical psychologists since 1997. Supportive
language has been included in conference reports accompanying
Medicare legislation in 1999 (Report 106-479), and in 2000
(Senate Report 106-293).
The Committee is concerned, however, that a delay in the
rule may mean that hospitals and institutions will reduce or
eliminate psychology training programs and urges implementation
of the rule as soon as possible. The Committee notes that
clinical psychologists provide valuable and unique services to
Medicare beneficiaries during their training. Regarding their
training, clinical psychologists are distinguishable from other
health care professionals in that they are the only doctoral
level mental health professionals fully participating in
Medicare whose clinical training is not currently reimbursed.
In addition, their clinical internship training is entirely
controlled, administered, supervised, evaluated, and certified
by the hospital or institution, separately accredited, and
distinct from any university training they receive. Clinical
psychologists are hospital-based in the final stages of their
training functioning in a parallel status to medical interns
and residents, not medical nursing or health professional
students. Where a clinical psychologist has clearly finished
their educational curriculum and is training solely in the
hospital setting, it is the intention of Congress that the
hospital be reimbursed if that training is hospital-based.
Second, Congresses original intent on BIPA section
422(a)(2) on the dialysis composite rate has not been correctly
interpreted by CMS. The intent was not to bar end stage renal
disease (ESRD) composite rate exception relief for facilities
that are not presently being paid under an exception to the
composite rate. It is the Committee's expectation that CMS will
evaluate ESRD composite rate exception requests submitted in
2002 and subsequent years by new renal dialysis facilities and
existing facilities that do not have an exception.
TITLE IX--MEDICAID AND PUBLIC HEALTH ACT
Subtitle A--Medicaid Provisions
Section 901. National Bipartisan Commission on the Future of Medicaid
(a) Establishment. This provision establishes the National
Bipartisan Commission on the Future of Medicaid.
(b) Duties of the Commission. The Commission will analyze
the long-term financial condition of the Medicaid program,
identify causes and consequences of increasing Medicaid costs,
analyze policies to ensure the financial integrity of the
Medicaid program and the provision of appropriate benefits
under such a program, and make recommendations to promote
enhanced efficiencies and for establishing the appropriate
balance between benefits, payments, State and Federal
contributions, and recipient cost-sharing obligations. The
Commission will also make recommendations on the impact of
promoting increased utilization of competitive, private
enterprise models and the financing of prescription drug
benefits currently covered under State Medicaid programs. The
Commission will also analyze the impact of impending
demographic changes on Medicaid benefits, including long term
care, and make recommendations about how best to divide State
and Federal responsibilities for funding these benefits.
(c) Membership. The Commission will be composed of 17
members. The ability to select appointees will be divided among
the President, Senate Majority and Minority leaders, the
Speaker of the House and the House Minority leader. The
President, Senate Majority Leader and Speaker of the House of
Representatives will jointly appoint the Chairman of the
Commission. Members of the Commission must be appointed by
December 1, 2002.
(d) Staff and Support Services. The Chairman will appoint
an Executive Director of the Commission, who may appoint such
staff as is considered appropriate.
(e) Powers of Commission. The Commission may hold hearings,
request GAO reports, obtain CBO and CMS Actuary cost estimates,
and obtain any information directly from any Federal agency
that is necessary to carry out its duties.
(f) Report. By March 1, 2004, the Commission shall submit a
report to the President and Congress that will contain the
recommendations, findings, and conclusions of the Commission.
Section 902. GAO Study on Medicaid Drug Payment System
(a) Study. The Comptroller General will conduct a study on
the reimbursements under the Medicaid program for covered
outpatient drugs. The report shall examine the extent to which
reimbursements for drugs exceed their acquisition cost, the
services and resources associated with dispensing a
prescription, any additional payments available to compensate
for these expenses for pharmacy services, and State efforts to
modify reimbursements for Medicaid covered drugs.
(b) Report. The Comptroller General shall submit a report
to Congress within 1 year of enactment, which will include
recommendations for legislative or administrative changes
regarding Medicaid reimbursements for outpatient prescription
drugs.
Subtitle B--Internet Pharmacies
Section 911. Findings
This provision contains findings concerning both the
benefits of Internet prescription drug sales and the potential
for abuse of consumers by unlawful or unscrupulous parties
through Internet prescription drug sales.
Section 912. Amendments to the Federal Food, Drug, and Cosmetic Act
This section requires interstate Internet sellers of
prescription drugs to disclose important information on their
web sites and to State licensing boards to improve the
reliability of consumer transactions and make it easier for
State and Federal enforcement officials to patrol for rogue
sellers. The failure to post information or for knowingly
making a false statement when posting information is
prohibited.
Section 913. Public Education
This section requires the Secretary to engage in activities
to educate the public about the dangers of purchasing
medications from Internet prescription drug sellers who fail to
follow the law. The Secretary is also directed to educate the
public about effective public and private sector consumer
protection efforts, as appropriate.
Section 914. Study Regarding Coordination of Regulatory Activities
Within 180 days of enactment and after consultation with
the Attorney General, the Secretary is required to submit to
Congress a report providing recommendations for coordinating
(1) the activities of federal agencies regarding interstate
Internet sellers that operate from foreign countries, and (2)
the activities of the Federal Government with the activities of
government of foreign countries regarding such interstate
Internet sellers.
Section 915. Effective Date
The sections in this subtitle shall take effect 1 year
after enactment, except that the authority of the Secretary to
commence rulemaking is effective on the date of enactment.
Subtitle C--Promotion of Electronic Prescribing
Section 921. Program of Grants to Health Care Professionals to
Implement Electronic Prescription Drug Programs
This section authorizes the Secretary to make grants for
the purpose of assisting health care professionals who
prescribe drugs and biologicals in implementing electronic
prescription programs. Grants may only be made pursuant to a
grant application submitted in a time, manner, and form
approved by the Secretary. Such sums as are necessary are
authorized to be appropriated for FY 2004 to carry out this
section.
Subtitle D--Treatment of Rare Diseases
Section 931. NIH Office of Rare Diseases at National Institutes of
Health
This section authorizes in statute an Office of Rare
Diseases at the National Institutes of Health. Rare diseases
are diseases affecting less than 200,000 individuals in the
United States. The Director of the Office of Rare Diseases will
serve as the principal advisor to the Director of NIH with
respect to rare diseases, and shall serve to promote sufficient
allocation of NIH resources to rare disease research, and
promote and encourage the establishment of a centralized
clearinghouse for rare disease information for the benefit of
the public, medical professionals, patients, and families. The
Director will prepare a biannual report that describes the
research and education activities on rare diseases and prepare
the NIH Director's annual report to Congress on rare disease
research conducted by or supported through the national
research institutes and centers. For fiscal years 2003 through
2006, $4 million per year is authorized to be appropriated.
Section 932. Rare Disease Regional Centers of Excellence
This section allows the Director of the Office of Rare
Diseases at the NIH to enter into cooperative agreements with,
and make grants to, nonprofit entities which will serve as
regional centers of excellence supporting clinical research
into, training in, and demonstration of diagnostic, prevention,
control, and treatment methods for rare diseases. Support for
regional centers of excellence may not exceed 5 years, though
such period may be extended if the operations of such centers
have been reviewed by an appropriate technical and scientific
peer review group. For fiscal years 2003 through 2006, $20
million per year is authorized to be appropriated.
Subtitle E--Other Provisions Relating to Drugs
Section 941. Study by General Accounting Office Regarding Direct-to-
Consumer Advertising of Prescription Drugs
The Comptroller General is directed to conduct a study to
determine whether DTC prescription drug advertising has
resulted in increased utilization rates for prescription drugs
and, if so, whether, and to what extent, increased utilization
has resulted in increased costs to health plans, health
insurance, or other health programs. The study will also
determine whether DTC prescription drug advertising has
resulted in increased consumer education and whether consumers
and physicians are satisfied with such advertising. Last, the
study will consider whether DTC prescription drug advertising
has resulted in lower overall health expenditures for consumers
and employers. The Comptroller General will submit to Congress
a report on the findings of this study within 2 years of
enactment.
Section 942. Certain Health Professions Programs Regarding Practice of
Pharmacy
This section grants the Secretary the authority to develop
and issue public service announcements to advertise and promote
the pharmacist profession. The Secretary may also award grants
to State and local governments to conduct public service
announcements to promote the pharmacist profession. A
demonstration project is established to expand the number of
pharmacists who are currently eligible to participate in the
National Health Service Corps Loan Repayment Program. It allows
pharmacists participating in the program to provide medication
therapy management services to assure that patients use
medications appropriately. It also grants the Secretary the
authority to make grants or contracts available to qualifying
schools of pharmacy for the purpose of assisting these schools
in acquiring and installing computer-based systems to provide
pharmaceutical education. This section authorizes such sums as
necessary for fiscal years 2003 through 2006.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statements are made
concerning the votes of the Committee on Ways and Means in its
consideration of the bill, H.R. 4954.
MOTION TO REPORT THE BILL
The bill, H.R. 4954, as amended, was ordered favorably
reported by a roll call vote of 22 yeas to 16 nays (with a
quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Crane...................... ........ ........ ......... Mr. Stark........ ........ X .........
Mr. Shaw....................... X ........ ......... Mr. Matsui....... ........ X .........
Mrs. Johnson................... X ........ ......... Mr. Coyne........ ........ ........ .........
Mr. Houghton................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Herger..................... X ........ ......... Mr. Cardin....... ........ X .........
Mr. McCrery.................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Camp....................... X ........ ......... Mr. Kleczka...... ........ X .........
Mr. Ramstad.................... X ........ ......... Mr. Lewis (GA)... ........ X .........
Mr. Nussle..................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... X ........ ......... Mr. Jefferson.... ........ X .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... ........ X .........
Mr. Portman.................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. English.................... X ........ ......... Mrs. Thurman..... ........ X .........
Mr. Watkins.................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Hayworth................... X ........ ......... Mr. Pomeroy...... ........ X .........
Mr. Weller..................... X ........ .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... X ........ .........
Mr. Ryan....................... X ........ .........
----------------------------------------------------------------------------------------------------------------
VOTES ON AMENDMENTS
A rollcall vote was conducted on the following amendment to
the Chairman's amendment in the nature of a substitute.
An amendment to Title I by Mr. Stark on behalf of Mr.
Rangel, to strike Title I and replace with a new Title I, was
defeated by a roll call vote of 16 yeas to 23 nays. The vote
was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ ........ ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title I by Mr. McDermott, which would
require all plans to charge a $35 monthly premium, was defeated
by a roll call vote of 17 yeas to 23 nays. The vote was as
follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ ........ ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title I by Messrs. Cardin and Levin, which
would assist high-need beneficiaries to access catastrophic
coverage by allowing dollars spent by others (e.g., family
members, employer coverage, etc.) to count toward the
catastrophic cap, was defeated by a rollcall vote of 16 yeas to
24 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... ........ ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title I by Mr. Becerra, which would provide
beneficiaries with 20 percent co-insurance between the $250
deductible and $2900 limit out-of-pocket spending, was defeated
by a rollcall vote of 17 yeas to 24 nays. The vote was as
follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title I by Mr. Tanner, which sought to
ensure that any pharmacy that is willing to accept the
negotiated reimbursement rates of a private drug plan should be
allowed to participate in the plan network, was defeated by a
rollcall vote of 18 yeas to 23 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ ........ ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... X ........ ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title I by Mr. Doggett and Mrs. Thurman,
which would require each participating manufacturers of a
covered outpatient drug to make available such drugs at a price
no greater than the manufacturer's average foreign price, was
defeated by a rollcall vote of 16 yeas to 22 nays. The vote was
as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... ........ ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ ........ ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... X ........ ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title II by Mr. McDermott, which would
strike the sections that (1) create a new premium support
program (including demonstration), (2) preempt state laws for
Medicare+Choice plans, and (3) make changes to Medicare MSA,
was defeated by a roll call vote of 15 yeas to 24 nays. The
vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... ........ ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title IV by Messrs. Neal and Rangel, which
would ensure providing inpatient PPS hospitals with a full
market basket in 2003 and permanently freeze IME at 6.5%, was
defeated by a rollcall vote of 16 yeas to 23 nays. The vote was
as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ ........ ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... ........ ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title IV by Mr. Pomeroy, which would phase-
in the elimination of skilled nursing facility add-on, was
defeated by a roll call vote of 15 yeas to 23 nays. The vote
was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ ........ ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title VI by Messrs. Jefferson and Levin,
which would strike both the new home health co-payment, and the
decrease in annual updates to home health agencies for year
2003-2005, was defeated by a roll call vote of 14 yeas to 23
nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui...... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ ........ ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment to Title VI by Mr. Levin, which would add
several preventive-care services to Medicare's basic benefit
package and eliminate coinsurance and deductibles for all new
and existing preventive care services, was defeated by a roll
call vote of 14 yeas to 23 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ ........ ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ X ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Coyne........ ........ ........ .........
Mr. Houghton................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Herger..................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. McNulty...... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Jefferson.... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Tanner....... ........ ........ .........
Mr. Portman.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. English.................... ........ X ......... Mrs. Thurman..... X ........ .........
Mr. Watkins.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Weller..................... ........ X .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made:
The Committee agrees with the estimate prepared by the
Congressional Budget Office (CBO), which is included below. The
Committee notes that the CBO score does not include a
discussion of the ``pharmacy cost management factor,'' which
represents potential savings on total drug expenditures,
reflecting changes in price, quantity and mix of drugs compared
to what a Medicare beneficiary without drug coverage would
otherwise spend. CBO has orally told the Committee that the
pharmacy cost management factor for H.R. 4954 is the highest of
any bills CBO has evaluated. The Committee believed it achieved
this distinction by providing prescription drug plans the both
the incentive to control costs and the tools to do so.
In addition, the score does not mention that CBO assumes 96
percent of Medicare seniors would have prescription drug
coverage under this legislation. That means CBO believes the
benefit will be offered nationwide and will be attractive to
virtually all Medicare beneficiaries.
CBO has agreed to provide a subsequent letter to clarify
these issues in writing, but that letter was not available at
the time this bill was filed.
B. Statement Regarding New Budget Authority and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
Committee bill would result in increased federal direct
spending by $4.1 billion in 2003 and by $337 billion over the
2003-2012 period.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives requiring a cost estimate
prepared by the Congressional Budget Office (CBO), the
following report prepared by the CBO is provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 24, 2002.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4954, the Medicare
Modernization and Prescription Drug Act of 2002, as ordered
reported by the Committee on Ways and Means on June 19, 2002.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Julia
Christensen.
Sincerely,
Steven Lieberman
(For Dan L. Crippen, Director).
Enclosure.
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
H.R. 4954--Medicare Modernization and Prescription Drug Act of 2002
Summary: H.R. 4954 would establish an outpatient
prescription drug benefit in Medicare and would modify
Medicare's payment rates or coverage rules for many services,
including those furnished by hospitals, skilled nursing
facilities, home health agencies, physicians, physical and
speech therapists, occupational therapists, and managed care
plans. CBO estimates those provisions would increase direct
spending by $4.1 billion in 2003 and by $337 billion over the
2003-2012 period.
The bill would authorize the collection of civil penalties
for the failure of interstate Internet pharmacies to comply
with disclosure requirements. Those collections would be
classified as revenues (i.e., governmental receipts). However,
CBO assumes that there would be substantial compliance with the
disclosure requirements and that the effect on revenues would
be negligible. Because the bill would affect direct spending
and revenues, pay-as-you-go procedures would apply.
The bill would also affect discretionary spending. H.R.
4954 would require the Centers for Medicare and Medicaid
Services to modify how Medicare regulations and policies are
developed, communicated, and enforced. It would establish a
Medicare Benefits Administration to administer the outpatient
drug benefit and the Medicare+Choice program, and would require
the Social Security Administration (SSA) to determine the
eligibility of low-income beneficiaries for the subsidy of the
drug benefit. The bill also would establish an Office of Rare
Diseases at the National Institutes of Health, require several
studies, and authorize several grant programs. CBO has not
completed an estimate of the costs of activities subject to
appropriation of the necessary amounts.
The bill contains intergovernmental mandates, including a
number of preemptions of state law, as defined in the Unfunded
Mandates Reform Act (UMRA). CBOestimates that the preemption of
state premium taxes would result in revenue losses to states of about
$70 million in 2005 (the first year the mandate is effective)
increasing to about $100 million in 2009. Those losses would exceed the
threshold established in UMRA ($62 million in 2005, adjusted annually
for inflation). CBO estimates that other mandates and preemptions in
the bill would impose minimal or no costs on state, local, or tribal
governments. Provisions of the bill affecting Medicaid would result in
net savings to state and local governments of about $46 billion over
the 2003-2012 period.
The bill would modify several existing private-sector
mandates on insurers that offer Medicare supplemental (medigap)
coverage and would impose new requirements on Internet
pharmacies and group health plans. CBO estimates that the
direct cost of the mandates in the bill would not exceed the
threshold specified in UMRA ($115 million in 2002, adjusted
annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact on H.R. 4954 is summarized in Table 1 and
major components of these costs are outlined below. The costs
of this legislation fall within budget functions 550 (health)
and 570 (Medicare).
Major provisions: The following discussion highlights
changes in gross outlays directly attributable to provisions of
the act. In addition, the estimate includes three interactions:
the effect of changes in Medicare Part B outlays on receipts
from Part B premiums, the effect of changes in Part B premiums
and cost sharing on federal Medicaid spending, and the effect
of changes in Medicare payment rates on federal Medicaid
spending subject to the ``upper payment limit'' (UPL).
About 25 percent of new Part B outlays would be covered by
premium payments by beneficiaries. CBO estimates that those
premium payments would total $4.3 billion from 2003 through
2012. Such payments would be recorded as offsetting receipts (a
credit against direct spending).
Medicaid pays some or all of the premiums and cost sharing
for individuals dually eligible for Medicaid and Medicare and
for other low-income Medicare beneficiaries not poor enough to
qualify for full Medicaid benefits. In addition to changing the
Part B premium, the bill would change cost sharing for services
furnished in hospital outpatient departments and by home health
agencies, and would change payment rates for many services
(which would affect cost sharing). CBO estimates that the
changes in premiums and cost sharing would increase federal
Medicaid costs by about $0.2 billion over the 2003-2012 period.
TABLE 1.--ESTIMATED IMPACT ON DIRECT SPENDING OF H.R. 4954, THE MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002, AS ORDERED REPORTED BY THE
COMMITTEE ON WAYS AND MEANS ON JUNE 19, 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, outlays in billions of dollars--
---------------------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003-12
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicare Outlays
Title I: Medicare Prescription Drug Benefit......... 0 0 22.0 35.8 40.5 45.7 51.3 57.3 64.2 72.2 389.0
Title II: Medicare+Choice:
201 M+C payment improvements................... 0.5 1.1 0.5 0 0 0 0 0 0 0 2.2
211 M+C competition program.................... 0 0 0.6 0.9 0.9 0.3 -0.4 -0.6 -0.6 -0.5 0.7
Other provisions................................ * * * * * * * * * * 0.2
---------------------------------------------------------------------------------------------------
Subtotal, title II............................ 0.5 1.2 1.2 0.9 0.9 0.3 -0.3 -0.6 -0.6 -0.5 3.0
===================================================================================================
Title III: Rural Health Care Improvements:
302 Disproportionate share adjustment.......... 0.0 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 1.6
303 Standardized payment amount................ 0.3 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0 7.2
306 Home Health 10 percent rural add-on........ 0.1 0.3 0.1 * 0 0 0 0 0 0 0.6
311 Increase for nonteaching hospitals......... 0.1 0.1 0.1 * 0 0 0 0 0 0 0.4
Other provisions................................ * * * * * * * * * * 0.1
---------------------------------------------------------------------------------------------------
Subtotal, title III........................... 0.5 1.1 1.0 0.9 0.9 1.0 1.0 1.1 1.2 1.2 9.9
===================================================================================================
Title IV: Part A:
401 Hospital update............................ 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 3.6
402 Indirect medical education................. 0.4 0.3 0 0 0 0 0 0 0 0 0.7
404 Phase-in federal rate in Puerto Rico....... * * * * * * * * * * 0.2
411 Skilled nursing facility payment rates..... 0.6 0.7 0.6 0.1 0 0 0 0 0 0 2.0
421 Hospice consultation services.............. 0 * * * * * * * * * 0.2
Other provisions................................ * * * * * * 0 0 0 0 0.1
---------------------------------------------------------------------------------------------------
Subtotal, title IV............................ 1.3 1.3 0.9 0.5 0.4 0.4 0.4 0.5 0.5 0.5 6.8
===================================================================================================
Title V: Part B:
501 Updates for physicians' services........... 1.6 4.4 6.6 5.7 2.9 -0.4 -2.5 -3.0 -2.5 -1.4 11.5
511 Competitive acquisition.................... 0 -0.2 -0.4 -0.7 -0.8 -0.9 -1.0 -1.1 -1.2 -1.3 -7.7
512 Ambulance.................................. 0.2 0.2 0.1 0.1 * 0 0 0 0 0 0.6
513 Therapy cap: 2 year extension of moratorium 0.4 0.5 0.1 * * * * * * * 1.0
514 Hospital outpatient services............... 0 0.2 0.5 0.7 0.8 0.8 0.8 1.0 1.8 3.1 9.7
515 Routine physical........................... 0 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 1.6
516 Renal dialysis services.................... * * 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.7
Other provisions................................ * 0.1 0.1 * * * * * * 0.1 0.5
---------------------------------------------------------------------------------------------------
Subtotal, title V............................. 2.2 5.4 7.2 6.1 3.1 -0.2 -2.4 -2.8 -1.5 0.8 17.8
===================================================================================================
Title VI: Parts A and B:
Home health provisions.......................... 0.2 * -0.3 -0.4 -0.4 -0.5 -0.6 -0.7 -0.7 -0.8 -4.1
611 Limit on high cost medical education * * -0.1 -0.2 -0.2 -0.3 -0.3 -0.4 -0.5 -0.5 -2.6
programs.......................................
612 Redistribute unused residency positions.... * 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.0
Other provisions................................ 0 * * * 0 0 0 0 0 0 *
---------------------------------------------------------------------------------------------------
Subtotal, title VI............................ 0.2 * -0.2 -0.4 -0.5 -0.7 -0.8 -0.9 -1.1 -1.2 -5.7
===================================================================================================
Title VII: Medicare Benefits Administration......... 0 0 0 0 0 0 0 0 0 0 0
Title VIII: Regulatory Reform....................... * * * * * * * * * * 0.1
Title IX: Medicaid, Public Health, and other 0 0 0 0 0 0 0 0 0 0 0
Provisions.........................................
Subtotal, gross Medicare outlays.............. 4.6 9.0 32.2 43.7 45.2 46.6 49.2 54.5 62.6 73.1 420.8
Premium collections................................. -0.7 -1.6 -1.9 -1.6 -0.8 0.1 0.7 0.9 0.6 * -4.3
---------------------------------------------------------------------------------------------------
Subtotal, net Medicare outlays................ 4.0 7.5 30.2 42.1 44.4 46.7 49.9 55.4 63.2 73.1 416.5
Medicaid Outlays
Title I: Medicare Prescription Drug Benefit......... 0 * -3.8 -8.1 -8.5 -9.2 -10.1 -11.3 -12.7 -14.2 -77.9
Spending subject to upper payment limit............. 0.1 0.1 0.1 * * * * * * * 0.3
Medicaid payments of Medicare premiums.............. 0.1 0.2 0.2 0.2 0.1 * -0.1 -0.1 -0.1 -0.1 0.2
---------------------------------------------------------------------------------------------------
Subtotal, Medicaid............................ 0.2 0.3 -3.5 -7.9 -8.5 -9.2 -10.2 -11.4 -12.8 -14.2 -77.4
Other Direct Spending \1\
Title I: Medicare Prescription Drug Benefit......... 0 0 -0.1 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.3 -1.8
Total Changes in Direct Spending
Estimated outlays................................... 4.1 7.7 26.6 34.0 35.7 37.2 39.5 43.7 50.2 58.5 337.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Federal savings in the Federal Employees Health Benefits program, Department of Defense spending on health benefits for Medicare-eligible retirees,
and spending from the Combined Benefits Funds for the United Mine Workers Association.
\2\ Notes:
*=Between -$50 million and $50 million.
Numbers may not add up to totals because of rounding.
State Medicaid programs use Medicare payment rates to calculate the maximum amount, known as the upper payment limit, that they can pay for services
furnished by hospitals and nursing homes. In recent years, many states
have increased their Medicaid payments up to the UPL in order to draw
down additional federal funds. The bill would raise Medicare payment
rates for services furnished by hospitals and skilled nursing
facilities, thus boosting the UPL and allowing states to receive
additional Medicaid funds. CBO estimates that the bill would increase
federal Medicaid spending subject to the UPL by $0.3 billion over the
2003-2012 period.
Title I--Medicare Outpatient Prescription Drug Benefit
Title I would create a voluntary outpatient prescription
drug benefit, beginning in 2005, under a new Part D of the
Medicare program. The prescription drug benefit would be
offered by competing private drug plans that would be at
financial risk for covering the cost of the benefit. Premiums
would be charged to participating beneficiaries and subsidized,
in part, by the Medicare program. The bill would establish a
program to subsidize premiums and cost sharing for certain low-
income beneficiaries, and would reduce federal Medicaid
payments to states through 2012 by a proportion of the spending
for subsidized premiums and cost sharing attributed to Medicare
enrollees who are entitled to prescription drug coverage under
Medicaid.
CBO estimates that the Part D provisions would increase
direct spending by about $309 billion over the 2003-2012 period
(see Table 2). Of that 10-year total, $294 billion represents
outlays for federal payments to plans offering qualified
prescription drug coverage and $97 billion is for spending by
Medicare for the low-income subsidy program. Those costs would
be partially offset by $96 billion in federal savings
associated with the new drug program, because Part D would
replace or supplement drug coverage that some Medicare
enrollees obtain through Medicaid, the Federal Employees Health
Benefits program, the Department of Defense, or the Combined
Benefits Funds of the United Mine Workers Association. Other
effects of the program--largely the result of increased
Medicare enrollees in Medicaid, offset, in part, by the
reduction through 2012 in federal Medicaid payments in states--
would increase federal spending by $14 billion through 2012,
CBO estimates.
TABLE 2.--EFFECT ON DIRECT SPENDING OF ESTABLISHING A PRESCRIPTION DRUG BENEFIT IN MEDICARE: TITLE I OF H.R. 4954, THE MEDICARE MODERNIZATION AND
PRESCRIPTION DRUG ACT OF 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, outlays in billions of dollars--
----------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003-12
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in Direct Spending
Medicare spending on prescription drugs........................ 0 0 18 29 31 35 38 43 47 53 294
Spending by Medicaid and other programs on drugs for Medicare 0 0 -4 -9 -10 -11 -13 -14 -16 -18 -96
enrollees.....................................................
Low-income subsidy............................................. 0 0 4 8 10 12 13 15 16 18 97
Other direct spending \1\...................................... 0 * * * 1 1 2 3 3 4 14
----------------------------------------------------------------------------------------
Total changes.................................................. 0 * 18 27 32 36 41 46 51 58 309
Memorandum
Monthly premium................................................ n.a. n.a. $35 $37 $40 $44 $47 $52 $57 $62 .......
Deductible..................................................... n.a. n.a. $250 $276 $303 $332 $364 $398 $434 $474 .......
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Other direct spending includes changes in Medicare and Medicaid spending associated with increases in the number of Medicare beneficiaries enrolled
in Medicaid and reductions in federal Medicaid payments to states.
Notes:
*=Costs or savings of less than $500 million.
n.a.=not applicable because the benefit would not take effect until 2005.
Numbers may not add up to totals because of rounding.
Under the prescription drug benefit, plan sponsors would
offer either ``standard coverage'' or actuarially equivalent
coverage, if approved by the Medicare Benefits Administration.
For 2005, standard coverage would have a $250 deductible; 20
percent cost sharing for costs between $250 and $1,000; and 50
percent cost sharing for costs between $1,000 and $2,000.
Beneficiaries would be responsible for 100 percent of costs
above $2,000 until the beneficiary reaches the catastrophic
limit at $3,800 in out-of-pocket spending. In subsequent years,
those amounts would be increased by the percentage change in
per-capita spending for outpatient prescription drugs among the
Medicare population.
The beneficiary would stop paying for covered prescription
drugs after reaching the catastrophic limit (out-of-pocket
spending of $3,800 in 2005). However, only payments made by the
beneficiary, the low-income subsidy, or by Medicaid would count
toward that catastrophic limit; payments or reimbursements made
by other insurance or third-party payers would not count toward
that limit.
Each plan would establish its own premium. CBO estimates
that premiums would average about $35 in 2005, increasing to
$62 in 2012.
The Medicaid program would subsidize the drug benefit
through two payments to plans: reimbursement of 35 percent of
the plan's spending for the standard benefit and ``individual
reinsurance'' payments for high-cost beneficiaries that, in
aggregate, equal 30 percent of total spending for standard
benefits.
Individuals with incomes below 150 percent of the federal
poverty level would be eligible for a full subsidy of the
lowest premium in the market and the cost sharing for drug
spending below $2,000. For individuals with incomes between 150
percent and 175 percent of the federal poverty level, there
would be a full subsidy of cost sharing for costs below $2,000
and there would be a sliding-scale subsidy of the lowest
premium in the market. (In 2002, the federal poverty level is
$8,860 for an individual and $11,940 for a couple.) The bill
would require the SSA to determine the eligibility of low-
income beneficiaries for the subsidy of the drug benefit.
Title II--Medicare+Choice Revitalization and Competition
Title II would increase rates paid to Medicare+Choice plans
in calendar years 2003 and 2004, and would establish a new
Medicare+Choice payment system based competitive bidding,
beginning in 2005. The bill would also extend several expiring
programs and demonstration programs involving group plans. CBO
estimates the provisions in title II would increase direct
spending by $0.5 billion in 2003 and by $3.0 billion over the
2003-2012 period.
CBO estimates that a requirement in current law will hold
increases in rates paid to nearly all Medicare+Choice plans to
2 percent in both 2003 and 2004. H.R. 4954 would eliminate that
requirement and modify the payment formula to pay the largest
of four amounts: a minimum payment amount, a blend of local and
national amounts based on inflated historical per-capita costs
in the fee-for-service sector, estimated currentper-capita
costs in the fee-for-service sector, and a minimum increase of 3
percent. (The minimum payment amounts would be $425 in most counties
and $525 in counties in a metropolitan area with a population greater
than 250,000, updated from 2001 by the increase in per-capita spending
in the Medicare program.) That provision would affect spending during
fiscal years 2003 through 2005, increasing outlays by $0.5 billion in
2003 and by a cumulative total of $2.2 billion.
H.R. 4954 would establish a competitive bidding program for
Medicare+Choice plans, beginning in 2005. Under the program,
plans would submit bids for the cost of providing standard
benefits under Parts A and B of Medicare and the standard drug
benefit under Part D. Those bids for standard Part A and Part B
benefits would be compared to a benchmark amount, which in 2005
through 2007 would be the larger of the minimum payment amount
and estimated current per-capita costs in the fee-for-service
sector. Beginning in 2008, the benchmark amount would be the
larger of the minimum payment amount and 95 percent of per-
capita costs in the fee-for-service sector. If a plan were to
bid below the benchmark amount, Medicare would pay the plan the
bid plus an amount that would approximate 75 percent of the
difference between the bid and the benchmark amount (after
adjusting for differences in risk attributable to the health
status of the plan's enrollees). The plans could rebate that
additional payment to Medicare enrollees, or could use it to
pay for additional benefits. CBO estimates that the competition
program would increase spending during the 2005-2008 period and
reduce spending beginning in 2009, with spending through 2012
increasing by a total of $0.7 billion.
Title III--Rural Health Care Improvements
Title III would increase payment rates for inpatient
service furnished by hospitals in rural areas or metropolitan
area with a population under one million, and for services
furnished by home health agencies located in rural areas. CBO
estimates these provisions would increase spending by $0.5
billion in 2003 and by about $10 billion through 2012 Two
provisions--increasing the standardized payment amount and
increasing payments to hospitals that qualify for a payment
adjustment as a disproportionate share hospital--account for
$8.8 billion of that 10-year total.
Title IV--Provisions Relating to Medicare Part A
Title IV would increase payment rates for inpatient
services furnished by hospitals, skilled nursing facilities,
and hospices. CBO estimates the provisions in title IV would
increase spending by $1.3 billion in 2003 and by $6.8 billion
over the 2003-2012 period.
H.R. 4954 would increase the 2003 update to payment rates
for hospital inpatient services paid under the prospective pay
system from 0.55 percentage points below the ``market basket
index'' measure of changes in hospital input prices go 0.25
percentage points below that index. Hospitals designated as
sole community hospitals would receive an update in 2003 equal
to the market basket index. CBO estimates that provision would
increase spending by $0.3 billion in 2003 and $3.6 billion over
the 2003-2012 period.
Temporary increases in payments to teaching hospitals and
skilled nursing facilities account for most of the remaining
costs of title IV. Teaching hospitals would receive higher
payments for two years, at an estimated cumulative cost of $0.7
billion, and skilled nursing facilities would receive higher
payment rates for three years, at accumulative cost of $2.0
billion.
Title V--Provisions Relating to Medicare Part B
CBO estimates that the provisions of title V would increase
Medicare spending by $2.2 billion in 2003 and $17.8 billion
over the 2003-1012 period. The provisions with the largest
budgetary effects include changes in payments or physicians'
services, assumption of some cost sharing for services
furnished by hospital outpatient departments, establishment of
a competitive acquisition program for durable medical equipment
and certain orthotics, coverage of some routine physical
examinations, and two-year delay in the implementation of caps
on payments for certain therapy services.
Compared to current law, CBO estimates that H.R. 4954 would
increase payments for services paid under the physican fee
schedule during 2003 through 2007, without outlays increasing
by $1.6 billion in 2003 and by $21.3 billion though 2007.
However, the bill would reduce payments for these services in
2008 and subsequent years, with a net increase in spending
during the 2003-2012 period of $11.5 billion.
Before the Balanced Budget Act of 1997 (BBA), beneficiaries
paid cost sharing of 20 percent of charge for hospital
outpatient services and the program paid 80 percent of allowed
charges. Allowed charges generally were a much lower amount
than charges. As a result beneficiaries, on average, were
paying about half of payments to hospitals for outpatient
services. The BBA and subsequent legislation are phasing in
increases in payments for outpatient services while limiting
cost sharing, with the objective of reducing the share paid by
beneficiaries to 20 percent. H.R. 4954 would accelerate the
Medicare program's assumption of cost sharing in excess of 20
percent, beginning in 2004. CBO estimates that provision would
increase spending by $9.7 billion over the 2003-2012 period.
The bill would expand and make permanent a demonstration
project in which certain durable medical equipment and
orthotics are acquired through competitive bidding instead of
paying on the basis of a fee schedule. CBO estimates that
provision would reduce spending by $7.7 billion through 2012.
Beginning in 2004, the bill would require Medicare to pay
for a routine physical examination, and association services,
when furnished within six months of when a beneficiary first
enrolls in Medicare. The bill would waive cost sharing for
those services. Beneficiaries already enrolled in Medicare
would not be eligible for this benefit. CBO estimates this
provision would cost $1.6 billion over the 2003-2012 period.
Title VI--Provisions Relating to Medicare Parts A and B
Title VI would modify payment rates for home health
services, limit subsidies to hospitals with graduate medical
education (GME) programs and permit redistribution of
subsidized GME slots, and establish several demonstration
programs. CBO estimates that the provisions of title VI would
increase Medicare spending by $0.2 billion in 2003 and would
reduce spending by $5.7 billion over the 2003-2012 period.
Under current law, there will be a so-called ``15 percent''
reduction in 2003 in rates paid for services to furnished by
home health agencies (the actual reduction would be about 7
percent). H.R. 4954 would eliminate the reduction, but would
provide for smaller annual updates to payment rates in
subsequent years. In addition, the bill would impose cost
sharing on beneficiaries of 1.5 percent of the average per-
episode payment amount. CBO estimates those provisions would
increase federal spending by $0.2 billion in 2003 and reduce
spending by $4.1 billion over the 2003-2012 period.
Under current law, a limit on subsidies for GME programs--
at 140 percent of the adjusted national average per-resident
amount--would expire at the end of 2002. The bill would extend
that limit through 2012, reducing federal spending by about
$2.6 billion over the 2003-2012 period. Current law caps the
number of residency slots at each teaching hospital that are
eligible for GME subsidies. The bill would permit unused
residency slots to be redistributed to hospitals that have
reached their caps. CBO estimates that provision would increase
spending by $1 billion over the 2003-2012 period.
Title VII--Medicare Benefits Administration
H.R. 4954 would establish a Medicare Benefits
Administration within the Department of Health and Human
Services to administer the Medicare+Choice competition program
and the prescription drug benefit. CBO estimates that title VII
would have no effect on direct spending.
Title VIII--Regulatory Reduction and Contracting Reform
Title VIII would establish a procedure for obtaining a
determination before a service is furnished whether Medicare
will pay for that service. CBO estimates that provision would
increase direct spending by about $0.1 billion over the 2003-
2012 period.
Title IX--Medicaid, Public Health, and Other Health Provisions
CBO estimates that the provisions of title IX would have no
effect on direct spending.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. The net
changes in outlays and governmental receipts that are subject
to pay-as-you-go procedures are shown in the following table.
For the purposes of enforcing pay-as-you-go procedures, only
the effects through 2006 are counted.
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays....................................... 0 4,100 7,700 26,000 34,000 35,700 37,200 39,500 43,700 50,200 58,500
Changes in receipts...................................... 0 0 0 0 0 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated impact on state, local, and tribal governments:
The bill contains intergovernmental mandates, including a
number of preemptions of state law, as defined in the Unfunded
Mandates Reform Act. CBO estimates that the preemption of state
premium taxes would result in revenue losses to states of about
$70 million in 2005 (the first year the mandate is effective)
increasing to about $100 million in 2009. Those losses would
exceed the threshold established in UMRA ($62 million in 2005,
adjusted annually for inflation). CBO estimates that other
mandates and preemptions in the bill would impose minimal or no
costs on state, local, or tribal governments. Provisions of the
bill affecting Medicaid would result in net savings to state
and local governments of about $64 billion over the 2003-2012
period.
Mandates
The bill would prohibit states from imposing premium taxes
on prescription drug plans (PDPs), and this prohibition would
be an intergovernmental mandate as defined in UMRA.
Participation in PDPs would result in a shift away from taxable
plans. Such a shift, in combination with the preemption of
state taxing authority for the new plans, would result in a
loss of tax revenues. CBO estimates that approximately 10
million people would change their insurance coverage for
prescription drugs from taxable plans to PDPs. As a result,
states would be unable to collect premium taxes (ranging from
0.2 percent to 3.0 percent of premiums) on those plans. CBO
estimates that state losses of premium tax revenue as a result
of this preemption would range from about $70 million in 2005
to $100 million in 2009.
The bill also would allow the Secretary of Health and Human
Services to waive state licensure requirements for PDPs in
cases where a state fails to act on a license application
within 90 days or where a state denial is based on
discriminatory treatment or solvency requirements that differ
from those in the bill. In cases where the Secretary waives
licensure requirements, states would lose fees associated with
those licenses. CBO cannot estimate the magnitude of such
losses because we have no basis for predicting the number of
cases where a waiver would be possible or would be granted.
Health plans that provide prescription drug coverage,
including retiree prescription drug plans and state
pharmaceutical programs, would be required to disclose whether
the coverage they offer provides benefits at least equivalent
to the benefits under the PDP. That disclosure requirement
would be an intergovernmental mandate as defined by UMRA;
however CBO estimates that the costs of the mandate would be
minimal.
The bill would preempt state solvency standards for PDP
sponsors and would supercede all state laws governing
Medicare+Choice plans, with the exception of licensing or
solvency requirements. While these preemptions would limit the
application of state laws, they would impose no duties on
states that would result in additional spending.
Other Impacts
The net effect of the bill on state Medicaid spending is
expected to be savings totaling about $46 billion over the
2003-2012 period. On the one hand, state Medicaid programs
would benefit as coverage responsibility for individuals that
are dually eligible for Medicaid and Medicare shift from
Medicaid to Medicare. However, some of these savings would be
offset by new prescription drug spending for new enrollees who
are fully eligible for both Medicare and Medicaid. CBO
estimates that savings to states from these provisions would
total about $58 billion over the 2003-2012 period. On the other
hand, the federal government would withhold funds from states'
quarterly reimbursements for Medicaid, reducing state savings
over the same period by about $12 billion.
States would be required to determine the eligibility of
individuals for premium and cost-sharing assistance under the
Medicare drug benefit. (Medicare beneficiaries may also apply
for these benefits through the Social Security Administration.)
The costs associated with this additional requirement would
decrease over time because the matching rate from the federal
government would increase annually until 2014 when it would
equal 100 percent. Because states may alter their programmatic
and financial responsibilities to offset the costs of this new
requirement, it would not be an intergovernmental mandate as
defined in UMRA.
State and local governments that provide health insurance
to their employees may benefit from federal reinsurance
payments provided for in the bill. They may alter their current
prescription drug plans to qualify for reinsurance payments or
they may contract with outside PDPs that qualify. In either
case, those governments could realize savings in their health
plans for retirees. Because CBO cannot predict how states might
restructure the prescription drug component of their health
plans, we cannot estimate the size of any federal reinsurance
payments that would accrue to those governments.
Estimated impact on the private sector: The bill would
modify or create a number of mandates on private-sector
entities.CBO estimates that the direct cost of the mandates in
the bill would not exceed the threshold specified in UMRA ($115 million
in 2002, adjusted annually for inflation).
Section 104 of the bill would modify several existing
private-sector mandates on insurers that offer Medicare
supplemental (medigap) coverage. One change would bar insurers
from offering policies that include prescription drug coverage
(policy categories H, I, and J) except to beneficiaries
currently enrolled in the plans. However, insurers would be
allowed to offer to beneficiaries who enroll in the Part D
program two new medigap policies whose coverage would
complement the Part D coverage. In addition, insurers who sell
medigap policies without prescription drug coverage (policy
categories A-G) would have to make those policies available, on
a similar basis as they do to beneficiaries newly eligible to
purchase medigap coverage, to any beneficiary who enrolls in
the new Medicare Part D program and who, at the time of
enrollment in Part D, held an H, I, or J policy.
CBO estimates that most Medicare beneficiaries who would
purchase medigap plans with prescription drug coverage under
current law would joint the new Part D program under the bill
and would also purchase one of the two new medigap drug plans.
As a result, nearly all of the profits lost by insurers due to
restrictions on current medigap plans would be offset by
profits earned on the new drug plans.
The bill would also impose three new private-sector
mandates. Section 1860A would require health plans that provide
prescription drug coverage, including retiree prescription drug
plans and state pharmaceutical programs, to certify that the
coverage they offer provides benefits at least equivalent to
the benefits under Part D. Such a certification would be needed
by enrollees who wanted to enter the Medicare drug benefit late
because they had previously obtained coverage from the
certifying plan. Section 850 would bar group health plans from
requiring dental providers to obtain a claims determination
from Medicare for dental benefits specifically excluded from
Medicare coverage as a condition for obtaining a claims
determination for such benefits under the group health plan.
Section 912 would require pharmacies operating on the Internet
to disclose their existence to state licensing boards and to
post certain information on their web sites. CBO estimates that
the direct cost of these mandates would be small.
Estimate prepared by: Federal Costs: Medicare outpatient
prescription drug benefit--Julia Christensen, Jeanne De Sa, and
Eric Rollins; Rachel Schmidt and Sarah Thomas. Medicare+Choice
Competition--Niall Brennan. Other provisions--Alexis Ahlstrom,
Charles Betley, Niall Brennan, Julia Christensen, Jeanne De Sa,
Eric Rollins, Christopher Topoleski. Impact on State, Local,
and Tribal Governments: Leo Lex. Impact on the Private Sector:
Stuart Hagen.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
need for this legislation was confirmed by the oversight
hearings of the Subcommittee on Health. The hearings were as
follows:
The Subcommittee on Health held a series of hearings on
Medicare Reform during the 107th Congress to examine the
implications of different proposals aimed at helping seniors
gain more affordable access to prescription drugs. A list of
these hearings may be found in this report in Section I.
Introduction, Part C. Legislative History (Page 4).
B. Summary of General Performance Goals and Objectives
In compliance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
primary purpose of H.R. 4954 is to create a prescription drug
benefit into the Medicare program while modernizing other
aspects of the program.
C. Constitutional Authority Statement
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, relating to constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article I of the
Constitution, Section 8 (``The Congress shall have power to lay
and collect taxes, duties, imposts, and excises, to pay the
debts and to provide for * * * the General Welfare of the
United States * * *'').
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SOCIAL SECURITY ACT
* * * * * * *
TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE
SIMPLIFICATION
* * * * * * *
Part A--General Provisions
SEC. 1108. ADDITIONAL GRANTS TO PUERTO RICO, THE VIRGIN ISLANDS, GUAM,
AND AMERICAN SAMOA; LIMITATION ON TOTAL PAYMENTS.
(a) * * *
* * * * * * *
(f) Subject to subsection (g) and section 1935(e)(1)(B), the
total amount certified by the Secretary under title XIX with
respect to a fiscal year for payment to--
(1) * * *
* * * * * * *
APPOINTMENT OF ADVISORY COUNCIL AND OTHER ADVISORY GROUPS
Sec. 1114. (a) * * *
* * * * * * *
[(i)(1) Any advisory committee appointed under subsection (f
) to advise the Secretary on matters relating to the
interpretation, application, or implementation of section
1862(a)(1) shall assure the full participation of a nonvoting
member in the deliberations of the advisory committee, and
shall provide such nonvoting member access to all information
and data made available to voting members of the advisory
committee, other than information that--
[(A) is exempt from disclosure pursuant to subsection
(a) of section 552 of title 5, United States Code, by
reason of subsection (b)(4) of such section (relating
to trade secrets); or
[(B) the Secretary determines would present a
conflict of interest relating to such nonvoting member.
[(2) If an advisory committee described in paragraph (1)
organizes into panels of experts according to types of items or
services considered by the advisory committee, any such panel
of experts may report any recommendation with respect to such
items or services directly to the Secretary without the prior
approval of the advisory committee or an executive committee
thereof.]
* * * * * * *
EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM PARTICIPATION IN
MEDICARE AND STATE HEALTH CARE PROGRAMS
Sec. 1128. (a) * * *
* * * * * * *
(c) Notice, Effective Date, and Period of Exclusion.--(1) * *
*
* * * * * * *
(3)(A) * * *
(B) [Subject to subparagraph (G), in the case of an exclusion
under subsection (a), the minimum period of exclusion shall be
not less than five years, except that, upon the request of a
State, the Secretary may waive the exclusion under subsection
(a)(1) in the case of an individual or entity that is the sole
community physician or sole source of essential specialized
services in a community.] Subject to subparagraph (G), in the
case of an exclusion under subsection (a), the minimum period
of exclusion shall be not less than five years, except that,
upon the request of the administrator of a Federal health care
program (as defined in section 1128B(f)) who determines that
the exclusion would impose a hardship on individuals entitled
to benefits under part A of title XVIII or enrolled under part
B of such title, or both, the Secretary may waive the exclusion
under subsection (a)(1), (a)(3), or (a)(4) with respect to that
program in the case of an individual or entity that is the sole
community physician or sole source of essential specialized
services in a community. The Secretary's decision whether to
waive the exclusion shall not be reviewable.
* * * * * * *
CRIMINAL PENALTIES FOR ACTS INVOLVING FEDERAL HEALTH CARE PROGRAMS
Sec. 1128B. (a) * * *
(b)(1) * * *
* * * * * * *
(3) Paragraphs (1) and (2) shall not apply to--
(A) * * *
* * * * * * *
(E) any payment practice specified by the Secretary
in regulations promulgated pursuant to section 14(a) of
the Medicare and Medicaid Patient and Program
Protection Act of 1987; [and]
(F) any remuneration between an organization and an
individual or entity providing items or services, or a
combination thereof, pursuant to a written agreement
between the organization and the individual or entity
if the organization is an eligible organization under
section 1876 or if the written agreement, through a
risk-sharing arrangement, places the individual or
entity at substantial financial risk for the cost or
utilization of the items or services, or a combination
thereof, which the individual or entity is obligated to
provide[.];
(G) the waiver or reduction of any cost-sharing
imposed under part D of title XVIII; and
(H) any remuneration between a public or
nonprofit private health center entity
described under clause (i) or (ii) of section
1905(l)(2)(B) and any individual or entity
providing goods, items, services, donations or
loans, or a combination thereof, to such health
center entity pursuant to a contract, lease,
grant, loan, or other agreement, if such
agreement contributes to the ability of the
health center entity to maintain or increase
the availability, or enhance the quality, of
services provided to a medically underserved
population served by the health center entity.
* * * * * * *
Part B--Peer Review of the Utilization and Quality of Health Care
Services
FUNCTIONS OF PEER REVIEW ORGANIZATIONS
Sec. 1154. (a) * * *
* * * * * * *
(e)(1) * * *
[(5) In any review conducted under paragraph (2) or (3), the
organization shall solicit the views of the patient involved
(or the patient's representative).]
* * * * * * *
TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED
NOTICE OF MEDICARE BENEFITS; MEDICARE AND MEDIGAP INFORMATION
Sec. 1804. (a) * * *
(b) The Secretary shall provide information via a toll-free
telephone number on the programs under this title. The
Secretary shall provide, through the toll-free number 1-800-
MEDICARE, for a means by which individuals seeking information
about, or assistance with, such programs who phone such toll-
free number are transferred (without charge) to appropriate
entities for the provision of such information or assistance.
Such toll-free number shall be the toll-free number listed for
general information and assistance in the annual notice under
subsection (a) instead of the listing of numbers of individual
contractors.
* * * * * * *
MEDICARE PAYMENT ADVISORY COMMISSION
Sec. 1805. (a) * * *
(b) Duties.--
(1) * * *
(2) Specific topics to be reviewed.--
(A) * * *
(B) Original medicare fee-for-service
system.--Specifically, the Commission shall
review payment policies under parts A and B,
including--
(i) the factors affecting
expenditures for the efficient
provision of services in different
sectors, including the process for
updating hospital, skilled nursing
facility, physician, and other fees,
* * * * * * *
(8) Examination of budget consequences.--Before
making any recommendations, the Commission shall
examine the budget consequences of such
recommendations, directly or through consultation with
appropriate expert entities.
* * * * * * *
MEDICARE PRESCRIPTION DRUG DISCOUNT CARD ENDORSEMENT PROGRAM
Sec. 1807. (a) In General.--The Secretary (or the Medicare
Benefits Administrator pursuant to section 1808(c)(3)(C)) shall
establish a program--
(1) to endorse prescription drug discount card
programs that meet the requirements of this section;
and
(2) to make available to medicare beneficiaries
information regarding such endorsed programs.
(b) Requirements for Endorsement.--The Secretary may not
endorse a prescription drug discount card program under this
section unless the program meets the following requirements:
(1) Savings to medicare beneficiaries.--The program
passes on to medicare beneficiaries who enroll in the
program discounts on prescription drugs, including
discounts negotiated with manufacturers.
(2) Prohibition on application only to mail order.--
The program applies to drugs that are available other
than solely through mail order.
(3) Beneficiary services.--The program provides
pharmaceutical support services, such as education and
counseling, and services to prevent adverse drug
interactions.
(4) Information.--The program makes available to
medicare beneficiaries through the Internet and
otherwise information, including information on
enrollment fees, prices charged to beneficiaries, and
services offered under the program, that the Secretary
identifies as being necessary to provide for informed
choice by beneficiaries among endorsed programs.
(5) Demonstrated experience.--The entity operating
the program has demonstrated experience and expertise
in operating such a program or a similar program.
(6) Quality assurance.--The entity has in place
adequate procedures for assuring quality service under
the program.
(7) Additional beneficiary protections.--The program
meets such additional requirements as the Secretary
identifies to protect and promote the interest of
medicare beneficiaries, including requirements that
ensure that beneficiaries are not charged more than the
lower of the negotiated retail price or the usual and
customary price.
(c) Program Operation.--The Secretary shall operate the
program under this section consistent with the following:
(1) Promotion of informed choice.--In order to
promote informed choice among endorsed prescription
drug discount card programs, the Secretary shall
provide for the dissemination of information which
compares the costs and benefits of such programs in a
manner coordinated with the dissemination of
educational information on Medicare+Choice plans under
part C.
(2) Oversight.--The Secretary shall provide
appropriate oversight to ensure compliance of endorsed
programs with the requirements of this section,
including verification of the discounts and services
provided.
(3) Use of medicare toll-free number.--The Secretary
shall provide through the 1-800-medicare toll free
telephone number for the receipt and response to
inquiries and complaints concerning the program and
programs endorsed under this section.
(4) Disqualification for abusive practices.--The
Secretary shall revoke the endorsement of a program
that the Secretary determines no longer meets the
requirements of this section or that has engaged in
false or misleading marketing practices.
(5) Enrollment practices.--A medicare beneficiary may
not be enrolled in more than one endorsed program at
any time.
(d) Transition.--The Secretary shall provide for an
appropriate transition and discontinuation of the program under
this section at the time prescription drug benefits first
become available under part D.
(e) Authorization of Appropriations.--There are authorized to
be appropriated such sums as may be necessary to carry out the
program under this section.
MEDICARE BENEFITS ADMINISTRATION
Sec. 1808. (a) Establishment.--There is established within
the Department of Health and Human Services an agency to be
known as the Medicare Benefits Administration.
(b) Administrator; Deputy Administrator; Chief Actuary.--
(1) Administrator.--
(A) In general.--The Medicare Benefits
Administration shall be headed by an
administrator to be known as the ``Medicare
Benefits Administrator'' (in this section
referred to as the ``Administrator'') who shall
be appointed by the President, by and with the
advice and consent of the Senate. The
Administrator shall be in direct line of
authority to the Secretary.
(B) Compensation.--The Administrator shall be
paid at the rate of basic pay payable for level
III of the Executive Schedule under section
5314 of title 5, United States Code.
(C) Term of office.--The Administrator shall
be appointed for a term of 5 years. In any case
in which a successor does not take office at
the end of an Administrator's term of office,
that Administrator may continue in office until
the entry upon office of such a successor. An
Administrator appointed to a term of office
after the commencement of such term may serve
under such appointment only for the remainder
of such term.
(D) General authority.--The Administrator
shall be responsible for the exercise of all
powers and the discharge of all duties of the
Administration, and shall have authority and
control over all personnel and activities
thereof.
(E) Rulemaking authority.--The Administrator
may prescribe such rules and regulations as the
Administrator determines necessary or
appropriate to carry out the functions of the
Administration. The regulations prescribed by
the Administrator shall be subject to the
rulemaking procedures established under section
553 of title 5, United States Code.
(F) Authority to establish organizational
units.--The Administrator may establish, alter,
consolidate, or discontinue such organizational
units or components within the Administration
as the Administrator considers necessary or
appropriate, except as specified in this
section.
(G) Authority to delegate.--The Administrator
may assign duties, and delegate, or authorize
successive redelegations of, authority to act
and to render decisions, to such officers and
employees of the Administration as the
Administrator may find necessary. Within the
limitations of such delegations, redelegations,
or assignments, all official acts and decisions
of such officers and employees shall have the
same force and effect as though performed or
rendered by the Administrator.
(2) Deputy administrator.--
(A) In general.--There shall be a Deputy
Administrator of the Medicare Benefits
Administration who shall be appointed by the
President, by and with the advice and consent
of the Senate.
(B) Compensation.--The Deputy Administrator
shall be paid at the rate of basic pay payable
for level IV of the Executive Schedule under
section 5315 of title 5, United States Code.
(C) Term of office.--The Deputy Administrator
shall be appointed for a term of 5 years. In
any case in which a successor does not take
office at the end of a Deputy Administrator's
term of office, such Deputy Administrator may
continue in office until the entry upon office
of such a successor. A Deputy Administrator
appointed to a term of office after the
commencement of such term may serve under such
appointment only for the remainder of such
term.
(D) Duties.--The Deputy Administrator shall
perform such duties and exercise such powers as
the Administrator shall from time to time
assign or delegate. The Deputy Administrator
shall be Acting Administrator of the
Administration during the absence or disability
of the Administrator and, unless the President
designates another officer of the Government as
Acting Administrator, in the event of a vacancy
in the office of the Administrator.
(3) Chief actuary.--
(A) In general.--There is established in the
Administration the position of Chief Actuary.
The Chief Actuary shall be appointed by, and in
direct line of authority to, the Administrator
of such Administration. The Chief Actuary shall
be appointed from among individuals who have
demonstrated, by their education and
experience, superior expertise in the actuarial
sciences. The Chief Actuary may be removed only
for cause.
(B) Compensation.--The Chief Actuary shall be
compensated at the highest rate of basic pay
for the Senior Executive Service under section
5382(b) of title 5, United States Code.
(C) Duties.--The Chief Actuary shall exercise
such duties as are appropriate for the office
of the Chief Actuary and in accordance with
professional standards of actuarial
independence.
(4) Secretarial coordination of program
administration.--The Secretary shall ensure appropriate
coordination between the Administrator and the
Administrator of the Centers for Medicare & Medicaid
Services in carrying out the programs under this title.
(c) Duties; Administrative Provisions.--
(1) Duties.--
(A) General duties.--The Administrator shall
carry out parts C and D, including--
(i) negotiating, entering into, and
enforcing, contracts with plans for the
offering of Medicare+Choice plans under
part C, including the offering of
qualified prescription drug coverage
under such plans; and
(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors
for the offering of prescription drug
plans under part D.
(B) Other duties.--The Administrator shall
carry out any duty provided for under part C or
part D, including demonstration projects
carried out in part or in whole under such
parts, the programs of all-inclusive care for
the elderly (PACE program) under section 1894,
the social health maintenance organization
(SHMO) demonstration projects (referred to in
section 4104(c) of the Balanced Budget Act of
1997), and through a Medicare+Choice project
that demonstrates the application of capitation
payment rates for frail elderly medicare
beneficiaries through the use of a
interdisciplinary team and through the
provision of primary care services to such
beneficiaries by means of such a team at the
nursing facility involved).
(C) Prescription drug card.--The
Administrator shall carry out section 1807
(relating to the medicare prescription drug
discount card endorsement program).
(D) Noninterference.--In carrying out its
duties with respect to the provision of
qualified prescription drug coverage to
beneficiaries under this title, the
Administrator may not--
(i) require a particular formulary or
institute a price structure for the
reimbursement of covered outpatient
drugs;
(ii) interfere in any way with
negotiations between PDP sponsors and
Medicare+Choice organizations and drug
manufacturers, wholesalers, or other
suppliers of covered outpatient drugs;
and
(iii) otherwise interfere with the
competitive nature of providing such
coverage through such sponsors and
organizations.
(E) Annual reports.--Not later March 31 of
each year, the Administrator shall submit to
Congress and the President a report on the
administration of parts C and D during the
previous fiscal year.
(2) Staff.--
(A) In general.--The Administrator, with the
approval of the Secretary, may employ, without
regard to chapter 31 of title 5, United States
Code, other than sections 3110 and 3112, such
officers and employees as are necessary to
administer the activities to be carried out
through the Medicare Benefits Administration.
The Administrator shall employ staff with
appropriate and necessary expertise in
negotiating contracts in the private sector.
(B) Flexibility with respect to
compensation.--
(i) In general.--The staff of the
Medicare Benefits Administration shall,
subject to clause (ii), be paid without
regard to the provisions of chapter 51
(other than section 5101) and chapter
53 (other than section 5301) of such
title (relating to classification and
schedule pay rates).
(ii) Maximum rate.--In no case may
the rate of compensation determined
under clause (i) exceed the rate of
basic pay payable for level IV of the
Executive Schedule under section 5315
of title 5, United States Code.
(C) Limitation on full-time equivalent
staffing for current cms functions being
transferred.--The Administrator may not employ
under this paragraph a number of full-time
equivalent employees, to carry out functions
that were previously conducted by the Centers
for Medicare & Medicaid Services and that are
conducted by the Administrator by reason of
this section, that exceeds the number of such
full-time equivalent employees authorized to be
employed by the Centers for Medicare & Medicaid
Services to conduct such functions as of the
date of the enactment of this Act.
(3) Redelegation of certain functions of the centers
for medicare & medicaid services.--
(A) In general.--The Secretary, the
Administrator, and the Administrator of the
Centers for Medicare & Medicaid Services shall
establish an appropriate transition of
responsibility in order to redelegate the
administration of part C from the Secretary and
the Administrator of the Centers for Medicare &
Medicaid Services to the Administrator as is
appropriate to carry out the purposes of this
section.
(B) Transfer of data and information.--The
Secretary shall ensure that the Administrator
of the Centers for Medicare & Medicaid Services
transfers to the Administrator of the Medicare
Benefits Administration such information and
data in the possession of the Administrator of
the Centers for Medicare & Medicaid Services as
the Administrator of the Medicare Benefits
Administration requires to carry out the duties
described in paragraph (1).
(C) Construction.--Insofar as a
responsibility of the Secretary or the
Administrator of the Centers for Medicare &
Medicaid Services is redelegated to the
Administrator under this section, any reference
to the Secretary or the Administrator of the
Centers for Medicare & Medicaid Services in
this title or title XI with respect to such
responsibility is deemed to be a reference to
the Administrator.
(d) Office of Beneficiary Assistance.--
(1) Establishment.--The Secretary shall establish
within the Medicare Benefits Administration an Office
of Beneficiary Assistance to coordinate functions
relating to outreach and education of medicare
beneficiaries under this title, including the functions
described in paragraph (2). The Office shall be
separate operating division within the Administration.
(2) Dissemination of information on benefits and
appeals rights.--
(A) Dissemination of benefits information.--
The Office of Beneficiary Assistance shall
disseminate, directly or through contract, to
medicare beneficiaries, by mail, by posting on
the Internet site of the Medicare Benefits
Administration and through a toll-free
telephone number, information with respect to
the following:
(i) Benefits, and limitations on
payment (including cost-sharing, stop-
loss provisions, and formulary
restrictions) under parts C and D.
(ii) Benefits, and limitations on
payment under parts A and B, including
information on medicare supplemental
policies under section 1882.
Such information shall be presented in a manner
so that medicare beneficiaries may compare
benefits under parts A, B, D, and medicare
supplemental policies with benefits under
Medicare+Choice plans under part C.
(B) Dissemination of appeals rights
information.--The Office of Beneficiary
Assistance shall disseminate to medicare
beneficiaries in the manner provided under
subparagraph (A) a description of procedural
rights (including grievance and appeals
procedures) of beneficiaries under the original
medicare fee-for-service program under parts A
and B, the Medicare+Choice program under part
C, and the Voluntary Prescription Drug Benefit
Program under part D.
(e) Medicare Policy Advisory Board.--
(1) Establishment.--There is established within the
Medicare Benefits Administration the Medicare Policy
Advisory Board (in this section referred to the
``Board''). The Board shall advise, consult with, and
make recommendations to the Administrator of the
Medicare Benefits Administration with respect to the
administration of parts C and D, including the review
of payment policies under such parts.
(2) Reports.--
(A) In general.--With respect to matters of
the administration of parts C and D, the Board
shall submit to Congress and to the
Administrator of the Medicare Benefits
Administration such reports as the Board
determines appropriate. Each such report may
contain such recommendations as the Board
determines appropriate for legislative or
administrative changes to improve the
administration of such parts, including the
topics described in subparagraph (B). Each such
report shall be published in the Federal
Register.
(B) Topics described.--Reports required under
subparagraph (A) may include the following
topics:
(i) Fostering competition.--
Recommendations or proposals to
increase competition under parts C and
D for services furnished to medicare
beneficiaries.
(ii) Education and enrollment.--
Recommendations for the improvement to
efforts to provide medicare
beneficiaries information and education
on the program under this title, and
specifically parts C and D, and the
program for enrollment under the title.
(iii) Implementation of risk-
adjustment.--Evaluation of the
implementation under section
1853(a)(3)(C) of the risk adjustment
methodology to payment rates under that
section to Medicare+Choice
organizations offering Medicare+Choice
plans that accounts for variations in
per capita costs based on health status
and other demographic factors.
(iv) Disease management programs.--
Recommendations on the incorporation of
disease management programs under parts
C and D.
(v) Rural access.--Recommendations to
improve competition and access to plans
under parts C and D in rural areas.
(C) Maintaining independence of board.--The
Board shall directly submit to Congress reports
required under subparagraph (A). No officer or
agency of the United States may require the
Board to submit to any officer or agency of the
United States for approval, comments, or
review, prior to the submission to Congress of
such reports.
(3) Duty of administrator of medicare benefits
administration.--With respect to any report submitted
by the Board under paragraph (2)(A), not later than 90
days after the report is submitted, the Administrator
of the Medicare Benefits Administration shall submit to
Congress and the President an analysis of
recommendations made by the Board in such report. Each
such analysis shall be published in the Federal
Register.
(4) Membership.--
(A) Appointment.--Subject to the succeeding
provisions of this paragraph, the Board shall
consist of seven members to be appointed as
follows:
(i) Three members shall be appointed
by the President.
(ii) Two members shall be appointed
by the Speaker of the House of
Representatives, with the advice of the
chairmen and the ranking minority
members of the Committees on Ways and
Means and on Energy and Commerce of the
House of Representatives.
(iii) Two members shall be appointed
by the President pro tempore of the
Senate with the advice of the chairman
and the ranking minority member of the
Senate Committee on Finance.
(B) Qualifications.--The members shall be
chosen on the basis of their integrity,
impartiality, and good judgment, and shall be
individuals who are, by reason of their
education and experience in health care
benefits management, exceptionally qualified to
perform the duties of members of the Board.
(C) Prohibition on inclusion of federal
employees.--No officer or employee of the
United States may serve as a member of the
Board.
(5) Compensation.--Members of the Board shall
receive, for each day (including travel time) they are
engaged in the performance of the functions of the
board, compensation at rates not to exceed the daily
equivalent to the annual rate in effect for level IV of
the Executive Schedule under section 5315 of title 5,
United States Code.
(6) Terms of office.--
(A) In general.--The term of office of
members of the Board shall be 3 years.
(B) Terms of initial appointees.--As
designated by the President at the time of
appointment, of the members first appointed--
(i) one shall be appointed for a term
of 1 year;
(ii) three shall be appointed for
terms of 2 years; and
(iii) three shall be appointed for
terms of 3 years.
(C) Reappointments.--Any person appointed as
a member of the Board may not serve for more
than 8 years.
(D) Vacancy.--Any member appointed to fill a
vacancy occurring before the expiration of the
term for which the member's predecessor was
appointed shall be appointed only for the
remainder of that term. A member may serve
after the expiration of that member's term
until a successor has taken office. A vacancy
in the Board shall be filled in the manner in
which the original appointment was made.
(7) Chair.--The Chair of the Board shall be elected
by the members. The term of office of the Chair shall
be 3 years.
(8) Meetings.--The Board shall meet at the call of
the Chair, but in no event less than three times during
each fiscal year.
(9) Director and staff.--
(A) Appointment of director.--The Board shall
have a Director who shall be appointed by the
Chair.
(B) In general.--With the approval of the
Board, the Director may appoint, without regard
to chapter 31 of title 5, United States Code,
such additional personnel as the Director
considers appropriate.
(C) Flexibility with respect to
compensation.--
(i) In general.--The Director and
staff of the Board shall, subject to
clause (ii), be paid without regard to
the provisions of chapter 51 and
chapter 53 of such title (relating to
classification and schedule pay rates).
(ii) Maximum rate.--In no case may
the rate of compensation determined
under clause (i) exceed the rate of
basic pay payable for level IV of the
Executive Schedule under section 5315
of title 5, United States Code.
(D) Assistance from the administrator of the
medicare benefits administration.--The
Administrator of the Medicare Benefits
Administration shall make available to the
Board such information and other assistance as
it may require to carry out its functions.
(10) Contract authority.--The Board may contract with
and compensate government and private agencies or
persons to carry out its duties under this subsection,
without regard to section 3709 of the Revised Statutes
(41 U.S.C. 5).
(f) Funding.--There is authorized to be appropriated, in
appropriate part from the Federal Hospital Insurance Trust Fund
and from the Federal Supplementary Medical Insurance Trust Fund
(including the Medicare Prescription Drug Account), such sums
as are necessary to carry out this section.
MEDICARE BENEFICIARY OMBUDSMAN
Sec. 1809. (a) In General.--The Secretary shall appoint
within the Department of Health and Human Services a Medicare
Beneficiary Ombudsman who shall have expertise and experience
in the fields of health care and education of (and assistance
to) individuals entitled to benefits under this title.
(b) Duties.--The Medicare Beneficiary Ombudsman shall--
(1) receive complaints, grievances, and requests for
information submitted by individuals entitled to
benefits under part A or enrolled under part B, or
both, with respect to any aspect of the medicare
program;
(2) provide assistance with respect to complaints,
grievances, and requests referred to in paragraph (1),
including--
(A) assistance in collecting relevant
information for such individuals, to seek an
appeal of a decision or determination made by a
fiscal intermediary, carrier, Medicare+Choice
organization, or the Secretary; and
(B) assistance to such individuals with any
problems arising from disenrollment from a
Medicare+Choice plan under part C; and
(3) submit annual reports to Congress and the
Secretary that describe the activities of the Office
and that include such recommendations for improvement
in the administration of this title as the Ombudsman
determines appropriate.
The Ombudsman shall not serve as an advocate for any increases
in payments or new coverage of services, but may identify
issues and problems in payment or coverage policies.
(c) Working with Health Insurance Counseling Programs.--To
the extent possible, the Ombudsman shall work with health
insurance counseling programs (receiving funding under section
4360 of Omnibus Budget Reconciliation Act of 1990) to
facilitate the provision of information to individuals entitled
to benefits under part A or enrolled under part B, or both
regarding Medicare+Choice plans and changes to those plans.
Nothing in this subsection shall preclude further collaboration
between the Ombudsman and such programs.
Part A--Hospital Insurance Benefits for the Aged and Disabled
SCOPE OF BENEFITS
Sec. 1812. (a) The benefits provided to an individual by the
insurance program under this part shall consist of entitlement
to have payment made on his behalf or, in the case of payments
referred to in section 1814(d)(2) to him (subject to the
provisions of this part) for--
(1) * * *
* * * * * * *
(3) for individuals not enrolled in part B, home
health services, and for individuals so enrolled, post-
institutional home health services furnished during a
home health spell of illness for up to 100 visits
during such spell of illness; [and]
(4) in lieu of certain other benefits, hospice care
with respect to the individual during up to two periods
of 90 days each and an unlimited number of subsequent
periods of 60 days each with respect to which the
individual makes an election under subsection
(d)(1)[.]; and
(5) for individuals who are terminally ill, have not
made an election under subsection (d)(1), and have not
previously received services under this paragraph,
services that are furnished by a physician who is
either the medical director or an employee of a hospice
program and that consist of--
(A) an evaluation of the individual's need
for pain and symptom management;
(B) counseling the individual with respect to
end-of-life issues and care options; and
(C) advising the individual regarding
advanced care planning.
* * * * * * *
DEDUCTIBLES AND COINSURANCE
Sec. 1813. (a)(1) * * *
* * * * * * *
(5)(A)(i) Subject to clause (ii), the amount payable for home
health services furnished to the individual under this title
for each episode of care beginning in a year (beginning with
2003) shall be reduced by a copayment equal to the copayment
amount specified in subparagraph (B)(ii) such year.
(ii) The copayment under clause (i) shall not apply--
(I) in the case of an individual who has been
determined to be a qualified medicare beneficiary (as
defined in section 1905(p)(1)) or otherwise to be
entitled to medical assistance under section
1902(a)(10)(A) or 1902(a)(10)(C); and
(II) in the case of an episode of care which consists
of 4 or fewer visits.
(B)(i) The Secretary shall estimate, before the beginning of
each year (beginning with 2003), the national average payment
under this title per episode for home health services projected
for the year involved.
(ii) For each year the copayment amount under this clause is
equal to 1.5 percent of the national average payment estimated
for the year involved under clause (i). Any amount determined
under the preceding sentence which is not a multiple of $5
shall be rounded to the nearest multiple of $5.
(iii) There shall be no administrative or judicial review
under section 1869, 1878, or otherwise of the estimation of
average payment under clause (i).
* * * * * * *
CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES
Requirement of Requests and Certifications
Sec. 1814. (a) * * *
* * * * * * *
Payment for Hospice Care
(i)(1)(A) * * *
* * * * * * *
(D) With respect to hospice care furnished in a frontier area
on or after January 1, 2003, and before January 1, 2008, the
payment rates otherwise established for such care shall be
increased by 10 percent. For purposes of this subparagraph, the
term `frontier area' means a county in which the population
density is less than 7 persons per square mile.
* * * * * * *
(4) The amount paid to a hospice program with respect to the
services under section 1812(a)(5) for which payment may be made
under this part shall be equal to an amount equivalent to the
amount established for an office or other outpatient visit for
evaluation and management associated with presenting problems
of moderate severity under the fee schedule established under
section 1848(b), other than the portion of such amount
attributable to the practice expense component.
(5) In the case of hospice care provided by a hospice program
under arrangements under section 1861(dd)(5)(D) made by another
hospice program, the hospice program that made the arrangements
shall bill and be paid for the hospice care.
* * * * * * *
PAYMENT TO PROVIDERS OF SERVICES
Sec. 1815. (a) * * *
* * * * * * *
(e)(1) * * *
(2) The Secretary shall provide (or continue to provide) for
payment on a periodic interim payment basis (under the
standards established under section 405.454(j) of title 42,
Code of Federal Regulations, as in effect on October 1, 1986)
with respect to--
(A) * * *
* * * * * * *
(C) extended care services; [and]
(D) hospice care; and
(E) inpatient critical access hospital services;
if the provider of such services elects to receive, and
qualifies for, such payments.
[USE OF PUBLIC AGENCIES OR PRIVATE ORGANIZATIONS TO FACILITATE PAYMENT
TO PROVIDERS OF SERVICES]
PROVISIONS RELATING TO THE ADMINISTRATION OF PART A
Sec. 1816. [(a) If any group or association of providers of
services wishes to have payments under this part to such
providers made through a national, State, or other public or
private agency or organization and nominates such agency or
organization for this purpose, the Secretary is authorized to
enter into an agreement with such agency or organization
providing for the determination by such agency or organization
(subject to the provisions of section 1878 and to such review
by the Secretary as may be provided for by the agreement) of
the amount of the payments required pursuant to this part to be
made to such providers (and to providers assigned to such
agency or organization under subsection (e)), and for the
making of such payments by such agency or organization to such
providers (and to providers assigned to such agency or
organization under subsection (e)). Such agreement may also
include provision for the agency or organization to do all or
any part of the following: (1) to provide consultative services
to institutions or agencies to enable them to establish and
maintain fiscal records necessary for purposes of this part and
otherwise to qualify as hospitals, extended care facilities, or
home health agencies, and (2) with respect to the providers of
services which are to receive payments through it (A) to serve
as a center for, and communicate to providers, any information
or instructions furnished to it by the Secretary, and serve as
a channel of communication from providers to the Secretary; (B)
to make such audits of the records of providers as may be
necessary to insure that proper payments are made under this
part; and (C) to perform such other functions as are necessary
to carry out this subsection. As used in this title and part B
of title XI, the term ``fiscal intermediary'' means an agency
or organization with a contract under this section.
[(b) The Secretary shall not enter into or renew an agreement
with any agency or organization under this section unless--
[(1) he finds--
[(A) after applying the standards, criteria,
and procedures developed under subsection (f),
that to do so is consistent with the effective
and efficient administration of this part, and
[(B) that such agency or organization is
willing and able to assist the providers to
which payments are made through it under this
part in the application of safeguards against
unnecessary utilization of services furnished
by them to individuals entitled to hospital
insurance benefits under section 226, and the
agreement provides for such assistance; and
[(2) such agency or organization agrees--
[(A) to furnish to the Secretary such of the
information acquired by it in carrying out its
agreement under this section, and
[(B) to provide the Secretary with access to
all such data, information, and claims
processing operations,
as the Secretary may find necessary in performing his
functions under this part.]
(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.
(c)[(1) An agreement with any agency or organization under
this section may contain such terms and conditions as the
Secretary finds necessary or appropriate, may provide for
advances of funds to the agency or organization for the making
of payments by it under subsection (a), and shall provide for
payment of so much of the cost of administration of the agency
or organization as is determined by the Secretary to be
necessary and proper for carrying out the functions covered by
the agreement. The Secretary shall provide that in determining
the necessary and proper cost of administration, the Secretary
shall, with respect to each agreement, take into account the
amount that is reasonable and adequate to meet the costs which
must be incurred by an efficiently and economically operated
agency or organization in carrying out the terms of its
agreement. The Secretary shall cause to have published in the
Federal Register, by not later than September 1 before each
fiscal year, data, standards, and methodology to be used to
establish budgets for fiscal intermediaries under this section
for that fiscal year, and shall cause to be published in the
Federal Register for public comment, at least 90 days before
such data, standards, and methodology are published, the data,
standards, and methodology proposed to be used. The Secretary
may not require, as a condition of entering into or renewing an
agreement under this section or under section 1871, that a
fiscal intermediary match data obtained other than in its
activities under this part with data used in the administration
of this part for purposes of identifying situations in which
the provisions of section 1862(b) may apply.]
(2)(A) Each [agreement under this section] contract under
section 1874A that provides for making payments under this part
shall provide that payment shall be issued, mailed, or
otherwise transmitted with respect to not less than 95 percent
of all claims submitted under this title--
(i) * * *
* * * * * * *
(3)(A) Each [agreement under this section] contract under
section 1874A that provides for making payments under this part
shall provide that no payment shall be issued, mailed, or
otherwise transmitted with respect to any claim submitted under
this title within the applicable number of calendar days after
the date on which the claim is received.
* * * * * * *
[(d) If the nomination of an agency or organization as
provided in this section is made by a group or association of
providers of services, it shall not be binding on members of
the group or association which notify the Secretary of their
election to that effect. Any provider may, upon such notice as
may be specified in the agreement under this section with an
agency or organization, withdraw its nomination to receive
payments through such agency or organization. Any provider
which has withdrawn its nomination, and any provider which has
not made a nomination, may elect to receive payments from any
agency or organization which has entered into an agreement with
the Secretary under this section if the Secretary and such
agency or organization agree to it.
[(e)(1) Notwithstanding subsections (a) and (d), the
Secretary, after taking into consideration any preferences of
providers of services, may assign or reassign any provider of
services to any agency or organization which has entered into
an agreement with him under this section, if he determines,
after applying the standards, criteria, and procedures
developed under subsection (f), that such assignment or
reassignment would result in the more effective and efficient
administration of this part.
[(2) Notwithstanding subsections (a) and (d), the Secretary
may (subject to the provisions of paragraph (4)) designate a
national or regional agency or organization which has entered
into an agreement with him under this section to perform
functions under the agreement with respect to a class of
providers of services in the Nation or region (as the case may
be), if he determines, after applying the standards, criteria,
and procedures developed under subsection (f), that such
designation would result in more effective and efficient
administration of this part.
[(3)(A) Before the Secretary makes an assignment or
reassignment under paragraph (1) of a provider of services to
other than the agency or organization nominated by the
provider, he shall furnish (i) the provider and such agency or
organization with a full explanation of the reasons for his
determination as to the efficiency and effectiveness of the
agency or organization to perform the functions required under
this part with respect to the provider, and (ii) such agency or
organization with opportunity for a hearing, and such
determination shall be subject to judicial review in accordance
with chapter 7 of title 5, United States Code.
[(B) Before the Secretary makes a designation under paragraph
(2) with respect to a class of providers of services, he shall
furnish (i) such providers and the agencies and organizations
adversely affected by such designation with a full explanation
of the reasons for his determination as to the efficiency and
effectiveness of such agencies and organizations to perform the
functions required under this part with respect to such
providers, and (ii) the agencies and organizations adversely
affected by such designation with opportunity for a hearing,
and such determination shall be subject to judicial review in
accordance with chapter 7 of title 5, United States Code.
[(4) Notwithstanding subsections (a) and (d) and paragraphs
(1), (2), and (3) of this subsection, the Secretary shall
designate regional agencies or organizations which have entered
into an agreement with him under this section to perform
functions under such agreement with respect to home health
agencies (as defined in section 1861(o)) in the region, except
that in assigning such agencies to such designated regional
agencies or organizations the Secretary shall assign a home
health agency which is a subdivision of a hospital (and such
agency and hospital are affiliated or under common control)
only if, after applying such criteria relating to
administrative efficiency and effectiveness as he shall
promulgate, he determines that such assignment would result in
the more effective and efficient administration of this title.
By not later than July 1, 1987, the Secretary shall limit the
number of such regional agencies or organizations to not more
than ten.
[(5) Notwithstanding any other provision of this title, the
Secretary shall designate the agency or organization which has
entered into an agreement under this section to perform
functions under such an agreement with respect to each hospice
program, except that with respect to a hospice program which is
a subdivision of a provider of services (and such hospice
program and provider of services are under common control) due
regard shall be given to the agency or organization which
performs the functions under this section for the provider of
services.
[(f)(1) In order to determine whether the Secretary should
enter into, renew, or terminate an agreement under this section
with an agency or organization, whether the Secretary should
assign or reassign a provider of services to an agency or
organization, and whether the Secretary should designate an
agency or organization to perform services with respect to a
class of providers of services, the Secretary shall develop
standards, criteria, and procedures to evaluate such agency's
or organization's (A) overall performance of claims processing
(including the agency's or organization's success in recovering
payments made under this title for services for which payment
has been or could be made under a primary plan (as defined in
section 1862(b)(2)(A))) and other related functions required to
be performed by such an agency or organization under an
agreement entered into under this section, and (B) performance
of such functions with respect to specific providers of
services, and the Secretary shall establish standards and
criteria with respect to the efficient and effective
administration of this part. No agency or organization shall be
found under such standards and criteria not to be efficient or
effective or to be less efficient or effective solely on the
ground that the agency or organization serves only providers
located in a single State.
[(2) The standards and criteria established under paragraph
(1) shall include--
[(A) with respect to claims for services furnished
under this part by any provider of services other than
a hospital--
[(i) whether such agency or organization is
able to process 75 percent of reconsiderations
within 60 days (except in the case of fiscal
year 1989, 66 percent of reconsiderations) and
90 percent of reconsiderations within 90 days,
and
[(ii) the extent to which such agency's or
organization's determinations are reversed on
appeal; and
[(B) with respect to applications for an exemption
from or exception or adjustment to the target amount
applicable under section 1886(b) to a hospital that is
not a subsection (d) hospital (as defined in section
1886(d)(1)(B))--
[(i) if such agency or organization receives
a completed application, whether such agency or
organization is able to process such
application not later than 75 days after the
application is filed, and
[(ii) if such agency or organization receives
an incomplete application, whether such agency
or organization is able to return the
application with instructions on how to
complete the application not later than 60 days
after the application is filed.
[(g) An agreement with the Secretary under this section may
be terminated--
[(1) by the agency or organization which entered into
such agreement at such time and upon such notice to the
Secretary, to the public, and to the providers as may
be provided in regulations, or
[(2) by the Secretary at such time and upon such
notice to the agency or organization, to the providers
which have nominated it for purposes of this section,
and to the public, as may be provided in regulations,
but only if he finds, after applying the standards,
criteria, and procedures developed under subsection (f)
and after reasonable notice and opportunity for hearing
to the agency or organization, that (A) the agency or
organization has failed substantially to carry out the
agreement, or (B) the continuation of some or all of
the functions provided for in the agreement with the
agency or organization is disadvantageous or is
inconsistent with the efficient administration of this
part.
[(h) An agreement with an agency or organization under this
section may require any of its officers or employees certifying
payments or disbursing funds pursuant to the agreement, or
otherwise participating in carrying out the agreement, to give
surety bond to the United States in such amount as the
Secretary may deem appropriate.
[(i)(1) No individual designated pursuant to an agreement
under this section as a certifying officer shall, in the
absence of gross negligence or intent to defraud the United
States, be liable with respect to any payments certified by him
under this section.
[(2) No disbursing officer shall, in the absence of gross
negligence or intent to defraud the United States, be liable
with respect to any payment by him under this section if it was
based upon a voucher signed by a certifying officer designated
as provided in paragraph (1) of this subsection.
[(3) No such agency or organization shall be liable to the
United States for any payments referred to in paragraph (1) or
(2).]
(j) [An agreement with an agency or organization under this
section] A contract with a medicare administrative contractor
under section 1874A with respect to the administration of this
part shall require that, with respect to a claim for home
health services, extended care services, or post-hospital
extended care services submitted by a provider to [such agency
or organization] such medicare administrative contractor that
is denied, [such agency or organization] such medicare
administrative contractor--
(1) * * *
* * * * * * *
(k) [An agreement with an agency or organization under this
section] A contract with a medicare administrative contractor
under section 1874A with respect to the administration of this
part shall require that [such agency or organization] such
medicare administrative contractor submit an annual report to
the Secretary describing the steps taken to recover payments
made for items or services for which payment has been or could
be made under a primary plan (as defined in section
1862(b)(2)(A)).
[(l) No agency or organization may carry out (or receive
payment for carrying out) any activity pursuant to an agreement
under this section to the extent that the activity is carried
out pursuant to a contract under the Medicare Integrity Program
under section 1893.]
FEDERAL HOSPITAL INSURANCE TRUST FUND
Sec. 1817. (a) * * *
(b) With respect to the Trust Fund, there is hereby created a
body to be known as the Board of Trustees of the Trust Fund
(hereinafter in this section referred to as the ``Board of
Trustees'') composed of the Commissioner of Social Security,
the Secretary of the Treasury, the Secretary of Labor, [and the
Secretary of Health and Human Services, all ex officio,] the
Secretary of Health and Human Services, and the Administrator
of the Medicare Benefits Administration, all ex officio, and of
two members of the public (both of whom may not be from the
same political party), who shall be nominated by the President
for a term of four years and subject to confirmation by the
Senate. A member of the Board of Trustees serving as a member
of the public and nominated and confirmed to fill a vacancy
occurring during a term shall be nominated and confirmed only
for the remainder of such term. An individual nominated and
confirmed as a member of the public may serve in such position
after the expiration of such member's term until the earlier of
the time at which the member's successor takes office or the
time at which a report of the Board is first issued under
paragraph (2) after the expiration of the member's term. The
Secretary of the Treasury shall be the Managing Trustee of the
Board of Trustees (hereinafter in this section referred to as
the ``Managing Trustee''). The Administrator of the Health Care
Financing Administration shall serve as the Secretary of the
Board of Trustees. The Board of Trustees shall meet not less
frequently than once each calendar year. It shall be the duty
of the Board of Trustees to--
(1) * * *
* * * * * * *
MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM
Sec. 1820. (a) * * *
* * * * * * *
(c) Medicare Rural Hospital Flexibility Program Described.--
(1) * * *
(2) State designation of facilities.--
(A) * * *
(B) Criteria for designation as critical
access hospital.--A State may designate a
facility as a critical access hospital if the
facility--
(i) * * *
* * * * * * *
(iii) provides subject to paragraph
(3) not more than 15 (or, in the case
of a facility under an agreement
described in subsection (f), 25) acute
care inpatient beds (meeting such
standards as the Secretary may
establish) for providing inpatient care
for a period that does not exceed, as
determined on an annual, average basis,
96 hours per patient;
* * * * * * *
(3) Increase in maximum number of beds for hospitals
with strong seasonal census fluctuations.--
(A) In general.--In the case of a hospital
that demonstrates that it meets the standards
established under subparagraph (B), the bed
limitations otherwise applicable under
paragraph (2)(B)(iii) and subsection (f) shall
be increased by 5 beds.
(B) Standards.--The Secretary shall specify
standards for determining whether a critical
access hospital has sufficiently strong
seasonal variations in patient admissions to
justify the increase in bed limitation provided
under subparagraph (A).
* * * * * * *
(f) Permitting Maintenance of Swing Beds.--Nothing in this
section shall be construed to prohibit a State from designating
or the Secretary from certifying a facility as a critical
access hospital solely because, at the time the facility
applies to the State for designation as a critical access
hospital, there is in effect an agreement between the facility
and the Secretary under section 1883 under which the facility's
inpatient hospital facilities are used for the provision of
extended care services, so long as the total number of beds
that may be used at any time for the furnishing of either such
services or acute care inpatient services does not exceed 25
beds and the number of beds used at any time for acute care
inpatient services does not exceed 15 beds. For purposes of the
previous sentence, any bed of a unit of the facility that is
licensed as a distinct-part skilled nursing facility at the
time the facility applies to the State for designation as a
critical access hospital shall not be counted. The limitations
in numbers of beds under the first sentence are subject to
adjustment under subsection (c)(3).
* * * * * * *
(j) Authorization of Appropriations.--There are authorized to
be appropriated from the Federal Hospital Insurance Trust Fund
for making grants to all States under subsection (g),
$25,000,000 in each of the fiscal years 1998 through [2002]
2007.
* * * * * * *
Part B--Supplementary Medical Insurance Benefits for the Aged and
Disabled
* * * * * * *
PAYMENT OF BENEFITS
Sec. 1833. (a) Except as provided in section 1876, and
subject to the succeeding provisions of this section, there
shall be paid from the Federal Supplementary Medical Insurance
Trust Fund, in the case of each individual who is covered under
the insurance program established by this part and incurs
expenses for services with respect to which benefits are
payable under this part, amounts equal to--
(1) in the case of services described in section
1832(a)(1)--80 percent of the reasonable charges for
the services; except that (A) an organization which
provides medical and other health services (or arranges
for their availability) on a prepayment basis (and
either is sponsored by a union or employer, or does not
provide, or arrange for the provision of, any inpatient
hospital services) may elect to be paid 80 percent of
the reasonable cost of services for which payment may
be made under this part on behalf of individuals
enrolled in such organization in lieu of 80 percent of
the reasonable charges for such services if the
organization undertakes to charge such individuals no
more than 20 percent of such reasonable cost plus any
amounts payable by them as a result of subsection (b),
(B) with respect to items and services described in
section 1861(s)(10)(A), the amounts paid shall be 100
percent of the reasonable charges for such items and
services, (C) with respect to expenses incurred for
those physicians' services for which payment may be
made under this part that are described in section
1862(a)(4), the amounts paid shall be subject to such
limitations as may be prescribed by regulations, (D)
with respect to clinical diagnostic laboratory tests
for which payment is made under this part (i) on the
basis of a fee schedule under subsection (h)(1) or
section 1834(d)(1), the amount paid shall be equal to
80 percent (or 100 percent, in the case of such tests
for which payment is made on an assignment-related
basis) of the lesser of the amount determined under
such fee schedule, the limitation amount for that test
determined under subsection (h)(4)(B), or the amount of
the charges billed for the tests, or (ii) on the basis
of a negotiated rate established under subsection
(h)(6), the amount paid shall be equal to 100 percent
of such negotiated rate, (E) with respect to services
furnished to individuals who have been determined to
have end stage renal disease, the amounts paid shall be
determined subject to the provisions of section 1881,
(F) with respect to clinical social worker services
under section 1861(s)(2)(N), the amounts paid shall be
80 percent of the lesser of (i) the actual charge for
the services or (ii) 75 percent of the amount
determined for payment of a psychologist under clause
(L), (H) with respect to services of a certified
registered nurse anesthetist under section 1861(s)(11),
the amounts paid shall be 80 percent of the least of
the actual charge, the prevailing charge that would be
recognized (or, for services furnished on or after
January 1, 1992, the fee schedule amount provided under
section 1848) if the services had been performed by an
anesthesiologist, or the fee schedule for such services
established by the Secretary in accordance with
subsection (l), (I) with respect to covered items
(described in section 1834(a)(13)), the amounts paid
shall be the amounts described in section 1834(a)(1),
and (J) with respect to expenses incurred for
radiologist services (as defined in section
1834(b)(6)), subject to section 1848, the amounts paid
shall be 80 percent of the lesser of the actual charge
for the services or the amount provided under the fee
schedule established under section 1834(b), (K) with
respect to certified nurse-midwife services under
section 1861(s)(2)(L), the amounts paid shall be 80
percent of the lesser of the actual charge for the
services or the amount determined by a fee schedule
established by the Secretary for the purposes of this
subparagraph (but in no event shall such fee schedule
exceed 65 percent of the prevailing charge that would
be allowed for the same service performed by a
physician, or, for services furnished on or after
January 1, 1992, 65 percent of the fee schedule amount
provided under section 1848 for the same service
performed by a physician), (L) with respect to
qualified psychologist services under section
1861(s)(2)(M), the amounts paid shall be 80 percent of
the lesser of the actual charge for the services or the
amount determined by a fee schedule established by the
Secretary for the purposes of this subparagraph, (M)
with respect to prosthetic devices and orthotics and
prosthetics (as defined in section 1834(h)(4)), the
amounts paid shall be the amounts described in section
1834(h)(1), (N) with respect to expenses incurred for
physicians' services (as defined in section
1848(j)(3)), the amounts paid shall be 80 percent (or
100 percent in the case of an initial preventive
physical examination, as defined in section 1861(ww))
of the payment basis determined under section
1848(a)(1), (O) with respect to services described in
section 1861(s)(2)(K) (relating to services furnished
by physician assistants, nurse practitioners, or clinic
nurse specialists), the amounts paid shall be equal to
80 percent (or 100 percent in the case of an initial
preventive physical examination, as defined in section
1861(ww)) of (i) the lesser of the actual charge or 85
percent of the fee schedule amount provided under
section 1848, or (ii) in the case of services as an
assistant at surgery, the lesser of the actual charge
or 85 percent of the amount that would otherwise be
recognized if performed by a physician who is serving
as an assistant at surgery, (P) with respect to
surgical dressings, the amounts paid shall be the
amounts determined under section 1834(i), (Q) with
respect to items or services for which fee schedules
are established pursuant to section 1842(s), the
amounts paid shall be 80 percent of the lesser of the
actual charge or the fee schedule established in such
section, (R) with respect to ambulance services, (i)
the amounts paid shall be 80 percent of the lesser of
the actual charge for the services or the amount
determined by a fee schedule established by the
Secretary under section 1834(l) and (ii) with respect
to ambulance services described in section 1834(l)(8),
the amounts paid shall be the amounts determined under
section 1834(g) for outpatient critical access hospital
services, (S) with respect to drugs and biologicals not
paid on a cost or prospective payment basis as
otherwise provided in this part (other than items and
services described in subparagraph (B)), the amounts
paid shall be 80 percent of the lesser of the actual
charge or the payment amount established in section
1842(o), (T) with respect to medical nutrition therapy
services (as defined in section 1861(vv)), the amount
paid shall be 80 percent of the lesser of the actual
charge for the services or 85 percent of the amount
determined under the fee schedule established under
section 1848(b) for the same services if furnished by a
physician, and (U) with respect to facility fees
described in section 1834(m)(2)(B), the amounts paid
shall be 80 percent of the lesser of the actual charge
or the amounts specified in such section;
(2) in the case of services described in section
1832(a)(2) (except those services described in
subparagraphs (C), (D), (E), (F), (G), (H), and (I) of
such section and unless otherwise specified in section
1881)--
(A) with respect to home health services
(other than a covered osteoporosis drug) (as
defined in section 1861(kk)), the amount
determined under the prospective payment system
under section 1895 less the copayment amount
applicable under section 1813(a)(5);
(b) Before applying subsection (a) with respect to expenses
incurred by an individual during any calendar year, the total
amount of the expenses incurred by such individual during such
year (which would, except for this subsection, constitute
incurred expenses from which benefits payable under subsection
(a) are determinable) shall be reduced by a deductible of $75
for calendar years before 1991 and $100 for 1991 and subsequent
years; except that (1) such total amount shall not include
expenses incurred for items and services described in section
1861(s)(10)(A), (2) such deductible shall not apply with
respect to home health services (other than a covered
osteoporosis drug (as defined in section 1861(kk))), (3) such
deductible shall not apply with respect to clinical diagnostic
laboratory tests for which payment is made under this part (A)
under subsection (a)(1)(D)(i) or (a)(2)(D)(i) on an assignment-
related basis, or to a provider having an agreement under
section 1866, or (B) on the basis of a negotiated rate
determined under subsection (h)(6), (4) such deductible shall
not apply to Federally qualified health center services, (5)
such deductible shall not apply with respect to screening
mammography (as described in section 1861(jj)), [and] (6) such
deductible shall not apply with respect to screening pap smear
and screening pelvic exam (as described in section 1861(nn)),
and (7) such deductible shall not apply with respect to an
initial preventive physical examination (as defined in section
1861(ww)). The total amount of the expenses incurred by an
individual as determined under the preceding sentence shall,
after the reduction specified in such sentence, be further
reduced by an amount equal to the expenses incurred for the
first three pints of whole blood (or equivalent quantities of
packed red blood cells, as defined under regulations) furnished
to the individual during the calendar year, except that such
deductible for such blood shall in accordance with regulations
be appropriately reduced to the extent that there has been a
replacement of such blood (or equivalent quantities of packed
red blood cells, as so defined); and for such purposes blood
(or equivalent quantities of packed red blood cells, as so
defined) furnished such individual shall be deemed replaced
when the institution or other person furnishing such blood (or
such equivalent quantities of packed red blood cells, as so
defined) is given one pint of blood for each pint of blood (or
equivalent quantities of packed red blood cells, as so defined)
furnished such individual with respect to which a deduction is
made under this sentence. The deductible under the previous
sentence for blood or blood cells furnished an individual in a
year shall be reduced to the extent that a deductible has been
imposed under section 1813(a)(2) to blood or blood cells
furnished the individual in the year.
(g)(1) * * *
* * * * * * *
(4) This subsection shall not apply to expenses incurred with
respect to services furnished during 2000, 2001, [and 2002]
2002, 2003, and 2004.
(h)(1) * * *
* * * * * * *
(8)(A) The Secretary shall establish by regulation procedures
for determining the basis for, and amount of, payment under
this subsection for any clinical diagnostic laboratory test
with respect to which a new or substantially revised HCPCS code
is assigned on or after January 1, 2004 (in this paragraph
referred to as `new tests').
(B) Determinations under subparagraph (A) shall be made only
after the Secretary--
(i) makes available to the public (through an
Internet site and other appropriate mechanisms) a list
that includes any such test for which establishment of
a payment amount under this subsection is being
considered for a year;
(ii) on the same day such list is made available,
causes to have published in the Federal Register notice
of a meeting to receive comments and recommendations
(and data on which recommendations are based) from the
public on the appropriate basis under this subsection
for establishing payment amounts for the tests on such
list;
(iii) not less than 30 days after publication of such
notice convenes a meeting, that includes
representatives of officials of the Centers for
Medicare & Medicaid Services involved in determining
payment amounts, to receive such comments and
recommendations (and data on which the recommendations
are based);
(iv) taking into account the comments and
recommendations (and accompanying data) received at
such meeting, develops and makes available to the
public (through an Internet site and other appropriate
mechanisms) a list of proposed determinations with
respect to the appropriate basis for establishing a
payment amount under this subsection for each such
code, together with an explanation of the reasons for
each such determination, the data on which the
determinations are based, and a request for public
written comments on the proposed determination; and
(v) taking into account the comments received during
the public comment period, develops and makes available
to the public (through an Internet site and other
appropriate mechanisms) a list of final determinations
of the payment amounts for such tests under this
subsection, together with the rationale for each such
determination, the data on which the determinations are
based, and responses to comments and suggestions
received from the public.
(C) Under the procedures established pursuant to subparagraph
(A), the Secretary shall--
(i) set forth the criteria for making determinations
under subparagraph (A); and
(ii) make available to the public the data (other
than proprietary data) considered in making such
determinations.
(D) The Secretary may convene such further public meetings to
receive public comments on payment amounts for new tests under
this subsection as the Secretary deems appropriate.
(E) For purposes of this paragraph:
(i) The term ``HCPCS'' refers to the Health Care
Procedure Coding System.
(ii) A code shall be considered to be ``substantially
revised'' if there is a substantive change to the
definition of the test or procedure to which the code
applies (such as a new analyte or a new methodology for
measuring an existing analyte-specific test).
* * * * * * *
(t) Prospective Payment System for Hospital Outpatient
Department Services.--
(1) Amount of payment.--
(A) * * *
(B) Definition of covered opd services.--For
purposes of this subsection, the term ``covered
OPD services''--
(i) * * *
* * * * * * *
(iv) does not include any therapy
services described in subsection (a)(8)
or ambulance services, for which
payment is made under a fee schedule
described in section 1834(k) or section
1834(l) and does not include screening
mammography (as defined in section
1861(jj)) and unilateral and bilateral
diagnostic mammography.
* * * * * * *
(6) Transitional pass-through for additional costs of
innovative medical devices, drugs, and biologicals.--
(A) In general.--The Secretary shall provide
for an additional payment under this paragraph
for any of the following that are provided as
part of a covered OPD service (or group of
services):
(i) * * *
(ii) Current cancer therapy drugs and
biologicals and brachytherapy.--A drug
or biological that is used in cancer
therapy, including (but not limited to)
a chemotherapeutic agent, an
antiemetic, a hematopoietic growth
factor, a colony stimulating factor, a
biological response modifier, a
bisphosphonate, and a device of
brachytherapy [or temperature monitored
cryoablation], if payment for such
drug, biological, or device as an
outpatient hospital service under this
part was being made on such first date.
* * * * * * *
(8) Copayment amount.--
(A) * * *
* * * * * * *
(C) Limitation on copayment amount.--
(i) * * *
(ii) To specified percentage.--The
Secretary shall reduce the national
unadjusted copayment amount for a
covered OPD service (or group of such
services) furnished in a year in a
manner so that the effective copayment
rate (determined on a national
unadjusted basis) for that service in
the year does not exceed the following
percentage:
(I) * * *
* * * * * * *
[(III) For procedures
performed in 2004, 50 percent.
[(IV) For procedures
performed in 2005, 45 percent.
[(V) For procedures performed
in 2006 and thereafter, 40
percent.]
(III) For procedures
performed in 2004, 45 percent.
(IV) For procedures performed
in 2005, 40 percent.
(V) For procedures performed
in 2006, 2007, 2008 and 2009,
35 percent.
(VI) For procedures performed
in 2010, 30 percent.
(VII) For procedures
performed in 2011, 25 percent.
(VIII) For procedures
performed in 2012 and
thereafter, 20 percent.
* * * * * * *
SPECIAL PAYMENT RULES FOR PARTICULAR ITEMS AND SERVICES
Sec. 1834. (a) * * *
* * * * * * *
(g) Payment for Outpatient Critical Access Hospital
Services.--
(1) * * *
(2) Election of cost-based hospital outpatient
service payment plus fee schedule for professional
services.--A critical access hospital may elect to be
paid for outpatient critical access hospital services
amounts equal to the sum of the following, less the
amount that such hospital may charge as described in
section 1866(a)(2)(A):
(A) * * *
(B) Fee schedule for professional services.--
With respect to professional services otherwise
included within outpatient critical access
hospital services, 115 percent of such amounts
as would otherwise be paid under this part if
such services were not included in outpatient
critical access hospital services.
The Secretary may not require, as a condition for
applying subparagraph (B) with respect to a critical
access hospital, that each physician providing
professional services in the hospital must assign
billing rights with respect to such services, except
that such subparagraph shall not apply to those
physicians who have not assigned such billing rights.
* * * * * * *
(l) Establishment of Fee Schedule for Ambulance Services.--
(1) * * *
(2) Considerations.--In establishing such fee
schedule, the Secretary shall--
(A) * * *
* * * * * * *
(E) phase in the application of the payment
rates under the fee schedule in an efficient
and fair manner consistent with paragraph (10),
except that such phase-in shall provide for
full payment of any national mileage rate for
ambulance services provided by suppliers that
are paid by carriers in any of the 50 States
where payment by a carrier for such services
for all such suppliers in such State did not,
prior to the implementation of the fee
schedule, include a separate amount for all
mileage within the county from which the
beneficiary is transported.
* * * * * * *
[(8)] (9) Transitional assistance for rural
providers.--In the case of ground ambulance services
furnished on or after July 1, 2001, and before January
1, 2004, for which the transportation originates in a
rural area (as defined in section 1886(d)(2)(D)) or in
a rural census tract of a metropolitan statistical area
(as determined under the most recent modification of
the Goldsmith Modification, originally published in the
Federal Register on February 27, 1992 (57 Fed. Reg.
6725)), the fee schedule established under this
subsection shall provide that, with respect to the
payment rate for mileage for a trip above 17 miles, and
up to 50 miles, the rate otherwise established shall be
increased by not less than \1/2\ of the additional
payment per mile established for the first 17 miles of
such a trip originating in a rural area.
(10) Phase-in providing floor using blend of fee
schedule and regional fee schedules.--In carrying out
the phase-in under paragraph (2)(E) for each level of
service furnished in a year before January 1, 2007, the
portion of the payment amount that is based on the fee
schedule shall not be less than the following blended
rate of the fee schedule under paragraph (1) and of a
regional fee schedule for the region involved:
(A) For 2003, the blended rate shall be based
20 percent on the fee schedule under paragraph
(1) and 80 percent on the regional fee
schedule.
(B) For 2004, the blended rate shall be based
40 percent on the fee schedule under paragraph
(1) and 60 percent on the regional fee
schedule.
(C) For 2005, the blended rate shall be based
60 percent on the fee schedule under paragraph
(1) and 40 percent on the regional fee
schedule.
(D) For 2006, the blended rate shall be based
80 percent on the fee schedule under paragraph
(1) and 20 percent on the regional fee
schedule.
For purposes of this paragraph, the Secretary shall
establish a regional fee schedule for each of the 9
Census divisions using the methodology (used in
establishing the fee schedule under paragraph (1)) to
calculate a regional conversion factor and a regional
mileage payment rate and using the same payment
adjustments and the same relative value units as used
in the fee schedule under such paragraph.
(11) Adjustment in payment for certain long trips.--
In the case of ground ambulance services furnished on
or after January 1, 2003, and before January 1, 2008,
regardless of where the transportation originates, the
fee schedule established under this subsection shall
provide that, with respect to the payment rate for
mileage for a trip above 50 miles the per mile rate
otherwise established shall be increased by \1/4\ of
the payment per mile otherwise applicable to such
miles.
* * * * * * *
AMOUNTS OF PREMIUMS
Sec. 1839. (a)(1) * * *
(2) The monthly premium of each individual enrolled under
this part for each month after December 1983 shall be the
amount determined under paragraph (3), adjusted as required in
accordance with subsections (b), (c), and (f )[, and to reflect
80 percent of any reduction elected under section 1854(f
)(1)(E).].
* * * * * * *
(b) In the case of an individual whose coverage period began
pursuant to an enrollment after his initial enrollment period
(determined pursuant to subsection (c) or (d) of section 1837)
and not pursuant to a special enrollment period under section
1837(i)(4), the monthly premium determined under subsection (a)
shall be increased by 10 percent of the monthly premium so
determined for each full 12 months (in the same continuous
period of eligibility) in which he could have been but was not
enrolled. For purposes of the preceding sentence, there shall
be taken into account (1) the months which elapsed between the
close of his initial enrollment period and the close of the
enrollment period in which he enrolled, plus (in the case of an
individual who reenrolls) (2) the months which elapsed between
the date of termination of a previous coverage period and the
close of the enrollment period in which he reenrolled, but
there shall not be taken into account months for which the
individual can demonstrate that the individual was enrolled in
a group health plan described in section 1862(b)(1)(A)(v) by
reason of the individual's (or the individual's spouse's)
current employment or months during which the individual has
not attained the age of 65 and for which the individual can
demonstrate that the individual was enrolled in a large group
health plan as an active individual (as those terms are defined
in section 1862(b)(1)(B)(iii)). Any increase in an individual's
monthly premium under the first sentence of this subsection
with respect to a particular continuous period of eligibility
shall not be applicable with respect to any other continuous
period of eligibility which such individual may have. No
increase in the premium shall be effected for a month in the
case of an individual who is 65 years of age or older, who
enrolls under this part during 2001, 2002, or 2003, and who
demonstrates to the Secretary before December 31, 2003, that
the individual is a covered beneficiary (as defined in section
1072(5) of title 10, United States Code). The Secretary of
Health and Human Services shall consult with the Secretary of
Defense in identifying individuals described in the previous
sentence.
* * * * * * *
(h)(1) In the case of an individual who resides in a
competitive-demonstration area designated under section
1851(k)(1) and who is not enrolled in a Medicare+Choice plan
under part C, the monthly premium otherwise applied under this
part (determined without regard to subsections (b) and (f) or
any adjustment under this subsection) shall be adjusted as
follows: If the fee-for-service area-specific non-drug bid (as
defined in section 1853(k)(6)) for the Medicare+Choice area in
which the individual resides for a month--
(A) does not exceed the choice non-drug benchmark (as
determined under section 1853(k)(2)) for such area, the
amount of the premium for the individual for the month
shall be reduced by an amount equal to 75 percent of
the amount by which such benchmark exceeds such fee-
for-service bid; or
(B) exceeds such choice non-drug benchmark, the
amount of the premium for the individual for the month
shall be adjusted to ensure that--
(i) the sum of the amount of the adjusted
premium and the choice non-drug benchmark for
the area, is equal to
(ii) the sum of the unadjusted premium plus
amount of the fee-for-service area-specific
non-drug bid for the area.
(2) Nothing in this subsection shall be construed as
preventing a reduction under paragraph (1)(A) in the premium
otherwise applicable under this part to zero or from requiring
the provision of a rebate to the extent such premium would
otherwise be required to be less than zero.
(3) The adjustment in the premium under this subsection shall
be effected in such manner as the Medicare Benefits
Administrator determines appropriate.
(4) In order to carry out this subsection (insofar as it is
effected through the manner of collection of premiums under
1840(a)), the Medicare Benefits Administrator shall transmit to
the Commissioner of Social Security--
(A) at the beginning of each year, the name, social
security account number, and the amount of the
adjustment (if any) under this subsection for each
individual enrolled under this part for each month
during the year; and
(B) periodically throughout the year, information to
update the information previously transmitted under
this paragraph for the year.
* * * * * * *
FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND
Sec. 1841. (a) * * *
(b) With respect to the Trust Fund, there is hereby created a
body to be known as the Board of Trustees of the Trust Fund
(hereinafter in this section referred to as the ``Board of
Trustees'') composed of the Commissioner of Social Security,
Secretary of the Treasury, the Secretary of Labor, [and the
Secretary of Health and Human Services, all ex officio,] the
Secretary of Health and Human Services, and the Administrator
of the Medicare Benefits Administration, all ex officio, and of
two members of the public (both of whom may not be from the
same political party), who shall be nominated by the President
for a term of four years and subject to confirmation by the
Senate. A member of the Board of Trustees serving as a member
of the public and nominated and confirmed to fill a vacancy
occurring during a term shall be nominated and confirmed only
for the remainder of such term. An individual nominated and
confirmed as a member of the public may serve in such position
after the expiration of such member's term until the earlier of
the time at which the member's successor takes office or the
time at which a report of the Board is first issued under
paragraph (2) after the expiration of the member's term. The
Secretary of the Treasury shall be the Managing Trustee of the
Board of Trustees (hereinafter in this section referred to as
the ``Managing Trustee''). The Administrator of the Health Care
Financing Administration shall serve as the Secretary of the
Board of Trustees. The Board of Trustees shall meet not less
frequently than once each calendar year. It shall be the duty
of the Board of Trustees to--
(1) * * *
* * * * * * *
[USE OF CARRIERS FOR ADMINISTRATION OF BENEFITS]
PROVISIONS RELATING TO THE ADMINISTRATION OF PART B
Sec. 1842. [(a) In order to provide for the administration of
the benefits under this part with maximum efficiency and
convenience for individuals entitled to benefits under this
part and for providers of services and other persons furnishing
services to such individuals, and with a view to furthering
coordination of the administration of the benefits under part A
and under this part, the Secretary is authorized to enter into
contracts with carriers, including carriers with which
agreements under section 1816 are in effect, which will perform
some or all of the following functions (or, to the extent
provided in such contracts, will secure performance thereof by
other organizations); and, with respect to any of the following
functions which involve payments for physicians' services on a
reasonable charge basis, the Secretary shall to the extent
possible enter into such contracts:
[(1)(A) make determinations of the rates and amounts
of payments required pursuant to this part to be made
to providers of services and other persons on a
reasonable cost or reasonable charge basis (as may be
applicable);
[(B) receive, disburse, and account for funds in
making such payments; and
[(C) make such audits of the records of providers of
services as may be necessary to assure that proper
payments are made under this part;
[(2)(A) determine compliance with the requirements of
section 1861(k) as to utilization review; and
[(B) assist providers of services and other persons
who furnish services for which payment may be made
under this part in the development of procedures
relating to utilization practices, make studies of the
effectiveness of such procedures and methods for their
improvement, assist in the application of safeguards
against unnecessary utilization of services furnished
by providers of services and other persons to
individuals entitled to benefits under this part, and
provide procedures for and assist in arranging, where
necessary, the establishment of groups outside
hospitals (meeting the requirements of section
1861(k)(2)) to make reviews of utilization;
[(3) serve as a channel of communication of
information relating to the administration of this
part; and
[(4) otherwise assist, in such manner as the contract
may provide, in discharging administrative duties
necessary to carry out the purposes of this part.]
(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.
(b)[(1) Contracts with carriers under subsection (a) may be
entered into without regard to section 3709 of the Revised
Statutes or any other provision of law requiring competitive
bidding.]
(2)[(A) No such contract shall be entered into with any
carrier unless the Secretary finds that such carrier will
perform its obligations under the contract efficiently and
effectively and will meet such requirements as to financial
responsibility, legal authority, and other matters as he finds
pertinent. The Secretary shall publish in the Federal Register
standards and criteria for the efficient and effective
performance of contract obligations under this section, and
opportunity shall be provided for public comment prior to
implementation. In establishing such standards and criteria,
the Secretary shall provide a system to measure a carrier's
performance of responsibilities described in paragraph (3)(H),
subsection (h), and section 1845(e)(2). The Secretary may not
require, as a condition of entering into or renewing a contract
under this section or under section 1871, that a carrier match
data obtained other than in its activities under this part with
data used in the administration of this part for purposes of
identifying situations in which section 1862(b) may apply.
[(B) The Secretary shall establish standards for evaluating
carriers' performance of reviews of initial carrier
determinations and of fair hearings under paragraph (3)(C),
under which a carrier is expected--
[(i) to complete such reviews, within 45 days after
the date of a request by an individual enrolled under
this part for such a review, in 95 percent of such
requests, and
[(ii) to make a final determination, within 120 days
after the date of receipt of a request by an individual
enrolled under this part for a fair hearing under
paragraph (3)(C), in 90 percent of such cases.]
(C) In the case of residents of nursing facilities who
receive services described in clause (i) or (ii) of section
1861(s)(2)(K) performed by a member of a team, the Secretary
shall instruct [carriers] medicare administrative contractors
to develop mechanisms which permit routine payment under this
part for up to 1.5 visits per month per resident. In the
previous sentence, the term ``team'' refers to a physician and
includes a physician assistant acting under the supervision of
the physician or a nurse practitioner working in collaboration
with that physician, or both.
[(D) In addition to any other standards and criteria
established by the Secretary for evaluating carrier performance
under this paragraph relating to avoiding erroneous payments,
the carrier shall be subject to standards and criteria relating
to the carrier's success in recovering payments made under this
part for items or services for which payment has been or could
be made under a primary plan (as defined in section
1862(b)(2)(A)).
[(E) With respect to the payment of claims for home health
services under this part that, but for the amendments made by
section 4611 of the Balanced Budget Act of 1997, would be
payable under part A instead of under this part, the Secretary
shall continue administration of such claims through fiscal
intermediaries under section 1816.]
(3) [Each such contract shall provide that the carrier] The
Secretary--
(A) [will] shall take such action as may be necessary
to assure that, where payment under this part for a
service is on a cost basis, the cost is reasonable cost
(as determined under section 1861(v));
(B) [will] shall take such action as may be necessary
to assure that, where payment under this part for a
service is on a charge basis, such charge will be
reasonable and not higher than the charge applicable,
for a comparable service and under comparable
circumstances, [to the policyholders and subscribers of
the carrier] to the policyholders and subscribers of
the medicare administrative contractor, and such
payment will (except as otherwise provided in section
1870(f)) be made--
(i) * * *
* * * * * * *
[(C) will establish and maintain procedures pursuant
to which an individual enrolled under this part will be
granted an opportunity for a fair hearing by the
carrier, in any case where the amount in controversy is
at least $100, but less than $500, when requests for
payment under this part with respect to services
furnished him are denied or are not acted upon with
reasonable promptness or when the amount of such
payment is in controversy;
[(D) will furnish to the Secretary such timely
information and reports as he may find necessary in
performing his functions under this part;
[(E) will maintain such records and afford such
access thereto as the Secretary finds necessary to
assure the correctness and verification of the
information and reports under subparagraph (D) and
otherwise to carry out the purposes of this part;]
(F) [will] shall take such action as may be necessary
to assure that where payment under this part for a
service rendered is on a charge basis, such payment
shall be determined on the basis of the charge that is
determined in accordance with this section on the basis
of customary and prevailing charge levels in effect at
the time the service was rendered or, in the case of
services rendered more than 12 months before the year
in which the bill is submitted or request for payment
is made, on the basis of such levels in effect for the
12-month period preceding such year;
(G) [will] shall, for a service that is furnished
with respect to an individual enrolled under this part,
that is not paid on an assignment-related basis, and
that is subject to a limiting charge under section
1848(g)--
(i) * * *
* * * * * * *
(H) [if it makes determinations or payments with
respect to physicians' services, will] shall
implement--
(i) programs to recruit and retain physicians
as participating physicians in the area served
by the [carrier] medicare administrative
contractor, including educational and outreach
activities and the use of professional
relations personnel to handle billing and other
problems relating to payment of claims of
participating physicians; and
* * * * * * *
[(I) will submit annual reports to the Secretary
describing the steps taken to recover payments made
under this part for items or services for which payment
has been or could be made under a primary plan (as
defined in section 1862(b)(2)(A)); and]
(L) [will] shall monitor and profile physicians'
billing patterns within each area or locality and
provide comparative data to physicians whose
utilization patterns vary significantly from other
physicians in the same payment area or locality[;].
[and shall contain such other terms and conditions not
inconsistent with this section as the Secretary may find
necessary or appropriate.] In determining the reasonable charge
for services for purposes of this paragraph, there shall be
taken into consideration the customary charges for similar
services generally made by the physician or other person
furnishing such services, as well as the prevailing charges in
the locality for similar services. No charge may be determined
to be reasonable in the case of bills submitted or requests for
payment made under this part after December 31, 1970, if it
exceeds the higher of (i) the prevailing charge recognized by
the carrier and found acceptable by the Secretary for similar
services in the same locality in administering this part on
December 31, 1970, or (ii) the prevailing charge level that, on
the basis of statistical data and methodology acceptable to the
Secretary, would cover 75 percent of the customary charges made
for similar services in the same locality during the 12-month
period ending on the June 30 last preceding the start of the
calendar year in which the service is rendered. In the case of
physicians' services the prevailing charge level determined for
purposes of clause (ii) of the preceding sentence for any
twelve-month period (beginning after June 30, 1973) specified
in clause (ii) of such sentence may not exceed (in the
aggregate) the level determined under such clause for the
fiscal year ending June 30, 1973, or (with respect to
physicians' services furnished in a year after 1987) the level
determined under this sentence (or under any other provision of
law affecting the prevailing charge level) for the previous
year except to the extent that the Secretary finds, on the
basis of appropriate economic index data, that such higher
level is justified by year-to-year economic changes. With
respect to power-operated wheelchairs for which payment may be
made in accordance with section 1861(s)(6), charges determined
to be reasonable may not exceed the lowest charge at which
power-operated wheelchairs are available in the locality. In
the case of medical services, supplies, and equipment
(including equipment servicing) that, in the judgment of the
Secretary, do not generally vary significantly in quality from
one supplier to another, the charges incurred after December
31, 1972, determined to be reasonable may not exceed the lowest
charge levels at which such services, supplies, and equipment
are widely and consistently available in a locality except to
the extent and under the circumstances specified by the
Secretary. The requirement in subparagraph (B) that a bill be
submitted or request for payment be made by the close of the
following calendar year shall not apply if (I) failure to
submit the bill or request the payment by the close of such
year is due to the error or misrepresentation of an officer,
employee, fiscal intermediary, carrier, medicare administrative
contractor, or agent of the Department of Health and Human
Services performing functions under this title and acting
within the scope of his or its authority, and (II) the bill is
submitted or the payment is requested promptly after such error
or misrepresentation is eliminated or corrected.
Notwithstanding the provisions of the third and fourth
sentences preceding this sentence, the prevailing charge level
in the case of a physician service in a particular locality
determined pursuant to such third and fourth sentences for any
calendar year after 1974 shall, if lower than the prevailing
charge level for the fiscal year ending June 30, 1975, in the
case of a similar physician service in the same locality by
reason of the application of economic index data, be raised to
such prevailing charge level for the fiscal year ending June
30, 1975, and shall remain at such prevailing charge level
until the prevailing charge for a year (as adjusted by economic
index data) equals or exceeds such prevailing charge level. The
amount of any charges for outpatient services which shall be
considered reasonable shall be subject to the limitations
established by regulations issued by the Secretary pursuant to
section 1861(v)(1)(K), and in determining the reasonable charge
for such services, the Secretary may limit such reasonable
charge to a percentage of the amount of the prevailing charge
for similar services furnished in a physician's office, taking
into account the extent to which overhead costs associated with
such outpatient services have been included in the reasonable
cost or charge of the facility.
* * * * * * *
[(5) Each contract under this section shall be for a term of
at least one year, and may be made automatically renewable from
term to term in the absence of notice by either party of
intention to terminate at the end of the current term; except
that the Secretary may terminate any such contract at any time
(after such reasonable notice and opportunity for hearing to
the carrier involved as he may provide in regulations) if he
finds that the carrier has failed substantially to carry out
the contract or is carrying out the contract in a manner
inconsistent with the efficient and effective administration of
the insurance program established by this part.]
(6) No payment under this part for a service provided to any
individual shall (except as provided in section 1870) be made
to anyone other than such individual or (pursuant to an
assignment described in subparagraph (B)(ii) of paragraph (3))
the physician or other person who provided the service, except
that (A) payment may be made (i) to the employer of such
physician or other person if such physician or other person is
required as a condition of his employment to turn over his fee
for such service to his employer, or (ii) (where the service
was provided in a hospital, critical access hospital, clinic,
or other facility) to the facility in which the service was
provided if there is a contractual arrangement between such
physician or other person and such facility under which such
facility submits the bill for such service, (B) payment may be
made to an entity (i) which provides coverage of the services
under a health benefits plan, but only to the extent that
payment is not made under this part, (ii) which has paid the
person who provided the service an amount (including the amount
payable under this part) which that person has accepted as
payment in full for the service, and (iii) to which the
individual has agreed in writing that payment may be made under
this part, (C) in the case of services described in clause (i)
of section 1861(s)(2)(K), payment shall be made to either (i)
the employer of the physician assistant involved, or (ii) with
respect to a physician assistant who was the owner of a rural
health clinic (as described in section 1861(aa)(2)) for a
continuous period beginning prior to the date of the enactment
of the Balanced Budget Act of 1997 and ending on the date that
the Secretary determines such rural health clinic no longer
meets the requirements of section 1861(aa)(2), payment may be
made directly to the physician assistant, (D) payment may be
made to a physician for physicians' services (and services
furnished incident to such services) furnished by a second
physician to patients of the first physician if (i) the first
physician is unavailable to provide the services; (ii) the
services are furnished pursuant to an arrangement between the
two physicians that (I) is informal and reciprocal, or (II)
involves per diem or other fee-for-time compensation for such
services; (iii) the services are not provided by the second
physician over a continuous period of more than 60 days; and
(iv) the claim form submitted to the [carrier] medicare
administrative contractor for such services includes the second
physician's unique identifier (provided under the system
established under subsection (r)) and indicates that the claim
meets the requirements of this subparagraph for payment to the
first physician, (E) in the case of an item or service (other
than services described in section 1888(e)(2)(A)(ii)) furnished
by, or under arrangements made by, a skilled nursing facility
to an individual who (at the time the item or service is
furnished) is a resident of a skilled nursing facility, payment
shall be made to the facility, (F) in the case of home health
services (including medical supplies described in section
1861(m)(5), but excluding durable medical equipment to the
extent provided for in such section) furnished to an individual
who (at the time the item or service is furnished) is under a
plan of care of a home health agency, payment shall be made to
the agency (without regard to whether or not the item or
service was furnished by the agency, by others under
arrangement with them made by the agency, or when any other
contracting or consulting arrangement, or otherwise), and (G)
in the case of services in a hospital or clinic to which
section 1880(e) applies, payment shall be made to such hospital
or clinic. No payment which under the preceding sentence may be
made directly to the physician or other person providing the
service involved (pursuant to an assignment described in
subparagraph (B)(ii) of paragraph (3)) shall be made to anyone
else under a reassignment or power of attorney (except to an
employer or facility as described in clause (A) of such
sentence); but nothing in this subsection shall be construed
(i) to prevent the making of such a payment in accordance with
an assignment from the individual to whom the service was
provided or a reassignment from the physician or other person
providing such service if such assignment or reassignment is
made to a governmental agency or entity or is established by or
pursuant to the order of a court of competent jurisdiction, or
(ii) to preclude an agent of the physician or other person
providing the service from receiving any such payment if (but
only if) such agent does so pursuant to an agency agreement
under which the compensation to be paid to the agent for his
services for or in connection with the billing or collection of
payments due such physician or other person under this title is
unrelated (directly or indirectly) to the amount of such
payments or the billings therefor, and is not dependent upon
the actual collection of any such payment. For purposes of
subparagraph (C) of the first sentence of this paragraph, an
employment relationship may include any independent contractor
arrangement, and employer status shall be determined in
accordance with the law of the State in which the services
described in such clause are performed.
(7)(A) In the case of physicians' services furnished to a
patient in a hospital with a teaching program approved as
specified in section 1861(b)(6) but which does not meet the
conditions described in section 1861(b)(7), [the carrier] the
Secretary shall not provide (except on the basis described in
subparagraph (C)) for payment for such services under this
part--
(i) * * *
* * * * * * *
(B) The customary charge for such services in a hospital
shall be determined in accordance with regulations issued by
the Secretary and taking into account the following factors:
(i) In the case of a physician who is not a teaching
physician (as defined by the Secretary), [the carrier]
the Secretary shall take into account the amounts the
physician charges for similar services in the
physician's practice outside the teaching setting.
(ii) In the case of a teaching physician, if the
hospital, its physicians, or other appropriate billing
entity has established one or more schedules of charges
which are collected for medical and surgical services,
[the carrier] the Secretary shall base payment under
this title on the greatest of--
(I) * * *
* * * * * * *
(C) In the case of physicians' services furnished to a
patient in a hospital with a teaching program approved as
specified in section 1861(b)(6) but which does not meet the
conditions described in section 1861(b)(7), if the conditions
described in subclauses (I) and (II) of subparagraph (A)(i) are
met and if the physician elects payment to be determined under
this subparagraph, [the carrier] the Secretary shall provide
for payment for such services under this part on the basis of
regulations of the Secretary governing reimbursement for the
services of hospital-based physicians (and not on any other
basis).
* * * * * * *
(c)[(1) Any contract entered into with a carrier under this
section shall provide for advances of funds to the carrier for
the making of payments by it under this part, and shall provide
for payment of the cost of administration of the carrier, as
determined by the Secretary to be necessary and proper for
carrying out the functions covered by the contract. The
Secretary shall provide that in determining a carrier's
necessary and proper cost of administration, the Secretary
shall, with respect to each contract, take into account the
amount that is reasonable and adequate to meet the costs which
must be incurred by an efficiently and economically operated
carrier in carrying out the terms of its contract. The
Secretary shall cause to have published in the Federal
Register, by not later than September 1 before each fiscal
year, data, standards, and methodology to be used to establish
budgets for carriers under this section for that fiscal year,
and shall cause to be published in the Federal Register for
public comment, at least 90 days before such data, standards,
and methodology are published, the data, standards, and
methodology proposed to be used.]
(2)(A) Each [contract under this section which provides for
the disbursement of funds, as described in subsection
(a)(1)(B),] contract under section 1874A that provides for
making payments under this part shall provide that payment
shall be issued, mailed, or otherwise transmitted with respect
to not less than 95 percent of all claims submitted under this
part--
(i) * * *
* * * * * * *
(3)(A) Each contract under this section which provides for
the disbursement of funds, as described in [subsection
(a)(1)(B)] section 1874A(a)(3)(B), shall provide that no
payment shall be issued, mailed, or otherwise transmitted with
respect to any claim submitted under this title within the
applicable number of calendar days after the date on which the
claim is received.
(4) Neither a [carrier] medicare administrative contractor
nor the Secretary may impose a fee under this title--
(A) * * *
* * * * * * *
[(5) Each contract under this section which provides for the
disbursement of funds, as described in subsection (a)(1)(B),
shall require the carrier to meet criteria developed by the
Secretary to measure the timeliness of carrier responses to
requests for payment of items described in section
1834(a)(15)(C).
[(6) No carrier may carry out (or receive payment for
carrying out) any activity pursuant to a contract under this
subsection to the extent that the activity is carried out
pursuant to a contract under the Medicare Integrity Program
under section 1893. The previous sentence shall not apply with
respect to the activity described in section 1893(b)(5)
(relating to prior authorization of certain items of durable
medical equipment under section 1834(a)(15)).
[(d) Any contract with a carrier under this section may
require such carrier or any of its officers or employees
certifying payments or disbursing funds pursuant to the
contract, or otherwise participating in carrying out the
contract, to give surety bond to the United States in such
amount as the Secretary may deem appropriate.
[(e)(1) No individual designated pursuant to a contract under
this section as a certifying officer shall, in the absence of
gross negligence or intent to defraud the United States, be
liable with respect to any payments certified by him under this
section.
[(2) No disbursing officer shall, in the absence of gross
negligence or intent to defraud the United States, be liable
with respect to any payment by him under this section if it was
based upon a voucher signed by a certifying officer designated
as provided in paragraph (1) of this subsection.
[(3) No such carrier shall be liable to the United States for
any payments referred to in paragraph (1) or (2).
[(f) For purposes of this part, the term ``carrier'' means--
[(1) with respect to providers of services and other
persons, a voluntary association, corporation,
partnership, or other nongovernmental organization
which is lawfully engaged in providing, paying for, or
reimbursing the cost of, health services under group
insurance policies or contracts, medical or hospital
service agreements, membership or subscription
contracts, or similar group arrangements, in
consideration of premiums or other periodic charges
payable to the carrier, including a health benefits
plan duly sponsored or underwritten by an employee
organization; and
[(2) with respect to providers of services only, any
agency or organization (not described in paragraph (1))
with which an agreement is in effect under section
1816.]
(g) The Railroad Retirement Board shall, in accordance with
such regulations as the Secretary may prescribe, contract with
a [carrier or carriers] medicare administrative contractor or
contractors to perform the functions set out in this section
with respect to individuals entitled to benefits as qualified
railroad retirement beneficiaries pursuant to section 226(a) of
this Act and section 7(d) of the Railroad Retirement Act of
1974.
(h)(1) * * *
(2) [Each carrier having an agreement with the Secretary
under subsection (a)] The Secretary shall maintain a toll-free
telephone number or numbers at which individuals enrolled under
this part may obtain the names, addresses, specialty, and
telephone numbers of participating physicians and suppliers and
may request a copy of an appropriate directory published under
paragraph (4). [Each such carrier] The Secretary shall, without
charge, mail a copy of such directory upon such a request.
(3)(A) In any case in which [a carrier having an agreement
with the Secretary under subsection (a)] medicare
administrative contractor having a contract under section 1874A
that provides for making payments under this part is able to
develop a system for the electronic transmission to [such
carrier] such contractor of bills for services, such carrier
shall establish direct lines for the electronic receipt of
claims from participating physicians and suppliers.
(B) The Secretary shall establish a procedure whereby an
individual enrolled under this part may assign, in an
appropriate manner on the form claiming a benefit under this
part for an item or service furnished by a participating
physician or supplier, the individual's rights of payment under
a medicare supplemental policy (described in section
1882(g)(1)) in which the individual is enrolled. In the case
such an assignment is properly executed and a payment
determination is made by [a carrier] a medicare administrative
contractor with a contract under this section, [the carrier]
the contractor shall transmit to the private entity issuing the
medicare supplemental policy notice of such fact and shall
include an explanation of benefits and any additional
information that the Secretary may determine to be appropriate
in order to enable the entity to decide whether (and the amount
of) any payment is due under the policy. The Secretary may
enter into agreements for the transmittal of such information
to entities electronically. The Secretary shall impose user
fees for the transmittal of information under this subparagraph
by [a carrier] a medicare administrative contractor, whether
electronically or otherwise, and such user fees shall be
collected and retained by [the carrier] the contractor.
* * * * * * *
(5)(A) The Secretary shall promptly notify individuals
enrolled under this part through an annual mailing of the
participation program under this subsection and the publication
and availability of the directories and shall make the
appropriate area directory or directories available in each
district and branch office of the Social Security
Administration, in the offices of [carriers] medicare
administrative contractors, and to senior citizen
organizations.
(B) The annual notice provided under subparagraph (A) shall
include--
(i) * * *
(iii) an explanation of the assistance offered by
[carriers] medicare administrative contractors in
obtaining the names of participating physicians and
suppliers, and
* * * * * * *
(l)(1)(A) Subject to subparagraph (C), if--
(i) * * *
* * * * * * *
(iii)(I) a [carrier] medicare administrative
contractor determines under this part or a peer review
organization determines under part B of title XI that
payment may not be made by reason of section 1862(a)(1)
because a service otherwise covered under this title is
not reasonable and necessary under the standards
described in that section or (II) payment under this
title for such services is denied under section
1154(a)(2) by reason of a determination under section
1154(a)(1)(B), and
* * * * * * *
(2) Each [carrier] medicare administrative contractor with a
contract in effect under this section with respect to
physicians and each peer review organization with a contract
under part B of title XI shall send any notice of denial of
payment for physicians' services based on section 1862(a)(1)
and for which payment is not requested on an assignment-related
basis to the physician and the individual involved.
* * * * * * *
(p)(1) * * *
* * * * * * *
(3) In the case of a request for payment for an item or
service furnished by a physician not submitted on an
assignment-related basis and which does not include the code
(or codes) required under paragraph (1)--
(A) if the physician knowingly and willfully fails to
provide the code (or codes) promptly upon request of
the Secretary or a [carrier] medicare administrative
contractor, the physician may be subject to a civil
money penalty in an amount not to exceed $2,000, and
* * * * * * *
(q)(1)(A) The Secretary, in consultation with groups
representing physicians who furnish anesthesia services, shall
establish by regulation a relative value guide for use in all
[carrier] localities in making payment for physician anesthesia
services furnished under this part. Such guide shall be
designed so as to result in expenditures under this title for
such services in an amount that would not exceed the amount of
such expenditures which would otherwise occur.
* * * * * * *
APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS AND CONTINGENCY
RESERVE
Sec. 1844. (a) * * *
* * * * * * *
(c) The Secretary shall determine the Government contribution
under subparagraphs (A) and (B) of subsection (a)(1) without
regard to any premium reduction resulting from an election
under section 1854(f )(1)(E) and without regard to any premium
adjustment effected under section 1839(h).
* * * * * * *
[SEC. 1847. DEMONSTRATION PROJECTS FOR COMPETITIVE ACQUISITION OF ITEMS
AND SERVICES.
[(a) Establishment of Demonstration Project Bidding Areas.--
[(1) In general.--The Secretary shall implement not
more than 5 demonstration projects under which
competitive acquisition areas are established for
contract award purposes for the furnishing under this
part of the items and services described in subsection
(d).
[(2) Project requirements.--Each demonstration
project under paragraph (1)--
[(A) shall include such group of items and
services as the Secretary may prescribe,
[(B) shall be conducted in not more than 3
competitive acquisition areas, and
[(C) shall be operated over a 3-year period.
[(3) Criteria for establishment of competitive
acquisition areas.--Each competitive acquisition area
established under a demonstration project implemented
under paragraph (1)--
[(A) shall be, or shall be within, a
metropolitan statistical area (as defined by
the Secretary of Commerce), and
[(B) shall be chosen based on the
availability and accessibility of entities able
to furnish items and services, and the probable
savings to be realized by the use of
competitive bidding in the furnishing of items
and services in such area.
[(b) Awarding of Contracts in Areas.--
[(1) In general.--The Secretary shall conduct a
competition among individuals and entities supplying
items and services described in subsection (c) for each
competitive acquisition area established under a
demonstration project implemented under subsection (a).
[(2) Conditions for awarding contract.--The Secretary
may not award a contract to any entity under the
competition conducted pursuant to paragraph (1) to
furnish an item or service unless the Secretary finds
that the entity meets quality standards specified by
the Secretary and that the total amounts to be paid
under the contract are expected to be less than the
total amounts that would otherwise be paid.
[(3) Contents of contract.--A contract entered into
with an entity under the competition conducted pursuant
to paragraph (1) is subject to terms and conditions
that the Secretary may specify.
[(4) Limit on number of contractors.--The Secretary
may limit the number of contractors in a competitive
acquisition area to the number needed to meet projected
demand for items and services covered under the
contracts.
[(c) Expansion of Projects.--
[(1) Evaluations.--The Secretary shall evaluate the
impact of the implementation of the demonstration
projects on medicare program payments, access,
diversity of product selection, and quality. The
Secretary shall make annual reports to the Committees
on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the
Senate on the results of the evaluation described in
the preceding sentence and a final report not later
than 6 months after the termination date specified in
subsection (e).
[(2) Expansion.--If the Secretary determines from the
evaluations under paragraph (1) that there is clear
evidence that any demonstration project--
[(A) results in a decrease in Federal
expenditures under this title, and
[(B) does not reduce program access,
diversity of product selection, and quality
under this title,
the Secretary may expand the project to additional
competitive acquisition areas.
[(d) Services described.--The items and services to which
this section applies are all items and services covered under
this part (except for physicians' services as defined in
section 1861(s)(1)) that the Secretary may specify. At least
one demonstration project shall include oxygen and oxygen
equipment.
[(e) Termination.--Notwithstanding any other provision of
this section, all projects under this section shall terminate
not later than December 31, 2002.]
COMPETITIVE ACQUISITION OF CERTAIN ITEMS AND SERVICES
Sec. 1847. (a) Establishment of Competitive Acquisition
Programs.--
(1) Implementation of programs.--
(A) In general.--The Secretary shall
establish and implement programs under which
competitive acquisition areas are established
throughout the United States for contract award
purposes for the furnishing under this part of
competitively priced items and services
(described in paragraph (2)) for which payment
is made under this part. Such areas may differ
for different items and services.
(B) Phased-in implementation.--The programs
shall be phased-in among competitive
acquisition areas over a period of not longer
than 3 years in a manner so that the
competition under the programs occurs in--
(i) at least \1/3\ of such areas in
2004; and
(ii) at least \2/3\ of such areas in
2005.
(C) Waiver of certain provisions.--In
carrying out the programs, the Secretary may
waive such provisions of the Federal
Acquisition Regulation as are necessary for the
efficient implementation of this section, other
than provisions relating to confidentiality of
information and such other provisions as the
Secretary determines appropriate.
(2) Items and services described.--The items and
services referred to in paragraph (1) are the
following:
(A) Durable medical equipment and inhalation
drugs used in connection with durable medical
equipment.--Covered items (as defined in
section 1834(a)(13)) for which payment is
otherwise made under section 1834(a), other
than items used in infusion, and inhalation
drugs used in conjunction with durable medical
equipment.
(B) Off-the-shelf orthotics.--Orthotics
(described in section 1861(s)(9)) for which
payment is otherwise made under section 1834(h)
which require minimal self-adjustment for
appropriate use and does not require expertise
in trimming, bending, molding, assembling, or
customizing to fit to the patient.
(3) Exemption authority.--In carrying out the
programs under this section, the Secretary may exempt--
(A) areas that are not competitive due to low
population density; and
(B) items and services for which the
application of competitive acquisition is not
likely to result in significant savings.
(b) Program Requirements.--
(1) In general.--The Secretary shall conduct a
competition among entities supplying items and services
described in subsection (a)(2) for each competitive
acquisition area in which the program is implemented
under subsection (a) with respect to such items and
services.
(2) Conditions for awarding contract.--
(A) In general.--The Secretary may not award
a contract to any entity under the competition
conducted in an competitive acquisition area
pursuant to paragraph (1) to furnish such items
or services unless the Secretary finds all of
the following:
(i) The entity meets quality and
financial standards specified by the
Secretary or developed by accreditation
entities or organizations recognized by
the Secretary.
(ii) The total amounts to be paid
under the contract (including costs
associated with the administration of
the contract) are expected to be less
than the total amounts that would
otherwise be paid.
(iii) Beneficiary access to a choice
of multiple suppliers in the area is
maintained.
(iv) Beneficiary liability is limited
to the applicable percentage of
contract award price.
(B) Quality standards.--The quality standards
specified under subparagraph (A)(i) shall not
be less than the quality standards that would
otherwise apply if this section did not apply
and shall include consumer services standards.
The Secretary shall consult with an expert
outside advisory panel composed of an
appropriate selection of representatives of
physicians, practitioners, and suppliers to
review (and advise the Secretary concerning)
such quality standards.
(3) Contents of contract.--
(A) In general.--A contract entered into with
an entity under the competition conducted
pursuant to paragraph (1) is subject to terms
and conditions that the Secretary may specify.
(B) Term of contracts.--The Secretary shall
rebid contracts under this section not less
often than once every 3 years.
(4) Limit on number of contractors.--
(A) In general.--The Secretary may limit the
number of contractors in a competitive
acquisition area to the number needed to meet
projected demand for items and services covered
under the contracts. In awarding contracts, the
Secretary shall take into account the ability
of bidding entities to furnish items or
services in sufficient quantities to meet the
anticipated needs of beneficiaries for such
items or services in the geographic area
covered under the contract on a timely basis.
(B) Multiple winners.--The Secretary shall
award contracts to more than one entity
submitting a bid in each area for an item or
service.
(5) Participating contractors.--Payment shall not be
made for items and services described in subsection
(a)(2) furnished by a contractor and for which
competition is conducted under this section unless--
(A) the contractor has submitted a bid for
such items and services under this section; and
(B) the Secretary has awarded a contract to
the contractor for such items and services
under this section.
(6) Authority to contract for education, outreach and
complaint services.--The Secretary may enter into a
contract with an appropriate entity to address
complaints from beneficiaries who receive items and
services from an entity with a contract under this
section and to conduct appropriate education of and
outreach to such beneficiaries with respect to the
program.
(c) Annual Reports.--The Secretary shall submit to Congress
an annual management report on the programs under this section.
Each such report shall include information on savings,
reductions in cost-sharing, access to items and services, and
beneficiary satisfaction.
(d) Demonstration Project for Clinical Laboratory Services.--
(1) In general.--The Secretary shall conduct a
demonstration project on the application of competitive
acquisition under this section to clinical diagnostic
laboratory tests--
(A) for which payment is otherwise made under
section 1833(h) or 1834(d)(1) (relating to
colorectal cancer screening tests); and
(B) which are furnished without a face-to-
face encounter between the individual and the
hospital or physician ordering the tests.
(2) Terms and conditions.--Such project shall be
under the same conditions as are applicable to items
and services described in subsection (a)(2).
(3) Report.--The Secretary shall submit to Congress--
(A) an initial report on the project not
later than December 31, 2004; and
(B) such progress and final reports on the
project after such date as the Secretary
determines appropriate.
* * * * * * *
PAYMENT FOR PHYSICIANS' SERVICES
Sec. 1848. (a) * * *
* * * * * * *
(d) Conversion Factors.--
(1) * * *
* * * * * * *
(4) Update for years beginning with 2001.--
(A) * * *
(B) Update adjustment factor.--For purposes
of subparagraph (A)(ii), subject to
subparagraph (D) and paragraph (6), the
``update adjustment factor'' for a year is
equal (as estimated by the Secretary) to the
sum of the following:
(i) * * *
* * * * * * *
(F) Transitional adjustment designed to
provide for budget neutrality.--Under this
subparagraph the Secretary shall provide for an
adjustment to the update under [subparagraph
(A)--
[(i) for each of 2001, 2002, 2003,
and 2004, of -0.2 percent; and
[(ii) for 2005 of +0.8 percent.]
subparagraph (A), for each of 2001 and
2002, of -0.2 percent.
(5) Update for 2003.--The update to the single
conversion factor established in paragraph (1)(C) for
2003 is 2 percent.
(6) Special rules for update for 2004 and 2005.--The
following rules apply in determining the update
adjustment factors under paragraph (4)(B) for 2004 and
2005:
(A) Use of 2002 data in determining allowable
costs.--
(i) The reference in clause (ii)(I)
of such paragraph to April 1, 1996, is
deemed to be a reference to January 1,
2002.
(ii) The allowed expenditures for
2002 is deemed to be equal to the
actual expenditures for physicians'
services furnished during 2002, as
estimated by the Secretary.
(B) 1 percentage point increase in gdp under
sgr.--The annual average percentage growth in
real gross domestic product per capita under
subsection (f)(2)(C) for each of 2003, 2004,
and 2005 is deemed to be increased by 1
percentage point.
* * * * * * *
(f) Sustainable Growth Rate.--
(1) * * *
(2) Specification of growth rate.--The sustainable
growth rate for all physicians' services for a fiscal
year (beginning with fiscal year 1998 and ending with
fiscal year 2000) and a year beginning with 2000 shall
be equal to the product of--
(A) * * *
* * * * * * *
(C) 1 plus the Secretary's estimate of the
[projected] annual average percentage growth in
real gross domestic product per capita (divided
by 100) [from the previous applicable period to
the applicable period involved] during the 10-
year period ending with the applicable period
involved, and
* * * * * * *
(j) Definitions.--In this section:
(1) * * *
* * * * * * *
(3) Physicians' services.--The term ``physicians'
services'' includes items and services described in
paragraphs (1), (2)(A), (2)(D), (2)(G), (2)(P) (with
respect to services described in subparagraphs (A) and
(C) of section 1861(oo)(2)), (2)(R) (with respect to
services described in suparagraphs (B), (C), and (D) of
section 1861(pp)(1)), (2)(S), (2)(W), (3), (4), (13),
(14) (with respect to services described in section
1861(nn)(2)), and (15) of section 1861(s) (other than
clinical diagnostic laboratory tests and, except for
purposes of subsection (a)(3), (g), and (h) such other
items and services as the Secretary may specify).
* * * * * * *
Part C--Medicare+Choice Program
ELIGIBILITY, ELECTION, AND ENROLLMENT
Sec. 1851. (a) Choice of Medicare Benefits Through
Medicare+Choice Plans.--
(1) In general.--Subject to the provisions of this
section, each Medicare+Choice eligible individual (as
defined in paragraph (3)) is entitled to elect to
receive benefits (other than qualified prescription
drug benefits) under this title--
(A) through the original medicare fee-for-
service program under parts A and B, or
(B) through enrollment in a Medicare+Choice
plan under this part[.],
and may elect qualified prescription drug coverage in
accordance with section 1860A.
(2) Types of medicare+choice plans that may be
available.--A Medicare+Choice plan may be any of the
following types of plans of health insurance:
(A) Coordinated care plans.--Coordinated care
plans which provide health care services,
including but not limited to health maintenance
organization plans (with or without point of
service options), plans offered by provider-
sponsored organizations (as defined in section
1855(d)), and preferred provider organization
plans. Specialized Medicare+Choice plans for
special needs beneficiaries (as defined in
section 1859(b)(4)) may be any type of
coordinated care plan.
* * * * * * *
(b) Special Rules.--
(1) * * *
* * * * * * *
(4) Coverage under msa plans [on a demonstration
basis].--
(A) In general.--[An individual is not
eligible to enroll in an MSA plan under this
part--
[(i) on or after January 1, 2003,
unless the enrollment is the
continuation of such an enrollment in
effect as of such date; or
[(ii) as of any date if the number of
such individuals so enrolled as of such
date has reached 390,000.]
Under rules established by the Secretary, an
individual is not eligible to enroll (or
continue enrollment) in an MSA plan for a year
unless the individual provides assurances
satisfactory to the Secretary that the
individual will reside in the United States for
at least 183 days during the year.
* * * * * * *
(C) Reports.--The Secretary shall submit to
Congress periodic reports on the numbers of
individuals enrolled in such plans and on the
evaluation being conducted under subparagraph
(B). [The Secretary shall submit such a report,
by not later than March 1, 2002, on whether the
time limitation under subparagraph (A)(i)
should be extended or removed and whether to
change the numerical limitation under
subparagraph (A)(ii).]
* * * * * * *
(d) Providing Information To Promote Informed Choice.--
(1) * * *
(2) Provision of notice.--
(A) Open season notification.--At least 15
days before the beginning of each annual,
coordinated election period (as defined in
subsection (e)(3)(B)), the Secretary shall mail
to each Medicare+Choice eligible individual
residing in an area the following:
(i) General information.--The general
information described in paragraph (3).
(ii) List of plans and comparison of
plan options.--A list identifying the
Medicare+Choice plans that are (or will
be) available to residents of the area
and information described in paragraph
(4) concerning such plans to the extent
such information is available at the
time of preparation of materials for
the mailing. Such information shall be
presented in a comparative form.
* * * * * * *
(e) Coverage Election Periods.--
(1) * * *
* * * * * * *
(3) Annual, coordinated election period.--
(A) * * *
(B) Annual, coordinated election period.--For
purposes of this section, the term ``annual,
coordinated election period'' means, with
respect to a year before 2003 [and after 2005,
the month of November before such year and with
respect to 2003, 2004, and 2005], the month of
November before such year and with respect to
2003 and any subsequent year, the period
beginning on November 15 and ending on December
31 of the year before such year.
* * * * * * *
(5) Special rules for msa plans.--Notwithstanding the
preceding provisions of this subsection, an
individual--
(A) may elect an MSA plan only during--
(i) an initial open enrollment period
described in paragraph (1), or
(ii) an annual, coordinated election
period described in paragraph (3)(B)[,
or];
[(iii) the month of November 1998;]
* * * * * * *
(g) Guaranteed Issue and Renewal.--
(1) In general.--Except as provided in this
subsection and section 1860A(c)(2)(B), a
Medicare+Choice organization shall provide that at any
time during which elections are accepted under this
section with respect to a Medicare+Choice plan offered
by the organization, the organization will accept
without restrictions individuals who are eligible to
make such election.
* * * * * * *
(h) Approval of Marketing Material and Application Forms.--
(1) * * *
* * * * * * *
(4) Prohibition of certain marketing practices.--Each
Medicare+Choice organization shall conform to fair
marketing standards, in relation to Medicare+Choice
plans offered under this part, included in the
standards established under section 1856. Such
standards--
(A) shall not permit a Medicare+Choice
organization to provide for cash or other
monetary rebates as an inducement for
enrollment or otherwise except as provided
under section 1854(b)(1)(C), and
* * * * * * *
(j) Availability of Prescription Drug Benefits.--
(1) Offer of qualified prescription drug coverage.--
(A) In general.--A Medicare+Choice
organization may not offer prescription drug
coverage (other than that required under parts
A and B) to an enrollee under a Medicare+Choice
plan unless such drug coverage is at least
qualified prescription drug coverage and unless
the requirements of this subsection with
respect to such coverage are met.
(B) Construction.--Nothing in this subsection
shall be construed as--
(i) requiring a Medicare+Choice plan
to include coverage of qualified
prescription drug coverage; or
(ii) permitting a Medicare+Choice
organization from providing such
coverage to an individual who has not
elected such coverage under section
1860A(b).
For purposes of this part, an individual who
has not elected qualified prescription drug
coverage under section 1860A(b) shall be
treated as being ineligible to enroll in a
Medicare+Choice plan under this part that
offers such coverage.
(2) Compliance with additional beneficiary
protections.--With respect to the offering of qualified
prescription drug coverage by a Medicare+Choice
organization under a Medicare+Choice plan, the
organization and plan shall meet the requirements of
section 1860C, including requirements relating to
information dissemination and grievance and appeals, in
the same manner as they apply to a PDP sponsor and a
prescription drug plan under part D and shall submit to
the Administrator the information described in section
1860F(a)(2). The Administrator shall waive such
requirements to the extent the Administrator determines
that such requirements duplicate requirements otherwise
applicable to the organization or plan under this part.
(3) Availability of premium and cost-sharing
subsidies for low-income enrollees and direct and
reinsurance subsidy payments for organizations.--For
provisions--
(A) providing premium and cost-sharing
subsidies to low-income individuals receiving
qualified prescription drug coverage through a
Medicare+Choice plan, see section 1860G; and
(B) providing a Medicare+Choice organization
with direct and insurance subsidy payments for
providing qualified prescription drug coverage
under this part, see section 1860H.
(4) Transition in initial enrollment period.--
Notwithstanding any other provision of this part, the
annual, coordinated election period under subsection
(e)(3)(B) for 2005 shall be the 6-month period
beginning with November 2004.
(5) Qualified prescription drug coverage; standard
coverage.--For purposes of this part, the terms
``qualified prescription drug coverage'' and ``standard
coverage'' have the meanings given such terms in
section 1860B.
BENEFITS AND BENEFICIARY PROTECTIONS
Sec. 1852. (a) Basic Benefits.--
(1) * * *
(2) Satisfaction of requirement.--
(A) * * *
* * * * * * *
(C) Election of uniform coverage [policy]
determination.--In the case of a
Medicare+Choice organization that offers a
Medicare+Choice plan in an area in which more
than one local coverage [policy] determination
is applied with respect to different parts of
the area, the organization may elect to have
the local coverage [policy] determination for
the part of the area that is most beneficial to
Medicare+Choice enrollees (as identified by the
Secretary) apply with respect to all
Medicare+Choice enrollees enrolled in the plan.
* * * * * * *
[(5) National coverage determinations and legislative
changes in benefits.--If there is a national coverage
determination or legislative change in benefits
required to be provided under this part made in the
period beginning on the date of an announcement under
section 1853(b) and ending on the date of the next
announcement under such section and the Secretary
projects that the determination will result in a
significant change in the costs to a Medicare+Choice
organization of providing the benefits that are the
subject of such national coverage determination and
that such change in costs was not incorporated in the
determination of the annual Medicare+Choice capitation
rate under section 1853 included in the announcement
made at the beginning of such period, then, unless
otherwise required by law--
[(A) such determination or legislative change
in benefits shall not apply to contracts under
this part until the first contract year that
begins after the end of such period, and
[(B) if such coverage determination or
legislative change provides for coverage of
additional benefits or coverage under
additional circumstances, section 1851(i)(1)
shall not apply to payment for such additional
benefits or benefits provided under such
additional circumstances until the first
contract year that begins after the end of such
period.
The projection under the previous sentence shall be
based on an analysis by the Chief Actuary of the Health
Care Financing Administration of the actuarial costs
associated with the coverage determination or
legislative change in benefits.]
(5) Prospective implementation of national coverage
determinations.--The Secretary shall only implement a
national coverage determination that will result in a
significant change in the costs to a Medicare+Choice
organization in a prospective manner that applies to
announcements made under section 1853(b) after the date
of the implementation of the determination.
(b) Antidiscrimination.--
(1) Beneficiaries.--
(A) In general.--A Medicare+Choice
organization may not deny, limit, or condition
the coverage or provision of benefits under
this part, for individuals permitted to be
enrolled with the organization under this part,
based on any health status-related factor
described in section 2702(a)(1) of the Public
Health Service Act. The Administrator shall not
approve a plan of an organization if the
Administrator determines that the benefits are
designed to substantially discourage enrollment
by certain Medicare+Choice eligible individuals
with the organization.
* * * * * * *
(c) Disclosure Requirements.--
(1) Detailed description of plan provisions.--A
Medicare+Choice organization shall disclose, in clear,
accurate, and standardized form to each enrollee with a
Medicare+Choice plan offered by the organization under
this part at the time of enrollment and at least
annually thereafter, the following information
regarding such plan:
(A) * * *
* * * * * * *
(I) Quality assurance program.--A description
of the organization's quality assurance program
under subsection (e) if required under such
section.
* * * * * * *
(e) Quality Assurance Program.--
(1) In general.--Each Medicare+Choice organization
must have arrangements, consistent with any regulation,
for an ongoing quality assurance program for health
care services it provides to individuals enrolled with
Medicare+Choice plans (other than MSA plans) of the
organization.
* * * * * * *
(k) Treatment of Services Furnished by Certain Providers.--
(1) In general.--Except as provided in paragraph (2),
a physician or other entity (other than a provider of
services) that does not have a contract establishing
payment amounts for services furnished to an individual
enrolled under this part with a Medicare+Choice
organization described in section 1851(a)(2)(A) or with
an organization offering a MSA plan shall accept as
payment in full for covered services under this title
that are furnished to such an individual the amounts
that the physician or other entity could collect if the
individual were not so enrolled. Any penalty or other
provision of law that applies to such a payment with
respect to an individual entitled to benefits under
this title (but not enrolled with a Medicare+Choice
organization under this part) also applies with respect
to an individual so enrolled.
* * * * * * *
PAYMENTS TO MEDICARE+CHOICE ORGANIZATIONS
Sec. 1853. (a) Payments to Organizations.--
(1) Monthly payments.--
(A) In general.--Under a contract under
section 1857 and subject to subsections (e),
(g), and (i) and section 1859(e)(4), the
Secretary shall make monthly payments under
this section in advance to each Medicare+Choice
organization, with respect to coverage of an
individual under this part in a Medicare+Choice
payment area for a month, [in an amount equal
to \1/12\ of the annual Medicare+Choice
capitation rate (as calculated under subsection
(c)) with respect to that individual for that
area, reduced by the amount of any reduction
elected under section 1854(f )(1)(E) and
adjusted for such risk factors as age,
disability status, gender, institutional
status, and such other factors as the Secretary
determines to be appropriate, so as to ensure
actuarial equivalence. The Secretary may add
to, modify, or substitute for such factors, if
such changes will improve the determination of
actuarial equivalence.] in an amount determined
as follows:
(i) Payment before 2005.--For years
before 2005, the payment amount shall
be equal to \1/12\ of the annual
Medicare+Choice capitation rate (as
calculated under subsection (c)) with
respect to that individual for that
area, reduced by the amount of any
reduction elected under section 1854(f
)(1)(E) and adjusted under clause
(iii).
(ii) Payment for statutory non-drug
benefits beginning with 2005.--For
years beginning with 2005--
(I) Plans with bids below
benchmark.--In the case of a
plan for which there are
average per capita monthly
savings described in section
1854(b)(3)(C) (or, in the case
of a competitive-demonstration
area, described in section
1854(b)(4)), the payment under
this subsection is equal to the
unadjusted non-drug monthly bid
amount (or, in the case of a
competitive-demonstration area,
the choice non-drug benchmark
amount), adjusted under clause
(iii), plus the amount of the
monthly rebate computed under
section 1854(b)(1)(C)(i) for
that plan and year.
(II) Plans with bids at or
above benchmark.--In the case
of a plan for which there are
no average per capita monthly
savings described in section
1854(b)(3)(C) (or, in the case
of a competitive-demonstration
area, described in section
1854(b)(4)), the payment amount
under this subsection is equal
to the fee-for-service area-
specific non-drug benchmark
amount, adjusted under clause
(iii).
(iii) Demographic adjustment,
including adjustment for health
status.--The Administrator shall adjust
the payment amount under clause (i),
the unadjusted non-drug monthly bid
amount under clause (ii)(I), and the
fee-for-service area-specific non-drug
benchmark amount under clause (ii)(II)
for such risk factors as age,
disability status, gender,
institutional status, and such other
factors as the Administrator determines
to be appropriate, including adjustment
for health status under paragraph (3),
so as to ensure actuarial equivalence.
The Administrator may add to, modify,
or substitute for such adjustment
factors if such changes will improve
the determination of actuarial
equivalence.
(iv) Reference to subsidy payment for
statutory drug benefits.--In the case
in which an enrollee is enrolled under
part D, the Medicare+Choice
organization also is entitled to a
subsidy payment amount under section
1860H.
* * * * * * *
(b) Annual Announcement of Payment Rates.--
(1) Annual announcement.--The Secretary shall
annually determine, and shall announce (in a manner
intended to provide notice to interested parties) for
years before 2004 [and after 2005 not later than March
1 before the calendar year concerned and for 2004 and
2005] not later than March 1 before the calendar year
concerned and for 2004 and each subsequent year not
later than the second Monday in May before [the
respective calendar year--
[(A) the annual Medicare+Choice capitation
rate for each Medicare+Choice payment area for
the year, and
[(B) the risk and other factors to be used in
adjusting such rates under subsection (a)(1)(A)
for payments for months in that year.] the
calendar year concerned with respect to each
Medicare+Choice payment area, the following:
(A) Pre-competition information.--For years
before 2005, the following:
(i) Medicare+choice capitation
rates.--The annual Medicare+Choice
capitation rate for each
Medicare+Choice payment area for the
year.
(ii) Adjustment factors.--The risk
and other factors to be used in
adjusting such rates under subsection
(a)(1)(A) for payments for months in
that year.
(B) Competition information.--For years
beginning with 2005, the following:
(i) Benchmarks.--The fee-for-service
area-specific non-drug benchmark under
section 1853(j) and, if applicable, the
choice non-drug benchmark under section
1853(k)(2), for the year involved and,
if applicable, the national fee-for-
service market share percentage.
(ii) Adjustment factors.--The
adjustment factors applied under
section 1853(a)(1)(A)(iii) (relating to
demographic adjustment), section
1853(a)(1)(B) (relating to adjustment
for end-stage renal disease), and
section 1853(a)(3) (relating to health
status adjustment).
(iii) Projected fee-for-service
bid.--In the case of a competitive
area, the projected fee-for-service
area-specific non-drug bid (as
determined under subsection (k)(6)) for
the area.
(iv) Individuals.--The number of
individuals counted under subsection
(k)(4)(B) and enrolled in each
Medicare+Choice plan in the area.
* * * * * * *
(3) Explanation of assumptions.--In each announcement
made under paragraph (1), the Secretary shall include
an explanation of the assumptions and changes in
methodology used in the announcement [in sufficient
detail so that Medicare+Choice organizations can
compute monthly adjusted Medicare+Choice capitation
rates for individuals in each Medicare+Choice payment
area which is in whole or in part within the service
area of such an organization].
(c) Calculation of Annual Medicare+Choice Capitation Rates.--
(1) In general.--For purposes of this part, subject
to paragraphs (6)(C) and (7), each annual
Medicare+Choice capitation rate, for a Medicare+Choice
payment area for a contract year consisting of a
calendar year, is equal to the largest of the amounts
specified in the following subparagraph (A), (B), [or
(C)] (C), or (D):
(A) Blended capitation rate.--The sum of--
(i) * * *
* * * * * * *
multiplied (for a year before 2003) by the
budget neutrality adjustment factor determined
under paragraph (5).
* * * * * * *
(C) Minimum percentage increase.--
(i) * * *
* * * * * * *
[(iv) For 2002 and each succeeding
year, 102 percent of the annual
Medicare+Choice capitation rate under
this paragraph for the area for the
previous year.]
(iv) For 2002, 102 percent of the
annual Medicare+Choice capitation rate
under this paragraph for the area for
2001.
(v) For 2003 and 2004, 103 percent of
the annual Medicare+Choice capitation
rate under this paragraph for the area
for the previous year.
(vi) For 2005 and each succeeding
year, 102 percent of the annual
Medicare+Choice capitation rate under
this paragraph for the area for the
previous year.
(D) Based on 100 percent of fee-for-service
costs.--
(i) In general.--For 2003 and 2004,
the adjusted average per capita cost
for the year involved, determined under
section 1876(a)(4) for the
Medicare+Choice payment area for
services covered under parts A and B
for individuals entitled to benefits
under part A and enrolled under part B
who are not enrolled in a
Medicare+Choice plan under this part
for the year, but adjusted to exclude
costs attributable to payments under
section 1886(h).
(ii) Inclusion of costs of va and dod
military facility services to medicare-
eligible beneficiaries.--In determining
the adjusted average per capita cost
under clause (i) for a year, such cost
shall be adjusted to include the
Secretary's estimate, on a per capita
basis, of the amount of additional
payments that would have been made in
the area involved under this title if
individuals entitled to benefits under
this title had not received services
from facilities of the Department of
Veterans Affairs or the Department of
Defense.
* * * * * * *
(3) Annual area-specific medicare+choice capitation
rate.--
(A) In general.--For purposes of paragraph
(1)(A), subject to [subparagraph (B)]
subparagraphs (B) and (E), the annual area-
specific Medicare+Choice capitation rate for a
Medicare+Choice payment area--
(i) * * *
* * * * * * *
(E) Inclusion of costs of dod and va military
facility services to medicare-eligible
beneficiaries.--In determining the area-
specific Medicare+Choice capitation rate under
subparagraph (A) for a year (beginning with
2003), the annual per capita rate of payment
for 1997 determined under section 1876(a)(1)(C)
shall be adjusted to include in the rate the
Secretary's estimate, on a per capita basis, of
the amount of additional payments that would
have been made in the area involved under this
title if individuals entitled to benefits under
this title had not received services from
facilities of the Department of Defense or the
Department of Veterans Affairs.
(4) Input-price-adjusted annual national
medicare+choice capitation rate.--
(A) * * *
(B) National standardized annual
medicare+choice capitation rate.--In
subparagraph (A)(i), the ``national
standardized annual Medicare+Choice capitation
rate'' for a year is equal to--
(i) the sum (for all Medicare+Choice
payment areas) of the product of--
(I) the annual area-specific
Medicare+Choice capitation rate
for that year for the area
under paragraph (3), and
(II) the average number of
medicare beneficiaries who
(with respect to determinations
for 2003 and for 2004) are
enrolled in a Medicare+Choice
plan residing in that area in
the year, multiplied by the
average of the risk factor
weights used to adjust payments
under subsection (a)(1)(A) for
such beneficiaries in such
area; divided by
* * * * * * *
(5) Payment adjustment budget neutrality factor.--For
purposes of paragraph (1)(A), for each year (before
2003), the Secretary shall determine a budget
neutrality adjustment factor so that the aggregate of
the payments under this part (other than those
attributable to subsections (a)(3)(C)(iii) and (i))
shall equal the aggregate payments that would have been
made under this part if payment were based entirely on
area-specific capitation rates.
(d) Medicare+Choice Payment Area Defined.--
(1) * * *
* * * * * * *
(3) Geographic adjustment.--
(A) In general.--Upon written request of the
chief executive officer of a State for a
contract year (beginning after 1998) made by
not later than February 1 of the previous year,
the Secretary shall make a geographic
adjustment to a Medicare+Choice payment area in
the State otherwise determined under paragraph
(1)--
[(i) to a single statewide
Medicare+Choice payment area,]
(i) to a single statewide
Medicare+Choice payment area,
* * * * * * *
[(B) Budget neutrality adjustment.--In the
case of a State requesting an adjustment under
this paragraph, the Secretary shall initially
(and annually thereafter) adjust the payment
rates otherwise established under this section
for Medicare+Choice payment areas in the State
in a manner so that the aggregate of the
payments under this section in the State shall
not exceed the aggregate payments that would
have been made under this section for
Medicare+Choice payment areas in the State in
the absence of the adjustment under this
paragraph.]
(B) Budget neutrality adjustment.--In the
case of a State requesting an adjustment under
this paragraph, the Medicare Benefits
Administrator shall initially (and annually
thereafter) adjust the payment rates otherwise
established under this section for
Medicare+Choice payment areas in the State in a
manner so that the aggregate of the payments
under this section in the State shall not
exceed the aggregate payments that would have
been made under this section for
Medicare+Choice payment areas in the State in
the absence of the adjustment under this
paragraph.
* * * * * * *
(j) Computation of Fee-for-Service Area-Specific Non-Drug
Benchmark Amount.--For purposes of this part, the term ``fee-
for-service area-specific non-drug benchmark amount'' means,
with respect to a Medicare+Choice payment area for a month in a
year, an amount equal to the greater of the following (but in
no case less than \1/12\ of the rate computed under subsection
(c)(1), without regard to subparagraph (A), for the year):
(1) Based on 100 percent of fee-for-service costs in
the area.--An amount equal to \1/12\ of 100 percent
(for 2005 through 2007, or 95 percent for 2008 and
years thereafter) of the adjusted average per capita
cost for the year involved, determined under section
1876(a)(4) for the Medicare+Choice payment area, for
the area and the year involved, for services covered
under parts A and B for individuals entitled to
benefits under part A and enrolled under part B who are
not enrolled in a Medicare+Choice plan under this part
for the year, and adjusted to exclude from such cost
the amount the Medicare Benefits Administrator
estimates is payable for costs described in subclauses
(I) and (II) of subsection (c)(3)(C)(i) for the year
involved and also adjusted in the manner described in
subsection (c)(1)(D)(ii) (relating to inclusion of
costs of VA and DOD military facility services to
medicare-eligible beneficiaries).
(2) Minimum monthly amount.--The minimum amount
specified in this paragraph is the amount specified in
subsection (c)(1)(B)(iv) for the year involved.
(k) Establishment of Competitive Demonstration Program.--
(1) Designation of competitive-demonstration areas as
part of program.--
(A) In general.--For purposes of this part,
the Administrator shall establish a
demonstration program under which the
Administrator designates Medicare+Choice areas
as competitive-demonstration areas consistent
with the following limitations:
(i) Limitation on number of areas
that may be designated.--The
Administrator may not designate more
than 4 areas as competitive-
demonstration areas.
(ii) Limitation on period of
designation of any area.--The
Administrator may not designate any
area as a competitive-demonstration
area for a period of more than 2 years.
The Administrator has the discretion to decide
whether or not to designate as a competitive-
demonstration area an area that qualifies for
such designation.
(B) Qualifications for designation.--For
purposes of this title, a Medicare+Choice area
(which is a metropolitan statistical area or
other area with a substantial number of
Medicare+Choice enrollees) may not be
designated as a ``competitive-demonstration
area'' for a 2-year period beginning with a
year unless the Administrator determines, by
such date before the beginning of the year as
the Administrator determines appropriate,
that--
(i) there will be offered during the
open enrollment period under this part
before the beginning of the year at
least 2 Medicare+Choice plans (in
addition to the fee-for-service program
under parts A and B), each offered by a
different Medicare+Choice organization;
and
(ii) during March of the previous
year at least 50 percent of the number
of Medicare+Choice eligible individuals
who reside in the area were enrolled in
a Medicare+Choice plan.
(2) Choice non-drug benchmark amount.--For purposes
of this part, the term ``choice non-drug benchmark
amount'' means, with respect to a Medicare+Choice
payment area for a month in a year, the sum of the 2
components described in paragraph (3) for the area and
year. The Administrator shall compute such benchmark
amount for each competitive-demonstration area before
the beginning of each annual, coordinated election
period under section 1851(e)(3)(B) for each year
(beginning with 2005) in which it is designated as such
an area.
(3) 2 components.--For purposes of paragraph (2), the
2 components described in this paragraph for an area
and a year are the following:
(A) Fee-for-service component weighted by
national fee-for-service market share.--The
product of the following:
(i) National fee-for-service market
share.--The national fee-for-service
market share percentage (determined
under paragraph (5)) for the year.
(ii) Fee-for-service area-specific
non-drug bid.--The fee-for-service
area-specific non-drug bid (as defined
in paragraph (6)) for the area and
year.
(B) M+C component weighted by national
medicare+choice market share.--The product of
the following:
(i) National medicare+choice market
share.--1 minus the national fee-for-
service market share percentage for the
year.
(ii) Weighted average of plan bids in
area.--The weighted average of the plan
bids for the area and year (as
determined under paragraph (4)(A)).
(4) Determination of weighted average bids for an
area.--
(A) In general.--For purposes of paragraph
(3)(B)(ii), the weighted average of plan bids
for an area and a year is the sum of the
following products for Medicare+Choice plans
described in subparagraph (C) in the area and
year:
(i) Proportion of each plan's
enrollees in the area.--The number of
individuals described in subparagraph
(B), divided by the total number of
such individuals for all
Medicare+Choice plans described in
subparagraph (C) for that area and
year.
(ii) Monthly non-drug bid amount.--
The unadjusted non-drug monthly bid
amount.
(B) Counting of individuals.--The
Administrator shall count, for each
Medicare+Choice plan described in subparagraph
(C) for an area and year, the number of
individuals who reside in the area and who were
enrolled under such plan under this part during
March of the previous year.
(C) Exclusion of plans not offered in
previous year.--For an area and year, the
Medicare+Choice plans described in this
subparagraph are plans that are offered in the
area and year and were offered in the area in
March of the previous year.
(5) Computation of national fee-for-service market
share percentage.--The Administrator shall determine,
for a year, the proportion (in this subsection referred
to as the ``national fee-for-service market share
percentage'') of Medicare+Choice eligible individuals
who during March of the previous year were not enrolled
in a Medicare+Choice plan.
(6) Fee-for-service area-specific non-drug bid.--For
purposes of this part, the term ``fee-for-service area-
specific non-drug bid'' means, for an area and year,
the amount described in section 1853(j)(1) for the area
and year, except that any reference to a percent of
less than 100 percent shall be deemed a reference to
100 percent.
PREMIUMS AND BID AMOUNTS.
Sec. 1854. (a) Submission of Proposed Premiums and Bid
Amounts and Related Information.--
(1) In general.--Not later than the second Monday in
September of 2002, 2003, and 2004 (or July 1 of each
other year), each Medicare+Choice organization shall
submit to the Secretary, in a form and manner specified
by the Secretary and for each Medicare+Choice plan for
the service area (or segment of such an area if
permitted under subsection (h)) in which it intends to
be offered in the following year--
[(A)] (A)(i) if the following year is before
2005, the information described in paragraph
(2), (3), or (4) for the type of plan involved
or (ii) if the following year is 2005 or later,
the information described in paragraph (6)(A);
and
* * * * * * *
(5) Review.--
(A) In general.--Subject to subparagraph (B),
the Secretary shall review the adjusted
community rates, the amounts of the basic and
supplemental premiums, and values filed under
paragraphs (2), (3), and (4) of this subsection
and shall approve or disapprove such rates,
amounts, and values so submitted. The Chief
Actuary of the Health Care Financing
Administration shall review the actuarial
assumptions and data used by the
Medicare+Choice organization with respect to
such rates, amounts, and values so submitted to
determine the appropriateness of such
assumptions and data.
* * * * * * *
(6) Submission of bid amounts by medicare+choice
organizations.--
(A) Information to be submitted.--The
information described in this subparagraph is
as follows:
(i) The monthly aggregate bid amount
for provision of all items and services
under this part and the actuarial basis
for determining such amount.
(ii) The proportions of such bid
amount that are attributable to--
(I) the provision of
statutory non-drug benefits
(such portion referred to in
this part as the ``unadjusted
non-drug monthly bid amount'');
(II) the provision of
statutory prescription drug
benefits; and
(III) the provision of non-
statutory benefits;
and the actuarial basis for determining
such proportions.
(iii) Such additional information as
the Administrator may require to verify
the actuarial bases described in
clauses (i) and (ii).
(B) Statutory benefits defined.--For purposes
of this part:
(i) The term ``statutory non-drug
benefits'' means benefits under parts A
and B.
(ii) The term ``statutory
prescription drug benefits'' means
benefits under part D.
(iii) The term ``statutory benefits''
means statutory prescription drug
benefits and statutory non-drug
benefits.
(C) Acceptance and negotiation of bid
amounts.--The Administrator has the authority
to negotiate regarding monthly bid amounts
submitted under subparagraph (A) (and the
proportion described in subparagraph (A)(ii)).
The Administrator may reject such a bid amount
or proportion if the Administrator determines
that such amount or proportion is not supported
by the actuarial bases provided under
subparagraph (A).
(b) Monthly Premium Charged.--
(1) In general.--
(A) * * *
* * * * * * *
(C) Beneficiary rebate rule.--
(i) Requirement for non-competitive-
demonstration areas.--In the case of a
Medicare+Choice payment area that is
not a competitive-demonstration area
designated under section 1853(k)(1),
the Medicare+Choice plan shall provide
to the enrollee a monthly rebate equal
to 75 percent of the average per capita
savings (if any) described in paragraph
(3) applicable to the plan and year
involved.
(ii) Requirement for competitive-
demonstration areas.--In the case of a
Medicare+Choice payment area that is
designated as a competitive-
demonstration area under section
1853(k)(1), if there are average per
capita monthly savings described in
paragraph (4) for a Medicare+Choice
plan and year, the Medicare+Choice plan
shall provide to the enrollee a monthly
rebate equal to 75 percent of such
savings.
(iii) Form of rebate.--A rebate
required under this subparagraph shall
be provided--
(I) through the crediting of
the amount of the rebate
towards the Medicare+Choice
monthly supplementary
beneficiary premium or the
premium imposed for
prescription drug coverage
under part D;
(II) through a direct monthly
payment (through electronic
funds transfer or otherwise);
or
(III) through other means
approved by the Medicare
Benefits Administrator,
or any combination thereof.
(2) Premium terminology defined.--For purposes of
this part:
[(A) The Medicare+Choice monthly basic
beneficiary premium.--The term
``Medicare+Choice monthly basic beneficiary
premium'' means, with respect to a
Medicare+Choice plan, the amount authorized to
be charged under subsection (e)(1) for the
plan, or, in the case of a Medicare+Choice
private fee-for-service plan, the amount filed
under subsection (a)(4)(A)(ii).
[(B) Medicare+Choice monthly supplemental
beneficiary premium.--The term
``Medicare+Choice monthly supplemental
beneficiary premium'' means, with respect to a
Medicare+Choice plan, the amount authorized to
be charged under subsection (e)(2) for the plan
or, in the case of a MSA plan or
Medicare+Choice private fee-for-service plan,
the amount filed under paragraph (3)(B) or
(4)(B) of subsection (a).]
(A) Medicare+Choice monthly basic beneficiary
premium.--The term ``Medicare+Choice monthly
basic beneficiary premium'' means, with respect
to a Medicare+Choice plan--
(i) described in section
1853(a)(1)(A)(ii)(I) (relating to plans
providing rebates), zero; or
(ii) described in section
1853(a)(1)(A)(ii)(II), the amount (if
any) by which the unadjusted non-drug
monthly bid amount exceeds the fee-for-
service area-specific non-drug
benchmark amount.
(B) Medicare+Choice monthly supplemental
beneficiary premium.--The term
``Medicare+Choice monthly supplemental
beneficiary premium'' means, with respect to a
Medicare+Choice plan, the portion of the
aggregate monthly bid amount submitted under
clause (i) of subsection (a)(6)(A) for the year
that is attributable under such section to the
provision of nonstatutory benefits.
(3) Computation of average per capita monthly
savings.--For purposes of paragraph (1)(C)(i), the
average per capita monthly savings referred to in such
paragraph for a Medicare+Choice plan and year is
computed as follows:
(A) Determination of state-wide average risk
adjustment.--
(i) In general.--The Medicare
Benefits Administrator shall determine,
at the same time rates are promulgated
under section 1853(b)(1) (beginning
with 2005), for each State the average
of the risk adjustment factors to be
applied to enrollees under section
1853(a)(1)(A) in that State. In the
case of a State in which a
Medicare+Choice plan was offered in the
previous year, the Administrator may
compute such average based upon risk
adjustment factors applied in that
State in a previous year.
(ii) Treatment of new states.--In the
case of a State in which no
Medicare+Choice plan was offered in the
previous year, the Administrator shall
estimate such average. In making such
estimate, the Administrator may use
average risk adjustment factors applied
to comparable States or applied on a
national basis.
(B) Determination of risk adjusted benchmark
and risk-adjusted bid.--For each
Medicare+Choice plan offered in a State, the
Administrator shall--
(i) adjust the fee-for-service area-
specific non-drug benchmark amount by
the applicable average risk adjustment
factor computed under subparagraph (A);
and
(ii) adjust the unadjusted non-drug
monthly bid amount by such applicable
average risk adjustment factor.
(C) Determination of average per capita
monthly savings.--The average per capita
monthly savings described in this subparagraph
is equal to the amount (if any) by which--
(i) the risk-adjusted benchmark
amount computed under subparagraph
(B)(i), exceeds
(ii) the risk-adjusted bid computed
under subparagraph (B)(ii).
(D) Authority to determine risk adjustment
for areas other than states.--The Administrator
may provide for the determination and
application of risk adjustment factors under
this paragraph on the basis of areas other than
States.
(4) Computation of average per capita monthly savings
for competitive-demonstration areas.--For purposes of
paragraph (1)(C)(ii), the average per capita monthly
savings referred to in such paragraph for a
Medicare+Choice plan and year shall be computed in the
same manner as the average per capita monthly savings
is computed under paragraph (3) except that the
reference to the fee-for-service area-specific non-drug
benchmark amount in paragraph (3)(B)(i) (or to the
benchmark amount as adjusted under paragraph (3)(C)(i))
is deemed to be a reference to the choice non-drug
benchmark amount (or such amount as adjusted in the
manner described in paragraph (3)(B)(i)).
[(c) Uniform Premium.--The Medicare+Choice monthly basic and
supplemental beneficiary premium, the Medicare+Choice monthly
MSA premium charged under subsection (b) of a Medicare+Choice
organization under this part may not vary among individuals
enrolled in the plan.]
(c) Uniform Bid Amounts.--The Medicare+Choice monthly bid
amount submitted under subsection (a)(6) of a Medicare+Choice
organization under this part may not vary among individuals
enrolled in the plan.
(d) Terms and Conditions of Imposing Premiums.--Each
Medicare+Choice organization shall permit the payment of
Medicare+Choice monthly basic and supplemental beneficiary
premiums on a monthly basis, may terminate election of
individuals for a Medicare+Choice plan for failure to make
premium payments only in accordance with section
1851(g)(3)(B)(i), and may not provide, except as provided under
subsection (b)(1)(C) and subsection (b)(1)(D), for cash or
other monetary rebates as an inducement for enrollment or
otherwise.
[(e) Limitation on Enrollee Liability.--
[(1) For basic and additional benefits.--In no event
may--
[(A) the Medicare+Choice monthly basic
beneficiary premium (multiplied by 12) and the
actuarial value of the deductibles,
coinsurance, and copayments applicable on
average to individuals enrolled under this part
with a Medicare+Choice plan described in
section 1851(a)(2)(A) of an organization with
respect to required benefits described in
section 1852(a)(1)(A) and additional benefits
(if any) required under subsection (f)(1)(A)
for a year, exceed
[(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be
applicable on average to individuals entitled
to benefits under part A and enrolled under
part B if they were not members of a
Medicare+Choice organization for the year.
[(2) For supplemental benefits.--If the
Medicare+Choice organization provides to its members
enrolled under this part in a Medicare+Choice plan
described in section 1851(a)(2)(A) with respect to
supplemental benefits described in section 1852(a)(3),
the sum of the Medicare+Choice monthly supplemental
beneficiary premium (multiplied by 12) charged and the
actuarial value of its deductibles, coinsurance, and
copayments charged with respect to such benefits may
not exceed the adjusted community rate for such
benefits (as defined in subsection (f)(3)).
[(3) Determination on other basis.--If the Secretary
determines that adequate data are not available to
determine the actuarial value under paragraph (1)(A) or
(2), the Secretary may determine such amount with
respect to all individuals in same geographic area, the
State, or in the United States, eligible to enroll in
the Medicare+Choice plan involved under this part or on
the basis of other appropriate data.
[(4) Special rule for private fee-for-service
plans.--With respect to a Medicare+Choice private fee-
for-service plan (other than a plan that is an MSA
plan), in no event may--
[(A) the actuarial value of the deductibles,
coinsurance, and copayments applicable on
average to individuals enrolled under this part
with such a plan of an organization with
respect to required benefits described in
section 1852(a)(1), exceed
[(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be
applicable on average to individuals entitled
to benefits under part A and enrolled under
part B if they were not members of a
Medicare+Choice organization for the year.
[(f) Requirement for Additional Benefits.--
[(1) Requirement.--
[(A) In general.--Each Medicare+Choice
organization (in relation to a Medicare+Choice
plan, other than an MSA plan, it offers) shall
provide that if there is an excess amount (as
defined in subparagraph (B)) for the plan for a
contract year, subject to the succeeding
provisions of this subsection, the organization
shall provide to individuals such additional
benefits (as the organization may specify) in a
value which the Secretary determines is at
least equal to the adjusted excess amount (as
defined in subparagraph (C)).
[(B) Excess amount.--For purposes of this
paragraph, the ``excess amount'', for an
organization for a plan, is the amount (if any)
by which--
[(i) the average of the capitation
payments made to the organization under
section 1853 for the plan at the
beginning of contract year, exceeds
[(ii) the actuarial value of the
required benefits described in section
1852(a)(1)(A) under the plan for
individuals under this part, as
determined based upon an adjusted
community rate described in paragraph
(3) (as reduced for the actuarial value
of the coinsurance, copayments, and
deductibles under parts A and B).
[(C) Adjusted excess amount.--For purposes of
this paragraph, the ``adjusted excess amount'',
for an organization for a plan, is the excess
amount reduced to reflect any amount withheld
and reserved for the organization for the year
under paragraph (2).
[(D) Uniform application.--This paragraph
shall be applied uniformly for all enrollees
for a plan.
[(E) Premium reductions.--
[(i) In general.--Subject to clause
(ii), as part of providing any
additional benefits required under
subparagraph (A), a Medicare+Choice
organization may elect a reduction in
its payments under section
1853(a)(1)(A) with respect to a
Medicare+Choice plan and the Secretary
shall apply such reduction to reduce
the premium under section 1839 of each
enrollee in such plan as provided in
section 1840(i).
[(ii) Amount of reduction.--The
amount of the reduction under clause
(i) with respect to any enrollee in a
Medicare+Choice plan--
[(I) may not exceed 125
percent of the premium
described under section
1839(a)(3); and
[(II) shall apply uniformly
to each enrollee of the
Medicare+Choice plan to which
such reduction applies.
[(F) Construction.--Nothing in this
subsection shall be construed as preventing a
Medicare+Choice organization from providing
supplemental benefits (described in section
1852(a)(3)) that are in addition to the health
care benefits otherwise required to be provided
under this paragraph and from imposing a
premium for such supplemental benefits.
[(2) Stabilization fund.--A Medicare+Choice
organization may provide that a part of the value of an
excess amount described in paragraph (1) be withheld
and reserved in the Federal Hospital Insurance Trust
Fund and in the Federal Supplementary Medical Insurance
Trust Fund (in such proportions as the Secretary
determines to be appropriate) by the Secretary for
subsequent annual contract periods, to the extent
required to stabilize and prevent undue fluctuations in
the additional benefits offered in those subsequent
periods by the organization in accordance with such
paragraph. Any of such value of the amount reserved
which is not provided as additional benefits described
in paragraph (1)(A) to individuals electing the
Medicare+Choice plan of the organization in accordance
with such paragraph prior to the end of such periods,
shall revert for the use of such trust funds.
[(3) Adjusted community rate.--For purposes of this
subsection, subject to paragraph (4), the term
``adjusted community rate'' for a service or services
means, at the election of a Medicare+Choice
organization, either--
[(A) the rate of payment for that service or
services which the Secretary annually
determines would apply to an individual
electing a Medicare+Choice plan under this part
if the rate of payment were determined under a
``community rating system'' (as defined in
section 1302(8) of the Public Health Service
Act, other than subparagraph (C)), or
[(B) such portion of the weighted aggregate
premium, which the Secretary annually estimates
would apply to such an individual, as the
Secretary annually estimates is attributable to
that service or services,
but adjusted for differences between the utilization
characteristics of the individuals electing coverage
under this part and the utilization characteristics of
the other enrollees with the plan (or, if the Secretary
finds that adequate data are not available to adjust
for those differences, the differences between the
utilization characteristics of individuals selecting
other Medicare+Choice coverage, or Medicare+Choice
eligible individuals in the area, in the State, or in
the United States, eligible to elect Medicare+Choice
coverage under this part and the utilization
characteristics of the rest of the population in the
area, in the State, or in the United States,
respectively).
[(4) Determination based on insufficient data.--For
purposes of this subsection, if the Secretary finds
that there is insufficient enrollment experience to
determine an average of the capitation payments to be
made under this part at the beginning of a contract
period or to determine (in the case of a newly operated
provider-sponsored organization or other new
organization) the adjusted community rate for the
organization, the Secretary may determine such an
average based on the enrollment experience of other
contracts entered into under this part and may
determine such a rate using data in the general
commercial marketplace.]
* * * * * * *
ESTABLISHMENT OF STANDARDS
Sec. 1856. (a) * * *
(b) Establishment of Other Standards.--
(1) * * *
* * * * * * *
[(3) Relation to state laws.--
[(A) In general.--The standards established
under this subsection shall supersede any State
law or regulation (including standards
described in subparagraph (B)) with respect to
Medicare+Choice plans which are offered by
Medicare+Choice organizations under this part
to the extent such law or regulation is
inconsistent with such standards.
[(B) Standards specifically superseded.--
State standards relating to the following are
superseded under this paragraph:
[(i) Benefit requirements (including
cost-sharing requirements).
[(ii) Requirements relating to
inclusion or treatment of providers.
[(iii) Coverage determinations
(including related appeals and
grievance processes).
[(iv) Requirements relating to
marketing materials and summaries and
schedules of benefits regarding a
Medicare+Choice plan.]
(3) Relation to state laws.--The standards
established under this subsection shall supersede any
State law or regulation (other than State licensing
laws or State laws relating to plan solvency) with
respect to Medicare+Choice plans which are offered by
Medicare+Choice organizations under this part.
* * * * * * *
DEFINITIONS; MISCELLANEOUS PROVISIONS
Sec. 1859. (a) * * *
(b) Definitions Relating to Medicare+Choice Plans.--
(1) * * *
* * * * * * *
(4) Specialized medicare+choice plans for special
needs beneficiaries.--
(A) In general.--The term ``specialized
Medicare+Choice plan for special needs
beneficiaries'' means a Medicare+Choice plan
that exclusively serves special needs
beneficiaries (as defined in subparagraph (B)).
(B) Special needs beneficiary.--The term
``special needs beneficiary'' means a
Medicare+Choice eligible individual who--
(i) is institutionalized (as defined
by the Secretary);
(ii) is entitled to medical
assistance under a State plan under
title XIX; or
(iii) meets such requirements as the
Secretary may determine would benefit
from enrollment in such a specialized
Medicare+Choice plan described in
subparagraph (A) for individuals with
severe or disabling chronic conditions.
* * * * * * *
(f) Restriction on Enrollment for Specialized Medicare+Choice
Plans for Special Needs Beneficiaries.--In the case of a
specialized Medicare+Choice plan (as defined in subsection
(b)(4)), notwithstanding any other provision of this part and
in accordance with regulations of the Secretary and for periods
before January 1, 2007, the plan may restrict the enrollment of
individuals under the plan to individuals who are within one or
more classes of special needs beneficiaries.
Part D--Voluntary Prescription Drug Benefit Program
SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE PERIOD.
(a) Provision of Qualified Prescription Drug Coverage Through
Enrollment in Plans.--Subject to the succeeding provisions of
this part, each individual who is entitled to benefits under
part A or is enrolled under part B is entitled to obtain
qualified prescription drug coverage (described in section
1860B(a)) as follows:
(1) Medicare+choice plan.--If the individual is
eligible to enroll in a Medicare+Choice plan that
provides qualified prescription drug coverage under
section 1851(j), the individual may enroll in the plan
and obtain coverage through such plan.
(2) Prescription drug plan.--If the individual is not
enrolled in a Medicare+Choice plan that provides
qualified prescription drug coverage, the individual
may enroll under this part in a prescription drug plan
(as defined in section 1860J(a)(5)).
Such individuals shall have a choice of such plans under
section 1860E(d).
(b) General Election Procedures.--
(1) In general.--An individual eligible to make an
election under subsection (a) may elect to enroll in a
prescription drug plan under this part, or elect the
option of qualified prescription drug coverage under a
Medicare+Choice plan under part C, and to change such
election only in such manner and form as may be
prescribed by regulations of the Administrator of the
Medicare Benefits Administration (appointed under
section 1808(b)) (in this part referred to as the
``Medicare Benefits Administrator'') and only during an
election period prescribed in or under this subsection.
(2) Election periods.--
(A) In general.--Except as provided in this
paragraph, the election periods under this
subsection shall be the same as the coverage
election periods under the Medicare+Choice
program under section 1851(e), including--
(i) annual coordinated election
periods; and
(ii) special election periods.
In applying the last sentence of section
1851(e)(4) (relating to discontinuance of a
Medicare+Choice election during the first year
of eligibility) under this subparagraph, in the
case of an election described in such section
in which the individual had elected or is
provided qualified prescription drug coverage
at the time of such first enrollment, the
individual shall be permitted to enroll in a
prescription drug plan under this part at the
time of the election of coverage under the
original fee-for-service plan.
(B) Initial election periods.--
(i) Individuals currently covered.--
In the case of an individual who is
entitled to benefits under part A or
enrolled under part B as of November 1,
2004, there shall be an initial
election period of 6 months beginning
on that date.
(ii) Individual covered in future.--
In the case of an individual who is
first entitled to benefits under part A
or enrolled under part B after such
date, there shall be an initial
election period which is the same as
the initial enrollment period under
section 1837(d).
(C) Additional special election periods.--The
Administrator shall establish special election
periods--
(i) in cases of individuals who have
and involuntarily lose prescription
drug coverage described in subsection
(c)(2)(C);
(ii) in cases described in section
1837(h) (relating to errors in
enrollment), in the same manner as such
section applies to part B;
(iii) in the case of an individual
who meets such exceptional conditions
(including conditions provided under
section 1851(e)(4)(D)) as the
Administrator may provide; and
(iv) in cases of individuals (as
determined by the Administrator) who
become eligible for prescription drug
assistance under title XIX under
section 1935(d).
(c) Guaranteed Issue; Community Rating; and
Nondiscrimination.--
(1) Guaranteed issue.--
(A) In general.--An eligible individual who
is eligible to elect qualified prescription
drug coverage under a prescription drug plan or
Medicare+Choice plan at a time during which
elections are accepted under this part with
respect to the plan shall not be denied
enrollment based on any health status-related
factor (described in section 2702(a)(1) of the
Public Health Service Act) or any other factor.
(B) Medicare+choice limitations permitted.--
The provisions of paragraphs (2) and (3) (other
than subparagraph (C)(i), relating to default
enrollment) of section 1851(g) (relating to
priority and limitation on termination of
election) shall apply to PDP sponsors under
this subsection.
(2) Community-rated premium.--
(A) In general.--In the case of an individual
who maintains (as determined under subparagraph
(C)) continuous prescription drug coverage
since the date the individual first qualifies
to elect prescription drug coverage under this
part, a PDP sponsor or Medicare+Choice
organization offering a prescription drug plan
or Medicare+Choice plan that provides qualified
prescription drug coverage and in which the
individual is enrolled may not deny, limit, or
condition the coverage or provision of covered
prescription drug benefits or increase the
premium under the plan based on any health
status-related factor described in section
2702(a)(1) of the Public Health Service Act or
any other factor.
(B) Late enrollment penalty.--In the case of
an individual who does not maintain such
continuous prescription drug coverage (as
described in subparagraph (C)), a PDP sponsor
or Medicare+Choice organization may
(notwithstanding any provision in this title)
adjust the premium otherwise applicable or
impose a pre-existing condition exclusion with
respect to qualified prescription drug coverage
in a manner that reflects additional actuarial
risk involved. Such a risk shall be established
through an appropriate actuarial opinion of the
type described in subparagraphs (A) through (C)
of section 2103(c)(4).
(C) Continuous prescription drug coverage.--
An individual is considered for purposes of
this part to be maintaining continuous
prescription drug coverage on and after the
date the individual first qualifies to elect
prescription drug coverage under this part if
the individual establishes that as of such date
the individual is covered under any of the
following prescription drug coverage and before
the date that is the last day of the 63-day
period that begins on the date of termination
of the particular prescription drug coverage
involved (regardless of whether the individual
subsequently obtains any of the following
prescription drug coverage):
(i) Coverage under prescription drug
plan or medicare+choice plan.--
Qualified prescription drug coverage
under a prescription drug plan or under
a Medicare+Choice plan.
(ii) Medicaid prescription drug
coverage.--Prescription drug coverage
under a medicaid plan under title XIX,
including through the Program of All-
inclusive Care for the Elderly (PACE)
under section 1934, through a social
health maintenance organization
(referred to in section 4104(c) of the
Balanced Budget Act of 1997), or
through a Medicare+Choice project that
demonstrates the application of
capitation payment rates for frail
elderly medicare beneficiaries through
the use of a interdisciplinary team and
through the provision of primary care
services to such beneficiaries by means
of such a team at the nursing facility
involved.
(iii) Prescription drug coverage
under group health plan.--Any
outpatient prescription drug coverage
under a group health plan, including a
health benefits plan under the Federal
Employees Health Benefit Plan under
chapter 89 of title 5, United States
Code, and a qualified retiree
prescription drug plan as defined in
section 1860H(f)(1), but only if
(subject to subparagraph (E)(ii)) the
coverage provides benefits at least
equivalent to the benefits under a
qualified prescription drug plan.
(iv) Prescription drug coverage under
certain medigap policies.--Coverage
under a medicare supplemental policy
under section 1882 that provides
benefits for prescription drugs
(whether or not such coverage conforms
to the standards for packages of
benefits under section 1882(p)(1)), but
only if the policy was in effect on
January 1, 2005, and if (subject to
subparagraph (E)(ii)) the coverage
provides benefits at least equivalent
to the benefits under a qualified
prescription drug plan.
(v) State pharmaceutical assistance
program.--Coverage of prescription
drugs under a State pharmaceutical
assistance program, but only if
(subject to subparagraph (E)(ii)) the
coverage provides benefits at least
equivalent to the benefits under a
qualified prescription drug plan.
(vi) Veterans' coverage of
prescription drugs.--Coverage of
prescription drugs for veterans under
chapter 17 of title 38, United States
Code, but only if (subject to
subparagraph (E)(ii)) the coverage
provides benefits at least equivalent
to the benefits under a qualified
prescription drug plan.
(D) Certification.--For purposes of carrying
out this paragraph, the certifications of the
type described in sections 2701(e) of the
Public Health Service Act and in section
9801(e) of the Internal Revenue Code shall also
include a statement for the period of coverage
of whether the individual involved had
prescription drug coverage described in
subparagraph (C).
(E) Disclosure.--
(i) In general.--Each entity that
offers coverage of the type described
in clause (iii), (iv), (v), or (vi) of
subparagraph (C) shall provide for
disclosure, consistent with standards
established by the Administrator, of
whether such coverage provides benefits
at least equivalent to the benefits
under a qualified prescription drug
plan.
(ii) Waiver of limitations.--An
individual may apply to the
Administrator to waive the requirement
that coverage of such type provide
benefits at least equivalent to the
benefits under a qualified prescription
drug plan, if the individual
establishes that the individual was not
adequately informed that such coverage
did not provide such level of benefits.
(F) Construction.--Nothing in this section
shall be construed as preventing the
disenrollment of an individual from a
prescription drug plan or a Medicare+Choice
plan based on the termination of an election
described in section 1851(g)(3), including for
non-payment of premiums or for other reasons
specified in subsection (d)(3), which takes
into account a grace period described in
section 1851(g)(3)(B)(i).
(3) Nondiscrimination.--A PDP sponsor offering a
prescription drug plan shall not establish a service
area in a manner that would discriminate based on
health or economic status of potential enrollees.
(d) Effective Date of Elections.--
(1) In general.--Except as provided in this section,
the Administrator shall provide that elections under
subsection (b) take effect at the same time as the
Administrator provides that similar elections under
section 1851(e) take effect under section 1851(f).
(2) No election effective before 2005.--In no case
shall any election take effect before January 1, 2005.
(3) Termination.--The Administrator shall provide for
the termination of an election in the case of--
(A) termination of coverage under both part A
and part B; and
(B) termination of elections described in
section 1851(g)(3) (including failure to pay
required premiums).
SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.
(a) Requirements.--
(1) In general.--For purposes of this part and part
C, the term ``qualified prescription drug coverage''
means either of the following:
(A) Standard coverage with access to
negotiated prices.--Standard coverage (as
defined in subsection (b)) and access to
negotiated prices under subsection (d).
(B) Actuarially equivalent coverage with
access to negotiated prices.--Coverage of
covered outpatient drugs which meets the
alternative coverage requirements of subsection
(c) and access to negotiated prices under
subsection (d), but only if it is approved by
the Administrator, as provided under subsection
(c).
(2) Permitting additional outpatient prescription
drug coverage.--
(A) In general.--Subject to subparagraph (B),
nothing in this part shall be construed as
preventing qualified prescription drug coverage
from including coverage of covered outpatient
drugs that exceeds the coverage required under
paragraph (1), but any such additional coverage
shall be limited to coverage of covered
outpatient drugs.
(B) Disapproval authority.--The Administrator
shall review the offering of qualified
prescription drug coverage under this part or
part C. If the Administrator finds that, in the
case of a qualified prescription drug coverage
under a prescription drug plan or a
Medicare+Choice plan, that the organization or
sponsor offering the coverage is engaged in
activities intended to discourage enrollment of
classes of eligible medicare beneficiaries
obtaining coverage through the plan on the
basis of their higher likelihood of utilizing
prescription drug coverage, the Administrator
may terminate the contract with the sponsor or
organization under this part or part C.
(3) Application of secondary payor provisions.--The
provisions of section 1852(a)(4) shall apply under this
part in the same manner as they apply under part C.
(b) Standard Coverage.--For purposes of this part, the
``standard coverage'' is coverage of covered outpatient drugs
(as defined in subsection (f)) that meets the following
requirements:
(1) Deductible.--The coverage has an annual
deductible--
(A) for 2005, that is equal to $250; or
(B) for a subsequent year, that is equal to
the amount specified under this paragraph for
the previous year increased by the percentage
specified in paragraph (5) for the year
involved.
Any amount determined under subparagraph (B) that is
not a multiple of $10 shall be rounded to the nearest
multiple of $10.
(2) Limits on cost-sharing.--
(A) In general.--The coverage has cost-
sharing (for costs above the annual deductible
specified in paragraph (1) and up to the
initial coverage limit under paragraph (3)) as
follows:
(i) First copayment range.--For costs
above the annual deductible specified
in paragraph (1) and up to amount
specified in subparagraph (C), the
cost-sharing--
(I) is equal to 20 percent;
or
(II) is actuarially
equivalent (using processes
established under subsection
(e)) to an average expected
payment of 20 percent of such
costs.
(ii) Secondary copayment range.--For
costs above the amount specified in
subparagraph (C) and up to the initial
coverage limit, the cost-sharing--
(I) is equal to 50 percent;
or
(II) is actuarially
consistent (using processes
established under subsection
(e)) with an average expected
payment of 50 percent of such
costs.
(B) Use of tiered copayments.--Nothing in
this part shall be construed as preventing a
PDP sponsor from applying tiered copayments, so
long as such tiered copayments are consistent
with subparagraph (A).
(C) Initial copayment threshold.--The amount
specified in this subparagraph--
(i) for 2005, is equal to $1,000; or
(ii) for a subsequent year, is equal
to the amount specified in this
subparagraph for the previous year,
increased by the annual percentage
increase described in paragraph (5) for
the year involved.
Any amount determined under clause (ii) that is
not a multiple of $10 shall be rounded to the
nearest multiple of $10.
(3) Initial coverage limit.--Subject to paragraph
(4), the coverage has an initial coverage limit on the
maximum costs that may be recognized for payment
purposes--
(A) for 2005, that is equal to $2,000; or
(B) for a subsequent year, that is equal to
the amount specified in this paragraph for the
previous year, increased by the annual
percentage increase described in paragraph (5)
for the year involved.
Any amount determined under subparagraph (B) that is
not a multiple of $25 shall be rounded to the nearest
multiple of $25.
(4) Catastrophic protection.--
(A) In general.--Notwithstanding paragraph
(3), the coverage provides benefits with no
cost-sharing after the individual has incurred
costs (as described in subparagraph (C)) for
covered outpatient drugs in a year equal to the
annual out-of-pocket threshold specified in
subparagraph (B).
(B) Annual out-of-pocket threshold.--For
purposes of this part, the ``annual out-of-
pocket threshold'' specified in this
subparagraph--
(i) for 2005, is equal to $3,800; or
(ii) for a subsequent year, is equal
to the amount specified in this
subparagraph for the previous year,
increased by the annual percentage
increase described in paragraph (5) for
the year involved.
Any amount determined under clause (ii) that is
not a multiple of $100 shall be rounded to the
nearest multiple of $100.
(C) Application.--In applying subparagraph
(A)--
(i) incurred costs shall only include
costs incurred for the annual
deductible (described in paragraph
(1)), cost-sharing (described in
paragraph (2)), and amounts for which
benefits are not provided because of
the application of the initial coverage
limit described in paragraph (3); and
(ii) such costs shall be treated as
incurred only if they are paid by the
individual, under section 1860G, or
under title XIX and the individual is
not reimbursed (through insurance or
otherwise) by another person for such
costs.
(5) Annual percentage increase.--For purposes of this
part, the annual percentage increase specified in this
paragraph for a year is equal to the annual percentage
increase in average per capita aggregate expenditures
for covered outpatient drugs in the United States for
medicare beneficiaries, as determined by the
Administrator for the 12-month period ending in July of
the previous year.
(c) Alternative Coverage Requirements.--A prescription drug
plan or Medicare+Choice plan may provide a different
prescription drug benefit design from the standard coverage
described in subsection (b) so long as the Administrator
determines (based on an actuarial analysis by the
Administrator) that the following requirements are met and the
plan applies for, and receives, the approval of the
Administrator for such benefit design:
(1) Assuring at least actuarially equivalent
coverage.--
(A) Assuring equivalent value of total
coverage.--The actuarial value of the total
coverage (as determined under subsection (e))
is at least equal to the actuarial value (as so
determined) of standard coverage.
(B) Assuring equivalent unsubsidized value of
coverage.--The unsubsidized value of the
coverage is at least equal to the unsubsidized
value of standard coverage. For purposes of
this subparagraph, the unsubsidized value of
coverage is the amount by which the actuarial
value of the coverage (as determined under
subsection (e)) exceeds the actuarial value of
the subsidy payments under section 1860H with
respect to such coverage.
(C) Assuring standard payment for costs at
initial coverage limit.--The coverage is
designed, based upon an actuarially
representative pattern of utilization (as
determined under subsection (e)), to provide
for the payment, with respect to costs incurred
that are equal to the initial coverage limit
under subsection (b)(3), of an amount equal to
at least the sum of the following products:
(i) First copayment range.--The
product of--
(I) the amount by which the
initial copayment threshold
described in subsection
(b)(2)(C) exceeds the
deductible described in
subsection (b)(1); and
(II) 100 percent minus the
cost-sharing percentage
specified in subsection
(b)(2)(A)(i)(I).
(ii) Secondary copayment range.--The
product of--
(I) the amount by which the
initial coverage limit
described in subsection (b)(3)
exceeds the initial copayment
threshold described in
subsection (b)(2)(C); and
(II) 100 percent minus the
cost-sharing percentage
specified in subsection
(b)(2)(A)(ii)(I).
(2) Catastrophic protection.--The coverage provides
for beneficiaries the catastrophic protection described
in subsection (b)(4).
(d) Access to Negotiated Prices.--
(1) In general.--Under qualified prescription drug
coverage offered by a PDP sponsor or a Medicare+Choice
organization, the sponsor or organization shall provide
beneficiaries with access to negotiated prices
(including applicable discounts) used for payment for
covered outpatient drugs, regardless of the fact that
no benefits may be payable under the coverage with
respect to such drugs because of the application of
cost-sharing or an initial coverage limit (described in
subsection (b)(3)). Insofar as a State elects to
provide medical assistance under title XIX for a drug
based on the prices negotiated by a prescription drug
plan under this part, the requirements of section 1927
shall not apply to such drugs. The prices negotiated by
a prescription drug plan under this part, by a
Medicare+Choice plan with respect to covered outpatient
drugs, or by a qualified retiree prescription drug plan
(as defined in section 1860H(f)(1)) with respect to
such drugs on behalf of individuals entitled to
benefits under part A or enrolled under part B, shall
(notwithstanding any other provision of law) not be
taken into account for the purposes of establishing the
best price under section 1927(c)(1)(C).
(2) Disclosure.--The PDP sponsor or Medicare+Choice
organization shall disclose to the Administrator (in a
manner specified by the Administrator) the extent to
which discounts or rebates made available to the
sponsor or organization by a manufacturer are passed
through to enrollees through pharmacies and other
dispensers or otherwise. The provisions of section
1927(b)(3)(D) shall apply to information disclosed to
the Administrator under this paragraph in the same
manner as such provisions apply to information
disclosed under such section.
(e) Actuarial Valuation; Determination of Annual Percentage
Increases.--
(1) Processes.--For purposes of this section, the
Administrator shall establish processes and methods--
(A) for determining the actuarial valuation
of prescription drug coverage, including--
(i) an actuarial valuation of
standard coverage and of the
reinsurance subsidy payments under
section 1860H;
(ii) the use of generally accepted
actuarial principles and methodologies;
and
(iii) applying the same methodology
for determinations of alternative
coverage under subsection (c) as is
used with respect to determinations of
standard coverage under subsection (b);
and
(B) for determining annual percentage
increases described in subsection (b)(5).
(2) Use of outside actuaries.--Under the processes
under paragraph (1)(A), PDP sponsors and
Medicare+Choice organizations may use actuarial
opinions certified by independent, qualified actuaries
to establish actuarial values, but the Administrator
shall determine whether such actuarial values meet the
requirements under subsection (c)(1).
(f) Covered Outpatient Drugs Defined.--
(1) In general.--Except as provided in this
subsection, for purposes of this part, the term
``covered outpatient drug'' means--
(A) a drug that may be dispensed only upon a
prescription and that is described in
subparagraph (A)(i) or (A)(ii) of section
1927(k)(2); or
(B) a biological product described in clauses
(i) through (iii) of subparagraph (B) of such
section or insulin described in subparagraph
(C) of such section,
and such term includes a vaccine licensed under section
351 of the Public Health Service Act and any use of a
covered outpatient drug for a medically accepted
indication (as defined in section 1927(k)(6)).
(2) Exclusions.--
(A) In general.--Such term does not include
drugs or classes of drugs, or their medical
uses, which may be excluded from coverage or
otherwise restricted under section 1927(d)(2),
other than subparagraph (E) thereof (relating
to smoking cessation agents), or under section
1927(d)(3).
(B) Avoidance of duplicate coverage.--A drug
prescribed for an individual that would
otherwise be a covered outpatient drug under
this part shall not be so considered if payment
for such drug is available under part A or B
for an individual entitled to benefits under
part A and enrolled under part B.
(3) Application of formulary restrictions.--A drug
prescribed for an individual that would otherwise be a
covered outpatient drug under this part shall not be so
considered under a plan if the plan excludes the drug
under a formulary and such exclusion is not
successfully appealed under section 1860C(f)(2).
(4) Application of general exclusion provisions.--A
prescription drug plan or Medicare+Choice plan may
exclude from qualified prescription drug coverage any
covered outpatient drug--
(A) for which payment would not be made if
section 1862(a) applied to part D; or
(B) which are not prescribed in accordance
with the plan or this part.
Such exclusions are determinations subject to
reconsideration and appeal pursuant to section
1860C(f).
SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE.
(a) Guaranteed Issue, Community-Rated Premiums, Access to
Negotiated Prices, and Nondiscrimination.--For provisions
requiring guaranteed issue, community-rated premiums, access to
negotiated prices, and nondiscrimination, see sections
1860A(c)(1), 1860A(c)(2), 1860B(d), and 1860F(b), respectively.
(b) Dissemination of Information.--
(1) General information.--A PDP sponsor shall
disclose, in a clear, accurate, and standardized form
to each enrollee with a prescription drug plan offered
by the sponsor under this part at the time of
enrollment and at least annually thereafter, the
information described in section 1852(c)(1) relating to
such plan. Such information includes the following:
(A) Access to covered outpatient drugs,
including access through pharmacy networks.
(B) How any formulary used by the sponsor
functions.
(C) Co-payments and deductible requirements,
including the identification of the tiered or
other co-payment level applicable to each drug
(or class of drugs).
(D) Grievance and appeals procedures.
(2) Disclosure upon request of general coverage,
utilization, and grievance information.--Upon request
of an individual eligible to enroll under a
prescription drug plan, the PDP sponsor shall provide
the information described in section 1852(c)(2) (other
than subparagraph (D)) to such individual.
(3) Response to beneficiary questions.--Each PDP
sponsor offering a prescription drug plan shall have a
mechanism for providing specific information to
enrollees upon request. The sponsor shall make
available on a timely basis, through an Internet
website and in writing upon request, information on
specific changes in its formulary.
(4) Claims information.--Each PDP sponsor offering a
prescription drug plan must furnish to enrolled
individuals in a form easily understandable to such
individuals an explanation of benefits (in accordance
with section 1806(a) or in a comparable manner) and a
notice of the benefits in relation to initial coverage
limit and annual out-of-pocket threshold for the
current year, whenever prescription drug benefits are
provided under this part (except that such notice need
not be provided more often than monthly).
(c) Access to Covered Benefits.--
(1) Assuring pharmacy access.--
(A) In general.--The PDP sponsor of the
prescription drug plan shall secure the
participation in its network of a sufficient
number of pharmacies that dispense (other than
by mail order) drugs directly to patients to
ensure convenient access (as determined by the
Administrator and including adequate emergency
access) for enrolled beneficiaries, in
accordance with standards established under
section 1860D(e) that ensure such convenient
access.
(B) Use of point-of-service system.--A PDP
sponsor shall establish an optional point-of-
service method of operation under which--
(i) the plan provides access to any
or all pharmacies that are not
participating pharmacies in its
network; and
(ii) the plan may charge
beneficiaries through adjustments in
premiums and copayments any additional
costs associated with the point-of-
service option.
The additional copayments so charged shall not
count toward the application of section
1860B(b).
(2) Use of standardized technology.--
(A) In general.--The PDP sponsor of a
prescription drug plan shall issue (and
reissue, as appropriate) such a card (or other
technology) that may be used by an enrolled
beneficiary to assure access to negotiated
prices under section 1860B(d) for the purchase
of prescription drugs for which coverage is not
otherwise provided under the prescription drug
plan.
(B) Standards.--
(i) Development.--The Administrator
shall provide for the development of
national standards relating to a
standardized format for the card or
other technology referred to in
subparagraph (A). Such standards shall
be compatible with standards
established under part C of title XI.
(ii) Application of advisory task
force.--The advisory task force
established under subsection
(d)(3)(B)(ii) shall provide
recommendations to the Administrator
under such subsection regarding the
standards developed under clause (i).
(3) Requirements on development and application of
formularies.--If a PDP sponsor of a prescription drug
plan uses a formulary, the following requirements must
be met:
(A) Pharmacy and therapeutic (p&t)
committee.--The sponsor must establish a
pharmacy and therapeutic committee that
develops and reviews the formulary. Such
committee shall include at least one physician
and at least one pharmacist both with expertise
in the care of elderly or disabled persons and
a majority of its members shall consist of
individuals who are a physician or a pharmacist
(or both).
(B) Formulary development.--In developing and
reviewing the formulary, the committee shall
base clinical decisions on the strength of
scientific evidence and standards of practice,
including assessing peer-reviewed medical
literature, such as randomized clinical trials,
pharmacoeconomic studies, outcomes research
data, and such other information as the
committee determines to be appropriate.
(C) Inclusion of drugs in all therapeutic
categories.--The formulary must include drugs
within each therapeutic category and class of
covered outpatient drugs (although not
necessarily for all drugs within such
categories and classes).
(D) Provider education.--The committee shall
establish policies and procedures to educate
and inform health care providers concerning the
formulary.
(E) Notice before removing drugs from
formulary.--Any removal of a drug from a
formulary shall take effect only after
appropriate notice is made available to
beneficiaries and physicians.
(F) Grievances and appeals relating to
application of formularies.--For provisions
relating to grievances and appeals of coverage,
see subsections (e) and (f).
(d) Cost and Utilization Management; Quality Assurance;
Medication Therapy Management Program.--
(1) In general.--The PDP sponsor shall have in place
with respect to covered outpatient drugs--
(A) an effective cost and drug utilization
management program, including medically
appropriate incentives to use generic drugs and
therapeutic interchange, when appropriate;
(B) quality assurance measures and systems to
reduce medical errors and adverse drug
interactions, including a medication therapy
management program described in paragraph (2)
and for years beginning with 2006, an
electronic prescription program described in
paragraph (3); and
(C) a program to control fraud, abuse, and
waste.
Nothing in this section shall be construed as impairing
a PDP sponsor from applying cost management tools
(including differential payments) under all methods of
operation.
(2) Medication therapy management program.--
(A) In general.--A medication therapy
management program described in this paragraph
is a program of drug therapy management and
medication administration that is designed to
assure, with respect to beneficiaries with
chronic diseases (such as diabetes, asthma,
hypertension, and congestive heart failure) or
multiple prescriptions, that covered outpatient
drugs under the prescription drug plan are
appropriately used to achieve therapeutic goals
and reduce the risk of adverse events,
including adverse drug interactions.
(B) Elements.--Such program may include--
(i) enhanced beneficiary
understanding of such appropriate use
through beneficiary education,
counseling, and other appropriate
means;
(ii) increased beneficiary adherence
with prescription medication regimens
through medication refill reminders,
special packaging, and other
appropriate means; and
(iii) detection of patterns of
overuse and underuse of prescription
drugs.
(C) Development of program in cooperation
with licensed pharmacists.--The program shall
be developed in cooperation with licensed
pharmacists and physicians.
(D) Considerations in pharmacy fees.--The PDP
sponsor of a prescription drug program shall
take into account, in establishing fees for
pharmacists and others providing services under
the medication therapy management program, the
resources and time used in implementing the
program.
(3) Electronic prescription program.--
(A) In general.--An electronic prescription
drug program described in this paragraph is a
program that includes at least the following
components, consistent with national standards
established under subparagraph (B):
(i) Electronic transmittal of
prescriptions.--Prescriptions are only
received electronically, except in
emergency cases and other exceptional
circumstances recognized by the
Administrator.
(ii) Provision of information to
prescribing health care professional.--
The program provides, upon transmittal
of a prescription by a prescribing
health care professional, for
transmittal by the pharmacist to the
professional of information that
includes--
(I) information (to the
extent available and feasible)
on the drugs being prescribed
for that patient and other
information relating to the
medical history or condition of
the patient that may be
relevant to the appropriate
prescription for that patient;
(II) cost-effective
alternatives (if any) for the
use of the drug prescribed; and
(III) information on the
drugs included in the
applicable formulary.
To the extent feasible, such program
shall permit the prescribing health
care professional to provide (and be
provided) related information on an
interactive, real-time basis.
(B) Standards.--
(i) Development.--The Administrator
shall provide for the development of
national standards relating to the
electronic prescription drug program
described in subparagraph (A). Such
standards shall be compatible with
standards established under part C of
title XI.
(ii) Advisory task force.--In
developing such standards and the
standards described in subsection
(c)(2)(B)(i) the Administrator shall
establish a task force that includes
representatives of physicians,
hospitals, pharmacists, and technology
experts and representatives of the
Departments of Veterans Affairs and
Defense and other appropriate Federal
agencies to provide recommendations to
the Administrator on such standards,
including recommendations relating to
the following:
(I) The range of available
computerized prescribing
software and hardware and their
costs to develop and implement.
(II) The extent to which such
systems reduce medication
errors and can be readily
implemented by physicians and
hospitals.
(III) Efforts to develop a
common software platform for
computerized prescribing.
(IV) The cost of implementing
such systems in the range of
hospital and physician office
settings, including hardware,
software, and training costs.
(V) Implementation issues as
they relate to part C of title
XI, and current Federal and
State prescribing laws and
regulations and their impact on
implementation of computerized
prescribing.
(iii) Deadlines.--
(I) The Administrator shall
constitute the task force under
clause (ii) by not later than
April 1, 2003.
(II) Such task force shall
submit recommendations to
Administrator by not later than
January 1, 2004.
(III) The Administrator shall
develop and promulgate the
national standards referred to
in clause (ii) by not later
than January 1, 2005.
(C) Reference to availability of grant
funds.--Grant funds are authorized under
section 399O of the Public Health Service Act
to provide assistance to health care providers
in implementing electronic prescription drug
programs.
(4) Treatment of accreditation.--Section 1852(e)(4)
(relating to treatment of accreditation) shall apply to
prescription drug plans under this part with respect to
the following requirements, in the same manner as they
apply to Medicare+Choice plans under part C with
respect to the requirements described in a clause of
section 1852(e)(4)(B):
(A) Paragraph (1) (including quality
assurance), including medication therapy
management program under paragraph (2).
(B) Subsection (c)(1) (relating to access to
covered benefits).
(C) Subsection (g) (relating to
confidentiality and accuracy of enrollee
records).
(5) Public disclosure of pharmaceutical prices for
equivalent drugs.--Each PDP sponsor shall provide that
each pharmacy or other dispenser that arranges for the
dispensing of a covered outpatient drug shall inform
the beneficiary at the time of purchase of the drug of
any differential between the price of the prescribed
drug to the enrollee and the price of the lowest cost
generic drug covered under the plan that is
therapeutically equivalent and bioequivalent.
(e) Grievance Mechanism, Coverage Determinations, and
Reconsiderations.--
(1) In general.--Each PDP sponsor shall provide
meaningful procedures for hearing and resolving
grievances between the organization (including any
entity or individual through which the sponsor provides
covered benefits) and enrollees with prescription drug
plans of the sponsor under this part in accordance with
section 1852(f).
(2) Application of coverage determination and
reconsideration provisions.--A PDP sponsor shall meet
the requirements of paragraphs (1) through (3) of
section 1852(g) with respect to covered benefits under
the prescription drug plan it offers under this part in
the same manner as such requirements apply to a
Medicare+Choice organization with respect to benefits
it offers under a Medicare+Choice plan under part C.
(3) Request for review of tiered formulary
determinations.--In the case of a prescription drug
plan offered by a PDP sponsor that provides for tiered
cost-sharing for drugs included within a formulary and
provides lower cost-sharing for preferred drugs
included within the formulary, an individual who is
enrolled in the plan may request coverage of a
nonpreferred drug under the terms applicable for
preferred drugs if the prescribing physician determines
that the preferred drug for treatment of the same
condition is not as effective for the individual or has
adverse effects for the individual.
(f) Appeals.--
(1) In general.--Subject to paragraph (2), a PDP
sponsor shall meet the requirements of paragraphs (4)
and (5) of section 1852(g) with respect to drugs not
included on any formulary in the same manner as such
requirements apply to a Medicare+Choice organization
with respect to benefits it offers under a
Medicare+Choice plan under part C.
(2) Formulary determinations.--An individual who is
enrolled in a prescription drug plan offered by a PDP
sponsor may appeal to obtain coverage for a covered
outpatient drug that is not on a formulary of the
sponsor if the prescribing physician determines that
the formulary drug for treatment of the same condition
is not as effective for the individual or has adverse
effects for the individual.
(g) Confidentiality and Accuracy of Enrollee Records.--A PDP
sponsor shall meet the requirements of section 1852(h) with
respect to enrollees under this part in the same manner as such
requirements apply to a Medicare+Choice organization with
respect to enrollees under part C.
SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) SPONSORS;
CONTRACTS; ESTABLISHMENT OF STANDARDS.
(a) General Requirements.--Each PDP sponsor of a prescription
drug plan shall meet the following requirements:
(1) Licensure.--Subject to subsection (c), the
sponsor is organized and licensed under State law as a
risk-bearing entity eligible to offer health insurance
or health benefits coverage in each State in which it
offers a prescription drug plan.
(2) Assumption of financial risk.--
(A) In general.--Subject to subparagraph (B)
and section 1860E(d)(2), the entity assumes
full financial risk on a prospective basis for
qualified prescription drug coverage that it
offers under a prescription drug plan and that
is not covered under section 1860H.
(B) Reinsurance permitted.--The entity may
obtain insurance or make other arrangements for
the cost of coverage provided to any enrolled
member under this part.
(3) Solvency for unlicensed sponsors.--In the case of
a sponsor that is not described in paragraph (1), the
sponsor shall meet solvency standards established by
the Administrator under subsection (d).
(b) Contract Requirements.--
(1) In general.--The Administrator shall not permit
the election under section 1860A of a prescription drug
plan offered by a PDP sponsor under this part, and the
sponsor shall not be eligible for payments under
section 1860G or 1860H, unless the Administrator has
entered into a contract under this subsection with the
sponsor with respect to the offering of such plan. Such
a contract with a sponsor may cover more than one
prescription drug plan. Such contract shall provide
that the sponsor agrees to comply with the applicable
requirements and standards of this part and the terms
and conditions of payment as provided for in this part.
(2) Negotiation regarding terms and conditions.--The
Administrator shall have the same authority to
negotiate the terms and conditions of prescription drug
plans under this part as the Director of the Office of
Personnel Management has with respect to health
benefits plans under chapter 89 of title 5, United
States Code. In negotiating the terms and conditions
regarding premiums for which information is submitted
under section 1860F(a)(2), the Administrator shall take
into account the subsidy payments under section 1860H
and the adjusted community rate (as defined in section
1854(f)(3)) for the benefits covered.
(3) Incorporation of certain medicare+choice contract
requirements.--The following provisions of section 1857
shall apply, subject to subsection (c)(5), to contracts
under this section in the same manner as they apply to
contracts under section 1857(a):
(A) Minimum enrollment.--Paragraphs (1) and
(3) of section 1857(b).
(B) Contract period and effectiveness.--
Paragraphs (1) through (3) and (5) of section
1857(c).
(C) Protections against fraud and beneficiary
protections.--Section 1857(d).
(D) Additional contract terms.--Section
1857(e); except that in applying section
1857(e)(2) under this part--
(i) such section shall be applied
separately to costs relating to this
part (from costs under part C);
(ii) in no case shall the amount of
the fee established under this
subparagraph for a plan exceed 20
percent of the maximum amount of the
fee that may be established under
subparagraph (B) of such section; and
(iii) no fees shall be applied under
this subparagraph with respect to
Medicare+Choice plans.
(E) Intermediate sanctions.--Section 1857(g).
(F) Procedures for termination.--Section
1857(h).
(4) Rules of application for intermediate
sanctions.--In applying paragraph (3)(E)--
(A) the reference in section 1857(g)(1)(B) to
section 1854 is deemed a reference to this
part; and
(B) the reference in section 1857(g)(1)(F) to
section 1852(k)(2)(A)(ii) shall not be applied.
(c) Waiver of Certain Requirements to Expand Choice.--
(1) In general.--In the case of an entity that seeks
to offer a prescription drug plan in a State, the
Administrator shall waive the requirement of subsection
(a)(1) that the entity be licensed in that State if the
Administrator determines, based on the application and
other evidence presented to the Administrator, that any
of the grounds for approval of the application
described in paragraph (2) has been met.
(2) Grounds for approval.--The grounds for approval
under this paragraph are the grounds for approval
described in subparagraph (B), (C), and (D) of section
1855(a)(2), and also include the application by a State
of any grounds other than those required under Federal
law.
(3) Application of waiver procedures.--With respect
to an application for a waiver (or a waiver granted)
under this subsection, the provisions of subparagraphs
(E), (F), and (G) of section 1855(a)(2) shall apply.
(4) Licensure does not substitute for or constitute
certification.--The fact that an entity is licensed in
accordance with subsection (a)(1) does not deem the
entity to meet other requirements imposed under this
part for a PDP sponsor.
(5) References to certain provisions.--For purposes
of this subsection, in applying provisions of section
1855(a)(2) under this subsection to prescription drug
plans and PDP sponsors--
(A) any reference to a waiver application
under section 1855 shall be treated as a
reference to a waiver application under
paragraph (1); and
(B) any reference to solvency standards shall
be treated as a reference to solvency standards
established under subsection (d).
(d) Solvency Standards for Non-Licensed Sponsors.--
(1) Establishment.--The Administrator shall
establish, by not later than October 1, 2003, financial
solvency and capital adequacy standards that an entity
that does not meet the requirements of subsection
(a)(1) must meet to qualify as a PDP sponsor under this
part.
(2) Compliance with standards.--Each PDP sponsor that
is not licensed by a State under subsection (a)(1) and
for which a waiver application has been approved under
subsection (c) shall meet solvency and capital adequacy
standards established under paragraph (1). The
Administrator shall establish certification procedures
for such PDP sponsors with respect to such solvency
standards in the manner described in section
1855(c)(2).
(e) Other Standards.--The Administrator shall establish by
regulation other standards (not described in subsection (d))
for PDP sponsors and plans consistent with, and to carry out,
this part. The Administrator shall publish such regulations by
October 1, 2003.
(f) Relation to State Laws.--
(1) In general.--The standards established under this
part shall supersede any State law or regulation (other
than State licensing laws or State laws relating to
plan solvency, except as provided in subsection (d))
with respect to prescription drug plans which are
offered by PDP sponsors under this part.
(2) Prohibition of state imposition of premium
taxes.--No State may impose a premium tax or similar
tax with respect to premiums paid to PDP sponsors for
prescription drug plans under this part, or with
respect to any payments made to such a sponsor by the
Administrator under this part.
SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED PRESCRIPTION
DRUG COVERAGE.
(a) In General.--The Administrator shall establish a process
for the selection of the prescription drug plan or
Medicare+Choice plan which offer qualified prescription drug
coverage through which eligible individuals elect qualified
prescription drug coverage under this part.
(b) Elements.--Such process shall include the following:
(1) Annual, coordinated election periods, in which
such individuals can change the qualifying plans
through which they obtain coverage, in accordance with
section 1860A(b)(2).
(2) Active dissemination of information to promote an
informed selection among qualifying plans based upon
price, quality, and other features, in the manner
described in (and in coordination with) section
1851(d), including the provision of annual comparative
information, maintenance of a toll-free hotline, and
the use of non-Federal entities.
(3) Coordination of elections through filing with a
Medicare+Choice organization or a PDP sponsor, in the
manner described in (and in coordination with) section
1851(c)(2).
(c) Medicare+Choice Enrollee In Plan Offering Prescription
Drug Coverage May Only Obtain Benefits Through the Plan.--An
individual who is enrolled under a Medicare+Choice plan that
offers qualified prescription drug coverage may only elect to
receive qualified prescription drug coverage under this part
through such plan.
(d) Assuring Access to a Choice of Qualified Prescription
Drug Coverage.--
(1) Choice of at least two plans in each area.--
(A) In general.--The Administrator shall
assure that each individual who is entitled to
benefits under part A or enrolled under part B
and who is residing in an area in the United
States has available, consistent with
subparagraph (B), a choice of enrollment in at
least two qualifying plans (as defined in
paragraph (5)) in the area in which the
individual resides, at least one of which is a
prescription drug plan.
(B) Requirement for different plan
sponsors.--The requirement in subparagraph (A)
is not satisfied with respect to an area if
only one PDP sponsor or Medicare+Choice
organization offers all the qualifying plans in
the area.
(2) Guaranteeing access to coverage.--In order to
assure access under paragraph (1) and consistent with
paragraph (3), the Administrator may provide financial
incentives (including partial underwriting of risk) for
a PDP sponsor to expand the service area under an
existing prescription drug plan to adjoining or
additional areas or to establish such a plan (including
offering such a plan on a regional or nationwide
basis), but only so long as (and to the extent)
necessary to assure the access guaranteed under
paragraph (1).
(3) Limitation on authority.--In exercising authority
under this subsection, the Administrator--
(A) shall not provide for the full
underwriting of financial risk for any PDP
sponsor;
(B) shall not provide for any underwriting of
financial risk for a public PDP sponsor with
respect to the offering of a nationwide
prescription drug plan; and
(C) shall seek to maximize the assumption of
financial risk by PDP sponsors or
Medicare+Choice organizations.
(4) Reports.--The Administrator shall, in each annual
report to Congress under section 1808(f), include
information on the exercise of authority under this
subsection. The Administrator also shall include such
recommendations as may be appropriate to minimize the
exercise of such authority, including minimizing the
assumption of financial risk.
(5) Qualifying plan defined.--For purposes of this
subsection, the term ``qualifying plan'' means a
prescription drug plan or a Medicare+Choice plan that
includes qualified prescription drug coverage.
SEC. 1860F. SUBMISSION OF BIDS.
(a) Submission of Bids and Related Information.--
(1) In general.--Each PDP sponsor shall submit to the
Administrator information of the type described in
paragraph (2) in the same manner as information is
submitted by a Medicare+Choice organization under
section 1854(a)(1).
(2) Type of information.--The information described
in this paragraph is the following:
(A) Information on the qualified prescription
drug coverage to be provided.
(B) Information on the actuarial value of the
coverage.
(C) Information on the bid for the coverage,
including an actuarial certification of--
(i) the actuarial basis for such bid;
(ii) the portion of such bid
attributable to benefits in excess of
standard coverage; and
(iii) the reduction in such bid
resulting from the subsidy payments
provided under section 1860H.
(D) Such other information as the
Administrator may require to carry out this
part.
(3) Review.--The Administrator shall review the
information filed under paragraph (2) for the purpose
of conducting negotiations under section 1860D(b)(2).
(b) Uniform Bid.--
(1) In general.--The bid for a prescription drug plan
under this section may not vary among individuals
enrolled in the plan in the same service area.
(2) Construction.--Nothing in paragraph (1) shall be
construed as preventing the imposition of a late
enrollment penalty under section 1860A(c)(2)(B).
(c) Collection.--
(1) Use at beneficiary's option of withholding from
social security payment and use of electronic funds
transfer mechanism.--In accordance with regulations, a
PDP sponsor shall permit each enrollee, at the
enrollee's option, to make payment of premiums through
withholding from benefit payments in the manner
provided under section 1840 with respect to monthly
premiums under section 1839. In the case in which an
enrollee does not elect such option, a PDP sponsor may,
in accordance with regulations, encourage enrollees to
make payment of the premium established by the plan
under this part through an electronic funds transfer
mechanism, such as automatic charges of an account at a
financial institution or a credit or debit card
account. All such amounts shall be credited to the
Medicare Prescription Drug Trust Fund.
(2) Offsetting.--Reductions in premiums for coverage
under parts A and B as a result of a selection of a
Medicare+Choice plan may be used to reduce the premium
otherwise imposed under paragraph (1).
(3) Payment of plans.--PDP plans shall receive
payment based on bid amounts in the same manner as
Medicare+Choice organizations receive payment based on
bid amounts under section 1853(a)(1)(A)(ii) except that
such payment shall be made from the Medicare
Prescription Drug Trust Fund.
(d) Acceptance of Benchmark Amount as Full Premium for
Subsidized Low-Income Individuals if No Standard (or
Equivalent) Coverage in an Area.--
(1) In general.--If there is no standard prescription
drug coverage (as defined in paragraph (2)) offered in
an area, in the case of an individual who is eligible
for a premium subsidy under section 1860G and resides
in the area, the PDP sponsor of any prescription drug
plan offered in the area (and any Medicare+Choice
organization that offers qualified prescription drug
coverage in the area) shall accept the benchmark bid
amount (under section 1860G(b)(2)) as payment in full
for the premium charge for qualified prescription drug
coverage.
(2) Standard prescription drug coverage defined.--For
purposes of this subsection, the term ``standard
prescription drug coverage'' means qualified
prescription drug coverage that is standard coverage or
that has an actuarial value equivalent to the actuarial
value for standard coverage.
SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME
INDIVIDUALS.
(a) Income-Related Subsidies for Individuals With Income
Below 175 Percent of Federal Poverty Level.--
(1) Full premium subsidy and reduction of cost-
sharing for individuals with income below 150 percent
of federal poverty level.--In the case of a subsidy
eligible individual (as defined in paragraph (4)) who
is determined to have income that does not exceed 150
percent of the Federal poverty level, the individual is
entitled under this section--
(A) to an income-related premium subsidy
equal to 100 percent of the amount described in
subsection (b)(1); and
(B) subject to subsection (c), to the
substitution for the beneficiary cost-sharing
described in paragraphs (1) and (2) of section
1860B(b) (up to the initial coverage limit
specified in paragraph (3) of such section) of
amounts that do not exceed $2 for a multiple
source or generic drug (as described in section
1927(k)(7)(A)) and $5 for a non-preferred drug.
(2) Sliding scale premium subsidy and reduction of
cost-sharing for individuals with income above 150, but
below 175 percent, of federal poverty level.--In the
case of a subsidy eligible individual who is determined
to have income that exceeds 150 percent, but does not
exceed 175 percent, of the Federal poverty level, the
individual is entitled under this section to--
(A) an income-related premium subsidy
determined on a linear sliding scale ranging
from 100 percent of the amount described in
subsection (b)(1) for individuals with incomes
at 150 percent of such level to 0 percent of
such amount for individuals with incomes at 175
percent of such level; and
(B) subject to subsection (c), to the
substitution for the beneficiary cost-sharing
described in paragraphs (1) and (2) of section
1860B(b) (up to the initial coverage limit
specified in paragraph (3) of such section) of
amounts that do not exceed $2 for a multiple
source or generic drug (as described in section
1927(k)(7)(A)) and $5 for a non-preferred drug.
(3) Construction.--Nothing in this section shall be
construed as preventing a PDP sponsor from reducing to
0 the cost-sharing otherwise applicable to generic
drugs.
(4) Determination of eligibility.--
(A) Subsidy eligible individual defined.--For
purposes of this section, subject to
subparagraph (D), the term ``subsidy eligible
individual'' means an individual who--
(i) is eligible to elect, and has
elected, to obtain qualified
prescription drug coverage under this
part;
(ii) has income below 175 percent of
the Federal poverty line; and
(iii) meets the resources requirement
described in section 1905(p)(1)(C).
(B) Determinations.--The determination of
whether an individual residing in a State is a
subsidy eligible individual and the amount of
such individual's income shall be determined
under the State medicaid plan for the State
under section 1935(a) or by the Social Security
Administration. In the case of a State that
does not operate such a medicaid plan (either
under title XIX or under a statewide waiver
granted under section 1115), such determination
shall be made under arrangements made by the
Administrator. There are authorized to be
appropriated to the Social Security
Administration such sums as may be necessary
for the determination of eligibility under this
subparagraph.
(C) Income determinations.--For purposes of
applying this section--
(i) income shall be determined in the
manner described in section
1905(p)(1)(B); and
(ii) the term ``Federal poverty
line'' means the official poverty line
(as defined by the Office of Management
and Budget, and revised annually in
accordance with section 673(2) of the
Omnibus Budget Reconciliation Act of
1981) applicable to a family of the
size involved.
(D) Treatment of territorial residents.--In
the case of an individual who is not a resident
of the 50 States or the District of Columbia,
the individual is not eligible to be a subsidy
eligible individual but may be eligible for
financial assistance with prescription drug
expenses under section 1935(e).
(E) Treatment of conforming medigap
policies.--For purposes of this section, the
term ``qualified prescription drug coverage''
includes a medicare supplemental policy
described in section 1860H(b)(4).
(5) Indexing dollar amounts.--
(A) For 2006.--The dollar amounts applied
under paragraphs (1)(B) and (2)(B) for 2006
shall be the dollar amounts specified in such
paragraph increased by the annual percentage
increase described in section 1860B(b)(5) for
2006.
(B) For subsequent years.--The dollar amounts
applied under paragraphs (1)(B) and (2)(B) for
a year after 2006 shall be the amounts (under
this paragraph) applied under paragraph (1)(B)
or (2)(B) for the preceding year increased by
the annual percentage increase described in
section 1860B(b)(5) (relating to growth in
medicare prescription drug costs per
beneficiary) for the year involved.
(b) Premium Subsidy Amount.--
(1) In general.--The premium subsidy amount described
in this subsection for an individual residing in an
area is the benchmark bid amount (as defined in
paragraph (2)) for qualified prescription drug coverage
offered by the prescription drug plan or the
Medicare+Choice plan in which the individual is
enrolled.
(2) Benchmark bid amount defined.--For purposes of
this subsection, the term ``benchmark bid amount''
means, with respect to qualified prescription drug
coverage offered under--
(A) a prescription drug plan that--
(i) provides standard coverage (or
alternative prescription drug coverage
the actuarial value is equivalent to
that of standard coverage), the bid
amount for enrollment under the plan
under this part (determined without
regard to any subsidy under this
section or any late enrollment penalty
under section 1860A(c)(2)(B)); or
(ii) provides alternative
prescription drug coverage the
actuarial value of which is greater
than that of standard coverage, the bid
amount described in clause (i)
multiplied by the ratio of (I) the
actuarial value of standard coverage,
to (II) the actuarial value of the
alternative coverage; or
(B) a Medicare+Choice plan, the portion of
the bid amount that is attributable to
statutory drug benefits (described in section
1853(a)(1)(A)(ii)(II)).
(c) Rules in Applying Cost-Sharing Subsidies.--
(1) In general.--In applying subsections (a)(1)(B)
and (a)(2)(B), nothing in this part shall be construed
as preventing a plan or provider from waiving or
reducing the amount of cost-sharing otherwise
applicable.
(2) Limitation on charges.--In the case of an
individual receiving cost-sharing subsidies under
subsection (a)(1)(B) or (a)(2)(B), the PDP sponsor may
not charge more than $5 per prescription.
(3) Application of indexing rules.--The provisions of
subsection (a)(4) shall apply to the dollar amount
specified in paragraph (2) in the same manner as they
apply to the dollar amounts specified in subsections
(a)(1)(B) and (a)(2)(B).
(d) Administration of Subsidy Program.--The Administrator
shall provide a process whereby, in the case of an individual
who is determined to be a subsidy eligible individual and who
is enrolled in prescription drug plan or is enrolled in a
Medicare+Choice plan under which qualified prescription drug
coverage is provided--
(1) the Administrator provides for a notification of
the PDP sponsor or Medicare+Choice organization
involved that the individual is eligible for a subsidy
and the amount of the subsidy under subsection (a);
(2) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the
amount of the applicable subsidy and submits to the
Administrator information on the amount of such
reduction; and
(3) the Administrator periodically and on a timely
basis reimburses the sponsor or organization for the
amount of such reductions.
The reimbursement under paragraph (3) with respect to cost-
sharing subsidies may be computed on a capitated basis, taking
into account the actuarial value of the subsidies and with
appropriate adjustments to reflect differences in the risks
actually involved.
(e) Relation to Medicaid Program.--
(1) In general.--For provisions providing for
eligibility determinations, and additional financing,
under the medicaid program, see section 1935.
(2) Medicaid providing wrap around benefits.--The
coverage provided under this part is primary payor to
benefits for prescribed drugs provided under the
medicaid program under title XIX.
(3) Coordination.--The Administrator shall develop
and implement a plan for the coordination of
prescription drug benefits under this part with the
benefits provided under the medicaid program under
title XIX, with particular attention to insuring
coordination of payments and prevention of fraud and
abuse. In developing and implementing such plan, the
Administrator shall involve the Secretary, the States,
the data processing industry, pharmacists, and
pharmaceutical manufacturers, and other experts.
SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES FOR QUALIFIED
PRESCRIPTION DRUG COVERAGE.
(a) Subsidy Payment.--In order to reduce premium levels
applicable to qualified prescription drug coverage for all
medicare beneficiaries consistent with an overall subsidy level
of 65 percent, to reduce adverse selection among prescription
drug plans and Medicare+Choice plans that provide qualified
prescription drug coverage, and to promote the participation of
PDP sponsors under this part, the Administrator shall provide
in accordance with this section for payment to a qualifying
entity (as defined in subsection (b)) of the following
subsidies:
(1) Direct subsidy.--In the case of an individual
enrolled in a prescription drug plan, Medicare+Choice
plan that provides qualified prescription drug
coverage, or qualified retiree prescription drug plan,
a direct subsidy equal to 35 percent of the total
payments made by a qualifying entity for standard
coverage under the respective plan.
(2) Subsidy through reinsurance.--The reinsurance
payment amount (as defined in subsection (c)), which in
the aggregate is 30 percent of such total payments, for
excess costs incurred in providing qualified
prescription drug coverage--
(A) for individuals enrolled with a
prescription drug plan under this part;
(B) for individuals enrolled with a
Medicare+Choice plan that provides qualified
prescription drug coverage; and
(C) for individuals who are enrolled in a
qualified retiree prescription drug plan.
This section constitutes budget authority in advance of
appropriations Acts and represents the obligation of the
Administrator to provide for the payment of amounts provided
under this section.
(b) Qualifying Entity Defined.--For purposes of this section,
the term ``qualifying entity'' means any of the following that
has entered into an agreement with the Administrator to provide
the Administrator with such information as may be required to
carry out this section:
(1) A PDP sponsor offering a prescription drug plan
under this part.
(2) A Medicare+Choice organization that provides
qualified prescription drug coverage under a
Medicare+Choice plan under part C.
(3) The sponsor of a qualified retiree prescription
drug plan (as defined in subsection (f)).
(c) Reinsurance Payment Amount.--
(1) In general.--Subject to subsection (d)(1)(B) and
paragraph (4), the reinsurance payment amount under
this subsection for a qualifying covered individual (as
defined in subsection (g)(1)) for a coverage year (as
defined in subsection (g)(2)) is equal to the sum of
the following:
(A) For the portion of the individual's gross
covered prescription drug costs (as defined in
paragraph (3)) for the year that exceeds the
initial copayment threshold specified in
section 1860B(b)(2)(C), but does not exceed the
initial coverage limit specified in section
1860B(b)(3), an amount equal to 30 percent of
the allowable costs (as defined in paragraph
(2)) attributable to such gross covered
prescription drug costs.
(B) For the portion of the individual's gross
covered prescription drug costs for the year
that exceeds the annual out-of-pocket threshold
specified in 1860B(b)(4)(B), an amount equal to
80 percent of the allowable costs attributable
to such gross covered prescription drug costs.
(2) Allowable costs.--For purposes of this section,
the term ``allowable costs'' means, with respect to
gross covered prescription drug costs under a plan
described in subsection (b) offered by a qualifying
entity, the part of such costs that are actually paid
(net of average percentage rebates) under the plan, but
in no case more than the part of such costs that would
have been paid under the plan if the prescription drug
coverage under the plan were standard coverage.
(3) Gross covered prescription drug costs.--For
purposes of this section, the term ``gross covered
prescription drug costs'' means, with respect to an
enrollee with a qualifying entity under a plan
described in subsection (b) during a coverage year, the
costs incurred under the plan (including costs
attributable to administrative costs) for covered
prescription drugs dispensed during the year, including
costs relating to the deductible, whether paid by the
enrollee or under the plan, regardless of whether the
coverage under the plan exceeds standard coverage and
regardless of when the payment for such drugs is made.
(4) Indexing dollar amounts.--
(A) Amounts for 2005.--The dollar amounts
applied under paragraph (1) for 2005 shall be
the dollar amounts specified in such paragraph.
(B) For 2006.--The dollar amounts applied
under paragraph (1) for 2006 shall be the
dollar amounts specified in such paragraph
increased by the annual percentage increase
described in section 1860B(b)(5) for 2006.
(C) For subsequent years.--The dollar amounts
applied under paragraph (1) for a year after
2006 shall be the amounts (under this
paragraph) applied under paragraph (1) for the
preceding year increased by the annual
percentage increase described in section
1860B(b)(5) (relating to growth in medicare
prescription drug costs per beneficiary) for
the year involved.
(D) Rounding.--Any amount, determined under
the preceding provisions of this paragraph for
a year, which is not a multiple of $10 shall be
rounded to the nearest multiple of $10.
(d) Adjustment of Payments.--
(1) Adjustment of reinsurance payments to assure 30
percent level of subsidy through reinsurance.--
(A) Estimation of payments.--The
Administrator shall estimate--
(i) the total payments to be made
(without regard to this subsection)
during a year under subsections (a)(2)
and (c); and
(ii) the total payments to be made by
qualifying entities for standard
coverage under plans described in
subsection (b) during the year.
(B) Adjustment.--The Administrator shall
proportionally adjust the payments made under
subsections (a)(2) and (c) for a coverage year
in such manner so that the total of the
payments made under such subsections for the
year is equal to 30 percent of the total
payments described in subparagraph (A)(ii).
(2) Risk adjustment for direct subsidies.--To the
extent the Administrator determines it appropriate to
avoid risk selection, the payments made for direct
subsidies under subsection (a)(1) are subject to
adjustment based upon risk factors specified by the
Administrator. Any such risk adjustment shall be
designed in a manner as to not result in a change in
the aggregate payments made under such subsection.
(e) Payment Methods.--
(1) In general.--Payments under this section shall be
based on such a method as the Administrator determines.
The Administrator may establish a payment method by
which interim payments of amounts under this section
are made during a year based on the Administrator's
best estimate of amounts that will be payable after
obtaining all of the information.
(2) Source of payments.--Payments under this section
shall be made from the Medicare Prescription Drug Trust
Fund.
(f) Qualified Retiree Prescription Drug Plan Defined.--
(1) In general.--For purposes of this section, the
term ``qualified retiree prescription drug plan'' means
employment-based retiree health coverage (as defined in
paragraph (3)(A)) if, with respect to an individual
enrolled (or eligible to be enrolled) under this part
who is covered under the plan, the following
requirements are met:
(A) Assurance.--The sponsor of the plan shall
annually attest, and provide such assurances as
the Administrator may require, that the
coverage meets or exceeds the requirements for
qualified prescription drug coverage.
(B) Audits.--The sponsor (and the plan) shall
maintain, and afford the Administrator access
to, such records as the Administrator may
require for purposes of audits and other
oversight activities necessary to ensure the
adequacy of prescription drug coverage, and the
accuracy of payments made.
(C) Provision of certification of
prescription drug coverage.--The sponsor of the
plan shall provide for issuance of
certifications of the type described in section
1860A(c)(2)(D).
(2) Limitation on benefit eligibility.--No payment
shall be provided under this section with respect to an
individual who is enrolled under a qualified retiree
prescription drug plan unless the individual is--
(A) enrolled under this part;
(B) is covered under the plan; and
(C) is eligible to obtain qualified
prescription drug coverage under section 1860A
but did not elect such coverage under this part
(either through a prescription drug plan or
through a Medicare+Choice plan).
(3) Definitions.--As used in this section:
(A) Employment-based retiree health
coverage.--The term ``employment-based retiree
health coverage'' means health insurance or
other coverage of health care costs for
individuals enrolled under this part (or for
such individuals and their spouses and
dependents) based on their status as former
employees or labor union members.
(B) Sponsor.--The term ``sponsor'' means a
plan sponsor, as defined in section 3(16)(B) of
the Employee Retirement Income Security Act of
1974.
(g) General Definitions.--For purposes of this section:
(1) Qualifying covered individual.--The term
``qualifying covered individual'' means an individual
who--
(A) is enrolled with a prescription drug plan
under this part;
(B) is enrolled with a Medicare+Choice plan
that provides qualified prescription drug
coverage under part C; or
(C) is enrolled for benefits under this title
and is covered under a qualified retiree
prescription drug plan.
(2) Coverage year.--The term ``coverage year'' means
a calendar year in which covered outpatient drugs are
dispensed if a claim for payment is made under the plan
for such drugs, regardless of when the claim is paid.
SEC. 1860I. MEDICARE PRESCRIPTION DRUG TRUST FUND.
(a) In General.--There is created on the books of the
Treasury of the United States a trust fund to be known as the
``Medicare Prescription Drug Trust Fund'' (in this section
referred to as the ``Trust Fund''). The Trust Fund shall
consist of such gifts and bequests as may be made as provided
in section 201(i)(1), and such amounts as may be deposited in,
or appropriated to, such fund as provided in this part. Except
as otherwise provided in this section, the provisions of
subsections (b) through (i) of section 1841 shall apply to the
Trust Fund in the same manner as they apply to the Federal
Supplementary Medical Insurance Trust Fund under such section.
(b) Payments From Trust Fund.--
(1) In general.--The Managing Trustee shall pay from
time to time from the Trust Fund such amounts as the
Administrator certifies are necessary to make--
(A) payments under section 1860G (relating to
low-income subsidy payments);
(B) payments under section 1860H (relating to
subsidy payments); and
(C) payments with respect to administrative
expenses under this part in accordance with
section 201(g).
(2) Transfers to medicaid account for increased
administrative costs.--The Managing Trustee shall
transfer from time to time from the Trust Fund to the
Grants to States for Medicaid account amounts the
Administrator certifies are attributable to increases
in payment resulting from the application of a higher
Federal matching percentage under section 1935(b).
(c) Deposits Into Trust Fund.--
(1) Low-income transfer.--There is hereby transferred
to the Trust Fund, from amounts appropriated for Grants
to States for Medicaid, amounts equivalent to the
aggregate amount of the reductions in payments under
section 1903(a)(1) attributable to the application of
section 1935(c).
(2) Appropriations to cover government
contributions.--There are authorized to be appropriated
from time to time, out of any moneys in the Treasury
not otherwise appropriated, to the Trust Fund, an
amount equivalent to the amount of payments made from
the Trust Fund under subsection (b), reduced by the
amount transferred to the Trust Fund under paragraph
(1).
(d) Relation to Solvency Requirements.--Any provision of law
that relates to the solvency of the Trust Fund under this part
shall take into account the Trust Fund and amounts receivable
by, or payable from, the Trust Fund.
SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO PROVISIONS IN PART
C.
(a) Definitions.--For purposes of this part:
(1) Covered outpatient drugs.--The term ``covered
outpatient drugs'' is defined in section 1860B(f).
(2) Initial coverage limit.--The term ``initial
coverage limit'' means such limit as established under
section 1860B(b)(3), or, in the case of coverage that
is not standard coverage, the comparable limit (if any)
established under the coverage.
(3) Medicare prescription drug trust fund.--The term
``Medicare Prescription Drug Trust Fund'' means the
Trust Fund created under section 1860I(a).
(4) PDP sponsor.--The term ``PDP sponsor'' means an
entity that is certified under this part as meeting the
requirements and standards of this part for such a
sponsor.
(5) Prescription drug plan.--The term ``prescription
drug plan'' means health benefits coverage that--
(A) is offered under a policy, contract, or
plan by a PDP sponsor pursuant to, and in
accordance with, a contract between the
Administrator and the sponsor under section
1860D(b);
(B) provides qualified prescription drug
coverage; and
(C) meets the applicable requirements of the
section 1860C for a prescription drug plan.
(6) Qualified prescription drug coverage.--The term
``qualified prescription drug coverage'' is defined in
section 1860B(a).
(7) Standard coverage.--The term ``standard
coverage'' is defined in section 1860B(b).
(b) Application of Medicare+Choice Provisions Under This
Part.--For purposes of applying provisions of part C under this
part with respect to a prescription drug plan and a PDP
sponsor, unless otherwise provided in this part such provisions
shall be applied as if--
(1) any reference to a Medicare+Choice plan included
a reference to a prescription drug plan;
(2) any reference to a provider-sponsored
organization included a reference to a PDP sponsor;
(3) any reference to a contract under section 1857
included a reference to a contract under section
1860D(b); and
(4) any reference to part C included a reference to
this part.
Part [D] E--Miscellaneous Provisions
DEFINITIONS OF SERVICES, INSTITUTIONS, ETC.
Sec. 1861. For purposes of this title--
Spell of Illness
(a) * * *
* * * * * * *
Supplier
(d) The term ``supplier'' means, unless the context otherwise
requires, a physician or other practitioner, a facility, or
other entity (other than a provider of services) that furnishes
items or services under this title.
* * * * * * *
Medical and Other Health Services
(s) The term ``medical and other health services'' means any
of the following items or services:
(1) * * *
(2)(A) * * *
* * * * * * *
(U) screening for glaucoma (as defined in subsection
(uu)) for individuals determined to be at high risk for
glaucoma, individuals with a family history of glaucoma
and individuals with diabetes; [and]
(V) medical nutrition therapy services (as defined in
subsection (vv)(1)) in the case of a beneficiary with
diabetes or a renal disease who--
(i) * * *
* * * * * * *
(iii) meets such other criteria determined by
the Secretary after consideration of protocols
established by dietitian or nutrition
professional organizations;
(W) an initial preventive physical
examination (as defined in subsection (ww));
and
(X) cholesterol and other blood lipid
screening tests (as defined in subsection
(XX));
* * * * * * *
Hospice Care; Hospice Program
(dd)(1) * * *
(2) The term ``hospice program'' means a public agency or
private organization (or a subdivision thereof) which--
(A)(i) is primarily engaged in providing the care and
services described in paragraph (1) and makes such
services available (as needed) on a 24-hour basis and
which also provides bereavement counseling for the
immediate family of terminally ill individuals and
services described in section 1812(a)(5),
* * * * * * *
(5)(A) * * *
* * * * * * *
(D) In extraordinary, exigent, or other non-routine
circumstances, such as unanticipated periods of high patient
loads, staffing shortages due to illness or other events, or
temporary travel of a patient outside a hospice program's
service area, a hospice program may enter into arrangements
with another hospice program for the provision by that other
program of services described in paragraph (2)(A)(ii)(I). The
provisions of paragraph (2)(A)(ii)(II) shall apply with respect
to the services provided under such arrangements.
* * * * * * *
Initial Preventive Physical Examination
(ww) The term ``initial preventive physical examination''
means physicians' services consisting of a physical examination
with the goal of health promotion and disease detection and
includes items and services specified by the Secretary in
regulations.
Cholesterol and Other Blood Lipid Screening Test
(xx)(1) The term ``cholesterol and other blood lipid
screening test'' means diagnostic testing of cholesterol and
other lipid levels of the blood for the purpose of early
detection of abnormal cholesterol and other lipid levels.
(2) The Secretary shall establish standards, in consultation
with appropriate organizations, regarding the frequency and
type of cholesterol and other blood lipid screening tests,
except that such frequency may not be more often than once
every 2 years.
EXCLUSIONS FROM COVERAGE AND MEDICARE AS SECONDARY PAYER
Sec. 1862. (a) Notwithstanding any other provision of this
title, no payment may be made under part A or part B for any
expenses incurred for items or services--
(1)(A) * * *
* * * * * * *
(H) in the case of colorectal cancer screening tests,
which are performed more frequently than is covered
under section 1834(d), [and]
(I) the frequency and duration of home health
services which are in excess of normative guidelines
that the Secretary shall establish by regulation[;],
(J) in the case of an initial preventive physical
examination, which is performed not later than 6 months
after the date the individual's first coverage period
begins under part B; and
(K) in the case of a cholesterol and other blood
lipid screening test (as defined in section
1861(xx)(1)), which is performed more frequently than
is covered under section 1861(xx)(2).
* * * * * * *
(7) where such expenses are for routine physical
checkups, eyeglasses (other than eyewear described in
section 1861(s)(8)) or eye examinations for the purpose
of prescribing, fitting, or changing eyeglasses,
procedures performed (during the course of any eye
examination) to determine the refractive state of the
eyes, hearing aids or examinations therefor, or
immunizations (except as otherwise allowed under
section 1861(s)(10) and subparagraph (B), (F), (G), [or
(H)] (H), or (J) of paragraph (1));
* * * * * * *
Paragraph (7) shall not apply to Federally qualified health
center services described in section 1861(aa)(3)(B). In making
a national coverage determination (as defined in paragraph
(1)(B) of section 1869(f )) the Secretary shall ensure that the
public is afforded notice and opportunity to comment prior to
implementation by the Secretary of the determination; meetings
of advisory committees [established under section 1114(f )]
with respect to the determination are made on the record; in
making the determination, the Secretary has considered
applicable information (including clinical experience and
medical, technical, and scientific evidence) with respect to
the subject matter of the determination; and in the
determination, provide a clear statement of the basis for the
determination (including responses to comments received from
the public), the assumptions underlying that basis, and make
available to the public the data (other than proprietary data)
considered in making the determination.
* * * * * * *
(d) For purposes of subsection (a)(1)(A), in the case of any
item or service that is required to be provided pursuant to
section 1867 to an individual who is entitled to benefits under
this title, determinations as to whether the item or service is
reasonable and necessary shall be made on the basis of the
information available to the treating physician or practitioner
(including the patient's presenting symptoms or complaint) at
the time the item or service was ordered or furnished by the
physician or practitioner (and not on the patient's principal
diagnosis). When making such determinations with respect to
such an item or service, the Secretary shall not consider the
frequency with which the item or service was provided to the
patient before or after the time of the admission or visit.
* * * * * * *
(h)(1) Subject to paragraph (2), a group health plan (as
defined in subsection (a)(1)(A)(v)) providing supplemental or
secondary coverage to individuals also entitled to services
under this title shall not require a medicare claims
determination under this title for dental benefits specifically
excluded under subsection (a)(12) as a condition of making a
claims determination for such benefits under the group health
plan.
(2) A group health plan may require a claims determination
under this title in cases involving or appearing to involve
inpatient dental hospital services or dental services expressly
covered under this title pursuant to actions taken by the
Secretary.
* * * * * * *
[(i)] (j)(1) Any advisory committee appointed [under
subsection (f )] to advise the Secretary on matters relating to
the interpretation, application, or implementation of [section
1862(a)(1)] subsection (a)(1) shall assure the full
participation of a nonvoting member in the deliberations of the
advisory committee, and shall provide such nonvoting member
access to all information and data made available to voting
members of the advisory committee, other than information
that--
(A) is exempt from disclosure pursuant to subsection
(a) of section 552 of title 5, United States Code, by
reason of subsection (b)(4) of such section (relating
to trade secrets); or
(B) the Secretary determines would present a conflict
of interest relating to such nonvoting member.
(2) If an advisory committee described in paragraph (1)
organizes into panels of experts according to types of items or
services considered by the advisory committee, any such panel
of experts may report any recommendation with respect to such
items or services directly to the Secretary without the prior
approval of the advisory committee or an executive committee
thereof.
* * * * * * *
AGREEMENTS WITH PROVIDERS OF SERVICES; ENROLLMENT PROCESSES
Sec. 1866. (a)(1) Any provider of services (except a fund
designated for purposes of section 1814(g) and section 1835(e))
shall be qualified to participate under this title and shall be
eligible for payments under this title if it files with the
Secretary an agreement--
(A) * * *
* * * * * * *
(R) to contract only with a health care clearinghouse
(as defined in section 1171) that meets each standard
and implementation specification adopted or established
under part C of title XI on or after the date on which
the health care clearinghouse is required to comply
with the standard or specification, [and]
(S) in the case of a hospital that has a financial
interest (as specified by the Secretary in regulations)
in an entity to which individuals are referred as
described in section 1861(ee)(2)(H)(ii), or in which
such an entity has such a financial interest, or in
which another entity has such a financial interest
(directly or indirectly) with such hospital and such an
entity, to maintain and disclose to the Secretary (in a
form and manner specified by the Secretary) information
on--
(i) * * *
* * * * * * *
(iii) the percentage of such individuals who
received such services from such provider (or
another such provider)[.], and
(T) in the case of hospitals that are not otherwise
subject to the Occupational Safety and Health Act of
1970, to comply with the Bloodborne Pathogens standard
under section 1910.1030 of title 29 of the Code of
Federal Regulations (or as subsequently redesignated).
In the case of a hospital which has an agreement in effect with
an organization described in subparagraph (F), which
organization's contract with the Secretary under part B of
title XI is terminated on or after October 1, 1984, the
hospital shall not be determined to be out of compliance with
the requirement of such subparagraph during the six month
period beginning on the date of the termination of that
contract.
(2)(A) A provider of services may charge such individual or
other person (i) the amount of any deduction [or coinsurance],
coinsurance, or copayment amount imposed pursuant to section
1813(a)(1), (a)(3), [or (a)(4)] (a)(4), or (a)(5), section
1833(b), or section 1861(y)(3) with respect to such items and
services (not in excess of the amount customarily charged for
such items and services by such provider), and (ii) an amount
equal to 20 per centum of the reasonable charges for such items
and services (not in excess of 20 per centum of the amount
customarily charged for such items and services by such
provider) for which payment is made under part B or which are
durable medical equipment furnished as home health services
(but in the case of items and services furnished to individuals
with end-stage renal disease, an amount equal to 20 percent of
the estimated amounts for such items and services calculated on
the basis established by the Secretary). In the case of items
and services described in section 1833(c), clause (ii) of the
preceding sentence shall be applied by substituting for 20
percent the proportion which is appropriate under such section.
A provider of services may not impose a charge under clause
(ii) of the first sentence of this subparagraph with respect to
items and services described in section 1861(s)(10)(A) and with
respect to clinical diagnostic laboratory tests for which
payment is made under part B. Notwithstanding the first
sentence of this subparagraph, a home health agency may charge
such an individual or person, with respect to covered items
subject to payment under section 1834(a), the amount of any
deduction imposed under section 1833(b) and 20 percent of the
payment basis described in section 1834(a)(1)(B). In the case
of items and services for which payment is made under part B
under the prospective payment system established under section
1833(t), clause (ii) of the first sentence shall be applied by
substituting for 20 percent of the reasonable charge, the
applicable copayment amount established under section
1833(t)(5). In the case of services described in section
1833(a)(8) or section 1833(a)(9) for which payment is made
under part B under section 1834(k), clause (ii) of the first
sentence shall be applied by substituting for 20 percent of the
reasonable charge for such services 20 percent of the lesser of
the actual charge or the applicable fee schedule amount (as
defined in such section) for such services.
* * * * * * *
(b)(1) * * *
* * * * * * *
(4)(A) A hospital that fails to comply with the requirement
of subsection (a)(1)(T) (relating to the Bloodborne Pathogens
standard) is subject to a civil money penalty in an amount
described in subparagraph (B), but is not subject to
termination of an agreement under this section.
(B) The amount referred to in subparagraph (A) is an amount
that is similar to the amount of civil penalties that may be
imposed under section 17 of the Occupational Safety and Health
Act of 1970 for a violation of the Bloodborne Pathogens
standard referred to in subsection (a)(1)(T) by a hospital that
is subject to the provisions of such Act.
(C) A civil money penalty under this paragraph shall be
imposed and collected in the same manner as civil money
penalties under subsection (a) of section 1128A are imposed and
collected under that section.
* * * * * * *
(h)(1)(A) Except as provided in paragraph (2), an institution
or agency dissatisfied with a determination by the Secretary
that it is not a provider of services or with a determination
described in subsection (b)(2) shall be entitled to a hearing
thereon by the Secretary (after reasonable notice) to the same
extent as is provided in section 205(b), and to judicial review
of the Secretary's final decision after such hearing as is
provided in section 205(g), except that, in so applying such
sections and in applying section 205(l) thereto, any reference
therein to the Commissioner of Social Security or the Social
Security Administration shall be considered a reference to the
Secretary or the Department of Health and Human Services,
respectively.
(B) An institution or agency described in subparagraph (A)
that has filed for a hearing under subparagraph (A) shall have
expedited access to judicial review under this subparagraph in
the same manner as providers of services, suppliers, and
individuals entitled to benefits under part A or enrolled under
part B, or both, may obtain expedited access to judicial review
under the process established under section 1869(b)(2). Nothing
in this subparagraph shall be construed to affect the
application of any remedy imposed under section 1819 during the
pendency of an appeal under this subparagraph.
* * * * * * *
(j) Enrollment Process for Providers of Services and
Suppliers.--
(1) Enrollment process.--
(A) In general.--The Secretary shall
establish by regulation a process for the
enrollment of providers of services and
suppliers under this title.
(B) Deadlines.--The Secretary shall establish
by regulation procedures under which there are
deadlines for actions on applications for
enrollment (and, if applicable, renewal of
enrollment). The Secretary shall monitor the
performance of medicare administrative
contractors in meeting the deadlines
established under this subparagraph.
(C) Consultation before changing provider
enrollment forms.--The Secretary shall consult
with providers of services and suppliers before
making changes in the provider enrollment forms
required of such providers and suppliers to be
eligible to submit claims for which payment may
be made under this title.
(2) Hearing rights in cases of denial or non-
renewal.--A provider of services or supplier whose
application to enroll (or, if applicable, to renew
enrollment) under this title is denied may have a
hearing and judicial review of such denial under the
procedures that apply under subsection (h)(1)(A) to a
provider of services that is dissatisfied with a
determination by the Secretary.
* * * * * * *
EXAMINATION AND TREATMENT FOR EMERGENCY MEDICAL CONDITIONS AND WOMEN IN
LABOR
Sec. 1867. (a) * * *
* * * * * * *
(d) Enforcement.--
(1) * * *
* * * * * * *
(3) Consultation with peer review organizations.--In
considering allegations of violations of the
requirements of this section in imposing sanctions
under paragraph (1) or in terminating a hospital's
participation under this title, the Secretary shall
request the appropriate utilization and quality control
peer review organization (with a contract under part B
of title XI) to assess whether the individual involved
had an emergency medical condition which had not been
stabilized, and provide a report on its findings.
Except in the case in which a delay would jeopardize
the health or safety of individuals, the Secretary
shall request such a review before effecting a sanction
under paragraph (1) and shall provide a period of at
least 60 days for such review. Except in the case in
which a delay would jeopardize the health or safety of
individuals, the Secretary shall also request such a
review before making a compliance determination as part
of the process of terminating a hospital's
participation under this title for violations related
to the appropriateness of a medical screening
examination, stabilizing treatment, or an appropriate
transfer as required by this section, and shall provide
a period of 5 days for such review. The Secretary shall
provide a copy of the organization's report to the
hospital or physician consistent with confidentiality
requirements imposed on the organization under such
part B.
(4) Notice upon closing an investigation.--The
Secretary shall establish a procedure to notify
hospitals and physicians when an investigation under
this section is closed.
PRACTICING PHYSICIANS ADVISORY COUNCIL; MEDICARE PROVIDER OMBUDSMAN
Sec. 1868. (a) Practicing Physicians Advisory Council.--(1)
The Secretary shall appoint, based upon nominations submitted
by medical organizations representing physicians, a Practicing
Physicians Advisory Council (in this [section] subsection
referred to as the ``Council'') to be composed of 15
physicians, each of whom has submitted at least 250 claims for
physicians' services under this title in the previous year. At
least 11 of the members of the Council shall be physicians
described in section 1861(r)(1) and the members of the Council
shall include both participating and nonparticipating
physicians and physicians practicing in rural areas and
underserved urban areas.
[(b)] (2) The Council shall meet once during each calendar
quarter to discuss certain proposed changes in regulations and
carrier manual instructions related to physician services
identified by the Secretary. To the extent feasible and
consistent with statutory deadlines, such consultation shall
occur before the publication of such proposed changes.
[(c)] (3) Members of the Council shall be entitled to receive
reimbursement of expenses and per diem in lieu of subsistence
in the same manner as other members of advisory councils
appointed by the Secretary are provided such reimbursement and
per diem under this title.
(b) Medicare Provider Ombudsman.--The Secretary shall appoint
within the Department of Health and Human Services a Medicare
Provider Ombudsman. The Ombudsman shall--
(1) provide assistance, on a confidential basis, to
providers of services and suppliers with respect to
complaints, grievances, and requests for information
concerning the programs under this title (including
provisions of title XI insofar as they relate to this
title and are not administered by the Office of the
Inspector General of the Department of Health and Human
Services) and in the resolution of unclear or
conflicting guidance given by the Secretary and
medicare contractors to such providers of services and
suppliers regarding such programs and provisions and
requirements under this title and such provisions; and
(2) submit recommendations to the Secretary for
improvement in the administration of this title and
such provisions, including--
(A) recommendations to respond to recurring
patterns of confusion in this title and such
provisions (including recommendations regarding
suspending imposition of sanctions where there
is widespread confusion in program
administration), and
(B) recommendations to provide for an
appropriate and consistent response (including
not providing for audits) in cases of self-
identified overpayments by providers of
services and suppliers.
The Ombudsman shall not serve as an advocate for any increases
in payments or new coverage of services, but may identify
issues and problems in payment or coverage policies.
(c) Council for Technology and Innovation.--
(1) Establishment.--The Secretary shall establish a
Council for Technology and Innovation within the
Centers for Medicare & Medicaid Services (in this
section referred to as ``CMS'').
(2) Composition.--The Council shall be composed of
senior CMS staff and clinicians and shall be chaired by
the Executive Coordinator for Technology and Innovation
(appointed or designated under paragraph (4)).
(3) Duties.--The Council shall coordinate the
activities of coverage, coding, and payment processes
under this title with respect to new technologies and
procedures, including new drug therapies, and shall
coordinate the exchange of information on new
technologies between CMS and other entities that make
similar decisions.
(4) Executive coordinator for technology and
innovation.--The Secretary shall appoint (or designate)
a noncareer appointee (as defined in section 3132(a)(7)
of title 5, United States Code) who shall serve as the
Executive Coordinator for Technology and Innovation.
Such executive coordinator shall report to the
Administrator of CMS, shall chair the Council, shall
oversee the execution of its duties, and shall serve as
a single point of contact for outside groups and
entities regarding the coverage, coding, and payment
processes under this title.
DETERMINATIONS; APPEALS
Sec. 1869. (a) Initial Determinations.--
(1) * * *
* * * * * * *
(4) Requirements of notice of determinations and
redeterminations.--A written notice of a determination
on an initial determination or on a redetermination,
insofar as such determination or redetermination
results in a denial of a claim for benefits, shall
include--
(A) the specific reasons for the
determination, including--
(i) upon request, the provision of
the policy, manual, or regulation used
in making the determination; and
(ii) as appropriate in the case of a
redetermination, a summary of the
clinical or scientific evidence used in
making the determination;
(B) the procedures for obtaining additional
information concerning the determination or
redetermination; and
(C) notification of the right to seek a
redetermination or otherwise appeal the
determination and instructions on how to
initiate such a redetermination or appeal under
this section.
The written notice on a redetermination shall be
provided in printed form and written in a manner
calculated to be understood by the individual entitled
to benefits under part A or enrolled under part B, or
both.
(b) Appeal Rights.--
(1) In general.--
(A) Reconsideration of initial
determination.--Subject to subparagraph (D),
any individual dissatisfied with any initial
determination under subsection (a)(1) shall be
entitled to reconsideration of the
determination, and, subject to subparagraphs
(D) and (E), a hearing thereon by the Secretary
to the same extent as is provided in section
205(b) and, subject to paragraph (2), to
judicial review of the Secretary's final
decision after such hearing as is provided in
section 205(g). For purposes of the preceding
sentence, any reference to the ``Commissioner
of Social Security'' or the ``Social Security
Administration'' in subsection (g) or (l) of
section 205 shall be considered a reference to
the ``Secretary'' or the ``Department of Health
and Human Services'', respectively.
* * * * * * *
(F) Expedited [proceedings.--
[(i) Expedited determination]
determinations and reconsiderations.--
In the case of an individual who has
received notice from a provider of
services that such provider plans--
[(I)] (i) to terminate services
provided to an individual and a
physician certifies that failure to
continue the provision of such services
is likely to place the individual's
health at significant risk, or
[(II)] (ii) to discharge the
individual from the provider of
services,
the individual may request, in writing
or orally, an expedited determination
or an expedited reconsideration of an
initial determination made under
subsection (a)(1), as the case may be,
and the Secretary shall provide such
expedited determination or expedited
reconsideration.
[(ii) Expedited hearing.--In a
hearing by the Secretary under this
section, in which the moving party
alleges that no material issues of fact
are in dispute, the Secretary shall
make an expedited determination as to
whether any such facts are in dispute
and, if not, shall render a decision
expeditiously.]
* * * * * * *
(2) Expedited access to judicial review.--
(A) In general.--The Secretary shall
establish a process under which a provider of
services or supplier that furnishes an item or
service or an individual entitled to benefits
under part A or enrolled under part B, or both,
who has filed an appeal under paragraph (1) may
obtain access to judicial review when a review
panel (described in subparagraph (D)), on its
own motion or at the request of the appellant,
determines that no entity in the administrative
appeals process has the authority to decide the
question of law or regulation relevant to the
matters in controversy and that there is no
material issue of fact in dispute. The
appellant may make such request only once with
respect to a question of law or regulation in a
case of an appeal.
(B) Prompt determinations.--If, after or
coincident with appropriately filing a request
for an administrative hearing, the appellant
requests a determination by the appropriate
review panel that no review panel has the
authority to decide the question of law or
regulations relevant to the matters in
controversy and that there is no material issue
of fact in dispute and if such request is
accompanied by the documents and materials as
the appropriate review panel shall require for
purposes of making such determination, such
review panel shall make a determination on the
request in writing within 60 days after the
date such review panel receives the request and
such accompanying documents and materials. Such
a determination by such review panel shall be
considered a final decision and not subject to
review by the Secretary.
(C) Access to judicial review.--
(i) In general.--If the appropriate
review panel--
(I) determines that there are
no material issues of fact in
dispute and that the only issue
is one of law or regulation
that no review panel has the
authority to decide; or
(II) fails to make such
determination within the period
provided under subparagraph
(B);
then the appellant may bring a civil
action as described in this
subparagraph.
(ii) Deadline for filing.--Such
action shall be filed, in the case
described in--
(I) clause (i)(I), within 60
days of date of the
determination described in such
subparagraph; or
(II) clause (i)(II), within
60 days of the end of the
period provided under
subparagraph (B) for the
determination.
(iii) Venue.--Such action shall be
brought in the district court of the
United States for the judicial district
in which the appellant is located (or,
in the case of an action brought
jointly by more than one applicant, the
judicial district in which the greatest
number of applicants are located) or in
the district court for the District of
Columbia.
(iv) Interest on amounts in
controversy.--Where a provider of
services or supplier seeks judicial
review pursuant to this paragraph, the
amount in controversy shall be subject
to annual interest beginning on the
first day of the first month beginning
after the 60-day period as determined
pursuant to clause (ii) and equal to
the rate of interest on obligations
issued for purchase by the Federal
Hospital Insurance Trust Fund and by
the Federal Supplementary Medical
Insurance Trust Fund for the month in
which the civil action authorized under
this paragraph is commenced, to be
awarded by the reviewing court in favor
of the prevailing party. No interest
awarded pursuant to the preceding
sentence shall be deemed income or cost
for the purposes of determining
reimbursement due providers of services
or suppliers under this Act.
(D) Review panels.--For purposes of this
subsection, a ``review panel'' is a panel
consisting of 3 members (who shall be
administrative law judges, members of the
Departmental Appeals Board, or qualified
individuals associated with a qualified
independent contractor (as defined in
subsection (c)(2)) or with another independent
entity) designated by the Secretary for
purposes of making determinations under this
paragraph.
(3) Requiring full and early presentation of evidence
by providers.--A provider of services or supplier may
not introduce evidence in any appeal under this section
that was not presented at the reconsideration conducted
by the qualified independent contractor under
subsection (c), unless there is good cause which
precluded the introduction of such evidence at or
before that reconsideration.
* * * * * * *
(c) Conduct of Reconsiderations by Independent Contractors.--
(1) * * *
* * * * * * *
(3) Requirements.--Any qualified independent
contractor entering into a contract with the Secretary
under this subsection shall meet all of the following
requirements:
(A) In general.--The qualified independent
contractor shall perform such duties and
functions and assume such responsibilities as
may be required by the Secretary to carry out
the provisions of this subsection, and shall
have [sufficient training and expertise in
medical science and legal matters] sufficient
medical, legal, and other expertise (including
knowledge of the program under this title) and
sufficient staffing to make reconsiderations
under this subsection.
(B) Reconsiderations.--
(i) In general.--The qualified
independent contractor shall review
initial determinations. Where an
initial determination is made with
respect to whether an item or service
is reasonable and necessary for the
diagnosis or treatment of illness or
injury (under section 1862(a)(1)(A)),
such review shall include consideration
of the facts and circumstances of the
initial determination by a panel of
physicians or other appropriate health
care professionals and any decisions
with respect to the reconsideration
shall be based on applicable
information, including clinical
experience (including the medical
records of the individual involved) and
medical, technical, and scientific
evidence.
* * * * * * *
[(D) Limitation on individual reviewing
determinations.--
[(i) Physicians and health care
professional.--No physician or health
care professional under the employ of a
qualified independent contractor may
review--
[(I) determinations regarding
health care services furnished
to a patient if the physician
or health care professional was
directly responsible for
furnishing such services; or
[(II) determinations
regarding health care services
provided in or by an
institution, organization, or
agency, if the physician or any
member of the family of the
physician or health care
professional has, directly or
indirectly, a significant
financial interest in such
institution, organization, or
agency.
[(ii) Family described.--For purposes
of this paragraph, the family of a
physician or health care professional
includes the spouse (other than a
spouse who is legally separated from
the physician or health care
professional under a decree of divorce
or separate maintenance), children
(including stepchildren and legally
adopted children), grandchildren,
parents, and grandparents of the
physician or health care professional.]
(D) Qualifications for reviewers.--The
requirements of subsection (g) shall be met
(relating to qualifications of reviewing
professionals).
(E) Explanation of decision.--Any decision
with respect to a reconsideration of a
qualified independent contractor shall be in
writing, be written in a manner calculated to
be understood by the individual entitled to
benefits under part A or enrolled under part B,
or both, and shall include (to the extent
appropriate) and shall include a detailed
explanation of the decision as well as a
discussion of the pertinent facts and
applicable regulations applied in making such
decision, and a notification of the right to
appeal such determination and instructions on
how to initiate such appeal under this section
and in the case of a determination of whether
an item or service is reasonable and necessary
for the diagnosis or treatment of illness or
injury (under section 1862(a)(1)(A)) an
explanation of the medical and scientific
rationale for the decision.
* * * * * * *
(I) Data collection.--
(i) * * *
(ii) Type of data collected.--Each
qualified independent contractor shall
keep accurate records of each decision
made, consistent with standards
established by the Secretary for such
purpose. Such records shall be
maintained in an electronic database in
a manner that provides for
identification of the following:
(I) * * *
* * * * * * *
(III) Situations suggesting
the need for changes in
national or local coverage
[policy] determination.
(IV) Situations suggesting
the need for changes in local
[medical review policies]
coverage determinations.
(J) Hearings by the secretary.--The qualified
independent contractor shall (i) [prepare]
submit such information as is required for an
appeal of a decision of the contractor [with
respect to a reconsideration to the Secretary
for a hearing, including as necessary,
explanations of issues involved in the decision
and relevant policies], and (ii) participate in
such hearings as required by the Secretary.
(K) Independence requirements.--
(i) In general.--Subject to clause
(ii), a qualified independent
contractor shall not conduct any
activities in a case unless the
entity--
(I) is not a related party
(as defined in subsection
(g)(5));
(II) does not have a material
familial, financial, or
professional relationship with
such a party in relation to
such case; and
(III) does not otherwise have
a conflict of interest with
such a party.
(ii) Exception for reasonable
compensation.--Nothing in clause (i)
shall be construed to prohibit receipt
by a qualified independent contractor
of compensation from the Secretary for
the conduct of activities under this
section if the compensation is provided
consistent with clause (iii).
(iii) Limitations on entity
compensation.--Compensation provided by
the Secretary to a qualified
independent contractor in connection
with reviews under this section shall
not be contingent on any decision
rendered by the contractor or by any
reviewing professional.
* * * * * * *
(d) Deadlines for Hearings by the Secretary; Notice.--
(1) * * *
* * * * * * *
(4) Notice.--Notice of the decision of an
administrative law judge shall be in writing in a
manner calculated to be understood by the individual
entitled to benefits under part A or enrolled under
part B, or both, and shall include--
(A) the specific reasons for the
determination (including, to the extent
appropriate, a summary of the clinical or
scientific evidence used in making the
determination);
(B) the procedures for obtaining additional
information concerning the decision; and
(C) notification of the right to appeal the
decision and instructions on how to initiate
such an appeal under this section.
* * * * * * *
(f ) Review of Coverage Determinations.--
(1) * * *
(2) Local coverage determination.--
(A) In general.--Review of any local coverage
determination shall be subject to the following
limitations:
(i) Upon the filing of a complaint by
an aggrieved party, such a
determination shall be reviewed by an
administrative law judge [of the Social
Security Administration]. The
administrative law judge--
(I) * * *
* * * * * * *
(4) Pending national coverage determinations.--
(A) In general.--In the event the Secretary
has not issued a national coverage or
noncoverage determination with respect to a
particular type or class of items or services,
an aggrieved person (as described in paragraph
(5)) may submit to the Secretary a request to
make such a determination with respect to such
items or services. By not later than the end of
the 90-day period beginning on the date the
Secretary receives such a request
(notwithstanding the receipt by the Secretary
of new evidence (if any) during such 90-day
period), the Secretary shall take one of the
following actions:
(i) * * *
* * * * * * *
(iv) Issue a notice that states that
the Secretary has not completed a
review of the request for a national
coverage determination and that
includes an identification of the
remaining steps in the Secretary's
review process and a deadline by which
the Secretary will complete the review
and take an action described in
[subclause (I), (II), or (III)] clause
(i), (ii), or (iii).
(B) Deemed action by the secretary.--In the
case of an action described in [clause (i)(IV)]
subparagraph (A)(iv), if the Secretary fails to
take an action referred to in such clause by
the deadline specified by the Secretary under
such clause, then the Secretary is deemed to
have taken an action described in [clause
(i)(III)] subparagraph (A)(iii) as of the
deadline.
(C) Explanation of determination.--When
issuing a determination under [clause (i)]
subparagraph (A), the Secretary shall include
an explanation of the basis for the
determination. An action taken under clause (i)
(other than [subclause (IV)] clause (iv)) is
deemed to be a national coverage determination
for purposes of review under [subparagraph (A)]
paragraph (1)(A).
* * * * * * *
(g) Qualifications of Reviewers.--
(1) In general.--In reviewing determinations under
this section, a qualified independent contractor shall
assure that--
(A) each individual conducting a review shall
meet the qualifications of paragraph (2);
(B) compensation provided by the contractor
to each such reviewer is consistent with
paragraph (3); and
(C) in the case of a review by a panel
described in subsection (c)(3)(B) composed of
physicians or other health care professionals
(each in this subsection referred to as a
``reviewing professional''), each reviewing
professional meets the qualifications described
in paragraph (4) and, where a claim is
regarding the furnishing of treatment by a
physician (allopathic or osteopathic) or the
provision of items or services by a physician
(allopathic or osteopathic), each reviewing
professional shall be a physician (allopathic
or osteopathic).
(2) Independence.--
(A) In general.--Subject to subparagraph (B),
each individual conducting a review in a case
shall--
(i) not be a related party (as
defined in paragraph (5));
(ii) not have a material familial,
financial, or professional relationship
with such a party in the case under
review; and
(iii) not otherwise have a conflict
of interest with such a party.
(B) Exception.--Nothing in subparagraph (A)
shall be construed to--
(i) prohibit an individual, solely on
the basis of a participation agreement
with a fiscal intermediary, carrier, or
other contractor, from serving as a
reviewing professional if--
(I) the individual is not
involved in the provision of
items or services in the case
under review;
(II) the fact of such an
agreement is disclosed to the
Secretary and the individual
entitled to benefits under part
A or enrolled under part B, or
both, (or authorized
representative) and neither
party objects; and
(III) the individual is not
an employee of the
intermediary, carrier, or
contractor and does not provide
services exclusively or
primarily to or on behalf of
such intermediary, carrier, or
contractor;
(ii) prohibit an individual who has
staff privileges at the institution
where the treatment involved takes
place from serving as a reviewer merely
on the basis of having such staff
privileges if the existence of such
privileges is disclosed to the
Secretary and such individual (or
authorized representative), and neither
party objects; or
(iii) prohibit receipt of
compensation by a reviewing
professional from a contractor if the
compensation is provided consistent
with paragraph (3).
For purposes of this paragraph, the term
``participation agreement'' means an agreement
relating to the provision of health care
services by the individual and does not include
the provision of services as a reviewer under
this subsection.
(3) Limitations on reviewer compensation.--
Compensation provided by a qualified independent
contractor to a reviewer in connection with a review
under this section shall not be contingent on the
decision rendered by the reviewer.
(4) Licensure and expertise.--Each reviewing
professional shall be--
(A) a physician (allopathic or osteopathic)
who is appropriately credentialed or licensed
in one or more States to deliver health care
services and has medical expertise in the field
of practice that is appropriate for the items
or services at issue; or
(B) a health care professional who is legally
authorized in one or more States (in accordance
with State law or the State regulatory
mechanism provided by State law) to furnish the
health care items or services at issue and has
medical expertise in the field of practice that
is appropriate for such items or services.
(5) Related party defined.--For purposes of this
section, the term ``related party'' means, with respect
to a case under this title involving a specific
individual entitled to benefits under part A or
enrolled under part B, or both, any of the following:
(A) The Secretary, the medicare
administrative contractor involved, or any
fiduciary, officer, director, or employee of
the Department of Health and Human Services, or
of such contractor.
(B) The individual (or authorized
representative).
(C) The health care professional that
provides the items or services involved in the
case.
(D) The institution at which the items or
services (or treatment) involved in the case
are provided.
(E) The manufacturer of any drug or other
item that is included in the items or services
involved in the case.
(F) Any other party determined under any
regulations to have a substantial interest in
the case involved.
(h) Prior Determination Process for Certain Items and
Services.--
(1) Establishment of process.--
(A) In general.--With respect to a medicare
administrative contractor that has a contract
under section 1874A that provides for making
payments under this title with respect to
eligible items and services described in
subparagraph (C), the Secretary shall establish
a prior determination process that meets the
requirements of this subsection and that shall
be applied by such contractor in the case of
eligible requesters.
(B) Eligible requester.--For purposes of this
subsection, each of the following shall be an
eligible requester:
(i) A physician, but only with
respect to eligible items and services
for which the physician may be paid
directly.
(ii) An individual entitled to
benefits under this title, but only
with respect to an item or service for
which the individual receives, from the
physician who may be paid directly for
the item or service, an advance
beneficiary notice under section
1879(a) that payment may not be made
(or may no longer be made) for the item
or service under this title.
(C) Eligible items and services.--For
purposes of this subsection and subject to
paragraph (2), eligible items and services are
items and services which are physicians'
services (as defined in paragraph (4)(A) of
section 1848(f) for purposes of calculating the
sustainable growth rate under such section).
(2) Secretarial flexibility.--The Secretary shall
establish by regulation reasonable limits on the
categories of eligible items and services for which a
prior determination of coverage may be requested under
this subsection. In establishing such limits, the
Secretary may consider the dollar amount involved with
respect to the item or service, administrative costs
and burdens, and other relevant factors.
(3) Request for prior determination.--
(A) In general.--Subject to paragraph (2),
under the process established under this
subsection an eligible requester may submit to
the contractor a request for a determination,
before the furnishing of an eligible item or
service involved as to whether the item or
service is covered under this title consistent
with the applicable requirements of section
1862(a)(1)(A) (relating to medical necessity).
(B) Accompanying documentation.--The
Secretary may require that the request be
accompanied by a description of the item or
service, supporting documentation relating to
the medical necessity for the item or service,
and any other appropriate documentation. In the
case of a request submitted by an eligible
requester who is described in paragraph
(1)(B)(ii), the Secretary may require that the
request also be accompanied by a copy of the
advance beneficiary notice involved.
(4) Response to request.--
(A) In general.--Under such process, the
contractor shall provide the eligible requester
with written notice of a determination as to
whether--
(i) the item or service is so
covered;
(ii) the item or service is not so
covered; or
(iii) the contractor lacks sufficient
information to make a coverage
determination.
If the contractor makes the determination
described in clause (iii), the contractor shall
include in the notice a description of the
additional information required to make the
coverage determination.
(B) Deadline to respond.--Such notice shall
be provided within the same time period as the
time period applicable to the contractor
providing notice of initial determinations on a
claim for benefits under subsection (a)(2)(A).
(C) Informing beneficiary in case of
physician request.--In the case of a request in
which an eligible requester is not the
individual described in paragraph (1)(B)(ii),
the process shall provide that the individual
to whom the item or service is proposed to be
furnished shall be informed of any
determination described in clause (ii)
(relating to a determination of non-coverage)
and the right (referred to in paragraph (6)(B))
to obtain the item or service and have a claim
submitted for the item or service.
(5) Effect of determinations.--
(A) Binding nature of positive
determination.--If the contractor makes the
determination described in paragraph (4)(A)(i),
such determination shall be binding on the
contractor in the absence of fraud or evidence
of misrepresentation of facts presented to the
contractor.
(B) Notice and right to redetermination in
case of a denial.--
(i) In general.--If the contractor
makes the determination described in
paragraph (4)(A)(ii)--
(I) the eligible requester
has the right to a
redetermination by the
contractor on the determination
that the item or service is not
so covered; and
(II) the contractor shall
include in notice under
paragraph (4)(A) a brief
explanation of the basis for
the determination, including on
what national or local coverage
or noncoverage determination
(if any) the determination is
based, and the right to such a
redetermination.
(ii) Deadline for redeterminations.--
The contractor shall complete and
provide notice of such redetermination
within the same time period as the time
period applicable to the contractor
providing notice of redeterminations
relating to a claim for benefits under
subsection (a)(3)(C)(ii).
(6) Limitation on further review.--
(A) In general.--Contractor determinations
described in paragraph (4)(A)(ii) or
(4)(A)(iii) (and redeterminations made under
paragraph (5)(B)), relating to pre-service
claims are not subject to further
administrative appeal or judicial review under
this section or otherwise.
(B) Decision not to seek prior determination
or negative determination does not impact right
to obtain services, seek reimbursement, or
appeal rights.--Nothing in this subsection
shall be construed as affecting the right of an
individual who--
(i) decides not to seek a prior
determination under this subsection
with respect to items or services; or
(ii) seeks such a determination and
has received a determination described
in paragraph (4)(A)(ii),
from receiving (and submitting a claim for)
such items services and from obtaining
administrative or judicial review respecting
such claim under the other applicable
provisions of this section. Failure to seek a
prior determination under this subsection with
respect to items and services shall not be
taken into account in such administrative or
judicial review.
(C) No prior determination after receipt of
services.--Once an individual is provided items
and services, there shall be no prior
determination under this subsection with
respect to such items or services.
* * * * * * *
REGULATIONS
Sec. 1871. (a)(1) * * *
* * * * * * *
(3)(A) The Secretary, in consultation with the Director of
the Office of Management and Budget, shall establish and
publish a regular timeline for the publication of final
regulations based on the previous publication of a proposed
regulation or an interim final regulation.
(B) Such timeline may vary among different regulations based
on differences in the complexity of the regulation, the number
and scope of comments received, and other relevant factors, but
shall not be longer than 3 years except under exceptional
circumstances. If the Secretary intends to vary such timeline
with respect to the publication of a final regulation, the
Secretary shall cause to have published in the Federal Register
notice of the different timeline by not later than the timeline
previously established with respect to such regulation. Such
notice shall include a brief explanation of the justification
for such variation.
(C) In the case of interim final regulations, upon the
expiration of the regular timeline established under this
paragraph for the publication of a final regulation after
opportunity for public comment, the interim final regulation
shall not continue in effect unless the Secretary publishes (at
the end of the regular timeline and, if applicable, at the end
of each succeeding 1-year period) a notice of continuation of
the regulation that includes an explanation of why the regular
timeline (and any subsequent 1-year extension) was not complied
with. If such a notice is published, the regular timeline (or
such timeline as previously extended under this paragraph) for
publication of the final regulation shall be treated as having
been extended for 1 additional year.
(D) The Secretary shall annually submit to Congress a report
that describes the instances in which the Secretary failed to
publish a final regulation within the applicable regular
timeline under this paragraph and that provides an explanation
for such failures.
(4) If the Secretary publishes notice of proposed rulemaking
relating to a regulation (including an interim final
regulation), insofar as such final regulation includes a
provision that is not a logical outgrowth of such notice of
proposed rulemaking, that provision shall be treated as a
proposed regulation and shall not take effect until there is
the further opportunity for public comment and a publication of
the provision again as a final regulation.
* * * * * * *
(d)(1) Subject to paragraph (2), the Secretary shall issue
proposed or final (including interim final) regulations to
carry out this title only on one business day of every month.
(2) The Secretary may issue a proposed or final regulation
described in paragraph (1) on any other day than the day
described in paragraph (1) if the Secretary--
(A) finds that issuance of such regulation on another
day is necessary to comply with requirements under law;
or
(B) finds that with respect to that regulation the
limitation of issuance on the date described in
paragraph (1) is contrary to the public interest.
If the Secretary makes a finding under this paragraph, the
Secretary shall include such finding, and brief statement of
the reasons for such finding, in the issuance of such
regulation.
(3) The Secretary shall coordinate issuance of new
regulations described in paragraph (1) relating to a category
of provider of services or suppliers based on an analysis of
the collective impact of regulatory changes on that category of
providers or suppliers.
(e)(1)(A) A substantive change in regulations, manual
instructions, interpretative rules, statements of policy, or
guidelines of general applicability under this title shall not
be applied (by extrapolation or otherwise) retroactively to
items and services furnished before the effective date of the
change, unless the Secretary determines that--
(i) such retroactive application is necessary to
comply with statutory requirements; or
(ii) failure to apply the change retroactively would
be contrary to the public interest.
(B)(i) Except as provided in clause (ii), a substantive
change referred to in subparagraph (A) shall not become
effective before the end of the 30-day period that begins on
the date that the Secretary has issued or published, as the
case may be, the substantive change.
(ii) The Secretary may provide for such a substantive change
to take effect on a date that precedes the end of the 30-day
period under clause (i) if the Secretary finds that waiver of
such 30-day period is necessary to comply with statutory
requirements or that the application of such 30-day period is
contrary to the public interest. If the Secretary provides for
an earlier effective date pursuant to this clause, the
Secretary shall include in the issuance or publication of the
substantive change a finding described in the first sentence,
and a brief statement of the reasons for such finding.
(C) No action shall be taken against a provider of services
or supplier with respect to noncompliance with such a
substantive change for items and services furnished before the
effective date of such a change.
(2)(A) If--
(i) a provider of services or supplier follows the
written guidance (which may be transmitted
electronically) provided by the Secretary or by a
medicare contractor (as defined in section 1889(g))
acting within the scope of the contractor's contract
authority, with respect to the furnishing of items or
services and submission of a claim for benefits for
such items or services with respect to such provider or
supplier;
(ii) the Secretary determines that the provider of
services or supplier has accurately presented the
circumstances relating to such items, services, and
claim to the contractor in writing; and
(iii) the guidance was in error;
the provider of services or supplier shall not be subject to
any sanction (including any penalty or requirement for
repayment of any amount) if the provider of services or
supplier reasonably relied on such guidance.
(B) Subparagraph (A) shall not be construed as preventing the
recoupment or repayment (without any additional penalty)
relating to an overpayment insofar as the overpayment was
solely the result of a clerical or technical operational error.
(f)(1) Not later than 2 years after the date of the enactment
of this subsection, and every 2 years thereafter, the Secretary
shall submit to Congress a report with respect to the
administration of this title and areas of inconsistency or
conflict among the various provisions under law and regulation.
(2) In preparing a report under paragraph (1), the Secretary
shall collect--
(A) information from individuals entitled to benefits
under part A or enrolled under part B, or both,
providers of services, and suppliers and from the
Medicare Beneficiary Ombudsman and the Medicare
Provider Ombudsman with respect to such areas of
inconsistency and conflict; and
(B) information from medicare contractors that tracks
the nature of written and telephone inquiries.
(3) A report under paragraph (1) shall include a description
of efforts by the Secretary to reduce such inconsistency or
conflicts, and recommendations for legislation or
administrative action that the Secretary determines appropriate
to further reduce such inconsistency or conflicts.
* * * * * * *
CONTRACTS WITH MEDICARE ADMINISTRATIVE CONTRACTORS
Sec. 1874A. (a) Authority.--
(1) Authority to enter into contracts.--The Secretary
may enter into contracts with any eligible entity to
serve as a medicare administrative contractor with
respect to the performance of any or all of the
functions described in paragraph (4) or parts of those
functions (or, to the extent provided in a contract, to
secure performance thereof by other entities).
(2) Eligibility of entities.--An entity is eligible
to enter into a contract with respect to the
performance of a particular function described in
paragraph (4) only if--
(A) the entity has demonstrated capability to
carry out such function;
(B) the entity complies with such conflict of
interest standards as are generally applicable
to Federal acquisition and procurement;
(C) the entity has sufficient assets to
financially support the performance of such
function; and
(D) the entity meets such other requirements
as the Secretary may impose.
(3) Medicare administrative contractor defined.--For
purposes of this title and title XI--
(A) In general.--The term ``medicare
administrative contractor'' means an agency,
organization, or other person with a contract
under this section.
(B) Appropriate medicare administrative
contractor.--With respect to the performance of
a particular function in relation to an
individual entitled to benefits under part A or
enrolled under part B, or both, a specific
provider of services or supplier (or class of
such providers of services or suppliers), the
``appropriate'' medicare administrative
contractor is the medicare administrative
contractor that has a contract under this
section with respect to the performance of that
function in relation to that individual,
provider of services or supplier or class of
provider of services or supplier.
(4) Functions described.--The functions referred to
in paragraphs (1) and (2) are payment functions,
provider services functions, and functions relating to
services furnished to individuals entitled to benefits
under part A or enrolled under part B, or both, as
follows:
(A) Determination of payment amounts.--
Determining (subject to the provisions of
section 1878 and to such review by the
Secretary as may be provided for by the
contracts) the amount of the payments required
pursuant to this title to be made to providers
of services, suppliers and individuals.
(B) Making payments.--Making payments
described in subparagraph (A) (including
receipt, disbursement, and accounting for funds
in making such payments).
(C) Beneficiary education and assistance.--
Providing education and outreach to individuals
entitled to benefits under part A or enrolled
under part B, or both, and providing assistance
to those individuals with specific issues,
concerns or problems.
(D) Provider consultative services.--
Providing consultative services to
institutions, agencies, and other persons to
enable them to establish and maintain fiscal
records necessary for purposes of this title
and otherwise to qualify as providers of
services or suppliers.
(E) Communication with providers.--
Communicating to providers of services and
suppliers any information or instructions
furnished to the medicare administrative
contractor by the Secretary, and facilitating
communication between such providers and
suppliers and the Secretary.
(F) Provider education and technical
assistance.--Performing the functions relating
to provider education, training, and technical
assistance.
(G) Additional functions.--Performing such
other functions as are necessary to carry out
the purposes of this title.
(5) Relationship to mip contracts.--
(A) Nonduplication of duties.--In entering
into contracts under this section, the
Secretary shall assure that functions of
medicare administrative contractors in carrying
out activities under parts A and B do not
duplicate activities carried out under the
Medicare Integrity Program under section 1893.
The previous sentence shall not apply with
respect to the activity described in section
1893(b)(5) (relating to prior authorization of
certain items of durable medical equipment
under section 1834(a)(15)).
(B) Construction.--An entity shall not be
treated as a medicare administrative contractor
merely by reason of having entered into a
contract with the Secretary under section 1893.
(6) Application of federal acquisition regulation.--
Except to the extent inconsistent with a specific
requirement of this title, the Federal Acquisition
Regulation applies to contracts under this title.
(b) Contracting Requirements.--
(1) Use of competitive procedures.--
(A) In general.--Except as provided in laws
with general applicability to Federal
acquisition and procurement or in subparagraph
(B), the Secretary shall use competitive
procedures when entering into contracts with
medicare administrative contractors under this
section, taking into account performance
quality as well as price and other factors.
(B) Renewal of contracts.--The Secretary may
renew a contract with a medicare administrative
contractor under this section from term to term
without regard to section 5 of title 41, United
States Code, or any other provision of law
requiring competition, if the medicare
administrative contractor has met or exceeded
the performance requirements applicable with
respect to the contract and contractor, except
that the Secretary shall provide for the
application of competitive procedures under
such a contract not less frequently than once
every five years.
(C) Transfer of functions.--The Secretary may
transfer functions among medicare
administrative contractors consistent with the
provisions of this paragraph. The Secretary
shall ensure that performance quality is
considered in such transfers. The Secretary
shall provide public notice (whether in the
Federal Register or otherwise) of any such
transfer (including a description of the
functions so transferred, a description of the
providers of services and suppliers affected by
such transfer, and contact information for the
contractors involved).
(D) Incentives for quality.--The Secretary
shall provide incentives for medicare
administrative contractors to provide quality
service and to promote efficiency.
(2) Compliance with requirements.--No contract under
this section shall be entered into with any medicare
administrative contractor unless the Secretary finds
that such medicare administrative contractor will
perform its obligations under the contract efficiently
and effectively and will meet such requirements as to
financial responsibility, legal authority, quality of
services provided, and other matters as the Secretary
finds pertinent.
(3) Performance requirements.--
(A) Development of specific performance
requirements.--In developing contract
performance requirements, the Secretary shall
develop performance requirements applicable to
functions described in subsection (a)(4).
(B) Consultation.-- In developing such
requirements, the Secretary may consult with
providers of services and suppliers,
organizations representing individuals entitled
to benefits under part A or enrolled under part
B, or both, and organizations and agencies
performing functions necessary to carry out the
purposes of this section with respect to such
performance requirements.
(C) Inclusion in contracts.--All contractor
performance requirements shall be set forth in
the contract between the Secretary and the
appropriate medicare administrative contractor.
Such performance requirements--
(i) shall reflect the performance
requirements developed under
subparagraph (A), but may include
additional performance requirements;
(ii) shall be used for evaluating
contractor performance under the
contract; and
(iii) shall be consistent with the
written statement of work provided
under the contract.
(4) Information requirements.--The Secretary shall
not enter into a contract with a medicare
administrative contractor under this section unless the
contractor agrees--
(A) to furnish to the Secretary such timely
information and reports as the Secretary may
find necessary in performing his functions
under this title; and
(B) to maintain such records and afford such
access thereto as the Secretary finds necessary
to assure the correctness and verification of
the information and reports under subparagraph
(A) and otherwise to carry out the purposes of
this title.
(5) Surety bond.--A contract with a medicare
administrative contractor under this section may
require the medicare administrative contractor, and any
of its officers or employees certifying payments or
disbursing funds pursuant to the contract, or otherwise
participating in carrying out the contract, to give
surety bond to the United States in such amount as the
Secretary may deem appropriate.
(c) Terms and Conditions.--
(1) In general.--A contract with any medicare
administrative contractor under this section may
contain such terms and conditions as the Secretary
finds necessary or appropriate and may provide for
advances of funds to the medicare administrative
contractor for the making of payments by it under
subsection (a)(4)(B).
(2) Prohibition on mandates for certain data
collection.--The Secretary may not require, as a
condition of entering into, or renewing, a contract
under this section, that the medicare administrative
contractor match data obtained other than in its
activities under this title with data used in the
administration of this title for purposes of
identifying situations in which the provisions of
section 1862(b) may apply.
(d) Limitation on Liability of Medicare Administrative
Contractors and Certain Officers.--
(1) Certifying officer.--No individual designated
pursuant to a contract under this section as a
certifying officer shall, in the absence of gross
negligence or intent to defraud the United States, be
liable with respect to any payments certified by the
individual under this section.
(2) Disbursing officer.--No disbursing officer shall,
in the absence of gross negligence or intent to defraud
the United States, be liable with respect to any
payment by such officer under this section if it was
based upon an authorization (which meets the applicable
requirements for such internal controls established by
the Comptroller General) of a certifying officer
designated as provided in paragraph (1) of this
subsection.
(3) Liability of medicare administrative
contractor.--No medicare administrative contractor
shall be liable to the United States for a payment by a
certifying or disbursing officer unless in connection
with such payment or in the supervision of or selection
of such officer the medicare administrative contractor
acted with gross negligence.
(4) Indemnification by secretary.--
(A) In general.--Subject to subparagraphs (B)
and (D), in the case of a medicare
administrative contractor (or a person who is a
director, officer, or employee of such a
contractor or who is engaged by the contractor
to participate directly in the claims
administration process) who is made a party to
any judicial or administrative proceeding
arising from or relating directly to the claims
administration process under this title, the
Secretary may, to the extent the Secretary
determines to be appropriate and as specified
in the contract with the contractor, indemnify
the contractor and such persons.
(B) Conditions.--The Secretary may not
provide indemnification under subparagraph (A)
insofar as the liability for such costs arises
directly from conduct that is determined by the
judicial proceeding or by the Secretary to be
criminal in nature, fraudulent, or grossly
negligent. If indemnification is provided by
the Secretary with respect to a contractor
before a determination that such costs arose
directly from such conduct, the contractor
shall reimburse the Secretary for costs of
indemnification.
(C) Scope of indemnification.--
Indemnification by the Secretary under
subparagraph (A) may include payment of
judgments, settlements (subject to subparagraph
(D)), awards, and costs (including reasonable
legal expenses).
(D) Written approval for settlements.--A
contractor or other person described in
subparagraph (A) may not propose to negotiate a
settlement or compromise of a proceeding
described in such subparagraph without the
prior written approval of the Secretary to
negotiate such settlement or compromise. Any
indemnification under subparagraph (A) with
respect to amounts paid under a settlement or
compromise of a proceeding described in such
subparagraph are conditioned upon prior written
approval by the Secretary of the final
settlement or compromise.
(E) Construction.--Nothing in this paragraph
shall be construed--
(i) to change any common law immunity
that may be available to a medicare
administrative contractor or person
described in subparagraph (A); or
(ii) to permit the payment of costs
not otherwise allowable, reasonable, or
allocable under the Federal Acquisition
Regulations.
(e) Requirements for Information Security.--
(1) Development of information security program.--A
medicare administrative contractor that performs the
functions referred to in subparagraphs (A) and (B) of
subsection (a)(4) (relating to determining and making
payments) shall implement a contractor-wide information
security program to provide information security for
the operation and assets of the contractor with respect
to such functions under this title. An information
security program under this paragraph shall meet the
requirements for information security programs imposed
on Federal agencies under section 3534(b)(2) of title
44, United States Code (other than requirements under
subparagraphs (B)(ii), (F)(iii), and (F)(iv) of such
section).
(2) Independent audits.--
(A) Performance of annual evaluations.--Each
year a medicare administrative contractor that
performs the functions referred to in
subparagraphs (A) and (B) of subsection (a)(4)
(relating to determining and making payments)
shall undergo an evaluation of the information
security of the contractor with respect to such
functions under this title. The evaluation
shall--
(i) be performed by an entity that
meets such requirements for
independence as the Inspector General
of the Department of Health and Human
Services may establish; and
(ii) test the effectiveness of
information security control techniques
for an appropriate subset of the
contractor's information systems (as
defined in section 3502(8) of title 44,
United States Code) relating to such
functions under this title and an
assessment of compliance with the
requirements of this subsection and
related information security policies,
procedures, standards and guidelines.
(B) Deadline for initial evaluation.--
(i) New contractors.--In the case of
a medicare administrative contractor
covered by this subsection that has not
previously performed the functions
referred to in subparagraphs (A) and
(B) of subsection (a)(4) (relating to
determining and making payments) as a
fiscal intermediary or carrier under
section 1816 or 1842, the first
independent evaluation conducted
pursuant subparagraph (A) shall be
completed prior to commencing such
functions.
(ii) Other contractors.--In the case
of a medicare administrative contractor
covered by this subsection that is not
described in clause (i), the first
independent evaluation conducted
pursuant subparagraph (A) shall be
completed within 1 year after the date
the contractor commences functions
referred to in clause (i) under this
section.
(C) Reports on evaluations.--
(i) To the inspector general.--The
results of independent evaluations
under subparagraph (A) shall be
submitted promptly to the Inspector
General of the Department of Health and
Human Services.
(ii) To congress.--The Inspector
General of Department of Health and
Human Services shall submit to Congress
annual reports on the results of such
evaluations.
(f) Incentives To Improve Contractor Performance in Provider
Education and Outreach.--In order to give medicare
administrative contractors an incentive to implement effective
education and outreach programs for providers of services and
suppliers, the Secretary shall develop and implement a
methodology to measure the specific claims payment error rates
of such contractors in the processing or reviewing of medicare
claims.
(g) Communications with Beneficiaries, Providers of Services
and Suppliers.--
(1) Communication strategy.--The Secretary shall
develop a strategy for communications with individuals
entitled to benefits under part A or enrolled under
part B, or both, and with providers of services and
suppliers under this title.
(2) Response to written inquiries.--Each medicare
administrative contractor shall, for those providers of
services and suppliers which submit claims to the
contractor for claims processing and for those
individuals entitled to benefits under part A or
enrolled under part B, or both, with respect to whom
claims are submitted for claims processing, provide
general written responses (which may be through
electronic transmission) in a clear, concise, and
accurate manner to inquiries of providers of services,
suppliers and individuals entitled to benefits under
part A or enrolled under part B, or both, concerning
the programs under this title within 45 business days
of the date of receipt of such inquiries.
(3) Response to toll-free lines.--The Secretary shall
ensure that each medicare administrative contractor
shall provide, for those providers of services and
suppliers which submit claims to the contractor for
claims processing and for those individuals entitled to
benefits under part A or enrolled under part B, or
both, with respect to whom claims are submitted for
claims processing, a toll-free telephone number at
which such individuals, providers of services and
suppliers may obtain information regarding billing,
coding, claims, coverage, and other appropriate
information under this title.
(4) Monitoring of contractor responses.--
(A) In general.--Each medicare administrative
contractor shall, consistent with standards
developed by the Secretary under subparagraph
(B)--
(i) maintain a system for identifying
who provides the information referred
to in paragraphs (2) and (3); and
(ii) monitor the accuracy,
consistency, and timeliness of the
information so provided.
(B) Development of standards.--
(i) In general.--The Secretary shall
establish and make public standards to
monitor the accuracy, consistency, and
timeliness of the information provided
in response to written and telephone
inquiries under this subsection. Such
standards shall be consistent with the
performance requirements established
under subsection (b)(3).
(ii) Evaluation.--In conducting
evaluations of individual medicare
administrative contractors, the
Secretary shall take into account the
results of the monitoring conducted
under subparagraph (A) taking into
account as performance requirements the
standards established under clause (i).
The Secretary shall, in consultation
with organizations representing
providers of services, suppliers, and
individuals entitled to benefits under
part A or enrolled under part B, or
both, establish standards relating to
the accuracy, consistency, and
timeliness of the information so
provided.
(C) Direct monitoring.--Nothing in this
paragraph shall be construed as preventing the
Secretary from directly monitoring the
accuracy, consistency, and timeliness of the
information so provided.
(h) Conduct of Prepayment Review.--
(1) Conduct of random prepayment review.--
(A) In general.--A medicare administrative
contractor may conduct random prepayment review
only to develop a contractor-wide or program-
wide claims payment error rates or under such
additional circumstances as may be provided
under regulations, developed in consultation
with providers of services and suppliers.
(B) Use of standard protocols when conducting
prepayment reviews.--When a medicare
administrative contractor conducts a random
prepayment review, the contractor may conduct
such review only in accordance with a standard
protocol for random prepayment audits developed
by the Secretary.
(C) Construction.--Nothing in this paragraph
shall be construed as preventing the denial of
payments for claims actually reviewed under a
random prepayment review.
(D) Random prepayment review.--For purposes
of this subsection, the term ``random
prepayment review'' means a demand for the
production of records or documentation absent
cause with respect to a claim.
(2) Limitations on non-random prepayment review.--
(A) Limitations on initiation of non-random
prepayment review.--A medicare administrative
contractor may not initiate non-random
prepayment review of a provider of services or
supplier based on the initial identification by
that provider of services or supplier of an
improper billing practice unless there is a
likelihood of sustained or high level of
payment error (as defined in subsection
(i)(3)(A)).
(B) Termination of non-random prepayment
review.--The Secretary shall issue regulations
relating to the termination, including
termination dates, of non-random prepayment
review. Such regulations may vary such a
termination date based upon the differences in
the circumstances triggering prepayment review.
* * * * * * *
PAYMENTS TO HEALTH MAINTENANCE ORGANIZATIONS AND COMPETITIVE MEDICAL
PLANS
Sec. 1876. (a) * * *
* * * * * * *
(h)(1) * * *
* * * * * * *
(5)(A) * * *
* * * * * * *
(C)(i) The Secretary may not extend or renew a reasonable
cost reimbursement contract under this subsection for any
period beyond December 31, 2004, except (subject to clause
(ii)) in the case of a contract for an area which is not
covered in the service area of 1 or more coordinated care
Medicare+Choice plans under part C.
(ii) In the case in which--
(I) a reasonable cost reimbursement contract includes
an area in its service area as of a date that is after
December 31, 2003;
(II) such area is no longer included in such service
area after such date by reason of the operation of
clause (i) because of the inclusion of such area within
the service area of a Medicare+Choice plan; and
(III) all Medicare+Choice plans subsequently
terminate coverage in such area;
such reasonable cost reimbursement contract may be extended and
renewed to cover such area (so long as it is not included in
the service area of any Medicare+Choice plan).
* * * * * * *
MEDICARE COVERAGE FOR END STAGE RENAL DISEASE PATIENTS
Sec. 1881. (a) * * *
(b)(1) * * *
* * * * * * *
(7) The Secretary shall provide by regulation for a method
(or methods) for determining prospectively the amounts of
payments to be made for dialysis services furnished by
providers of services and renal dialysis facilities to
individuals in a facility and to such individuals at home. Such
method (or methods) shall provide for the prospective
determination of a rate (or rates) for each mode of care based
on a single composite weighted formula (which takes into
account the mix of patients who receive dialysis services at a
facility or at home and the relative costs of providing such
services in such settings) for hospital-based facilities and
such a single composite weighted formula for other renal
dialysis facilities, or based on such other method or
combination of methods which differentiate between hospital-
based facilities and other renal dialysis facilities and which
the Secretary determines, after detailed analysis, will more
effectively encourage the more efficient delivery of dialysis
services and will provide greater incentives for increased use
of home dialysis than through the single composite weighted
formulas. The amount of a payment made under any method other
than a method based on a single composite weighted formula may
not exceed the amount (or, in the case of continuous cycling
peritoneal dialysis, 130 percent of the amount) of the median
payment that would have been made under the formula for
hospital-based facilities. [The Secretary] Subject to section
422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000, the Secretary shall
provide for such exceptions to such methods as may be warranted
by unusual circumstances (including the special circumstances
of sole facilities located in isolated, rural areas and of
pediatric facilities). Each application for such an exception
shall be deemed to be approved unless the Secretary disapproves
it by not later than 60 working days after the date the
application is filed. The Secretary may provide that such
method will serve in lieu of any target reimbursement rate that
would otherwise be established under paragraph (6). The
Secretary shall reduce the amount of each composite rate
payment under this paragraph for each treatment by 50 cents
(subject to such adjustments as may be required to reflect
modes of dialysis other than hemodialysis) and provide for
payment of such amount to the organizations (designated under
subsection (c)(1)(A)) for such organizations' necessary and
proper administrative costs incurred in carrying out the
responsibilities described in subsection (c)(2). The Secretary
shall provide that amounts paid under the previous sentence
shall be distributed to the organizations described in
subsection (c)(1)(A) to ensure equitable treatment of all such
network organizations. The Secretary in distributing any such
payments to network organizations shall take into account--
(A) * * *
* * * * * * *
CERTIFICATION OF MEDICARE SUPPLEMENTAL HEALTH INSURANCE POLICIES
Sec. 1882. (a) * * *
* * * * * * *
(v) Coverage of Prescription Drugs.--
(1) In general.--Notwithstanding any other provision
of law, except as provided in paragraph (3) no new
medicare supplemental policy that provides coverage of
expenses for prescription drugs may be issued under
this section on or after January 1, 2005, to an
individual unless it replaces a medicare supplemental
policy that was issued to that individual and that
provided some coverage of expenses for prescription
drugs.
(2) Issuance of substitute policies if obtain
prescription drug coverage under part d.--
(A) In general.--The issuer of a medicare
supplemental policy--
(i) may not deny or condition the
issuance or effectiveness of a medicare
supplemental policy that has a benefit
package classified as ``A'', ``B'',
``C'', ``D'', ``E'', ``F'', or ``G''
(under the standards established under
subsection (p)(2)) and that is offered
and is available for issuance to new
enrollees by such issuer;
(ii) may not discriminate in the
pricing of such policy, because of
health status, claims experience,
receipt of health care, or medical
condition; and
(iii) may not impose an exclusion of
benefits based on a pre-existing
condition under such policy,
in the case of an individual described in
subparagraph (B) who seeks to enroll under the
policy not later than 63 days after the date of
the termination of enrollment described in such
paragraph and who submits evidence of the date
of termination or disenrollment along with the
application for such medicare supplemental
policy.
(B) Individual covered.--An individual
described in this subparagraph is an individual
who--
(i) enrolls in a prescription drug
plan under part D; and
(ii) at the time of such enrollment
was enrolled and terminates enrollment
in a medicare supplemental policy which
has a benefit package classified as
``H'', ``I'', or ``J'' under the
standards referred to in subparagraph
(A)(i) or terminates enrollment in a
policy to which such standards do not
apply but which provides benefits for
prescription drugs.
(C) Enforcement.--The provisions of paragraph
(4) of subsection (s) shall apply with respect
to the requirements of this paragraph in the
same manner as they apply to the requirements
of such subsection.
(3) New standards.--In applying subsection (p)(1)(E)
(including permitting the NAIC to revise its model
regulations in response to changes in law) with respect
to the change in benefits resulting from title I of the
Medicare Modernization and Prescription Drug Act of
2002, with respect to policies issued to individuals
who are enrolled under part D, the changes in standards
shall only provide for substituting for the benefit
packages that included coverage for prescription drugs
two benefit packages that may provide for coverage of
cost-sharing with respect to qualified prescription
drug coverage under such part, except that such
coverage may not cover the prescription drug deductible
under such part. The two benefit packages shall be
consistent with the following:
(A) First new policy.--The policy described
in this subparagraph has the following
benefits, notwithstanding any other provision
of this section relating to a core benefit
package:
(i) Coverage of 50 percent of the
cost-sharing otherwise applicable,
except coverage of 100 percent of any
cost-sharing otherwise applicable for
preventive benefits.
(ii) No coverage of the part B
deductible.
(iii) Coverage for all hospital
coinsurance for long stays (as in the
current core benefit package).
(iv) A limitation on annual out-of-
pocket expenditures to $4,000 in 2005
(or, in a subsequent year, to such
limitation for the previous year
increased by an appropriate inflation
adjustment specified by the Secretary).
(B) Second new policy.--The policy described
in this subparagraph has the same benefits as
the policy described in subparagraph (A),
except as follows:
(i) Substitute ``75 percent'' for
``50 percent'' in clause (i) of such
subparagraph.
(ii) Substitute ``$2,000'' for
``$4,000'' in clause (iv) of such
subparagraph.
(4) Construction.--Any provision in this section or
in a medicare supplemental policy relating to
guaranteed renewability of coverage shall be deemed to
have been met through the offering of other coverage
under this subsection.
* * * * * * *
PAYMENT TO HOSPITALS FOR INPATIENT HOSPITAL SERVICES
Sec. 1886. (a) * * *
(b)(1) * * *
* * * * * * *
(3)(A) * * *
(B)(i) For purposes of subsection (d) and subsection (j) for
discharges occurring during a fiscal year, the ``applicable
percentage increase'' shall be--
(I) * * *
* * * * * * *
[(XVIII) for fiscal year 2003, the market basket
percentage increase minus 0.55 percentage points for
hospitals in all areas, and]
(XVIII) for fiscal year 2003, the market basket
percentage increase for sole community hospitals and
such increase minus 0.25 percentage points for other
hospitals, and
* * * * * * *
(d)(1) * * *
* * * * * * *
(3) The Secretary shall determine a national adjusted DRG
prospective payment rate, for each inpatient hospital discharge
in a fiscal year after fiscal year 1984 involving inpatient
hospital services of a subsection (d) hospital in the United
States, and shall determine a regional adjusted DRG prospective
payment rate for such discharges in each region for which
payment may be made under part A of this title. Each such rate
shall be determined for hospitals located in large urban, other
urban, or rural areas within the United States and within each
such region, respectively, as follows:
(A) Updating previous standardized amounts.--(i) * *
*
* * * * * * *
[(iv) For discharges] (iv)(I) Subject to the
succeeding provisions of this clause, for discharges
occurring in a fiscal year beginning on or after
October 1, 1995, the Secretary shall compute an average
standardized amount for hospitals located in a large
urban area and for hospitals located in other areas
within the United States and within each region equal
to the respective average standardized amount computed
for the previous fiscal year under this subparagraph
increased by the applicable percentage increase under
subsection (b)(3)(B)(i) with respect to hospitals
located in the respective areas for the fiscal year
involved.
(II) For discharges occurring during fiscal year
2003, the average standardized amount for hospitals
located other than in a large urban area shall be
increased by \1/2\ of the difference between the
average standardized amount determined under subclause
(I) for hospitals located in large urban areas for such
fiscal year and such amount determined (without regard
to this subclause) for other hospitals for such fiscal
year.
(III) For discharges occurring in a fiscal year
beginning with fiscal year 2004, the Secretary shall
compute an average standardized amount for hospitals
located in any area within the United States and within
each region equal to the average standardized amount
computed for the previous fiscal year under this
subparagraph for hospitals located in a large urban
area (or, beginning with fiscal year 2005, for
hospitals located in any area) increased by the
applicable percentage increase under subsection
(b)(3)(B)(i).
* * * * * * *
(5)(A) * * *
(B) The Secretary shall provide for an additional payment
amount for subsection (d) hospitals with indirect costs of
medical education, in an amount computed in the same manner as
the adjustment for such costs under regulations (in effect as
of January 1, 1983) under subsection (a)(2), except as follows:
(i) * * *
(ii) For purposes of clause (i)(II), the indirect
teaching adjustment factor is equal to c
(((1+r) to the nth power) - 1), where ``r'' is the
ratio of the hospital's full-time equivalent interns
and residents to beds and ``n'' equals .405. For
discharges occurring--
(I) * * *
* * * * * * *
(VI) during fiscal year 2002, ``c'' is equal
to 1.6; [and]
(VII) during fiscal year 2003, ``c'' is equal
to 1.47;
(VIII) during fiscal year 2004, ``c'' is
equal to 1.45; and
[(VII)] (IX) on or after October 1, [2002]
2004, ``c'' is equal to 1.35.
* * * * * * *
(v) In determining the adjustment with respect to a
hospital for discharges occurring on or after October
1, 1997, the total number of full-time equivalent
interns and residents in the fields of allopathic and
osteopathic medicine in either a hospital or
nonhospital setting may not exceed the number (or, 130
percent of such number in the case of a hospital
located in a rural area) of such full-time equivalent
interns and residents in the hospital with respect to
the hospital's most recent cost reporting period ending
on or before December 31, 1996. Rules similar to the
rules of subsection (h)(4)(F)(ii) shall apply for
purposes of this clause. The provisions of clause (i)
of subparagraph (I) of subsection (h)(4) shall apply
with respect to the first sentence of this clause in
the same manner as it applies with respect to
subparagraph (F) of such subsection, but the provisions
of clause (ii) of such subparagraph shall not apply.
* * * * * * *
(F)(i) * * *
* * * * * * *
(iv) The disproportionate share adjustment percentage for a
cost reporting period for a hospital that is not described in
clause (i)(II) and that--
(I) * * *
(II) is located in an urban area and has less than
100 beds, is equal to 5 percent or, subject to clause
(xiv) and for discharges occurring on or after April 1,
2001, is equal to the percent determined in accordance
with clause (xiii);
(III) is located in a rural area and is not described
in subclause (IV) or (V) or in the second sentence of
clause (v), is equal to 4 percent or, subject to clause
(xiv) and for discharges occurring on or after April 1,
2001, is equal to the percent determined in accordance
with clause (xii);
(IV) is located in a rural area, is classified as a
rural referral center under subparagraph (C), and is
classified as a sole community hospital under
subparagraph (D), is equal to 10 percent or, if
greater, the percent determined in accordance with the
applicable formula described in clause (viii) or,
subject to clause (xiv) and for discharges occurring on
or after April 1, 2001, the greater of the percentages
determined under clause (x) or (xi);
(V) is located in a rural area, is classified as a
rural referral center under subparagraph (C), and is
not classified as a sole community hospital under
subparagraph (D), is equal to the percent determined in
accordance with the applicable formula described in
clause (viii) or, subject to clause (xiv) and for
discharges occurring on or after April 1, 2001, is
equal to the percent determined in accordance with
clause (xi); or
(VI) is located in a rural area, is classified as a
sole community hospital under subparagraph (D), and is
not classified as a rural referral center under
subparagraph (C), is 10 percent or, subject to clause
(xiv) and for discharges occurring on or after April 1,
2001, is equal to the percent determined in accordance
with clause (x).
* * * * * * *
(viii) [The formula] Subject to clause (xiv), the formula
used to determine the disproportionate share adjustment
percentage for a cost reporting period for a hospital described
in clause (iv)(IV) or (iv)(V) is the percentage determined in
accordance with the following formula:(P-30)(.6) + 4.0, where
``P'' is the hospital's disproportionate patient percentage (as
defined in clause (vi)).
* * * * * * *
(x) [For purposes] Subject to clause (xiv), for purposes of
clause (iv)(VI) (relating to sole community hospitals), in the
case of a hospital for a cost reporting period with a
disproportionate patient percentage (as defined in clause (vi))
that--
(I) * * *
* * * * * * *
(xi) [For purposes] Subject to clause (xiv), for purposes of
clause (iv)(V) (relating to rural referral centers), in the
case of a hospital for a cost reporting period with a
disproportionate patient percentage (as defined in clause (vi))
that--
(I) * * *
* * * * * * *
(xii) [For purposes] Subject to clause (xiv), for purposes of
clause (iv)(III) (relating to small rural hospitals generally),
in the case of a hospital for a cost reporting period with a
disproportionate patient percentage (as defined in clause (vi))
that--
(I) * * *
* * * * * * *
(xiii) [For purposes] Subject to clause (xiv), for purposes
of clause (iv)(II) (relating to urban hospitals with less than
100 beds), in the case of a hospital for a cost reporting
period with a disproportionate patient percentage (as defined
in clause (vi)) that--
(I) * * *
* * * * * * *
(xiv)(I) In the case of discharges in a fiscal year beginning
on or after October 1, 2002, subject to subclause (II), there
shall be substituted for the disproportionate share adjustment
percentage otherwise determined under clause (iv) (other than
subclause (I)) or under clause (viii), (x), (xi), (xii), or
(xiii), the old blend proportion (specified under subclause
(III)) of the disproportionate share adjustment percentage
otherwise determined under the respective clause and 100
percent minus such old blend proportion of the disproportionate
share adjustment percentage determined under clause (vii)
(relating to large, urban hospitals).
(II) Under subclause (I), the disproportionate share
adjustment percentage shall not exceed 10 percent for a
hospital that is not classified as a rural referral center
under subparagraph (C).
(III) For purposes of subclause (I), the old blend proportion
for fiscal year 2003 is 80 percent, for each subsequent year
(through 2006) is the old blend proportion under this subclause
for the previous year minus 20 percentage points, and for each
year beginning with 2007 is 0 percent.
* * * * * * *
(K)(i) Effective for discharges beginning on or after October
1, 2001, the Secretary shall establish a mechanism to recognize
the costs of new medical services and technologies under the
payment system established under this subsection. Such
mechanism shall be established after notice and opportunity for
public comment (in the publications required by subsection
(e)(5) for a fiscal year or otherwise). Such mechanism shall be
modified to meet the requirements of clause (viii).
(ii) The mechanism established pursuant to clause (i) shall--
(I) apply to a new medical service or technology if,
based on the estimated costs incurred with respect to
discharges involving such service or technology, the
DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate
(applying a threshold specified by the Secretary that
is the lesser of 50 percent of the national average
standardized amount for operating costs of inpatient
hospital services for all hospitals and all diagnosis-
related groups or one standard deviation for the
diagnosis-related group involved);
* * * * * * *
(III) subject to paragraph (4)(C)(iii), provide for
additional payment to be made under this subsection
with respect to discharges involving a new medical
service or technology described in subclause (I) that
occur during the period described in subclause (II) in
an amount that adequately reflects the estimated
average cost of such service or technology (based on
the marginal rate applied to costs under subparagraph
(A)); and
* * * * * * *
(vi)(I) For purposes of this subparagraph and subparagraph
(L), a medical service or technology will be considered a ``new
medical service or technology'' if the service or technology
meets criteria established by the Secretary after notice and an
opportunity for public comment.
(II) Under such criteria, a service or technology shall not
be denied treatment as a new service or technology on the basis
of the period of time in which the service or technology has
been in use if such period ends before the end of the 2-to-3-
year period that begins on the effective date of implementation
of a code under ICD-9-CM (or a successor coding methodology)
that enables the identification of a significant sample of
specific discharges in which the service or technology has been
used.
(III) The Secretary shall by regulation provide for further
clarification of the criteria applied to determine whether a
new service or technology represents an advance in medical
technology that substantially improves the diagnosis or
treatment of beneficiaries. Under such criteria, in determining
whether a new service or technology represents an advance in
medical technology that substantially improves the diagnosis or
treatment of beneficiaries, the Secretary shall deem a service
or technology as meeting such requirement if the service or
technology is a drug or biological that is designated under
section 506 or 526 of the Federal Food, Drug, and Cosmetic Act,
approved under section 314.510 or 601.41 of title 21, Code of
Federal Regulations, or designated for priority review when the
marketing application for such drug or biological was filed or
is a medical device for which an exemption has been granted
under section 520(m) of such Act, or for which priority review
has been provided under section 515(d)(5) of such Act.
(vii) Under the mechanism under this subparagraph, the
Secretary shall provide for the addition of new diagnosis and
procedure codes in April 1 of each year, but the addition of
such codes shall not require the Secretary to adjust the
payment (or diagnosis-related group classification) under this
subsection until the fiscal year that begins after such date.
(viii) The mechanism established pursuant to clause (i) shall
be adjusted to provide, before publication of a proposed rule,
for public input regarding whether a new service or technology
not described in the second sentence of clause (vi)(III)
represents an advance in medical technology that substantially
improves the diagnosis or treatment of beneficiaries as
follows:
(I) The Secretary shall make public and periodically
update a list of all the services and technologies for
which an application for additional payment under this
subparagraph is pending.
(II) The Secretary shall accept comments,
recommendations, and data from the public regarding
whether the service or technology represents a
substantial improvement.
(III) The Secretary shall provide for a meeting at
which organizations representing hospitals, physicians,
medicare beneficiaries, manufacturers, and any other
interested party may present comments, recommendations,
and data to the clinical staff of the Centers for
Medicare & Medicaid Services before publication of a
notice of proposed rulemaking regarding whether service
or technology represents a substantial improvement.
(ix) Before establishing any add-on payment under this
subparagraph with respect to a new technology, the Secretary
shall seek to identify one or more diagnosis-related groups
associated with such technology, based on similar clinical or
anatomical characteristics and the cost of the technology.
Within such groups the Secretary shall assign an eligible new
technology into a diagnosis-related group where the average
costs of care most closely approximate the costs of care of
using the new technology. In such case, no add-on payment under
this subparagraph shall be made with respect to such new
technology and this clause shall not affect the application of
paragraph (4)(C)(iii).
* * * * * * *
(9)(A) Notwithstanding section 1814(b) but subject to the
provisions of section 1813, the amount of the payment with
respect to the operating costs of inpatient hospital services
of a subsection (d) Puerto Rico hospital for inpatient hospital
discharges is equal to the sum of--
(i) [for discharges beginning on or after October 1,
1997, 50 percent (and for discharges between October 1,
1987, and September 30, 1997, 75 percent)] the
applicable Puerto Rico percentage (specified in
subparagraph (E)) of the Puerto Rico adjusted DRG
prospective payment rate (determined under subparagraph
(B) or (C)) for such discharges, and
(ii) [for discharges beginning in a fiscal year
beginning on or after October 1, 1997, 50 percent (and
for discharges between October 1, 1987, and September
30, 1997, 25 percent)] the applicable Federal
percentage (specified in subparagraph (E)) of the
discharge-weighted average of--
(I) * * *
* * * * * * *
(E) For purposes of subparagraph (A), for discharges
occurring--
(i) between October 1, 1987, and September 30, 1997,
the applicable Puerto Rico percentage is 75 percent and
the applicable Federal percentage is 25 percent;
(ii) on or after October 1, 1997, and before October
1, 2003, the applicable Puerto Rico percentage is 50
percent and the applicable Federal percentage is 50
percent;
(iii) during fiscal year 2004, the applicable Puerto
Rico percentage is 45 percent and the applicable
Federal percentage is 55 percent;
(iv) during fiscal year 2005, the applicable Puerto
Rico percentage is 40 percent and the applicable
Federal percentage is 60 percent;
(v) during fiscal year 2006, the applicable Puerto
Rico percentage is 35 percent and the applicable
Federal percentage is 65 percent;
(vi) during fiscal year 2007, the applicable Puerto
Rico percentage is 30 percent and the applicable
Federal percentage is 70 percent; and
(vii) on or after October 1, 2007, the applicable
Puerto Rico percentage is 25 percent and the applicable
Federal percentage is 75 percent.
* * * * * * *
(h) Payments for Direct Graduate Medical Education Costs.--
(1) * * *
(2) Determination of hospital-specific approved fte
resident amounts.--The Secretary shall determine, for
each hospital with an approved medical residency
training program, an approved FTE resident amount for
each cost reporting period beginning on or after July
1, 1985, as follows:
(A) * * *
* * * * * * *
(D) Amount for subsequent cost reporting
periods.--
(i) * * *
* * * * * * *
(iv) Adjustment in rate of increase
for hospitals with fte approved amount
above 140 percent of locality adjusted
national average per resident amount.--
(I) Freeze for fiscal years
2001 [and 2002] through 2012.--
For a cost reporting period
beginning [during fiscal year
2001 or fiscal year 2002]
during the period beginning
with fiscal year 2001 and
ending with fiscal year 2012,
if the approved FTE resident
amount for a hospital for the
preceding cost reporting period
exceeds 140 percent of the
locality adjusted national
average per resident amount
computed under subparagraph (E)
for that hospital and period,
[subject to subclause (III),]
the approved FTE resident
amount for the period involved
shall be the same as the
approved FTE resident amount
for the hospital for such
preceding cost reporting
period.
[(II) 2 percent decrease in
update for fiscal years 2003,
2004, and 2005.--For a cost
reporting period beginning
during fiscal year 2003, fiscal
year 2004, or fiscal year 2005,
if the approved FTE resident
amount for a hospital for the
preceding cost reporting period
exceeds 140 percent of the
locality adjusted national
average per resident amount
computed under subparagraph (E)
for that hospital and preceding
period, the approved FTE
resident amount for the period
involved shall be updated in
the manner described in
subparagraph (D)(i) except
that, subject to subclause
(III), the consumer price index
applied for a 12-month period
shall be reduced (but not below
zero) by 2 percentage points.]
[(III)] (II) No adjustment
below 140 percent.--In no case
shall subclause (I) [or (II)]
reduce an approved FTE resident
amount for a hospital for a
cost reporting period below 140
percent of the locality
adjusted national average per
resident amount computed under
subparagraph (E) for such
hospital and period.
* * * * * * *
(4) Determination of full-time-equivalent
residents.--
(A) * * *
* * * * * * *
(F) Limitation on number of residents in
allopathic and osteopathic medicine.--
(i) In general.--Such rules shall
provide that for purposes of a cost
reporting period beginning on or after
October 1, 1997, subject to
subparagraph (I), the total number of
full-time equivalent residents before
application of weighting factors (as
determined under this paragraph) with
respect to a hospital's approved
medical residency training program in
the fields of allopathic medicine and
osteopathic medicine may not exceed the
number (or, 130 percent of such number
in the case of a hospital located in a
rural area) of such full-time
equivalent residents for the hospital's
most recent cost reporting period
ending on or before December 31, 1996.
* * * * * * *
(H) Special rules for application of
subparagraphs (f) and (g).--
(i) New facilities.--The Secretary
shall, consistent with the principles
of subparagraphs (F) and (G), subject
to subparagraph (I), prescribe rules
for the application of such
subparagraphs in the case of medical
residency training programs established
on or after January 1, 1995. In
promulgating such rules for purposes of
subparagraph (F), the Secretary shall
give special consideration to
facilities that meet the needs of
underserved rural areas.
* * * * * * *
(I) Redistribution of unused resident
positions.--
(i) Reduction in limit based on
unused positions.--
(I) In general.--If a
hospital's resident level (as
defined in clause (iii)(I)) is
less than the otherwise
applicable resident limit (as
defined in clause (iii)(II))
for each of the reference
periods (as defined in
subclause (II)), effective for
cost reporting periods
beginning on or after January
1, 2003, the otherwise
applicable resident limit shall
be reduced by 75 percent of the
difference between such limit
and the reference resident
level specified in subclause
(III) (or subclause (IV) if
applicable).
(II) Reference periods
defined.--In this clause, the
term ``reference periods''
means, for a hospital, the 3
most recent consecutive cost
reporting periods of the
hospital for which cost reports
have been settled (or, if not,
submitted) on or before
September 30, 2001.
(III) Reference resident
level.--Subject to subclause
(IV), the reference resident
level specified in this
subclause for a hospital is the
highest resident level for the
hospital during any of the
reference periods.
(IV) Adjustment process.--
Upon the timely request of a
hospital, the Secretary may
adjust the reference resident
level for a hospital to be the
resident level for the hospital
for the cost reporting period
that includes July 1, 2002.
(ii) Redistribution.--
(I) In general.--The
Secretary is authorized to
increase the otherwise
applicable resident limits for
hospitals by an aggregate
number estimated by the
Secretary that does not exceed
the aggregate reduction in such
limits attributable to clause
(i) (without taking into
account any adjustment under
subclause (IV) of such clause).
(II) Effective date.--No
increase under subclause (I)
shall be permitted or taken
into account for a hospital for
any portion of a cost reporting
period that occurs before July
1, 2003, or before the date of
the hospital's application for
an increase under this clause.
No such increase shall be
permitted for a hospital unless
the hospital has applied to the
Secretary for such increase by
December 31, 2004.
(III) Considerations in
redistribution.--In determining
for which hospitals the
increase in the otherwise
applicable resident limit is
provided under subclause (I),
the Secretary shall take into
account the need for such an
increase by specialty and
location involved, consistent
with subclause (IV).
(IV) Priority for rural and
small urban areas.--In
determining for which hospitals
and residency training programs
an increase in the otherwise
applicable resident limit is
provided under subclause (I),
the Secretary shall first
distribute the increase to
programs of hospitals located
in rural areas or in urban
areas that are not large urban
areas (as defined for purposes
of subsection (d)) on a first-
come-first-served basis (as
determined by the Secretary)
based on a demonstration that
the hospital will fill the
positions made available under
this clause and not to exceed
an increase of 25 full-time
equivalent positions with
respect to any hospital.
(V) Application of locality
adjusted national average per
resident amount.--With respect
to additional residency
positions in a hospital
attributable to the increase
provided under this clause,
notwithstanding any other
provision of this subsection,
the approved FTE resident
amount is deemed to be equal to
the locality adjusted national
average per resident amount
computed under subparagraph (E)
for that hospital.
(VI) Construction.--Nothing
in this clause shall be
construed as permitting the
redistribution of reductions in
residency positions
attributable to voluntary
reduction programs under
paragraph (6) or as affecting
the ability of a hospital to
establish new medical residency
training programs under
subparagraph (H).
(iii) Resident level and limit
defined.--In this subparagraph:
(I) Resident level.--The term
``resident level'' means, with
respect to a hospital, the
total number of full-time
equivalent residents, before
the application of weighting
factors (as determined under
this paragraph), in the fields
of allopathic and osteopathic
medicine for the hospital.
(II) Otherwise applicable
resident limit.--The term
``otherwise applicable resident
limit'' means, with respect to
a hospital, the limit otherwise
applicable under subparagraphs
(F)(i) and (H) on the resident
level for the hospital
determined without regard to
this subparagraph.
PAYMENT TO SKILLED NURSING FACILITIES FOR ROUTINE SERVICE COSTS
Sec. 1888. (a) * * *
* * * * * * *
(e) Prospective Payment.--
(1) * * *
* * * * * * *
[(12) Payment rule for certain facilities.--
[(A) In general.--In the case of a qualified
acute skilled nursing facility described in
subparagraph (B), the per diem amount of
payment shall be determined by applying the
non-Federal percentage and Federal percentage
specified in paragraph (2)(C)(ii).
[(B) Facility described.--For purposes of
subparagraph (A), a qualified acute skilled
nursing facility is a facility that--
[(i) was certified by the Secretary
as a skilled nursing facility eligible
to furnish services under this title
before July 1, 1992;
[(ii) is a hospital-based facility;
and
[(iii) for the cost reporting period
beginning in fiscal year 1998, the
facility had more than 60 percent of
total patient days comprised of
patients who are described in
subparagraph (C).
[(C) Description of patients.--For purposes
of subparagraph (B), a patient described in
this subparagraph is an individual who--
[(i) is entitled to benefits under
part A; and
[(ii) is immuno-compromised secondary
to an infectious disease, with specific
diagnoses as specified by the
Secretary.]
(12) Adjustment for residents with aids.--
(A) In general.--Subject to subparagraph (B),
in the case of a resident of a skilled nursing
facility who is afflicted with acquired immune
deficiency syndrome (AIDS), the per diem amount
of payment otherwise applicable shall be
increased by 128 percent to reflect increased
costs associated with such residents.
(B) Sunset.--Subparagraph (A) shall not apply
on and after such date as the Secretary
certifies that there is an appropriate
adjustment in the case mix under paragraph
(4)(G)(i) to compensate for the increased costs
associated with residents described in such
subparagraph.
PROVIDER EDUCATION AND TECHNICAL ASSISTANCE
Sec. 1889. (a) Coordination of Education Funding.--The
Secretary shall coordinate the educational activities provided
through medicare contractors (as defined in subsection (g),
including under section 1893) in order to maximize the
effectiveness of Federal education efforts for providers of
services and suppliers.
(b) Enhanced Education and Training.--
(1) Additional resources.--There are authorized to be
appropriated to the Secretary (in appropriate part from
the Federal Hospital Insurance Trust Fund and the
Federal Supplementary Medical Insurance Trust Fund)
$25,000,000 for each of fiscal years 2004 and 2005 and
such sums as may be necessary for succeeding fiscal
years.
(2) Use.--The funds made available under paragraph
(1) shall be used to increase the conduct by medicare
contractors of education and training of providers of
services and suppliers regarding billing, coding, and
other appropriate items and may also be used to improve
the accuracy, consistency, and timeliness of contractor
responses.
(c) Tailoring Education and Training Activities for Small
Providers or Suppliers.--
(1) In general.--Insofar as a medicare contractor
conducts education and training activities, it shall
tailor such activities to meet the special needs of
small providers of services or suppliers (as defined in
paragraph (2)).
(2) Small provider of services or supplier.--In this
subsection, the term ``small provider of services or
supplier'' means--
(A) a provider of services with fewer than 25
full-time-equivalent employees; or
(B) a supplier with fewer than 10 full-time-
equivalent employees.
(d) Internet Sites; FAQs.--The Secretary, and each medicare
contractor insofar as it provides services (including claims
processing) for providers of services or suppliers, shall
maintain an Internet site which--
(1) provides answers in an easily accessible format
to frequently asked questions, and
(2) includes other published materials of the
contractor,
that relate to providers of services and suppliers under the
programs under this title (and title XI insofar as it relates
to such programs).
(e) Encouragement of Participation in Education Program
Activities.--A medicare contractor may not use a record of
attendance at (or failure to attend) educational activities or
other information gathered during an educational program
conducted under this section or otherwise by the Secretary to
select or track providers of services or suppliers for the
purpose of conducting any type of audit or prepayment review.
(f) Construction.--Nothing in this section or section 1893(g)
shall be construed as providing for disclosure by a medicare
contractor of information that would compromise pending law
enforcement activities or reveal findings of law enforcement-
related audits.
(g) Definitions.--For purposes of this section, the term
``medicare contractor'' includes the following:
(1) A medicare administrative contractor with a
contract under section 1874A, including a fiscal
intermediary with a contract under section 1816 and a
carrier with a contract under section 1842.
(2) An eligible entity with a contract under section
1893.
Such term does not include, with respect to activities of a
specific provider of services or supplier an entity that has no
authority under this title or title IX with respect to such
activities and such provider of services or supplier.
* * * * * * *
MEDICARE INTEGRITY PROGRAM
Sec. 1893. (a) * * *
* * * * * * *
(f) Recovery of Overpayments.--
(1) Use of repayment plans.--
(A) In general.--If the repayment, within 30
days by a provider of services or supplier, of
an overpayment under this title would
constitute a hardship (as defined in
subparagraph (B)), subject to subparagraph (C),
upon request of the provider of services or
supplier the Secretary shall enter into a plan
with the provider of services or supplier for
the repayment (through offset or otherwise) of
such overpayment over a period of at least 6
months but not longer than 3 years (or not
longer than 5 years in the case of extreme
hardship, as determined by the Secretary).
Interest shall accrue on the balance through
the period of repayment. Such plan shall meet
terms and conditions determined to be
appropriate by the Secretary.
(B) Hardship.--
(i) In general.--For purposes of
subparagraph (A), the repayment of an
overpayment (or overpayments) within 30
days is deemed to constitute a hardship
if--
(I) in the case of a provider
of services that files cost
reports, the aggregate amount
of the overpayments exceeds 10
percent of the amount paid
under this title to the
provider of services for the
cost reporting period covered
by the most recently submitted
cost report; or
(II) in the case of another
provider of services or
supplier, the aggregate amount
of the overpayments exceeds 10
percent of the amount paid
under this title to the
provider of services or
supplier for the previous
calendar year.
(ii) Rule of application.--The
Secretary shall establish rules for the
application of this subparagraph in the
case of a provider of services or
supplier that was not paid under this
title during the previous year or was
paid under this title only during a
portion of that year.
(iii) Treatment of previous
overpayments.--If a provider of
services or supplier has entered into a
repayment plan under subparagraph (A)
with respect to a specific overpayment
amount, such payment amount under the
repayment plan shall not be taken into
account under clause (i) with respect
to subsequent overpayment amounts.
(C) Exceptions.--Subparagraph (A) shall not
apply if--
(i) the Secretary has reason to
suspect that the provider of services
or supplier may file for bankruptcy or
otherwise cease to do business or
discontinue participation in the
program under this title; or
(ii) there is an indication of fraud
or abuse committed against the program.
(D) Immediate collection if violation of
repayment plan.--If a provider of services or
supplier fails to make a payment in accordance
with a repayment plan under this paragraph, the
Secretary may immediately seek to offset or
otherwise recover the total balance outstanding
(including applicable interest) under the
repayment plan.
(E) Relation to no fault provision.--Nothing
in this paragraph shall be construed as
affecting the application of section 1870(c)
(relating to no adjustment in the cases of
certain overpayments).
(2) Limitation on recoupment.--
(A) In general.--In the case of a provider of
services or supplier that is determined to have
received an overpayment under this title and
that seeks a reconsideration by a qualified
independent contractor on such determination
under section 1869(b)(1), the Secretary may not
take any action (or authorize any other person,
including any medicare contractor, as defined
in subparagraph (C)) to recoup the overpayment
until the date the decision on the
reconsideration has been rendered. If the
provisions of section 1869(b)(1) (providing for
such a reconsideration by a qualified
independent contractor) are not in effect, in
applying the previous sentence any reference to
such a reconsideration shall be treated as a
reference to a redetermination by the fiscal
intermediary or carrier involved.
(B) Collection with interest.--Insofar as the
determination on such appeal is against the
provider of services or supplier, interest on
the overpayment shall accrue on and after the
date of the original notice of overpayment.
Insofar as such determination against the
provider of services or supplier is later
reversed, the Secretary shall provide for
repayment of the amount recouped plus interest
at the same rate as would apply under the
previous sentence for the period in which the
amount was recouped.
(C) Medicare contractor defined.--For
purposes of this subsection, the term
``medicare contractor'' has the meaning given
such term in section 1889(g).
(3) Limitation on use of extrapolation.--A medicare
contractor may not use extrapolation to determine
overpayment amounts to be recovered by recoupment,
offset, or otherwise unless--
(A) there is a sustained or high level of
payment error (as defined by the Secretary by
regulation); or
(B) documented educational intervention has
failed to correct the payment error (as
determined by the Secretary).
(4) Provision of supporting documentation.--In the
case of a provider of services or supplier with respect
to which amounts were previously overpaid, a medicare
contractor may request the periodic production of
records or supporting documentation for a limited
sample of submitted claims to ensure that the previous
practice is not continuing.
(5) Consent settlement reforms.--
(A) In general.--The Secretary may use a
consent settlement (as defined in subparagraph
(D)) to settle a projected overpayment.
(B) Opportunity to submit additional
information before consent settlement offer.--
Before offering a provider of services or
supplier a consent settlement, the Secretary
shall--
(i) communicate to the provider of
services or supplier--
(I) that, based on a review
of the medical records
requested by the Secretary, a
preliminary evaluation of those
records indicates that there
would be an overpayment;
(II) the nature of the
problems identified in such
evaluation; and
(III) the steps that the
provider of services or
supplier should take to address
the problems; and
(ii) provide for a 45-day period
during which the provider of services
or supplier may furnish additional
information concerning the medical
records for the claims that had been
reviewed.
(C) Consent settlement offer.--The Secretary
shall review any additional information
furnished by the provider of services or
supplier under subparagraph (B)(ii). Taking
into consideration such information, the
Secretary shall determine if there still
appears to be an overpayment. If so, the
Secretary--
(i) shall provide notice of such
determination to the provider of
services or supplier, including an
explanation of the reason for such
determination; and
(ii) in order to resolve the
overpayment, may offer the provider of
services or supplier--
(I) the opportunity for a
statistically valid random
sample; or
(II) a consent settlement.
The opportunity provided under clause (ii)(I)
does not waive any appeal rights with respect
to the alleged overpayment involved.
(D) Consent settlement defined.--For purposes
of this paragraph, the term ``consent
settlement'' means an agreement between the
Secretary and a provider of services or
supplier whereby both parties agree to settle a
projected overpayment based on less than a
statistically valid sample of claims and the
provider of services or supplier agrees not to
appeal the claims involved.
(6) Notice of over-utilization of codes.--The
Secretary shall establish, in consultation with
organizations representing the classes of providers of
services and suppliers, a process under which the
Secretary provides for notice to classes of providers
of services and suppliers served by the contractor in
cases in which the contractor has identified that
particular billing codes may be overutilized by that
class of providers of services or suppliers under the
programs under this title (or provisions of title XI
insofar as they relate to such programs).
(7) Payment audits.--
(A) Written notice for post-payment audits.--
Subject to subparagraph (C), if a medicare
contractor decides to conduct a post-payment
audit of a provider of services or supplier
under this title, the contractor shall provide
the provider of services or supplier with
written notice (which may be in electronic
form) of the intent to conduct such an audit.
(B) Explanation of findings for all audits.--
Subject to subparagraph (C), if a medicare
contractor audits a provider of services or
supplier under this title, the contractor
shall--
(i) give the provider of services or
supplier a full review and explanation
of the findings of the audit in a
manner that is understandable to the
provider of services or supplier and
permits the development of an
appropriate corrective action plan;
(ii) inform the provider of services
or supplier of the appeal rights under
this title as well as consent
settlement options (which are at the
discretion of the Secretary);
(iii) give the provider of services
or supplier an opportunity to provide
additional information to the
contractor; and
(iv) take into account information
provided, on a timely basis, by the
provider of services or supplier under
clause (iii).
(C) Exception.--Subparagraphs (A) and (B)
shall not apply if the provision of notice or
findings would compromise pending law
enforcement activities, whether civil or
criminal, or reveal findings of law
enforcement-related audits.
(8) Standard methodology for probe sampling.--The
Secretary shall establish a standard methodology for
medicare contractors to use in selecting a sample of
claims for review in the case of an abnormal billing
pattern.
* * * * * * *
PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES
Sec. 1895. (a) * * *
(b) System of Prospective Payment for Home Health Services.--
(1) * * *
* * * * * * *
(3) Payment basis.--
[(A) Initial basis.--
[(i) In general.--Under such system
the Secretary shall provide for
computation of a standard prospective
payment amount (or amounts) as follows:
[(I) Such amount (or amounts)
shall initially be based on the
most current audited cost
report data available to the
Secretary and shall be computed
in a manner so that the total
amounts payable under the
system for the 12-month period
beginning on the date the
Secretary implements the system
shall be equal to the total
amount that would have been
made if the system had not been
in effect.
[(II) For the 12-month period
beginning after the period
described in subclause (I),
such amount (or amounts) shall
be equal to the amount (or
amounts) determined under
subclause (I), updated under
subparagraph (B).
[(III) For periods beginning
after the period described in
subclause (II), such amount (or
amounts) shall be equal to the
amount (or amounts) that would
have been determined under
subclause (I) that would have
been made for fiscal year 2001
if the system had not been in
effect and if section
1861(v)(1)(L)(ix) had not been
enacted but if the reduction in
limits described in clause (ii)
had been in effect, updated
under subparagraph (B).
Each such amount shall be standardized
in a manner that eliminates the effect
of variations in relative case mix and
area wage adjustments among different
home health agencies in a budget
neutral manner consistent with the case
mix and wage level adjustments provided
under paragraph (4)(A). Under the
system, the Secretary may recognize
regional differences or differences
based upon whether or not the services
or agency are in an urbanized area.
[(ii) Reduction.--The reduction
described in this clause is a reduction
by 15 percent in the cost limits and
per beneficiary limits described in
section 1861(v)(1)(L), as those limits
are in effect on September 30, 2000.]
(A) Initial basis.--Under such system the
Secretary shall provide for computation of a
standard prospective payment amount (or
amounts) as follows:
(i) Such amount (or amounts) shall
initially be based on the most current
audited cost report data available to
the Secretary and shall be computed in
a manner so that the total amounts
payable under the system for fiscal
year 2001 shall be equal to the total
amount that would have been made if the
system had not been in effect and if
section 1861(v)(1)(L)(ix) had not been
enacted.
(ii) For fiscal year 2002 and for the
first quarter of fiscal year 2003, such
amount (or amounts) shall be equal to
the amount (or amounts) determined
under this paragraph for the previous
fiscal year, updated under subparagraph
(B).
(iii) For 2003, such amount (or
amounts) shall be equal to the amount
(or amounts) determined under this
paragraph for fiscal year 2002, updated
under subparagraph (B) for 2003.
(iv) For 2004 and each subsequent
year, such amount (or amounts) shall be
equal to the amount (or amounts)
determined under this paragraph for the
previous year, updated under
subparagraph (B).
Each such amount shall be standardized in a
manner that eliminates the effect of variations
in relative case mix and area wage adjustments
among different home health agencies in a
budget neutral manner consistent with the case
mix and wage level adjustments provided under
paragraph (4)(A). Under the system, the
Secretary may recognize regional differences or
differences based upon whether or not the
services or agency are in an urbanized area.
(B) Annual update.--
(i) In general.--The standard
prospective payment amount (or amounts)
shall be adjusted for [each fiscal year
(beginning with fiscal year 2002)]
fiscal year 2002 and for each
subsequent year (beginning with 2003)
in a prospective manner specified by
the Secretary by the home health
applicable increase percentage (as
defined in clause (ii)) applicable to
the fiscal year or year involved.
(ii) Home health applicable increase
percentage.--For purposes of this
subparagraph, the term ``home health
applicable increase percentage'' means,
with respect to--
(I) [each of fiscal years
2002 and 2003] fiscal year
2002, the home health market
basket percentage increase (as
defined in clause (iii)) minus
1.1 percentage points;
(II) 2003, [the home health
market basket percentage
increase (as defined in clause
(iii)) minus 1.1 percentage
points] 2.0 percentage points;
[or]
(III) 2004, 1.1 percentage
points;
(IV) 2005, 2.7 percentage
points; or
[(II)] (V) any subsequent
[fiscal] year, the home health
market basket percentage
increase.
(iii) Home health market basket
percentage increase.--For purposes of
this subsection, the term ``home health
market basket percentage increase''
means, with respect to a fiscal year or
year, a percentage (estimated by the
Secretary before the beginning of the
fiscal year or year) determined and
applied with respect to the mix of
goods and services included in home
health services in the same manner as
the market basket percentage increase
under section 1886(b)(3)(B)(iii) is
determined and applied to the mix of
goods and services comprising inpatient
hospital services for the fiscal year
or year.
(iv) Adjustment for case mix
changes.--Insofar as the Secretary
determines that the adjustments under
paragraph (4)(A)(i) for a previous
fiscal year or year (or estimates that
such adjustments for a future fiscal
year or year) did (or are likely to)
result in a change in aggregate
payments under this subsection during
the fiscal year or year that are a
result of changes in the coding or
classification of different units of
services that do not reflect real
changes in case mix, the Secretary may
adjust the standard prospective payment
amount (or amounts) under paragraph (3)
for subsequent fiscal years or years so
as to eliminate the effect of such
coding or classification changes.
* * * * * * *
(5) Outliers.--The Secretary may provide for an
addition or adjustment to the payment amount otherwise
made in the case of outliers because of unusual
variations in the type or amount of medically necessary
care. The total amount of the additional payments or
payment adjustments made under this paragraph with
respect to a fiscal year or year may not exceed [5] 3
percent of the total payments projected or estimated to
be made based on the prospective payment system under
this subsection in that year.
* * * * * * *
TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
STATE PLANS FOR MEDICAL ASSISTANCE
Sec. 1902. (a) A State plan for medical assistance must--
(1) * * *
* * * * * * *
(64) provide, not later than 1 year after the date of
the enactment of this paragraph, a mechanism to receive
reports from beneficiaries and others and compile data
concerning alleged instances of waste, fraud, and abuse
relating to the operation of this title; [and]
(65) provide that the State shall issue provider
numbers for all suppliers of medical assistance
consisting of durable medical equipment, as defined in
section 1861(n), and the State shall not issue or renew
such a supplier number for any such supplier unless--
(A) * * *
* * * * * * *
(B) a surety bond in a form specified by the
Secretary under section 1834(a)(16)(B) and in
an amount that is not less than $50,000 or such
comparable surety bond as the Secretary may
permit under the second sentence of such
section[.]; and
(66) provide for making eligibility determinations
under section 1935(a).
Notwithstanding paragraph (5), if on January 1, 1965, and on
the date on which a State submits its plan for approval under
this title, the State agency which administered or supervised
the administration of the plan of such State approved under
title X (or title XVI, insofar as it relates to the blind) was
different from the State agency which administered or
supervised the administration of the State plan approved under
title I (or title XVI, insofar as it relates to the aged), the
State agency which administered or supervised the
administration of such plan approved under title X (or title
XVI, insofar as it relates to the blind) may be designated to
administer or supervise the administration of the portion of
the State plan for medical assistance which relates to blind
individuals and a different State agency may be established or
designated to administer or supervise the administration of the
rest of the State plan for medical assistance; and in such case
the part of the plan which each such agency administers, or the
administration of which each such agency supervises, shall be
regarded as a separate plan for purposes of this title (except
for purposes of paragraph (10)). The provisions of paragraphs
(9)(A), (31), and (33) and of section 1903(i)(4) shall not
apply to a religious nonmedical health care institution (as
defined in section 1861(ss)(1)).
For purposes of paragraph (10) any individual who, for the
month of August 1972, was eligible for or receiving aid or
assistance under a State plan approved under title I, X, XIV,
or XVI, or part A of title IV and who for such month was
entitled to monthly insurance benefits under title II shall for
purposes of this title only be deemed to be eligible for
financial aid or assistance for any month thereafter if such
individual would have been eligible for financial aid or
assistance for such month had the increase in monthly insurance
benefits under title II resulting from enactment of Public Law
92-336 not been applicable to such individual.
The requirement of clause (A) of paragraph (37) with respect
to a State plan may be waived by the Secretary if he finds that
the State has exercised good faith in trying to meet such
requirement. For purposes of this title, any child who meets
the requirements of paragraph (1) or (2) of section 473(b)
shall be deemed to be a dependent child as defined in section
406 and shall be deemed to be a recipient of aid to families
with dependent children under part A of title IV in the State
where such child resides. Notwithstanding paragraph (10)(B) or
any other provision of this subsection, a State plan shall
provide medical assistance with respect to an alien who is not
lawfully admitted for permanent residence or otherwise
permanently residing in the United States under color of law
only in accordance with section 1903(v).
* * * * * * *
PAYMENT TO STATES
Sec. 1903. (a) From the sums appropriated therefor, the
Secretary (except as otherwise provided in this section) shall
pay to each State which has a plan approved under this title,
for each quarter, beginning with the quarter commencing January
1, 1966--
(1) an amount equal to the Federal medical assistance
percentage (as defined in section 1905(b), subject to
subsections (g) and (j) of this section and subsection
1923(f)) of the total amount expended during such
quarter as medical assistance under the State plan,
reduced by the amount computed under section 1935(c)(1)
for the State and the quarter; plus
* * * * * * *
SPECIAL PROVISIONS RELATING TO MEDICARE PRESCRIPTION DRUG BENEFIT
Sec. 1935. (a) Requirement for Making Eligibility
Determinations for Low-Income Subsidies.--As a condition of its
State plan under this title under section 1902(a)(66) and
receipt of any Federal financial assistance under section
1903(a) subject to subsection (e), a State shall--
(1) make determinations of eligibility for premium
and cost-sharing subsidies under (and in accordance
with) section 1860G;
(2) inform the Administrator of the Medicare Benefits
Administration of such determinations in cases in which
such eligibility is established; and
(3) otherwise provide such Administrator with such
information as may be required to carry out part D of
title XVIII (including section 1860G).
(b) Payments for Additional Administrative Costs.--
(1) In general.--The amounts expended by a State in
carrying out subsection (a) are, subject to paragraph
(2), expenditures reimbursable under the appropriate
paragraph of section 1903(a); except that,
notwithstanding any other provision of such section,
the applicable Federal matching rates with respect to
such expenditures under such section shall be increased
as follows (but in no case shall the rate as so
increased exceed 100 percent):
(A) For expenditures attributable to costs
incurred during 2005, the otherwise applicable
Federal matching rate shall be increased by 10
percent of the percentage otherwise payable
(but for this subsection) by the State.
(B)(i) For expenditures attributable to costs
incurred during 2006 and each subsequent year
through 2013, the otherwise applicable Federal
matching rate shall be increased by the
applicable percent (as defined in clause (ii))
of the percentage otherwise payable (but for
this subsection) by the State.
(ii) For purposes of clause (i), the
``applicable percent'' for--
(I) 2006 is 20 percent; or
(II) a subsequent year is the
applicable percent under this clause
for the previous year increased by 10
percentage points.
(C) For expenditures attributable to costs
incurred after 2013, the otherwise applicable
Federal matching rate shall be increased to 100
percent.
(2) Coordination.--The State shall provide the
Administrator with such information as may be necessary
to properly allocate administrative expenditures
described in paragraph (1) that may otherwise be made
for similar eligibility determinations.
(c) Federal Assumption of Medicaid Prescription Drug Costs
for Dually-Eligible Beneficiaries.--
(1) In general.--For purposes of section 1903(a)(1)
subject to subsection (e), for a State that is one of
the 50 States or the District of Columbia for a
calendar quarter in a year (beginning with 2005) the
amount computed under this subsection is equal to the
product of the following:
(A) Medicare subsidies.--The total amount of
payments made in the quarter under section
1860G (relating to premium and cost-sharing
prescription drug subsidies for low-income
medicare beneficiaries) that are attributable
to individuals who are residents of the State
and are entitled to benefits with respect to
prescribed drugs under the State plan under
this title (including such a plan operating
under a waiver under section 1115).
(B) State matching rate.--A proportion
computed by subtracting from 100 percent the
Federal medical assistance percentage (as
defined in section 1905(b)) applicable to the
State and the quarter.
(C) Phase-out proportion.--The phase-out
proportion (as defined in paragraph (2)) for
the quarter.
(2) Phase-out proportion.--For purposes of paragraph
(1)(C), the ``phase-out proportion'' for a calendar
quarter in--
(A) 2005 is 90 percent;
(B) a subsequent year before 2014, is the
phase-out proportion for calendar quarters in
the previous year decreased by 10 percentage
points; or
(C) a year after 2013 is 0 percent.
(d) Additional Provisions.--
(1) Medicaid as secondary payor.--In the case of an
individual who is entitled to qualified prescription
drug coverage under a prescription drug plan under part
D of title XVIII (or under a Medicare+Choice plan under
part C of such title) and medical assistance for
prescribed drugs under this title, medical assistance
shall continue to be provided under this title for
prescribed drugs to the extent payment is not made
under the prescription drug plan or the Medicare+Choice
plan selected by the individual.
(2) Condition.--A State may require, as a condition
for the receipt of medical assistance under this title
with respect to prescription drug benefits for an
individual eligible to obtain qualified prescription
drug coverage described in paragraph (1), that the
individual elect qualified prescription drug coverage
under section 1860A.
(e) Treatment of Territories.--
(1) In general.--In the case of a State, other than
the 50 States and the District of Columbia--
(A) the previous provisions of this section
shall not apply to residents of such State; and
(B) if the State establishes a plan described
in paragraph (2) (for providing medical
assistance with respect to the provision of
prescription drugs to medicare beneficiaries),
the amount otherwise determined under section
1108(f) (as increased under section 1108(g))
for the State shall be increased by the amount
specified in paragraph (3).
(2) Plan.--The plan described in this paragraph is a
plan that--
(A) provides medical assistance with respect
to the provision of covered outpatient drugs
(as defined in section 1860B(f)) to low-income
medicare beneficiaries; and
(B) assures that additional amounts received
by the State that are attributable to the
operation of this subsection are used only for
such assistance.
(3) Increased amount.--
(A) In general.--The amount specified in this
paragraph for a State for a year is equal to
the product of--
(i) the aggregate amount specified in
subparagraph (B); and
(ii) the amount specified in section
1108(g)(1) for that State, divided by
the sum of the amounts specified in
such section for all such States.
(B) Aggregate amount.--The aggregate amount
specified in this subparagraph for--
(i) 2005, is equal to $20,000,000; or
(ii) a subsequent year, is equal to
the aggregate amount specified in this
subparagraph for the previous year
increased by annual percentage increase
specified in section 1860B(b)(5) for
the year involved.
(4) Report.--The Administrator shall submit to
Congress a report on the application of this subsection
and may include in the report such recommendations as
the Administrator deems appropriate.
REFERENCES TO LAWS DIRECTLY AFFECTING MEDICAID PROGRAM
Sec. [1935.] 1936. (a) Authority or Requirements to Cover
Additional Individuals.--For provisions of law which make
additional individuals eligible for medical assistance under
this title, see the following:
(1) * * *
* * * * * * *
----------
SECTION 4018 OF THE OMNIBUS BUDGET RECONCILIATION ACT OF 1987
SEC. 4018. SPECIAL RULES.
(a) * * *
(b) Extension of Waivers for Social Health Maintenance
Organizations.--
(1) The Secretary of Health and Human Services shall
extend without interruption, through [the date that is
30 months after the date that the Secretary submits to
Congress the report described in section 4014(c) of the
Balanced Budget Act of 1997] December 31, 2004, the
approval of waivers granted under subsection (a) of
section 2355 of the Deficit Reduction Act of 1984 for
the demonstration project described in subsection (b)
of that section, subject to the terms and conditions
(other than duration of the project) established under
that section (as amended by paragraph (2) of this
subsection).
* * * * * * *
----------
SECTION 9215 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF
1985
SEC. 9215. EXTENSION OF CERTAIN MEDICARE MUNICIPAL HEALTH SERVICES
DEMONSTRATION PROJECTS.
(a) The Secretary of Health and Human Services shall extend
through December 31, 1997, approval of four municipal health
services demonstration projects (located in Baltimore,
Cincinnati, Milwaukee, and San Jose) authorized under section
402(a) of the Social Security Amendments of 1967. The Secretary
shall submit a report to Congress on the waiver program with
respect to the quality of health care, beneficiary costs, costs
to the medicaid program and other payers, access to care,
outcomes, beneficiary satisfaction, utilization differences
among the different populations served by the projects, and
such other factors as may be appropriate. Subject to subsection
(c), the Secretary may further extend such demonstration
projects through [December 31, 2004, but only with respect to
individuals who received at least one service during the period
beginning on January 1, 1996, and ending on the date of the
enactment of the Balanced Budget Act of 1997.] December 31,
2009, but only with respect to individuals who reside in the
city in which the project is operated and so long as the total
number of individuals participating in the project does not
exceed the number of such individuals participating as of
January 1, 1996.
* * * * * * *
----------
MEDICARE, MEDICAID, AND SCHIP BENEFITS IMPROVEMENT AND PROTECTION ACT
OF 2000 (BIPA)
* * * * * * *
TITLE III--PROVISIONS RELATING TO PART A
* * * * * * *
Subtitle B--Adjustments to PPS Payments for Skilled Nursing Facilities
* * * * * * *
SEC. 312. INCREASE IN NURSING COMPONENT OF PPS FEDERAL RATE.
(a) In General.--The Secretary of Health and Human Services
shall increase by 16.66 percent the nursing component of the
case-mix adjusted Federal prospective payment rate specified in
Tables 3 and 4 of the final rule published in the Federal
Register by the Health Care Financing Administration on July
31, 2000 (65 Fed. Reg. 46770) and as subsequently updated,
effective for services furnished on or after April 1, 2001, and
before October 1, 2002. The Secretary of Health and Human
Services shall increase by 12, 10, and 8 percent the nursing
component of the case-mix adjusted Federal prospective payment
rate specified in Tables 3 and 4 of the final rule published in
the Federal Register by the Health Care Financing
Administration on July 31, 2000 (65 Fed. Reg. 46770) and as
subsequently updated under section 1888(e)(4)(E)(ii) of the
Social Security Act (42 U.S.C. 1395yy(e)(4)(E)(ii)), effective
for services furnished during fiscal years 2003, 2004, and
2005, respectively.
* * * * * * *
TITLE IV--PROVISIONS RELATING TO PART B
* * * * * * *
Subtitle C--Other Services
* * * * * * *
SEC. 422. UPDATE IN RENAL DIALYSIS COMPOSITE RATE.
(a) Update.--
(1) * * *
(2) Prohibition on exceptions.--
(A) In general.--Subject to subparagraphs (B)
[and (C)], (C), and (D), the Secretary of
Health and Human Services may not provide for
an exception under section 1881(b)(7) of the
Social Security Act (42 U.S.C. 1395rr(b)(7)) on
or after December 31, 2000.
(B) Deadline for new applications.--[In the
case] Subject to subparagraph (D), in the case
of a facility that during 2000 did not file for
an exception rate under such section, the
facility may submit an application for an
exception rate by not later than July 1, 2001.
* * * * * * *
(D) Inapplicability to pediatric
facilities.--Subparagraphs (A) and (B) shall
not apply, as of October 1, 2002, to pediatric
facilities that do not have an exception rate
described in subparagraph (C) in effect on such
date. For purposes of this subparagraph, the
term ``pediatric facility'' means a renal
facility at least 50 percent of whose patients
are individuals under 18 years of age.
* * * * * * *
TITLE V--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
* * * * * * *
SEC. 508. TEMPORARY INCREASE FOR HOME HEALTH SERVICES FURNISHED IN A
RURAL AREA.
(a) [24-Month Increase Beginning April 1, 2001] In General.--
In the case of home health services furnished in a rural area
(as defined in section 1886(d)(2)(D) of the Social Security Act
(42 U.S.C. 1395ww(d)(2)(D))) on or after April 1, 2001, and
before [April 1, 2003] January 1, 2005, the Secretary of Health
and Human Services shall increase the payment amount otherwise
made under section 1895 of such Act (42 U.S.C. 1395fff ) for
such services by 10 percent.
* * * * * * *
Subtitle E--Other Provisions
* * * * * * *
SEC. 542. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES UNDER
MEDICARE.
(a) * * *
* * * * * * *
(c) Effective Date.--This section shall apply to services
furnished during the [2-year period] 3-year period beginning on
January 1, 2001.
* * * * * * *
SEC. 547. CLARIFICATION OF APPLICATION OF TEMPORARY PAYMENT INCREASES
FOR 2001.
(a) * * *
* * * * * * *
(c) Home Health Services.--
(1) * * *
(2) Temporary increase for rural home health
services.--The payment increase provided under section
508(a) for [the period beginning on April 1, 2001, and
ending on September 30, 2002,] a period under such
section shall not apply to episodes and visits ending
after such period, and shall not be taken into account
in calculating the payment amounts applicable for
episodes and visits occurring after such period.
* * * * * * *
----------
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
Subpart D--Pay and Allowances
* * * * * * *
CHAPTER 53--PAY RATES AND SYSTEMS
* * * * * * *
SUBCHAPTER II--EXECUTIVE SCHEDULE PAY RATES
* * * * * * *
Sec. 5314. Positions at level III
Level III of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Solicitor General of the United States.
Under Secretary of Commerce, Under Secretary of
Commerce for Economic Affairs, Under Secretary of
Commerce for Export Administration and Under Secretary
of Commerce for Travel and Tourism.
* * * * * * *
Administrator of the Centers for Medicare & Medicaid
Services .
Administrator of the Medicare Benefits
Administration.
Sec. 5315. Positions at level IV
Level IV of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Deputy Administrator of General Services.
* * * * * * *
[Administrator of the Health Care Financing
Administration.]
* * * * * * *
----------
FEDERAL FOOD, DRUG, AND COSMETIC ACT
* * * * * * *
CHAPTER III--PROHIBITED ACTS AND PENALTIES
PROHIBITED ACTS
Sec. 301. The following acts and the causing thereof are
hereby prohibited:
(a) * * *
* * * * * * *
(bb) The failure to post information required under section
503B(b)(2) or for knowingly making a materially false statement
when posting such information as required under such section or
violating section 503B(b)(4).
* * * * * * *
CHAPTER V--DRUGS AND DEVICES
Subchapter A--Drugs and Devices
* * * * * * *
SEC. 503B. INTERNET PRESCRIPTION DRUG SALES.
(a) Definitions.--For purposes of this section:
(1) Consumer.--The term ``consumer'' means a person
(other than an entity licensed or otherwise authorized
under Federal or State law as a pharmacy or to dispense
or distribute prescription drugs) that purchases or
seeks to purchase prescription drugs through the
Internet.
(2) Home page.--The term ``home page'' means the
entry point or main web page for an Internet site.
(3) Internet.--The term ``Internet'' means
collectively the myriad of computer and
telecommunications facilities, including equipment and
operating software, which comprise the interconnected
worldwide network of networks that employ the
Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio,
including electronic mail.
(4) Interstate internet seller.--
(A) In general.--The term ``interstate
Internet seller'' means a person whether in the
United States or abroad, that engages in,
offers to engage in, or causes the delivery or
sale of a prescription drug through the
Internet and has such drug delivered directly
to the consumer via the Postal Service, or any
private or commercial interstate carrier to a
consumer in the United States who is residing
in a State other than the State in which the
seller's place of business is located. This
definition excludes a person who only delivers
a prescription drug to a consumer, such as an
interstate carrier service.
(B) Exemption.--With respect to the consumer
involved, the term ``interstate Internet
seller'' does not include a person described in
subparagraph (A) whose place of business is
located within 75 miles of the consumer.
(5) Link.--The term ``link'' means either a textual
or graphical marker on a web page that, when clicked
on, takes the consumer to another part of the Internet,
such as to another web page or a different area on the
same web page, or from an electronic message to a web
page.
(6) Pharmacy.--The term ``pharmacy'' means any place
licensed or otherwise authorized as a pharmacy under
State law.
(7) Prescriber.--The term ``prescriber'' means an
individual, licensed or otherwise authorized under
applicable Federal and State law to issue prescriptions
for prescription drugs.
(8) Prescription drug.--The term ``prescription
drug'' means a drug under section 503(b)(1).
(9) Valid prescription.--The term ``valid
prescription'' means a prescription that meets the
requirements of section 503(b)(1) and other applicable
Federal and State law.
(10) Web site; site.--The terms ``web site'' and
``site'' mean a specific location on the Internet that
is determined by Internet protocol numbers or by a
domain name.
(b) Requirements for Interstate Internet Sellers.--
(1) In general.--Each interstate Internet seller
shall comply with the requirements of this subsection
with respect to the sale of, or the offer to sell,
prescription drugs through the Internet and shall at
all times display on its web site information in
accordance with paragraph (2).
(2) Web site disclosure information.--An interstate
Internet seller shall post in a visible and clear
manner (as determined by regulation) on the home page
of its web site, or on a page directly linked to such
home page--
(A) the street address of the interstate
Internet seller's place of business, and the
telephone number of such place of business;
(B) each State in which the interstate
Internet seller is licensed or otherwise
authorized as a pharmacy, or if the interstate
Internet seller is not licensed or otherwise
authorized by a State as a pharmacy, each State
in which the interstate Internet seller is
licensed or otherwise authorized to dispense
prescription drugs, and the type of State
license or authorization;
(C) in the case of an interstate Internet
seller that makes referrals to or solicits on
behalf of a prescriber, the name of each
prescriber, the street address of each such
prescriber's place of business, the telephone
number of such place of business, each State in
which each such prescriber is licensed or
otherwise authorized to prescribe prescription
drugs, and the type of such license or
authorization; and
(D) a statement that the interstate Internet
seller will dispense prescription drugs only
upon a valid prescription.
(3) Date of posting.--Information required to be
posted under paragraph (2) shall be posted by an
interstate Internet seller--
(A) not later than 90 days after the
effective date of this section if the web site
of such seller is in operation as of such date;
or
(B) on the date of the first day of operation
of such seller's web site if such site goes
into operation after such date.
(4) Qualifying statements.--An interstate Internet
seller shall not indicate in any manner that posting
disclosure information on its web site signifies that
the Federal Government has made any determination on
the legitimacy of the interstate Internet seller or its
business.
(5) Disclosure to state licensing boards.--An
interstate Internet seller licensed or otherwise
authorized to dispense prescription drugs in accordance
with applicable State law shall notify each State
entity that granted such licensure or authorization
that it is an interstate Internet seller, the name of
its business, the Internet address of its business, the
street address of its place of business, and the
telephone number of such place of business.
(6) Regulations.--The Secretary is authorized to
promulgate such regulations as are necessary to carry
out the provisions of this subsection. In issuing such
regulations, the Secretary--
(A) shall take into consideration disclosure
formats used by existing interstate Internet
seller certification programs; and
(B) shall in defining the term ``place of
business'' include provisions providing that
such place is a single location at which
employees of the business perform job
functions, and not a post office box or similar
locale.
* * * * * * *
----------
PUBLIC HEALTH SERVICE ACT
* * * * * * *
TITLE III--GENERAL POWERS AND DUTIES OF PUBLIC HEALTH SERVICE
* * * * * * *
PART P--ADDITIONAL PROGRAMS
* * * * * * *
SEC. 399O. GRANTS TO HEALTH CARE PROVIDERS TO IMPLEMENT ELECTRONIC
PRESCRIPTION DRUG PROGRAMS.
(a) In General.--The Secretary is authorized to make grants
for the purpose of assisting health care providers who
prescribe drugs and biologicals in implementing electronic
prescription programs described in section 1860C(d)(3) of the
Social Security Act.
(b) Application.--No grant may be made under this section
except pursuant to a grant application that is submitted in a
time, manner, and form approved by the Secretary.
(c) Authorization of Appropriations.--There are authorized to
be appropriated for fiscal year 2004, such sums as may be
appropriate to carry out this section.
TITLE IV--NATIONAL RESEARCH INSTITUTES
Part A--National Institutes of Health
* * * * * * *
OFFICE OF RARE DISEASES
Sec. 404F. (a) Establishment.--There is established within
the Office of the Director of NIH an office to be known as the
Office of Rare Diseases (in this section referred to as the
``Office''), which shall be headed by a Director (in this
section referred to as the ``Director''), appointed by the
Director of NIH.
(b) Duties.--
(1) In general.--The Director of the Office shall
carry out the following:
(A) The Director shall recommend an agenda
for conducting and supporting research on rare
diseases through the national research
institutes and centers. The agenda shall
provide for a broad range of research and
education activities, including scientific
workshops and symposia to identify research
opportunities for rare diseases.
(B) The Director shall, with respect to rare
diseases, promote coordination and cooperation
among the national research institutes and
centers and entities whose research is
supported by such institutes.
(C) The Director, in collaboration with the
directors of the other relevant institutes and
centers of the National Institutes of Health,
may enter into cooperative agreements with and
make grants for regional centers of excellence
on rare diseases in accordance with section
404G.
(D) The Director shall promote the sufficient
allocation of the resources of the National
Institutes of Health for conducting and
supporting research on rare diseases.
(E) The Director shall promote and encourage
the establishment of a centralized
clearinghouse for rare and genetic disease
information that will provide understandable
information about these diseases to the public,
medical professionals, patients and families.
(F) The Director shall biennially prepare a
report that describes the research and
education activities on rare diseases being
conducted or supported through the national
research institutes and centers, and that
identifies particular projects or types of
projects that should in the future be conducted
or supported by the national research
institutes and centers or other entities in the
field of research on rare diseases.
(G) The Director shall prepare the NIH
Director's annual report to Congress on rare
disease research conducted by or supported
through the national research institutes and
centers.
(2) Principal advisor regarding orphan diseases.--
With respect to rare diseases, the Director shall serve
as the principal advisor to the Director of NIH and
shall provide advice to other relevant agencies. The
Director shall provide liaison with national and
international patient, health and scientific
organizations concerned with rare diseases.
(c) Definition.--For purposes of this section, the term
``rare disease'' means any disease or condition that affects
less than 200,000 persons in the United States.
(d) Authorization of Appropriations.--For the purpose of
carrying out this section, there are authorized to be
appropriated such sums as already have been appropriated for
fiscal year 2002, and $4,000,000 for each of the fiscal years
2003 through 2006.
RARE DISEASE REGIONAL CENTERS OF EXCELLENCE
Sec. 404G. (a) Cooperative Agreements and Grants.--
(1) In general.--The Director of the Office of Rare
Diseases (in this section referred to as the
``Director''), in collaboration with the directors of
the other relevant institutes and centers of the
National Institutes of Health, may enter into
cooperative agreements with and make grants to public
or private nonprofit entities to pay all or part of the
cost of planning, establishing, or strengthening, and
providing basic operating support for regional centers
of excellence for clinical research into, training in,
and demonstration of diagnostic, prevention, control,
and treatment methods for rare diseases.
(2) Policies.--A cooperative agreement or grant under
paragraph (1) shall be entered into in accordance with
policies established by the Director of NIH.
(b) Coordination With Other Institutes.--The Director shall
coordinate the activities under this section with similar
activities conducted by other national research institutes,
centers and agencies of the National Institutes of Health and
by the Food and Drug Administration to the extent that such
institutes, centers and agencies have responsibilities that are
related to rare diseases.
(c) Uses for Federal Payments Under Cooperative Agreements or
Grants.--Federal payments made under a cooperative agreement or
grant under subsection (a) may be used for--
(1) staffing, administrative, and other basic
operating costs, including such patient care costs as
are required for research;
(2) clinical training, including training for allied
health professionals, continuing education for health
professionals and allied health professions personnel,
and information programs for the public with respect to
rare diseases; and
(3) clinical research and demonstration programs.
(d) Period of Support; Additional Periods.--Support of a
center under subsection (a) may be for a period of not to
exceed 5 years. Such period may be extended by the Director for
additional periods of not more than 5 years if the operations
of such center have been reviewed by an appropriate technical
and scientific peer review group established by the Director
and if such group has recommended to the Director that such
period should be extended.
(e) Authorization of Appropriations.--For the purpose of
carrying out this section, there are authorized to be
appropriated such sums as already have been appropriated for
fiscal year 2002, and $20,000,000 for each of the fiscal years
2003 through 2006.
* * * * * * *
TITLE VII--HEALTH PROFESSIONS EDUCATION
* * * * * * *
PART E--HEALTH PROFESSIONS AND PUBLIC HEALTH WORKFORCE
* * * * * * *
Subpart 3--Pharmacist Workforce Programs
SEC. 771. PUBLIC SERVICE ANNOUNCEMENTS.
(a) Public Service Announcements.--
(1) In general.--The Secretary shall develop and
issue public service announcements that advertise and
promote the pharmacist profession, highlight the
advantages and rewards of being a pharmacist, and
encourage individuals to enter the pharmacist
profession.
(2) Method.--The public service announcements
described in subsection (a) shall be broadcast through
appropriate media outlets, including television or
radio, in a manner intended to reach as wide and
diverse an audience as possible.
(b) State and Local Public Service Announcements.--
(1) In general.--The Secretary shall award grants to
entities to support State and local advertising
campaigns through appropriate media outlets to promote
the pharmacist profession, highlight the advantages and
rewards of being a pharmacist, and encourage
individuals to enter the pharmacist profession.
(2) Use of funds.--An entity that receives a grant
under subsection (a) shall use funds received through
such grant to acquire local television and radio time,
place advertisements in local newspapers, and post
information on billboards or on the Internet, in order
to--
(A) advertise and promote the pharmacist
profession;
(B) promote pharmacist education programs;
(C) inform the public of public assistance
regarding such education programs;
(D) highlight individuals in the community
that are presently practicing as pharmacists to
recruit new pharmacists; and
(E) provide any other information to recruit
individuals for the pharmacist profession.
(3) Method.--The campaigns described in subsection
(a) shall be broadcast on television or radio, placed
in newspapers as advertisements, or posted on
billboards or the Internet, in a manner intended to
reach as wide and diverse an audience as possible.
SEC. 772. DEMONSTRATION PROJECT.
(a) In General.--The Secretary shall establish a
demonstration project to enhance the participation of
individuals who are pharmacists in the National Health Service
Corps Loan Repayment Program described in section 338B.
(b) Services.--Services that may be provided by pharmacists
pursuant to the demonstration project established under this
section include medication therapy management services to
assure that medications are used appropriately by patients, to
enhance patients' understanding of the appropriate use of
medications, to increase patients' adherence to prescription
medication regimens, to reduce the risk of adverse events
associated with medications, and to reduce the need for other
costly medical services through better management of medication
therapy. Such services may include case management, disease
management, drug therapy management, patient training and
education, counseling, drug therapy problem resolution,
medication administration, the provision of special packaging,
or other services that enhance the use of prescription
medications.
(c) Procedure.--The Secretary may not provide assistance to
an individual under this section unless the individual agrees
to comply with all requirements described in sections 338B and
338D.
(d) Limitations.--The demonstration project described in this
section shall provide for the participation of--
(1) individuals to provide services in rural and
urban areas; and
(2) enough individuals to allow the Secretary to
properly analyze the effectiveness of such project.
(e) Designations.--The demonstration project described in
this section, and any pharmacists who are selected to
participate in such project, shall not be considered by the
Secretary in the designation of a health professional shortage
area under section 332 during fiscal years 2003 through 2005.
(f) Rule of Construction.--This section shall not be
construed to require any State to participate in the project
described in this section.
(g) Report.--The Secretary shall prepare and submit a report
on the project to--
(1) the Committee on Health, Education, Labor, and
Pensions of the Senate;
(2) the Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
Appropriations of the Senate;
(3) the Committee on Energy and Commerce of the House
of Representatives; and
(4) the Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
Appropriations of the House of Representatives.
SEC. 773. INFORMATION TECHNOLOGY.
(a) Grants and Contracts.--The Secretary may make awards of
grants or contracts to qualifying schools of pharmacy for the
purpose of assisting such schools in acquiring and installing
computer-based systems to provide pharmaceutical education.
Education provided through such systems may be graduate
education, professional education, or continuing education. The
computer-based systems may be designed to provide on-site
education, or education at remote sites (commonly referred to
as distance learning), or both.
(b) Qualifying School of Pharmacy.--For purposes of this
section, the term ``qualifying school of pharmacy'' means a
school of pharmacy (as defined in section 799B) that requires
students to serve in a clinical rotation in which pharmacist
services are part of the curriculum.
SEC. 774. AUTHORIZATION OF APPROPRIATIONS.
For the purpose of carrying out this subpart, there are
authorized to be appropriated such sums as may be necessary for
each of the fiscal years 2003 through 2006.
DISSENTING VIEWS
The bill ordered reported from this Committee solely by its
Republican Members is a political placebo designed to provide
political cover to politicians instead of prescription drug
coverage to Medicare beneficiaries. This legislation is little
more than a $310 billion give-away to the private insurance
industry and pharmaceutical companies.
The Republican bill falls far short of what is needed to
provide meaningful prescription drug coverage to the nation's
40 million senior citizens and individuals with disabilities
who depend on Medicare. The Congressional Budget Office
estimates that drug spending on behalf of beneficiaries will
total $1.6 trillion between 2005--the first year of the
Republican drug benefit proposal--and 2012. Yet the $310
billion Committee-passed bill covers only 19 percent of the
anticipated spending during that time period. This means that
most Medicare beneficiaries will continue to pay far more for
prescription drugs than they can afford.
Republicans claim that they can't afford to do more. They
criticize our proposal for costing too much. Don't be fooled.
It's a matter of priorities. Last year, they squandered the
surplus on tax breaks for the wealthy, and they're at it again
this year. In 2012 alone, the tax cut would cost $229 billion--
more than three times the amount that Republican are willing to
dedicate to prescription drugs.
The Republican drug proposal is nothing more than an empty
promise and campaign rhetoric. It doesn't guarantee any
specific benefit. It gives private plans free reign to charge
beneficiaries whatever they want for premiums. It has a gaping
hole in coverage that would force approximately half of all
beneficiaries--including millions of low-income senior citizens
and individuals with disabilities--to pay 100 percent of their
drug costs at a time when their needs are increasing. It uses a
cynical, technical calculation of out-of-pocket costs that will
prevent family members from helping beneficiaries pay for
needed medications and discourage employers from offering wrap-
around coverage. It fails to assure access to needed
medications by allowing private drug plans to decide which
drugs to cover, and it allows the private drug plans to exclude
neighborhood pharmacies.
The Committee bill also lays the groundwork for the
Republicans' ultimate goal to privatize Medicare. The new drug
program relies on a risky, untested private insurance scheme
that sets the stage for broader changes in Medicare. It moves
Medicare+Choice to a competition-based program in 2005, and
conducts a premium-support demonstration under which fee-for-
service premiums could rise dramatically. Finally, it creates a
new bureaucracy to regulate the Medicare+Choice and private
drug plans that both disadvantages the agency which oversees
traditional fee-for-service Medicare and stacks the deck at the
new agency in favor of the private plans.
The Democratic plan: Real choices real coverage
By rejecting the Democratic substitute, the Committee
missed its opportunity to provide an affordable, comprehensive
prescription medicine benefit under Medicare. We urge the House
to take a different position and pass the Democratic
alternative.
Our plan is an entitlement that would guarantee all
beneficiaries the option to purchase affordable, dependable,
comprehensive prescription drug coverage at a uniform price.
The program would be administered and managed through pharmacy
contractors, much like carriers and fiscal intermediaries do
for the rest of Medicare today. Starting in 2005, under our
plan, beneficiaries would pay a $25 monthly premium, $100
annual deductible and not more than 20 percent co-insurance
until they spend $2,000, the government would pay 100 percent
of the drug costs. This benefit minimizes beneficiary costs.
[Chart 1]
Low-income beneficiaries receive additional assistance
under our proposal. Those with incomes up to 150% of poverty
($13,290 for one person) will pay nothing. Those with incomes
between 150-175% ($13,290-$15,505 for a single person) of
poverty will pay premiums on a sliding scale.
The Democratic substitute also substantially reduces the
soaring costs that seniors currently pay for prescription
drugs. Under our plan, the Secretary would leverage the
collective bargaining power of 40 million beneficiaries to
negotiate with manufacturers for lower drug prices. Secretary
Thompson recently demonstrated the effectiveness of similar
bargaining power when he negotiated an 80 percent discount off
the list price of the antibiotic Cipro during the anthrax scare
last year. Pharmacy contractors would also negotiate additional
savings. The savings from these negotiations would be required
to be directly passed on to beneficiaries through lower prices.
The Democratic substitute guarantees senior citizens and
those with disabilities the choices that matter--choice of
drugs and choice of pharmacy. Under our plan Medicare would pay
toward the cost of every prescription drug. The Democratic
substitute also assures access to pharmacies by prohibiting
pharmacy contractors from refusing to contract with a pharmacy
that agreed to meet its standards. These are the choices people
want and need.
Most importantly unlike the Republican plan, our plan will
never force seniors into an HMO or similar private plan in
order to get a prescription drug benefit. That's why the
leading consumer organizations back the Democratic substitute.
[See letters attached.]
The Republican plan: Let the buyer beware
Under the legislation reported out of Committee, virtually
all of the important decisions are left to the private drug
plans--the amounts paid by beneficiaries for premiums and cost-
sharing, which specific drugs are covered, and the number and
location of participating pharmacies. The motto of the free
market approach in the Republican bill is caveat emptor: Let
the buyer aware.
Rather than pursue negotiations to define on a bipartisan
basis the best path to provide a good Medicare drug benefit,
the Republican majority has chosen instead to push for a
complex plan that puts the interests of HMOs and the drug
industry ahead of the interests of benefiaries. Its key flaws
are:
No guaranteed premium. Insurers can charge whatever they
want for premiums. While Republicans claim that the premium
will be $35, which is 40 percent higher than the premium in the
Democratic plan, there is nothing in the legislation to support
that claim. In fact, there are no limits or guidelines
regarding the setting of the premium. Under this proposal,
premiums will vary by plan and place. In addition, the
Republican plan does not provide any direct premium subsidies
to beneficiaries with incomes in excess of 175 percent of
poverty. Yet middle income seniors are finding their retirement
security undermined by the high cost of pharmaceuticals, too.
Subsidies to HMOs, not beneficiaries. The Republican
legislation provides premium subsidies to insurance companies
and HMOs, but not to beneficiaries. And nothing in the
legislation requires the HMOs and insurers to pass on the
subsidies to beneficiaries.
Pay more and get less. For most seniors in the Republican
plan, the more you spend, the less coverage you get.
Inexplicably, the design of the Committee bill forces the
elderly to pay a higher percentage of costs as their needs
increase. Once the initial $250 deductible is met,
beneficiaries have to pay 20 percent of the cost until there
has been $1000 in drug spending. Then the co-insurance
increases to 50 percent for spending between $1000 and $2000.
And it increases again to 100 percent--no government
contribution whatsoever--after $2000 in drug spending.
Beneficiares are forced to pay all of their drug costs for
spending between $2000 and $4900, while continuing to pay
premiums. (NOTE: The Republican $3800 out-of-pocket cap
translates into $4900 in spending.)
In fact, under the Committee bill, America's senior
citizens and individuals with disabilities will spend $4,220 to
get $4900 worth of drugs; in contrast, under the Democratic
plan, beneficiaries would pay just $1,360. [CHART 2]
No standard benefit. The benefits described above are
merely suggestions. Private plans can vary cost-sharing levers
in both the standard coverage option and in the alternative
coverage option. This is an invitation for plans to design
benefits that ``cherry pick'' low-cost, healthy enrollees. It
is a recipe for beneficiary confusion. This model represents a
retreat from the Medigap reforms of the early 1990s that
standardized benefits, thus ensuring that plans compete on
price and quality and not on consumer confusion.
Not a real entitlement. Despite Republican claims to the
contrary, the Republican bill is not a true Medicare
entitlement. Under Medicare today, beneficiares are entitled to
a set of benefits defined in law, regardless of where they live
or what it costs to deliver the benefits. For example,
beneficiaries in Milwaukee and Miami pay a $100 deductible for
Part B and 20% co-insurance for Part B services. Beneficiaries
in Bakersfield and Boston are guaranteed the same coverage for
hospital care and home health services. Under the Republican
plan, there is no such entitlement. Instead, Republicans
guarantee hundreds of billions of taxpayer dollars in federal
subsidies to their friends in the private insurance and
pharmaceutical industries.
Limits access to specific drugs and pharmacies. Under the
Republican plan, private plans can refuse to cover needed
medications. The private plans decide what specific drugs are
on their formulary; beneficiaries who need prescription drugs
that are not on the formulary are out-of-luck. Plans are not
required to disclose the formulatory to prospective enrollees,
and plans are allowed to change the formulary during the year
with ``adequate'' notice. Private plans also pick and choose
with pharmacies are in their network. Private plans could also
change their pharmacy networks mid-year. And, because the
Republican plan uses the Medicare+Choice enrollment procedures,
beneficiaries will be locked into the private plan for the
entire year--even if the plan drops a needed drug or local
pharmacy.
Hidden hatchet. Crafted behind closed doors and without
public hearing, the legislation has a hidden hatchet designed
to artifically depress its aggregate cost and undermine its
already paltry benefit. It strictly limits the dollars that
count toward the out-of-pocket cap by specifying that only
costs which are paid by the individual and are ``not reimbursed
(through insurance or otherwise) by another person'' count
toward the out-of-pocket limot. In other words, if a
beneficiary receives any assistance--other than low-income
assistance--with his or her drug costs, those costs do not
count toward the $3,800 limit. This means beneficiaries who pay
for supplemental coverage or who get help from family members
might never qualify for the catastrophic coverage. Perhaps more
importantly, this new notion of ``true'' out-of-pocket costs
put employers, unions, and others who provide retiree coverage
in a bind. Employers are already steadily reducing their
retiree benefits. [Chart 3] Unfortunately, the Republican bill
moves in the wrong direction by providing employers with an
incentive to either cap their retiree prescription drug
benefits or drop them entirely. Committee counsel for the
majority indicated in the mark-up that eliminating this gimmick
would increase the cost of their bill by $120 billion.
Flawed private-market model. There is no guarantee that any
private plans will even agree to participate, as drug-only
risk-bearing insurance plans don't currently exist. For two
years, the insurance industry has expressed skepticism about
the Republican plan, which relies exclusively on the
participation of private insurers. The Health Insurance
Association of America recently wrote to the Chairman that
there is a ``better chance'' now than before that their
companies will participate, but that's hardly a guarantee. That
said, relying on a private insurance system will increase the
costs to the beneficiary and the government due to the
additional expenses related to product development, marketing,
administration and profit. Developing a new private insurance
product market would be difficult in sparsely populated rural
areas, where the need is greatest, risk pools are smaller and
costs often higher.
Risk-bearing requirement is bad news for beneficiaries.
Because the Republican plan would require the private insurers
to be financially ``at-risk'' for the utilization of the
benefit, the Congressional Budget Office assumes that these
organizations will aggressively use every tool at their
disposal to limit their financial exposure. This means they
will deny or otherwise limit access to needed medications, set
up very restrictive formularies, limit pharmacy networks and
take other steps to keep claims low.
Government ``bribe.'' To entice plans to participate, the
Committee-reported bill authorizes the Secretary to pay
virtually any price, provided the entity is still ``partially''
at-risk. Thus, the Secretary could subsidize 99.99% of the
risk. How much more will taxpayers pay for wasted overhead? How
much more will beneficiaries pay? Will the market be stable and
certain? Or will private plans be able to come and go as they
wish? Will the drug coverage be available and affordable to all
beneficiaries? Or only to a select few?
Medicare+Choice all over again. Even if coverage were
offered, insurers would be likely to come in and out of the
market, move to profitable areas and significantly modify
benefit design from year-to-year based on the prior year's
experience. This could easily result in the same pull-outs and
churning seen in the Medicare+Choice plans--except that the M+C
program affects just 14 percent of beneficiaries.
Prescription drug card: The placebo effect
The Committee legislation authorizes the Administration's
prescription drug discount card program, but fails to require
the cards to provide any minimum discount. These cards are
currently available on the market, and they are clearly not the
answer to beneficiaries' needs. We are concerned about the
potential that this program has to tarnish Medicare's good
name.
The real Republican agenda: Privatization of Medicare
This legislation takes the first steps needed to pursue the
majority's privatization agenda. It creates a private-sector
based drug benefit. It moves Medicare+Choice to a competition-
based system in 2005. And it creates a premium support
demonstration program under which fee-for-service premiums
could rise dramatically. Make no mistake: The long march to
privatization is beginning in this bill.
Republican plan: Creates new bureaucracy, adds inefficiency and expense
Ironically, the Committee-reported bill creates a new
agency within the Department of Health and Human Services. The
new Medicare Benefits Administration (MBA) would be exempt from
normal Civil Service pay scales and the conflict of interest
rules that govern the civil service. The MBA would regulate
Medicare+Choice plans and the prescription drug plans, though
the Administrator would be forbidden from ``interfering'' with
negotiations and performing other important oversight duties.
Predictably, this new agency is stacked in favor of the plans,
and will drain needed resources from the Centers for Medicare
and Medicaid Services.
A matter of priorities: Democrats support a Medicare prescription drug
benefit, while Republicans prefer to focus on tax breaks for
the wealthy
We admit that the cost of our Medicare program expansion to
seniors and the disabled is likely to be more than twice the
cost of the Republican gift to drug companies and HMOs. But
that's because we provide a much more generous benefit--e.g.,
beneficiaries save three times more under our plan [Chart 4]--
and we don't include any hidden hatchets or other gimmicks or
gaps to shift costs elsewhere. Under the Democratic plan, what
you see is what you get.
We are proud to be doing more for the most vulnerable in
our society. The Democratic Medicare prescription drug benefit
will make a real difference in the lives of America's seniors
and their families both by lowering drug prices and giving them
substantial assistance in paying for them. But you simply
cannot do a meaningful prescription drug benefit on the cheap.
Help for Medicare providers
While we have grave concerns about the feasibility,
advisability and scope of benefits under the Republican drug
plan in Title I and the steps toward competitive bidding in
Title II, we are largely supportive of the package of provider
payment relief in Titles II, III, IV, V, and VI of the
Committee-passed bill. We would strongly prefer to consider the
provider-related pieces on their own merits, and not as part of
a larger more controversial debate.
Conclusion
Medicare's promise of health and financial security will
not be fulfill until a prescription drug benefit is enacted.
The Republican scheme is a prescription for failure. [Chart 5]
Many Democratic amendments were offered in repeated attempts to
fix its many flaws or, in some cases, simply live up to
Republican rhetoric. All were rejected on virtually party-line
votes.
Seniors need and deserve stability, equity, continuity and
predictability in their health care plans. They do not get this
from for-profit HMOs in the M+C program. And they will not get
it from private drug plans with variable premiums, co-insurance
and benefits.
Members of Congress should defeat the Republican drug hoax
and vote for a real, defined benefit in Medicare. They should
enact the Democratic substitute.
C.B. Rangel.
William J. Coyne.
Ben Cardin.
Jim McDermott.
Jerry Kleczka.
William J. Jefferson.
John Tanner.
Michael R. McNulty.
Pete Stark.
Sander M. Levin.
Robert T. Matsui.
John Lewis.
Karen L. Thurman.
Richard E. Neal.
Xavier Becerra.
ADDITIONAL VIEWS OF CONGRESSMAN EARL POMEROY
While I have great concerns about the total cost of the
Minority alternative prescription drug package, I firmly
believe that it uses the best and most appropriate delivery
mechanism--an entitlement provided directly through Medicare.
The underlying bill, on the other hand, proposes to deliver the
benefit through private insurance companies. The argument made
by the Majority that this method of delivery is superior and
will result in greater savings is not substantial and relies on
blind faith in the insurance industry. In my eight years as
Insurance Commissioner for the State of North Dakota, it became
apparent that this is simply an unproven theory. One need not
look any further than the Medicare+Choice experience in North
Dakota as evidence. In our state, we witnessed all three plans
that tested the market fail and ultimately pull out. Today
there are not available M+C plans in the state because a
market-driven approach clearly does not work for providing
coverage to our seniors under Medicare.
However, I am compelled to remind my colleagues that
Congress has a critical responsibility to address the
prescription drug needs of seniors sooner rather than later,
and I am committed to working to keep this legislation moving
forward. As the process continues, it is my hope that we can
work in a bipartisan manner to correct the deficiencies in this
bill, beginning with changing the delivery mechanism to utilize
the proven, successful elements of the existing Medicare
program.
Earl Pomeroy.