[House Report 108-178]
[From the U.S. Government Publishing Office]
108th Congress Rept. 108-178
HOUSE OF REPRESENTATIVES
1st Session Part 2
======================================================================
MEDICARE PRESCRIPTION DRUG AND MODERNIZATION ACT OF 2003
_______
July 15, 2003.--Committed to the Committee of the Whole House on the
State of the Union and 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 VIEWS
[To accompany H.R. 2473]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 2473) 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 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. Introduction...................................................144
A. Purpose and Summary................................. 144
B. Background and Need for Legislation................. 144
C. Legislative History................................. 147
II. Explanation of Provisions......................................150
A. Title I--Medicare Prescription Drug Benefit......... 150
B. Title II--Medicare Enhanced Fee-for-Service and
Medicare Advantage Programs; Medicare Competition.. 174
C. Title III--Combatting Waste, Fraud and Abuse........ 189
D. Title IV--Rural Health Care Improvements............ 199
E. Title V--Provisions Relating to Part A.............. 215
F. Title VI--Provisions Relating to Part B............. 222
G. Title VII--Provisions Relating to Parts A and B..... 239
H. Title VIII--Medicare Benefits Administration........ 250
I. Title IX--Regulatory Relief......................... 253
III. Votes of the Committee.........................................288
IV. Budget Effects of the Bill.....................................293
The Congressional Budget Office has not submitted a
final score of the legislation at the time of the
filing of this report (July 15, 2003)..............
V. Other Matters Required To Be Discussed Under House Rules.......293
A. Committee Oversight Findings and Recommendations.... 293
B. Summary of General Performance Goals and Objectives. 293
C. Constitutional Authority Statement.................. 293
VI. Changes in Existing Law Made by the Bill, as Reported.............
Legislative Counsel has not prepared a Ramseyer at the
time of the filing of this report (July 15, 2003).. 294
VII. Views..........................................................295
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
Prescription Drug and Modernization Act of 2003''.
(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. 1860D-1. Benefits; eligibility; enrollment; and coverage
period.
``Sec. 1860D-2. Requirements for qualified prescription drug
coverage.
``Sec. 1860D-3. Beneficiary protections for qualified
prescription drug coverage.
``Sec. 1860D-4. Requirements for and contracts with
prescription drug plan (PDP) sponsors.
``Sec. 1860D-5. Process for beneficiaries to select qualified
prescription drug coverage.
``Sec. 1860D-6. Submission of bids and premiums.
``Sec. 1860D-7. Premium and cost-sharing subsidies for low-
income individuals.
``Sec. 1860D-8. Subsidies for all medicare beneficiaries for
qualified prescription drug coverage.
``Sec. 1860D-9. Medicare Prescription Drug Trust Fund.
``Sec. 1860D-10. Definitions; application to medicare advantage
and EFFS programs; treatment of references to
provisions in part C.
Sec. 102. Offering of qualified prescription drug coverage under
Medicare Advantage and enhanced fee-for-service (EFFS) program.
Sec. 103. Medicaid amendments.
``Sec. 1935. Special provisions relating to medicare prescription drug
benefit.
Sec. 104. Medigap transition.
Sec. 105. Medicare prescription drug discount card endorsement program.
Sec. 106. Disclosure of return information for purposes of carrying out
medicare catastrophic prescription drug program.
Sec. 107. State pharmaceutical assistance transition commission.
TITLE II--MEDICARE ENHANCED FEE-FOR-SERVICE AND MEDICARE ADVANTAGE
PROGRAMS; MEDICARE COMPETITION
Sec. 200. Medicare modernization and revitalization.
Subtitle A--Medicare Enhanced Fee-for-Service Program
Sec. 201. Establishment of enhanced fee-for-service (EFFS) program
under medicare.
``Part E--Enhanced Fee-for-Service Program
``Sec. 1860E-1. Offering of enhanced fee-for-service plans
throughout the United States.
``Sec. 1860E-2. Offering of enhanced fee-for-service (EFFS)
plans.
``Sec. 1860E-3. Submission of bids; beneficiary savings;
payment of plans.
``Sec. 1860E-4. Premiums; organizational and financial
requirements; establishment of standards;
contracts with EFFS organizations.
Subtitle B--Medicare Advantage Program
Chapter 1--Implementation Of Program
Sec. 211. Implementation of medicare advantage program.
Sec. 212. Medicare advantage improvements.
Chapter 2--Implementation Of Competition Program
Sec. 221. Competition program beginning in 2006.
Chapter 3--Additional Reforms
Sec. 231. Making permanent change in medicare advantage reporting
deadlines and annual, coordinated election period.
Sec. 232. Avoiding duplicative State regulation.
Sec. 233. Specialized medicare advantage plans for special needs
beneficiaries.
Sec. 234. Medicare MSAs.
Sec. 235. Extension of reasonable cost contracts.
Sec. 236. Extension of municipal health service demonstration projects.
Subtitle C--Application of FEHBP-Style Competitive Reforms
Sec. 241. Application of FEHBP-style competitive reform beginning in
2010.
TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE
Sec. 301. Medicare secondary payor (MSP) provisions.
Sec. 302. Competitive acquisition of certain items and services.
Sec. 303. Competitive acquisition of covered outpatient drugs and
biologicals.
Sec. 304. Demonstration project for use of recovery audit contractors.
TITLE IV--RURAL HEALTH CARE IMPROVEMENTS
Sec. 401. Enhanced disproportionate share hospital (DSH) treatment for
rural hospitals and urban hospitals with fewer than 100 beds.
Sec. 402. Immediate establishment of uniform standardized amount in
rural and small urban areas.
Sec. 403. Establishment of essential rural hospital classification.
Sec. 404. More frequent update in weights used in hospital market
basket.
Sec. 405. Improvements to critical access hospital program.
Sec. 406. Redistribution of unused resident positions.
Sec. 407. Two-year extension of hold harmless provisions for small
rural hospitals and sole community hospitals under prospective payment
system for hospital outpatient department services.
Sec. 408. Exclusion of certain rural health clinic and federally
qualified health center services from the prospective payment system
for skilled nursing facilities.
Sec. 409. Recognition of attending nurse practitioners as attending
physicians to serve hospice patients.
Sec. 410. Improvement in payments to retain emergency capacity for
ambulance services in rural areas.
Sec. 411. Two-year increase for home health services furnished in a
rural area.
Sec. 412. Providing safe harbor for certain collaborative efforts that
benefit medically underserved populations.
Sec. 413. GAO study of geographic differences in payments for
physicians' services.
Sec. 414. Treatment of missing cost reporting periods for sole
community hospitals.
Sec. 415. Extension of telemedicine demonstration project.
Sec. 416. Adjustment to the medicare inpatient hospital PPS wage index
to revise the labor-related share of such index.
Sec. 417. Medicare incentive payment program improvements for physician
scarcity.
TITLE V--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
Sec. 501. Revision of acute care hospital payment updates.
Sec. 502. Recognition of new medical technologies under inpatient
hospital PPS.
Sec. 503. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 504. Wage index adjustment reclassification reform .
Sec. 505. MedPAC report on specialty hospitals.
Subtitle B--Other Provisions
Sec. 511. Payment for covered skilled nursing facility services.
Sec. 512. Coverage of hospice consultation services.
TITLE VI--PROVISIONS RELATING TO PART B
Subtitle A--Physicians' Services
Sec. 601. Revision of updates for physicians' services.
Sec. 602. Studies on access to physicians' services.
Sec. 603. MedPAC report on payment for physicians' services.
Subtitle B--Preventive Services
Sec. 611. Coverage of an initial preventive physical examination.
Sec. 612. Coverage of cholesterol and blood lipid screening.
Sec. 613. Waiver of deductible for colorectal cancer screening tests.
Sec. 614. Improved payment for certain mammography services.
Subtitle C--Other Services
Sec. 621. Hospital outpatient department (HOPD) payment reform.
Sec. 622. Payment for ambulance services.
Sec. 623. Renal dialysis services.
Sec. 624. One-year moratorium on therapy caps; provisions relating to
reports.
Sec. 625. Adjustment to payments for services furnished in ambulatory
surgical centers.
Sec. 626. Payment for certain shoes and inserts under the fee schedule
for orthotics and prosthetics.
Sec. 627. Waiver of part B late enrollment penalty for certain military
retirees; special enrollment period.
Sec. 628. Part B deductible.
Sec. 629. Extension of coverage of intravenous immune globulin (IVIG)
for the treatment of primary immune deficiency diseases in the home.
TITLE VII--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
Sec. 701. Update in home health services.
Sec. 702. Establishment of reduced copayment for a home health service
episode of care for certain beneficiaries.
Sec. 703. MedPAC study on medicare margins of home health agencies.
Subtitle B--Direct Graduate Medical Education
Sec. 711. Extension of update limitation on high cost programs.
Subtitle C--Chronic Care Improvement
Sec. 721. Voluntary chronic care improvement under traditional fee-for-
service.
Sec. 722. Chronic care improvement under medicare advantage and
enhanced fee-for-service programs.
Sec. 723. Institute of Medicine report.
Sec. 724. MedPAC report.
Subtitle D--Other Provisions
Sec. 731. Modifications to medicare payment advisory commission
(MedPAC).
Sec. 732. Demonstration project for medical adult day care services.
Sec. 733. Improvements in national and local coverage determination
process to respond to changes in technology.
Sec. 734. Treatment of certain physician pathology services.
TITLE VIII--MEDICARE BENEFITS ADMINISTRATION
Sec. 801. Establishment of Medicare Benefits Administration.
TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM
Subtitle A--Regulatory Reform
Sec. 901. Construction; definition of supplier.
``Supplier
Sec. 902. Issuance of regulations.
Sec. 903. Compliance with changes in regulations and policies.
Sec. 904. Reports and studies relating to regulatory reform.
Subtitle B--Contracting Reform
Sec. 911. Increased flexibility in medicare administration.
Sec. 912. Requirements for information security for medicare
administrative contractors.
Subtitle C--Education and Outreach
Sec. 921. Provider education and technical assistance.
``Sec. 1889. Provider education and technical assistance.
Sec. 922. Small provider technical assistance demonstration program.
Sec. 923. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman.
Sec. 924. Beneficiary outreach demonstration program.
Sec. 925. Inclusion of additional information in notices to
beneficiaries about skilled nursing facility benefits.
Sec. 926. Information on medicare-certified skilled nursing facilities
in hospital discharge plans.
Subtitle D--Appeals and Recovery
Sec. 931. Transfer of responsibility for medicare appeals.
Sec. 932. Process for expedited access to review.
Sec. 933. Revisions to medicare appeals process.
Sec. 934. Prepayment review.
Sec. 935. Recovery of overpayments.
Sec. 936. Provider enrollment process; right of appeal.
Sec. 937. Process for correction of minor errors and omissions without
pursuing appeals process.
Sec. 938. Prior determination process for certain items and services;
advance beneficiary notices.
Subtitle V--Miscellaneous Provisions
Sec. 941. Policy development regarding evaluation and management (E &
M) documentation guidelines.
Sec. 942. Improvement in oversight of technology and coverage.
Sec. 943. Treatment of hospitals for certain services under medicare
secondary payor (MSP) provisions.
Sec. 944. EMTALA improvements.
Sec. 945. Emergency Medical Treatment and Active Labor Act (EMTALA)
technical advisory group.
Sec. 946. Authorizing use of arrangements to provide core hospice
services in certain circumstances.
Sec. 947. Application of osha bloodborne pathogens standard to certain
hospitals.
Sec. 948. BIPA-related technical amendments and corrections.
Sec. 949. Conforming authority to waive a program exclusion.
Sec. 950. Treatment of certain dental claims.
Sec. 951. Furnishing hospitals with information to compute dsh formula.
Sec. 952. Revisions to reassignment provisions.
Sec. 953. Other provisions.
Sec. 954. Temporary suspension of OASIS requirement for collection of
data on non-medicare and non-medicaid patients.
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 F; and
(2) by inserting after part C the following new part:
``Part D--Voluntary Prescription Drug Benefit Program
``SEC. 1860D-1. 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 1860D-2(a)) as follows:
``(1) Medicare-related plans.--
``(A) Medicare advantage.--If the individual is
eligible to enroll in a Medicare Advantage plan that
provides qualified prescription drug coverage under
section 1851(j), the individual may enroll in such plan
and obtain coverage through such plan.
``(B) EFFS plans.--If the individual is eligible to
enroll in an EFFS plan that provides qualified
prescription drug coverage under part E under section
1860E-2(d), the individual may enroll in such plan and
obtain coverage through such plan.
``(C) MA-EFFS plan; MA-EFFS Rx plan.--For purposes of
this part, the term `MA-EFFS plan' means a Medicare
Advantage plan under part C and an EFFS plan under part
E and the term `MA-EFFS Rx plan' means a MA-EFFS plan
insofar as such plan provides qualified prescription
drug coverage.
``(2) Prescription drug plan.--If the individual is not
enrolled in a MA-EFFS plan , the individual may enroll under
this part in a prescription drug plan (as defined in section
1860D-10(a)(5)).
Such individuals shall have a choice of such plans under section 1860D-
5(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 MA-EFFS Rx plan under part C
or part E, 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 1809(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 Advantage and EFFS programs 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 an 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 October 1, 2005, 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).
``(3) Information on plans.--Information described in section
1860D-3(b)(1) on prescription drug plans shall be made
available during election periods.
``(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 MA-EFFS Rx 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 advantage 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
enrolls under a prescription drug plan or in a MA-EFFS
Rx plan during the individual's initial enrollment
period under this part or 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 entity offering a prescription drug plan
or MA-EFFS Rx plan and in which the individual is
enrolled may not deny, limit, or condition the coverage
or provision of covered prescription drug benefits or
vary 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 an entity offering
a MA-EFFS Rx plan 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 ma-effs rx plan.--Qualified prescription
drug coverage under a prescription drug plan or
under a MA-EFFS Rx 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 demonstration project under
part C that demonstrates the application of
capitation payment rates for frail elderly
medicare beneficiaries through the use of an
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 1860D-8(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, 2006, 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 MA-EFFS
Rx 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 that offers a
prescription drug plan in an area designated under section
1860D-4(b)(5) shall make such plan available to all eligible
individuals residing in the area without regard to their health
or economic status or their place of residence within the area.
``(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 2006.--In no case shall
any election take effect before January 1, 2006.
``(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. 1860D-2. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.
``(a) Requirements.--
``(1) In general.--For purposes of this part and part C and
part E, 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 or E. If the
Administrator finds, in the case of a qualified
prescription drug coverage under a prescription drug
plan or a MA-EFFS Rx 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 or E.
``(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 2006, 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) 80:20 benefit structure.--
``(A) 20 percent coinsurance.--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)) that is--
``(i) 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.
``(B) Use of tiers.--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).
``(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 2006, 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.--
``(i) In general.--For purposes of this part,
the `annual out-of-pocket threshold' specified
in this subparagraph is equal to $3,500
(subject to adjustment under clause (ii) and
subparagraph (D)).
``(ii) Inflation increase.--For a year after
2006, the dollar amount specified in clause (i)
shall be increased by the annual percentage
increase described in paragraph (5) for the
year involved. Any amount determined under the
previous sentence 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 (or by another individual, such as a
family member, on behalf of the individual),
under section 1860D-7, under title XIX, or
under a State pharmaceutical assistance program
and the individual (or other individual) is not
reimbursed through insurance or otherwise, a
group health plan, or other third-party payment
arrangement (other than under such title or
such program) for such costs.
``(D) Adjustment of annual out-of-pocket
thresholds.--
``(i) In general.--For each enrollee in a
prescription drug plan or in a MA-EFFS Rx plan
whose adjusted gross income exceeds the income
threshold as defined in clause (ii) for a year,
the annual out-of-pocket threshold otherwise
determined under subparagraph (B) for such year
shall be increased by an amount equal to the
percentage specified in clause (iii),
multiplied by the lesser of--
``(I) the amount of such excess; or
``(II) the amount by which the income
threshold limit exceeds the income
threshold.
Any amount determined under the previous
sentence that is not a multiple of $100 shall
be rounded to the nearest multiple of $100.
``(ii) Income threshold.--For purposes of
clause (i)--
``(I) In general.--Subject to
subclause (II), the term `income
threshold' means $60,000 and the term
`income threshold limit' means
$200,000.
``(II) Income inflation adjustment.--
In the case of a year beginning after
2006, each of the dollar amounts in
subclause (I) shall be increased by an
amount equal to such dollar amount
multiplied by the cost-of-living
adjustment determined under section
1(f)(3) of the Internal Revenue Code of
1986 for such year, determined by
substituting `calendar year 2005' for
`calendar year 1992'. If any amount
increased under the previous sentence
is not a multiple of $100, such amount
shall be rounded to the nearest
multiple of $100.
``(iii) Percentage.--The percentage specified
in this clause for a year is a fraction
(expressed as a percentage) equal to--
``(I) the annual out-of-pocket
threshold for a year under subparagraph
(B) (determined without regard to this
subparagraph), divided by
``(II) the income threshold under
clause (ii) for that year.
If any percentage determined under the previous
sentence that is not a multiple of \1/10\th of
1 percentage point, such percentage shall be
rounded to the nearest multiple of \1/10\th of
1 percentage point.
``(iv) Use of most recent return
information.--For purposes of clause (i) for an
enrollee for a year, except as provided in
clause (v), the adjusted gross income of an
individual shall be based on the most recent
information disclosed to the Secretary under
section 6109(l)(19) of the Internal Revenue
Code of 1986 before the beginning of that year.
``(v) Individual election to present most
recent information regarding income.--The
Secretary shall provide, in coordination with
the Secretary of the Treasury, a procedure
under which, for purposes of applying this
subparagraph for a calendar year, instead of
using the information described in clause (iv),
an enrollee may elect to use more recent
information, including information with respect
to a taxable year ending in such calendar year.
Such process shall--
``(I) require the enrollee to provide
the Secretary with a copy of the
relevant portion of the more recent
return to be used under this clause;
``(II) provide for the Medicare
Beneficiary Ombudsman (under section
1810) offering assistance to such
enrollees in presenting such
information and the toll-free number
under such section being a point of
contact for beneficiaries to inquire as
to how to present such information;
``(III) provide for the verification
of the information in such return by
the Secretary of the Treasury under
section 6103(l)(19) of the Internal
Revenue Code of 1986; and
``(IV) provide for the payment by the
Secretary (in a manner specified by the
Secretary) to the enrollee of an amount
equal to the excess of the benefit
payments that would have been payable
under the plan if the more recent
return information were used, over the
benefit payments that were made under
the plan.
In the case of a payment under subclause (III)
for an enrollee under a prescription drug plan,
the PDP sponsor of the plan shall pay to the
Secretary the amount so paid, less the
applicable reinsurance amount that would have
applied under section 1860D-8(c)(1)(B) if such
payment had been treated as an allowable cost
under such section. Such plan payment shall be
deposited in the Treasury to the credit of the
Medicare Prescription Drug Account in the
Federal Supplementary Medical Insurance Trust
Fund (under section 1841).
``(vi) Dissemination of information on
process.--The Secretary shall provide, through
the annual medicare handbook under section
1804(a), for a general description of the
adjustment of annual out-of-pocket thresholds
provided under this subparagraph, including the
process for adjustment based upon more recent
information and the confidentiality provisions
of subparagraph (F), and shall provide for
dissemination of a table for each year that
sets forth the amount of the adjustment that is
made under clause (i) based on the amount of an
enrollee's adjusted gross income.
``(E) Requesting information on enrollees.--
``(i) In general.--The Secretary shall,
periodically as required to carry out
subparagraph (D), transmit to the Secretary of
the Treasury a list of the names and TINs of
enrollees in prescription drug plans (or in MA-
EFFS Rx plans) and request that such Secretary
disclose to the Secretary information under
subparagraph (A) of section 6103(l)(19) of the
Internal Revenue Code of 1986 with respect to
those enrollees for a specified taxable year
for application in a particular calendar year.
``(ii) Disclosure to plan sponsors.--In the
case of a specified taxpayer (as defined in
section 6103(l)(19)(B) of the Internal Revenue
Code of 1986) who is enrolled in a prescription
drug plan or in an MA-EFFS Rx plan, the
Secretary shall disclose to the entity that
offers the plan the annual out-of-pocket
threshold applicable to such individual under
subparagraph (D).
``(F) Maintaining confidentiality of information.--
``(i) In general.--The amount of any increase
in an annual out-of-pocket threshold under
subparagraph (D) may not be disclosed by the
Secretary except to a PDP sponsor or entity
that offers a MA-EFFS Rx plan to the extent
necessary to carry out this part.
``(ii) Criminal and civil penalties for
unauthorized disclosure.--A person who makes an
unauthorized disclosure of information
disclosed under section 6103(l)(19) of the
Internal Revenue Code of 1986 (including
disclosure of any increase in an annual out-of-
pocket threshold under subparagraph (D)) shall
be subject to penalty to the extent provided
under--
``(I) section 7213 of such Code
(relating to criminal penalty for
unauthorized disclosure of
information);
``(II) section 7213A of such Code
(relating to criminal penalty for
unauthorized inspection of returns or
return information);
``(III) section 7431 of such Code
(relating to civil damages for
unauthorized inspection or disclosure
of returns and return information);
``(IV) any other provision of the
Internal Revenue Code of 1986; or
``(V) any other provision of law.
``(iii) Application of additional civil
monetary penalty for unauthorized
disclosures.--In addition to any penalty
otherwise provided under law, any person who
makes an unauthorized disclosure of such
information shall be subject to a civil
monetary penalty of not to exceed $10,000 for
each such unauthorized disclosure. The
provisions of section 1128A (other than
subsections (a) and (b)) shall apply to civil
money penalties under this subparagraph in the
same manner as they apply to a penalty or
proceeding under section 1128A(a).
``(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
MA-EFFS Rx 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 1860D-8 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 product of--
``(i) the amount by which the initial
coverage limit described in subsection (b)(3)
exceeds the deductible described in subsection
(b)(1); and
``(ii) 100 percent minus the cost-sharing
percentage specified in subsection
(b)(2)(A)(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 an entity offering a MA-EFFS Rx
plan, the sponsor or entity 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 to a beneficiary enrolled under such
title and under a prescription drug plan or MA-EFFS Rx plan for
a drug based on the prices negotiated by a prescription drug
plan or MA-EFFS Rx 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
MA-EFFS Rx plan with respect to covered outpatient drugs, or by
a qualified retiree prescription drug plan (as defined in
section 1860D-8(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 entity offering a MA-
EFFS Rx plan shall disclose to the Administrator (in a manner
specified by the Administrator) the extent to which discounts
or rebates or other remuneration or price concessions 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.
``(3) Audits and reports.--To protect against fraud and abuse
and to ensure proper disclosures and accounting under this
part, in addition to any protections against fraud and abuse
provided under section 1860D-4(b)(3)(C), the Administrator may
periodically audit the financial statements and records of PDP
sponsor or entities offering a MA-EFFS Rx plan.
``(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 1860D-8;
``(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 entities offering MA-EFFS Rx
plans 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
1860D-3(f)(2).
``(4) Application of general exclusion provisions.--A
prescription drug plan or MA-EFFS Rx 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 1860D-3(f).
``SEC. 1860D-3. 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 1860D-1(c)(1), 1860D-
1(c)(2), 1860D-2(d), and 1860D-6(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 specific covered outpatient drugs,
including access through pharmacy networks.
``(B) How any formulary used by the sponsor
functions, including the drugs included in the
formulary.
``(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.
Such information shall also be made available upon request to
prospective enrollees.
``(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 each enrollee in a form
easily understandable to such enrollees 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 the annual out-of-pocket threshold
applicable to such enrollee 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) Participation of any willing pharmacy.--A PDP
sponsor and an entity offering a MA-EFFS Rx plan shall
permit the participation of any pharmacy that meets
terms and conditions that the plan has established.
``(B) Discounts allowed for network pharmacies.--A
prescription drug plan and a MA-EFFS Rx plan may,
notwithstanding subparagraph (A), reduce coinsurance or
copayments for its enrolled beneficiaries below the
level otherwise provided for covered outpatient drugs
dispensed through in-network pharmacies, but in no case
shall such a reduction result in an increase in
payments made by the Administrator under section 1860D-
8 to a plan.
``(C) Convenient access for network pharmacies.--The
PDP sponsor of the prescription drug plan and the
entity offering a MA-EFFS Rx 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
(consistent with rules of the Administrator). The
Administrator shall establish convenient access rules
under this subparagraph that are no less favorable to
enrollees than the rules for convenient access to
pharmacies of the Secretary of Defense established as
of June 1, 2003, for purposes of the TRICARE Retail
Pharmacy (TRRx) program. Such rules shall include
adequate emergency access for enrolled beneficiaries.
``(D) Level playing field.--Such a sponsor shall
permit enrollees to receive benefits (which may include
a 90-day supply of drugs or biologicals) through a
community pharmacy, rather than through mail order,
with any differential in cost paid by such enrollees.
``(E) Not required to accept insurance risk.--The
terms and conditions under subparagraph (A) may not
require participating pharmacies to accept insurance
risk as a condition of participation.
``(2) Use of standardized technology.--
``(A) In general.--The PDP sponsor of a prescription
drug plan and an entity offering a MA-EFFS Rx plan
shall issue (and reissue, as appropriate) such a card
(or other technology) that may be used by an enrollee
to assure access to negotiated prices under section
1860D-2(d) for the purchase of prescription drugs for
which coverage is not otherwise provided under the
plan.
``(B) Standards.--
``(i) Development.--The Administrator shall
provide for the development or utilization of
uniform 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 or
an entity offering a MA-EFFS Rx plan uses a formulary, the
following requirements must be met:
``(A) Pharmacy and therapeutic (p&t) committee.--The
sponsor or entity must establish a pharmacy and
therapeutic committee that develops and reviews the
formulary. Such committee shall include at least one
practicing physician and at least one practicing
pharmacist independent and free of conflict with
respect to the committee both with expertise in the
care of elderly or disabled persons and a majority of
its members shall consist of individuals who are
practicing physicians or practicing pharmacists (or
both).
``(B) Formulary development.--In developing and
reviewing the formulary, the committee shall--
``(i) 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; and
``(ii) shall take into account whether
including in the formulary particular covered
outpatient drugs has therapeutic advantages in
terms of safety and efficacy.
``(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). In
establishing such classes, the committee shall take
into account the standards published in the United
States Pharmacopeia-Drug Information. The committee
shall make available to the enrollees under the plan
through the Internet or otherwise the bases for the
exclusion of coverage of any drug from the formulary.
``(D) Provider and patient education.--The committee
shall establish policies and procedures to educate and
inform health care providers and enrollees concerning
the formulary.
``(E) Notice before removing drug from formulary for
changing preferred or tier status of drug.--Any removal
of a covered outpatient drug from a formulary and any
change in the preferred or tier cost-sharing status of
such a drug shall take effect only after appropriate
notice is made available to beneficiaries and
physicians.
``(F) Periodic evaluation of protocols.--In
connection with the formulary, a prescription drug plan
shall provide for the periodic evaluation and analysis
of treatment protocols and procedures.
``(G) 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 or entity offering a MA-
EFFS Rx plan shall have in place, directly or through
appropriate arrangements, 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 side-effects, and improve medication use,
including a medication therapy management program
described in paragraph (2) and for years beginning with
2007, 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 or entity from utilizing 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 may be furnished by a pharmacy provider and that
is designed to assure, with respect to beneficiaries at
risk for potential medication problems, such as
beneficiaries with complex or 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 optimize therapeutic outcomes
through improved medication use and reduce the risk of
adverse events, including adverse drug interactions.
Such programs may distinguish between services in
ambulatory and institutional settings.
``(B) Elements.--Such program may include--
``(i) enhanced beneficiary understanding to
promote the appropriate use of medications by
beneficiaries and to reduce the risk of
potential adverse events associated with
medications, through beneficiary education,
counseling, case management, disease state
management programs, and other appropriate
means;
``(ii) increased beneficiary adherence with
prescription medication regimens through
medication refill reminders, special packaging,
and other compliance programs 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 and practicing pharmacists
and physicians.
``(D) Considerations in pharmacy fees.--The PDP
sponsor of a prescription drug program and an entity
offering a MA-EFFS Rx plan 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. Each such sponsor or entity shall disclose
to the Administrator upon request the amount of any
such management or dispensing fees.
``(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 uniform standards established under subparagraph
(B):
``(i) Electronic transmittal of
prescriptions.--Prescriptions must be written
and transmitted electronically (other than by
facsimile), except in emergency cases and other
exceptional circumstances recognized by the
Administrator.
``(ii) Provision of information to
prescribing health care professional.--The
program provides for the electronic transmittal
to the prescribing health care professional of
information that includes--
``(I) information (to the extent
available and feasible) on the drug or
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 uniform
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,
pharmacies, beneficiaries, pharmacy benefit
managers, individuals with expertise in
information technology, and pharmacy benefit
experts 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
standards and systems reduce medication
errors and can be readily implemented
by physicians, pharmacies, and
hospitals.
``(III) Efforts to develop uniform
standards and a common software
platform for the secure electronic
communication of medication history,
eligibility, benefit, and prescription
information.
``(IV) Efforts to develop and promote
universal connectivity and
interoperability for the secure
electronic exchange of such
information.
``(V) The cost of implementing such
systems in the range of hospital and
physician office settings and
pharmacies, including hardware,
software, and training costs.
``(VI) 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, 2004.
``(II) Such task force shall submit
recommendations to Administrator by not
later than January 1, 2005.
``(III) The Administrator shall
provide for the development and
promulgation, by not later than January
1, 2006, of national standards relating
to the electronic prescription drug
program described in clause (ii). Such
standards shall be issued by a
standards organization accredited by
the American National Standards
Institute (ANSI) and shall be
compatible with standards established
under part C of title XI.
``(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
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 and each entity offering a
MA-EFFS Rx plan 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 available 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 an organization with respect to benefits
it offers under a 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 or a MA-EFFS Rx plan 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 either would not be as effective for the individual
or would have adverse effects for the individual or both.
``(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 (including a
determination related to the application of tiered cost-sharing
described in subsection (e)(3)) in the same manner as such
requirements apply to an organization with respect to benefits
it offers under a plan under part C.
``(2) Formulary determinations.--An individual who is
enrolled in a prescription drug plan offered by a PDP sponsor
or in a MA-EFFS Rx plan may appeal to obtain coverage for a
covered outpatient drug that is not on a formulary of the
sponsor or entity offering the plan if the prescribing
physician determines that the formulary drug for treatment of
the same condition either would not be as effective for the
individual or would have adverse effects for the individual or
both.
``(g) Confidentiality and Accuracy of Enrollee Records.--A PDP
sponsor that offers a prescription drug plan shall meet the
requirements of section 1852(h) with respect to enrollees under the
plan in the same manner as such requirements apply to an organization
with respect to enrollees under part C. A PDP sponsor shall be treated
as a business associate for purposes of the provisions of subpart E of
part 164 of title 45, Code of Federal Regulations, adopted pursuant to
the authority of the Secretary under section 264(c) of the Health
Insurance Portability and Accountability Act of 1996 (42 U.S. C. 1320d-
2 note).
``SEC. 1860D-4. REQUIREMENTS FOR AND CONTRACTS WITH PRESCRIPTION DRUG
PLAN (PDP) SPONSORS.
``(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 for unsubsidized
coverage.--
``(A) In general.--Subject to subparagraph (B) and
section 1860D-5(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 1860D-8.
``(B) Reinsurance permitted.--The entity may obtain
insurance or make other arrangements for the cost of
coverage provided to any enrollee.
``(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 1860D-1 of a prescription drug plan
offered by a PDP sponsor under this part, and the sponsor shall
not be eligible for payments under section 1860D-7 or 1860D-8,
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 1860D-6(a)(2), the Administrator shall take into
account the subsidy payments under section 1860D-8.
``(3) Incorporation of certain medicare advantage 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 and part E);
``(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 MA-EFFS Rx 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.
``(5) Service area requirement.--For purposes of this part,
the Administrator shall designate at least 10 areas covering
the entire United States and shall be consistent with EFFS
regions established under section 1860E-1(a)(2).
``(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) have
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, 2004, 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) 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. 1860D-5. 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 MA-EFFS Rx plan 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 1860D-1(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 the
entity offering a MA-EFFS Rx plan or a PDP sponsor, in the
manner described in (and in coordination with) section
1851(c)(2).
``(4) Informing each enrollee before the beginning of each
year of the annual out-of-pocket threshold applicable to the
enrollee for that year under section 1860D-2(b)(4) at such
time.
``(c) MA-EFFS Rx Enrollee May Only Obtain Benefits Through the
Plan.--An individual who is enrolled under a MA-EFFS Rx plan 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 one
entity that offers a MA-EFFS Rx plan 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 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; and
``(B) shall seek to maximize the assumption of
financial risk by PDP sponsors or entities offering a
MA-EFFS Rx plan.
``(4) Reports.--The Administrator shall, in each annual
report to Congress under section 1809(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 MA-EFFS Rx plan.
``SEC. 1860D-6. SUBMISSION OF BIDS AND PREMIUMS.
``(a) Submission of Bids, Premiums, and Related Information.--
``(1) In general.--Each PDP sponsor shall submit to the
Administrator the information described in paragraph (2) in the
same manner as information is submitted by an organization
under section 1854(a)(1).
``(2) Information submitted.--The information described in
this paragraph is the following:
``(A) Coverage provided.--Information on the
qualified prescription drug coverage to be provided.
``(B) Actuarial value.--Information on the actuarial
value of the coverage.
``(C) Bid and premium.--Information on the bid and
the premium for the coverage, including an actuarial
certification of--
``(i) the actuarial basis for such bid and
premium;
``(ii) the portion of such bid and premium
attributable to benefits in excess of standard
coverage;
``(iii) the reduction in such bid resulting
from the reinsurance subsidy payments provided
under section 1860D-8(a)(2); and
``(iv) the reduction in such premium
resulting from the direct and reinsurance
subsidy payments provided under section 1860D-
8.
``(D) Additional information.--Such other information
as the Administrator may require to carry out this
part.
``(3) Review of information; negotiation and approval of
premiums.--
``(A) In general.--Subject to subparagraph (B), the
Administrator shall review the information filed under
paragraph (2) for the purpose of conducting
negotiations under section 1860D-4(b)(2) (relating to
using OPM-like authority under the FEHBP). The
Administrator, using the information provided
(including the actuarial certification under paragraph
(2)(C)) shall approve the premium submitted under this
subsection only if the premium accurately reflects both
(i) the actuarial value of the benefits provided, and
(ii) the 73 percent average subsidy provided under
section 1860D-8 for the standard benefit. The
Administrator shall apply actuarial principles to
approval of a premium under this part in a manner
similar to the manner in which those principles are
applied in establishing the monthly part B premium
under section 1839.
``(B) Exception.--In the case of a plan described in
section 1851(a)(2)(C), the provisions of subparagraph
(A) shall not apply and the provisions of paragraph
(5)(B) of section 1854(a), prohibiting the review,
approval, or disapproval of amounts described in such
paragraph, shall apply to the negotiation and rejection
of the monthly bid amounts and proportion referred to
in subparagraph (A).
``(b) Uniform Bid and Premium.--
``(1) In general.--The bid and premium for a prescription
drug plan under this section may not vary among enrollees 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 1860D-1(c)(2)(B).
``(c) Collection.--
``(1) Beneficiary's option of payment through withholding
from social security payment or 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 under this part to the sponsor
through withholding from benefit payments in the manner
provided under section 1840 with respect to monthly premiums
under section 1839 or through an electronic funds transfer
mechanism (such as automatic charges of an account at a
financial institution or a credit or debit card account) or
otherwise. All premium payments that are withheld under this
paragraph shall be credited to the Medicare Prescription Drug
Trust Fund and shall be paid to the PDP sponsor involved.
``(2) Offsetting.--Reductions in premiums for coverage under
parts A and B as a result of a selection of a MA-EFFS Rx plan
may be used to reduce the premium otherwise imposed under
paragraph (1).
``(d) Acceptance of Reference Premium 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 1860D-7 and resides in the area, the PDP sponsor
of any prescription drug plan offered in the area (and any
entity offering a MA-EFFS Rx plan in the area) shall accept the
reference premium amount (under paragraph (3)) 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.
``(3) Reference premium amount defined.--For purposes of this
subsection, the term `reference premium 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 plan's PDP premium; or
``(ii) provides alternative prescription drug
coverage the actuarial value of which is
greater than that of standard coverage, the
plan's PDP premium multiplied by the ratio of
(I) the actuarial value of standard coverage,
to (II) the actuarial value of the alternative
coverage;
``(B) an EFFS plan, the EFFS monthly prescription
drug beneficiary premium (as defined in section 1860E-
4(a)(3)(B)); or
``(C) a Medicare Advantage, the Medicare Advantage
monthly prescription drug beneficiary premium (as
defined in section 1854(b)(2)(B)).
For purposes of subparagraph (A), the term `PDP premium' means,
with respect to a prescription drug plan, the premium amount
for enrollment under the plan under this part (determined
without regard to any low-income subsidy under section 1860D-7
or any late enrollment penalty under section 1860D-1(c)(2)(B)).
``SEC. 1860D-7. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME
INDIVIDUALS.
``(a) Income-Related Subsidies for Individuals With Income Below 150
Percent of Federal Poverty Level.--
``(1) Full premium subsidy and reduction of cost-sharing for
individuals with income below 135 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 135 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 1860D-2(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 for individuals with
income above 135, but below 150 percent, of federal poverty
level.--In the case of a subsidy eligible individual who is
determined to have income that exceeds 135 percent, but does
not exceed 150 percent, of the Federal poverty level, the
individual is entitled under this section to 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 135 percent of such level to 0
percent of such amount for individuals with incomes at 150
percent of such level.
``(3) Construction.--Nothing in this section shall be
construed as preventing a PDP sponsor or entity offering a MA-
EFFS Rx plan 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 150 percent of the
Federal poverty line; and
``(iii) meets the resources requirement
described in subparagraph (D) .
``(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) Resource standard applied to be based on twice
ssi resource standard.--The resource requirement of
this subparagraph is that an individual's resources (as
determined under section 1613 for purposes of the
supplemental security income program) do not exceed--
``(i) for 2006 twice the maximum amount of
resources that an individual may have and
obtain benefits under that program; and
``(ii) for a subsequent year the resource
limitation established under this clause for
the previous year increased by the annual
percentage increase in the consumer price index
(all items; U.S. city average) as of September
of such previous year.
Any resource limitation established under clause (ii)
that is not a multiple of $10 shall be rounded to the
nearest multiple of $10.
``(E) 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).
``(F) Treatment of conforming medigap policies.--For
purposes of this section, the term `qualified
prescription drug coverage' includes a medicare
supplemental policy described in section 1860D-8(b)(4).
``(5) Indexing dollar amounts.--
``(A) For 2007.--The dollar amounts applied under
paragraphs (1)(B) for 2007 shall be the dollar amounts
specified in such paragraph increased by the annual
percentage increase described in section 1860D-2(b)(5)
for 2007.
``(B) For subsequent years.--The dollar amounts
applied under paragraph (1)(B) for a year after 2007
shall be the amounts (under this paragraph) applied
under paragraph (1)(B) for the preceding year increased
by the annual percentage increase described in section
1860D-2(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 premium amount (as defined in paragraph (2)) for
qualified prescription drug coverage offered by the
prescription drug plan or the MA-EFFS Rx plan in which the
individual is enrolled.
``(2) Benchmark premium amount defined.--For purposes of this
subsection, the term `benchmark premium 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 of which is equivalent to that
of standard coverage), the premium 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 1860D-1(c)(2)(B)); or
``(ii) provides alternative prescription drug
coverage the actuarial value of which is
greater than that of standard coverage, the
premium 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 MA-EFFS Rx plan, the portion of the premium
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 subsection (a)(1)(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),
the PDP sponsor or entity offering a MA-EFFS Rx plan may not
charge more than $5 per prescription.
``(3) Application of indexing rules.--The provisions of
subsection (a)(5) 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).
``(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 MA-EFFS Rx plan--
``(1) the Administrator provides for a notification of the
PDP sponsor or the entity offering the MA-EFFS Rx plan involved
that the individual is eligible for a subsidy and the amount of
the subsidy under subsection (a);
``(2) the sponsor or entity 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 entity 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 consistent with section 1935(d)(1).
``(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. 1860D-8. 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 73 percent, to reduce
adverse selection among prescription drug plans and MA-EFFS Rx plans,
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 enrollee enrolled
for a month in a prescription drug plan or a MA-EFFS Rx plan, a
direct subsidy equal to 43 percent of the national average
monthly bid amount (computed under subsection (g)) for that
month.
``(2) Subsidy through reinsurance.--In the case of an
enrollee enrolled for a month in a prescription drug plan or a
MA-EFFS Rx plan, the reinsurance payment amount (as defined in
subsection (c)), which in the aggregate is 30 percent of the
total payments made by qualifying entities for standard
coverage under the respective plan, for excess costs incurred
in providing qualified prescription drug coverage--
``(A) for enrollees with a prescription drug plan
under this part; and
``(B) for enrollees with a MA-EFFS Rx plan.
``(3) Employer and union flexibility.--In the case of an
individual who is a participant or beneficiary in a qualified
retiree prescription drug plan (as defined in subsection
(f)(1)) and who is not enrolled in a prescription drug plan or
in a MA-EFFS Rx plan, the special subsidy payments under
subsection (f)(3).
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. In applying the
percentages under paragraphs (1) and (2), there shall be taken into
account under the respective paragraphs the portion of the employer and
union special subsidy payments under subsection (f)(3) that reflect
payments that would have been made under the respective paragraphs if
such paragraphs had applied to qualified retiree prescription drug
plans instead of paragraph (3).
``(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) An entity that offers a MA-EFFS Rx plan.
``(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
paragraph (5)) for a coverage year (as defined in subsection
(h)(2)) is equal to the sum of the following:
``(A) Reinsurance between initial reinsurance
threshold and the initial coverage limit.--For the
portion of the individual's gross covered prescription
drug costs (as defined in paragraph (3)) for the year
that exceeds the initial reinsurance threshold
specified in paragraph (4), but does not exceed the
initial coverage limit specified in section 1860D-
2(b)(3), an amount equal to 20 percent of the allowable
costs (as defined in paragraph (2)) attributable to
such gross covered prescription drug costs.
``(B) Reinsurance above annual out-of-pocket
threshold.--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
1860D-2(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 discounts, chargebacks, and 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) Initial reinsurance threshold.--The initial reinsurance
threshold specified in this paragraph--
``(A) for 2006, is equal to $1,000; or
``(B) for a subsequent year, is equal to the payment
threshold specified in this paragraph for the previous
year, increased by the annual percentage increase
described in section 1860D-2(b)(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.
``(5) Qualifying covered individual defined.--For purposes of
this subsection, the term `qualifying covered individual' means
an individual who--
``(A) is enrolled with a prescription drug plan under
this part; or
``(B) is enrolled with a MA-EFFS Rx plan.
``(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 (and under subsection (f)(3) insofar
as such payments reflect payments that would have been
made under such subsections if such subsections had
applied to qualified retiree prescription drug plans
instead of subsections (a)(3) and (f)(3)) 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) Rules Relating to Qualified Retiree Prescription Drug Plan.--
``(1) Definition.--For purposes of this section, the term
`qualified retiree prescription drug plan' means employment-
based retiree health coverage (as defined in paragraph (4)(A))
if, with respect to an individual who is a participant or
beneficiary under such coverage and is eligible to be enrolled
in a prescription drug plan or a MA-EFFS Rx plan under this
part, the following requirements are met:
``(A) Actuarial equivalence to standard coverage.--
The Administrator determines (based on an actuarial
analysis by the Administrator) that coverage provides
at least the same actuarial value as standard coverage.
Such determination may be made on an annual basis.
``(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 1860D-1(c)(2)(D).
``(2) Limitation on benefit eligibility.--No payment shall be
provided under this section with respect to a participant or
beneficiary in a qualified retiree prescription drug plan
unless the individual is--
``(A) is covered under the plan; and
``(B) is eligible to obtain qualified prescription
drug coverage under section 1860D-1 but did not elect
such coverage under this part (either through a
prescription drug plan or through a MA-EFFS Rx plan).
``(3) Employer and union special subsidy amounts.--
``(A) In general.--For purposes of subsection (a),
the special subsidy payment amount under this paragraph
for a qualifying covered retiree(as defined in
paragraph (6)) for a coverage year (as defined in
subsection (h)) enrolled in a qualifying entity
described in subsection (b)(3) under a qualified
retiree prescription drug plan is, for the portion of
the individual's gross covered prescription drug costs
for the year that exceeds the deductible amount
specified in subparagraph (B), an amount equal to,
subject to subparagraph (D), 28 percent of the
allowable costs attributable to such gross covered
prescription drug costs, but only to the extent such
costs exceed the deductible under subparagraph (B) and
do not exceed the cost limit under such subparagraph in
the case of any such individual for the plan year.
``(B) Deductible and cost limit applicable.--Subject
to subparagraph (C)--
``(i) the deductible under this subparagraph
is equal to $250 for plan years that end in
2006; and
``(ii) the cost limit under this subparagraph
is equal to $5,000 for plan years that end in
2006.
``(C) Indexing.--The deductible and cost limit
amounts specified in subparagraphs (B) for a plan year
that ends after 2006 shall be adjusted in the same
manner as the annual deductible under section 1860D-
2(b)(1) is annually adjusted under such section.
``(D) Adjustment contingency.--The Secretary may
adjust the percentage specified in subparagraph (A)
with respect to plan years that end in a year in a
manner so that the aggregate expenditures in the year
under this section are the same as the aggregate
expenditures that would have been made under this
section (taking into account the effect of any
adjustment under subsection (d)(1)(B)) if paragraphs
(1) and (2) of subsection (a) had applied to qualified
prescription drug coverage instead of this paragraph
and subsection (a)(3).
``(4) Related 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 eligible to enroll in a prescription
drug plan or MA-EFFS Rx plan under this part (or for
such individuals and their spouses and dependents)
under a group health plan (including such a plan that
is established or maintained under or pursuant to one
or more collective bargaining agreements) based on
their status as retired participants in such plan.
``(B) Qualifying covered retiree.--The term
`qualifying covered retiree' means an individual who is
eligible to obtain qualified prescription drug coverage
under section 1860D-1 but did not elect such coverage
under this part (either through a prescription drug
plan or through a MA-EFFS Rx plan) but is covered under
a qualified retiree prescription drug plan.
``(C) Sponsor.--The term `sponsor' means a plan
sponsor, as defined in section 3(16)(B) of the Employee
Retirement Income Security Act of 1974, except that, in
the case of a single-employer plan (as defined in
section 3(41) of such Act), such term means the
employer of the plan participants if such employer has
been designated as the plan sponsor in all prior
summary plan descriptions and annual reports issued
with respect to the plan under part 1 of subtitle B of
title I of such Act.
``(5) Construction.--Nothing in this subsection shall be
construed as--
``(A) precluding an individual who is covered under
employment-based retiree health coverage from enrolling
in a prescription drug plan or in a MA-EFFS plan;
``(B) precluding such employment-based retiree health
coverage or an employer or other person from paying all
or any portion of any premium required for coverage
under such a prescription drug plan or MA-EFFS plan on
behalf of such an individual; or
``(C) preventing such employment-based retiree health
coverage from providing coverage for retirees--
``(i) who are covered under a qualified
retiree prescription plan that is better than
standard coverage; or
``(ii) who are not covered under a qualified
retiree prescription plan but who are enrolled
in a prescription drug plan or a MA-EFFS Rx
plan, that is supplemental to the benefits
provided under such prescription drug plan or
MA-EFFS Rx plan, except that any such
supplemental coverage (not including payment of
any premium referred to in subparagraph (B))
shall be treated as primary coverage to which
section 1862(b)(2)(A)(i) is deemed to apply.
``(g) Computation of National Average Monthly Bid Amount.--
``(1) In general.--For each year (beginning with 2006) the
Administrator shall compute a national average monthly bid
amount equal to the average of the benchmark bid amounts for
each prescription drug plan and for each MA-EFFS Rx plan (as
computed under paragraph (2), but excluding plans described in
section 1851(a)(2)(C))) adjusted under paragraph (4) to take
into account reinsurance payments.
``(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 of which is equivalent to that
of standard coverage), the PDP bid; or
``(ii) provides alternative prescription drug
coverage the actuarial value of which is
greater than that of standard coverage, the PDP
bid multiplied by the ratio of (I) the
actuarial value of standard coverage, to (II)
the actuarial value of the alternative
coverage; or
``(B) a MA-EFFS Rx plan, the portion of the bid
amount that is attributable to statutory drug benefits
(described in section 1853(a)(1)(A)(ii)(II)).
For purposes of subparagraph (A), the term `PDP bid' means,
with respect to a prescription drug plan, the bid amount for
enrollment under the plan under this part (determined without
regard to any low-income subsidy under section 1860D-7 or any
late enrollment penalty under section 1860D-1(c)(2)(B)).
``(3) Weighted average.--
``(A) In general.--The monthly national average
monthly bid amount computed under paragraph (1) shall
be a weighted average, with the weight for each plan
being equal to the average number of beneficiaries
enrolled under such plan in the previous year.
``(B) Special rule for 2006.--For purposes of
applying this subsection for 2006, the Administrator
shall establish procedures for determining the weighted
average under subparagraph (A) for 2005.
``(4) Adjustment to add back in value of reinsurance
subsidies.--The adjustment under this paragraph, to take into
account reinsurance payments under subsection (c) making up 30
percent of total payments, is such an adjustment as will make
the national average monthly bid amount represent represent 100
percent, instead of representing 70 percent, of average
payments under this part.
``(h) Coverage Year Defined.--For purposes of this section, 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. 1860D-9. 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 1860D-7 (relating to
low-income subsidy payments);
``(B) payments under section 1860D-8 (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. 1860D-10. DEFINITIONS; APPLICATION TO MEDICARE ADVANTAGE AND
EFFS PROGRAMS; 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 1860D-2(f).
``(2) Initial coverage limit.--The term `initial coverage
limit' means such limit as established under section 1860D-
2(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 1860D-9(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-4(b);
``(B) provides qualified prescription drug coverage;
and
``(C) meets the applicable requirements of the
section 1860D-3 for a prescription drug plan.
``(6) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' is defined in section
1860D-2(a).
``(7) Standard coverage.--The term `standard coverage' is
defined in section 1860D-2(b).
``(b) Offer of Qualified Prescription Drug Coverage Under Medicare
Advantage and EFFS Programs.--
``(1) As part of medicare advantage plan.--Medicare Advantage
organizations are required to offer Medicare Advantage plans
that include qualified prescription drug coverage under part C
pursuant to section 1851(j).
``(2) As part of effs plan.--EFFS organizations are required
to offer EFFS plans that include qualified prescription drug
coverage under part E pursuant to section 1860E-2(d).
``(c) Application of Part C 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 Advantage or other 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-4(b); and
``(4) any reference to part C included a reference to this
part.
``(d) Report on Pharmacy Services Provided to Nursing Facility
Patients.--
``(1) Review.--Within 6 months after the date of the
enactment of this section, the Secretary shall review the
current standards of practice for pharmacy services provided to
patients in nursing facilities.
``(2) Evaluations and recommendations.--Specifically in the
review under paragraph (1), the Secretary shall--
``(A) assess the current standards of practice,
clinical services, and other service requirements
generally utilized for pharmacy services in the long-
term care setting;
``(B) evaluate the impact of those standards with
respect to patient safety, reduction of medication
errors and quality of care; and
``(C) recommend (in the Secretary's report under
paragraph (3)) necessary actions and appropriate
reimbursement to ensure the provision of prescription
drugs to medicare beneficiaries residing in nursing
facilities in a manner consistent with existing patient
safety and quality of care standards under applicable
State and Federal laws.
``(3) Report.--The Secretary shall submit a report to the
Congress on the Secretary's findings and recommendations under
this subsection, including a detailed description of the
Secretary's plans to implement this part in a manner consistent
with applicable State and Federal laws designed to protect the
safety and quality of care of nursing facility patients.''.
(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 F 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, 2005, 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
MEDICARE ADVANTAGE AND ENHANCED FEE-FOR-SERVICE
(EFFS) PROGRAM.
(a) Medicare Advantage.--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 and Subsidies.--
``(1) Offering of qualified prescription drug coverage.--A
Medicare Advantage organization on and after January 1, 2006--
``(A) may not offer a Medicare Advantage plan
described in section 1851(a)(2)(A) in an area unless
either that plan (or another Medicare Advantage plan
offered by the organization in that area) includes
qualified prescription drug coverage; and
``(B) may not offer the prescription drug coverage
(other than that required under parts A and B) to an
enrollee under a Medicare Advantage 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.
``(2) Requirement for election of part d coverage to obtain
qualified prescription drug coverage.--For purposes of this
part, an individual who has not elected qualified prescription
drug coverage under section 1860D-1(b) shall be treated as
being ineligible to enroll in a Medicare Advantage plan under
this part that offers such coverage.
``(3) Compliance with certain additional beneficiary
protections for prescription drug coverage.--With respect to
the offering of qualified prescription drug coverage by a
Medicare Advantage organization under this part on and after
January 1, 2006, the organization and plan shall meet the
requirements of subsections (a) through (d) of section 1860D-3
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 1860D-
6(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.
``(4) Availability of premium and cost-sharing subsidies.--In
the case of low-income individuals who are enrolled in a
Medicare Advantage plan that provides qualified prescription
drug coverage, premium and cost-sharing subsidies are provided
for such coverage under section 1860D-7.
``(5) Availability of direct and reinsurance subsidies to
reduce bids and premiums.--Medicare Advantage organizations are
provided direct and reinsurance subsidy payments for providing
qualified prescription drug coverage under this part under
section 1860D-8.
``(6) Consolidation of drug and non-drug premiums.--In the
case of a Medicare Advantage plan that includes qualified
prescription drug coverage, with respect to an enrollee in such
plan there shall be a single premium for both drug and non-drug
coverage provided under the plan.
``(7) Transition in initial enrollment period.--
Notwithstanding any other provision of this part, the annual,
coordinated election period under subsection (e)(3)(B) for 2006
shall be the 6-month period beginning with November 2005.
``(8) 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 1860D-2.
``(9) Special rules for private fee-for-service plans.-- With
respect to a Medicare Advantage plan described in section
1851(a)(2)(C) that offers qualified prescription drug
coverage--
``(A) Requirements regarding negotiated prices.--
Subsections (a)(1) and (d)(1) of section 1860D-2 shall
not be construed to require the plan to negotiate
prices or discounts but shall apply to the extent the
plan does so.
``(B) Modification of pharmacy participation
requirement.--If the plan provides access, without
charging additional copayments, to all pharmacies
without regard to whether they are participating
pharmacies in a network, section 1860D-3(c)(1)(A)(iii)
shall not apply to the plan.
``(C) Drug utilization management program not
required.--The requirements of section 1860D-3(d)(1)(A)
shall not apply to the plan.
``(D) Non-participating pharmacy disclosure
exception.--If the plan provides coverage for drugs
purchased from all pharmacies, without entering into
contracts or agreements with pharmacies to provide
drugs to enrollees covered by the plan, section 1860D-
3(d)(5) shall not apply to the plan.''.
(b) Application to EFFS Plans.--Subsection (d) of section 1860E-2, as
added by section 201(a), is amended to read as follows:
``(d) Availability of Prescription Drug Benefits and Subsidies.--
``(1) Offering of qualified prescription drug coverage.--An
EFFS organization--
``(A) may not offer an EFFS plan in an area unless
either that plan (or another EFFS plan offered by the
organization in that area) includes qualified
prescription drug coverage; and
``(B) may not offer the prescription drug coverage
(other than that required under parts A and B) to an
enrollee under an EFFS 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.
``(2) Requirement for election of part d coverage to obtain
qualified prescription drug coverage.--For purposes of this
part, an individual who has not elected qualified prescription
drug coverage under section 1860D-1(b) shall be treated as
being ineligible to enroll in an EFFS plan under this part that
offers such coverage.
``(3) Compliance with certain additional beneficiary
protections for prescription drug coverage.--With respect to
the offering of qualified prescription drug coverage by an EFFS
organization under this part, the organization and plan shall
meet the requirements of subsections (a) through (d) of section
1860D-3 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 1860D-
6(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.
``(4) Availability of premium and cost-sharing subsidies.--In
the case of low-income individuals who are enrolled in an EFFS
plan that provides qualified prescription drug coverage,
premium and cost-sharing subsidies are provided for such
coverage under section 1860D-7.
``(5) Availability of direct and reinsurance subsidies to
reduce bids and premiums.--EFFS organizations are provided
direct and reinsurance subsidy payments for providing qualified
prescription drug coverage under this part under section 1860D-
8.
``(6) Consolidation of drug and non-drug premiums.--In the
case of an EFFS plan that includes qualified prescription drug
coverage, with respect to an enrollee in such plan there shall
be a single premium for both drug and non-drug coverage
provided under the plan.
``(7) 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 1860D-2.''.
(c) 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 1860D-1.''; and
(2) in subsection (g)(1), by inserting ``and section 1860D-
1(c)(2)(B)'' after ``in this subsection''.
(d) Effective Date.--The amendments made by this section apply to
coverage provided on or after January 1, 2006.
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
1860D-7;
``(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 1860D-7).
``(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 1860D-7
(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) 2006 is 93-\1/3\ percent;
``(B) a subsequent year before 2021, is the phase-out
proportion for calendar quarters in the previous year
decreased by 6-\2/3\ percentage points; or
``(C) a year after 2020 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 MA-EFFS Rx plan under part C or E of such
title) and medical assistance for prescribed drugs under this
title, medical assistance shall continue to be provided under
this title (other than for copayment amounts specified in
section 1860D-7(a)(1)(B), notwithstanding section 1916) for
prescribed drugs to the extent payment is not made under the
prescription drug plan or MA-EFFS Rx 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 1860D-1.''.
(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 1860D-2(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) 2006, is equal to $25,000,000; 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 1860D-
2(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)''.
(e) Amendment to Best Price.--Section 1927(c)(1)(C)(i) (42 U.S.C.
1396r-8(c)(1)(C)(i)) is amended--
(1) by striking ``and'' at the end of subclause (III);
(2) by striking the period at the end of subclause (IV) and
inserting ``; and''; and
(3) by adding at the end the following new subclause:
``(V) any prices charged which are
negotiated by a prescription drug plan
under part D of title XVIII, by a MA-
EFFS Rx plan under part C or E of such
title with respect to covered
outpatient drugs, or by a qualified
retiree prescription drug plan (as
defined in section 1860D-8(f)(1)) with
respect to such drugs on behalf of
individuals entitled to benefits under
part A or enrolled under part B of such
title.''.
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, 2006, 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.
Nothing in this subsection shall be construed as preventing the
policy holder of a medicare supplemental policy issued before
January 1, 2006, from continuing to receive benefits under such
policy on and after such date.
``(2) Issuance of substitute policies for beneficiaries
enrolled with a plan 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 Prescription
Drug and Modernization Act of 2003, with respect to policies
issued to individuals who are enrolled in a plan under part D,
the changes in standards shall only provide for substituting
(for the benefit packages described in paragraph (2)(B)(ii)
that included coverage for prescription drugs) two benefit
packages that may provide for coverage of cost-sharing (other
than the prescription drug deductible) with respect to
qualified prescription drug coverage 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 under parts A and
B, 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 under parts A and B 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.''.
(b) NAIC Report to Congress on Medigap Modernization.--The Secretary
shall request the National Association of Insurance Commissioners to
submit to Congress, not later than 18 months after the date of the
enactment of this Act, a report that includes recommendations on the
modernization of coverage under the medigap program under section 1882
of the Social Security Act (42 U.S.C. 1395ss).
SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD ENDORSEMENT PROGRAM.
(a) In General.--Title XVIII is amended by inserting after section
1806 the following new sections:
``medicare prescription drug discount card endorsement program
``Sec. 1807. (a) Establishment of Program.--
``(1) In general.--The Secretary (or the Medicare Benefits
Administrator pursuant to section 1809(c)(3)(C)) shall
establish a program to endorse prescription drug discount card
programs (each such program referred to as an `endorsed
program') that meet the requirements of this section in order
to provide access to prescription drug discounts for medicare
beneficiaries throughout the United States. The Secretary shall
make available to medicare beneficiaries information regarding
endorsed programs under this section.
``(2) Limited period of operation.--The Secretary shall begin
the program under this section as soon as possible, but in no
case later than 90 days after the date of the enactment of this
section. The Secretary shall provide for an appropriate
transition and discontinuation of such program at the time
medicare prescription drug benefits first become available
under part D.
``(b) Requirements for Card Endorsement Program.--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, rebates, and other price concessions on prescription
drugs, including discounts negotiated with pharmacies and
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 program is operated
directly, or through arrangements with affiliated organization,
by an entity that has demonstrated experience and expertise in
operating such a program or a similar program.
``(6) Quality assurance.--Such operating entity has in place
adequate procedures for assuring quality service under the
program.
``(7) Enrollment fees.--The program may charge an annual
enrollment fee, but the amount of such annual fee may not
exceed $30. A State may pay some or all of the fee for
individuals residing in the State.
``(8) Confidentiality protections.--The program implements
policies and procedures to safeguard the use and disclosure of
program beneficiaries' individually identifiable health
information in a manner consistent with the Federal regulations
(concerning the privacy of individually identifiable health
information) promulgated under section 264(c) of the Health
Insurance Portability and Accountability Act of 1996.
``(9) Periodic reports to secretary.--The entity operating
the program shall submit to the Secretary periodic reports on
performance, utilization, finances, and such other matters as
the Secretary may specify.
``(10) 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.
The prices negotiated by a prescription drug discount card program
endorsed under this section 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).
``(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 prices and services of such
programs in a manner coordinated with the dissemination of
educational information on Medicare Advantage 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 and
disclosure (upon request) of the discounts and services
provided, the amount of dispensing fees recognized, and audits
under section 1860D-2(d)(3).
``(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) Sanctions for abusive practices.--The Secretary may
implement intermediate sanctions or may revoke the endorsement
of a program in the case 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. A
medicare beneficiary may change the endorsed program in which
the beneficiary is enrolled, but may not make such change until
the beneficiary has been enrolled in a program for a minimum
period of time specified by the Secretary.
``(d) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out this section.
``(e) Interim, Final Regulatory Authority.--In order to carry out
this section in a timely manner, the Secretary may promulgate
regulations that take effect on an interim basis, after notice and
pending opportunity for public comment.
``transitional prescription drug assistance program for low-income
beneficiaries
``Sec. 1807A. (a) Purpose.--The purpose of this section is to provide
low-income medicare beneficiaries with incomes below 150 percent of the
Federal poverty level immediate assistance in the purchase of covered
outpatient prescription drugs during the period before the program
under part D becomes effective.
``(b) Appropriations.--For the purpose of carrying out this section,
there is appropriated, out of any money in the Treasury not otherwise
appropriated--
``(1) for fiscal year 2004, $2,000,000,000; and
``(2) for fiscal year 2005, $3,000,000,000.
``(c) Eligibility.--
``(1) In general.--The Secretary shall establish eligibility
standards consistent with this subsection.
``(2) Specifics.--In no case shall an individual be eligible
for assistance under this section unless the individual--
``(A) is entitled to benefits under part A or
enrolled under part B;
``(B) has income that is at or below 150 percent of
the Federal poverty line;
``(C) meets the resources requirement described in
section 1905(p)(1)(C);
``(D) is enrolled under a prescription drug discount
card program under section 1807 (or under an
alternative program authorized under subsection
(d)(2)); and
``(E) is not eligible for coverage of, or assistance
for, outpatient prescription drugs under any of the
following:
``(i) A medicaid plan under title XIX
(including under any waiver approved under
section 1115).
``(ii) Enrollment under a group health plan
or health insurance coverage.
``(iii) Enrollment under a medicare
supplemental insurance policy.
``(iv) Chapter 55 of title 10, United States
Code (relating to medical and dental care for
members of the uniformed services).
``(v) Chapter 17 of title 38, United States
Code (relating to Veterans' medical care).
``(vi) Enrollment under a plan under chapter
89 of title 5, United States Code (relating to
the Federal employees' health benefits
program).
``(vii) The Indian Health Care Improvement
Act (25 U.S.C. 1601 et seq.).
``(d) Form of Assistance.--
``(1) In general.--Subject to paragraph (2), the assistance
under this section to an eligible individual shall be in such
form as the Secretary shall specify, including the use of a
debit card mechanism to pay for drugs purchased through the use
of the prescription drug discount card program to eligible
individuals who are enrolled in such program.
``(2) Through alternative state program.--A State may apply
to the Secretary for authorization to provide the assistance
under this section to an eligible individual through a State
pharmaceutical assistance program or private program of
pharmaceutical assistance. The Secretary shall not authorize
the use of such a program unless the Secretary finds that the
program--
``(A) was in existence before the date of the
enactment of this section; and
``(B) is reasonably designed to provide for
pharmaceutical assistance for a number of individuals,
and in a scope, that is not less than the number of
individuals, and minimum required amount, that would
occur if the provisions of this paragraph had not
applied in the State.
``(3) Relationship to discounts.--The assistance provided
under this section is in addition to the discount otherwise
available to individuals enrolled in prescription drug discount
card programs who are not eligible individuals.
``(4) Limitation on assistance.--
``(A) In general.--The assistance under this section
for an eligible individual shall be limited to
assistance--
``(i) for covered outpatient drugs (as
defined for purposes of part D) and for
enrollment fees imposed under prescription drug
discount card programs; and
``(ii) for expenses incurred--
``(I) on and after the date the
individual is both enrolled in the
prescription drug discount card program
and determined to be an eligible
individual under this section; and
``(II) before the date benefits are
first available under the program under
part D.
``(B) Authority.--The Secretary shall take such steps
as may be necessary to assure compliance with the
expenditure limitations described in subsection (b).
``(e) Payment of Federal Subsidy to Sponsors.--
``(1) In general.--Insofar as assistance is provided under
this section through programs under section 1807, the Secretary
shall make payment (within the amounts under subsection (b),
less the administrative costs relating to determinations of
eligibility) to the sponsor of the prescription drug discount
card program (or to a State or other entity operating an
alternative program under subsection (d)(2)) in which an
eligible individual is enrolled of the amount of the assistance
provided by the sponsor pursuant to this section.
``(2) Periodic payments.--Payments under this subsection
shall be made on a monthly or other periodic installment basis,
based upon estimates of the Secretary and shall be reduced or
increased to the extent of any overpayment or underpayment
which the Secretary determines was made under this section for
any prior period and with respect to which adjustment has not
already been made under this paragraph.
``(f) Definitions.--For purposes of this section:
``(1) Eligible individual.--The term `eligible individual'
means an individual who is determined by a State to be eligible
for assistance under this section.
``(2) Prescription drug discount card program.--The term
`prescription drug discount card program' means such a program
that is endorsed under section 1807.
``(3) Sponsor.--The term `sponsor' means the sponsor of a
prescription drug discount card program, or, in the case of an
alternative program authorized under subsection (d)(2), the
State or other entity operating the program.''.
(b) Conforming Amendment.--Section 1927(c)(1)(C)(i)(V) (42 U.S.C.
1396r-8(c)(1)(C)(i)(V)), as added by section 103(e), is amended by
striking ``or by a qualified retiree prescription drug plan (as defined
in section 1860D-8(f)(1))'' and inserting ``by a qualified retiree
prescription drug plan (as defined in section 1860D-8(f)(1)), or by a
prescription drug discount card program endorsed under section 1807''.
SEC. 106. DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF CARRYING OUT
MEDICARE CATASTROPHIC PRESCRIPTION DRUG PROGRAM.
(a) In General.--Subsection (l) of section 6103 of the Internal
Revenue Code of 1986 (relating to disclosure of returns and return
information for purposes other than tax administration) is amended by
adding at the end the following new paragraph:
``(19) Disclosure of return information for purposes of
carrying out medicare catastrophic prescription drug program.--
``(A) In general.--The Secretary may, upon written
request from the Secretary of Health and Human Services
under section 1860D-2(b)(4)(E)(i) of the Social
Security Act, disclose to officers and employees of the
Department of Health and Human Services with respect to
a specified taxpayer for the taxable year specified by
the Secretary of Health and Human Services in such
request--
``(i) the taxpayer identity information with
respect to such taxpayer, and
``(ii) the adjusted gross income of such
taxpayer for the taxable year (or, if less, the
income threshold limit specified in section
1860D-2(b)(4)(D)(ii) for the calendar year
specified by such Secretary in such request).
``(B) Specified taxpayer.--For purposes of this
paragraph, the term `specified taxpayer' means any
taxpayer who--
``(i) is identified by the Secretary of
Health and Human Services in the request
referred to in subparagraph (A), and
``(ii) either--
``(I) has an adjusted gross income
for the taxable year referred to in
subparagraph (A) in excess of the
income threshold specified in section
1860D-2(b)(4)(D)(ii) of such Act for
the calendar year referred to in such
subparagraph, or
``(II) is identified by such
Secretary under subparagraph (A) as
being an individual who elected to use
more recent information under section
1860D-2(b)(4)(D)(v) of such Act.
``(C) Joint returns.--In the case of a joint return,
the Secretary shall, for purposes of applying this
paragraph, treat each spouse as a separate taxpayer
having an adjusted gross income equal to one-half of
the adjusted gross income determined with respect to
such return.
``(D) Restriction on use of disclosed information.--
Return information disclosed under subparagraph (A) may
be used by officers and employees of the Department of
Health and Human Services only for the purpose of
administering the prescription drug benefit under title
XVIII of the Social Security Act. Such officers and
employees may disclose the annual out-of-pocket
threshold which applies to an individual under such
part to the entity that offers the plan referred to in
section 1860D-2(b)(4)(E)(ii) of such Act in which such
individual is enrolled. Such sponsor may use such
information only for purposes of administering such
benefit.''.
(b) Confidentiality.--Paragraph (3) of section 6103(a) of such Code
is amended by striking ``or (16)'' and inserting ``(16), or (19)''.
(c) Procedures and Recordkeeping Related to Disclosures.--Subsection
(p)(4) of section 6103 of such Code is amended by striking ``any other
person described in subsection (l)(16) or (17)'' each place it appears
and inserting ``any other person described in subsection (l)(16), (17),
or (19)''.
(d) Unauthorized Disclosure.--Paragraph (2) of section 7213(a) of
such Code is amended by striking ``or (16)'' and inserting ``(16), or
(19)''.
(e) Unauthorized Inspection.--Subparagraph (B) of section 7213A(a)(1)
of such Code is amended by inserting ``or (19)'' after ``subsection
(l)(18)''.
SEC. 107. STATE PHARMACEUTICAL ASSISTANCE TRANSITION COMMISSION.
(a) Establishment.--
(1) In general.--There is established, as of the first day of
the third month beginning after the date of the enactment of
this Act, a State Pharmaceutical Assistance Transition
Commission (in this section referred to as the ``Commission'')
to develop a proposal for addressing the unique transitional
issues facing State pharmaceutical assistance programs, and
program participants, due to the implementation of the medicare
prescription drug program under part D of title XVIII of the
Social Security Act.
(2) Definitions.--For purposes of this section:
(A) State pharmaceutical assistance program
defined.--The term ``State pharmaceutical assistance
program'' means a program (other than the medicaid
program) operated by a State (or under contract with a
State) that provides as of the date of the enactment of
this Act assistance to low-income medicare
beneficiaries for the purchase of prescription drugs.
(B) Program participant.--The term ``program
participant'' means a low-income medicare beneficiary
who is a participant in a State pharmaceutical
assistance program.
(b) Composition.--The Commission shall include the following:
(1) A representative of each governor of each State that the
Secretary identifies as operating on a statewide basis a State
pharmaceutical assistance program that provides for eligibility
and benefits that are comparable or more generous than the low-
income assistance eligibility and benefits offered under part D
of title XVIII of the Social Security Act.
(2) Representatives from other States that the Secretary
identifies have in operation other State pharmaceutical
assistance programs, as appointed by the Secretary.
(3) Representatives of organizations that have an inherent
interest in program participants or the program itself, as
appointed by the Secretary but not to exceed the number of
representatives under paragraphs (1) and (2).
(4) Representatives of Medicare Advantage organizations and
other private health insurance plans, as appointed by the
Secretary.
(5) The Secretary (or the Secretary's designee) and such
other members as the Secretary may specify
The Secretary shall designate a member to serve as chair of the
Commission and the Commission shall meet at the call of the chair.
(c) Development of Proposal.--The Commission shall develop the
proposal described in subsection (a) in a manner consistent with the
following principles:
(1) Protection of the interests of program participants in a
manner that is the least disruptive to such participants and
that includes a single point of contact for enrollment and
processing of benefits.
(2) Protection of the financial and flexibility interests of
States so that States are not financially worse off as a result
of the enactment of this title.
(3) Principles of medicare modernization provided under title
II of this Act.
(d) Report.--By not later than January 1, 2005, the Commission shall
submit to the President and the Congress a report that contains a
detailed proposal (including specific legislative or administrative
recommendations, if any) and such other recommendations as the
Commission deems appropriate.
(e) Support.--The Secretary shall provide the Commission with the
administrative support services necessary for the Commission to carry
out its responsibilities under this section.
(f) Termination.--The Commission shall terminate 30 days after the
date of submission of the report under subsection (d).
TITLE II--MEDICARE ENHANCED FEE-FOR-SERVICE AND MEDICARE ADVANTAGE
PROGRAMS; MEDICARE COMPETITION
SEC. 200. MEDICARE MODERNIZATION AND REVITALIZATION.
This title provides for--
(1) establishment of the medicare enhanced fee-for-service
(EFFS) program under which medicare beneficiaries are provided
access to a range of enhanced fee-for-service (EFFS) plans that
may use preferred provider networks to offer an enhanced range
of benefits;
(2) establishment of a Medicare Advantage program that offers
improved managed care plans with coordinated care; and
(3) competitive bidding, in the style of the Federal
Employees Health Benefits program (FEHBP), among enhanced fee-
for-service plans and Medicare Advantage plans in order to
promote greater efficiency and responsiveness to medicare
beneficiaries.
Subtitle A--Medicare Enhanced Fee-for-Service Program
SEC. 201. ESTABLISHMENT OF ENHANCED FEE-FOR-SERVICE (EFFS) PROGRAM
UNDER MEDICARE.
(a) In General.--Title XVIII, as amended by section 101(a), is
amended--
(1) by redesignating part E as part F; and
(2) by inserting after part D the following new part:
``Part E--Enhanced Fee-for-Service Program
``offering of enhanced fee-for-service plans throughout the united
states
``Sec. 1860E-1. (a) Establishment of Program.--
``(1) In general.--The Administrator shall establish under
this part beginning January 1, 2006, an enhanced fee-for-
service program under which enhanced fee-for-service plans (as
defined in subsection (b)) are offered to EFFS-eligible
individuals (as so defined) in EFFS regions throughout the
United States.
``(2) EFFS regions.--For purposes of this part the
Administrator shall establish EFFS regions throughout the
United States by dividing the entire United States into at
least 10 such regions. Before establishing such regions, the
Administrator shall conduct a market survey and analysis,
including an examination of current insurance markets, to
determine how the regions should be established. The regions
shall be established in a manner to take into consideration
maximizing full access for all EFFS-eligible individuals,
especially those residing in rural areas.
``(b) Definitions.--For purposes of this part:
``(1) EFFS organization.--The `EFFS organization' means an
entity that the Administrator certifies as meeting the
requirements and standards applicable to such organization
under this part.
``(2) Enhanced fee-for-service plan; effs plan.--The terms
`enhanced fee-for-service plan' and `EFFS plan' mean health
benefits coverage offered under a policy, contract, or plan by
an EFFS organization pursuant to and in accordance with a
contract pursuant to section 1860E-4(c), but only if the plan
provides either fee-for-service coverage described in the
following subparagraph (A) or preferred provider coverage
described in the following subparagraph (B):
``(A) Fee-for-service coverage.--The plan--
``(i) reimburses hospitals, physicians, and
other providers at a rate determined by the
plan on a fee-for-service basis without placing
the provider at financial risk;
``(ii) does not vary such rates for such a
provider based on utilization relating to such
provider; and
``(iii) does not restrict the selection of
providers among those who are lawfully
authorized to provide the covered services and
agree to accept the terms and conditions of
payment established by the plan.
``(B) Preferred provider coverage.--The plan--
``(i) has a network of providers that have
agreed to a contractually specified
reimbursement for covered benefits with the
organization offering the plan; and
``(ii) provides for reimbursement for all
covered benefits regardless of whether such
benefits are provided within such network of
providers.
``(3) EFFS eligible individual.--The term `EFFS eligible
individual' means an eligible individual described in section
1851(a)(3).
``(4) EFFS region.--The term `EFFS region' means a region
established under subsection (a)(2).
``(c) Application of Certain Eligibility, Enrollment, Etc.
Requirements.--The provisions of section 1851 (other than subsection
(h)(4)(A)) shall apply to EFFS plans offered by an EFFS organization in
an EFFS region, including subsection (g) (relating to guaranteed issue
and renewal).
``offering of enhanced fee-for-service (effs) plans
``Sec. 1860E-2. (a) Plan Requirements.--No EFFS plan may be offered
under this part in an EFFS region unless the requirements of this part
are met with respect to the plan and EFFS organization offering the
plan.
``(b) Available to All EFFS Beneficiaries in the Entire Region.--With
respect to an EFFS plan offered in an EFFS region--
``(1) In general.--The plan must be offered to all EFFS-
eligible individuals residing in the region.
``(2) Assuring access to services.--The plan shall comply
with the requirements of section 1852(d)(4).
``(c) Benefits.--
``(1) In general.--Each EFFS plan shall provide to members
enrolled in the plan under this part benefits, through
providers and other persons that meet the applicable
requirements of this title and part A of title XI--
``(A) for the items and services described in section
1852(a)(1);
``(B) that are uniform for the plan for all EFFS
eligible individuals residing in the same EFFS region;
``(C) that include a single deductible applicable to
benefits under parts A and B and include a catastrophic
limit on out-of-pocket expenditures for such covered
benefits; and
``(D) that include benefits for prescription drug
coverage for each enrollee who elects under part D to
be provided qualified prescription drug coverage
through the plan.
``(2) Disapproval authority.--The Administrator shall not
approve a plan of an EFFS organization if the Administrator
determines (pursuant to the last sentence of section
1852(b)(1)(A)) that the benefits are designed to substantially
discourage enrollment by certain EFFS eligible individuals with
the organization.
``(d) Outpatient Prescription Drug Coverage.--For rules concerning
the offering of prescription drug coverage under EFFS plans, see the
amendment made by section 102(b) of the Medicare Prescription Drug and
Modernization Act of 2003.
``(e) Other Additional Provisions.--The provisions of section 1852
(other than subsection (a)(1)) shall apply under this part to EFFS
plans. For the application of chronic care improvement provisions, see
the amendment made by section 722(b).
``submission of bids; beneficiary savings; payment of plans
``Sec. 1860E-3. (a) Submission of Bids.--
``(1) Requirement.--
``(A) EFFS monthly bid amount.--For each year
(beginning with 2006), an EFFS organization shall
submit to the Administrator an EFFS monthly bid amount
for each EFFS plan offered in each region. Each such
bid is referred to in this section as the `EFFS monthly
bid amount'.
``(B) Form.--Such bid amounts shall be submitted for
each such plan and region in a form and manner and time
specified by the Administrator, and shall include
information described in paragraph (3)(A).
``(2) Uniform bid amounts.--Each EFFS monthly bid amount
submitted under paragraph (1) by an EFFS organization under
this part for an EFFS plan in an EFFS region may not vary among
EFFS eligible individuals residing in the EFFS region involved.
``(3) Submission of bid amount information by effs
organizations.--
``(A) Information to be submitted.--The information
described in this subparagraph is as follows:
``(i) The EFFS monthly bid amount for
provision of all items and services under this
part, which amount shall be based on average
costs for a typical beneficiary residing in the
region, 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 EFFS
statutory 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 section 1852(a)(1).
``(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)),
and for such purpose, the Administrator has negotiation
authority that the Director of the Office of Personnel
Management has with respect to health benefits plans
under chapter 89 of title 5, United States Code. 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).
``(D) Contract authority.--The Administrator may,
taking into account the unadjusted EFFS statutory non-
drug monthly bid amounts accepted under subparagraph
(C), enter into contracts for the offering of up to 3
EFFS plans in any region.
``(b) Provision of Beneficiary Savings for Certain Plans.--
``(1) Beneficiary rebate rule.--
``(A) Requirement.--The EFFS plan shall provide to
the enrollee a monthly rebate equal to 75 percent of
the average per capita savings (if any) described in
paragraph (2) applicable to the plan and year involved.
``(B) Form of rebate.--A rebate required under this
paragraph shall be provided--
``(i) through the crediting of the amount of
the rebate towards the EFFS monthly
prescription drug beneficiary premium (as
defined in section 1860E-4(a)(3)(B)) and the
EFFS monthly supplemental beneficiary premium
(as defined in section 1860E-4(a)(3)(C));
``(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) Computation of average per capita monthly savings.--For
purposes of paragraph (1)(A), the average per capita monthly
savings referred to in such paragraph for an EFFS plan and year
is computed as follows:
``(A) Determination of region-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 2006), for each EFFS region the
average of the risk adjustment factors
described in subsection (c)(3) to be applied to
enrollees under this part in that region. In
the case of an EFFS region in which an EFFS
plan was offered in the previous year, the
Administrator may compute such average based
upon risk adjustment factors applied under
subsection (c)(3) in that region in a previous
year.
``(ii) Treatment of new regions.--In the case
of a region in which no EFFS 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 EFFS
regions or applied on a national basis.
``(B) Determination of risk adjusted benchmark and
risk-adjusted bid.--For each EFFS plan offered in an
EFFS region, the Administrator shall--
``(i) adjust the EFFS region-specific non-
drug monthly benchmark amount (as defined in
paragraph (3)) by the applicable average risk
adjustment factor computed under subparagraph
(A); and
``(ii) adjust the unadjusted EFFS statutory
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).
``(3) Computation of effs region-specific non-drug monthly
benchmark amount.--For purposes of this part, the term `EFFS
region-specific non-drug monthly benchmark amount' means, with
respect to an EFFS region for a month in a year, an amount
equal to \1/12\ of the average (weighted by number of EFFS
eligible individuals in each payment area described in section
1853(d)) of the annual capitation rate as calculated under
section 1853(c)(1) for that area.
``(c) Payment of Plans Based on Bid Amounts.--
``(1) Non-drug benefits.--Under a contract under section
1860E-4(c) and subject to section 1853(g) (as made applicable
under subsection (d)), the Administrator shall make monthly
payments under this subsection in advance to each EFFS
organization, with respect to coverage of an individual under
this part in an EFFS region for a month, in an amount
determined as follows:
``(A) Plans with bids below benchmark.--In the case
of a plan for which there are average per capita
monthly savings described in subsection (b)(2)(C), the
payment under this subsection is equal to the
unadjusted EFFS statutory non-drug monthly bid amount,
adjusted under paragraphs (3) and (4), plus the amount
of the monthly rebate computed under subsection
(b)(1)(A) for that plan and year.
``(B) 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 subsection
(b)(2)(C), the payment amount under this subsection is
equal to the EFFS region-specific non-drug monthly
benchmark amount, adjusted under paragraphs (3) and
(4).
``(2) For federal drug subsidies.--In the case in which an
enrollee who elects under part D to be provided qualified
prescription drug coverage through the plan, the EFFS
organization offering such plan also is entitled--
``(A) to direct subsidy payment under section 1860D-
8(a)(1);
``(B) to reinsurance subsidy payments under section
1860D-8(a)(2); and
``(C) to reimbursement for premium and cost-sharing
reductions for low-income individuals under section
1860D-7(c)(3).
``(3) Demographic risk adjustment, including adjustment for
health status.--The Administrator shall adjust under paragraph
(1)(A) the unadjusted EFFS statutory non-drug monthly bid
amount and under paragraph (1)(B) the EFFS region-specific non-
drug monthly benchmark amount 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 section 1853(a)(3)
(as applied under subsection (d)), 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.
``(4) Adjustment for intra-regional geographic variations.--
The Administrator shall also adjust such amounts in a manner to
take into account variations in payments rates under part C
among the different payment areas under such part included in
each EFFS region.
``(d) Application of Additional Payment Rules.--The provisions of
section 1853 (other than subsections (a)(1)(A), (d), and (e)) shall
apply to an EFFS plan under this part, except as otherwise provided in
this section.
``premiums; organizational and financial requirements; establishment of
standards; contracts with effs organizations
``Sec. 1860E-4. (a) Premiums.--
``(1) In general.--The provisions of section 1854 (other than
subsections (a)(6)(C) and (h)), including subsection (b)(5)
relating to the consolidation of drug and non-drug beneficiary
premiums and subsection (c) relating to uniform bids and
premiums, shall apply to an EFFS plan under this part, subject
to paragraph (2).
``(2) Cross-walk.--In applying paragraph (1), any reference
in section 1854(b)(1)(A) or 1854(d) to--
``(A) a Medicare Advantage monthly basic beneficiary
premium is deemed a reference to the EFFS monthly basic
beneficiary premium (as defined in paragraph (3)(A));
``(B) a Medicare Advantage monthly prescription drug
beneficiary premium is deemed a reference to the EFFS
monthly prescription drug beneficiary premium (as
defined in paragraph (3)(B)); and
``(C) a Medicare Advantage monthly supplemental
beneficiary premium is deemed a reference to the EFFS
monthly supplemental beneficiary premium (as defined in
paragraph (3)(C)).
``(3) Definitions.--For purposes of this part:
``(A) EFFS monthly basic beneficiary premium.--The
term `EFFS monthly basic beneficiary premium' means,
with respect to an EFFS plan--
``(i) described in section 1860E-3(c)(1)(A)
(relating to plans providing rebates), zero; or
``(ii) described in section 1860E-3(c)(1)(B),
the amount (if any) by which the unadjusted
EFFS statutory non-drug monthly bid amount
exceeds the EFFS region-specific non-drug
monthly benchmark amount (as defined in section
1860E-3(b)(3)).
``(B) EFFS monthly prescription drug beneficiary
premium.--The term `EFFS monthly prescription drug
beneficiary premium' means, with respect to an EFFS
plan, the portion of the aggregate monthly bid amount
submitted under clause (i) of section 1860E-3(a)(3)(A)
for the year that is attributable under such section to
the provision of statutory prescription drug benefits.
``(C) EFFS monthly supplemental beneficiary
premium.--The term `EFFS monthly supplemental
beneficiary premium' means, with respect to an EFFS
plan, the portion of the aggregate monthly bid amount
submitted under clause (i) of section 1860E-3(a)(3)(A)
for the year that is attributable under such section to
the provision of nonstatutory benefits.
``(b) Organizational and Financial Requirements.--The provisions of
section 1855 shall apply to an EFFS plan offered by an EFFS
organization under this part.
``(c) Contracts with EFFS Organizations.--The provisions of section
1857 shall apply to an EFFS plan offered by an EFFS organization under
this part, except that any reference in such section to part C is
deemed a reference to this part.''.
(b) Prohibition on Coverage Under Medigap Plans of Deductible Imposed
Under EFFS Plans.--Section 1882 (42 U.S.C. 1395ss), as amended by
section 104(a), is amended by adding at the end the following new
subsection:
``(w) Prohibition on Coverage of Deductible and Certain Cost-Sharing
Imposed Under EFFS Plans.--Notwithstanding any other provision of law,
no medicare supplemental policy (other than the 2 benefit packages
described in subsection (v)(3)) may provide for coverage of the single
deductible or more than 50 percent of other cost-sharing imposed under
an EFFS plan under part E.''.
(c) Conforming Provisions.--Section 1882 of the Social Security Act
(42 U.S.C. 1395ss) shall be administered as if any reference to a
Medicare+Choice organization offering a Medicare+Choice plan under part
C of title XVIII of such Act were a reference both to a Medicare
Advantage organization offering a Medicare Advantage plan under such
part and an EFFS organization offering an EFFS plan under part E of
such title.
Subtitle B--Medicare Advantage Program
CHAPTER 1--IMPLEMENTATION OF PROGRAM
SEC. 211. IMPLEMENTATION OF MEDICARE ADVANTAGE PROGRAM.
(a) In General.--There is hereby established the Medicare Advantage
program. The Medicare Advantage program shall consist of the program
under part C of title XVIII of the Social Security Act, as amended by
this title.
(b) References.--Any reference to the program under part C of title
XVIII of the Social Security Act shall be deemed a reference to the
Medicare Advantage program and, with respect to such part, any
reference to ``Medicare+Choice'' is deemed a reference to ``Medicare
Advantage''.
SEC. 212. MEDICARE ADVANTAGE IMPROVEMENTS.
(a) Equalizing Payments With Fee-For-Service.--
(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 2004, the adjusted
average per capita cost for the year involved,
determined under section 1876(a)(4) for the
Medicare Advantage 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
Advantage 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) Change in Budget Neutrality for Blend.--Section 1853(c) (42
U.S.C. 1395w-23(c)) is amended--
(1) in paragraph (1)(A), by inserting ``(for a year other
than 2004)'' after ``multiplied''; and
(2) in paragraph (5), by inserting ``(other than 2004)''
after ``for each year''.
(c) Increasing Minimum Percentage Increase to National Growth Rate.--
(1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
23(c)(1)) is amended--
(A) in subparagraph (B)(iv), by striking ``and each
succeeding year'' and inserting ``, 2003, and 2004'';
(B) in subparagraph (C)(iv), by striking ``and each
succeeding year'' and inserting ``and 2003''; and
(C) by adding at the end of subparagraph (C) the
following new clause:
``(v) For 2004 and each succeeding year, the
greater of--
``(I) 102 percent of the annual
Medicare Advantage capitation rate
under this paragraph for the area for
the previous year; or
``(II) the annual Medicare Advantage
capitation rate under this paragraph
for the area for the previous year
increased by the national per capita
Medicare Advantage growth percentage,
described in paragraph (6) for that
succeeding year, but not taking into
account any adjustment under paragraph
(6)(C) for a year before 2004.''.
(2) Conforming amendment.--Section 1853(c)(6)(C) (42 U.S.C.
1395w-23(c)(6)(C)) is amended by inserting before the period at
the end the following: ``, except that for purposes of
paragraph (1)(C)(v)(II), no such adjustment shall be made for a
year before 2004''.
(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 2004), 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) Extending Special Rule for Certain Inpatient Hospital Stays to
Rehabilitation Hospitals.--
(1) In general.--Section 1853(g) (42 U.S.C. 1395w-23(g)) is
amended--
(A) by inserting ``or from a rehabilitation facility
(as defined in section 1886(j)(1)(A))'' after
``1886(d)(1)(B))''; and
(B) in paragraph (2)(B), by inserting ``or section
1886(j), as the case may be,'' after ``1886(d)''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to contract years beginning on or after January 1,
2004.
(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))
as applied under section 1853(c)(1)(A) of such Act (as amended
by subsection (a)). Such study shall include an examination
of--
(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 Advantage 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 18 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).
(g) Report on Impact of Increased Financial Assistance to Medicare
Advantage Plans.--Not later than July 1, 2006, the Medicare Benefits
Administrator 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 Advantage plans
in different areas and its impact on lowering premiums and increasing
benefits under such plans.
CHAPTER 2--IMPLEMENTATION OF COMPETITION PROGRAM
SEC. 221. COMPETITION PROGRAM BEGINNING IN 2006.
(a) Submission of EFFS-Like Bidding Information Beginning in 2006.--
Section 1854 (42 U.S.C. 1395w-24) is amended--
(1) by amending the section heading to read as follows:
``premiums and bid amount'';
(2) in subsection (a)(1)(A)--
(A) by striking ``(A)'' and inserting ``(A)(i) if the
following year is before 2006,''; and
(B) by inserting before the semicolon at the end the
following: ``or (ii) if the following year is 2006 or
later, the information described in paragraph (3) or
(6)(A) for the type of plan involved''; and
(3) by adding at the end of subsection (a) the following:
``(6) Submission of bid amounts by medicare advantage
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, which amount shall be based on average
costs for a typical beneficiary residing in the
area, 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
Medicare Advantage statutory 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 section 1852(a)(1).
``(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.--
``(i) In general.--Subject to clause (ii)--
``(I) the Administrator has the
authority to negotiate regarding
monthly bid amounts submitted under
subparagraph (A) (and the proportion
described in subparagraph (A)(ii)), and
for such purpose and subject to such
clause, the Administrator has
negotiation authority that the Director
of the Office of Personnel Management
has with respect to health benefits
plans under chapter 89 of title 5,
United States Code; and
``(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).
``(ii) Exception.--In the case of a plan
described in section 1851(a)(2)(C), the
provisions of clause (i) shall not apply and
the provisions of paragraph (5)(B), prohibiting
the review, approval, or disapproval of amounts
described in such paragraph, shall apply to the
negotiation and rejection of the monthly bid
amounts and proportion referred to in
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 Advantage
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 Advantage 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
paragraphs:
``(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 Advantage
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 2006), for each State the
average of the risk adjustment factors to be
applied under section 1853(a)(1)(A) to payment
for enrollees in that State. In the case of a
State in which a Medicare Advantage 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 Advantage 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 Advantage plan
offered in a State, the Administrator shall--
``(i) adjust the Medicare Advantage area-
specific non-drug monthly benchmark amount (as
defined in subsection (j)) by the applicable
average risk adjustment factor computed under
subparagraph (A); and
``(ii) adjust the unadjusted Medicare
Advantage statutory 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) Beneficiary's option of payment through withholding
from social security payment or use of electronic funds
transfer mechanism.--In accordance with regulations, a Medicare
Advantage organization shall permit each enrollee, at the
enrollee's option, to make payment of premiums under this part
to the organization indirectly through withholding from benefit
payments in the manner provided under section 1840 with respect
to monthly premiums under section 1839 or through an electronic
funds transfer mechanism (such as automatic charges of an
account at a financial institution or a credit or debit card
account) or otherwise. All premium payments that are withheld
under this paragraph that are credited to the Federal
Supplementary Medical Insurance Drug Trust Fund shall be paid
to the Medicare Advantage organization involved.''.
(2) Provision of single consolidated premium.--Section
1854(b) (42 U.S.C. 1395w-24(b)), as amended by paragraph (1),
is further amended by adding at the end the following new
paragraph:
``(5) Single consolidated premium.--In the case of an
enrollee in a Medicare Advantage plan who elects under part D
to be provided qualified prescription drug coverage through the
plan, the Administrator shall provide a mechanism for the
consolidation of the beneficiary premium amount for non-drug
benefits under this part with the premium amount for
prescription drug coverage under part D provided through the
plan.''.
(3) Computation of medicare advantage 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 Medicare Advantage Area-Specific Non-Drug
Monthly Benchmark Amount.--For purposes of this part, the term
`Medicare Advantage area-specific non-drug monthly benchmark amount'
means, with respect to a Medicare Advantage payment area for a month in
a year, an amount equal to \1/12\ of the annual Medicare Advantage
capitation rate under section 1853(c)(1) for the area for the year.''.
(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 2006.--For years before
2006, the payment amount shall be equal to \1/
12\ of the annual Medicare Advantage capitation
rate (as calculated under subsection (c)(1))
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 (iv).
``(ii) Payment for statutory non-drug
benefits beginning with 2006.--For years
beginning with 2006--
``(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
Medicare Advantage statutory non-drug
monthly bid amount, adjusted under
clause (iv), 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
Medicare Advantage area-specific non-
drug monthly benchmark amount, adjusted
under clause (iv).
``(iii) For federal drug subsidies.--In the
case in which an enrollee who elects under part
D to be provided qualified prescription drug
coverage through the plan, the Medicare
Advantage organization offering such plan also
is entitled--
``(I) to direct subsidy payment under
section 1860D-8(a)(1);
``(II) to reinsurance subsidy
payments under section 1860D-8(a)(2);
and
``(III) to reimbursement for premium
and cost-sharing reductions for low-
income individuals under section 1860D-
7(c)(3).
``(iv) Demographic adjustment, including
adjustment for health status.--The
Administrator shall adjust the payment amount
under clause (i), the unadjusted Medicare
Advantage statutory non-drug monthly bid amount
under clause (ii)(I), and the Medicare
Advantage area-specific non-drug monthly
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.''.
(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 Advantage eligible
individuals with the organization.''.
(2) Conforming amendment to premium terminology.--Section
1854(b)(2) (42 U.S.C. 1395w-24(b)(2)) is amended by
redesignating subparagraph (C) as subparagraph (D) and by
striking subparagraphs (A) and (B) and inserting the following:
``(A) Medicare advantage monthly basic beneficiary
premium.--The term `Medicare Advantage monthly basic
beneficiary premium' means, with respect to a Medicare
Advantage 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 Medicare Advantage
statutory non-drug monthly bid amount exceeds
the Medicare Advantage area-specific non-drug
monthly benchmark amount.
``(B) Medicare advantage monthly prescription drug
beneficiary premium.--The term `Medicare Advantage
monthly prescription drug beneficiary premium' means,
with respect to a Medicare Advantage plan, that portion
of the bid amount submitted under clause (i) of
subsection (a)(6)(A) for the year that is attributable
under such section to the provision of statutory
prescription drug benefits.
``(C) Medicare advantage monthly supplemental
beneficiary premium.--The term `Medicare Advantage
monthly supplemental beneficiary premium' means, with
respect to a Medicare Advantage 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 premium and bid amounts.--Section
1854(c) (42 U.S.C. 1395w-24(c)) is amended to read as follows:
``(c) Uniform Premium and Bid Amounts.--The Medicare Advantage
monthly bid amount submitted under subsection (a)(6), the Medicare
Advantage monthly basic, prescription drug, and supplemental
beneficiary premiums, and the Medicare Advantage monthly MSA premium
charged under subsection (b) of a Medicare Advantage 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''.
(5) Other conforming amendments relating to bids.--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''.
(e) Additional Conforming Amendments.--
(1) Annual determination and announcement of certain
factors.--Section 1853(b)(1) (42 U.S.C. 1395w-23(b)(1)) is
amended by striking ``the respective calendar year'' and all
that follows and inserting the following: ``the calendar year
concerned with respect to each Medicare Advantage payment area,
the following:
``(A) Pre-competition information.--For years before
2006, the following:
``(i) Medicare advantage capitation rates.--
The annual Medicare Advantage capitation rate
for each Medicare Advantage 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 2006, the following:
``(i) Benchmark.--The Medicare Advantage
area-specific non-drug benchmark under section
1853(j).
``(ii) Adjustment factors.--The adjustment
factors applied under section 1853(a)(1)(A)(iv)
(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).''.
(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 amendments.--(i) 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.
(ii) Section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)) is
amended by striking ``title XI'' and all that follows
and inserting the following: ``title XI those items and
services (other than hospice care) for which benefits
are available under parts A and B to individuals
residing in the area served by the plan.''.
(iii) Section 1857(d)(1) (42 U.S.C. 1395w-27(d)(1))
is amended by striking ``, costs, and computation of
the adjusted community rate'' and inserting ``and
costs''.
(f) References under Part E.--Section 1859 (42 U.S.C. 1395w-29) is
amended by adding at the end the following new subsection:
``(f) Application under Part E.--In the case of any reference under
part E to a requirement or provision of this part in the relation to an
EFFS plan or organization under such part, except as otherwise
specified any such requirement or provision shall be applied to such
organization or plan in the same manner as such requirement or
provision applies to a Medicare Advantage private fee-for-service plan
(and the Medicare Advantage organization that offers such plan) under
this part.''.
(g) Effective Date.--The amendments made by this section shall apply
to payments and premiums for months beginning with January 2006.
CHAPTER 3--ADDITIONAL REFORMS
SEC. 231. MAKING PERMANENT CHANGE IN MEDICARE ADVANTAGE 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''.
(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--
(1) by striking ``and after 2005''; and
(2) by striking ``, 2004, and 2005'' and inserting ``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--
(1) by striking ``and after 2005''; and
(2) by striking ``and 2005'' and inserting ``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. 232. 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 Advantage
plans which are offered by Medicare Advantage 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. 233. SPECIALIZED MEDICARE ADVANTAGE 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 Advantage plans for special needs
beneficiaries (as defined in section 1859(b)(4)) may be any type of
coordinated care plan.''.
(b) Specialized Medicare Advantage 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 advantage plans for special needs
beneficiaries.--
``(A) In general.--The term `specialized Medicare
Advantage plan for special needs beneficiaries' means a
Medicare Advantage plan that exclusively serves special
needs beneficiaries (as defined in subparagraph (B)).
``(B) Special needs beneficiary.--The term `special
needs beneficiary' means a Medicare Advantage 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
Advantage 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 Advantage
Plans for Special Needs Beneficiaries.--In the case of a specialized
Medicare Advantage 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 Advantage 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 shall issue
interim 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. 234. 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 ``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. 235. EXTENSION OF REASONABLE COST CONTRACTS.
Subparagraph (C) of section 1876(h)(5) (42 U.S.C. 1395mm(h)(5)) is
amended to read as follows:
``(C)(i) Subject to clause (ii), may be extended or renewed under
this subsection indefinitely.
``(ii) For any period beginning on or after January 1, 2008, a
reasonable cost reimbursement contract under this subsection may not be
extended or renewed for a service area insofar as such area, during the
entire previous year, was within the service area of 2 or more plans
which were coordinated care Medicare Advantage plans under part C or 2
or more enhanced fee-for-service plans under part E and each of which
plan for that previous year for the area involved meets the following
minimum enrollment requirements:
``(I) With respect to any portion of the area involved that
is within a Metropolitan Statistical Area with a population of
more than 250,000 and counties contiguous to such Metropolitan
Statistical Area, 5,000 individuals.
``(II) With respect to any other portion of such area, 1,500
individuals.''.
SEC. 236. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION PROJECTS.
Section 9215(a) of the Consolidated Omnibus Budget Reconciliation Act
of 1985 (42 U.S.C. 1395b-1 note), as amended by section 6135 of the
Omnibus Budget Reconciliation Act of 1989, section 13557 of the Omnibus
Budget Reconciliation Act of 1993, section 4017 of BBA, section 534 of
BBRA (113 Stat. 1501A-390), and section 633 of BIPA, is amended by
striking ``December 31, 2004'' and inserting ``December 31, 2009''.
Subtitle C--Application of FEHBP-Style Competitive Reforms
SEC. 241. APPLICATION OF FEHBP-STYLE COMPETITIVE REFORM BEGINNING IN
2010.
(a) Identification of Competitive EFFS Regions; Computation of
Competitive EFFS Non-Drug Benchmarks Under EFFS Program.--
(1) In general.--Section 1860E-3, as added by section 201(a),
is amended by adding at the end the following new subsection:
``(e) Application of Competition.--
``(1) Determination of competitive effs regions.--
``(A) In general.--For purposes of this part, the
term `competitive EFFS region' means, for a year
beginning with 2010, an EFFS region that the
Administrator finds--
``(i) there will be offered in the region
during the annual, coordinated election period
under section 1851(e)(3)(B) (as applied under
section 1860E-1(c)) before the beginning of the
year at least 2 EFFS plans (in addition to the
fee-for-service program under parts A and B),
each offered by a different EFFS organization
and each of which met the minimum enrollment
requirements of paragraph (1) of section
1857(b) (as applied without regard to paragraph
(3) thereof) as of March of the previous year;
and
``(ii) during March of the previous year at
least the percentage specified in subparagraph
(C) of the number of EFFS eligible individuals
who reside in the region were enrolled in an
EFFS plan.
``(B) Percentage specified.--
``(i) In general.--For purposes of
subparagraph (A), subject to clause (ii), the
percentage specified in this subparagraph for a
year is equal the lesser of 20 percent or to
the sum of--
``(I) the percentage, as estimated by
the Administrator, of EFFS eligible
individuals in the United States who
are enrolled in EFFS plans during March
of the previous year; and
``(II) the percentage, as estimated
by the Administrator, of Medicare
Advantage eligible individuals in the
United States who are enrolled in
Medicare Advantage plans during March
of the previous year.
``(ii) Exception.--In the case of an EFFS
region that was a competitive EFFS region for
the previous year, the Medicare Benefits
Administrator may continue to treat the region
as meeting the requirement of subparagraph
(A)(ii) if the region would meet such
requirement but for a de minimis reduction
below the percentage specified in clause (i).
``(2) Competitive effs non-drug monthly benchmark amount.--
For purposes of this part, the term `competitive EFFS non-drug
monthly benchmark amount' means, with respect to an EFFS region
for a month in a year and subject to paragraph (8), the sum of
the 2 components described in paragraph (3) for the region and
year. The Administrator shall compute such benchmark amount for
each competitive EFFS region before the beginning of each
annual, coordinated election period under section 1851(e)(3)(B)
for each year (beginning with 2010) in which it is designated
as such a region.
``(3) 2 components.--For purposes of paragraph (2), the 2
components described in this paragraph for an EFFS region and a
year are the following:
``(A) EFFS component.--The product of the following:
``(i) Weighted average of plan bids in
region.--The weighted average of the EFFS plan
bids for the region and year (as determined
under paragraph (4)(A)).
``(ii) Non-ffs market share.--1 minus the
fee-for-service market share percentage
determined under paragraph (5) for the region
and the year.
``(B) Fee-for-service component.--The product of the
following:
``(i) Fee-for-service region-specific non-
drug amount.--The fee-for-service region-
specific non-drug amount (as defined in
paragraph (6)) for the region and year.
``(ii) Fee-for-service market share.--The
fee-for-service market share percentage
(determined under paragraph (5)) for the region
and the year.
``(4) Determination of weighted average effs plan bids for a
region.--
``(A) In general.--For purposes of paragraph
(3)(A)(i), the weighted average of EFFS plan bids for
an EFFS region and a year is the sum of the following
products for EFFS plans described in subparagraph (C)
in the region and year:
``(i) Unadjusted effs statutory non-drug
monthly bid amount.--The unadjusted EFFS
statutory non-drug monthly bid amount (as
defined in subsection (a)(3)(A)(ii)(I)) for the
region and year.
``(ii) Plan's share of effs enrollment in
region.--The number of individuals described in
subparagraph (B), divided by the total number
of such individuals for all EFFS plans
described in subparagraph (C) for that region
and year.
``(B) Counting of individuals.--The Administrator
shall count, for each EFFS plan described in
subparagraph (C) for an EFFS region and year, the
number of individuals who reside in the region 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 EFFS region and year, the EFFS plans
described in this subparagraph are plans that are
offered in the region and year and were offered in the
region in March of the previous year.
``(5) Computation of fee-for-service market share
percentage.--The Administrator shall determine, for a year and
an EFFS region, the proportion (in this subsection referred to
as the `fee-for-service market share percentage') of the EFFS
eligible individuals who are residents of the region during
March of the previous year, of such individuals who were not
enrolled in an EFFS plan or in a Medicare Advantage plan (or,
if greater, such proportion determined for individuals
nationally).
``(6) Fee-for-service region-specific non-drug amount.--
``(A) In general.--For purposes of paragraph
(3)(B)(i) and section 1839(h)(2)(A), subject to
subparagraph (B), the term `fee-for-service region-
specific non-drug amount' means, for a competitive EFFS
region and a year, the adjusted average per capita cost
for the year involved, determined under section
1876(a)(4) for such region for services covered under
parts A and B for individuals entitled to benefits
under part A and enrolled under this part who are not
enrolled in an EFFS plan under part E or a Medicare
Advantage plan under part C for the year, but adjusted
to exclude costs attributable to payments under section
1886(h).
``(B) Inclusion of costs of va and dod military
facility services to medicare-eligible beneficiaries.--
In determining the adjusted average per capita cost
under subparagraph (A) for a year, such cost shall be
adjusted to include the Administrator's estimate, on a
per capita basis, of the amount of additional payments
that would have been made in the region 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.
``(7) Application of competition.--In the case of an EFFS
region that is a competitive EFFS region for a year, for
purposes of applying subsections (b) and (c)(1) and section
1860E-4(a), any reference to an EFFS region-specific non-drug
monthly benchmark amount shall be treated as a reference to the
competitive EFFS non-drug monthly benchmark amount under
paragraph (2) for the region and year.
``(8) Phase-in of benchmark for each region.--
``(A) Use of blended benchmark.--In the case of a
region that has not been a competitive EFFS region for
each of the previous 4 years, the competitive EFFS non-
drug monthly benchmark amount shall be equal to the sum
of the following:
``(i) New competitive component.--The product
of--
``(I) the weighted average phase-in
proportion for that area and year, as
specified in subparagraph (B); and
``(II) the competitive EFFS non-drug
monthly benchmark amount for the region
and year, determined under paragraph
(2) without regard to this paragraph.
``(ii) Old competitive component.--The
product of--
``(I) 1 minus the weighted average
phase-in proportion for that region and
year; and
``(II) the EFFS region-specific non-
drug benchmark amount for the region
and the year.
``(B) Computation of weighted average phase-in
proportion.--For purposes of this paragraph, the
`weighted average phase-in proportion' for an EFFS
region for a year shall be determined as follows:
``(i) First year (and region not competitive
region in previous year).--If the area was not
a competitive EFFS region in the previous year,
the weighted average phase-in proportion for
the region for the year is equal to \1/5\.
``(ii) Competitive region in previous year.--
If the region was a competitive EFFS region in
the previous year, the weighted average phase-
in proportion for the region for the year is
equal to the weighted average phase-in
proportion determined under this subparagraph
for the region for the previous year plus \1/
5\, but in no case more than 1.''.
(2) Conforming amendments.--
(A) Such section 1860E-3 is further amended--
(i) in subsection (b), by adding at the end
the following new paragraph:
``(4) Application in competitive regions.--For
special rules applying this subsection in competitive
EFFS regions, see subsection (e)(7).'';
(ii) in subsection (c)(1), by inserting ``and
subsection (e)(7)'' after ``(as made applicable
under subsection (d))''; and
(iii) in subsection (d) , by striking ``and
(e)'' and inserting ``(e), and (k) ''.
(B) Section 1860E-4(a)(1), as inserted by section
201(a)(2), is amended by inserting ``, except as
provided in section 1860E-3(e)(7)'' after ``paragraph
(2)''.
(b) Identification of Competitive Medicare Advantage Areas;
Application of Competitive Medicare Advantage Non-Drug Benchmarks Under
Medicare Advantage Program.--
(1) In general.--Section 1853, as amended by section
221(b)(3), is amended by adding at the end the following new
subsection:
``(k) Application of Competition.--
``(1) Determination of competitive medicare advantage
areas.--
``(A) In general.--For purposes of this part, the
terms `competitive Medicare Advantage area' and `CMA
area' mean, for a year beginning with 2010, an area
(which is a metropolitan statistical area or other area
with a substantial number of Medicare Advantage
enrollees) that the Administrator finds--
``(i) there will be offered during the
annual, coordinated election period under
section 1851(e)(3)(B) under this part before
the beginning of the year at least 2 Medicare
Advantage plans (in addition to the fee-for-
service program under parts A and B), each
offered by a different Medicare Advantage
organization and each of which met the minimum
enrollment requirements of paragraph (1) of
section 1857(b) (as applied without regard to
paragraph (3) thereof) as of March of the
previous year with respect to the area; and
``(ii) during March of the previous year at
least the percentage specified in subparagraph
(B) of the number of Medicare Advantage
eligible individuals who reside in the area
were enrolled in a Medicare Advantage plan.
``(B) Percentage specified.--
``(i) In general.--For purposes of
subparagraph (A), subject to clause (ii), the
percentage specified in this subparagraph for a
year is equal the lesser of 20 percent or to
the sum of--
``(I) the percentage, as estimated by
the Administrator, of EFFS eligible
individuals in the United States who
are enrolled in EFFS plans during March
of the previous year; and
``(II) the percentage, as estimated
by the Administrator, of Medicare
Advantage eligible individuals in the
United States who are enrolled in
Medicare Advantage plans during March
of the previous year.
``(ii) Exception.--In the case of an area
that was a competitive area for the previous
year, the Medicare Benefits Administrator may
continue to treat the area as meeting the
requirement of subparagraph (A)(ii) if the area
would meet such requirement but for a de
minimis reduction below the percentage
specified in clause (i).
``(2) Competitive medicare advantage non-drug monthly
benchmark amount.--For purposes of this part, the term
`competitive Medicare Advantage non-drug monthly benchmark
amount' means, with respect to a competitive Medicare Advantage
area for a month in a year subject to paragraph (8), 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 Medicare Advantage area before the beginning
of each annual, coordinated election period under section
1851(e)(3)(B) for each year (beginning with 2010) 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 a competitive
Medicare Advantage area and a year are the following:
``(A) Medicare advantage component.--The product of
the following:
``(i) Weighted average of medicare advantage
plan bids in area.--The weighted average of the
plan bids for the area and year (as determined
under paragraph (4)(A)).
``(ii) Non-ffs market share.--1 minus the
fee-for-service market share percentage,
determined under paragraph (5) for the area and
year.
``(B) Fee-for-service component.--The product of the
following:
``(i) Fee-for-service area-specific non-drug
amount.--The fee-for-service area-specific non-
drug amount (as defined in paragraph (6)) for
the area and year.
``(ii) Fee-for-service market share.--The
fee-for-service market share percentage,
determined under paragraph (5) for the area and
year.
``(4) Determination of weighted average medicare advantage
bids for an area.--
``(A) In general.--For purposes of paragraph
(3)(A)(i), the weighted average of plan bids for an
area and a year is the sum of the following products
for Medicare Advantage plans described in subparagraph
(C) in the area and year:
``(i) Monthly medicare advantage statutory
non-drug bid amount.--The unadjusted Medicare
Advantage statutory non-drug monthly bid
amount.
``(ii) Plan's share of medicare advantage
enrollment in area.--The number of individuals
described in subparagraph (B), divided by the
total number of such individuals for all
Medicare Advantage plans described in
subparagraph (C) for that area and year.
``(B) Counting of individuals.--The Administrator
shall count, for each Medicare Advantage 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 Advantage
plans described in this subparagraph are plans
described in the first sentence of section
1851(a)(2)(A) that are offered in the area and year and
were offered in the area in March of the previous year.
``(5) Computation of fee-for-service market share
percentage.--The Administrator shall determine, for a year and
a competitive Medicare Advantage area, the proportion (in this
subsection referred to as the `fee-for-service market share
percentage') of Medicare Advantage eligible individuals
residing in the area who during March of the previous year were
not enrolled in a Medicare Advantage plan or in an EFFS plan
(or, if greater, such proportion determined for individuals
nationally).
``(6) Fee-for-service area-specific non-drug amount.--
``(A) In general.--For purposes of paragraph
(3)(B)(i) and section 1839(h)(1)(A), subject to
subparagraph (B), the term `fee-for-service area-
specific non-drug amount' means, for a competitive
Medicare Advantage area and a year, the adjusted
average per capita cost for the year involved,
determined under section 1876(a)(4) for such area for
services covered under parts A and B for individuals
entitled to benefits under part A and enrolled under
this part who are not enrolled in a Medicare Advantage
plan under part C or an EFFS plan under part E for the
year, but adjusted to exclude costs attributable to
payments under section 1886(h).
``(B) Inclusion of costs of va and dod military
facility services to medicare-eligible beneficiaries.--
In determining the adjusted average per capita cost
under subparagraph (A) for a year, such cost shall be
adjusted to include the Administrator'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.
``(7) Application of competition.--In the case of an area
that is a competitive Medicare Advantage area for a year, for
purposes of applying subsection (a)(1)(A)(ii) and sections
1854(b)(2)(A)(ii) and 1854(b)(3)(B)(i), any reference to a
Medicare Advantage area-specific non-drug monthly benchmark
amount shall be treated as a reference to the competitive
Medicare Advantage non-drug monthly benchmark amount under
paragraph (2) for the area and year.
``(8) Phase-in of benchmark for each area.--
``(A) Use of blended benchmark.--In the case of an
area that has not been a competitive Medicare Advantage
area for each of the previous 4 years, the competitive
Medicare Advantage non-drug monthly benchmark amount
shall be equal to the sum of the following:
``(i) New competitive component.--The product
of--
``(I) the weighted average phase-in
proportion for that area and year, as
specified in subparagraph (B); and
``(II) the competitive Medicare
Advantage non-drug monthly benchmark
amount for the area and year,
determined under paragraph (2) without
regard to this paragraph.
``(ii) Old competitive component.--The
product of--
``(I) 1 minus the weighted average
phase-in proportion for that area and
year; and
``(II) the Medicare Advantage area-
wide non-drug benchmark amount for the
area and the year.
``(B) Computation of weighted average phase-in
proportion.--For purposes of this paragraph, the
`weighted average phase-in proportion' for a Medicare
Advantage payment area for a year shall be determined
as follows:
``(i) First year (and area not competitive
area in previous year).--If the area was not a
Medicare Advantage competitive area in the
previous year, the weighted average phase-in
proportion for the area for the year is equal
to \1/5\.
``(ii) Competitive area in previous year.--If
the area was a competitive Medicare Advantage
area in the previous year, the weighted average
phase-in proportion for the area for the year
is equal to the weighted average phase-in
proportion determined under this subparagraph
for the area for the previous year plus \1/5\,
but in no case more than 1.
``(C) Medicare advantage area-wide non-drug benchmark
amount.--For purposes of subparagraph (A)(ii)(II), the
term `Medicare Advantage area-wide non-drug benchmark
amount' means, for an area and year, the weighted
average of the amounts described in section 1853(j) for
Medicare Advantage payment area or areas included in
the area (based on the number of traditional fee-for-
service enrollees in such payment area or areas) and
year.''.
(2) Application.--Section 1854 (42 U.S.C. 1395w-24) is
amended--
(A) in subsection (b)(1)(C)(i), as added by section
221(b)(1)(A), by striking ``(i) Requirement.--The'' and
inserting ``(i) Requirement for non-competitive
areas.--In the case of a Medicare Advantage payment
area that is not a competitive Medicare Advantage 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 medicare
advantage areas.--In the case of a Medicare
Advantage payment area that is designated as a
competitive Medicare Advantage area under
section 1853(k)(1), if there are average per
capita monthly savings described in paragraph
(6) for a Medicare Advantage plan and year, the
Medicare Advantage plan shall provide to the
enrollee a monthly rebate equal to 75 percent
of such savings.''; and
(C) by adding at the end of subsection (b), as
amended by sections 221(b)(1)(B) and 221(b)(2), the
following new paragraph:
``(6) Computation of average per capita monthly savings for
competitive medicare advantage areas.--For purposes of
paragraph (1)(C)(ii), the average per capita monthly savings
referred to in such paragraph for a Medicare Advantage 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 Medicare Advantage area-specific non-
drug monthly 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 competitive Medicare Advantage
non-drug monthly benchmark amount (or such amount as adjusted
in the manner described in paragraph (3)(B)(i)).''.
(3) Additional conforming amendments.--
(A) Payment of plans.--Section 1853(a)(1)(A)(ii), as
amended by section 221(c)(1), is amended--
(i) in subclauses (I) and (II), by inserting
``(or, insofar as such payment area is a
competitive Medicare Advantage area, described
in section 1854(b)(6))'' after ``section
1854(b)(3)(C)''; and
(ii) in subclause (II), by inserting ``(or,
insofar as such payment area is a competitive
Medicare Advantage area, the competitive
Medicare Advantage non-drug monthly benchmark
amount)'' after ``Medicare Advantage area-
specific non-drug monthly benchmark amount'';
and
(B) Disclosure of information.--Section
1853(b)(1)(B), as amended by section 221(e)(1), is
amended to read as follows:
``(B) Competition information.--For years beginning
with 2006, the following:
``(i) Benchmarks.--The Medicare Advantage
area-specific non-drug benchmark under section
1853(j) and, if applicable, the competitive
Medicare Advantage non-drug benchmark under
section 1853(k)(2), for the year and
competitive Medicare Advantage area involved
and the national fee-for-service market share
percentage for the area and year.
``(ii) Adjustment factors.--The adjustment
factors applied under section 1853(a)(1)(A)(iv)
(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) Certain benchmarks and amounts.--In
the case of a competitive Medicare Advantage
area, the Medicare Advantage area-wide non-drug
benchmark amount (as defined in subsection
(k)(8)(C)) and the fee-for-service area-
specific non-drug amount (as defined in section
1853(k)(6)) for the area.
``(iv) Individuals.--The number of
individuals counted under subsection (k)(4)(B)
and enrolled in each Medicare Advantage plan in
the area.''.
(C) Definition of monthly basic premium.--Section
1854(b)(2)(A)(ii), as amended by section 221(d)(2), is
amended by inserting ``(or, in the case of a
competitive Medicare Advantage area, the competitive
Medicare Advantage non-drug monthly benchmark amount
or, in applying this paragraph under part E in the case
of a competitive EFFS region, the competitive EFFS non-
drug monthly benchmark amount)'' after ``benchmark
amount''.
(c) Premium Adjustment.--
(1) In general.--Section 1839 (42 U.S.C. 1395r) is amended by
adding at the end the following new subsection:
``(h)(1)(A) In the case of an individual who resides in a competitive
Medicare Advantage area under section 1853(k)(1) (regardless of whether
such area is in a competitive EFFS region under section 1860E-3(e)) and
who is not enrolled in a Medicare Advantage plan under part C or in an
EFFS plan under part E, 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 amount (as defined in section
1853(k)(6)) for the competitive Medicare Advantage area in which the
individual resides for a month--
``(i) does not exceed the competitive Medicare Advantage non-
drug benchmark (as determined under paragraph (2) of section
1853(k), without regard to paragraph (8) thereof) for such
area, the amount of the premium for the individual for the
month shall be reduced by an amount equal to the product of the
adjustment factor under subparagraph (C) and 75 percent of the
amount by which such competitive benchmark exceeds such fee-
for-service area-specific non-drug amount; or
``(ii) exceeds such competitive Medicare Advantage non-drug
benchmark, the amount of the premium for the individual for the
month shall be adjusted to ensure, subject to subparagraph (B),
that--
``(I) the sum of the amount of the adjusted premium
and the competitive Medicare Advantage 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 amount
for the area.
``(B) In no case shall the actual amount of an adjustment under
subparagraph (A)(ii) exceed the product of the adjustment factor under
subparagraph (C) and the amount of the adjustment otherwise computed
under subparagraph (A)(ii) without regard to this subparagraph.
``(C) The adjustment factor under this subparagraph for an area for a
year is equal to--
``(i) the number of consecutive years (in the 5-year period
ending with the year involved) in which such area was a
competitive Medicare Advantage area; divided by
``(ii) 5.
``(2)(A) In the case of an individual who resides in an area that is
within a competitive EFFS region under section 1860E-3(e) but is not
within a competitive Medicare Advantage area under section 1853(k)(1)
and who is not enrolled in a Medicare Advantage plan under part C or in
an EFFS plan under part E, 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 region-specific non-drug amount (as defined in section
1860E-3(e)(6)) for a region for a month--
``(i) does not exceed the competitive EFFS non-drug monthly
benchmark amount (as determined under paragraph (2) of section
1860E-3(e), without regard to paragraph (8) thereof) for such
region, the amount of the premium for the individual for the
month shall be reduced by an amount equal to the product of the
adjustment factor under subparagraph (C) and 75 percent of the
amount by which such competitive benchmark amount exceeds such
fee-for-service region-specific non-drug benchmark amount; or
``(ii) exceeds such competitive EFFS non-drug monthly
benchmark amount, the amount of the premium for the individual
for the month shall be adjusted to ensure, subject to
subparagraph (B), that--
``(I) the sum of the amount of the adjusted premium
and the competitive EFFS non-drug monthly benchmark
amount for the region, is equal to
``(II) the sum of the unadjusted premium plus the
amount of the EFFS region-specific non-drug monthly
bidfor the region.
``(B) In no case shall the actual amount of an adjustment under
subparagraph (A)(ii) exceed the product of the adjustment factor under
subparagraph (C) and the amount of the adjustment otherwise computed
under subparagraph (A)(ii) without regard to this subparagraph.
``(C) The adjustment factor under this subparagraph for an EFFS
region for a year is equal to--
``(i) the number of consecutive years (in the 5-year period
ending with the year involved) in which such region was a
competitive EFFS region; divided by
``(ii) 5.
``(3) Nothing in this subsection shall be construed as preventing a
reduction under paragraph (1)(A) or paragraph (2)(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.
``(4) The adjustment in the premium under this subsection shall be
effected in such manner as the Medicare Benefits Administrator
determines appropriate.
``(5) 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.''.
(2) 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.
(d) Effective Date.--The amendments made by this section shall take
effect on January 1, 2010.
TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE
SEC. 301. MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.
(a) Technical Amendment Concerning Secretary's Authority to Make
Conditional Payment When Certain Primary Plans Do Not Pay Promptly.--
(1) In general.--Section 1862(b)(2) (42 U.S.C. 1395y(b)(2))
is amended--
(A) in subparagraph (A)(ii), by striking ``promptly
(as determined in accordance with regulations)'';
(B) in subparagraph (B)--
(i) by redesignating clauses (i) through
(iii) as clauses (ii) through (iv),
respectively; and
(ii) by inserting before clause (ii), as so
redesignated, the following new clause:
``(i) Authority to make conditional
payment.--The Secretary may make payment under
this title with respect to an item or service
if a primary plan described in subparagraph
(A)(ii) has not made or cannot reasonably be
expected to make payment with respect to such
item or service promptly (as determined in
accordance with regulations). Any such payment
by the Secretary shall be conditioned on
reimbursement to the appropriate Trust Fund in
accordance with the succeeding provisions of
this subsection.''.
(2) Effective date.--The amendments made by paragraph (1)
shall be effective as if included in the enactment of title III
of the Medicare and Medicaid Budget Reconciliation Amendments
of 1984 (Public Law 98-369).
(b) Clarifying Amendments to Conditional Payment Provisions.--Section
1862(b)(2) (42 U.S.C. 1395y(b)(2)) is further amended--
(1) in subparagraph (A), in the matter following clause (ii),
by inserting the following sentence at the end: ``An entity
that engages in a business, trade, or profession shall be
deemed to have a self-insured plan if it carries its own risk
(whether by a failure to obtain insurance, or otherwise) in
whole or in part.'';
(2) in subparagraph (B)(ii), as redesignated by subsection
(a)(2)(B)--
(A) by striking the first sentence and inserting the
following: ``A primary plan, and an entity that
receives payment from a primary plan, shall reimburse
the appropriate Trust Fund for any payment made by the
Secretary under this title with respect to an item or
service if it is demonstrated that such primary plan
has or had a responsibility to make payment with
respect to such item or service. A primary plan's
responsibility for such payment may be demonstrated by
a judgment, a payment conditioned upon the recipient's
compromise, waiver, or release (whether or not there is
a determination or admission of liability) of payment
for items or services included in a claim against the
primary plan or the primary plan's insured, or by other
means.''; and
(B) in the final sentence, by striking ``on the date
such notice or other information is received'' and
inserting ``on the date notice of, or information
related to, a primary plan's responsibility for such
payment or other information is received''; and
(3) in subparagraph (B)(iii), , as redesignated by subsection
(a)(2)(B), by striking the first sentence and inserting the
following: ``In order to recover payment made under this title
for an item or service, the United States may bring an action
against any or all entities that are or were required or
responsible (directly, as an insurer or self-insurer, as a
third-party administrator, as an employer that sponsors or
contributes to a group health plan, or large group health plan,
or otherwise) to make payment with respect to the same item or
service (or any portion thereof) under a primary plan. The
United States may, in accordance with paragraph (3)(A) collect
double damages against any such entity. In addition, the United
States may recover under this clause from any entity that has
received payment from a primary plan or from the proceeds of a
primary plan's payment to any entity.''.
(c) Clerical Amendments.--Section 1862(b) (42 U.S.C. 1395y(b)) is
amended--
(1) in paragraph (1)(A), by moving the indentation of clauses
(ii) through (v) 2 ems to the left; and
(2) in paragraph (3)(A), by striking ``such'' before
``paragraphs''.
SEC. 302. 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--
``(i) 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
2005; and
``(II) at least \2/3\ of such areas
in 2006; and
``(ii) among items and services in a manner
such that the programs apply to the highest
cost and highest volume items and services
first.
``(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 medical
supplies.--Covered items (as defined in section
1834(a)(13)) for which payment is otherwise made under
section 1834(a), including items used in infusion and
drugs and supplies used in conjunction with durable
medical equipment, but excluding class III devices
under the Federal Food, Drug, and Cosmetic Act.
``(B) Other equipment and supplies.--Items,
equipment, and supplies (as described in section
1842(s)(2)(D) other than enteral nutrients).
``(C) 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) Exception authority.--In carrying out the programs
under this section, the Secretary may exempt--
``(A) rural areas and areas with low population
density within urban areas that are not competitive,
unless there is a significant national market through
mail order for a particular item or service; and
``(B) items and services for which the application of
competitive acquisition is not likely to result in
significant savings.
``(4) Special rule for certain rented items of durable
medical equipment.--In the case of a covered item for which
payment is made on a rental basis under section 1834(a), the
Secretary shall establish a process by which rental agreements
for the covered items entered into before the application of
the competitive acquisition program under this section for the
item may be continued notwithstanding this section. In the case
of any such continuation, the supplier involved shall provide
for appropriate servicing and replacement, as required under
section 1834(a).
``(5) Physician authorization.--The Secretary may establish a
process under which a physician may prescribe a particular
brand or mode of delivery of an item or service if the item or
service involved is clinically more appropriate than other
similar items or services.
``(6) Application.--For each competitive acquisition area in
which the program is implemented under this subsection with
respect to items and services, the payment basis determined
under the competition conducted under subsection (b) shall be
substituted for the payment basis otherwise applied under
section 1834(a).
``(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 the Program Advisory and Oversight
Committee established under subsection (c).
``(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 20
percent of the applicable contract award price,
except in such cases where a supplier has
furnished an upgraded item and has executed an
advanced beneficiary notice.
``(B) Development of quality standards for dme
products.--
``(i) In general.--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.
Not later than July 1, 2004, the Secretary
shall establish new quality standards for
products subject to competitive acquisition
under this section. Such standards shall be
applied prospectively and shall be published on
the website of the Department of Health and
Human Services.
``(ii) Consultation with program advisory and
oversight committee.--The Secretary shall
consult with the Program Advisory and Oversight
Committee (established under subsection (c)) to
review (and advise the Secretary concerning)
the quality standards referred to in clause
(i).
``(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
recompete 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 multiple entities submitting bids in each
area for an item or service.
``(5) Payment.--Payment under this part for competitively
priced items and services described in subsection (a)(2) shall
be based on the bids submitted and accepted under this section
for such items and services.
``(6) 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.
In this section, the term `bid' means a request for a proposal
for an item or service that includes the cost of the item or
service, and where appropriate, any services that are attendant
to the provision of the item or service.
``(7) Consideration in determining categories for bids.--The
Secretary shall consider the similarity of the clinical
efficiency and value of specific codes and products, including
products that may provide a therapeutic advantage to
beneficiaries, before delineating the categories and products
that will be subject to bidding.
``(8) Authority to contract for education, monitoring,
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 and
monitoring quality of services with respect to the program.
``(c) Program Advisory and Oversight Committee.--
``(1) Establishment.--There is established a Program Advisory
and Oversight Committee (hereinafter in this section referred
to as the `Committee').
``(2) Membership; terms.--The Committee shall consist of such
members as the Secretary may appoint who shall serve for such
term as the Secretary may specify.
``(3) Duties.--
``(A) Technical assistance.--The Committee shall
provide advice and technical assistance to the
Secretary with respect to the following functions:
``(i) The implementation of the program under
this section.
``(ii) The establishment of requirements for
collection of data.
``(iii) The development of proposals for
efficient interaction among manufacturers and
distributors of the items and services and
providers and beneficiaries.
``(B) Additional duties.--The Committee shall perform
such additional functions to assist the Secretary in
carrying out this section as the Secretary may specify.
``(4) Inapplicability of faca.--The provisions of the Federal
Advisory Committee Act (5 U.S.C. App.) shall not apply.
``(d) 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 beneficiary
cost-sharing, access to and quality of items and services, and
beneficiary satisfaction.
``(e) 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 by entities that did not
have a face-to-face encounter with the individual.
``(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, 2005; and
``(B) such progress and final reports on the project
after such date as the Secretary determines
appropriate.''.
(b) Conforming Amendments.--
(1) Durable medical equipment; elimination of inherent
reasonableness authority.--Section 1834(a) (42 U.S.C. 1395m(a))
is amended--
(A) in paragraph (1)(B), by striking ``The payment
basis'' and inserting ``Subject to subparagraph (E)(i),
the payment basis'';
(B) in paragraph (1)(C), by striking ``This
subsection'' and inserting ``Subject to subparagraph
(E)(ii), this subsection'';
(C) by adding at the end of paragraph (1) the
following new subparagraph:
``(E) Application of competitive acquisition;
elimination of inherent reasonableness authority.--In
the case of covered items and services that are
included in a competitive acquisition program in a
competitive acquisition area under section 1847(a)--
``(i) the payment basis under this subsection
for such items and services furnished in such
area shall be the payment basis determined
under such competitive acquisition program; and
``(ii) the Secretary may use information on
the payment determined under such competitive
acquisition programs to adjust the payment
amount otherwise recognized under subparagraph
(B)(ii) for an area that is not a competitive
acquisition area under section 1847 and in the
case of such adjustment, paragraph (10)(B)
shall not be applied.''; and
(D) in paragraph (10)(B), by inserting ``in an area
and with respect to covered items and services for
which the Secretary does not make a payment amount
adjustment under paragraph (1)(E)'' after ``under this
subsection''.
(2) Off-the-shelf orthotics; elimination of inherent
reasonableness authority.--Section 1834(h) (42 U.S.C. 1395m(h))
is amended--
(A) in paragraph (1)(B), by striking ``and (E)'' and
inserting ``, (E) , and (H)(i)'';
(B) in paragraph (1)(D), by striking ``This
subsection'' and inserting ``Subject to subparagraph
(H)(ii), this subsection'';
(C) by adding at the end of paragraph (1) the
following new subparagraph:
``(H) Application of competitive acquisition to
orthotics; elimination of inherent reasonableness
authority.--In the case of orthotics described in
paragraph (2)(B) of section 1847(a) that are included
in a competitive acquisition program in a competitive
acquisition area under such section--
``(i) the payment basis under this subsection
for such orthotics furnished in such area shall
be the payment basis determined under such
competitive acquisition program; and
``(ii) the Secretary may use information on
the payment determined under such competitive
acquisition programs to adjust the payment
amount otherwise recognized under subparagraph
(B)(ii) for an area that is not a competitive
acquisition area under section 1847, and in the
case of such adjustment, paragraphs (8) and (9)
of section 1842(b) shall not be applied.''.
(c) Report on Activities of Suppliers.--The Secretary shall conduct a
study to determine the extent to which (if any) suppliers of covered
items of durable medical equipment that are subject to the competitive
acquisition program under section 1847 of the Social Security Act, as
amended by subsection (a), are soliciting physicians to prescribe
certain brands or modes of delivery of covered items based on
profitability.
SEC. 303. COMPETITIVE ACQUISITION OF COVERED OUTPATIENT DRUGS AND
BIOLOGICALS.
(a) Adjustment to Physician Fee Schedule.--
(1) Adjustment in practice expense relative value units.--
Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended--
(A) in subparagraph (B)--
(i) in clause (ii)(II), by striking ``The
adjustments'' and inserting ``Subject to clause
(iv), the adjustments''; and
(ii) by adding at the end of subparagraph
(B), the following new clause:
``(iv) Exception to budget neutrality.--The
additional expenditures attributable to clauses
(ii) and (iii) of subparagraph (H) shall not be
taken into account in applying clause (ii)(II)
for 2005.''; and
(B) by adding at the end the following new
subparagraph:
``(H) Adjustments in practice expense relative value
units for 2004.--
``(i) In general.--As part of the annual
process of establishing the physician fee
schedule under subsection (b) for 2004, the
Secretary shall increase the practice expense
relative value units for 2004 consistent with
clauses (ii) and (iii).
``(ii) Use of supplemental survey data.--For
2004 for any specialty that submitted survey
data that included expenses for the
administration of drugs and biologicals for
which payment is made under section 1842(o) (or
section 1847A), the Secretary shall use such
supplemental survey data in carrying out this
subparagraph insofar as they are collected and
provided by entities and organizations
consistent with the criteria established by the
Secretary pursuant to section 212(a) of the
Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 and insofar as such data
are submitted to the Secretary by the date of
the enactment of this subparagraph.
``(iii) Expediting consideration of cpt codes
for affected physician specialties.--The
Secretary shall, in cooperation with
representatives of physician specialities
affected by section 1847A, take such actions as
are necessary to expedite considerations of CPT
codes, or expand the ability to appropriately
bill for physicians' services under existing
CPT codes, for costs associated with the
administration of covered outpatient drugs. The
Secretary shall consult with representatives of
advisory physician groups in expediting such
considerations.
``(iv) Subsequent, budget neutral adjustments
permitted.--Nothing in this subparagraph shall
be construed as preventing the Secretary from
providing for adjustments in practice expense
relative value units under (and consistent
with) subparagraph (B) for years after 2004.
``(v) Consultation.--Before publishing the
notice of proposed rulemaking to carry out this
subparagraph, the Secretary shall consult with
the Comptroller General of the United States
and with groups representing the physician
specialties involved.
``(vi) Treatment as change in law and
regulation in sustainable growth rate
determination.--The enactment of subparagraph
(B)(iv) and this subparagraph shall be treated
as a change in law for purposes of applying
subsection (f)(2)(D).''.
(2) Prohibition of administrative and judicial review.--
Section 1848(i)(1) (42 U.S.C. 1395w-4(i)(1)) is amended--
(A) by striking ``and'' at the end of subparagraph (D);
(B) by striking the period at the end of subparagraph (E) and
inserting ``, and''; and
(C) by adding at the end the following new subparagraph:
``(F) adjustments in practice expense relative value
units for 2005 under subsection (c)(2)(H).''.
(3) Treatment of other services currently in the non-
physician work pool.--The Secretary shall make adjustments to
the non-physician work pool methodology (as such term is used
in the regulations promulgated by the Secretary in the Federal
Register as of December 31, 2002) for determination of practice
expense relative value units under the physician fee schedule
described in section 1848(c)(2)(C)(ii) of the Social Security
Act so that the practice expense relative value units for
services determined under such methodology are not
disproportionately reduced relative to the practice expense
relative value units of other services not determined under
such non-physician work pool methodology, as the result of
amendments made by paragraph (1).
(4) Submission of practice expense survey data.--Any
physician specialty may submit survey data related to practice
expenses to the Secretary through Decmeber 31, 2004. Nothing in
this paragraph shall be construed as waiving the application of
budget neutrality under section 1848 of the Social Security
Act.
(b) Payment Based on Competition.--Title XVIII is amended by
inserting after section 1847 (42 U.S.C. 1395w-3), as amended by section
302, the following new sections:
``competitive acquisition of covered outpatient drugs and biologicals
``Sec. 1847A. (a) Implementation of Competitive Acquisition.--
``(1) Implementation of program.--
``(A) In general.--The Secretary shall establish and
implement a competitive acquisition program under
which--
``(i) competitive acquisition areas are
established throughout the United States for
contract award purposes for acquisition of and
payment for categories of covered outpatient
drugs and biologicals (as defined in paragraph
(2)) under this part; and
``(ii) each physician who does not elect
section 1847B to apply makes an annual
selection, under paragraph (5) of the
contractor through which drugs and biologicals
within a category of drugs and biologicals will
be acquired and delivered to the physician
under this part.
``(B) Implementation.--The Secretary shall implement
the program so that the program applies to--
``(i) the oncology category beginning in
2005; and
``(ii) the non-oncology category beginning in
2006.
This section shall not apply in the case of a physician
who elects section 1847B to apply.
``(C) Waiver of certain provisions.--In order to
promote competition, efficient service, and product
quality, in carrying out the program 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.
``(D) Exclusion authority.--The Secretary may exclude
covered outpatient drugs and biologicals (including a
class of such drugs and biologicals) from the
competitive bidding system under this section if the
drugs or biologicals (or class) are not appropriate for
competitive bidding due to low volume of utilization by
beneficiaries under this part or a unique mode or
method of delivery or similar reasons.
``(2) Covered outpatient drugs and biologicals, categories,
program defined.--For purposes of this section--
``(A) Covered outpatient drugs and biologicals
defined.--The term `covered outpatient drugs and
biologicals' means drugs and biologicals to which
section 1842(o) applies and which are not covered under
section 1847 (relating to competitive acquisition for
items of durable medical equipment). Such term does not
include the following:
``(i) Blood clotting factors.
``(ii) Drugs and biologicals furnished to
individuals in connection with the treatment of
end stage renal disease.
``(iii) Radiopharmaceuticals.
``(B) 2 categories.--Each of the following shall be a
separate category of covered outpatient drugs and
biologicals, as identified by the Secretary:
``(i) Oncology category.--A category (in this
section referred to as the `oncology category')
consisting of those covered outpatient drugs
and biologicals that, as determined by the
Secretary, are typically primarily billed by
oncologists or are otherwise used to treat
cancer.
``(ii) Non-oncology categories.--Such numbers
of categories (in this section referred to as
the `non-oncology categories') consisting of
covered outpatient drugs and biologicals not
described in clause (i), and appropriate
subcategories of such drugs and biologicals as
the Secretary may specify.
``(C) Program.--The term `program' means the
competitive acquisition program under this section.
``(D) Competitive acquisition area; area.--The terms
`competitive acquisition area' and `area' mean an
appropriate geographic region established by the
Secretary under the program.
``(E) Contractor.--The term `contractor' means an
entity that has entered into a contract with the
Secretary under this section.
``(3) Application of program payment methodology.--With
respect to covered outpatient drugs and biologicals which are
supplied under the program in an area and which are prescribed
by a physician who has not elected section 1847B to apply--
``(A) the claim for such drugs and biologicals shall
be submitted by the contractor that supplied the drugs
and biologicals;
``(B) collection of amounts of any deductible and
coinsurance applicable with respect to such drugs and
biologicals shall be the responsibility of such
contractor and shall not be collected unless the drug
or biological is administered to the beneficiary
involved; and
``(C) the payment under this section (and related
coinsurance amounts) for such drugs and biologicals--
``(i) shall be made only to such contractor;
``(ii) shall be conditioned upon the
administration of such drugs and biologicals;
and
``(iii) shall be based on the average of the
bid prices for such drugs and biologicals in
the area, as computed under subsection (d).
The Secretary shall provide a process for recoupment in
the case in which payment is made for drugs and
biologicals which were billed at the time of dispensing
but which were not actually administered.
``(4) Contract required.--
``(A) In general.--Payment may not be made under this
part for covered outpatient drugs and biologicals
prescribed by a physician who has not elected section
1847B to apply within a category and a competitive
acquisition area with respect to which the program
applies unless--
``(i) the drugs or biologicals are supplied
by a contractor with a contract under this
section for such category of drugs and
biologicals and area; and
``(ii) the physician has elected such
contractor under paragraph (5) for such
category and area.
``(B) Physician choice.--Subparagraph (A) shall not
apply for a category of drugs for an area if the
physician prescribing the covered outpatient drug in
such category and area has elected to apply section
1847B instead of this section.
``(5) Contractor selection process.--
``(A) In general.--The Secretary shall provide a
process for the selection of a contractor, on an annual
basis and in such exigent circumstances as the
Secretary may provide and with respect to each category
of covered outpatient drugs and biologicals for an
area, by physicians prescribing such drugs and
biologicals in the area of the contractor under this
section that will supply the drugs and biologicals
within that category and area. Such selection shall
also include the election described in section
1847B(a).
``(B) Information on contractors.--The Secretary
shall make available to physicians on an ongoing basis,
through a directory posted on the Department's Internet
website or otherwise and upon request, a list of the
contractors under this section in the different
competitive acquisition areas.
``(C) Selecting physician defined.--For purposes of
this section, the term `selecting physician' means,
with respect to a contractor and category and
competitive acquisition area, a physician who has not
elected section 1847B to apply and has selected to
apply under this section such contractor for such
category and area.
``(b) Program Requirements.--
``(1) Contract for covered outpatient drugs and
biologicals.--The Secretary shall conduct a competition among
entities for the acquisition of a covered outpatient drug or
biological within each HCPCS code within each category for each
competitive acquisition area.
``(2) Conditions for awarding contract.--
``(A) In general.--The Secretary may not award a
contract to any entity under the competition conducted
in a competitive acquisition area pursuant to paragraph
(1) with respect to the acquisition of covered
outpatient drugs and biologicals within a category
unless the Secretary finds that the entity meets all of
the following with respect to the contract period
involved:
``(i) Capacity to supply covered outpatient
drug or biological within category.--
``(I) In general.--The entity has
sufficient arrangements to acquire and
to deliver covered outpatient drugs and
biologicals within such category in the
area specified in the contract at the
bid price specified in the contract for
all physicians that may elect such
entity.
``(II) Shipment methodology.--The
entity has arrangements in effect for
the shipment at least 5 days each week
of covered outpatient drugs and
biologicals under the contract and for
the timely delivery (including for
emergency situations) of such drugs and
biologicals in the area under the
contract.
``(ii) Quality, service, financial
performance and solvency standards.--The entity
meets quality, service, financial performance,
and solvency standards specified by the
Secretary, including--
``(I) the establishment of procedures
for the prompt response and resolution
of physician and beneficiary complaints
and inquiries regarding the shipment of
covered outpatient drugs and
biologicals; and
``(II) a grievance process for the
resolution of disputes.
``(B) Additional considerations.--The Secretary may
refuse to award a contract under this section, and may
terminate such a contract, with an entity based upon--
``(i) the suspension or revocation, by the
Federal Government or a State government, of
the entity's license for the distribution of
drugs or biologicals (including controlled
substances); or
``(ii) the exclusion of the entity under
section 1128 from participation under this
title.
``(C) Application of medicare provider ombudsman.--
For provision providing for a program-wide Medicare
Provider Ombudsman to review complaints, see section
1868(b), as added by section 923 of the Medicare
Prescription Drug and Modernization Act of 2003.
``(3) Awarding multiple contracts for a category and area.--
In order to provide a choice of at least 2 contractors in each
competitive acquisition area for a category of drugs and
biologicals, the Secretary may limit (but not below 2) the
number of qualified entities that are awarded such contracts
for any category and area. The Secretary shall select among
qualified entities based on the following:
``(A) The bid prices for covered outpatient drugs and
biologicals within the category and area.
``(B) Bid price for distribution of such drugs and
biologicals.
``(C) Ability to ensure product integrity.
``(D) Customer service.
``(E) Past experience in the distribution of drugs
and biologicals, including controlled substances.
``(F) Such other factors as the Secretary may
specify.
``(4) Terms of contracts.--
``(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 consistent with this section.
``(B) Period of contracts.--A contract under this
section shall be for a term of 2 years, but may be
terminated by the Secretary or the entity with
appropriate, advance notice.
``(C) Integrity of drug and biological distribution
system.--The Secretary--
``(i) shall require that for all drug and
biological products distributed by a contractor
under this section be acquired directly from
the manufacturer or from a distributor that has
acquired the products directly from the
manufacturer; and
``(ii) may require, in the case of such
products that are particularly susceptible to
counterfeit or diversion, that the contractor
comply with such additional product integrity
safeguards as may be determined to be
necessary.
``(D) Implementation of anti-counterfeiting, quality,
safety, and record keeping requirements.--The Secretary
shall require each contractor to implement (through its
officers, agents, representatives, and employees)
requirements relating to the storage and handling of
covered outpatient drugs and biologicals and for the
establishment and maintenance of distribution records
for such drugs and biologicals. A contract under this
section may include requirements relating to the
following:
``(i) Secure facilities.
``(ii) Safe and appropriate storage of drugs
and biologicals.
``(iii) Examination of drugs and biologicals
received and dispensed.
``(iv) Disposition of damaged and outdated
drugs and biologicals.
``(v) Record keeping and written policies and
procedures.
``(vi) Compliance personnel.
``(E) Compliance with code of conduct and fraud and
abuse rules.--Under the contract--
``(i) the contractor shall comply with a code
of conduct, specified or recognized by the
Secretary, that includes standards relating to
conflicts of interest; and
``(ii) the contractor shall comply with all
applicable provisions relating to prevention of
fraud and abuse, including compliance with
applicable guidelines of the Department of
Justice and the Inspector General of the
Department of Health and Human Services.
``(F) Direct delivery of drugs and biologicals to
physicians.--Under the contract the contractor shall
only supply covered outpatient drugs and biologicals
directly to the selecting physicians and not directly
to beneficiaries, except under circumstances and
settings where a beneficiary currently receives a drug
or biological in the beneficiary's home or other non-
physician office setting as the Secretary may provide.
The contractor shall not deliver drugs and biologicals
to a selecting physician except upon receipt of a
prescription for such drugs and biologicals, and such
necessary data as may be required by the Secretary to
carry out this section. This section does not require a
physician to submit a prescription for each individual
treatment and does not change the physician's
flexibility in terms of writing a prescription for
drugs for a single treatment or a course of treatment.
``(5) Permitting access to drugs and biologicals.--The
Secretary shall establish rules under this section under which
drugs and biologicals which are acquired through a contractor
under this section may be used to resupply inventories of such
drugs and biologicals which are administered consistent with
safe drug practices and with adequate safeguards against fraud
and abuse. The previous sentence shall apply--
``(A) in cases in which the drugs or biologicals are
immediately required;
``(B) in cases in which the physician could not have
reasonably anticipated the immediate requirement for
the drugs or biologicals;
``(C) in cases in which the contractor could not
deliver to the physician the drugs or biologicals in a
timely manner; and
``(D) in emergency situations.
``(6) Construction.--Nothing in this section shall be
construed as waiving applicable State requirements relating to
licensing of pharmacies.
``(c) Bidding Process.--
``(1) In general.--In awarding a contract for a category of
drugs and biologicals in an area under the program, the
Secretary shall consider with respect to each entity seeking to
be awarded a contract the prices bid to acquire and supply the
covered outpatient drugs and biologicals for that category and
area and the other factors referred to in subsection (b)(3).
``(2) Prices bid.--The prices bid by an entity under
paragraph (1) shall be the prices in effect and available for
the supply of contracted drugs and biologicals in the area
through the entity for the contract period.
``(3) Rejection of contract offer.--The Secretary shall
reject the contract offer of an entity with respect to a
category of drugs and biologicals for an area if the Secretary
estimates that the prices bid, in the aggregate on average,
would exceed 120 percent of the average sales price (as
determined under section 1847B).
``(4) Bidding on a national or regional basis.--Nothing in
this section shall be construed as precluding a bidder from
bidding for contracts in all areas of the United States or as
requiring a bidder to submit a bid for all areas of the United
States.
``(5) Uniformity of bids within area.--The amount of the bid
submitted under a contract offer for any covered outpatient
drug or biological for an area shall be the same for that drug
or biological for all portions of that area.
``(6) Confidentiality of bids.--The provisions of
subparagraph (D) of section 1927(b)(3) shall apply to a bid
submitted in a contract offer for a covered outpatient drug or
biological under this section in the same manner as it applies
to information disclosed under such section, except that any
reference--
``(A) in that subparagraph to a `manufacturer or
wholesaler' is deemed a reference to a `bidder' under
this section;
``(B) in that section to `prices charged for drugs'
is deemed a reference to a `bid' submitted under this
section; and
``(C) in clause (i) of that section to `this
section', is deemed a reference to `part B of title
XVIII'.
``(7) Inclusion of costs.--The bid price submitted in a
contract offer for a covered outpatient drug or biological
shall--
``(A) include all costs related to the delivery of
the drug or biological to the selecting physician (or
other point of delivery); and
``(B) include the costs of dispensing (including
shipping) of such drug or biological and management
fees, but shall not include any costs related to the
administration of the drug or biological, or wastage,
spillage, or spoilage.
``(8) Price adjustments during contract period; disclosure of
costs.--Each contract awarded shall provide for--
``(A) disclosure to the Secretary the contractor's
reasonable, net acquisition costs for periods specified
by the Secretary, not more often than quarterly, of the
contract; and
``(B) appropriate price adjustments over the period
of the contract to reflect significant increases or
decreases in a contractor's reasonable, net acquisition
costs, as so disclosed.
``(d) Computation of Average Bid Prices for a Category and Area.--
``(1) In general.--For each year or other contract period for
each covered outpatient drug or biological and area with
respect to which a competition is conducted under the program,
the Secretary shall compute an area average of the bid prices
submitted, in contract offers accepted for the category and
area, for that year or other contract period.
``(2) Special rules.--The Secretary shall establish rules
regarding the use under this section of the alternative payment
amount provided under section 1847B to the use of a price for
specific covered outpatient drugs and biologicals in the
following cases:
``(A) New drugs and biologicals.--A covered
outpatient drug or biological for which an average bid
price has not been previously determined.
``(B) Other cases.--Such other exceptional cases as
the Secretary may specify in regulations.
Such alternative payment amount shall be based upon actual
market price information and in no case shall it exceed the
average sales price (as determined under section 1847B).
``(e) Coinsurance.--
``(1) In general.--Coinsurance under this part with respect
to a covered outpatient drug or biological for which payment is
payable under this section shall be based on 20 percent of the
payment basis under this section.
``(2) Collection.--Such coinsurance shall be collected by the
contractor that supplies the drug or biological involved and,
subject to subsection (a)(3)(B), in the same manner as
coinsurance is collected for durable medical equipment under
this part.
``(f) Special Payment Rules.--
``(1) In general.--The Secretary may not provide for an
adjustment to reimbursement for covered outpatient drugs and
biologicals unless adjustments to the practice expense payment
adjustment are made on the basis of supplemental surveys under
section 1848(c)(2)(H)(ii) of the Social Security Act, as added
by subsection (a)(1)(B).
``(B) Use in exclusion cases.--If the Secretary
excludes a drug or biological (or class of drugs or
biologicals) under subsection (a)(1)(D), the Secretary
may provide for reimbursement to be made under this
part for such drugs and biologicals (or class) using
the payment methodology under section 1847B or other
market based pricing system.
``(2) Coordination rules.--The provisions of section
1842(h)(3) shall apply to a contractor with respect to covered
outpatients drugs and biologicals supplied by that contractor
in the same manner as they apply to a participating supplier.
In order to administer this section, the Secretary may
condition payment under this part to a person for the
administration of a drug or biological supplied under this
section upon person's provision of information on such
administration.
``(3) Application of requirement for assignment.--For
provision requiring assignment of claims for covered outpatient
drugs and biologicals, see section 1842(o)(3).
``(4) Protection for beneficiary in case of medical necessity
denial.--For protection of beneficiaries against liability in
the case of medical necessity determinations, see section
1842(b)(3)(B)(ii)(III).
``(5) Physician role in appeals process.--The Secretary shall
establish a procedure under which a physician who prescribes a
drug or biological for which payment is made under this section
has appeal rights that are similar to those provided to a
physician who prescribes durable medical equipment or a
laboratory test.
``(g) Advisory Committee.--The Secretary shall establish an advisory
committee that includes representatives of parties affected by the
program under this section, including physicians, specialty pharmacies,
distributors, manufacturers, and beneficiaries. The committee shall
advise the Secretary on issues relating to the effective implementation
of this section.
``(h) Annual Reports.--The Secretary shall submit to Congress an
annual report in each of 2004, 2005, and 2006, on the program. Each
such report shall include information on savings, reductions in cost-
sharing, access to covered outpatient drugs and biologicals, the range
of choices of contractors available to providers, and beneficiary and
provider satisfaction.
``optional use of average sales price payment methodology
``Sec. 1847B. (a) In General.--In connection with the election made
by a physician under section 1847A(a)(5), the physician may elect to
apply this section to the payment for covered outpatient drugs instead
of the payment methodology under section 1847A. For purposes of this
section, the term `covered outpatient drug' has the meaning given such
term in section 1847A(a)(2)(A).
``(b) Computation of Payment Amount.--
``(1) In general.--If this section applies with respect to a
covered outpatient drug, the amount payable for the drug (based
on a minimum dosage unit) is, subject to applicable deductible
and coinsurance--
``(A) in the case of a multiple source drug (as
defined in subsection (c)(6)(C)), the amount determined
under paragraph (3); or
``(B) in the case of a single source drug (as defined
in subsection (c)(6)(D)), the amount determined under
paragraph (4).
``(2) Specification of unit.--
``(A) Specification by manufacturer.--The
manufacturer of a covered outpatient drug shall specify
the unit associated with each National Drug Code as
part of the submission of data under section
1927(b)(3)(A)(iii).
``(B) Unit defined.--In this section, the term `unit'
means, with respect to a covered outpatient drug, the
lowest identifiable quantity (such as a capsule or
tablet, milligram of molecules, or grams) of the drug
that is dispensed, exclusive of any diluent without
reference to volume measures pertaining to liquids.
``(3) Multiple source drug.--For all drug products included
within the same multiple source drug, the amount specified in
this paragraph is the volume-weighted average of the average
sales prices reported under section 1927(b)(3)(A)(iii) computed
as follows:
``(A) Compute the sum of the products (for each
national drug code assigned to such drug products) of--
``(i) the manufacturer's average sales price
(as defined in subsection (c)); and
``(ii) the total number of units specified
under paragraph (2) sold, as reported under
section 1927(b)(3)(A)(iii).
``(B) Divide the sum computed under subparagraph (A)
by the sum of the total number of units under
subparagraph (A)(ii) for all national drug codes
assigned to such drug products.
``(4) Single source drug.--The amount specified in this
paragraph for a single source drug is the lesser of the
following:
``(A) Manufacturer's average sales price.--The
manufacturer's average sales price for a national drug
code, as computed using the methodology applied under
paragraph (3).
``(B) Wholesale acquisition cost (wac).--The
wholesale acquisition cost (as defined in subsection
(c)(6)(B)) reported for the single source drug.
``(5) Basis for determination.--The payment amount shall be
determined under this subsection based on information reported
under subsection (e) and without regard to any special
packaging, labeling, or identifiers on the dosage form or
product or package.
``(c) Manufacturer's Average Sales Price.--
``(1) In general.--For purposes of this subsection, subject
to paragraphs (2) and (3), the manufacturer's `average sales
price' means, of a covered outpatient drug for a NDC code for a
calendar quarter for a manufacturer for a unit--
``(A) the manufacturer's total sales (as defined by
the Secretary in regulations for purposes of section
1927(c)(1)) in the United States for such drug in the
calendar quarter; divided by
``(B) the total number of such units of such drug
sold by the manufacturer in such quarter.
``(2) Certain sales exempted from computation.--In
calculating the manufacturer's average sales price under this
subsection, the following sales shall be excluded:
``(A) Sales exempt from best price.--Sales exempt
from the inclusion in the determination of `best price'
under section 1927(c)(1)(C)(i).
``(B) Sales at nominal charge.--Such other sales as
the Secretary identifies by regulation as sales to an
entity that are nominal in price or do not reflect a
market price paid by an entity to which payment is made
under this section.
``(3) Sale price net of discounts.--In calculating the
manufacturer's average sales price under this subsection, such
price shall be determined taking into account volume discounts,
prompt pay discounts, cash discounts, the free goods that are
contingent on any purchase requirement, chargebacks, and
rebates (other than rebates under section 1927), that result in
a reduction of the cost to the purchaser. A rebate to a payor
or other entity that does not take title to a covered
outpatient drug shall not be taken into account in determining
such price unless the manufacturer has an agreement with the
payor or other entity under which the purchaser's price for the
drug is reduced as a consequence of such rebate.
``(4) Authority to disregard average sales price during first
quarter of sales.--In the case of a covered outpatient drug
during an initial period (not to exceed a full calendar
quarter) in which data on the prices for sales for the drug is
not sufficiently available from the manufacturer to compute an
average sales price for the drug, the Secretary may determine
the amount payable under this section for the drug without
considering the manufacturer's average sales price of that
manufacturer for that drug.
``(5) Frequency of determinations.--
``(A) In general on a quarterly basis.--The
manufacturer's average sales price, for a covered
outpatient drug of a manufacturer, shall be determined
by such manufacturer under this subsection on a
quarterly basis. In making such determination insofar
as there is a lag in the reporting of the information
on rebates and chargebacks under paragraph (3) so that
adequate data are not available on a timely basis, the
manufacturer shall apply a methodology established by
the Secretary based on a 12-month rolling average for
the manufacturer to estimate costs attributable to
rebates and chargebacks.
``(B) Updates in rates.--The payment rates under
subsection (b)(1) and (b)(2)(A) shall be updated by the
Secretary on a quarterly basis and shall be applied
based upon the manufacturer's average sales price
determined for the most recent calendar quarter.
``(C) Use of contractors; implementation.--The
Secretary may use a carrier, fiscal intermediary, or
other contractor to determine the payment amount under
subsection (b). Notwithstanding any other provision of
law, the Secretary may implement, by program memorandum
or otherwise, any of the provisions of this section.
``(6) Definitions and other rules.--In this section:
``(A) Manufacturer.--The term `manufacturer' means,
with respect to a covered outpatient drug, the
manufacturer (as defined in section 1927(k)(5)) whose
national drug code appears on such drug.
``(ii) Wholesale acquisition cost.--The term
`wholesale acquisition cost' means, with respect to a
covered outpatient drug, the manufacturer's list price
for the drug to wholesalers or direct purchasers in the
United States, not including prompt pay or other
discounts, rebates or reductions in price, for the most
recent month for which the information is available, as
reported in wholesale price guides or other
publications of drug pricing data.
``(C) Multiple source drug.--The term `multiple
source drug' means, for a calendar quarter, a covered
outpatient drug for which there are 2 or more drug
products which--
``(i) are rated as therapeutically equivalent
(under the Food and Drug Administration's most
recent publication of `Approved Drug Products
with Therapeutic Equivalence Evaluations'),
``(ii) except as provided in subparagraph
(E), are pharmaceutically equivalent and
bioequivalent, as determined under subparagraph
(F) and as determined by the Food and Drug
Administration, and
``(iii) are sold or marketed in the United
States during the quarter.
``(D) Single source drug.--The term `single source
drug' means a covered outpatient drug which is not a
multiple source drug and which is produced or
distributed under an original new drug application
approved by the Food and Drug Administration, including
a drug product marketed by any cross-licensed producers
or distributors operating under the new drug
application, or which is a biological.
``(E) Exception from pharmaceutical equivalence and
bioequivalence requirement.--Subparagraph (C)(ii) shall
not apply if the Food and Drug Administration changes
by regulation the requirement that, for purposes of the
publication described in subparagraph (C)(i), in order
for drug products to be rated as therapeutically
equivalent, they must be pharmaceutically equivalent
and bioequivalent, as defined in subparagraph (F).
``(F) Determination of pharmaceutical equivalence and
bioequivalence.--For purposes of this paragraph--
``(i) drug products are pharmaceutically
equivalent if the products contain identical
amounts of the same active drug ingredient in
the same dosage form and meet compendial or
other applicable standards of strength,
quality, purity, and identity; and
``(ii) drugs are bioequivalent if they do not
present a known or potential bioequivalence
problem, or, if they do present such a problem,
they are shown to meet an appropriate standard
of bioequivalence.
``(G) Inclusion of vaccines.--In applying provisions
of section 1927 under this section, `other than a
vaccine' is deemed deleted from section 1927(k)(2)(B).
``(d) Monitoring price information.--
``(1) In general.--The Secretary shall monitor available
pricing information, including information on average sales
price and average manufacturer price.
``(2) Response to significant discrepancies.--
``(A) Report to congress.--If the Secretary finds
that there are significant discrepancies among such
prices and that the manufacturer's average sales price
does not reflect a broad-based market price or a
reasonable approximation of the acquisition cost of the
covered outpatient drug involved to purchasers
reimbursed under this section, the Secretary shall
submit to Congress a report.
``(B) Confidentiality of information reported.--
Consistent with requirements relating to maintaining
the confidentiality of information reported on
manufacturer's average prices under section
1927(b)(3)(D), such report shall include details
regarding such discrepancies and recommendations on how
to best address such discrepancies. Such report shall
not disclose average manufacturer prices or average
sales prices.
``(C) Recommendations.--Such recommendations may
include other changes in payment methodology.
``(D) Authority to modify payment methodology by
rule.--Upon submission of such report, the Secretary
may commence a rulemaking to change such percent or
payment methodologies under paragraph (1)(D) and (2) as
applied to the covered outpatient drug involved under
this section.
``(3) Response to public health emergency.--In the case of a
public health emergency under section 319 of the Public Health
Service Act in which there is a documented inability to access
covered outpatient drugs, and a concomitant increase in the
price, of a drug which is not reflected in the manufacturer's
average sales price for one or more quarters, the Secretary may
use the wholesale acquisition cost (or other reasonable measure
of drug price) instead of the manufacturer's average sales
price for such quarters and for subsequent quarters until the
price and availability of the drug has stabilized and is
substantially reflected in the applicable manufacturer's
average sales price.
``(4) Annual report to congress.--The Secretary shall submit
to the Committees on Energy and Commerce and Ways and Means of
the House of Representatives and the Committee on Finance of
the Senate an annual report on the operation of this section.
Such report shall be submitted in coordination with the
submission of reports under section 1927(i). Such report shall
include information on the following:
``(A) Trends in average sales price under subsection
(b).
``(B) Administrative costs associated with compliance
with this section.
``(C) Total value of payments made under this
section.
``(D) Comparison of the average manufacturer price as
applied under section 1927 for a covered outpatient
drug with the manufacturer's average sales price for
the drug under this section.
``(e) Reports on pricing information.--
``(1) Reference to reporting requirement on average sales
price.--For requirements for reporting the manufacturer's
average sales price (and, if required to make payment, the
manufacturer's wholesale acquisition cost) for the covered
outpatient drug, see section 1927(b)(3).
``(2) MedPAC review.--The Medicare Payment Advisory
Commission shall periodically review the payment methodology
established under this section and submit to Congress such
recommendations on such methodology as it deems appropriate as
part of its annual reports to Congress.
``(3) Construction.--Nothing in this subsection shall be
construed as authorizing the Secretary to review for purposes
of this section information reported only under section
1927(b)(3).
``(f) Restriction on administrative and judicial review.--There shall
be no administrative or judicial review under section 1869, section
1878, or otherwise, of determinations of manufacturer's average sales
price under subsection (c).''.
(c) Continuation of Payment Methodology for Radiopharmaceuticals.--
Nothing in the amendments made by this section shall be construed as
changing the payment methodology under part B of title XVIII of the
Social Security Act for radiopharmaceuticals, including the use by
carriers of invoice pricing methodology.
(d) Conforming Amendments.--
(1) In general.--Section 1842(o) (42 U.S.C. 1395u(o)) is
amended--
(A) in paragraph (1), by inserting ``, subject to
section 1847A and 1847B,'' before ``the amount payable
for the drug or biological''; and
(B) by adding at the end of paragraph (2) the
following: ``This paragraph shall not apply in the case
of payment under section 1847A or 1847B.''.
(2) No change in coverage basis.--Section 1861(s)(2)(A) (42
U.S.C. 1395x(s)(2)(A)) is amended by inserting ``(or would have
been so included but for the application of section 1847A or
1847B)'' after ``included in the physicians' bills''.
(3) Payment.--Section 1833(a)(1)(S) (42 U.S.C.
1395l(a)(1)(S)) is amended by inserting ``(or, if applicable,
under section 1847A or 1847B)'' after ``1842(o)''.
(4) Consolidated reporting of pricing information.--Section
1927 (42 U.S.C. 1396r-8) is amended--
(A) in subsection (a)(1), by inserting ``or under
part B of title XVIII'' after ``section 1903(a)'';
(B) in subsection (b)(3)(A)--
(i) in clause (i), by striking ``and'' at the
end;
(ii) in clause (ii), by striking the period
and inserting ``; and''; and
(iii) by adding at the end the following new
clause:
``(iii) for calendar quarters beginning on or
after April 1, 2004, in conjunction with
reporting required under clause (i) and by
national drug code (NDC)--
``(I) the manufacturer's average
sales price (as defined in section
1847B(c)) and the total number of units
specified under section 1847B(b)(2)(A);
``(II) if required to make payment
under section 1847B, the manufacturer's
wholesale acquisition cost, as defined
in subsection (c)(6) of such section;
and
``(III) information on those sales
that were made at a nominal price or
otherwise described in section
1847B(c)(2)(B), which information is
subject to audit by the Inspector
General of the Department of Health and
Human Services;
for a covered outpatient drug for which payment
is made under section 1847B.'';
(C) in subsection (b)(3)(B)--
(i) in the heading, by inserting ``and
manufacturer's average sales price'' after
``price''; and
(ii) by inserting ``and manufacturer's
average sales prices (including wholesale
acquisition cost) if required to make payment''
after ``manufacturer prices''; and
(D) in subsection (b)(3)(D)(i), by inserting ``and
section 1847B'' after ``this section''.
(e) GAO Study.--
(1) Study.--The Comptroller General of the United States
shall conduct a study to assess the impact of the amendments
made by this section on the delivery of services, including
their impact on--
(A) beneficiary access to drugs and biologicals for
which payment is made under part B of title XVIII of
the Social Security Act; and
(B) the site of delivery of such services.
(2) Report.--Not later than 2 years after the year in which
the amendment made by subsection (a)(1) first takes effect, the
Comptroller General shall submit to Congress a report on the
study conducted under paragraph (1).
(f) MedPAC Recommendations on Blood Clotting Factors.--The Medicare
Payment Advisory Commission shall submit to Congress, in its annual
report in 2004, specific recommendations regarding a payment amount (or
amounts) for blood clotting factors and its administration under the
medicare program.
(g) Establishment of Pharmaceutical Management Fee Where Drugs
Provided Through a Contractor.--Section 1848(a) (42 U.S.C. 1395w-4(a))
is amended by adding at the end the following new paragraph:
``(5) Recognition of pharmaceutical management fee in certain
cases.--In establishing the fee schedule under this section,
the Secretary shall provide for a separate payment with respect
to physicians' services consisting of the unique administrative
and management costs associated with covered drugs and
biologicals which are furnished to physicians through a
contractor under section 1847A (compared with such costs if
such drugs and biologicals were acquired directly by such
physicians).''.
SEC. 304. 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
underpayments and overpayments and recouping overpayments under the
medicare program for services for which payment is made under part A or
part B 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.--
(1) Scope.--The project shall cover at least 2 States that
are among the States with--
(A) the highest per capita utilization rates of
medicare services, and
(B) at least 3 contractors.
(2) Duration.--The project 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 the appropriate clinical 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 risk entities that the Secretary determines
have demonstrated more than 3 years direct management
experience and a proficiency in recovery audits with private
insurers or under the medicaid program under title XIX of such
Act.
(e) Construction Relating to Conduct of Investigation of Fraud.--A
recovery of an overpayment to a provider by a recovery audit contractor
shall not be construed to prohibit the Secretary or the Attorney
General from investigating and prosecuting, if appropriate, allegations
of fraud or abuse arising from such overpayment.
(f) 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 IV--RURAL HEALTH CARE IMPROVEMENTS
SEC. 401. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) TREATMENT FOR
RURAL HOSPITALS AND URBAN HOSPITALS WITH FEWER THAN
100 BEDS.
(a) Doubling the Cap.--
(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, 2003, 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 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).''.
(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, 2003.
SEC. 402. IMMEDIATE ESTABLISHMENT OF UNIFORM STANDARDIZED AMOUNT IN
RURAL AND SMALL URBAN AREAS.
(a) In General.--Section 1886(d)(3)(A) (42 U.S.C. 1395ww(d)(3)(A)) is
amended--
(1) in clause (iv), by inserting ``and ending on or before
September 30, 2003,'' after ``October 1, 1995,''; and
(2) by redesignating clauses (v) and (vi) as clauses (vii)
and (viii), respectively, and inserting after clause (iv) the
following new clauses:
``(v) For discharges occurring in the fiscal year beginning
on October 1, 2003, the average standardized amount for
hospitals located in areas other than a large urban area shall
be equal to the average standardized amount for hospitals
located in a large urban area.''.
(b) Conforming Amendments.--
(1) Computing drg-specific rates.--Section 1886(d)(3)(D) (42
U.S.C. 1395ww(d)(3)(D)) is amended--
(A) in the heading, by striking ``in different
areas'';
(B) in the matter preceding clause (i), by striking
``, each of'';
(C) in clause (i)--
(i) in the matter preceding subclause (I), by
inserting ``for fiscal years before fiscal year
2004,'' before ``for hospitals''; and
(ii) in subclause (II), by striking ``and''
after the semicolon at the end;
(D) in clause (ii)--
(i) in the matter preceding subclause (I), by
inserting ``for fiscal years before fiscal year
2004,'' before ``for hospitals''; and
(ii) in subclause (II), by striking the
period at the end and inserting ``; and''; and
(E) by adding at the end the following new clause:
``(iii) for a fiscal year beginning after fiscal year
2003, for hospitals located in all areas, to the
product of--
``(I) the applicable standardized amount
(computed under subparagraph (A)), reduced
under subparagraph (B), and adjusted or reduced
under subparagraph (C) for the fiscal year; and
``(II) the weighting factor (determined under
paragraph (4)(B)) for that diagnosis-related
group.''.
(2) Technical conforming sunset.--Section 1886(d)(3) (42
U.S.C. 1395ww(d)(3)) is amended--
(A) in the matter preceding subparagraph (A), by
inserting ``, for fiscal years before fiscal year
1997,'' before ``a regional adjusted DRG prospective
payment rate''; and
(B) in subparagraph (D), in the matter preceding
clause (i), by inserting ``, for fiscal years before
fiscal year 1997,'' before ``a regional DRG prospective
payment rate for each region,''.
SEC. 403. ESTABLISHMENT OF ESSENTIAL RURAL HOSPITAL CLASSIFICATION.
(a) Classification.--Section 1861(mm) (42 U.S.C. 1395x(mm)) is
amended--
(1) in the heading by adding ``Essential Rural Hospitals'' at
the end; and
(2) by adding at the end the following new paragraphs:
``(4)(A) The term `essential rural hospital' means a subsection (d)
hospital (as defined in section 1886(d)(1)(B)) that is located in a
rural area (as defined for purposes of section 1886(d)), has more than
25 licensed acute care inpatient beds, has applied to the Secretary for
classification as such a hospital, and with respect to which the
Secretary has determined that the closure of the hospital would
significantly diminish the ability of medicare beneficiaries to obtain
essential health care services.
``(B) The determination under subparagraph (A) shall be based on the
following criteria:
``(i) High proportion of medicare beneficiaries receiving
care from hospital.--(I) A high percentage of such
beneficiaries residing in the area of the hospital who are
hospitalized (during the most recent year for which complete
data are available) receive basic inpatient medical care at the
hospital.
``(II) For a hospital with more than 200 licensed beds, a
high percentage of such beneficiaries residing in such area who
are hospitalized (during such recent year) receive specialized
surgical inpatient care at the hospital.
``(III) Almost all physicians described in section 1861(r)(1)
in such area have privileges at the hospital and provide their
inpatient services primarily at the hospital.
``(ii) Significant adverse impact in absence of hospital.--If
the hospital were to close--
``(I) there would be a significant amount of time
needed for residents to reach emergency treatment,
resulting in a potential significant harm to
beneficiaries with critical illnesses or injuries;
``(II) there would be an inability in the community
to stablize emergency cases for transfers to another
acute care setting, resulting in a potential for
significant harm to medicare beneficiaries; and
``(III) any other nearby hospital lacks the physical
and clinical capacity to take over the hospital's
typical admissions.
``(C) In making such determination, the Secretary may also consider
the following:
``(i) Free-standing ambulatory surgery centers, office-based
oncology care, and imaging center services are insufficient in
the hospital's area to handle the outpatient care of the
hospital.
``(ii) Beneficiaries in nearby areas would be adversely
affected if the hospital were to close as the hospital provides
specialized knowledge and services to a network of smaller
hospitals and critical access hospitals.
``(iii) Medicare beneficiaries would have difficulty in
accessing care if the hospital were to close as the hospital
provides significant subsidies to support ambulatory care in
local clinics, including mental health clinics and to support
post acute care.
``(iv) The hospital has a committment to provide graduate
medical education in a rural area.
``(C) Quality care.--The hospital inpatient score for quality
of care is not less than the median hospital score for qualify
of care for hospitals in the State, as established under
standards of the utilization and quality control peer review
organization under part B of title XI or other quality
standards recognized by the Secretary.
A hospital classified as an essential rural hospital may not change
such classification and a hospital so classified shall not be treated
as a sole community hospital, medicare dependent hospital, or rural
referral center for purposes of section 1886.''.
(b) Payment Based on 102 Percent of Allowed Costs.--
(1) Inpatient hospital services.--Section 1886(d) (42 U.S.C.
1395ww(d)) is amended by adding at the end the following:
``(11) In the case of a hospital classified as an essential rural
hospital under section 1861(mm)(4) for a cost reporting period, the
payment under this subsection for inpatient hospital services for
discharges occurring during the period shall be based on 102 percent of
the reasonable costs for such services. Nothing in this paragraph shall
be construed as affecting the application or amount of deductibles or
copayments otherwise applicable to such services under part A or as
waiving any requirement for billing for such services.''.
(2) Hospital outpatient services.--Section 1833(t)(13) (42
U.S.C. 1395l(t)(13)) is amended by adding at the end the
following new subparagraph:
``(B) Special rule for essential rural hospitals.--In
the case of a hospital classified as an essential rural
hospital under section 1861(mm)(4) for a cost reporting
period, the payment under this subsection for covered
OPD services during the period shall be based on 102
percent of the reasonable costs for such services.
Nothing in this subparagraph shall be construed as
affecting the application or amount of deductibles or
copayments otherwise applicable to such services under
this part or as waiving any requirement for billing for
such services.''.
(c) Effective Date.--The amendments made by this section shall apply
to cost reporting periods beginning on or after October 1, 2004.
SEC. 404. 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, including the labor share, 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, 2004, 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. 405. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.
(a) Increase in Payment Amounts.--
(1) In general.--Sections 1814(l), 1834(g)(1), and 1883(a)(3)
(42 U.S.C. 1395f(l); 1395m(g)(1); 42 U.S.C. 1395tt(a)(3)) are
each amended by inserting ``equal to 102 percent of'' before
``the reasonable costs''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to payments for services furnished during cost
reporting periods beginning on or after October 1, 2003.
(b) Coverage of Costs for Certain Emergency Room On-Call Providers.--
(1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5))
is amended--
(A) in the heading--
(i) by inserting ``certain'' before
``emergency''; and
(ii) by striking ``physicians'' and inserting
``providers'';
(B) by striking ``emergency room physicians who are
on-call (as defined by the Secretary)'' and inserting
``physicians, physician assistants, nurse
practitioners, and clinical nurse specialists who are
on-call (as defined by the Secretary) to provide
emergency services''; and
(C) by striking ``physicians' services'' and
inserting ``services covered under this title''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply with respect to costs incurred for services
provided on or after January 1, 2004.
(c) Modification of the Isolation Test for Cost-Based CAH Ambulance
Services.--
(1) In general.--Section 1834(l)(8) (42 U.S.C. 1395m(l)), as
added by section 205(a) of BIPA (114 Stat. 2763A-482), is
amended by adding at the end the following: ``The limitation
described in the matter following subparagraph (B) in the
previous sentence shall not apply if the ambulance services are
furnished by such a provider or supplier of ambulance services
who is a first responder to emergencies (as determined by the
Secretary).''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to ambulances services furnished on or after the
first cost reporting period that begins after the date of the
enactment of this Act.
(d) Reinstatement of Periodic Interim Payment (PIP).--
(1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2))
is amended--
(A) in the matter before subparagraph (A), by
inserting ``, in the cases described in subparagraphs
(A) through (D)'' after ``1986''; and
(B) by striking ``and'' at the end of subparagraph
(C);
(C) by adding ``and'' at the end of subparagraph (D);
and
(D) by inserting after subparagraph (D) the following
new subparagraph:
``(E) inpatient critical access hospital services;''.
(2) Development of alternative methods of periodic interim
payments.--With respect to periodic interim payments to
critical access hospitals for inpatient critical access
hospital services under section 1815(e)(2)(E) of the Social
Security Act, as added by paragraph (1), the Secretary shall
develop alternative methods for such payments that are based on
expenditures of the hospital.
(3) Reinstatement of pip.--The amendments made by paragraph
(1) shall apply to payments made on or after January 1, 2004.
(e) Condition for Application of Special Physician Payment
Adjustment.--
(1) In general.--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.''.
(2) Effective date.--The amendment made by paragraph (1)
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).
(f) Flexibility in Bed Limitation for Hospitals.--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.--Subject to subparagraph (C), in
the case of a hospital that demonstrates that it meets
the standards established under subparagraph (B) and
has not made the election described in subsection
(f)(2)(A), 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)--
(A) by inserting ``(1)'' after ``(f)''; and
(B) by adding at the end the following new paragraph:
``(2)(A) A hospital may elect to treat the reference in paragraph (1)
to `15 beds' as a reference to `25 beds', but only if no more than 10
beds in the hospital are at any time used for non-acute care services.
A hospital that makes such an election is not eligible for the increase
provided under subsection (c)(3)(A).
``(B) The limitations in numbers of beds under the first sentence of
paragraph (1) are subject to adjustment under subsection (c)(3).''.
(4) Effective date.--The amendments made by this subsection
shall apply to designations made before, on, or after January
1, 2004.
(g) Additional 5-Year Period of Funding for Grant Program.--
(1) In general.--Section 1820(g) (42 U.S.C. 1395i-4(g)) is
amended by adding at the end the following new paragraph:
``(4) Funding.--
``(A) In general.--Subject to subparagraph (B),
payment for grants made under this subsection during
fiscal years 2004 through 2008 shall be made from the
Federal Hospital Insurance Trust Fund.
``(B) Annual aggregate limitation.--In no case may
the amount of payment provided for under subparagraph
(A) for a fiscal year exceed $25,000,000.''.
(2) Conforming amendment.--Section 1820 (42 U.S.C. 1395i-4)
is amended by striking subsection (j).
SEC. 406. 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, 2004, 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,
2002.
``(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, 2003.
``(V) Affiliation.--With respect to
hospitals which are members of the same
affiliated group (as defined by the
Secretary under subparagraph (H)(ii)),
the provisions of this section shall be
applied with respect to such an
affiliated group by deeming the
affiliated group to be a single
hospital.
``(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, 2004,
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, 2005.
``(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) Conforming Amendment 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 subparagraph (I) of subsection (h)(4) shall apply
with respect to the first sentece of this clause in the same manner as
it applies with respect to subparagraph (F) of such subsection.''.
(c) Report on Extension of Applications Under Redistribution
Program.--Not later than July 1, 2005, 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)).
SEC. 407. TWO-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR SMALL
RURAL HOSPITALS AND SOLE COMMUNITY HOSPITALS UNDER
PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.
(a) Hold Harmless Provisions.--
(1) In general.--Section 1833(t)(7)(D)(i) (42 U.S.C.
1395l(t)(7)(D)(i)) is amended--
(A) in the heading, by striking ``small'' and
inserting ``certain'';
(B) by inserting ``or a sole community hospital (as
defined in section 1886(d)(5)(D)(iii)) located in a
rural area'' after ``100 beds''; and
(C) by striking ``2004'' and inserting ``2006''.
(2) Effective date.--The amendment made by subsection (a)(2)
shall apply with respect to payment for OPD services furnished
on and after January 1, 2004.
(b) Study; Adjustment.--
(1) Study.--The Secretary shall conduct a study to determine
if, under the prospective payment system for hospital
outpatient department services under section 1833(t) of the
Social Security Act (42 U.S.C. 1395l(t)), costs incurred by
rural providers of services by ambulatory payment
classification groups (APCs) exceed those costs incurred by
urban providers of services.
(2) Adjustment.--Insofar as the Secretary determines under
paragraph (1) that costs incurred by rural providers exceed
those costs incurred by urban providers of services, the
Secretary shall provide for an appropriate adjustment under
such section 1833(t) to reflect those higher costs by January
1, 2005.
SEC. 408. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND FEDERALLY
QUALIFIED HEALTH CENTER SERVICES FROM THE
PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING
FACILITIES.
(a) In General.--Section 1888(e)(2)(A) (42 U.S.C. 1395yy(e)(2)(A)) is
amended--
(1) in clause (i)(II), by striking ``clauses (ii) and (iii)''
and inserting ``clauses (ii), (iii), and (iv)''; and
(2) by adding at the end the following new clause:
``(iv) Exclusion of certain rural health
clinic and federally qualified health center
services.--Services described in this clause
are--
``(I) rural health clinic services
(as defined in paragraph (1) of section
1861(aa)); and
``(II) Federally qualified health
center services (as defined in
paragraph (3) of such section);
that would be described in clause (ii) if such
services were not furnished by an individual
affiliated with a rural health clinic or a
Federally qualified health center.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to services furnished on or after January 1, 2004.
SEC. 409. RECOGNITION OF ATTENDING NURSE PRACTITIONERS AS ATTENDING
PHYSICIANS TO SERVE HOSPICE PATIENTS.
(a) In General.--Section 1861(dd)(3)(B) (42 U.S.C. 1395x(dd)(3)(B))
is amended by inserting ``or nurse practitioner (as defined in
subsection (aa)(5))'' after ``the physician (as defined in subsection
(r)(1))''.
(b) Prohibition on Nurse Practitioner Certifying Need for Hospice.--
Section 1814(a)(7)(A)(i)(I) (42 U.S.C. 1395f(a)(7)(A)(i)(I)) is amended
by inserting ``(which for purposes of this subparagraph does not
include a nurse practitioner)'' after ``attending physician (as defined
in section 1861(dd)(3)(B))''.
SEC. 410. IMPROVEMENT IN PAYMENTS TO RETAIN EMERGENCY CAPACITY FOR
AMBULANCE SERVICES IN RURAL AREAS.
Section 1834(l) (42 U.S.C. 1395m(l)) is amended--
(1) by redesignating paragraph (8), as added by section
221(a) of BIPA (114 Stat. 2763A-486), as paragraph (9); and
(2) by adding at the end the following new paragraph:
``(10) Assistance for rural providers furnishing services in
low medicare population density areas.--
``(A) In general.--In the case of ground ambulance
services furnished on or after January 1, 2004, for
which the transportation originates in a qualified
rural area (as defined in subparagraph (B)), the
Secretary shall provide for an increase in the base
rate of the fee schedule for mileage for a trip
established under this subsection. In establishing such
increase, the Secretary shall, based on the
relationship of cost and volume, estimate the average
increase in cost per trip for such services as compared
with the cost per trip for the average ambulance
service.
``(B) Qualified rural area defined.--For purposes of
subparagraph (A), the term `qualified rural area' is a
rural area (as defined in section 1886(d)(2)(D)) with a
population density of medicare beneficiaries residing
in the area that is in the lowest quartile of all rural
county populations.''.
SEC. 411. TWO-YEAR INCREASE FOR HOME HEALTH SERVICES FURNISHED IN A
RURAL AREA.
(a) 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))) during 2004 and 2005, the Secretary
shall increase the payment amount otherwise made under section 1895 of
such Act (42 U.S.C. 1395fff ) for such services by 5 percent.
(b) Waiving Budget Neutrality.--The Secretary shall not reduce the
standard prospective payment amount (or amounts) under section 1895 of
the Social Security Act (42 U.S.C. 1395fff ) applicable to home health
services furnished during a period to offset the increase in payments
resulting from the application of subsection (a).
SEC. 412. 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. 413. 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. 414. TREATMENT OF MISSING COST REPORTING PERIODS FOR SOLE
COMMUNITY HOSPITALS.
(a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 1395ww(b)(3)(I)) is
amended by adding at the end the following new clause:
``(iii) In no case shall a hospital be denied treatment as a sole
community hospital or payment (on the basis of a target rate as such as
a hospital) because data are unavailable for any cost reporting period
due to changes in ownership, changes in fiscal intermediaries, or other
extraordinary circumstances, so long as data for at least one
applicable base cost reporting period is available.''.
(b) Effective Date.--The amendment made by subsection (a) shall apply
to cost reporting periods beginning on or after January 1, 2004.
SEC. 415. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.
Section 4207 of Balanced Budget Act of 1997 (Public Law 105-33) is
amended--
(1) in subsection (a)(4), by striking ``4-year'' and
inserting ``8-year''; and
(2) in subsection (d)(3), by striking ``$30,000,000'' and
inserting ``$60,000,000''.
SEC. 416. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL PPS WAGE INDEX
TO REVISE THE LABOR-RELATED SHARE OF SUCH INDEX.
(a) In General.--Section 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)) is
amended--
(1) by striking ``wage levels.--The Secretary'' and inserting
``wage levels.--
``(i) In general.--Except as provided in clause (ii),
the Secretary''; and
(2) by adding at the end the following new clause:
``(ii) Alternative proportion to be adjusted
beginning in fiscal year 2004.--
``(I) In general.--Except as provided in
subclause (II), for discharges occurring on or
after October 1, 2003, the Secretary shall
substitute the `62 percent' for the proportion
described in the first sentence of clause (i).
``(II) Hold harmless for certain hospitals.--
If the application of subclause (I) would
result in lower payments to a hospital than
would otherwise be made, then this subparagraph
shall be applied as if this clause had not been
enacted.''.
(b) Waiving Budget Neutrality.--Section 1886(d)(3)(E) (42 U.S.C.
1395ww(d)(3)(E)), as amended by subsection (a), is amended by adding at
the end of clause (i) the following new sentence: ``The Secretary shall
apply the previous sentence for any period as if the amendments made by
section 402(a) of the Medicare Prescription Drug and Modernization Act
of 2003 had not been enacted.''.
SEC. 417. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS FOR PHYSICIAN
SCARCITY.
(a) Additional Bonus Payment for Certain Physician Scarcity Areas.--
(1) In general.--Section 1833 (42 U.S.C. 1395l) is amended by
adding at the end the following new subsection:
``(u) Incentive Payments for Physician Scarcity Areas.--
``(1) In general.--In the case of physicians' services
furnished in a year--
``(A) by a primary care physician in a primary care
scarcity county (identified under paragraph (4)); or
``(B) by a physician who is not a primary care
physician in a specialist care scarcity county (as so
identified),
in addition to the amount of payment that would otherwise be
made for such services under this part, there also shall be
paid an amount equal to 5 percent of the payment amount for the
service under this part.
``(2) Determination of ratios of physicians to medicare
beneficiaries in area.--Based upon available data, the
Secretary shall periodically determine, for each county or
equivalent area in the United States, the following:
``(A) Number of physicians practicing in the area.--
The number of physicians who furnish physicians'
services in the active practice of medicine or
osteopathy in that county or area, other than
physicians whose practice is exclusively for the
Federal Government, physicians who are retired, or
physicians who only provide administrative services. Of
such number, the number of such physicians who are--
``(i) primary care physicians; or
``(ii) physicians who are not primary care
physicians.
``(B) Number of medicare beneficiaries residing in
the area.--The number of individuals who are residing
in the county and are entitled to benefits under part A
or enrolled under this part, or both.
``(C) Determination of ratios.--
``(i) Primary care ratio.--The ratio (in this
paragraph referred to as the `primary care
ratio') of the number of primary care
physicians (determined under subparagraph
(A)(i)), to number of medicare beneficiaries
determined under subparagraph (B).
``(ii) Specialist care ratio.--The ratio (in
this paragraph referred to as the `specialist
care ratio') of the number of other physicians
(determined under subparagraph (A)(ii)), to
number of medicare beneficiaries determined
under subparagraph (B).
``(3) Ranking of counties.--The Secretary shall rank each
such county or area based separately on its primary care ratio
and its specialist care ratio.
``(4) Identification of counties.--The Secretary shall
identify--
``(A) those counties and areas (in this paragraph
referred to as `primary care scarcity counties') with
the lowest primary care ratios that represent, if each
such county or area were weighted by the number of
medicare beneficiaries determined under paragraph
(2)(B), an aggregate total of 20 percent of the total
of the medicare beneficiaries determined under such
paragraph; and
``(B) those counties and areas (in this subsection
referred to as `specialist care scarcity counties')
with the lowest specialist care ratios that represent,
if each such county or area were weighted by the number
of medicare beneficiaries determined under paragraph
(2)(B), an aggregate total of 20 percent of the total
of the medicare beneficiaries determined under such
paragraph.
There is no administrative or judicial review respecting the
identification of a county or area or the assignment of a
specialty of any physician under this paragraph.
``(5) Rural census tracks.--To the extent feasible, the
Secretary shall treat 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) as an equivalent area for purposes of qualifying as
a primary care scarcity county or specialist care scarcity
county under this subsection.
``(6) Physician Defined.--For purposes of this paragraph, the
term `physician' means a physician described in section
1861(r)(1) and the term `primary care physician' means a
physician who is identified in the available data as a general
practitioner, family practice practitioner, general internist,
or obstetrician or gynecologist.
``(7) Publication of list of counties.--In carrying out this
subsection for a year, the Secretary shall include, as part of
the proposed and final rule to implement the physician fee
schedule under section 1848 for the year, a list of all areas
which will qualify as a primary care scarcity county or
specialist care scarcity county under this subsection for the
year involved.''.
(2) Effective date.--The amendments made by subsection (a)
shall apply to physicians' services furnished or after January
1, 2004.
(b) Improvement to Medicare Incentive Payment Program.--
(1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is
amended--
(A) by inserting ``(1)'' after ``(m)''; and
(B) by adding at the end the following new
paragraphs:
``(2) The Secretary shall establish procedures under which the
Secretary, and not the physician furnishing the service, is responsible
for determining when a payment is required to be made under paragraph
(1).
``(3) In carrying out paragraph (1) for a year, the Secretary shall
include, as part of the proposed and final rule to implement the
physician fee schedule under section 1848 for the year, a list of all
areas which will qualify as a health professional shortage area under
paragraph (1) for the year involved.''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to physicians' services furnished or after January
1, 2004.
TITLE V--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
SEC. 501. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.
Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended--
(1) by striking ``and'' at the end of subclause (XVIII);
(2) by striking subclause (XIX); and
(3) by inserting after subclause (XVIII) the following new
subclauses:
``(XIX) for each of fiscal years 2004 through 2006, the
market basket percentage increase minus 0.4 percentage points
for hospitals in all areas; and
``(XX) for fiscal year 2007 and each subsequent fiscal year,
the market basket percentage increase for hospitals in all
areas.''.
SEC. 502. 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 for Technology Outliers.--
(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
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 75
percent of 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
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. Nothing in this subclause shall be construed as effecting the
authority of the Secretary to determine whether items and services are
medically necessary and appropriate under section 1862(a)(1).''.
(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, the new technology would no
longer meet the threshold of exceeding 75 percent of the standard
deviation for the diagnosis-related group involved under clause
(ii)(I). 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) Establishment of New Funding for Hospital Inpatient Technology.--
Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) is
amended by striking ``subject to paragraph (4)(C)(iii),''.
(f) 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 2005.
(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 2004 and that is denied--
(A) the Secretary shall automatically reconsider the
application as an application for fiscal year 2005
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. 503. INCREASE IN 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) on or after October 1, 1987, and before October 1,
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 41 percent and the applicable Federal percentage
is 59 percent;
``(iv) during fiscal year 2005, the applicable Puerto Rico
percentage is 33 percent and the applicable Federal percentage
is 67 percent; and
``(v) on or after October 1, 2005, the applicable Puerto Rico
percentage is 25 percent and the applicable Federal percentage
is 75 percent.''.
SEC. 504. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM .
(a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by
adding at the end the following:
``(11)(A) In order to recognize commuting patterns among Metropolitan
Statistical Areas and between such Areas and rural areas, the Secretary
shall establish a process, upon application of a subsection (d)
hospital that establishes that it is a qualifying hospital described in
subparagraph (B), for an increase of the wage index applied under
paragraph (3)(E) for the hospital in the amount computed under
subparagraph (D).
``(B) A qualifying hospital described in this subparagraph is a
subsection (d) hospital--
``(i) the average wages of which exceed the average wages for
the area in which the hospital is located; and
``(ii) which has at least 10 percent of its employees who
reside in one or more higher wage index areas.
``(C) For purposes of this paragraph, the term `higher wage index
area' means, with respect to a hospital, an area with a wage index that
exceeds that of the area in which the hospital is located.
``(D) The increase in the wage index under subparagraph (A) for a
hospital shall be equal to the percentage of the employees of the
hospital that resides in any higher wage index area multiplied by the
sum of the products, for each higher wage index area of--
``(i) the difference between (I) the wage index for such
area, and (II) the wage index of the area in which the hospital
is located (before the application of this paragraph); and
``(ii) the number of employees of the hospital that reside in
such higher wage index area divided by the total number of such
employees that reside in all high wage index areas.
``(E) The process under this paragraph shall be based upon the
process used by the Medicare Geographic Classification Review Board
under paragraph (10) with respect to data submitted by hospitals to the
Board on the location of residence of hospital employees and wages
under the applicable schedule established for geographic
reclassification.
``(F) A reclassification under this paragraph shall be effective for
a period of 3 fiscal years, except that the Secretary shall establish
procedures under which a subsection (d) hospital may elect to terminate
such reclassification before the end of such period.
``(G) A hospital that is reclassified under this paragraph for a
period is not eligible for reclassification under paragraphs (8) or
(10) during that period.
``(H) Any increase in a wage index under this paragraph for a
hospital shall not be taken into account for purposes of--
``(i) computing the wage index for the area in which the
hospital is located or any other area; or
``(ii) applying any budget neutrality adjustment with respect
to such index under paragraph (8)(D).''.
(b) Effective Date.--The amendment made by subsection (a) shall first
apply to the wage index for cost reporting period beginning on or after
October 1, 2004.
SEC. 505. MEDPAC REPORT ON SPECIALTY HOSPITALS.
(a) MedPAC Study.--The Medicare Payment Advisory Commission shall
conduct a study of specialty hospitals compared with other similar
general acute care hospitals under the medicare program. Such study
shall examine--
(1) whether there are excessive self-referrals;
(2) quality of care furnished;
(3) the impact of specialty hospitals on such general acute
care hospitals; and
(4) differences in the scope of services, medicaid
utilization, and uncompensated care furnished.
(b) Report.--Not later than 1 year after the date of the enactment of
this Act, the Secretary shall submit to Congress a report on the study
conducted under subsection (a), and shall include any recommendations
for legislation or administrative change as the Secretary determines
appropriate.
Subtitle B--Other Provisions
SEC. 511. PAYMENT FOR COVERED SKILLED NURSING FACILITY SERVICES.
(a) Adjustment to RUGs for AIDS Residents.--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.''.
(b) Effective Date.--The amendment made by paragraph (1) shall apply
to services furnished on or after October 1, 2003.
SEC. 512. 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.
TITLE VI--PROVISIONS RELATING TO PART B
Subtitle A--Physicians' Services
SEC. 601. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.
(a) Update for 2004 and 2005.--
(1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is
amended by adding at the end the following new paragraph:
``(5) Update for 2004 and 2005.--The update to the single
conversion factor established in paragraph (1)(C) for each of
2004 and 2005 shall be not less than 1.5 percent.''.
(2) Conforming amendment.--Paragraph (4)(B) of such section
is amended, in the matter before clause (i), by inserting ``and
paragraph (5)'' 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 2003.
SEC. 602. 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.
(c) GAO Study of Medicare Payment for Inhalation Therapy.--
(1) Study.--The Comptroller General of the United States
shall conduct a study to examine the adequacy of current
reimbursements for inhalation therapy under the medicare
program.
(2) Report.--Not later than May 1, 2004, the Comptroller
General shall submit to Congress a report on the study
conducted under paragraph (1).
SEC. 603. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.
(a) Practice Expense Component.--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, 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.
(b) Volume of Physician Services.--The Medicare Payment Advisory
Commission shall submit to Congress a report on the extent to which
increases in the volume of physicians' services under part B of the
medicare program are a result of care that improves the health and
well-being of medicare beneficiaries. The study shall include the
following:
(1) An analysis of recent and historic growth in the
components that the Secretary includes under the sustainable
growth rate (under section 1848(f) of the Social Security Act).
(2) An examination of the relative growth of volume in
physician services between medicare beneficiaries and other
populations.
(3) An analysis of the degree to which new technology,
including coverage determinations of the Centers for Medicare &
Medicaid Services, has affected the volume of physicians'
services.
(4) An examination of the impact on volume of demographic
changes.
(5) An examination of shifts in the site of service of
services that influence the number and intensity of services
furnished in physicians' offices and the extent to which
changes in reimbursement rates to other providers have affected
these changes.
(6) An evaluation of the extent to which the Centers for
Medicare & Medicaid Services takes into account the impact of
law and regulations on the sustainable growth rate.
Subtitle B--Preventive Services
SEC. 611. 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 (excluding clinical laboratory tests), as determined by the
Secretary, consistent with the recommendations of the United States
Preventive Services Task Force.''.
(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. 612. COVERAGE OF CHOLESTEROL AND BLOOD LIPID SCREENING.
(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as amended
by section 611(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 611(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 611(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, 2005.
SEC. 613. WAIVER OF DEDUCTIBLE FOR COLORECTAL CANCER SCREENING TESTS.
(a) In General.--The first sentence of section 1833(b) (42 U.S.C.
1395l(b)), as amended by section 611(c)(1), is amended--
(1) by striking ``and'' before ``(7)''; and
(2) by inserting before the period at the end the following:
``, and (8) such deductible shall not apply with respect to
colorectal cancer screening tests (as described in section
1861(pp)(1))''.
(b) Conforming Amendments.--Paragraphs (2)(C)(ii) and (3)(C)(ii) of
section 1834(d) (42 U.S.C. 1395m(d)) are each amended--
(1) by striking ``deductible and'' in the heading; and
(2) in subclause (I), by striking ``deductible or'' each
place it appears.
(c) Effective Date.--The amendment made by this section shall apply
to items and services furnished on or after Janaury 1, 2004.
SEC. 614. 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.
Subtitle C--Other Services
SEC. 621. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT REFORM.
(a) Payment for Drugs.--
(1) Modification of ambulatory payment classification (apc)
groups.--Section 1833(t) (42 U.S.C. 1395l(t)) is amended--
(A) by redesignating paragraph (13) as paragraph
(14); and
(B) by inserting after paragraph (12) the following
new paragraph:
``(13) Drug apc payment rates.--
``(A) In general.--With respect to payment for
covered OPD services that includes a specified covered
outpatient drug (defined in subparagraph (B)), the
amount provided for payment for such drug under the
payment system under this subsection for services
furnished in--
``(i) 2004, 2005, or 2006, shall in no case--
``(I) exceed 95 percent of the
average wholesale price for the drug;
or
``(II) be less than the transition
percentage (under subparagraph (C)) of
the average wholesale price for the
drug; or
``(ii) a subsequent year, shall be equal to
the average price for the drug for that area
and year established under the competitive
acquisition program under section 1847A as
calculated and applied by the Secretary for
purposes of this paragraph.
``(B) Specified covered outpatient drug defined.--
``(i) In general.--In this paragraph, the
term `specified covered outpatient drug' means,
subject to clause (ii), a covered outpatient
drug (as defined in 1927(k)(2), that is--
``(I) a radiopharmaceutical; or
``(II) a drug or biological for which
payment was made under paragraph (6)
(relating to pass-through payments) on
or before December 31, 2002.
``(ii) Exception.--Such term does not
include--
``(I) a drug for which payment is
first made on or after January 1, 2003,
under paragraph (6); or
``(II) a drug for a which a temporary
HCPCS code has not been assigned.
``(C) Transition towards historical average
acquisition cost.--The transition percentage under this
subparagraph for drugs furnished in a year is
determined in accordance with the following table:
The transition percentage for--
For the year-- Innovator
Single source multiple source Generic drugs
drugs are-- drugs are-- are--
2004......................................................... 83% 81.5% 46%
2005......................................................... 77% 75% 46%
2006......................................................... 71% 68% 46%
``(D) Payment for new drugs until temporary hcpcs
code assigned.--With respect to payment for covered OPD
services that includes a covered outpatient drug (as
defined in 1927(k)) for a which a temporary HCPCS code
has not been assigned, the amount provided for payment
for such drug under the payment system under this
subsection shall be equal to 95 percent of the average
wholesale price for the drug.
``(E) Classes of drugs.--For purposes of this
paragraph, each of the following shall be treated as a
separate class of drugs:
``(i) Sole source drugs.--A sole source drug
which for purposes of this paragraph means a
drug or biological that is not a multiple
source drug (as defined in subclauses (I) and
(II) of section 1927(k)(7)(A)(i)) and is not a
drug approved under an abbreviated new drug
application under section 355(j) of the Federal
Food, Drug, and Cosmetic Act.
``(ii) Innovator multiple source drugs.--
Innovator multiple source drugs (as defined in
section 1927(k)(7)(A)(ii)).
``(iii) Noninnovator multiple source drugs.--
Noninnovator multiple source drugs (as defined
in section 1927(k)(7)(A)(iii)).
``(F) Inapplicability of expenditures in determining
conversion factors.--Additional expenditures resulting
from this paragraph and paragraph (14)(C) in a year
shall not be taken into account in establishing the
conversion factor for that year.''.
(2) Reduction in threshold for separate apcs for drugs.--
Section 1833(t)(14), as redesignated by paragraph (1)(A), is
amended by adding at the end the following new subparagraph:
``(B) Threshold for establishment of separate apcs
for drugs.--The Secretary shall reduce the threshold
for the establishment of separate ambulatory procedure
classification groups (APCs) with respect to drugs to
$50 per administration.''.
(3) Exclusion of separate drug apcs from outlier payments.--
Section 1833(t)(5) is amended by adding at the end the
following new subparagraph:
``(E) Exclusion of separate drug apcs from outlier
payments.--No additional payment shall be made under
subparagraph (A) in the case of ambulatory procedure
codes established separately for drugs.''.
(4) Payment for pass through drugs.--Clause (i) of section
1833(t)(6)(D) (42 U.S.C. 1395l(t)(6)(D)) is amended by
inserting after ``under section 1842(o)'' the following: ``(or
if the drug is covered under a competitive acquisition contract
under section 1847A for an area, an amount determined by the
Secretary equal to the average price for the drug for that area
and year established under such section as calculated and
applied by the Secretary for purposes of this paragraph)''.
(5) Effective date.--The amendments made by this subsection
shall apply to services furnished on or after January 1, 2004.
(b) Special Payment for Brachytherapy.--
(1) In general.--Section 1833(t)(14), as so redesignated and
amended by subsection (a)(2), is amended by adding at the end
the following new subparagraph:
``(C) Payment for devices of brachytherapy at charges
adjusted to cost.--Notwithstanding the preceding
provisions of this subsection, for a device of
brachytherapy furnished on or after January 1, 2004,
and before January 1, 2007, the payment basis for the
device under this subsection shall be equal to the
hospital's charges for each device furnished, adjusted
to cost.''.
(2) Specification of groups for brachytherapy devices.--
Section 1833(t)(2) (42 U.S.C. 1395l(t)(2) is amended--
(A) in subparagraph (F), by striking ``and'' at the
end;
(B) in subparagraph (G), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(H) with respect to devices of brachytherapy, the
Secretary shall create additional groups of covered OPD
services that classify such devices separately from the
other services (or group of services) paid for under
this subsection in a manner reflecting the number,
isotope, and radioactive intensity of such devices
furnished, including separate groups for palladium-103
and iodine-125 devices.''.
(3) GAO report.--The Comptroller General of the United States
shall conduct a study to determine appropriate payment amounts
under section 1833(t)(13)(B) of the Social Security Act, as
added by paragraph (1), for devices of brachytherapy. Not later
than January 1, 2005, the Comptroller General shall submit to
Congress and the Secretary a report on the study conducted
under this paragraph, and shall include specific
recommendations for appropriate payments for such devices.
(c) Application of Functional Equivalence Test.--
(1) In general.--Section 1833(t)(6) (42 U.S.C. 1395l(t)(6))
is amended by adding at the end the following new subparagraph:
``(F) Limitation on application of functional
equivalence standard.--The Secretary may not apply a
`functional equivalence' payment standard (including
such standard promulgated on November 1, 2002) or any
other similar standard in order to deem a particular
drug or biological to be identical to or similar to
another drug or biological with respect to its
mechanism of action or clinical effect to deny pass-
through status to new drugs or biologics or to remove
such status of an existing eligible drug or biologic
under this paragraph unless--
``(i) the Secretary develops by regulation
(after providing notice and a period for public
comment) criteria for the application of such
standard; and
``(ii) such criteria provide for coordination
with the Federal Food and Drug Administration
and require scientific studies that show the
clinical relationship between the drugs or
biologicals treated as functionally
equivalent.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to the application of a functional equivalence
standard to a drug or biological on or after the date of the
enactment of this Act, unless such application was being made
to such drug or biological prior to June 13, 2003.
(d) Hospital Acquisition Cost Study.--
(1) In general.--The Secretary shall conduct a study on the
costs incurred by hospitals in acquiring covered outpatient
drugs for which payment is made under section 1833(t) of the
Social Security Act (42 U.S.C. 1395l(t)).
(2) Drugs covered.--The study in paragraph (1) shall not
include those drugs for which the acquisition costs is less
than $50 per administration.
(3) Representative sample of hospitals.--In conducting the
study under paragraph (1), the Secretary shall collect data
from a statistically valid sample of hospitals with an urban/
rural stratification.
(4) Report.--Not later than January 1, 2006, the Secretary
shall submit to Congress a report on the study conducted under
paragraph (1), and shall include recommendations with respect
to the following:
(A) Whether the study should be repeated, and if so,
how frequently.
(B) Whether the study produced useful data on
hospital acquisition cost.
(C) Whether data produced in the study is appropriate
for use in making adjustments to payments for drugs and
biologicals under section 1847A of the Social Security
Act.
(D) Whether separate estimates can made of overhead
costs, including handing and administering costs for
drugs.
SEC. 622. 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)), as amended by
section 410(a), is amended--
(1) in paragraph (2)(E), by inserting ``consistent with
paragraph (11)'' after ``in an efficient and fair manner''; and
(2) by adding at the end the following new paragraph:
``(11) 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,
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 2004, 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 2005, 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 2006, 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 2007, 2008, and 2009, the blended rate
shall be based 80 percent on the fee schedule under
paragraph (1) and 20 percent on the regional fee
schedule.
``(E) For 2010 and each succeeding year, the blended
rate shall be based 100 percent on the fee schedule
under paragraph (1).
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:
``(12) Adjustment in payment for certain long trips.--In the
case of ground ambulance services furnished on or after January
1, 2004, and before January 1, 2009, 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) GAO Report on Costs and Access.--Not later than December 31,
2005, the Comptroller General of the United States shall submit to
Congress an initial report on how costs differ among the types of
ambulance providers and on access, supply, and quality of ambulance
services in those regions and States that have a reduction in payment
under the medicare ambulance fee schedule (under section 1834(l) of the
Social Security Act, as amended by this section). Not later than
December 31, 2007, the Comptroller General shall submit to Congress a
final report on such access and supply.
(d) Effective Date.--The amendments made by this section shall apply
to ambulance services furnished on or after January 1, 2004.
SEC. 623. RENAL DIALYSIS SERVICES.
(a) Demonstration of Alternative Delivery Models.--
(1) Use of advisory board.--In carrying out the demonstration
project relating to improving care for people with end-stage
renal disease through alternative delivery models (as published
in the Federal Register of June 4, 2003), the Secretary shall
establish an advisory board comprised of representatives
described in paragraph (2) to provide advice and
recommendations with respect to the establishment and operation
of such demonstration project.
(2) Representatives.--Representatives referred to in
paragraph (1) include representatives of the following:
(A) Patient organizations.
(B) Clinicians.
(C) The medicare payment advisory commission,
established under section 1805 of the Social Security
Act (42 U.S.C. 1395b-6).
(D) The National Kidney Foundation.
(E) The National Institute of Diabetes and Digestive
and Kidney Diseases of National Institutes of Health.
(F) End-stage renal disease networks.
(G) Medicare contractors to monitor quality of care.
(I) providers of services and renal dialysis
facilities furnishing end-stage renal disease services.
(J) Economists.
(K) Researchers.
(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)), as amended by subsection
(b), is further amended by striking ``Until'' and inserting
``Subject to section 422(a)(2) of the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000, and
until''.
(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 1.6 percent.
SEC. 624. ONE-YEAR MORATORIUM ON THERAPY CAPS; PROVISIONS RELATING TO
REPORTS.
(a) 1-Year Moratorium on Therapy Caps.--Section 1833(g)(4) (42 U.S.C.
1395l(g)(4)) is amended by striking ``and 2002'' and inserting ``2002,
and 2004''.
(b) Prompt Submission of Overdue Reports on Payment and Utilization
of Outpatient Therapy Services.--Not later than December 31, 2003, 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.--
(A) Preliminary report.--Not later than July 1, 2004,
the Secretary shall submit to Congress a preliminary
report on the conditions and diseases identified under
paragraph (1).
(B) Final report.--Not later than September 1, 2004,
the Secretary shall submit to Congress a final report
on such conditions and diseases.
(C) Recommendations.--Not later than October 1, 2004,
the Secretary shall submit to Congress a recommendation
of criteria, with respect to such conditions and
disease, under which a waiver of the therapy caps would
apply.
(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. 625. ADJUSTMENT TO PAYMENTS FOR SERVICES FURNISHED IN AMBULATORY
SURGICAL CENTERS.
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended in the
last sentence by inserting ``and each of fiscal years 2004 through
2008'' after ``In each of the fiscal years 1998 through 2002''.
SEC. 626. PAYMENT FOR CERTAIN SHOES AND INSERTS UNDER THE FEE SCHEDULE
FOR ORTHOTICS AND PROSTHETICS.
(a) In General.--Section 1833(o) (42 U.S.C. 1395l(o)) is amended--
(1) in paragraph (1), by striking ``no more than the limits
established under paragraph (2)'' and inserting ``no more than
the amount of payment applicable under paragraph (2)''; and
(2) in paragraph (2), to read as follows:
``(2)(A) Except as provided by the Secretary under subparagraphs (B)
and (C), the amount of payment under this paragraph for custom molded
shoes, extra depth shoes, and inserts shall be the amount determined
for such items by the Secretary under section 1834(h).
``(B) The Secretary or a carrier may establish payment amounts for
shoes and inserts that are lower than the amount established under
section 1834(h) if the Secretary finds that shoes and inserts of an
appropriate quality are readily available at or below the amount
established under such section.
``(C) In accordance with procedures established by the Secretary, an
individual entitled to benefits with respect to shoes described in
section 1861(s)(12) may substitute modification of such shoes instead
of obtaining one (or more, as specified by the Secretary) pair of
inserts (other than the original pair of inserts with respect to such
shoes). In such case, the Secretary shall substitute, for the payment
amount established under section 1834(h), a payment amount that the
Secretary estimates will assure that there is no net increase in
expenditures under this subsection as a result of this subparagraph.''.
(b) Conforming Amendments.--(1) Section 1834(h)(4)(C) (42 U.S.C.
1395m(h)(4)(C)) is amended by inserting ``(and includes shoes described
in section 1861(s)(12))'' after ``in section 1861(s)(9)''.
(2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is amended by striking
subparagraph (C).
(c) Effective Date.--The amendments made by this section shall apply
to items furnished on or after January 1, 2004.
SEC. 627. 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, 2003, or 2004 and
who demonstrates to the Secretary before December 31, 2004,
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 2004.
The Secretary of Health and Human Services shall establish a
method for providing rebates of premium penalties paid for
months on or after January 2004 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, 2004.
(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. 628. PART B DEDUCTIBLE.
Section 1833(b) (42 U.S.C. 1395l(b)) is amended--
(1) by striking ``1991 and'' and inserting ``1991,''; and
(2) by striking ``and subsequent years'' and inserting ``and
each subsequent year through 2003, and for a subsequent year
after 2003 the amount of such deductible for the previous year
increased by the annual percentage increase in the monthly
actuarial rate under section 1839(a)(1) ending with such
subsequent year (rounded to the nearest $1)''.
SEC. 629. EXTENSION OF COVERAGE OF INTRAVENOUS IMMUNE GLOBULIN (IVIG)
FOR THE TREATMENT OF PRIMARY IMMUNE DEFICIENCY
DISEASES IN THE HOME.
(a) In General.--Section 1861 (42 U.S.C. 1395x), as amended by
sections 611(a) and 612(a) is amended--
(1) in subsection (s)(2)--
(A) by striking ``and'' at the end of subparagraph
(W);
(B) by adding ``and'' at the end of subparagraph (X);
and
(C) by adding at the end the following new
subparagraph:
``(Y) intravenous immune globulin for the treatment
of primary immune deficiency diseases in the home (as
defined in subsection (yy));''; and
(2) by adding at the end the following new subsection:
``Intravenous Immune Globulin
``(yy) The term `intravenous immune globulin' means an approved
pooled plasma derivative for the treatment in the patient's home of a
patient with a diagnosed primary immune deficiency disease, but not
including items or services related to the administration of the
derivative, if a physician determines administration of the derivative
in the patient's home is medically appropriate.''.
(b) Payment as a Drug or Biological.--Section 1833(a)(1)(S) (42
U.S.C. 1395l(a)(1)(S)) is amended by inserting ``(including intravenous
immune globulin (as defined in section 1861(yy)))'' after ``with
respect to drugs and biologicals''.
(c) Effective Date.--The amendments made by this section shall apply
to items furnished administered on or after January 1, 2004.
TITLE VII--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
SEC. 701. UPDATE IN HOME HEALTH SERVICES.
(a) Change to Calender 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 fiscal year 2003 and for each
subsequent year (beginning with 2004)''; and
(ii) by inserting ``or year'' after ``the
fiscal year'';
(B) in paragraph (3)(B)(ii)(II), by striking ``any
subsequent fiscal year'' and inserting ``2004 and any
subsequent year'';
(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, 2003,
shall be such amount (or amounts) for the previous calendar
quarter.
(b) Changes in Updates for 2004, 2005, and 2006.--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) by striking ``or'' at the end of subclause (I);
(2) by redesignating subclause (II) as subclause (III);
(3) in subclause (III), as so redesignated, by striking
``2004'' and inserting ``2007''; and
(4) by inserting after subclause (I) the following new
subclause:
``(II) each of 2004, 2005, and 2006
the home health market basket
percentage increase minus 0.4
percentage points; or''.
SEC. 702. 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 2004) shall be
reduced by a copayment equal to the copayment amount specified in
subparagraph (B)(ii) for such year.
``(ii) The copayment under clause (i) shall not apply--
``(I) in the case of an individual who has been determined to
be entitled to medical assistance under section 1902(a)(10)(A)
or 1902(a)(10)(C) or to be a qualified medicare beneficiary (as
defined in section 1905(p)(1)), a specified low-income medicare
beneficiary described in section 1902(a)(10)(E)(iii), or a
qualifying individual described in section
1902(a)(10)(E)(iv)(I); 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 2004), 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 2004
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. 703. 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. 711. 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 inserting ``and 2004 through 2013'' after
``and 2002''; and
(B) by inserting ``or during the period beginning
with fiscal year 2004 and ending with fiscal year
2013'' after ``during fiscal year 2001 or fiscal year
2002''; and
(2) in subclause (II)--
(A) by striking ``fiscal year 2004, or fiscal year
2005,'' and
(B) by striking ``For a'' and inserting ``For the''.
Subtitle C--Chronic Care Improvement
SEC. 721. VOLUNTARY CHRONIC CARE IMPROVEMENT UNDER TRADITIONAL FEE-FOR-
SERVICE.
Title XVIII, as amended by section 105(a), is amended by inserting
after section 1807 the following new section:
``chronic care improvement
``Sec. 1808. (a) In General.--
``(1) In general.--The Secretary shall establish a process
for providing chronic care improvement programs in each CCIA
region for medicare beneficiaries who are not enrolled under
part C or E and who have certain chronic conditions, such as
congestive heart failure, diabetes, chronic obstructive
pulmonary disease (COPD), stroke, or other disease as
identified by the Secretary as appropriate for chronic care
improvement. Such a process shall begin to be implemented no
later than 1 year after the date of the enactment of this
section.
``(2) Terminology.--For purposes of this section:
``(A) CCIA region.--The term `CCIA region' means a
chronic care improvement administrative region
delineated under subsection (b)(2).
``(B) Chronic care improvement program.--The terms
`chronic care improvement program' and `program' means
such a program provided by a contractor under this
section.
``(C) Contractor.--The term `contractor' means an
entity with a contract to provide a chronic care
improvement program in a CCIA region under this
section.
``(D) Individual plan.--The term `individual plan'
means a chronic care improvement plan established under
subsection (c)(5) for an individual.
``(3) Construction.--Nothing in this section shall be
construed as expanding the amount, duration, or scope of
benefits under this title.
``(b) Competitive Bidding Process.--
``(1) In general.--Under this section the Secretary shall
award contracts to qualified entities for chronic care
improvement programs for each CCIA region under this section
through a competitive bidding process.
``(2) Process.--Under such process--
``(A) the Secretary shall delineate the United States
into multiple chronic care improvement administrative
regions; and
``(B) the Secretary shall select at least 2 winning
bidders in each CCIA region on the basis of the ability
of each bidder to carry out a chronic care improvement
program in accordance with this section, in order to
achieve improved health and financial outcomes.
``(3) Eligible contractor.--A contractor may be a disease
improvement organization, health insurer, provider
organization, a group of physicians, or any other legal entity
that the Secretary determines appropriate.
``(c) Chronic Care Improvement Programs.--
``(1) In general.--Each contract under this section shall
provide for the operation of a chronic care improvement program
by a contractor in a CCIA region consistent with this
subsection.
``(2) Identification of prospective program participants.--
Each contractor shall have a method for identifying medicare
beneficiaries in the region to whom it will offer services
under its program. The contractor shall identify such
beneficiaries through claims or other data and other means
permitted consistent with applicable disclosure provisions.
``(3) Initial contact by secretary.--The Secretary shall
communicate with each beneficiary identified under paragraph
(2) as a prospective participant in one or more programs
concerning participation in a program. Such communication may
be made by the Secretary (or on behalf of the Secretary) and
shall include information on the following:
``(A) A description of the advantages to the
beneficiary in participating in a program.
``(B) Notification that the contractor offering a
program may contact the beneficiary directly concerning
such participation.
``(C) Notification that participation in a program is
voluntary.
``(D) A description of the method for the beneficiary
to select the single program in which the beneficiary
wishes to participate and for declining to participate
and a method for obtaining additional information
concerning such participation.
``(4) Participation.--A medicare beneficiary may participate
in only one program under this section and may terminate
participation at any time in a manner specified by the
Secretary.
``(5) Individual chronic care improvement plans.--
``(A) In general.--For each beneficiary participating
in a program of a contractor under this section, the
contractor shall develop with the beneficiary an
individualized, goal-oriented chronic care improvement
plan.
``(B) Elements of individual plan.--Each individual
plan developed under subparagraph (A) shall include a
single point of contact to coordinate care and the
following, as appropriate:
``(i) Self-improvement education for the
beneficiary and support education for health
care providers, primary caregivers, and family
members.
``(ii) Coordination of health care services,
such as application of a prescription drug
regimen and home health services.
``(iii) Collaboration with physicians and
other providers to enhance communication of
relevant clinical information.
``(iv) The use of monitoring technologies
that enable patient guidance through the
exchange of pertinent clinical information,
such as vital signs, symptomatic information,
and health self-assessment.
``(v) The provision of information about
hospice care, pain and palliative care, and
end-of-life care.
``(C) Contractor responsibilities.--In establishing
and carrying out individual plans under a program, a
contractor shall, directly or through subcontractors--
``(i) guide participants in managing their
health, including all their co-morbidities, and
in performing activities as specified under the
elements of the plan;
``(ii) use decision support tools such as
evidence-based practice guidelines or other
criteria as determined by the Secretary; and
``(iii) develop a clinical information
database to track and monitor each participant
across settings and to evaluate outcomes.
``(6) Additional requirements.--The Secretary may establish
additional requirements for programs and contractors under this
section.
``(7) Accreditation.--The Secretary may provide that programs
that are accredited by qualified organizations may be deemed to
meet such requirements under this section as the Secretary may
specify.
``(c) Contract Terms.--
``(1) In general.--A contract under this section shall
contain such terms and conditions as the Secretary may specify
consistent with this section. The Secretary may not enter into
a contract with an entity under this section unless the entity
meets such clinical, quality improvement, financial, and other
requirements as the Secretary deems to be appropriate for the
population to be served.
``(2) Use of subcontractors permitted.--A contractor may
carry out a program directly or through contracts with
subcontractors.
``(3) Budget neutral payment condition.--In entering into a
contract with an entity under this subsection, the Secretary
shall establish payment rates that assure that there will be no
net aggregate increase in payments under this title over any
period of 3 years or longer, as agreed to by the Secretary.
Under this section, the Secretary shall assure that medicare
program outlays plus administrative expenses (that would not
have been paid under this title without implementation of this
section), including contractor fees, shall not exceed the
expenditures that would have been incurred under this title for
a comparable population in the absence of the program under
this section for the 3-year contract period.
``(4) At risk relationship.--For purposes of section
1128B(b)(3)(F), a contract under this section shall be treated
as a risk-sharing arrangement referred to in such section.
``(5) Performance standards.--Payment to contractors under
this section shall be subject to the contractor's meeting of
clinical and financial performance standards set by the
Secretary.
``(6) Contractor outcomes report.--Each contractor offering a
program shall monitor and report to the Secretary, in a manner
specified by the Secretary, the quality of care and efficacy of
such program in terms of--
``(A) process measures, such as reductions in errors
of treatment and rehospitalization rates;
``(B) beneficiary and provider satisfaction;
``(C) health outcomes; and
``(D) financial outcomes.
``(7) Phased in implementation.--Nothing in this section
shall be construed as preventing the Secretary from phasing in
the implementation of programs.
``(d) Biannual Outcomes Reports.--The Secretary shall submit to the
Congress biannual reports on the implementation of this section. Each
such report shall include information on--
``(1) the scope of implementation (in terms of both regions
and chronic conditions);
``(2) program design; and
``(3) improvements in health outcomes and financial
efficiencies that result from such implementation.
``(e) Clinical Trials.--The Secretary shall conduct randomized
clinical trials, that compare program participants with medicare
beneficiaries who are offered, but decline, to participate, in order to
assess the potential of programs to--
``(1) reduce costs under this title; and
``(2) improve health outcomes under this title.
``(f) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary, in appropriate part from the Hospital
Insurance Trust Fund and the Supplementary Medical Insurance Trust
Fund, such sums as may be necessary to provide for contracts with
chronic care improvement programs under this section.
``(g) Limitation on Funding.--In no case shall the funding under this
section exceed $100,000,000 over a period of 3 years.''.
SEC. 722. CHRONIC CARE IMPROVEMENT UNDER MEDICARE ADVANTAGE AND
ENHANCED FEE-FOR-SERVICE PROGRAMS.
(a) Under Medicare Advantage Program.--Section 1852 (42 U.S.C. 1395w-
22) is amended--
(1) by amending subsection (e) to read as follows:
``(e) Implementation of Chronic Care Improvement Programs for
Beneficiaries with Multiple or Sufficiently Severe Chronic
Conditions.--
``(1) In general.--Each Medicare Advantage organization with
respect to each Medicare Advantage plan it offers shall have in
effect, for enrollees with multiple or sufficiently severe
chronic conditions, a chronic care improvement program that is
designed to manage the needs of such enrollees and that meets
the requirements of this subsection.
``(2) Enrollee with multiple or sufficiently severe chronic
conditions.--For purposes of this subsection, the term
`enrollee with multiple or sufficiently severe chronic
conditions' means, with respect to an enrollee in a Medicare
Advantage plan of a Medicare Advantage organization, an
enrollee in the plan who has one or more chronic conditions,
such as congestive heart failure, diabetes, COPD, stroke, or
other disease as identified by the organization as appropriate
for chronic care improvement.
``(3) General requirements.--
``(A) In general.--Each chronic care improvement
program under this subsection shall be conducted
consistent with this subsection.
``(B) Identification of enrollees.--Each such program
shall have a method for monitoring and identifying
enrollees with multiple or sufficiently severe chronic
conditions that meet the organization's criteria for
participation under the program.
``(C) Development of plans.--For an enrollee
identified under subparagraph (B) for participation in
a program, the program shall develop, with the
enrollee's consent, an individualized, goal-oriented
chronic care improvement plan for chronic care
improvement.
``(D) Elements of plans.--Each chronic care
improvement plan developed under subparagraph (C) shall
include a single point of contact to coordinate care
and the following, as appropriate:
``(i) Self-improvement education for the
enrollee and support education for health care
providers, primary caregivers, and family
members.
``(ii) Coordination of health care services,
such as application of a prescription drug
regimen and home health services.
``(iii) Collaboration with physicians and
other providers to enhance communication of
relevant clinical information.
``(iv) The use of monitoring technologies
that enable patient guidance through the
exchange of pertinent clinical information,
such as vital signs, symptomatic information,
and health self-assessment.
``(v) The provision of information about
hospice care, pain and palliative care, and
end-of-life care.
``(E) Organization responsibilities.--In establishing
and carrying out chronic care improvement plans for
participants under this paragraph, a Medicare Advantage
organization shall, directly or through
subcontractors--
``(i) guide participants in managing their
health, including all their co-morbidities, and
in performing the activities as specified under
the elements of the plan;
``(ii) use decision support tools such as
evidence-based practice guidelines or other
criteria as determined by the Secretary; and
``(iii) develop a clinical information
database to track and monitor each participant
across settings and to evaluate outcomes.
``(3) Additional requirements.--The Secretary may establish
additional requirements for chronic care improvement programs
under this section.
``(4) Accreditation.--The Secretary may provide that chronic
care improvement programs that are accredited by qualified
organizations may be deemed to meet such requirements under
this subsection as the Secretary may specify.
``(5) Outcomes report.--Each Medicare Advantage organization
with respect to its chronic care improvement program under this
subsection shall monitor and report to the Secretary
information on the quality of care and efficacy of such program
as the Secretary may require.''; and
(2) by amending subparagraph (I) of subsection (c)(1) to read
as follows:
``(I) Chronic care improvement program.--A
description of the organization's chronic care
improvement program under subsection (e).''.
(b) Application under Enhanced Fee-for-Service Program.--Section
1860E-2(c)(3), as inserted by section 201(a), is amended by inserting
``, including subsection (e) (relating to implementation of chronic
care improvement programs)'' after ``The provisions of section 1852''.
(c) Effective Date.--The amendments made by this section shall apply
for contract years beginning on or after 1 year after the date of the
enactment of this Act.
SEC. 723. INSTITUTE OF MEDICINE REPORT.
(a) Study.--
(1) In general.--The Secretary of Health and Human Services
shall contract with the Institute of Medicine of the National
Academy of Sciences to conduct a study of the barriers to
effective integrated care improvement for medicare
beneficiaries with multiple or severe chronic conditions across
settings and over time and to submit a report under subsection
(b).
(2) Specific items.--The study shall examine the statutory
and regulatory barriers to coordinating care across settings
for medicare beneficiaries in transition from one setting to
another (such as between hospital, nursing facility, home
health, hospice, and home). The study shall specifically
identify the following:
(A) Clinical, financial, or administrative
requirements in the medicare program that present
barriers to effective, seamless transitions across care
settings.
(B) Policies that impede the establishment of
administrative and clinical information systems to
track health status, utilization, cost, and quality
data across settings.
(C) State-level requirements that may present
barriers to better care for medicare beneficiaries.
(3) Consultation.--The study under this subsection shall be
conducted in consultation with experts in the field of chronic
care, consumers, and family caregivers, working to integrate
care delivery and create more seamless transitions across
settings and over time.
(b) Report.--The report under this subsection shall be submitted to
the Secretary and Congress not later than 18 months after the date of
the enactment of this Act.
SEC. 724. MEDPAC REPORT.
(a) Evaluation.--shall conduct an evaluation that includes a
description of the status of the implementation of chronic care
improvement programs under section 1808 of the Social Security Act, the
quality of health care services provided to individuals in such
program, the health status of the participants of such program, and the
cost savings attributed to implementation of such program.
(b) Report.--Not later than 2 years after the date of implementation
of such chronic care improvement programs, the Commission shall submit
a report on such evaluation.
Subtitle D--Other Provisions
SEC. 731. 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) Application of Disclosure Requirements.--
(1) In general.--Section 1805(c)(2)(D) (42 U.S.C. 1395b-
6(c)(2)(D)) is amended by adding at the end the following:
``Members of the Commission shall be treated as employees of
the Congress for purposes of applying title I of the Ethics in
Government Act of 1978 (Public Law 95-521).''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on January 1, 2004.
(d) 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, 2004, 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 share 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,
2004, a report on the following:
(A) Investments, endowments, and fundraising of
hospitals participating under the medicare program and
related foundations.
(B) Access to capital financing for private and for
not-for-profit hospitals.
SEC. 732. 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 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 are currently licensed or
certified through common ownership and control to furnish medical adult
day care services.
(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.
SEC. 733. IMPROVEMENTS IN NATIONAL AND LOCAL COVERAGE DETERMINATION
PROCESS TO RESPOND TO CHANGES IN TECHNOLOGY.
(a) National and Local Coverage Determination Process.--
(1) In general.--Section 1862 (42 U.S.C. 1395y) is amended--
(A) in the third sentence of subsection (a) by
inserting ``consistent with subsection (k)'' after
``the Secretary shall ensure''; and
(B) by adding at the end the following new
subsection:
``(k) National and Local Coverage Determination Process.--
``(1) Criteria and evidence used in making national coverage
determinations.--The Secretary shall make available to the
public the criteria the Secretary uses in making national
coverage determinations, including how evidence to demonstrate
that a procedure or device is reasonable and necessary is
considered.
``(2) Timeframe for decisions on requests for national
coverage determinations.--In the case of a request for a
national coverage determination that--
``(A) does not require a technology assessment from
an outside entity or deliberation from the Medicare
Coverage Advisory Committee, the decision on the
request shall be made not later than 6 months after the
date of the request; or
``(B) requires such an assessment or deliberation and
in which a clinical trial is not requested, the
decision on the request shall be made not later than 12
months after the date of the request.
``(3) Process for public comment in national coverage
determinations.--At the end of the 6-month period that begins
on the date a request for a national coverage determination is
made, the Secretary shall--
``(A) make a draft of proposed decision on the
request available to the public through the Medicare
Internet site of the Department of Health and Human
Services or other appropriate means;
``(B) provide a 30-day period for public comment on
such draft;
``(C) make a final decision on the request within 60
days of the conclusion of the 30-day period referred to
under subparagraph (B);
``(D) include in such final decision summaries of the
public comments received and responses thereto;
``(E) make available to the public the clinical
evidence and other data used in making such a decision
when the decision differs from the recommendations of
the Medicare Coverage Advisory Committee; and
``(F) in the case of a decision to grant the coverage
determination, assign a temporary or permanent code
during the 60-day period referred to in subparagraph
(C).
``(4) Consultation with outside experts in certain national
coverage determinations.--With respect to a request for a
national coverage determination for which there is not a review
by the Medicare Coverage Advisory Committee, the Secretary
shall consult with appropriate outside clinical experts.
``(5) Local coverage determination process.--With respect to
local coverage determinations made on or after January 1,
2004--
``(A) Plan to promote consistency of coverage
determinations.--The Secretary shall develop a plan to
evaluate new local coverage determinations to determine
which determinations should be adopted nationally and
to what extent greater consistency can be achieved
among local coverage determinations.
``(B) Consultation.--The Secretary shall require the
fiscal intermediaries or carriers providing services
within the same area to consult on all new local
coverage determinations within the area.
``(C) Dissemination of information.--The Secretary
should serve as a center to disseminate information on
local coverage determinations among fiscal
intermediaries and carriers to reduce duplication of
effort.
``(6) National and local coverage determination defined.--For
purposes of this subsection, the terms `national coverage
determination' and `local coverage determination' have the
meaning given such terms in paragraphs (1)(B) and (2)(B),
respectively, of section 1869(f).''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to national and local coverage determinations as of
January 1, 2004.
(b) Medicare Coverage of Routine Costs Associated With Certain
Clinical Trials.--
(1) In general.--With respect to the coverage of routine
costs of care for beneficiaries participating in a qualifying
clinical trial, as set forth on the date of the enactment of
this Act in National Coverage Determination 30-1 of the
Medicare Coverage Issues Manual, the Secretary shall deem
clinical trials conducted in accordance with an investigational
device exemption approved under section 520(g) of the Federal
Food, Drug, and Cosmetic Act (42 U.S.C. 360j(g)) to be
automatically qualified for such coverage.
(2) Rule of construction.--Nothing in this subsection shall
be construed as authorizing or requiring the Secretary to
modify the regulations set forth on the date of the enactment
of this Act at subpart B of part 405 of title 42, Code of
Federal Regulations, or subpart A of part 411 of such title,
relating to coverage of, and payment for, a medical device that
is the subject of an investigational device exemption by the
Food and Drug Administration (except as may be necessary to
implement paragraph (1)).
(3) Effective date.--This subsection shall apply to clinical
trials begun before, on, or after the date of the enactment of
this Act and to items and services furnished on or after such
date.
(c) Issuance of Temporary National Codes.--Not later than January 1,
2004, the Secretary shall implement revised procedures for the issuance
of temporary national HCPCS codes under part B of title XVIII of the
Social Security Act.
SEC. 734. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES.
(a) In General.--Section 1848(i) (42 U.S.C. 1395w-4(i)) is amended by
adding at the end the following new paragraph:
``(4) Treatment of certain inpatient physician pathology
services.--
``(A) In general.--With respect to services furnished
on or after January 1, 2001, and before January 1,
2006, if an independent laboratory furnishes the
technical component of a physician pathology service to
a fee-for-service medicare beneficiary who is an
inpatient or outpatient of a covered hospital, the
Secretary shall treat such component as a service for
which payment shall be made to the laboratory under
this section and not as an inpatient hospital service
for which payment is made to the hospital under section
1886(d) or as a hospital outpatient service for which
payment is made to the hospital under section 1833(t).
``(B) Definitions.--In this paragraph:
``(i) Covered hospital.--
``(I) In general.--The term `covered
hospital' means, with respect to an
inpatient or outpatient, a hospital
that had an arrangement with an
independent laboratory that was in
effect as of July 22, 1999, under which
a laboratory furnished the technical
component of physician pathology
services to fee-for-service medicare
beneficiaries who were hospital
inpatients or outpatients,
respectively, and submitted claims for
payment for such component to a carrier
with a contract under section 1842 and
not to the hospital.
``(II) Change in ownership does not
affect determination.--A change in
ownership with respect to a hospital on
or after the date referred to in
subclause (I) shall not affect the
determination of whether such hospital
is a covered hospital for purposes of
such subclause.
``(ii) Fee-for-service medicare
beneficiary.--The term `fee-for-service
medicare beneficiary' means an individual who
is entitled to benefits under part A, or
enrolled under this part, or both, but is not
enrolled in any of the following:
``(I) A Medicare+Choice plan under
part C.
``(II) A plan offered by an eligible
organization under section 1876.
``(III) A program of all-inclusive
care for the elderly (PACE) under
section 1894.
``(IV) A social health maintenance
organization (SHMO) demonstration
project established under section
4018(b) of the Omnibus Budget
Reconciliation Act of 1987 (Public Law
100-203).''.
(b) Conforming Amendment.--Section 542 of the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (114 Stat. 2763A-
550), as enacted into law by section 1(a)(6) of Public Law 106-554, is
repealed.
(c) Effective Dates.--The amendments made by this section shall take
effect as if included in the enactment of the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (Appendix F, 114
Stat. 2763A-463), as enacted into law by section 1(a)(6) of Public Law
106-554.
TITLE VIII--MEDICARE BENEFITS ADMINISTRATION
SEC. 801. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as amended by
sections 105 and 721, is amended by inserting after 1808 the following
new section:
``medicare benefits administration
``Sec. 1809. (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 4 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. The
Administrator shall provide for the issuance of new
regulations to carry out parts C, D, and E.
``(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 4 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, D, and E, including--
``(i) negotiating, entering into, and
enforcing, contracts with plans for the
offering of Medicare Advantage plans under part
C and EFFS plans under part E, 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, part D, or part
E, 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),
medicare cost contractors under section 1876(h), and
through a Medicare Advantage 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 Advantage
organizations and EFFS 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, D, and E 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 3102 through 3108, 3110 through 3113,
3136m and 3151, 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, D,
and E.
``(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 Advantage plans under part C
and EFFS plans under part E.
``(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
Advantage program under part C, the Voluntary
Prescription Drug Benefit Program under part D, and the
Enhanced Fee-for-Service program under part E.
``(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, D, and E, including
the review of payment policies under such parts.
``(2) Reports.--
``(A) In general.--With respect to matters of the
administration of parts C, D, and E 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, D, and E 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, D, and E, 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 Advantage organizations offering
Medicare Advantage plans (and the corresponding
payment provisions under part E) that accounts
for variations in per capita costs based on
health status, geography, and other demographic
factors.
``(iv) Rural access.--Recommendations to
improve competition and access to plans under
parts C, D, and E 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) 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 parts C and E of such title for years
beginning or after January 1, 2006.
(3) 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, 2004.
TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM
Subtitle A--Regulatory Reform
SEC. 901. 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. 902. ISSUANCE OF REGULATIONS.
(a) 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.
(b) Limitations on New Matter in Final Regulations.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as
amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(4) If the Secretary publishes a final regulation that includes a
provision that is not a logical outgrowth of a previously published
notice of proposed rulemaking or interim final rule, such 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. 903. 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 902(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. 904. 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 one year after the date of the enactment of this
Act.
(b) Report on Legal and Regulatory Inconsistencies.--Section 1871 (42
U.S.C. 1395hh), as amended by section 2(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. 911. 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 the reckless disregard of the individual's
obligations or the intent by that individual 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 the reckless disregard of the officer's
obligations or the intent by that officer 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.--
``(A) In general.--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, the medicare administrative contractor acted with
reckless disregard of its obligations under its medicare
administrative contract or with intent to defraud the United
States.
``(B) Relationship to false claims act.--Nothing in this
subsection shall be construed to limit liability for conduct
that would constitute a violation of sections 3729 through 3731
of title 31, United States Code (commonly known as the `False
Claims Act').
``(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, 2005, 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, 2010.
(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 a 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,
2004, 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, 2008, 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. 912. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE
ADMINISTRATIVE CONTRACTORS.
(a) In General.--Section 1874A, as added by section 911(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 paragraphs (1) through (8) of section
3544(b) of title 44, United States Code (other than the
requirements under paragraphs (2)(D)(i), (5)(A), and (5)(B) 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 of 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,
including policies and procedures as may be
prescribed by the Director of the Office of
Management and Budget and applicable
information security standards promulgated
under section 11331 of title 40, United States
Code.
``(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 department of health and human
services.--The results of independent
evaluations under subparagraph (A) shall be
submitted promptly to the Inspector General of
the Department of Health and Human Services and
to the Secretary.
``(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, including
assessments of the scope and sufficiency of
such evaluations.
``(iii) Agency reporting.--The Secretary
shall address the results of such evaluations
in reports required under section 3544(c) of
title 44, United States Code.''.
(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. 921. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.
(a) Coordination of Education Funding.--
(1) In general.--Title XVIII 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, 2004, 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 911(a)(1)
and as amended by section 912(a), is amended by adding at the
end the following new subsection:
``(f) Incentives To Improve Contractor Performance in Provider
Education and Outreach.--The Secretary shall use specific claims
payment error rates or similar methodology of medicare administrative
contractors in the processing or reviewing of medicare claims in order
to give such contractors an incentive to implement effective education
and outreach programs for providers of services and suppliers.''.
(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, 2004, 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, 2004, 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 911(a)(1)
and as amended by section 912(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, 2004.
(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 2005 and 2006 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, 2004.
(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, 2004.
(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. 922. 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 2005, $1,000,000, and
(2) for fiscal year 2006, $6,000,000.
SEC. 923. 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 previously
amended, is amended by inserting after section 1809 the following new
section:
``medicare beneficiary ombudsman
``Sec. 1810. (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;
``(B) assistance to such individuals with any
problems arising from disenrollment from a
Medicare+Choice plan under part C; and
``(C) assistance to such individuals in presenting
information under section 1860D-2(b)(4)(D)(v); 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 1807 of such Act (relating to
the Medicare Beneficiary Ombudsman), as added by subsection (b), such
sums as are necessary for fiscal year 2004 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. 924. 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.
SEC. 925. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO
BENEFICIARIES ABOUT SKILLED NURSING FACILITY
BENEFITS.
(a) In General.--The Secretary shall provide that in medicare
beneficiary notices provided (under section 1806(a) of the Social
Security Act, 42 U.S.C. 1395b-7(a)) with respect to the provision of
post-hospital extended care services under part A of title XVIII of the
Social Security Act, there shall be included information on the number
of days of coverage of such services remaining under such part for the
medicare beneficiary and spell of illness involved.
(b) Effective Date.--Subsection (a) shall apply to notices provided
during calendar quarters beginning more than 6 months after the date of
the enactment of this Act.
SEC. 926. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING FACILITIES
IN HOSPITAL DISCHARGE PLANS.
(a) Availability of Data.--The Secretary shall publicly provide
information that enables hospital discharge planners, medicare
beneficiaries, and the public to identify skilled nursing facilities
that are participating in the medicare program.
(b) Inclusion of Information in Certain Hospital Discharge Plans.--
(1) In general.--Section 1861(ee)(2)(D) (42 U.S.C.
1395x(ee)(2)(D)) is amended--
(A) by striking ``hospice services'' and inserting
``hospice care and post-hospital extended care
services''; and
(B) by inserting before the period at the end the
following: ``and, in the case of individuals who are
likely to need post-hospital extended care services,
the availability of such services through facilities
that participate in the program under this title and
that serve the area in which the patient resides''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to discharge plans made on or after such date as
the Secretary shall specify, but not later than 6 months after
the date the Secretary provides for availability of information
under subsection (a).
Subtitle D--Appeals and Recovery
SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.
(a) Transition Plan.--
(1) In general.--Not later than October 1, 2004, 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, 2005, and not later
than October 1, 2005, 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. In order to assure such independence, the
Secretary shall place such judges in an administrative office
that is organizationally and functionally separate from such
Centers. Such judges shall report to, and be under the general
supervision of, the Secretary, but shall not report to, or be
subject to supervision by, another other officer of the
Department.
(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 2005 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. 932. 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, 2004.
(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 2005 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. 933. 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 932(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, 2004.
(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 paragraphs:
``(4) Requirements of notice of determinations.--With respect
to an initial determination insofar as it results in a denial
of a claim for benefits--
``(A) the written notice on the determination shall
include--
``(i) the reasons for the determination,
including whether a local medical review policy
or a local coverage determination was used;
``(ii) the procedures for obtaining
additional information concerning the
determination, including the information
described in subparagraph (B); and
``(iii) notification of the right to seek a
redetermination or otherwise appeal the
determination and instructions on how to
initiate such a redetermination under this
section; and
``(B) the person provided such notice may obtain,
upon request, the specific provision of the policy,
manual, or regulation used in making the determination.
``(5) Requirements of notice of redeterminations.--With
respect to a redetermination insofar as it results in a denial
of a claim for benefits--
``(A) the written notice on the redetermination shall
include--
``(i) the specific reasons for the
redetermination;
``(ii) as appropriate, a summary of the
clinical or scientific evidence used in making
the redetermination;
``(iii) a description of the procedures for
obtaining additional information concerning the
redetermination; and
``(iv) notification of the right to appeal
the redetermination and instructions on how to
initiate such an appeal under this section;
``(B) such written notice 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; and
``(C) the person provided such notice may obtain,
upon request, information on the specific provision of
the policy, manual, or regulation used in making the
redetermination.''.
(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'), a 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), a 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) Reducing minimum number of qualified independent
contractors.--Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is
amended by striking ``not fewer than 12 qualified independent
contractors under this subsection'' and inserting ``with a
sufficient number of qualified independent contractors (but not
fewer than 4 such contractors) to conduct reconsiderations
consistent with the timeframes applicable under this
subsection''.
(4) 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).
(5) 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. 934. PREPAYMENT REVIEW.
(a) In General.--Section 1874A, as added by section 911(a)(1) and as
amended by sections 912(b), 921(b)(1), and 921(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. 935. 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. 936. 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, 2004.
(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. 937. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS WITHOUT
PURSUING APPEALS PROCESS.
(a) Claims.--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 301(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.
(b) Permitting Use of Corrected and Supplementary Data.--
(1) In general.--Section 1886(d)(10)(D)(vi) (42 U.S.C.
1395ww(d)(10)(D)(vi)) is amended by adding after subclause (II)
at the end the following:
``Notwithstanding subclause (I), a hospital may submit, and the
Secretary may accept upon verification, data that corrects or
supplements the data described in such subclause without regard to
whether the corrected or supplementary data relate to a cost report
that has been settled.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to fiscal years beginning with fiscal year 2004.
(3) Submittal and resubmittal of applications permitted for
fiscal year 2004.--
(A) In general.--Notwithstanding any other provision
of law, a hospital may submit (or resubmit) an
application for a change described in section
1886(d)(10)(C)(i)(II) of the Social Security Act for
fiscal year 2004 if the hospital demonstrates on a
timely basis to the satisfaction of the Secretary that
the use of corrected or supplementary data under the
amendment made by paragraph (1) would materially affect
the approval of such an application.
(B) Application of budget neutrality.--If one or more
hospital's applications are approved as a result of
paragraph (1) and subparagraph (A) for fiscal year
2004, the Secretary shall make a proportional
adjustment in the standardized amounts determined under
section 1886(d)(3) of the Social Security Act (42
U.S.C. 1395ww(d)(3)) for fiscal year 2004 to assure
that approval of such applications does not result in
aggregate payments under section 1886(d) of such Act
that are greater or less than those that would
otherwise be made if paragraph (1) and subparagraph (A)
did not apply.
SEC. 938. 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 933(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 (5)) 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 V--Miscellaneous Provisions
SEC. 941. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E &
M) DOCUMENTATION GUIDELINES.
(a) In General.--The Secretary may not implement any new
documentation guidelines for, or clinical examples of, 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, 2005,
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, 2005, 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. 942. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.
(a) Council for Technology and Innovation.--Section 1868 (42 U.S.C.
1395ee), as amended by section 921(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.''.
(b) 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,
2005 (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).''.
(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, 2004, the
Comptroller General shall submit a report to Congress on the
study under paragraph (1).
(d) Process for Adoption of ICD Codes as Data Standard.--Section
1172(f) (42 U.S.C. 1320d-1(f)) is amended by inserting after the first
sentence the following: ``Notwithstanding the preceding sentence, if
the National Committee on Vital and Health Statistics has not made a
recommendation to the Secretary before the date of the enactment of
this sentence, with respect to the adoption of the International
Classification of Diseases, 10th Revision, Procedure Coding System
(`ICD-10-PCS') and the International Classification of Diseases, 10th
Revision, Clinical Modification (`ICD-10-CM') as a standard under this
part for the reporting of diagnoses, the Secretary may adopt ICD-10-PCS
and ICD-10-CM as such a standard on or after 1 year after such date
without receiving such a recommendation.''.
SEC. 943. 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. 944. 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, 2004.
(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.
(d) Modification of Requirment for Medical Screening Examinations for
Patients Not Requesting Emergency Department Services.--
(1) In general.--Section 1867(a) (42 U.S.C. 1395dd(a)) is
amended--
(A) by designating all that follows ``(a) Medical
Screening Requirement.--'' as paragraph (1) with the
heading ``In general.--'';
(B) by aligning such paragraph with the paragraph
added by paragraph (3); and
(C) by adding at the end the following new paragraph:
``(2) Exception for certain cases.--The requirement for an
appropriate medical screening examination under paragraph (1)
shall not apply in the case of an individual who comes to the
emergency department and does not request examination or
treatment for an emergency medical condition (such as a request
solely for prescription refills, blood pressure screening, and
non-emergency laboratory and diagnostic tests).''.
(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. 945. EMERGENCY MEDICAL TREATMENT AND ACTIVE 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, pediatrics or a pediatric
subspecialty, 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. 946. AUTHORIZING USE OF ARRANGEMENTS 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:
``(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.
``(E) A hospice program may provide services described in paragraph
(1)(A) other than directly by the program if the services are highly
specialized services of a registered professional nurse and are
provided non-routinely and so infrequently so that the provision of
such services directly would be impracticable and prohibitively
expensive.''.
(b) Conforming Payment Provision.--Section 1814(i) (42 U.S.C.
1395f(i)) is amended by adding at the end the following new paragraph:
``(4) 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. 947. 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, 2004.
SEC. 948. 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. 949. 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. 950. 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. 951. FURNISHING HOSPITALS WITH INFORMATION TO COMPUTE DSH FORMULA.
Beginning not later than 1 year after the date of the enactment of
this Act, the Secretary shall furnish to subsection (d) hospitals (as
defined in section 1886(d)(1)(B) of the Social Security Act, 42 U.S.C.
1395ww(d)(1)(B)) the data necessary for such hospitals to compute the
number of patient days described in subclause (II) of section
1886(d)(5)(F)(vi) of the Social Security Act (42 U.S.C.
1395ww(d)(5)(F)(vi)) used in computing the disproportionate patient
percentage under such section for that hospital. Such data shall also
be furnished to other hospitals which would qualify for additional
payments under part A of title XVIII of the Social Security Act on the
basis of such data.
SEC. 952. REVISIONS TO REASSIGNMENT PROVISIONS.
(a) In General.--Section 1842(b)(6)(A) (42 U.S.C. 1395u(b)(6)(A)) is
amended by striking ``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,'' and
inserting ``or (ii) where the service was provided under a contractual
arrangement between such physician or other person and an entity (as
defined by the Secretary), to the entity if, under the contractual
arrangement, the entity submits the bill for the service and the
contractual arrangement meets such other program integrity and other
safeguards as the Secretary may determine to be appropriate,''.
(b) Conforming Amendment.--The second sentence of section 1842(b)(6)
(42 U.S.C. 1395u(b)(6)) is amended by striking ``except to an employer
or facility'' and inserting ``except to an employer, entity, or other
person''.
(c) Effective Date.--The amendments made by section shall apply to
payments made on or after the date that is one year after the date of
the enactment of this Act.
SEC. 953. OTHER PROVISIONS.
(a) GAO Reports on the Physician Compensation.--
(1) Sustainable Growth Rate and Updates.--Not later than 6
months after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to
Congress a report on the appropriateness of the updates in the
conversion factor under subsection (d)(3) of section 1848 of
the Social Security Act (42 U.S.C. 1395w-4), including the
appropriateness of the sustainable growth rate formula under
subsection (f) of such section for 2002 and succeeding years.
Such report shall examine the stability and predictability of
such updates and rate and alternatives for the use of such rate
in the updates.
(2) Physician compensation generally.--Not later than 12
months after the date of the enactment of this Act, the
Comptroller General shall submit to Congress a report on all
aspects of physician compensation for services furnished under
title XVIII of the Social Security Act, and how those aspects
interact and the effect on appropriate compensation for
physician services. Such report shall review alternatives for
the physician fee schedule under section 1848 of such title (42
U.S.C. 1395w-4).
(b) 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.
(c) GAO Report on Flexibility in Applying Home Health Conditions of
Participation to Patients Who Are Not Medicare Beneficiaries.--Not
later than 6 months after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to Congress a
report on the implications if there were flexibility in the application
of the medicare conditions of participation for home health agencies
with respect to groups or types of patients who are not medicare
beneficiaries. The report shall include an analysis of the potential
impact of such flexible application on clinical operations and the
recipients of such services and an analysis of methods for monitoring
the quality of care provided to such recipients.
(d) OIG Report on Notices Relating to Use of Hospital Lifetime
Reserve Days.--Not later than 1 year after the date of the enactment of
this Act, the Inspector General of the Department of Health and Human
Services shall submit a report to Congress on--
(1) the extent to which hospitals provide notice to medicare
beneficiaries in accordance with applicable requirements before
they use the 60 lifetime reserve days described in section
1812(a)(1) of the Social Security Act (42 U.S.C. 1395d(a)(1));
and
(2) the appropriateness and feasibility of hospitals
providing a notice to such beneficiaries before they completely
exhaust such lifetime reserve days.
SEC. 954. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR COLLECTION OF
DATA ON NON-MEDICARE AND NON-MEDICAID PATIENTS.
(a) In General.--During the period described in subsection (b), the
Secretary 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 (such information in this section referred to as ``non-
medicare/medicaid OASIS information'').
(b) Period of Suspension.--The period described in this subsection--
(1) begins on the date of the enactment of this Act; and
(2) ends on the last day of the 2nd month beginning after the
date as of which the Secretary has published final regulations
regarding the collection and use by the Centers for Medicare &
Medicaid Services of non-medicare/medicaid OASIS information
following the submission of the report required under
subsection (c).
(c) Report.--
(1) Study.--The Secretary shall conduct a study on how non-
medicare/medicaid OASIS information is and can be used by large
home health agencies. Such study shall examine--
(A) whether there are unique benefits from the
analysis of such information that cannot be derived
from other information available to, or collected by,
such agencies; and
(B) the value of collecting such information by small
home health agencies compared to the administrative
burden related to such collection.
In conducting the study the Secretary shall obtain
recommendations from quality assessment experts in the use of
such information and the necessity of small, as well as large,
home health agencies collecting such information.
(2) Report.--The Secretary shall submit to Congress a report
on the study conducted under paragraph (1) by not later than 18
months after the date of the enactment of this Act.
(d) Construction.--Nothing in this section shall be construed as
preventing home health agencies from collecting non-medicare/medicaid
OASIS information for their own use.
I. INTRODUCTION
A. Purpose and Summary, and
B. Background and Need for Legislation
Nearly four decades 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 has both successfully 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 that can only change when Congress enacts a law.
When Medicare was enacted, there were few prescription
drugs, and most care was delivered in hospitals and physician
offices. Consequently, Medicare did not cover prescription
drugs. While about two-thirds of seniors have some prescription
drug coverage through various sources, access to such coverage
has been declining and oftentimes remains inadequate. Many
other seniors lack prescription drug coverage, and therefore,
they lack the bargaining power to reduce their drug costs.
Prescription drugs are an integral part of health care
today. They prevent and manage diseases and most often are less
invasive and costly than alternative health care options (e.g.
surgery, hospitalization, nursing home admission, etc.). Most
private health plans have voluntarily integrated prescription
drugs into their benefits. Nobody today with a blank sheet of
paper would design a health care program for seniors 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 cherish and want to strengthen.
Irrational and unpredictable payments to physicians are
just one example of what is wrong with Medicare's reimbursement
policy. While health costs are escalating under the current
Sustainable Growth Rate formula, payments to physicians under
current law would be substantially reduced. Patients' access to
physicians will suffer and the doctors beneficiaries rely on
will only become more demoralized. Similarly, rural hospitals
continue to struggle and are not paid equitably compared 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 cost of providing health care.
At the same time, Medicare is overpaying on other counts,
such as for durable medical equipment. The Office of Inspector
General has documented that taxpayers and Medicare
beneficiaries are paying millions more for durable medical
equipment than other programs, such as the Federal Employees
Health Benefit Program (FEHBP). Similarly, numerous studies by
the General Accounting Office, Office of Inspector General and
others have documented tremendous overpayments to oncologists
and other physicians for currently covered prescription drugs.
In some cases, the beneficiary copay exceeds the actual
acquisition cost of the drug.
In addition, the health care professionals serving 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 over-regulation
hampers efforts to provide quality care to seniors, and it must
be changed.
Finally, and most importantly, Medicare's long-term
viability is not on stable ground. When Medicare was enacted,
there were more than six workers per beneficiary. Today, there
are about four workers per beneficiary. After the baby-boom
generation retires (which starts at the end of this decade),
there will be about two workers per beneficiary. Absent any
change in law, Medicare costs will nearly double over the next
10 years. Medicare needs to become more efficient.
This bill addresses all of these issues and more.
First and foremost, the bill provides a voluntary,
affordable prescription drug benefit as an entitlement to all
beneficiaries. The proposal is within the $400 billion over 10
years allocated under the budget resolution. Under the bill,
Medicare beneficiaries would pay a $250 deductible and then
receive 80 percent coverage of their annual drug costs up to
$2,000. This 80-20 benefit looks like standard coverage offered
by employer plans, and today nearly two-thirds of beneficiaries
spend less than $2,000 on drugs annually. In addition, the bill
provides catastrophic protection after an individual has
incurred $3,500 in out-of-pocket costs. At that threshold, 100
percent of costs will be covered. The Congressional Budget
Office (CBO) estimates the average monthly beneficiary premium
to be about $35.
Additionally, the bill targets resources to those who need
them most. For low-income seniors up to 135 percent of poverty,
premiums would be fully subsidized and all cost-sharing, except
for nominal copays, would be covered. Those with incomes
between 135 and 150 percent would also receive assistance for
their premiums. Seniors with incomes above $60,000 or couples
with incomes above $120,000 would have a higher catastrophic
threshold, but would receive the same front-end benefit. This
higher threshold would affect only about five percent of
individuals.
The prescription drug benefit would be delivered through
competing integrated health plans and private sector entities
that 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 drug 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 that would save taxpayers and
beneficiaries billions of dollars. The private sector delivery
of benefits 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 Centers for Medicare
and Medicaid Services (CMS) Office of the Actuary predicts that
more than 95 percent of the seniors that lack coverage would
voluntarily sign up for this benefit.
The bill would provide seniors with more and better choices
for the delivery of their health care. The Medicare+Choice
program would be fundamentally reformed by re-linking payments
to fee-for-service costs and permitting plans to bid their
actual costs, beginning in2006. Plans would be paid what they
bid and savings would be split 75 percent-25 percent between the
beneficiary and government for plans that bid below the benchmark. The
bill would also implement the President's ``enhanced fee-for-service''
program, which provides for regional, open-network plans offering
better integrated care.
In 2010, the bill would put Medicare on a more stable
funding path by moving to a FEHBP-style of competition between
plans. Nothing would change Medicare's entitlement to a defined
set of benefits, but costs between fee-for-service and private
plans would be directly compared. Beneficiaries would be
rewarded for enrolling in more efficient plans, regardless of
whether the plans are private or traditional fee-for-service.
This program would only apply in areas with significant private
plan penetration (at least equal to the national average market
share), and the fee-for-service plan would have
disproportionate influence in establishing the benchmark. This
transition would be phased in over five years. This provision
provides Medicare the best chance to bend its growth rate in
the out-years by enabling beneficiaries to make efficient and
rational choices, and by permitting the government to share in
the savings when beneficiaries select cost-effective plans.
More than 179 different patient groups, provider groups,
and employers have endorsed this legislation because it
provides a meaningful benefit, modernizes irrational
reimbursements, and reduces burdensome regulatory structures
that undermine the quality and accessibility of care. The bill
reforms physician payments, addresses payment inequities for
rural hospitals and home health providers, and makes
responsible decisions on provider reimbursements based on the
Medicare Payment Advisory Commission's recommendations. More
importantly, the legislation sets Medicare on a path of more
rational pricing--determined by the marketplace, rather than
government edict--through moving durable medical equipment,
currently covered drugs, and Medicare's contractors into a
competitive system. In addition to creating a more rational
system that saves money over time, these changes get Congress
out of the business of micro-managing payments to providers
across communities in America based on political decisions in
Washington.
The bill provides clear improvements for preventive
benefits for beneficiaries. For the first time, in order to
diagnose problems early and keep seniors healthy, Medicare
would cover initial physicals and provide coverage for
cholesterol screening. The bill would also provide better-
coordinated care for the numerous Medicare beneficiaries who
suffer from multiple chronic illnesses.
The bill also includes regulatory and contracting reforms--
reforms that passed the House twice in the 107th Congress--to
reduce unnecessary regulation and modernize how Medicare
selects its contractors.
Finally, the bill also establishes a new Medicare Benefits
Administration (MBA) to manage and oversee the Medicare
Advantage and Enhanced Fee-for-Service Programs as well as the
prescription drug benefit. Creating of the MBA eliminates the
inherent conflict-of-interest in requiring a government-run
fee-for-service plan to regulate competing private plans.
C. Legislative History
Legislative Hearings
During the 107th and 108th Congresses, the Committee on
Ways and Means, and its Subcommittee on Health, held 24
hearings exploring how Medicare should be strengthened and
modernized. These hearings, which examined all aspects of the
Medicare program, included expert testimony from academic,
beneficiary and provider representatives. The following lists
the hearings in the 107th and 108th Congresses in reverse
chronological order:
108TH CONGRESS
May 1, 2003: Medicare Cost-Sharing and Medigap Reform (Subcommittee on
Health)
Witnesses
Glenn M. Hackbarth, Chairman, Medicare Payment Advisory
Commission.
Stephen W. Still, Esq., Maynard, Cooper & Gale, P.C.,
Birmingham, Alabama, on behalf of Torchmark Corporation,
Birmingham, Alabama, and United American Insurance Company,
McKinney, Texas.
Richard White, Vice President, Individual Project
Management, Southeast Region, Anthem Blue Cross and Blue
Shield, Roanoke, Virginia.
Patricia Neuman, Sc. D., Vice President and Director,
Medicare Policy Project, Kaiser Medicare Policy Project, Henry
J. Kaiser Family Foundation.
April 9, 2003: Hearing on Expanding Coverage of Prescription Drugs in
Medicare (Full Committee)
Witnesses
Douglas Holtz-Eakin, Ph.D., Director, Congressional Budget
Office.
The Honorable David M. Walker, Comptroller General, U.S.
General Accounting Office.
Bruce Stewart, Ph.D., Director, Peter Lamy Center on Drug
Therapy and Aging, University of Maryland, Baltimore, Maryland.
Mark V. Pauly, Ph.D., Chairperson, Health Care Systems
Department, The Wharton School, University of Pennsylvania,
Philadelphia, Pennsylvania.
Uwe Reinhardt, Ph.D., Professor, Economics and Public
Affairs, Department of Economics, and Woodrow Wilson School of
Public and International Affairs, Princeton University,
Princeton, New Jersey
March 6, 2003: Hearing on the MedPAC Report on Medicare Payment
Policies (Subcommittee on Health)
Witnesses
Glenn M. Hackbarth, Chairman, MedPAC.
James Jaruzewicz, President and Chief Executive Officer,
Visiting Nurses Association of Erie County, Erie, Pennsylvania,
on behalf of the Visiting Nurses Association of America.
Larry C. Buckelew, President and Chief Executive Officer,
Gambro Healthcare U.S., and Chairman, Renal Leadership Council.
William G. Plested, III, M.D., Chair-Elect, American
Medical Association.
Mary K. Ousley, Chairman, American Health Care Association.
Dennis Barry, President and Chief Executive Officer, Moses
Cone Health System, Greensboro, North Carolina, and Chairman,
Board of Trustees, American Hospital Association.
Betty Severyn, Member, Board of Directors, AARP.
February 25, 2003: Hearing on Eliminating Barriers to Chronic Care
Management in Medicare (Subcommittee on Health)
Witnesses
Stuart Guterman, Director, Office of Research, Development
and Information, Centers for Medicare and Medicaid Services.
Jeff Lemieux, Senior Economist, Progressive Policy
Institute.
Ed Wagner, M.D., Director, MacColl Institute for Healthcare
Innovation, Center for Health Studies, Group Health
Cooperative, Seattle, Washington.
George A. Taler, M.D., Director, Long Term Care, Department
of Medicine, Washington Hospital Center, on behalf of the
American Geriatric Society.
Jan Berger, M.D., Senior Vice President, Clinical Quality
and Support, Caremark Rx Incorporated, Northbrook, Illinois.
February 13, 2003: Hearing on Medicare Regulatory and Contracting
Reform (Subcommittee on Health)
Witnesses
The Honorable Thomas A. Scully, Administrator, Centers for
Medicare and Medicaid Services.
Douglas L. Wood, M.D., Vice Chair, Department of Medicine,
Mayo Clinic and Foundation, Rochester, Minnesota.
Michael Luebke, President, Verizon Information Technologies
Inc., Tampa, Florida.
Tony Fay, Vice President, Government Affairs, Province
Healthcare Company, Brentwood, Tennessee, on behalf of the
American Hospital Association.
J. Edward Hill, M.D., Chairman, Board of Trustees, American
Medical Association.
Janet B. Wolf, President, Munson Home Health, Traverse
City, Michigan, and Past President, Board of Directors,
Michigan Home Health Association, Okemos, Michigan, on behalf
of the National Association for Home Care and Hospice.
Judith A. Ryan, Ph.D., President and Chief Executive
Officer, Evangelical Lutheran Good Samaritan Society, Sioux
Falls, South Dakota, on behalf of the American Health Care
Association.
Michael Carius, M.D., Immediate Past President, American
College of Emergency Physicians, Norwalk, Connecticut, and
Founding Member, Alliance of Specialty Medicine.
Vicki Gottlich, Attorney, Healthcare Rights Project, Center
for Medicare Advocacy, Inc.
February 6, 2003: Hearing on the President's Fiscal Year 2004 Budget
with U.S. Department of Health and Human Services (Full
Committee)
Witness
The Honorable Tommy G. Thompson, Secretary, U.S. Department
of Health and Human Services.
107TH CONGRESS
October 3, 2002: Medicare Payments for Currently Covered
Prescription Drugs (Subcommittee on Health)
July 23, 2002: Medicare's Geographic Cost Adjusters
(Subcommittee on Health)
April 17, 2002: Integrating Prescription Drugs into Medicare
(Full Committee)
April 16, 2002: Promoting Disease Management in Medicare
(Subcommittee on Health)
March 14, 2002: Medicare Supplemental Insurance (Subcommittee
on Health)
March 7, 2002: Health Quality and Medical Errors (Subcommittee
on Health)
February 28, 2002: Reforming Physician Payments (Subcommittee
on Health)
December 4, 2001: Status of the Medicare+Choice Program
(Subcommittee on Health)
September 25, 2001: H.R. 2768, Medicare Regulatory and
Contracting Reform Act (Subcommittee on Health)
July 19, 2001: Administration's Principles to Strengthen and
Modernize Medicare (Full Committee)
June 12, 2001: Rural Health Care in Medicare (Subcommittee on
Health)
May 9, 2001: Strengthening Medicare: Modernizing Beneficiary
Cost-Sharing (Subcommittee on Health)
May 1, 2001: Medicare+Choice: Lessons for Reform (Subcommittee
on Health)
March 27, 2001: Laying the Groundwork for a Prescription Drug
Benefit (Subcommittee on Health)
March 20, 2001: Medicare Solvency (Full Committee)
March 15, 2001: Bringing Regulatory Relief to Beneficiaries and
Providers (Subcommittee on Health)
March 14, 2001: Administration's Health and Welfare Priorities
(Full Committee)
February 28, 2001: Perspectives on Medicare Reform
(Subcommittee on Health)
On April 11, 2003, Congress agreed to the conference report
for H. Con. Res. 95, ``Establishing the congressional budget
for the United States Government for fiscal year 2004 and
setting forth appropriate budgetary levels for fiscal years
2003 and 2005 through 2013,'' which provided $400 billion over
10 years for Medicare modernization and prescription drugs.
On June 16, 2003, Committee on Ways and Means Chairman Bill
Thomas and Committee on Energy and Commerce Chairman Billy
Tauzin introduced H.R. 2473, the ``Medicare Prescription Drug
and Modernization Act of 2003''. (Identical language in the
form of a report was released publicly June 13, 2003.) On June
17, 2003, H.R. 2473 was marked up by the full Committee on Ways
and Means and ordered favorably reported by a vote of 25-15,
after adopted amendments--including the Thomas amendment in the
nature of a substitute--were accepted into the bill. The
amendments that were accepted to the Thomas amendment in the
nature of a substitute were: (1) an amendment offered by Mrs.
Johnson to instruct the Secretary of the U.S. Department of
Health and Human Services to promptly evaluate existing codes
for physician services associated with the administration of
covered outpatient drugs; and to use existing processes to
establish relative values for such services; (2) an en bloc
amendment offered by Mr. Collins to exempt MA private FFS plans
from compliance with the drug utilization management program,
negotiation of discounts from manufacturers, disclosure of fact
that generic drug is available at a lower cost, and TRICARE
standards for participation; and (3) an amendment offered by
Mr. Nussle and Mr. Pomeroy to adjust the Medicare inpatient
hospital prospective payments system wage index to revise the
labor-related share of such index, and to provide a five
percent bonus payment to physicians operating in physician
scarcity areas.
II. EXPLANATION OF PROVISIONS
A. 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 in 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, Medicare statute 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 provided 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 that must be put
directly into 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 Medicare Part D of Title XVIII
of the Social Security Act. Effective January 1, 2006, a new
voluntary benefit would be established. Beneficiaries could
purchase either ``standard coverage'' or actuarially equivalent
coverage approved by the Secretary of Health and Human
Services. In 2006, ``standard coverage'' would have a $250
deductible, 80 percent coverage for costs between $251 and
$2,000, and all costs after the individual has borne $3,500 in
out-of-pocket spending (a.k.a. the catastrophic threshold). The
catastrophic threshold would be raised for individuals with
income above $60,000 and couples with income above $120,000.
Subsidies would be provided for persons with income below 150
percent of poverty. Coverage would be provided through PDPs,
Medicare Advantage (MA) plans (formerly known as
Medicare+Choice plans), or Enhanced Fee-For-Service plans
(EFFS). The program would rely on private plans to provide
coverage and to bear some of the financial risk for drug costs.
Federal subsidies would be provided to encourage participation.
Plans would be expected to negotiate prices for drugs. A new
Medicare Benefits Administration (MBA), within the Department
of Health and Human Services (HHS), would contract with plans.
New Section 1860D-1. Benefits; Eligibility; Enrollment; and
Coverage Period
The new Section 1860A would specify that each individual
entitled to Medicare Part A or enrolled in Medicare Part B
would be entitled to obtain qualified prescription drug
coverage under Medicare. MA plans and EFFS plans (MA-EFFS
plans) would be required to offer qualified prescription drug
coverage. An individual enrolled in a MA-EFFS plan would obtain
their drug coverage through the plan. An individual not
enrolled in either a Medicare Advantage or EFFS plan could
enroll in a new PDP. The provision would specify that an
individual eligible to make an election to enroll in a PDP, or
with a MA-EFFS plan, would do so in accordance with regulations
issued by the Administrator of the new 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 MA-EFFS programs including annual
coordinated election periods and special election periods. An
individual discontinuing a MA election during the first year of
eligibility would be permitted to enroll in a PDP at the same
time as the election of coverage under the original fee-for-
service plan (FFS).
An initial six month election period, beginning on October
1, 2005, would be established for persons entitled to Part A or
enrolled under Part B on that date. For persons first entitled
to Part A or enrolled in Part B after that date, an initial
election period that would be the same as that for initial Part
B enrollment, would be established. The MBA Administrator would
be required to establish special election periods for persons
in specific circumstances, such as having and then
involuntarily losing prescription drug coverage; enrollment
delays or non-enrollment attributable to government action;
becoming eligible for Medicaid drug coverage; or any such
exceptional circumstance specified by the MBA Administrator
(including circumstances pertaining to MA enrollment).
Guaranteed issue and community-rating protections would be
established for beneficiaries. Individuals electing qualified
prescription drug coverage under a PDP plan or MA-EFFS plan
could not be denied enrollment based on health status or other
factor. MA 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 MA-EFFS
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 in a manner reflecting the additional actuarial risk
involved. Such risk would be established through an appropriate
actuarial opinion.
An individual would be considered to have had continuous
prescription drug coverage if the individual could establish
that he or she had coverage under one of the following (and
coverage in one plan occurred no more than 63 days after
termination of coverage in anotherplan): (1) a qualified PDP or
MA-EFFS plan, (2) Medicaid, (3) a group health plan, but only if
benefits were at least equivalent to benefits under a qualified PDP,
(4) a Medigap plan, but only if the policy was in effect on January 1,
2006, and only if the benefits were at least equivalent to benefits
under a qualified PDP, (5) a state pharmaceutical assistance program,
but only if benefits were at least equivalent to benefits under a
qualified PDP, or (6) a veteran's plan, but only if benefits were at
least equivalent to benefits under a qualified PDP. Individuals could
apply to the MBA Administrator to waive the requirement that such
coverage be at least equivalent to benefits under a qualified PDP if
they could establish that they were not adequately informed that the
coverage did not provide such level of coverage.
PDP sponsors would make drug coverage available to all
eligible individuals residing in the area--without regard to
their health, economic status, or place of residence.
Elections would take effect at the same time that they do
for MA plans; however, no election could take effect before
January 1, 2006. The MBA Administrator would provide for the
termination of an election in the case of termination of Part A
and Part B coverage or termination of an election for cause
(including failure to pay the required premium).
New Section 1860D-2. Requirements for Qualified
Prescription Drug Coverage
The new Section 1860D-2 would specify the requirements for
qualified prescription drug coverage. Qualified coverage would
be defined as either ``standard coverage'' or actuarially
equivalent coverage.
For 2006, ``standard coverage'' would have a $250
deductible, 80 percent coverage for costs between $251 and
$2,000, and full coverage for all costs after the individual
has borne $3,500 in out-of-pocket spending (a.k.a. the
catastrophic threshold). Beneficiaries would have access to
negotiated discounts even where there would be no insurance
benefit (between $2,000 in spending and $3,500 in out-of-pocket
spending). Beginning in 2007, standard coverage thresholds
would be increased by the annual percent increase in average
per capita expenditures for covered outpatient drugs for
beneficiaries (for the 12-month period ending in July of the
previous year).
Plans would be permitted to substitute cost-sharing
schedules for costs up to the initial coverage limit ($2,000)
that are actuarially consistent with the average expected 20
percent cost-sharing up to the initial coverage limit. They
could also apply tiered coinsurance, provided such coinsurance
was actuarially consistent with the average 20 percent cost-
sharing requirements.
Costs that would count toward meeting the catastrophic
limit would only be considered incurred if they were paid for
the deductible, cost-sharing, or benefits not paid because of
application to the initial coverage limit. Costs would be
treated as incurred costs only if they are paid by the
individual (or by another family member on behalf of the
individual), paid on behalf of a low-income individual under
the subsidy provisions, under the Medicaid program, or by a
state pharmaceutical assistance program. Substantial new
assistance would be provided to those states with
pharmaceutical assistance programs through the catastrophic
benefit by requiring Medicare to pay 80 percent of the costs
above the catastrophic limit. Any costs for which the
individual was reimbursed by insurance or otherwise would not
count toward incurred costs.
The provision would increase the annual out-of-pocket
threshold for each enrollee whose adjusted gross income exceeds
a specified income threshold. The portion of income exceeding
this income threshold ($60,000 for individuals and $120,000 for
couples in 2006), but below an income threshold limit ($200,000
in 2006), would be considered in making this calculation. The
increase would be calculated as follows: first, the ratio of
the annual out-of-pocket limit to the income limit would be
calculated and expressed as a percent; for 2006, this would be
$3,500 divided by $60,000, equaling about 5.8 percent. This
percentage would be multiplied by income over the income
threshold, not exceeding $140,000. Thus, the catastrophic out-
of-pocket limit would be $5,820 for an enrollee with an income
of $100,000 and $11,620 for persons with incomes at $200,000 or
above. Beginning in 2007, the income threshold and income
threshold limit would be increased by the percentage increase
in the consumer product index (CPI) for all urban consumers,
rounding to the nearest $100.
The amount used for making the income determination would
be adjusted gross income Individuals filing joint returns would
be treated separately with each person considered to have an
adjusted gross income equal to one-half of the total. The
determination would be the most recent return information
disclosed by the Secretary of the Treasury to the Secretary of
HHS before the beginning of the year. The Secretary, in
coordination with the Secretary of the Treasury, would provide
a procedure under which an enrollee could elect to use more
recent information, including information for a taxable year
ending in the current calendar year. Through the 1-800 toll
free Medicare beneficiary line, individuals would have
assistance in appealing a determination from the Medicare
Ombudsman. The process would require: (1) the enrollee to
provide the Secretary with the relevant portion of the more
recent return, (2) verification by the Secretary of the
Treasury, and (3) payment by the Secretary to the enrollee
equal to the benefit payments that would have been payable
under the plan if more recent information had been used. If
such payments were made, the PDP sponsor would pay the
Secretary the requisite amount, less the applicable reinsurance
that would have applied.
The Secretary would be required to provide, through the
annual Medicare handbook, general information on the
calculation of catastrophic out-of-pocket thresholds. The
Secretary would periodically transmit to the Secretary of the
Treasury the names and Social Security Numbers (SSNs) of
enrollees in PDPs or MA-EFFS plans and request that the
Secretary of the Treasury disclose income information. The
Secretary would disclose to entities offering the plan the
amount of the out-of-pocket threshold that would apply to a
specified taxpayer. New confidentiality protections and severe
criminal and civil penalties would apply to any unauthorized
disclosure of information.
The provision would permit a PDP or MA-EFFS sponsor to
offer, subject to approval by the MBA Administrator,
alternative coverage providing certain requirements were met.
The actuarial value of total coverage would have to be at least
equal to the actuarial value of standard coverage. The
unsubsidized value of the coverage (i.e. the value of the
coverage exceeding subsidy payments) would have to be equal to
the unsubsidized value of standard coverage. The coverage would
be designed (based on actuarially representative patterns of
utilization) toprovide for payment of incurred costs up to the
initial coverage limit of at least the same percentage of costs
provided under standard coverage. Further, catastrophic protection
would have to be the same as that under standard coverage. It could not
vary.
Both standard coverage and actuarially equivalent coverage
would offer access to negotiated prices, including applicable
discounts. Access would be provided even when no benefits were
payable because of the application of cost-sharing or initial
coverage limits. Insofar as a State elected to use these
negotiated prices for its Medicaid program, the Medicaid drug
payment provisions would not apply. Further, the negotiated
prices would not be taken into account in making ``best price''
determinations under Medicaid. Under the current Medicaid best
price policy, the largest discount a pharmaceutical
manufacturer negotiates in the private market must be passed
along to the Medicaid program as well. Since manufacturers can
only influence market share and volume in the private sector,
not Medicaid, the ``best price'' policy has led to less
discounting by manufacturers. As a result, arbitrary price
floors are created and consumers pay the price as competing
manufacturers have had less incentive to steeply discount their
prices. This provision saves Medicare billions of dollars by
encouraging pharmaceutical manufacturers to offer the same
discounts that private plans currently receive. For
transparency reasons, the PDP or MA-EFFS sponsor would be
required to disclose to the MBA Administrator the extent to
which manufacturer discounts or rebates or other remunerations
or price concessions are made available to the sponsor or
organization and passed through to enrollees through
pharmacies. Manufacturers would be required to disclose pricing
information to the MBA Administrator under the same conditions
currently required for Medicaid. Transparency in pricing and
rebate arrangements is a key factor in ensuring beneficiaries
and taxpayers are receiving the best value for their resources.
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 MBA Administrator
could terminate a contract with a PDP or MA-EFFS sponsor 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)(2) 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) vaccines licensed under
Section 351 of the Public Health Service Act. Drugs excluded
from Medicaid coverage would be excluded from the definition
except for smoking cessation drugs. The definition includes any
use of a covered outpatient drug for a medically accepted
indication. Drugs paid for under Medicare Part B would not be
covered under Part D. A plan could elect to exclude a drug that
would otherwise be covered, if the drug was excluded under the
formulary and the exclusion was not successfully appealed under
the new Section 1860D-3. In addition, a PDP or MA-EFFS sponsor
could exclude from coverage, subject to reconsideration and
appeals provisions, any drug that either does not meet
Medicare's definition of medical necessity or is not prescribed
in accordance with the plan or Part D. Beneficiaries could
appeal the placement of a drug in a higher coinsurance tier to
an external, independent entity.
New Section 1860D-3. Beneficiary Protections for Qualified
Prescription Drug Coverage
The new Section 1860D-3 would specify required beneficiary
protections. Plans would have to comply with guaranteed issue
and community-rated premium requirements specified in the new
Section 1860D-1, access to negotiated prices as specified in
the new Section 1860D-2, and the non-discrimination provisions
specified in the new Section 1860D-6.
The PDP sponsors would be required to disclose to each
enrolling beneficiary information about the plan's benefit
structure, including information on: (1) access to covered
drugs, including access through pharmacy networks, (2) how any
formulary used by the sponsor functioned, (3) copayment and
deductible requirements (including any applicable tiered
copayment requirements), and (4) grievance and appeals
procedures. In addition, beneficiaries would have the right to
obtain more detailed plan information. The sponsor would be
required to make available, through an Internet site and, on
request, in writing, information regarding the basis for
exclusion of any drug from the formulary. Plans must notify
enrollees when a change has been made in the preferred status
of a drug or biological, or if there has been a change in a
beneficiary's coinsurance. Plans would be required to furnish
to enrollees a detailed explanation of benefits, including
information on benefits compared to the initial coverage limit
and the applicable out-of-pocket threshold.
PDP and MA-EFFs sponsors would be required to permit the
participation of any pharmacy that met the plan's terms and
conditions. Beneficiaries would be ensured access to any
convenient local pharmacy that chose to participate in the
plan. PDP and MA-EFFS sponsors could reduce coinsurance for
their enrolled beneficiaries below the otherwise applicable
level for drugs dispensed through in-network pharmacies; in no
case could the reduction result in an increase in subsidy
payments made by the MBA Administrator to the plan. Sponsors
would be required to secure participation in its network of a
sufficient number of pharmacies that dispense drugs directly to
patients to assure convenient access. Mail order only pharmacy
would be prohibited so that beneficiaries have access to a
convenient bricks and mortar pharmacy. The MBA Administrator
would establish convenient access rules that were no less
favorable to enrollees than rules for convenient access
established by the Secretary of Defense on June 1, 2003, for
the TRICARE Retail Pharmacy program. The TRICARE standard
specifies that, in an urban area, 90 percent of beneficiaries
must be within two miles of a participating pharmacy; in a
suburban area, 90 percent of beneficiaries must be within five
miles of a participating pharmacy; and in rural areas, 70
percent of beneficiaries must be within fifteen miles of a
participating pharmacy. According to the Department of Defense,
the TRICARE Retail Pharmacy program receives minimal access
complaints each year, and problems and disputes related to
access are resolved quickly. The rules would include adequate
emergency access for enrolled beneficiaries. Sponsors would
permit enrollees to receive benefits through a community
pharmacy, rather than through mail-order, with any differential
in cost paid by enrollees. Pharmacies could not be required to
accept insurance risk as a condition of participation. It is
important that pharmacies are not put at risk for events they
cannot control, such as volume and frequency of prescriptions.
PDP and MA-EFFS sponsors would be required to issue (and
reissue as appropriate) a card or other technology that could
be used by an enrolled beneficiary to assure access to
negotiated prices for drugs when coverage is not otherwise
provided under the plan. The MBA Administrator would provide
for the development of uniform standards relating to a
standardized format for the card or other technology. These
standards would be compatible with the administrative
simplification requirements of Title XI of the Social Security
Act.
There is no requirement to use a formulary, however, if a
PDP or MA-EFFS sponsor uses a formulary, it would have to meet
certain requirements. It would be required to establish an
independent pharmaceutical and therapeutic committee free of
conflict with the plan 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 the 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,
including assessing peer-reviewed medical literature, such as
randomized clinical trials, pharmacoeconomic studies, outcomes
research data, and such other information the committee
determined appropriate. Arbitrary determinations to exclude
products from the formulary would not be permitted.
The P&T committee would also take into account whether
including a particular covered drug had therapeutic advantages
in terms of safety and efficacy. In addition, the formulary
would have to include at least two drugs within each
therapeutic category and class of covered outpatient drugs,
although not necessarily all drugs within such categories or
classes. When establishing such classes, the committee would
take into account the standards published in the United States
Pharmacopoeia Drug Information. It would be required to make
available to plan enrollees, through the Internet or otherwise,
the clinical basis for the coverage of any drug on the
formulary. 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 plan would
provide for periodic evaluation and analysis of treatment
protocols and procedures. Further, the PDP or MA-EFFS sponsor
would be required to provide for, as part of its overall
appeals process, appeals of coverage denials regarding
application of the formulary.
Each PDP or MA-EFFS sponsor would ensure that each pharmacy
or other dispenser informed enrolled beneficiaries 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 PDP or MA-EFFS sponsor would be required to have
(directly, or indirectly through arrangements): (1) an
effective cost and drug utilization management program, (2)
quality assurance measures including a medication therapy
management program, (3) for years beginning with 2007, an
electronic prescription drug program, and (4) a program to
control waste, fraud, and abuse. 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 at risk for potential
medication problems such as beneficiaries with complex or
chronic diseases (such as diabetes, asthma, hypertension, and
congestive heart failure) or multiple prescriptions, that drugs
under the plan were appropriately used to optimize therapeutic
outcomes through improved medication use and to 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. MA private fee-for-
service plans would not be required to comply with the drug
utilization management program, negotiate discounts from
manufacturers, meet the TRICARE standards for participation, or
disclose the fact that a lower priced generic drug is available
at the time of purchase.
The electronic prescription drug program would have to be
consistent with national standards developed by the MBA
Administrator. The program 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. The electronic prescribing program would permit
health professionals to access information on the different
medications a senior may be taking--making it easier to prevent
adverse drug interactions and side effects. In addition,
electronic prescribing would cut down on both the costs and
hassle that pharmacists incur trying to decipher a handwritten
script. These systems will increase drug compliance and
properly monitor drug utilization.
The MBA Administrator would be required to provide for the
development of national standards relating to the electronic
prescription drug program. The standards would be compatible
with those established for the administrative simplification
program established under title XI of the Social Security Act.
The MBA Administrator would establish an advisory task force
that included representatives of physicians, hospitals,
pharmacies, beneficiaries, pharmacy benefit managers,
technology experts, and pharmacy benefit experts of the
Department of Veterans Affairs, Defense and other appropriate
Federal agencies. The task force would provide recommendations
to the MBA 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 standards and systems reduce
medication errors and can be readily implemented by physicians,
pharmacies, and hospitals, (3) efforts to develop uniform
standards and a common software platform for the secure
electronic transmission of medication history, eligibility,
benefit and prescription information, (4) efforts to develop
and promote universal connectivity and interoperability for the
secure exchange of information, (5) cost of implementing such
systems in hospital and physician office settings and
pharmacies, and (6) implementation issues as they relate to
administrative simplification requirements and current Federal
and State prescribing laws and regulations and their impact on
implementation of computerized prescribing. The MBA
Administrator would be required to establish the task force by
April 1, 2004. The task force would be required to submit
recommendations to the MBA Administrator by January 1, 2005.
The MBA Administrator would be required to promulgate national
standards by January 1, 2006. Given current available
technology, the committee supports the timely development of
standards to facilitate a secure electronic prescription
information program between prescribing health care
professionals,pharmacists, and pharmacy benefit managers (PBMs)
to reduce dangerous drug interactions as well as errors due to poor
handwriting and transcribing errors. To this end, the committee
believes that it would be to the benefit of the patient for prescribing
professionals to have real-time, ``up-front'' access to the patient's
medication history, eligibility for benefits, drug formulary (if
applicable), and coverage, when making prescribing decisions.
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 MA. 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 determines that the preferred drug
for the treatment of the same condition was not as effective
for the enrollee or could have adverse effects for the
enrollee. Such decisions could also be appealed under the MA
appeals structure.
In general, PDP sponsors would be required to meet for
independent review standards for coverage denials and appeals
in the same manner that such standards apply to MA
organizations. An individual enrolled in a PDP could appeal to
obtain coverage for a drug not on the formulary or in a
different cost sharing tier 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 MA organizations.
New Section 1860D-4. Requirements for and Contracts With
Prescription Drug Plan (PDP) Sponsors
New Section 1860D-4 would specify organizational plan
requirements for entities seeking to become PDP sponsors. In
general, the section would require a PDP sponsor to be 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. Alternatively it
could meet solvency standards established by the MBA
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 subsidy payments and 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 insurance or
make other arrangements for the cost of coverage provided to
enrollees.
PDP sponsors would be required to enter into a contract
with the MBA 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 MBA Administrator would have the same
authority to negotiate the terms and conditions of the plans as
the Director of the Office of Personnel Management has with
respect to FEHB plans. The MBA Administrator would be required
to take into account subsidy payments for covered benefits in
negotiating the terms and conditions regarding premiums. The
MBA Administrator would designate at least 10 service areas
consistent with the areas established for EFFS plans.
The new section would incorporate, by reference, many of
the contract requirements applicable to MA plans, including
minimum enrollment, contract periods, allowable audits to
protect against fraud and abuse, intermediate sanctions, and
contract terminations. Pro rated 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 MA plan.
The new Section would permit the MBA 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 MBA Administrator. The MBA Administrator would establish
such standards by regulation by October 1, 2004.
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 MBA Administrator.
New Section 1860D-5. Process for Beneficiaries To Select
Qualified Prescription Drug Coverage
The new Section 1860D-5 would require the MBA Administrator
to establish a process for the selection of a PDP or MA-EFFS
sponsor that provided qualified prescription drug coverage. The
process would include the conduct of annual coordinated
election periods 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 MA. Further, the process would provide for
the coordination of elections through filing with a PDP or MA-
EFFS sponsor in a manner consistent with that provided under
MA. The plan would have to inform each enrollee at the
beginning of the year of the enrollee's annual out-of-pocket
threshold.
The section would specify that an EFFS enrollee could only
elect to receive drug coverage through the plan.
The MBA Administrator would assure that all eligible
individuals residing in the United States would have a choice
of enrollment in at least two qualifying plan options, at least
one of which is a PDP, in their area of residence. The
requirement would not be satisfied if only one PDP or MA-EFFS
sponsor offers all the qualifying plans in the area. If
necessary to ensure such access, the MBA Administrator would be
authorized to provide 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 MBA Administrator could never provide
for the full underwriting of financial risk for any PDP sponsor.
Additionally, the MBA Administrator would be directed to seek to
maximize the assumption of financial risk by PDP sponsors and entities
offering MA-EFFS plans. The MBA 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 1860D-6. Submission of Bids
The new Section 1860D-6 would require each PDP sponsor to
submit to the MBA Administrator specified information in the
same manner MA organizations submit information. The submitted
information would be the qualified drug coverage to be
provided, the actuarial value of the coverage, and details of
the bid and coverage premium. The PDP sponsor would include:
(1) actuarial certification of the bid and premium, (2) the
portion of the bid and premium attributable to benefits in
excess of the standard coverage, (3) the reduction in the
premium resulting from reinsurance subsidies, (4) the reduction
in the bid resulting from direct and reinsurance subsidy
payments, and (5) such other information required by the MBA
Administrator.
The MBA Administrator would review the submitted
information for purposes of conducting negotiations with the
plan. The MBA Administrator would approve the premium only if
it accurately reflected the actuarial value of the benefits and
the 73 percent average subsidy provided for under the new
Section 1860D-8. The MBA Administrator would apply actuarial
principles to approval of a premium in a manner similar to that
used for establishing the monthly Part B premium. These
requirements would not apply to MA plans.
The bid and premium 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 sponsor would permit each enrollee to have their premiums
withheld from their Social Security checks in the same manner
as is currently done for Part B premiums and transferred to the
plan in which they are enrolled. Beneficiaries could also make
payment of the premium through an electronic funds transfer
mechanism. The amount would be credited to the Medicare
Prescription Drug Trust Fund. Reductions in Part B premiums
attributable to enrollment in MA plans could be used to reduce
the premium otherwise applicable.
Under certain conditions, PDP or MA-EFFS sponsors in an
area would be required to accept, for an individual eligible
for a low-income premium subsidy, the reference premium amount
(premium for standard coverage) 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.
New Section 1860D-7. Premium and Cost-Sharing Subsidies for
Low-Income Individuals
The new Section 1860D-7 would provide subsidies for low-
income individuals. Low-income persons would receive a premium
subsidy (based on the value of standard coverage). Individuals
with incomes below 135 percent of poverty (and assets below
$4,000) would have a subsidy equal to 100 percent of the value
of standard drug coverage provided under the plan. For
individuals between 135 percent and 150 percent of poverty,
there would be a sliding scale premium subsidy ranging from 100
percent of such value at 135 percent of poverty to zero percent
of such value at 150 percent of poverty. The asset test for
this part is twice the asset test used for determining
Supplemental Security Income (SSI) eligibility, indexed to
inflation. (Note: the asset test has not previously been
indexed.) Not all resources are counted. Excluded resources
include: a home (with no limit on its value) if the individual
lives in it; household goods and personal effects up to $2,000;
one car used to provide necessary transportation regardless of
value or if not used to provide transportation, excluded up to
$4,500 in value; the value of a burial space; other property
essential for self support of the individual; life insurance up
to $1,500; the value of a trust, but trusts must meet very
specific criteria; and other exclusions. Sponsors and entities
could not charge individuals receiving cost-sharing subsidies
more than five dollars per prescription. Sponsors and entities
could reduce the cost-sharing to zero, which would otherwise be
applicable for generic drugs.
State Medicaid programs or the Social Security
Administration (SSA) would determine whether an individual
would be eligible for a low-income subsidy, as well as the
amount of the subsidy. SSA would be appropriated the necessary
funds. The Congressional Budget Office (CBO) estimates that
152,000 seniors who would otherwise not enroll in the low-
income subsidy program would participate since the enrollment
process through SSA avoids the stigma of signing up at a
welfare office. 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.
Whether offered by a PDP or MA-EFFS sponsor, the premium
subsidy amount would be defined as the benchmark premium amount
for the qualified prescription drug coverage chosen by the
beneficiary. The benchmark premium amount for a plan means the
premium amount for enrollment under the plan (without regard to
any subsidies or late enrollment penalties) for standard
coverage (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 premium
as the actuarial value of standard coverage was to the
actuarial value of alternative coverage.
The MBA Administrator would provide a process whereby the
PDP or MA-EFFS sponsor would notify an individual that he or
she is eligible for a subsidy as well as the amount of the
subsidy. The sponsor would reduce the individual's premium or
cost-sharing otherwise imposed by the amount of the subsidy.
The MBA Administrator would periodically, and on a timely
basis, reimburse the sponsor or entity for the amount of such
reductions.
Part D benefits would be primary to any coverage available
under Medicaid. The MBA 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 MBA 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.
New Section 1860D-8. Subsidies for All Medicare
Beneficiaries for Qualified Prescription Drug
Coverage
New Section 1860D-8 would provide for subsidy payments to
qualifying entities. The payments would reduce premiums for all
enrolled beneficiaries consistent with an overall subsidy level
of 73 percent, reduce adverse selection among plans, and
promote the participation of PDP sponsors. Such payments would
be made as direct subsidies and through reinsurance. The
section would constitute budget authority in advance of
appropriations and represent the obligation of the MBA
Administrator to provide for subsidy payments specified under
the section.
Direct subsidies would be made for individuals enrolled in
a PDP or MA-EFFS plan, equal to 43 percent of the national
weighted average monthly bid amount. Each year, the MBA
Administrator would compute a national average monthly bid
amount equal to the average of the benchmark bid amounts for
each drug plan (not including those offered by private plans)
adjusted to add back in the value of reinsurance subsidies. The
benchmark bid amount would be defined as the portion of the bid
attributable to standard coverage or actuarial equivalent
coverage. The bid amount would be a weighted average with the
weight for each plan equal to the average number of
beneficiaries enrolled in the plan for the previous year. (The
MBA Administrator would establish a procedure for determining
the weighted average for 2005).
Reinsurance payments would be made for specified costs
incurred in providing prescription drug coverage for
individuals enrolled in either a PDP or MA-EFFS plan. The MBA
Administrator would provide for reinsurance payments to PDP
sponsors, and entities offering MA or EFFS plans. Reinsurance
payments would be provided for 30 percent of an individual's
allowable drug costs over the initial reinsurance threshold
($1,000 in 2006) but not over the initial coverage limit
($2,000 in 2006). Reinsurance of 80 percent would also be
provided for allowable costs over the out-of-pocket threshold
($3,500 in 2006). These reinsurance payments would provide
additional assistance to those plans that enroll beneficiaries
who have multiple or very expensive prescription drug regimens.
In the aggregate, reinsurance payments would equal 30 percent
of total payments made by qualifying entities for standard
coverage.
For purposes of calculating reinsurance payments, allowable
costs would be defined as the portion of gross covered
prescription drug costs that were actually paid by the plan,
but in no case 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 MBA Administrator would be required to estimate the
total reinsurance subsidy payments that would be made during
the year (including those made to qualified retiree plans) and
total benefit payments to be made by qualifying entities for
standard coverage during the year. The MBA Administrator would
proportionately adjust payments such that total subsidy
payments during the year were equal to 30 percent of total
payments made by qualifying plans for standard coverage during
the year. The MBA Administrator could adjust direct subsidy
payments in order to avoid risk selection. The MBA
Administrator would determine the payment method and could use
an interim payment system based on estimates. Payments would be
made from the Medicare Prescription Drug Trust Fund.
Special subsidy payments would be made to a qualified
retiree prescription drug plan. A qualified plan would be
defined as employment-based retiree health coverage (including
coverage offered pursuant to one or more collective bargaining
agreements) meeting certain requirements. The MBA Administrator
would approve coverage with at least the same actuarial value
as standard 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 and entitled to enroll under a PDP or MA-EFFS plan but
elected not to. Subsidy payments would equal 28 percent of
allowable costs between $250 and $5,000. (The dollar amounts
would be adjusted annually by the percentage increase in
Medicare per capita prescription drug costs.)
About one-third of Medicare beneficiaries receive retiree
coverage from their former employers. While most of these
people are satisfied with their coverage, employers are under
increasing pressure to drop or reduce prescription drug
coverage. This subsidy provides employers and union plans with
maximum flexibility, encouraging them to maintain or expand
their retiree plans. Thus, Medicare would reap significant
savings from subsidizing employer plans at two-thirds of the
cost of other Medicare prescription drug plans.
New Section 1860D-9. Medicare Prescription Drug Trust Fund
New Section 1860D-9 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 amounts received by, or payable from, the Trust
Fund.
EFFECTIVE DATE
Upon enactment.
New Section 1860D-10. Definitions; Treatment of References
to Provisions in Part C
New section 1860D-10 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 Secretary
to submit a report to Congress within 6 months of enactment
that makes recommendations regarding providing benefits under
Part D.
Also within six months of enactment, the Secretary would be
required to review the current standards of practice for
pharmacy services provided to patients in nursing facilities.
Specifically, the Secretary would assess: (1) the current
standards of practice, clinical services, and other service
requirements generally utilized for such pharmacy services, (2)
evaluate the impact of those standards with respect to patient
safety, reduction of medication errors, and quality of care,
and (3) recommend necessary actions.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Prescription drugs are just as important to modern health
care as hospitals and physician services were when Medicare was
enacted in nearly 40 years ago. Prescription drugs are more
often than not, the health care solution of choice. Most often,
they prevent, treat or manage diseases more effectively and
less invasively than hospitals and nursing homes. The typical
senior now takes more than 20 prescriptions a year to improve
their health or manage their diseases. While seniors are taking
more drugs than any other demographic group, they are often
paying the highest prices because more than one-third of
seniors have no prescription drug coverage. Similarly, low-
income beneficiaries must often make unacceptable choices
between life-savings medicines and other essentials.
The addition of a prescription drug benefit to Medicare,
while providing seniors additional choices in how they receive
their health services, is a critical modernization of the
program. In designing how these benefits are delivered, the
Committee believes competition among plans will lead to the
most efficient allocation of resources and will create
opportunities to increase the availability of certain drugs, to
reduce the cost of drugs, and the cost of the program to
taxpayers.
Importantly, guaranteeing issuance of policies, providing
uniform plan premiums, ensuring two plans in each area and
providing a worst case fall back ensure beneficiaries have the
coverage to which they are entitled. Important new beneficiary
protections, such as allowing any willing pharmacy to
participate, ensuring convenient access to bricks and mortar
pharmacies, creating a level playing field for mail order and
retail pharmacy, and prohibiting plans from pushing insurance
risk onto pharmacists ensure seniors can get the drugs at the
pharmacy of their choice. Establishing new appeal rights for
coverage denials or tiered cost sharing problems helps
beneficiaries access the drugs most appropriate to their
medical condition.
In addition, by providing new tools to improve health, such
as electronic prescribing, medication therapy management, and
utilization review, the provision would greatly improve the
quality of services provided to beneficiaries.
In combination, these provisions will provide important new
benefits where Medicare is lacking, create new choices for
seniors, and create new protections to achieve the goals of
reduced costs and improved health.
Section 102. Offering of Qualified Prescription Drug Coverage Under the
Medicare Advantage and Enhanced Fee-For-Service 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, beginning January 1,
2006, a MA organization could not offer a coordinated care MA
plan unless either that plan or another plan offered by the
organization in the area included qualified drug coverage. It
could not offer drug coverage (other than that already required
under Medicare) unless the coverage was at least qualified
prescription drug coverage. An individual not electing
qualified prescription drug coverage under Part D would be
treated as ineligible to enroll in a MA plan offering such
coverage.
The organization would be required to meet beneficiary
protections outlined in the new Section 1860D-3, 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 MBA Administrator could waive such
requirements to the extent the MBA Administrator determined
they were duplicative of requirements otherwise applicable to
the organization or plan. MA organizations providing qualified
drug coverage would receive low-income subsidy payments, and
direct and reinsurance subsidies. A single premium would be
established for drug and non-drug coverage.
The same requirements would be applicable to an EFFS
organization.
EFFECTIVE DATE
Applies to coverage provided on or after January 1, 2006
REASON FOR CHANGE
Ensures MA-EFFS plans offer qualified prescription drug
coverage if they offer coverage, consistent with Section 101.
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 full
coverage under Medicaid. Persons entitled to full 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
Medicare beneficiaries (SLMBs), and certain qualifying
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. SLMBs are
persons who meet the QMB criteria, except that their income is
over the QMB limit; the SLMB limit is 120 percent of the
federal poverty level. Medicaid protection for SLMBs is limited
to payment of the Medicare Part B premium. QMBs and SLMBs 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 would
be 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 ``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, inform the MBA Administrator of cases where
eligibility has been established, and otherwise provide the MBA
Administrator with information that may be needed to carry out
Part D. In 2005, the federal matching rate would be increased
to 100 percent over 15 years. Beginning in 2020 the, the
federal matching rate would be 100 percent. The states would be
required to provide the MBA Administrator with the appropriate
information needed to properly allocate administrative
expenditures that could 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 the 2006-2020 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.
Residents of territories would not be eligible for regular
low-income subsidies. However, territories would be able to get
additional Medicaid funds, beginning at $25 million in 2006 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 MBA Administrator would be
required to report to Congress on the application of the law in
the territories.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Seniors should be treated as seniors first and low-income
second. The patchwork of state Medicaid programs that can vary
from state to state is confusing and demoralizing for many
seniors. By federalizing the drug costs of the dual eligibles,
we ensure beneficiaries have access to a uniform, Medicare
benefit.
Section 104. Medigap Transition
CURRENT LAW
Most beneficiaries have some health insurance coverage in
addition to basic Medicare benefits. Some individuals obtain
private supplemental 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 ten standardized
plans, though not all ten plans are offered in all states. The
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 supplemental
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, 2006,
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, or pre-standards, as
outlined below. Beneficiaries could keep their existing H, I,
and J plans.
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 H, I, or J plan. 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 H, I, or J plan. 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
for Part A and Part B beneficiaries 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.
The NAIC would make recommendations to Congress on
modernizing the Medigap market.
It is the Committee's intent that the offering of these new
Medigap policies would be voluntary on the part of insurers, as
is the case for all other Medigap standardized policies beyond
plan type A, basic Medigap coverage.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The two new Medigap policies would provide additional cost
sharing for beneficiaries without first dollar coverage. This
ensures beneficiaries have additional access to cover cost
sharing for the new prescription drug benefit if they so
choose.
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 that meet
certain requirements. This program was intended to be an
interim step until a legislative reform package, including both
a drug benefit and other Medicare reforms, is enacted.
Implementation of the drug discount card program was suspended
by court action.
explanation of provision
The provision would require the Secretary or Administrator
to establish a program to: (1) endorse prescription drug
discount card programs that meet certain requirements, and (2)
make available information on such programs to beneficiaries.
The Secretary would begin operating the program within 90 days
of enactment. The Secretary would provide for an appropriate
transition and discontinuation at the time a drug benefit first
becomes available under Part D.
Programs endorsed by the Secretary must meet certain
requirements. Programs shall pass negotiated discounts on drugs
to enrollees. Programs could not be limited to mail order drugs
and must provide support services to educate patients and
prevent adverse events. Programs must also provide, through the
Internet or otherwise, information to enrollees that the
Secretary deems necessary for beneficiaries to make informed
choices among all endorsed programs. This information would
include information on enrollment fees, prices charged to
beneficiaries, and services offered under the program. Program
sponsors would be required to demonstrate experience and
expertise in operating such a program. The sponsor would also
be required to have in place adequate procedures for quality
assurance. The annual enrollment fee could not exceed $30
(which could be paid in whole or in part by states). 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 that compared the costs and benefits of available
programs. This activity would be coordinated with the
dissemination of educational information on MA plans. The
Secretary would also oversee the endorsed programs' compliance
with the requirements of this section, including verification
of discounts, and services provided, the amount of dispensing
fees, and audits. 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 that
no longer meets requirements or engages in false or misleading
marketing practices. The provision would specify that a
beneficiary could only be enrolled in one endorsed program at a
time. A beneficiary could change enrollment after he or she has
been enrolled in a plan for a minimum period specified by the
Secretary.
The provision creates a two-year, temporary, transitional
low-income assistance program. Medicare beneficiaries with
incomes below 150 percent of poverty would be eligible for
assistance in 2004 and 2005. The program provides additional
funds in conjunction with the discount card to help low-income
seniors purchase prescription drugs prior to the implementation
of the drug benefit in 2006. The bill provides for $2 billion
in 2004 and $3 billion in 2005.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Immediate help for those without prescription drug coverage
will provide a transition into the new Part D drug benefit
while ensuring those who cannot afford prescription drugs
receive assistance. In addition, drug discount cards can be up
and running within 90 days, which will provide savings to
seniors at retail between 10 and 20 percent, according to HHS.
Discounts must be provided by both manufacturers and pharmacies
and must be passed on to beneficiaries.
Section 106. Disclosure of Return Information for Purpose of Carrying
Out Medicare Catastrophic Prescription Drug Program
CURRENT LAW
Current law authorizes, under specified circumstances, the
Secretary of the Treasury to disclose returns and return
information for purposes other than tax administration.
EXPLANATION OF PROVISION
The provision would permit the Secretary of the Treasury,
upon written request from the Secretary of the Department of
Health and Human Services (HHS), to disclose to officers and
employees of HHS specific information with respect to a
specified taxpayer for a specific tax year. Information that
could be disclosed would be taxpayer identification information
and adjusted gross income, or, simply the income threshold
limit specified under the new Part D ($200,000 in 2006). A
specified taxpayer would be either: (1) an individual who had
adjusted gross income for the year in question in excess of the
income threshold specified in the new Part D ($60,000 per
individual), or (2) an individual who elected to use more
recent income information as permitted under Part D.
Individuals filing joint returns would be treated separately,
each considered to have an adjusted gross income equal to one-
half of the total.
Officers and employees of HHS would be authorized to use
tax return information only for administering the prescription
drug benefit. HHS could disclose a beneficiary's determined
annual out-of-pocket threshold to a beneficiary's PDP sponsor.
The sponsor could use such information only for the purposes of
administering the benefit.
EFFECTIVE DATE
Upon enactment.
Section 107. State Pharmaceutical Assistance Transition Commission
CURRENT LAW
A number of states currently have programs to provide low-
income persons, not qualifying for Medicaid, with financial
assistance in meeting their drug costs. The state programs
differ substantially in both design and coverage.
EXPLANATION OF PROVISION
The provision would establish a State Pharmaceutical
Assistance Transition Commission to develop a proposal for
dealing with the transitional issues facing state programs and
participants due to implementation of the new Part D
prescription drug program. The Commission, to be established on
the first day of the third month following enactment, would
include: (1) a representative of each governor from each state
with a program that the Secretary identifies as having a
benefit package comparable to or more generous than the new
Part D,(2) representatives from other states that have
pharmaceutical assistance programs, as appointed by the Secretary, (3)
representatives (not exceeding the total under (1) or (2) above) of
organizations that represent interests of participants, appointed by
the Secretary, (4) representatives of Medicare Advantage organizations;
and (5) the Secretary or the Secretary's designee and other members
specified by the Secretary. The Commission would develop the proposal
in accordance with specified principles, namely: (1) protection of the
interests of program participants in the least disruptive manner, (2)
protection of the financial and flexibility interests of states so they
are not financially worse off, and (3) principles of Medicare
modernization outlined in Title II of the Act. It is the intent of the
Committee that Medicare beneficiaries use one prescription drug card
for their benefit. The Committee believes presenting beneficiaries with
more than one card would be confusing and administratively inefficient.
The Commission would report to the President and Congress
by January 1, 2005. The report would contain specific proposals
including specific legislative or administrative
recommendations, if any. The Commission would terminate 30 days
later.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
States, especially those with comprehensive pharmaceutical
assistance programs, would benefit significantly. States would
receive billions of dollars in assistance under the proposal,
with the most help going to those states that have already
provided pharmaceutical drug assistance to seniors. Since some
states have initiated pharmaceutical assistance for low-income
seniors, these states would reap the most savings, as Medicare
would become the primary insurer for these beneficiaries.
States have several options in relation to the new benefit.
First, they could design their pharmacy programs to ``wrap
around'' the Medicare drug benefit. Second, their pharmacy
program could subsidize low-income individuals with costs
between $2,000 and the $3,500 catastrophic benefit. This
spending would count toward the catastrophic cap. Further,
state pharmacy assistance programs could use money saved from
the Medicare drug benefit to extend their assistance to persons
with incomes above 150 percent of poverty. Finally, state
pharmacy programs could work to encourage low-income
individuals to enroll in a PDP, thereby creating a seamless
transition from the perspective of the individual. Their cost-
sharing still could not exceed $5 per prescription, and they
could get the prescription drugs they need at a convenient
pharmacy. From the beneficiary's perspective nothing will have
changed.
It is difficult to foresee every issue that may impact
states that have already provided substantial assistance to
seniors. A State Pharmaceutical Assistance Transition
Commission would be established under the bill. This commission
would develop a proposal to address the unique transition
issues facing these states.
B. Title II--Medicare Enhanced Fee-for-Service and Medicare Advantage
Programs; Medicare Competition
Section 200. Medicare Modernization and Revitalization
CURRENT LAW
Health Maintenance Organizations (HMOs) and other types of
managed care plans have been allowed to participate in the
Medicare program, beginning with private health plan contracts
in the 1970s and the Medicare risk contract program in the
1980s. BBA 97 replaced the risk contract program with the
Medicare+Choice (M+C) program.
EXPLANATION OF PROVISION
This title would establish the Medicare Enhanced Fee-for-
Service (EFFS) program, under which Medicare beneficiaries
would be provided access to a range of EFFS plans that may
include preferred provider networks. It would establish a
Medicare Advantage (MA) program to offer improved managed care
plans with coordinated care. It would also use competitive
bidding, in the same style as FEHBP for certain areas,
beginning in 2010, to promote greater efficiency and
responsiveness to Medicare beneficiaries.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This title modernizes and revitalizes private plans under
Medicare. BBA 97 altered payments for private plans and
expanded the types of plans that could be offered under
Medicare. Since payment rate changes were implemented,
enrollment in private plans has fallen from 6.2 million
beneficiaries in 1998 to 4.6 million beneficiaries in May 2003,
and the number of plans has decreased from 346 risk plans in
1998 to 153 (149 coordinated care plans and 4 private FFS
plans) in May 2003. This disruption has been due, in part, to
unpredictable and insufficient payments. BBA 97 fundamentally
de-linked payments to plans from FFS payment growth.
To increase beneficiary choice, Title II reforms the
payment system in 2004. All plans would be paid at a rate at
least as high as the rate for traditional FFS Medicare, as
recommended by the Medicare Payment Advisory Commission
(MedPAC). After 2004, private plans' capitation rates would
grow at the same rate as FFS Medicare. To increase beneficiary
choice in more rural areas, Title II would establish the
Enhanced Fee-for-Service (EFFS) program, which would encourage
private plans to serve Medicare beneficiaries in larger
regions, beginning in 2006. Private plans in both Medicare
Advantage (MA) and EFFS plans would bid competitively against a
benchmark beginning in 2006.
Once private plans became established, and enrollment in
private plans increased, plans in certain areas would enter a
FEHBP-style competitive bidding program, beginning in 2010.
Plan bids from private plans and rates for traditional FFS
Medicare would be averaged to create a benchmark for
competitive bidding. The competitive program would encourage
beneficiaries to enroll in the most efficient plan, producing
savings for both beneficiaries, through reduced premiums, and
for taxpayers, through relatively lower Medicare costs.
Subtitle A--Medicare Enhanced Fee-for-Service Program
Section 201. Establishment of Enhanced Fee-for-Service (EFFS) Program
under Medicare
CURRENT LAW
Payment. Under current law, Medicare+Choice (M+C) plans are
paid an administered monthly payment, called the M+C payment
rate, for each enrollee. The per capita rate for a payment area
is set at the highest one of three amounts, calculated
according to formulas established in statute and updated by
law. 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.
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 would 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. Blend payments have been made only once since
1998 (in the year 2000) because of the budget neutrality
provision.
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
per capita, the national growth percentage. The minimum
increase provides an additional two percent over the previous
year's amount.
Eligibility: Medicare beneficiaries who are entitled to
Medicare Part A and are enrolled in Part B may receive benefits
through traditional FFS or they may enroll in a M+C plan.
EXPLANATION OF PROVISION
Beginning January 1, 2006 the MBA Administrator would
establish an EFFS program to offer EFFS plans to EFFS-eligible
individuals in one of not less than 10 regions established by
the MBA Administrator. Before establishing regions, the MBA
Administrator must conduct a market survey and analysis to
determine how regions should be established.
The EFFS plans would be required to provide open network
plans--either Fee-for-Service (FFS) or preferred provider
coverage. Under FFS coverage, plans would: (1) reimburse
hospitals, physicians and other providers at a rate determined
by the plan on a FFS basis, without placing providers at
financial risk, (2) not vary rates based on utilization related
to the provider, and (3) not restrict the selection of
providers from among those who are lawfully authorized to
provide covered services and agree to accept the plan's terms
and conditions. Preferred Provider Organization (PPO) coverage
plans would: (1) require a network of providers who agreed to a
contractually specified reimbursement for covered benefits with
the organization, and (2) provide for reimbursement for all
covered benefits regardless of whether they were provided
within the network.
The EFFS-eligible individuals would be those individuals
who were entitled to Medicare Part A and enrolled in Part B.
EFFS plans could only be offered in a region, if the plan was:
(1) available to all EFFS beneficiaries in an entire region,
(2) complied with statutory access requirements, (3) uniformly
provided all required Parts A and B benefits, and other
benefits as may be required, (4) included a single deductible
for benefits under Parts A and B, and a catastrophic limit on
out-of-pocket expenses, and (5) provided prescription drug
coverage for each enrollee electing Part D drug coverage. The
MBA Administrator would not approve an EFFS plan if benefits
were designed to substantially discourage enrollment by certain
eligible individuals.
Each year, beginning in 2006, an EFFS organization would
submit a monthly bid amount for each plan in each region,
referred to as the ``EFFS monthly bid amount''. The bid could
not vary among EFFS eligible individuals in the EFFS region
involved. The EFFS organization would be required to provide
the following information: (1) the bid amount for the provision
of all required items and services, based on average costs for
a typical enrollee residing in the region and the actuarial
basis for determining such amount, (2) the proportion of the
bid attributed to the provision of statutory non-drug benefits
(the ``unadjusted EFFS statutory non-drug monthly bid
amount''), statutory prescription drug benefits, and non-
statutory benefits, (3) the actuarial basis for determining
these proportions, and (4) additional information as the MBA
Administrator may require. The MBA Administrator would have the
negotiation authority that the Director of the Office of
Personnel Management has with regard to FEHBP to negotiate the
bid amount and could also reject a bid amount or proportion, if
it was not supported by the actuarial basis. The MBA
Administrator could enter into contract for up to three EFFS
plans in any region.
Certain plans, based in part on their monthly bid amount,
may be able to provide beneficiary savings. The EFFS plan would
provide the enrollee a monthly rebate equal to 75 percent of
the average per capita savings, if any. (Calculation of average
per capita savings isdiscussed below.) The rebate could be in
the form of a credit towards the EFFS monthly prescription drug premium
or the EFFS monthly supplemental beneficiary premium, a direct monthly
payment, or other means approved by the MBA Administrator.
The MBA Administrator would determine, at the same time
payment rates were announced (beginning in 2006), the average
of the risk adjustment factors, by region. For plans offered in
the previous year, the MBA Administrator could compute the
average based on a previous year's risk adjustment factors. For
plans entering a region, in which no plan was offered in the
previous year, the MBA Administrator would estimate the
average, and could use factors applied in comparable regions or
on a national basis.
For each EFFS plan, the MBA Administrator would adjust the
EFFS region-specific non-drug monthly benchmark amount and the
unadjusted EFFS statutory non-drug monthly bid amount by the
applicable average risk adjustment factor. The average per
capita monthly savings would equal the amount by which the
risk-adjusted benchmark exceeds the risk-adjusted bid. The EFFS
region-specific non-drug monthly benchmark amount would be an
amount equal to 1/12 of the average (weighted by the number of
EFFS-eligible individuals in each payment area) of the annual
capitation rate calculated for that area.
The MBA Administrator would pay plans as follows. For plans
with bids below the benchmark (for which there were average per
capita monthly savings), the payment would equal the unadjusted
EFFS statutory non-drug monthly bid amount, with three
adjustments. Payment would be adjusted for demographics factors
including age, disability, gender, institutional status, health
status, and other factors; intra-regional geographic
variations; and the amount of the monthly rebate for the plan
and year. For plans with bids at or above the benchmark (for
which there were no average per capita monthly savings), the
payment amount would equal the EFFS region-specific non-drug
monthly benchmark amount, with the demographic, health status
and geographic adjustments. Additionally, for an EFFS enrollee
who enrolls in Part D and elects qualified prescription drug
coverage through the plan, the plan would receive reimbursement
for prescription drugs. This reimbursement would include a
direct subsidy payment, a reinsurance subsidy payment and
reimbursement for premiums and cost-sharing reductions for
certain low-income individuals.
Beneficiary EFFS premiums are defined as follows. In the
case where a plan provides a rebate, the EFFS monthly basic
beneficiary premium would be zero. In the case where a plan
does not provide a rebate (the plan's unadjusted EFFS statutory
non-drug bid is above the EFFS region specific non-drug
benchmark), the EFFS monthly basic beneficiary premium would be
the difference between the bid and the benchmark amount. The
EFFS monthly prescription drug beneficiary premium would be the
portion of the plan's total monthly bid that the statutory drug
benefit represents. The EFFS monthly supplemental beneficiary
premium would be the portion of the plan's total monthly bid
that is attributable to the supplemental non-statutory
benefits.
Most of the statutory requirements concerning payment rules
(other than the requirements for rates, service areas and MSA
payments), organization and financial requirements, the
establishment of standards, and contracts, would apply to EFFS
plans. However, unlike current law, EFFS plans would not be
permitted to segment a region. No Medicare supplemental policy
could provide coverage of the single deductible or more than 50
percent of the other cost-sharing imposed under an EFFS plan
under Part E.
EFFECTIVE DATE
On or after January 1, 2006.
REASON FOR CHANGE
The EFFS program would encourage the development of
regional plans, by requiring EFFS plans to serve all
beneficiaries throughout the region. Because enrollees in an
EFFS plan must have the same benefits, cost-sharing
obligations, and premiums, EFFS would decrease the variation in
private plan offerings in the M+C program today. EFFS plans
would also encourage plans to enter rural areas, where few M+C
plans currently exist.
In carrying out these programs, the Committee believes the
existing experience of the Medicare Quality Improvement
Organizations (QIOs) would be employed to offer assistance to
beneficiaries, providers and plans operating in Parts C, D and
E, particularly as it relates to quality improvement. QIOs are
currently required to offer assistance with clinical
improvement under Parts A and B in hospitals, physicians'
offices, nursing homes and home health agencies and to all MA
organizations under part C. Expanding the QIOs' work to include
the new entities and benefits created in this legislation will
help improve the quality of care for Medicare beneficiaries.
Subtitle B--Medicare Advantage Program
CHAPTER 1--IMPLEMENTATION OF PROGRAM
Section 211. Implementation of Medicare Advantage Program
CURRENT LAW
Health Maintenance Organizations (HMOs) and other types of
managed care plans have been allowed to participate in the
Medicare program, beginning with private health plan contracts
in the 1970s and the Medicare risk contract program in the
1980s. BBA 97 replaced the risk contract program with the
Medicare+Choice (M+C) program.
EXPLANATION OF PROVISION
This provision would establish the Medicare Advantage (MA)
program under Part C of Medicare, replacing the Medicare+Choice
provision.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Medicare Advantage would reform Medicare+Choice to increase
beneficiary choice.
Section 212. Medicare Advantage Improvements
CURRENT LAW
Payment. Under current law, Medicare+Choice (M+C) plans are
paid an administered monthly payment, called the M+C payment
rate, for each enrollee. The per capita rate for a payment area
is set at the highest one of three amounts, calculated
according to formulas established in statute and updated by
law. 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.
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 would 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. Blend payments have been made only once since
1998 (in the year 2000) because of the budget neutrality
provision.
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
per capita, the national growth percentage. The minimum
increase provides an additional two percent over the previous
year's amount.
Eligibility. Medicare beneficiaries who are entitled to
Medicare Part A and are enrolled in Part B may receive benefits
through the traditional FFS program or they may enroll in a M+C
plan.
EXPLANATION OF PROVISION
This provision would change payments for MA plans. A fourth
payment option would be added: 100 percent of the adjusted FFS
rate for the area (the Adjusted Average Per Capita Cost (AAPCC)
for the year, for the MA payment area for services covered
under Parts A and B for individuals entitled to benefits under
Part A, enrolled under Part B, and who are not enrolled in a MA
plan). The AAPCC would be adjusted to include the additional
payments that would have been made if Medicare beneficiaries
had not received services from facilities of the Department of
Veterans Affairs (VA) and the Department of Defense (DoD), and
would include payments for indirect medical education costs.
The minimum payment (floor) would be increased as under current
law. The minimum percentage increase amount would also be
changed. For 2004 and beyond, the minimum percent increase
would be the greater of: (1) a two percent increase over the
previous year, as under current law, or (2) the annual MA
capitation rate for the area for the previous year, increased
by the national per capita growth percentage increase. There
would be no adjustment to the national growth percentage for
prior years' errors before 2004, for purposes of calculating
the minimum percentage increase in 2004. For 2005, the annual
rate would equal the previous year's rate increased by the
greater of two percent or the national per capita growth
percentage.
No later than 18 months after enactment of this
legislation, the Medicare Payment Advisory Commission would
report to Congress providing an assessment of the method used
for determining the adjusted average per capita cost (AAPCC).
The report would examine: (1) the variation in costs between
different areas, including differences in input prices,
utilization and practice patterns, (2) the appropriate
geographic area for payment, and (3) the accuracy of the risk
adjustment methods in reflecting differences in the cost of
providing care.
No later than July 1, 2006, the MBA Administrator would
submit a report to Congress that describes the impact of
additional financing provided under this Act and other Acts,
including the Balanced Budget Refinement Act of 1999 (BBRA) and
the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA) on the availability of MA plans
in different areas and its impact on lowering premiums and
increasing benefits under such plans.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
In some M+C payment areas, the M+C payment rate is lower
than the costs of providing FFS care to enrollees in
traditional Medicare. Many private plans have seen their
Medicare payment rates rise much less rapidly than the costs of
FFS Medicare, as they have been held to increases of two
percent annually every year since 1998, except for 2001 when a
three percent increase was paid due to the BIPA. Health costs
in general are running much higher than the two percent payment
increases that most plans are receiving in the areas where most
of the beneficiaries are enrolled in Medicare+Choice. Plans
find it difficult--if not impossible--to contract with
providers if FFS Medicare can reimburse providers at higher
rates than private plans may offer, given their Medicare
payments. If paid less than FFS Medicare, private plans may be
forced to increase enrollee premiums or cost-sharing, or
decrease supplemental benefits, such as prescription drug
coverage. Since 1998, the number of plans participating in M+C
has declined from 346 to 153. To level the playing field
between traditional Medicare and private plans, under this
provision all private plans would be paid at a minimum of the
FFS rate. In addition, private plan rates would increase at the
same rate as growth in FFS Medicare. The goal is to increase
beneficiary choice, by increasing private plan participation in
Medicare.
CHAPTER 2--IMPLEMENTATION OF COMPETITION PROGRAM
Section 221. Competition Program Beginning in 2006
CURRENT LAW
See Section 200. Medicare Modernization and Revitalization
and Section 201. Establishment of Enhanced Fee-For-Service
(EFFS) Program under Medicare.
EXPLANATION OF PROVISION
Each year, beginning in 2006, an MA organization would be
required to provide the following information: (1) the bid
amount for the provision of all required items and services,
based on average costs for a typical enrollee residing in the
area and the actuarial basis for determining such amount, (2)
the proportion of the bid attributed to the provision of
statutory non-drug benefits (the ``unadjusted MA statutory non-
drug monthly bid amount''), statutory prescription drug
benefits, and non-statutory benefits, (3) the actuarial basis
for determining these proportions, and (4) additional
information as the MBA Administrator may require. The MBA
Administrator would have the negotiation authority that the
Director of the Office of Personnel Management has with regard
to the FEHBP to negotiate the bid amount and could also reject
a bid amount or proportion, if it was not supported by the
actuarial basis. Private fee-for-service (PFFS) plans would be
exempt from this negotiation and rejection.
Certain plans, based in part on their monthly bid amount,
may be able to provide beneficiary savings. The MA plan would
provide the enrollee a monthly rebate equal to 75 percent of
the average per capita savings, if any, as discussed below. The
rebate could be in the form of a credit towards the MA monthly
supplemental beneficiary premium or the MA monthly prescription
drug premium, a direct monthly payment, or other means approved
by the MBA Administrator.
The MBA Administrator would determine, at the same time
payment rates were announced (beginning in 2006), the average
of the risk adjustment factors, by state, or on a basis other
than the state. For plans offered in the previous year, the MBA
Administrator could compute the average based on the previous
year's risk adjustment factors. For plans entering a state, in
which no plan was offered in the previous year, the MBA
Administrator would estimate the average, and could use factors
applied in comparable states or on a national basis.
For each MA plan, the MBA Administrator would adjust the
FFS area-specific non-drug monthly benchmark amount and the
unadjusted MA statutory non-drug monthly bid amount by the
applicable average risk adjustment factor. The average per
capita monthly savings would equal the amount by which the
risk-adjusted benchmark exceeds the risk-adjusted bid. The FFS
area-specific non-drug monthly benchmark amount would be an
amount equal to 1/12 of the annual MA capitation rate
calculated for that area.
Beginning in 2006, the MBA Administrator would pay plans as
follows. For plans below the benchmark (for which there were
average per capita monthly savings), the payment would equal
the unadjusted MA statutory non-drug monthly bid amount, with
two adjustments. Payment would be adjusted for demographic
factors including age, disability, gender, health status, and
other factors, and the amount of the monthly rebate for the
plan and year. For plans with bids at or above the benchmark
(for which there were no average per capita monthly savings),
the payment amount would equal the FFS area-specific non-drug
monthly benchmark amount, with the demographic and health
status adjustments. Additionally, for an MA enrollee who
enrolls in Part D and elects qualified prescription drug
coverage through the plan, the plan would receive reimbursement
for prescription drugs. This reimbursement would include a
direct subsidy payment, a reinsurance subsidy payment and
reimbursement for premiums and cost-sharing reductions for
certain low-income individuals.
The MBA Administrator would not approve a plan if benefits
were designed to discourage enrollment by certain MA-eligible
individuals. The MA monthly bid amount, the MA monthly basic
and supplemental beneficiary premium and the MA monthly MSA
premium, would not vary among individuals enrolled in the plan.
EFFECTIVE DATE
On or after January 1, 2006.
REASON FOR CHANGE
Competitive bidding against a benchmark would encourage
plans to become more efficient, in order to lower their bids
and gain market share. Beneficiaries, because they would
benefit from enrolling in plans with lower bids by receiving 75
percent of the difference between the plan's bid and the
benchmark, would be encouraged to enroll in more efficient
plans. Plan efficiency and beneficiary enrollment in more
efficient plans would reduce the costs of Medicare, easing the
threat to insolvency of the Medicare Part A Trust Fund and
easing the taxpayers' burden. Indeed, the Congressional Budget
Office has estimated that the increased benchmarks are fully
paid for through the 25 percent savings to the government. The
government would share in the savings as beneficiaries make
rational and efficient choices.
CHAPTER 3--ADDITIONAL REFORMS
Section 231. Making Permanent Change in Medicare Advantage Reporting
Deadlines and Annual, Coordinated Election Period
CURRENT LAW
The Public Health Security and Bioterrorism Preparedness
and Response Act of 2002 (P.L. 107-188) made temporary changes
to reporting dates and deadlines: (1) the plan deadline for
submitting adjusted community rates (ACRs) and other
information moved from no later than July 1 to no later than
the second Monday in September for 2002, 2003, and 2004, (2)
the annual coordinated election period moved from the month of
November to November 15 through December 31 for 2002, 2003, and
2004, and (3) the M+C payment rate announcement movedfrom no
later than March 1 to no later than the second Monday in May for 2003
and 2004. The Secretary is required to mail information to enrollees at
least 15 days before each annual open season, including a list of plan
and plan options.
EXPLANATION OF PROVISION
This provision would permanently: (1) move the plan
deadline for submitting information to the second Monday in
September; (2) change the annual coordinated election period to
November 15 through December 31, and (3) move the annual
payment rate announcement to no later than the second Monday in
May. The requirement for providing information comparing plan
options would be amended to require that the information would
be provided to the extent possible at the time of preparation
of material for mailing.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The deadlines for reporting and election periods were moved
to allow for more accurate information from both CMS and plans.
As these dates were shifted to later in the year, consistent
changes were made to allow for the annual open season for
beneficiary enrollment in private plans. A provision was added
to limit CMS' responsibility for mailing to only those
materials available at the time of the mailing.
Section 232. Avoiding Duplicative State Regulations
CURRENT LAW
Medicare law currently preempts State law or regulation
from applying to M+C plans to the extent that 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 stipulate that Federal standards
established by this legislation would supersede any state law
or regulation (other than state licensing laws or state laws
relating to plan solvency), with respect to MA plans offered by
MA organizations.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This clarifies that the MA program is a Federal program
operated under Federal rules. State laws, do not, and should
not apply, with the exception of state licensing laws or state
laws related to plan solvency. There has been some confusion in
recent court cases. This provision would apply prospectively;
thus, it would not affect previous and ongoing litigation.
Section 233. Specialized Medicare Advantage 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-care needs of nursing
home residents by pairing physicians and geriatric nurse
practitioners. EverCare receives a fixed capitated payment,
based on a percentage of the adjusted average per capita costs
(AAPCC), for all nursing home resident Medicare enrollees.
EXPLANATION OF PROVISION
This provision would establish a new MA option--specialized
MA plans for special needs beneficiaries (such as the EverCare
demonstration). Special needs beneficiaries are defined as
those MA-eligible individuals who are institutionalized,
entitled to Medicaid, or meet requirements determined by the
Secretary. Enrollment in specialized MA plans could be limited
to special needs beneficiaries until January 1, 2007. No later
than December 31, 2005 the MBA Administrator would be required
to submit a report to Congress that assesses the impact of
specialized MA plans for special needs beneficiaries on the
cost and quality of services provided. No later than 6 months
after enactment of this Act, the Secretary would be required to
issue final regulations to establish requirements for special
needs beneficiaries.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Specialized MA plans for special needs beneficiaries are
designed to serve beneficiaries with certain needs, thus these
plans are not meant to handle beneficiaries without special
needs. This provision allows these plans to serve beneficiaries
for whom their programs were designed.
Section 234. Medicare MSAs
CURRENT LAW
BBA 97 authorized a demonstration to test the feasibility
of medical savings accounts (MSA) for the Medicare population.
This 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 are exempt from taxes if they would be deductible
under the Internal Revenue Code. New enrollment is not allowed
after 2003, or after the number of enrollees reaches 390,000,
if earlier.
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
Upon enactment.
REASON FOR CHANGE
Medicare MSAs are not being offered in the Medicare program
today, despite the legislative authority granted in 1997 and
despite the fact that non-Medicare MSAs are being offered. By
eliminating the cap on enrollment, the time constraint, and the
reporting requirements, the Committee hopes to encourage this
additional choice for seniors.
Section 235. Extension of Reasonable Cost Contracts
CURRENT LAW
Medicare reimburses cost-based plans for the actual cost of
furnishing covered services, less the estimated value of
beneficiary cost-sharing. The Secretary may not extend or renew
a reasonable cost reimbursement contract for any period beyond
December 31, 2004.
EXPLANATION OF PROVISION
This provision would allow reasonable cost contracts to be
extended or renewed indefinitely, with an exception that would
begin January 1, 2008. These contracts could not be extended or
renewed for a service area, if during the entire previous year,
the area had 2 or more coordinated care MA plans or 2 or more
EFFS plans which met the following minimum enrollment
requirements: (1) at least 5,000 enrollees for the portion of
the area within a metropolitan statistical area with a
population of more than 250,000 and counties contiguous to such
a metropolitan statistical area, and (2) at least 1,500
enrollees for any other portion of such area.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The uncertainty about the continuation of cost contracts
would be removed, allowing these plans to operate indefinitely,
unless two other plans of the same type (i.e., either 2 MA or
2(c) EFFS plans) enter the cost contract's service area. If
other plans are willing to enter the cost contract's service
area, then the cost contract would be required to operate under
the same provisions as these other private plans.
Section 236. Extension of Municipal Health Service Demonstration
Projects
CURRENT LAW
The Municipal Health Services Demonstration Project
operates in four cities. These cities use their existing public
health programs as the nucleus of a coordinated system to
provide community-based health care for the underserved urban
poor. The project provides comprehensive health services,
including a prescription drug benefit and dental services.
BBA 97 extended the program through 2000. The BBRA extended
it through 2002, and the BIPA extended it through December 31,
2004.
EXPLANATION OF PROVISION
This provision would extend the program until December 31,
2009, and permit the programs to enroll up to the number of
individuals who were enrolled as of January 1, 1996.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
BBA 97 required demonstration participants to become M+C
enrollees. In Baltimore, no M+C plans, and in the other,
smaller sites, private sector options for Medicare
beneficiaries are also limited. This provision also closed the
program to new enrollees. The programs need acertain number of
enrollees to remain viable; opening enrollment with a cap at levels
from 1996 would permit these programs to reach the enrollment levels
they need to operate efficiently.
Subtitle C--Application of FEHBP-Style Competitive Reforms
Section 241. Application of FEHBP-Style Competitive Reform Beginning in
2010
CURRENT LAW
See Section 200. Medicare Modernization and Revitalization
and Section 201. Establishment of Enhanced Fee-For-Service
(EFFS) Program under Medicare.
explanation of provision
Beginning in 2010, FEHBP-style competition would begin
nationwide in competitive areas. Competitive areas are defined
as areas in which Medicare beneficiaries have access to two
private plans--either two MA or two EFFS plans--along with
traditional FFS Medicare. Private plan enrollment in the area
must be at least as great as private plan enrollment
nationwide, or at least 20 percent. For example, if private
plan enrollment nationwide is 15 percent, the area must have
private plan enrollment of at least 15 percent to become a
competitive area. If private plan enrollment nationwide is 40
percent, the area must have private plan enrollment of at least
20 percent to trigger competition. In addition, competitive MA
(CMA) areas would be limited to metropolitan statistical areas,
or areas with substantial numbers of MA enrollees. The two
private plans must be offered during the open season by
different organizations, and each must meet minimum enrollment
requirements as of March of the previous year.
In competitive areas, private plans would submit bids and
the MBA Administrator would calculate FFS amounts, based on the
adjusted average per capita cost (AAPCC) in the area or region.
The AAPCC would be adjusted to remove costs associated with
direct graduate medical education, and to include costs of
services provided to Medicare beneficiaries by VA and DoD
military facilities. In addition, payments would be adjusted
for health and other demographic factors.
The competitive benchmark would be set at the weighted
average of the private plan bids and the FFS amount in the
competitive area. In order to provide traditional FFS
disproportionate influence in competitive areas, the weight of
the benchmark for FFS would equal the nationwide proportion of
Medicare beneficiaries enrolled in FFS, or the competitive
area's proportion, if higher. The weights for all other private
plans would equal the national proportion of beneficiaries
enrolled in private plans, or the regional proportion if lower.
For the first 5 years of competition, the benchmarks for
private plans would be a blend of the competitive benchmark and
the older, pre-2010 benchmark. For the first year of
competition, the private plan benchmark would be based 80
percent on the older benchmark and 20 percent on the newer
benchmark. For the second year, the private plan benchmark
would be based 60 percent on the older benchmark and 40 percent
on the new benchmark. By the fifth year, the private plan's
benchmark would be fully phased in, and equal the new
competitive benchmark. This phase-in allows for a transition to
a more competitive system based on the new competitive
benchmark.
Premium adjustments for beneficiaries remaining in
traditional FFS in competitive areas would also be phased-in
over the first 5 years as a competitive area. The FFS amount
would be compared to the new competitive benchmark. During the
first year of competition, 20 percent of the change in
beneficiary premiums would occur. During the second year of
competition, 40 percent of the change would be implemented, and
so forth, until 100 percent of the premium change would be
implemented during the fifth year of competition.
Beneficiaries enrolling in plans with bids or FFS amounts
below the competitive benchmark would receive 75 percent of the
difference between the benchmark and bid/FFS amount, and the
government would receive 25 percent of the difference.
Beneficiaries enrolling in plans with bids/FFS amounts above
the benchmark would pay the excess. Premium adjustments would
be moderated over a 5-year period for beneficiaries remaining
in traditional FFS in competitive areas. The traditional FFS
beneficiary premium would be unaffected in non-competitive
areas or regions.
Beginning in 2010, the MBA Administrator would announce the
MA area-specific non-drug benchmark yearly. If applicable, the
MBA Administrator would also announce, for the year and CMA
area: the competitive MA non-drug benchmark; the national FFS
market share percentage; the demographic, end-stage renal
disease, and health status adjustment factors; the MA area-wide
non-drug benchmark amount; the FFS area-specific non-drug
amount; and MA enrollment.
To carry out this section, the MBA Administrator would
transmit the name, social security number, and adjustment
amount to the Commissioner of SSA at the beginning of each year
and at periodic times throughout the year.
EFFECTIVE DATE
On or after January 1, 2010.
REASON FOR CHANGE
Market-oriented policymakers have maintained that the best
way to reform Medicare is to provide beneficiaries with a
choice of plans, similar to the choice available to members of
Congress under the Federal Employees Health Benefits Program
(FEHBP). The Bipartisan Commission on the Future of Medicare
came to the same conclusion.
Medicare must be transformed to bend the growth curve in
expenditures to put the program on a sound financial footing.
To reduce program growth, true competition, including both
traditional fee-for-service and private plans, would begin in
2010 in certain competitive areas.
As areas of the country show increased enrollment in
private plans, a more competitive system, based on the
structure of the FEHBP, would provide for greater beneficiary
savings and reductions in government costs. Allowing for
competition for enrollees, between private plans and
traditional FFS Medicare, would level the playing field between
all options available to Medicare beneficiaries.
If traditional FFS Medicare is able to provide benefits at
a lower cost than some or all private plans in a competitive
area, then beneficiaries remaining in traditional FFS would see
their premiums decline. In this case, beneficiaries enrolling
in higher-cost private plans would be required to pay the extra
price stemming from that decision. Likewise, if a private plan
is able to offer Medicare beneficiaries coverage at a lower
cost, then beneficiaries would be encouraged to enroll in the
private plan by lowering the beneficiaries' costs of coverage
under the private plan. In any case, beneficiaries would be
entitled to the same defined benefit package and payments to
plans would be fully adjusted for health and other demographic
factors. If the traditional FFS plan disproportionately enrolls
beneficiaries with poor risk, the beneficiary premium would be
adjusted to compensate.
This reform is the only provision in the bill that has the
potential to produce the savings needed for long-term solvency.
Although the bill provides for bidding against a benchmark
prior to 2010, the benchmarks prior to 2010 increase each year,
by the rate of growth in Medicare. Without this stage of
competition, private plans would not be able to influence the
benchmark and would have an incentive to shadow price their
benchmarks. A floating benchmark rewards more efficient plans,
and it allows these more efficient plans to lower the benchmark
and government outlays in future years, as their market share
rises.
Several features were added in the Chairman's amendment in
the nature of a substitute to allow for a smooth transition to
a more competitive system in 2010 in competitive areas/regions,
and to prevent shock to the current system. The competitive
benchmark, based on private plan bids and traditional FFS
rates, would be calculated based on the relative enrollment in
FFS versus private plans nationwide (or the area/region if FFS
enrollment is a larger proportion in the area/region). This
feature ensures that the competitive benchmark is closer to the
traditional FFS rate than would otherwise occur. Premium
changes for beneficiaries remaining in traditional FFS in
competitive areas would be phased-in over five years to prevent
oscillations. In addition, the competitive benchmark would be
phased-in over a 5-year period for private plans. This would
allow for a more gradual change from the benchmarks under the
pre-2010 system to the new competitive benchmark for private
plans in competitive areas.
C. Title III--Combatting Waste, Fraud, and Abuse
Section 301. Medicare Secondary Payer (MSP) Provisions
CURRENT LAW
In certain instances, Medicare is prohibited from making
payment for a health care claim if payment is expected to be
made promptly under a worker's compensation law or plan, under
automobile or liability insurance (including a self-insured
plan), or under no-fault insurance on behalf of a beneficiary.
Medicare is permitted to make a conditional payment in certain
circumstances including if Medicare could reasonably expect
payment to be made under a workers' compensation plan or no-
fault insurance claim and Medicare determines that the payment
will not be made promptly, as determined in accordance with
regulations.
EXPLANATION OF PROVISION
The Secretary would be able to make a Medicare payment if a
worker's compensation law or plan, an automobile or liability
insurance policy or plan (including a self-insured plan), or a
no-fault insurance plan, has not been made or cannot reasonably
be expected to be made promptly (as determined in accordance
with regulations). This payment would be contingent on
reimbursement by the primary plan to the Medicare Trust Funds.
The list of primary plans for which conditional payment
could be made would be expanded; an entity engaging in a
business, trade, or profession would be deemed as having a
self-insured plan if it carries its own risk. Failure to obtain
insurance would be required as evidence of carrying risk. A
primary plan, as well as an entity that receives payment from a
primary plan, would be required to reimburse the Medicare Trust
Funds for any payment made by the Secretary if the primary plan
was obligated to make payment. The Secretary's authority to
recover payment from any and all responsible entities and bring
action, including the collection of double damages, to recover
payment under the Medicare Secondary Payer provisions also
would be clarified.
effective date
Subsection (a) would be effective as if included in the
enactment of Title III of the Medicare and Medicaid Budget
Reconciliation Amendments of 1984 (P.L. 98-369). Subsection (b)
would be effective upon enactment.
REASON FOR CHANGE
Recent court decisions such as Thompson v. Goetzmann
resulted in a narrow interpretation of the statutory reference
to ``promptly.'' Liability insurers would have been able to
draw out their settlements and avoid repaying Medicare for
payment of medical expenses. Moreover, firms that self-insure
for product liability would have been able to avoid paying
Medicare for past medical payments related to the claim. This
provision guards the Medicare trust fund and saves nearly nine-
billion dollars over 10 years.
Section 302. Competitive Acquisition of Certain Items and Services
CURRENT LAW
In general, durable medical equipment (DME) is paid for
under a set of local (or state) fee schedules subject to
certain floors and ceilings as well as limited to the lower of
the actual charge for the equipment or the fee schedule amount.
Fee schedule amounts received an update of the full consumer
price index for urban consumers (CPI-U) in 2003.
BBA 97 authorized the Secretary to conduct up to five
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 three competitive acquisition areas for this purpose. Three
competitive bidding demonstrations for durable medical
equipment, prosthetics, orthotics, and supplies were
successfully implemented: two in Polk County, Florida and one
in the San Antonio, Texas area.
EXPLANATION OF PROVISION
The Secretary would be required to establish and implement
competitive acquisition programs for durable medical equipment,
medical supplies, items used in infusion, drugs and supplies
used in conjunction with durable medical equipment, parenteral
nutrition, and off-the-shelf orthotics (requiring minimal self-
adjustment for appropriate use) that would replace the Medicare
fee schedule payments. Class III devices--devices that sustain
or support life, are implanted, or present potential
unreasonable risk (e.g. implantable infusion pumps and heart
valve replacements)--are subject to premarket approval by the
Food and Drug Administration and would not be covered by the
competitive bidding system.
In starting the competitive bidding programs, the Secretary
would be required to establish competitive acquisition areas,
but would be able to exempt rural areas and areas with low
population density within urban areas that are not competitive,
unless a significant national market exists through mail order
for a particular item or service. The programs would be phased-
in over three years with one-third of the areas implemented
each year. High-cost and high-volume items and services would
be required to be phased-in first. The Secretary would be able
to exempt items and services for which competitive acquisition
would not likely result in significant savings. The Secretary
would be required to establish a process where existing rental
agreements for covered DME items entered into contract before
implementation of this program would not be affected. The
supplier would be required to provide for appropriate servicing
and replacement of these rental items.
Certain requirements for the competitive acquisition
program would be established. Specifically, the Secretary would
be allowed to award contracts in an area only when the
following conditions were met: entities met quality and
financial standards specified by the Secretary or the Program
Advisory and Oversight Committee; total amounts paid under the
contracts would be expected to be less than would be paid
otherwise; and beneficiary access to multiple suppliers would
be maintained. Beneficiary liability would be reduced to 20
percent of the applicable contract award price.
Contracts would be required to be re-competed at least
every three years. The Secretary would be required to award
contracts to multiple entities submitting bids in each area for
an item or service and would also have the authority to limit
the number of contractors in a competitive acquisition area to
the number needed to meet projected demand for covered items
and services. The Secretary would be permitted to waive certain
provisions of the Federal Acquisition Regulation that are
necessary for the efficient implementation of this program,
other than those relating to confidentiality of information.
The Secretary would be required to report to Congress annually
on savings, reductions in cost-sharing, access to items and
services, and beneficiary satisfaction under the competitive
acquisition program.
A Program Advisory and Oversight Committee with members
appointed by the Secretary would be established. The Committee
would be required to provide advice and technical assistance to
the Secretary regarding the implementation of the program, data
collection requirements, proposals for efficient interaction
among manufacturers and distributors of the items and services,
providers, and beneficiaries, and other functions specified by
the Secretary. The provisions of the Federal Advisory Committee
Act would not apply to this Committee.
The Secretary would be required to conduct a demonstration
program on using competitive acquisition for clinical
laboratory tests that are furnished without a face-to-face
encounter between the individual and the hospital personnel or
physician performing the tests. The same quality and financial
conditions specified for the DME competitive acquisition
program would apply for clinical laboratory test competitive
acquisition. An initial report to Congress would be required of
the Secretary and must be submitted by December 31, 2005 with
progress and final reports, as the Secretary would determine
appropriate. The General Accounting Office (GAO) would be
required to report to Congress on the differences in
reimbursement between public and private payors of clinical
diagnostic services. The Secretary would be required to study
whether suppliers of DME are soliciting physicians to prescribe
certain brands or modes of delivery of covered items based on
profitability.
The covered items and services included in the competitive
acquisition program would be paid as determined under this
program. The Secretary would be able to use this payment
information to adjust the payment amounts for DME not located
in a competitive acquisition area. In this instance, the
inherent reasonableness rule would not be applied. Orthotics
included in a competitive acquisition program would also be
paid the amounts determined by this program. The Secretary
would be able to use this payment information to adjust the
payment amounts for such items. In this instance, the regular
payment rules established by regulation, including the inherent
reasonableness rule, would not be applied.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Numerous studies conducted by the HHS Office of the
Inspector General (OIG) as well as GAO have found the
government-determined fee schedule for durable medical
equipment (DME) too high for certain items. For example, the
OIG found that Medicare's reasonable payment methodology paid
too much for parenteral nutrition. The OIG also found that
Medicare payments for hospital beds were substantially higher
than rates paid by other payors. Further, the OIG discovered
that payments for albuterol were six times the catalog price
for the drug.
The DME competitive bidding demonstration has been a
success. The taxpayers and beneficiaries saved significantly
and quality standards were higher under the demonstration.More,
that three-quarters of the DME winners were small businesses and
beneficiary satisfaction remained high.
Section 303. Competitive Acquisition of Covered Outpatient Drugs and
Biologicals
(a) Adjustment to the Physician Fee Schedule
CURRENT LAW
The relative value associated with a particular physician
service is the sum of three components: physician work,
practice expense, and malpractice expense. Practice expense
includes both direct costs (such as clinical staff time and
medical supplies used to provide a specific service to an
individual patient) as well as indirect costs such as rent,
utilities, and business costs associated with running a
practice. When the physician fee schedule was implemented,
reimbursement for practice expenses was based on historic
charges. The Social Security Act Amendments of 1994 (PL. 103-
432) required the Secretary to develop a methodology for a
resource-based system for calculating practice expenses for use
in CY1998. BBA 97 delayed the implementation of the methodology
until CY1999 and established a transition period with full
implementation by CY2002. BBRA required the Secretary to
establish a data collection process and data standards for
determining practice expense relative values. Under this survey
process, the Secretary was required to use data collected or
developed outside HHS, to the maximum extent practicable,
consistent with sound data collection practices.
The Secretary is required to periodically review and adjust
the relative values affecting physician payment to account for
changes in medical practice, coding changes, new data on
relative value components, or the addition of new procedures.
Under the budget-neutrality requirement, changes in these
factors cannot cause expenditures to differ by more than $20
million from what would have been spent if such adjustments had
not been made.
EXPLANATION OF PROVISION
As part of the annual process of establishing the physician
fee schedule, the Secretary would be required to increase the
practice expense relative values using supplemental survey data
provided by entities and organizations. This survey data must
meet the Secretary's criteria for acceptance and include
expenses for the administration of drugs and biologicals.
The Secretary would be directed to cooperate with
representatives of physician specialties affected by reform of
the Average Wholesale Price (AWP) method of reimbursement for
outpatient prescription drugs. The Secretary would be required
to expedite consideration of the Current Procedural Terminology
(CPT) codes used to bill for the costs associated with the
administration of outpatient drugs affected by AWP reform. In
addition, the Secretary would be required to consult with
representatives of advisory physician groups, such as the
Practice Expense Advisory Committee, when reviewing CPT codes.
Increases in practice expenses resulting from the use of
new survey data submitted by the date of enactment, or
consideration of CPT codes for drug administration services for
drugs affected by AWP reform would not be subject to the budget
neutrality. The Secretary would not be prevented from adjusting
the practice expense relative values in subsequent years. The
Secretary would be required to consult with GAO and groups
representing the affected physician specialties before
publishing the notice of proposed rulemaking.
The resulting adjustments in practice expense relative
value units would not be subject to administrative or judicial
review. They would be considered as a change in law and
regulation for purposes of determining the sustainable growth
rate, used to set the payment update for physician services.
The Secretary would be required to adjust the non-physician
work pool methodology so that practice expense relative values
for these services are not disproportionately reduced as a
result of the above changes.
Any physician specialty would be permitted to submit survey
data related to practice expenses through December 31, 2004.
Budget neutrality would not be waived.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Physicians would be paid appropriate amounts for the
administration of outpatient drugs covered by Medicare. It is
the Committee's intent that the Secretary should use the survey
data submitted by the American Society of Clinical Oncologists
(ASCO) since the data meets all requirements for inclusion. The
Committee directs the Secretary to depart from typical
procedures and not average new ASCO survey data on practice
expenses with older survey data from the American Medical
Associations' socioeconomic monitoring system data. The
Committee also directs the Secretary not to alter the ASCO
survey data by removing any responses, including outliers. The
Committee intends that the Secretary use the new ASCO survey
data in the Secretary's normal methodology for determining
practice expenses.
Furthermore, it is the Committee's intent that the
Secretary use current procedures for consideration of CPT codes
and modifications to those codes. The provision directs the
Secretary to work with specialties affected by AWP reform to
ensure that CPT codes, which would permit appropriate payment
for drug administration, are in place before AWP reform occurs.
(b) Payment Based on Competition
CURRENT LAW
Although Medicare does not currently provide an outpatient
prescription drug benefit, coverage of certain outpatient drugs
is specifically authorized by statute. Specifically, under
Medicare Part B, outpatient prescription drugs and biologicals
are covered if they are usually not self-administered and are
provided incident to a physician's services. Drugs and
biologicals are also covered if they are necessary for the
effective use of covered durable medical equipment, including
those that must be put directly into equipment. In addition,
Medicare will pay for certain self-administered oral cancer and
anti-nausea drugs, erythropoietin (used to treat anemia),
immunosuppressive drugs after covered Medicare organ
transplants and hemophilia clotting factors. Vaccines for
diseases like influenza, pneumonia, and hepatitis B are
considered drugs and are covered by Medicare. Payments for
covered outpatient drugs are made under Medicare Part B and are
based on 95 percent of AWP. The term ``AWP'' is not defined in
statute or regulation, but generally, AWP is intended to
represent the average price used by wholesalers to sell drugs
to their customers. It has been based on reported prices as
published in industry reference publications or drug price
compendia. There are no uniform criteria for reporting these
numbers. Moreover, these reported prices do not reflect the
discounts that manufacturers and wholesalers customarily offer
to providers and physicians. To differing degrees, the
published prices on which Medicare payment's are based are
higher than the amounts actually paid to acquire a given
prescription drug.
Since covered outpatient prescription drugs are Part B
services, Medicare pays 80 percent of the recognized amount and
the beneficiary is liable for the remaining 20 percent
coinsurance amount, except in the case of vaccines where no
beneficiary cost-sharing is imposed. Also, beneficiaries cannot
be charged for any amounts in excess of the recognized payment
amount.
EXPLANATION OF PROVISION
New sections 1847A and 1847B in Title XVIII of the Social
Security Act would be established to provide physicians in the
Medicare program with an annual choice between two payment and
delivery systems: (1) a contractor who would deliver drugs to
the physician and would be reimbursed on prices established
through a competitive bidding process, or (2) the physician
would be reimbursed for covered drugs at the Average Sales
Price (ASP).
Under Section 1847A, the Secretary would be required to
establish a competitive acquisition program to acquire and pay
for covered outpatient drugs. Under this program, at least two
contractors would be established in each competitive
acquisition area (which would be defined as an appropriate
geographic region) throughout the United States. Each year, a
physician would be required to select contractors who would
deliver covered drugs and biologicals to the physician. There
would be two categories of drugs under this program: the
oncology category (which would include drugs determined by the
Secretary as typically primarily billed by oncologists or are
otherwise used to treat cancer) that would be implemented
beginning in 2005, and the non-oncology category that would be
implemented beginning in 2006. In this case, covered drugs
means certain drugs currently covered under Section 1842(o) of
the Social Security Act which are not covered as part of the
competitive acquisition for durable medical equipment. Blood
clotting factors, erythropoetin furnished as treatment for end-
stage renal disease (ESRD), and radiopharmaceuticals would not
be considered covered drugs under the competitive acquisition
program. Nothing in the section would affect the carrier
invoice pricing method used to pay for radiopharmaceuticals.
The Secretary would also be able to exclude other drugs and
biologicals or classes of drugs and biologicals that are not
appropriate for competitive bidding or would not produce
savings.
Certain contractor selection and contracting requirements
for the competitive acquisition program would be established.
Specifically, the Secretary would be required to establish an
annual selection process for contractors in each area for each
of the two categories of drugs. The Secretary may not award the
two-year contract to any entity that does not have the capacity
to supply covered outpatient drugs within the applicable
category, or does not meet quality, service, or financial
performance and solvency standards established by the
Secretary. Specifically the contractor would be required to
have: (1) arrangements to ship covered drugs at least 5 days of
the week and on an emergency basis, (2) procedures for the
prompt response and resolution of physician and beneficiary
complaints and inquiries, and (3) grievance resolution
procedures, including review by the Medicare Provider Ombudsman
established in this legislation. At the Secretary's discretion,
the Secretary could refuse to contract with an entity that has
had its license for distributing drugs (including controlled
substances) suspended or revoked by the Federal or a State
government or that has been excluded from Medicare program
participation. A contractor would be required to comply with a
specified code of conduct, including conflict of interest
provisions and all applicable provisions relating to the
prevention of fraud and abuse. A contract would include
specifications to ensure secure facilities, safe and
appropriate storage of covered drugs, maintain record keeping,
provide written policies and procedures to ensure drug safety,
and retain compliance personnel. Either the Secretary or the
entity could terminate contracts with appropriate advance
notice. The Secretary would make the list of the available
contractors accessible to physicians on an ongoing basis,
through a directory posted on the Internet and provided by
request.
The Secretary would be able to limit the number of
qualified entities in each category and area, but not below
two. The Secretary would be required to base selection on bid
prices for covered drugs, bid prices for distribution of those
drugs, ability to ensure product integrity, customer service,
past experience with drug distribution, and other factors.
Drugs dispensed under this program would be acquired directly
from the manufacturer or from a distributor directly from the
manufacturer. Contractors may be required to comply with
additional product integrity safeguards for drugs susceptible
to counterfeiting or diversion. The bid prices in an area would
be effective for that area throughout the two-year contract
period, but the contract would allow for appropriate price
adjustments to reflect significant increases or decreases in a
contractor's reasonable, net acquisition costs as disclosed to
the Secretary. The Secretary would not be able to accept a
contract for an area if its aggregate average prices exceed 120
percent of the Average Sales Price established under 1847B.
Under the program, the Secretary would be required to compute
an area average of the submitted bid prices. For drugs and
biologicals for which an average bid price has not been
established due to its establishment as a new Medicare covered
product, the payment rate would be the payment rate established
under 1847B. The Secretary would be able to establish average
sales price as the reimbursement amount in otherexceptional
cases. Beneficiary liability would be limited to 20 percent of the
payment basis for the covered drug or biological, and would be
collected by the contractor upon drug administration.
The Secretary would be permitted to waive certain
provisions of the Federal Acquisition Regulation that are
necessary for the efficient implementation of this program,
other than those relating to confidentiality of information.
The contractor supplying the physician in the area would submit
the claim for the drug and would collect the cost-sharing
amount from the beneficiary after administration of the drug.
Both program payment and beneficiary cost sharing amounts would
only be made to the contractor; would only be made upon the
administration of the drug; and would be based on the average
bid of prices for the drug and biological in the area. The
Secretary would be required to establish a process for recovery
of payments billed at the time of dispensing for drugs that
were not actually administered.
The appropriate contractor, as selected by the physician,
would supply covered drugs directly to the physician, except
under the circumstances when a beneficiary is able to receive a
drug at home. The Secretary would be able to specify other non-
physician office settings where a beneficiary would be able to
receive a covered drug directly. However, the contractor would
not be able to deliver drugs to a physician without first
receiving a prescription as well as other necessary information
specified by the Secretary. A physician would not be required
to submit a prescription for each individual treatment. The
Secretary would establish requirements, including adequate
safeguards against fraud and abuse and consistent with safe
drug practices, in order for a physician to maintain an
inventory of drugs in cases where: the drugs or biologicals are
immediately required, where the physician could not have
reasonably anticipated the immediate requirement, where the
contractor could not deliver the product in a timely manner,
and in emergency situations related to the patient's health. No
applicable State requirements relating to the licensing of
pharmacies would be waived.
Current rules related to physician assignment and
beneficiary appeal rights in cases of medical necessity denial
would remain unchanged. New physician appeal rights would be
established similar to those provided to physicians who
prescribe durable medical equipment or laboratory tests.
The Secretary would be required to establish an advisory
committee to assist in the implementation of this program. The
Secretary would be required to report to Congress on savings,
reductions in cost-sharing, access to items and services, the
availability of contractors as well as beneficiary and provider
satisfaction under the competitive acquisition program. These
reports would be due each year from 2005 through 2007.
The new section 1847B would establish an alternative choice
for physician reimbursement for covered Part B drugs based on
an Average Sales Price methodology (ASP). ASP is calculated for
multiple source drugs based on the average of all sales net of
volume discounts, prompt pay discounts, cash discounts, free
goods to physicians, charge backs and rebates other than
Medicaid rebates. For single source products, ASP is calculated
using the above methodology or the Wholesale Acquisition Cost,
which ever is lower. In an initial period for which sales data
is not available, the Secretary may determine the amount
payable under the section without regard to the manufacturer's
average sales price. In response to a public health emergency,
the Secretary may use the wholesale acquisition cost instead of
the average sales price until the price and availability of the
drug has stabilized. Prices would be reported to the Secretary
on a quarterly and confidential basis.
The Secretary would submit an annual report to the Congress
on trends in average sales prices, administrative costs
associated with compliance with this section, the total value
of payments made under this section, and a comparison of the
average manufacturer price reported under Medicaid with the
average sales price. GAO would be required to assess the impact
of this program on the delivery of services, particularly with
respect to beneficiary access to drugs and the site of
delivery. MedPAC would be required to submit to Congress
specific recommendations with respect to payment for blood
clotting factors in its 2004 annual report.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Balanced Budget Act of 1997 (BBA 97, P.L. 105-33)
specified that Medicare payment for covered outpatient
prescription drugs would equal 95 percent of AWP. Law or
regulation does not define AWP. Publishing organizations report
AWPs provided by drug manufacturers. Medicare carriers use the
published data to payment for Medicare covered drugs, but AWPs
are not grounded in any real market transaction, and do not
reflect the actual price paid by purchasers. Congress has long
recognized AWP is a list price and not a measure of actual
prices. Congress is now able to adopt an alternative basis for
payment that will more accurately reflect actual acquisition
costs for physicians. This will ensure that Medicare no longer
bases its payments on prices that do not reflect prices
otherwise available through market incentives and transactions.
AWP for a product is often far greater than the acquisition
cost paid by suppliers and physicians. Some drug manufacturers
use AWP to inflate payments made for drugs. As a result of
abuses in the current system, beneficiaries are paying hundreds
of millions of dollars in inflated co-payments every year.
Medicare also pays upwards of one billion dollars in excess
payments every year.
Some physicians assert that the overpayment for drugs
covers underpayment for practice expenses. They contend that
Medicare does not adequately reimburse them for the practice
expenses associated with providing care in outpatient settings.
This section reduces the overpayment for drugs and biologics,
while increasing physician practice expenses.
Over the past 6 years, the OIG has issued a number of
reports, all of which have reached the conclusion that Medicare
and its beneficiaries pay too much for prescription drugs. The
OIG studied the prices for 24 Medicare covered drugs that
accounted for $3.1 billion of the $3.9 billion in Medicare drug
expenditures in 1999. The OIG compared Medicare reimbursement
to prices available to the physician/supplier community, the
Department of Veterans Affairs, andMedicaid. They found that
Medicare and its beneficiaries would have saved substantial amounts of
money on their coinsurance. The savings would have been $761 million a
year by paying the actual wholesale prices available to physicians and
suppliers. For each drug, Medicare paid more than the wholesale price
available to physicians and suppliers.
Subsequently, the findings of the report were updated with
more current drug pricing information and estimated that, of
the $3.7 billion Medicare spent for 24 drugs in 2000, had
Medicare paid the actual wholesale prices available to
physicians and suppliers for these 24 drugs, the program and
its beneficiaries would save $887 million a year. If Medicare
had paid for these drugs based on catalog prices, according to
the OIG, beneficiaries would have paid over $175 million less
in coinsurance.
GAO's September 2001 report found that physicians can
obtain Medicare-covered drugs at prices below current Medicare
payments. In fact, wholesalers' and Group Purchasing
Organizations' (GPO) prices are less than the AWP currently
used to establish Medicare reimbursement for covered drugs. GAO
found that the average discount from AWP ranged from 13 percent
to 34 percent, and that two drugs had discounts of 65 percent
and 86 percent.
In its recommendations to the Congress, the GAO urged CMS
to take steps to begin reimbursing providers for part B-covered
drugs and related services at levels reflecting providers'
acquisition costs using information about actual market
transaction prices. CMS should also evaluate expanding
competitive bidding approaches to setting payment levels,
according to the GAO, and that CMS should monitor beneficiary
access to covered drugs in light of any changes to
reimbursement.
The GAO also debunked some common myths generally held by
many in the health care community. Specifically, the GAO found
that despite concerns that the discounts available to large
purchasers would not be available to physicians with a small
number of drug claims, physicians with low volumes reported
that their purchase prices were the same or less than the
widely available prices GAO documented. GAO also believes that
Medicare should pay for each service appropriately and not rely
on overpayments for some services to offset inadequate payments
for complementary services. The Committee shares this view, and
believes the legislation achieves this goal.
Section 304. 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 for up to three years on the use of recovery audit
contractors under the Medicare Integrity Program. The recovery
audit contractors would identify underpayments and overpayments
in the Medicare program and would recoup overpayments made to
providers. Payment would be made to these contractors by
providing incentives for good performance. The Secretary would
be able to waive Medicare statutory provisions to pay for the
services of the recovery audit contractors. The Secretary would
be required to examine the efficacy of using these contractors
with respect to duplicative payments, accuracy of coding, and
other payment policies in which inaccurate payments arise. The
demonstration project would be required to cover at least two
states among the states with the highest per-capita utilization
rates of Medicare services and have at least three contractors.
Recovery of an overpayment through this project would not
prohibit the Secretary or the Attorney General from
investigating and prosecuting appropriate allegations of fraud
and abuse. Fiscal intermediaries, carriers, and Medicare
Administrative Contractors would not be eligible to participate
as a recovery audit contractor. The Secretary would be required
to show preference to contracting with entities that have
demonstrated more than three years direct management experience
and a proficiency in recovery audits. Within six months of
completion, the Secretary would be required to report to
Congress on the project's savings to the Medicare program,
including recommendations on the cost-effectiveness of
extending or expanding the program.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This is a common approach used in the private sector
including physicians and hospitals to recover payments from
insurers. It provides a useful check on whether the other CMS
contractors are paying accurately and identifying potential
fraud problems.
D. Title IV--Rural Health Care Improvements
Section 401. Enhanced Disproportionate Share Hospital (DSH) Treatment
for Rural Hospitals 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 part of its inpatient prospective payment
system (PPS). As specified by BIPA, starting with discharges
occurring on or after April 1, 2001, all hospitals are eligible
to receive Medicare disproportionate share hospital (DSH)
payments when their DSH percentage or threshold amount exceeds
fifteen.
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 (RRC) or sole community
hospital (SCH). The DSH adjustment that a small urban or rural
hospital can receive is limited to 5.25 percent of total
Medicare inpatient payments.
EXPLANATION OF PROVISION
For discharges after October 1, 2003, a small rural or
urban hospital that qualifies for a DSH adjustment would
potentially receive an increase in DSH payments. The DSH
adjustment for these hospitals, except for rural referral
centers, would be almost doubled but not to exceed a maximum of
10 percent.
EFFECTIVE DATE
The provision would apply to discharges occurring on or
after October 1, 2003.
REASON FOR CHANGE
MedPAC, an independent advisory committee that advises
Congress, recommended this policy in its March 2003 report.
MedPAC believes this change would mitigate the effects of
uncompensated care for many rural hospitals and thereby protect
Medicare beneficiaries' access to care in rural communities.
Historically, rural and small urban hospitals have been treated
unfairly with respect to DSH payments.
Section 402. Immediate Establishment of Uniform Standardized Amount in
Rural and Small Urban Areas
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). The Consolidated Appropriations Act of 2003 (P.L. 108-
7) provided for a temporary payment increase to rural and small
urban hospitals; all Medicare discharges from April 1, 2003, to
September 30, 2003, would be paid on the basis of the large
urban area amount.
EXPLANATION OF PROVISION
Beginning for discharges in FY2004, the standardized amount
for hospitals located in areas other than large urban areas
would be equal to the amount used to pay hospitals located in
large urban areas. Technical conforming amendments would also
be adopted.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
MedPAC recommends eliminating this differential in payment.
MedPAC found no statistically significant difference in costs
between the cost of hospitals in large urban areas (over one
million) and other hospitals, after removing the effect of
geographic differences in wages, teaching and other Medicare
adjustments.
Section 403. Establishment of Essential Rural Hospital Classification
CURRENT LAW
No provision in current law.
EXPLANATION OF PROVISION
An Essential Rural Hospital would be a new designation for
the purposes of Medicare reimbursement. To be eligible for the
Essential Rural Hospital designation, the hospital must have
more than 25 beds and must be located in a rural area. The
Secretary must then determine that the closure of the hospital
would significantly diminish the ability of beneficiaries to
obtain essential health care services based on certain
criteria. Specifically, the Secretary must determine that (1) a
high proportion of Medicare beneficiaries residing in the
hospital's service area receive basic inpatient care from the
hospital, and (2) there exists, in the service area, a hospital
with more than 200 licensed beds that provides specialized
surgical care to a high percentage of beneficiaries. Regardless
of the size of the hospital, almost all physicians in the area
must have admitting privileges and provide their inpatient
services primarily at the hospital. Also, the Secretary must
determine that the closure of the hospital would have a
significant adverse impact on the availability of health care
service in the absence of the hospital.
In making such determination, the Secretary may also
consider: (1) whether ambulatory care providers in the
hospital's service area are insufficient to handle the
outpatient care of the hospital, (2) whether beneficiaries
would have difficulty accessing care, and (3) whether the
hospital has a commitment to provide graduate medical education
in a rural area. The essential rural hospital would have to
have a quality of care score above the median state scores.
A hospital classified as an essential rural hospital would
not be able to change such classification. An essential rural
hospital would not be able to be treated as a sole community
hospital, Medicare dependent hospital, or rural referral
center. A hospital that is classified as an essential rural
hospital for a cost reporting period beginning on or after
October 1, 2004 would be reimbursed 102 percent of its
reasonable Medicare costs for inpatient and outpatient
services. Beneficiary cost-sharing amounts would not be
affected and required billing for such services would not be
waived.
EFFECTIVE DATE
The provision would apply to cost reporting periods
beginning on or after October 1, 2004.
REASON FOR CHANGE
The purpose of this provision is to recognize the impact of
certain hospitals whose existence is essential in the health
care delivery system of the community. Some rural hospitals
have high fixed costs because of the necessity for providing
the capacity for essential services in a community. There are
also problems with the definition and payment for some
communitiesand rural referral hospitals. This would provide a
new crosscutting designation field for hospitals that can meet the
criteria.
Section 404. More Frequent Update in Weights Used in Hospital Market
Basket
CURRENT LAW
Medicare's standardized amounts, which serve as the basis
for its payment per discharge from acute hospitals, are
increased annually using an update factor which is determined
in part by the projected increase in the hospital market
basket. The market basket is a fixed-weight hospital input
price index, which measures the average change in the price of
goods and services hospitals purchased in order to furnish
inpatient care. CMS revises the cost category weights,
reevaluates the price proxies for such categories, and rebases
(or changes the base period) for the market basket every five
years. CMS implemented a revised and rebased market basket
using 1997 cost data for use in the FY2003 Medicare hospital
payment rates.
EXPLANATION OF PROVISION
The Secretary would be required to revise the market basket
cost weights including the labor share to reflect the most
currently available data and to establish a schedule for
revising the cost weights more often than once every five
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.
REASON FOR CHANGE
At the current time the hospital market basket is only
updated every ten years using five-year-old data for the
weights including the labor share. Statisticians at the
Department of Labor and other experts believe the measures of
inflation should be updated on a more regular basis to correct
consistent inaccuracies over time.
Section 405. Improvements to the Critical Access Hospital (CAH) Program
(a) Increase in Payment Amounts
CURRENT LAW
Generally, a critical access hospital (CAH) receives
reasonable, cost-based reimbursement for care rendered to
Medicare beneficiaries. CAHs may elect either a cost-based
hospital outpatient service payment or an all-inclusive rate,
which is equal to a reasonable cost payment for facility
services plus 115 percent of the fee schedule payment for
professional services. Ambulance services that are owned and
operated by CAHs are reimbursed on a reasonable cost basis if
these ambulance services are 35 miles from another ambulance
system.
EXPLANATION OF PROVISION
Inpatient, outpatient, and covered skilled nursing facility
services provided by a CAH would be reimbursed at 102 percent
of reasonable costs of services furnished to Medicare
beneficiaries.
EFFECTIVE DATE
This provision would apply to cost reporting periods
beginning on or after October 1, 2003.
REASON FOR CHANGE
Small hospitals need the ability to build up reserves and
to finance new capital expenditures. This provides a margin for
these hospitals under the Medicare program, often their most
important payor.
(b) Coverage of Costs for Certain Emergency Room On-Call
Providers
CURRENT LAW
BIPA required the Secretary to include the costs of
compensation (and related costs) of on-call emergency room
physicians who are not present on the premises of a CAH, are
not otherwise furnishing services, and are not on-call at any
other provider or facility when determining the allowable,
reasonable cost of outpatient CAH services.
EXPLANATION OF PROVISION
Reimbursement of on-call emergency room providers would be
expanded to include the costs associated with physician
assistants, nurse practitioners, and clinical nurse specialists
as well as emergency room physicians for covered Medicare
services.
EFFECTIVE DATE
This provision would apply to costs for services provided
on or after January 1, 2004.
REASON FOR CHANGE
In sparsely populated areas, it is often the physician
assistant or nurse practitioner employed by a physician
practice or operating independently who is providing the on
call services for the emergency room. This recognizes the
bonuses that hospitals pay for their services.
(c) Modification of the Isolation Test for Cost-Based CAH
Ambulance Services
CURRENT LAW
Ambulance services provided by a CAH or provided by an
entity that is owned or operated by a CAH is paid on a
reasonable cost basis and not the ambulance fee schedule, if
the CAH or entity is the only provider or supplier of ambulance
services that is located within a 35-mile drive of the CAH.
EXPLANATION OF PROVISION
The 35-mile requirement would not apply to the ambulance
services that are furnished by a provider or supplier of
ambulance services who is determined by the Secretary to be a
first responder to emergencies.
EFFECTIVE DATE
This provision would apply to ambulance services furnished
on or after the first cost reporting period that begins after
the date of enactment.
REASON FOR CHANGE
CAHs may not be eligible for cost-based reimbursement
because other ambulances may come into the area to transport
patients between hospitals or to transfer patients to/from
nursing homes. This would ensure that CAHs owned-and-operated
ambulances would be paid cost when they are the first
responders to an emergency.
(d) 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 two 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 difference between the
estimated PIP payment and the actual amount owed. A CAH is not
eligible for PIP payments.
EXPLANATION OF PROVISION
An eligible CAH would be able to receive payments made on a
PIP basis for its inpatient services. The Secretary would be
required to develop alternative methods based on the
expenditures of the hospital for these PIP payments.
EFFECTIVE DATE
This provision would apply to payments made on or after
January 1, 2004.
REASON FOR CHANGE
Small rural hospitals often have significant changes in
volume due to the season or just on a day-to-day basis. This
provision averages payments over time to aid the hospital's
financial stability.
(e) Condition for Application of Special Physician Payment
Adjustment
CURRENT LAW
As specified by BBRA, 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 services otherwise included within its outpatient
critical access hospital services for cost reporting periods
starting on or after October 1, 2000.
EXPLANATION OF PROVISION
The Secretary would not be able to require that all
physicians providing services in a CAH assign their billing
rights to the entity in order for the CAH to be able to be paid
on the basis of 115 percent of the fee schedule for the
professional services provided by 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
This provision would be effective as if it had been
included as part of BBRA.
REASON FOR CHANGE
This provision ensures that the intent of Congress is for
CMS to provide these payments in order to attract physicians to
CAHs.
(f) Flexibility in Bed Limitation for Hospitals
CURRENT LAW
A CAH is a limited service facility that must provide 24-
hour emergency services and operate a limited number of
inpatient beds in which hospital stays can average no more than
96 hours. A CAH cannot operate more than 15 acute-care beds at
one time, but can have an additional 10 swing beds that are set
up for skilled nursing facility (SNF) level care. SNF beds in a
unit of the facility that is licensed as a distinct-part
skilled nursing facility at the time of the facility's
application for CAH designation are not counted toward these
bed limits.
EXPLANATION OF PROVISION
The Secretary would be required to specify standards for
determining whether a CAH has seasonal variations in patient
admissions that would justify a 5-bed increase in the number of
beds it can maintain (and still retain its classification as a
CAH). CAHs that operate swing beds would be able to use up to
25 beds for acute care services as long as no more than 10 beds
at any time are used for non-acute services. Those CAHs with
swing beds that made this election would not be eligible for
the 5-bed seasonal adjustment. A CAH with swing beds that
elects to operate only 15 of its 25 beds as acute care beds
would be eligible for the 5-bed seasonal adjustment.
EFFECTIVE DATE
These provisions would only apply to CAH designations made
before, on or after January 1, 2004.
REASON FOR CHANGE
These provisions allow some needed flexibility in the CAH
program designation to ensure that if there is a flu epidemic
or major accident that the hospital would have the capacity to
treat those patients.
(g) Additional 5-Year Period of Funding for Grant Program
CURRENT LAW
The Secretary is able to make grants for specified purposes
to States or eligible small rural hospitals that apply for such
awards. The authorization to award the grants expired in
FY2002.
EXPLANATION OF PROVISION
The authorization to award grants would be established from
FY2004 through FY2008 from the Federal Hospital Insurance Trust
Fund at amounts of up $25 million each year.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This would continue the planning and monitoring aspects of
the states for the CAH program. The Committee expects that the
states would work in cooperation with the critical access
hospitals in determining the best use of the funds.
Section 406. Redistribution of Unused Resident Positions
CURRENT LAW
Medicare has different resident limits for counting
residents, its indirect medical education (IME) adjustment and
for reimbursement for a teaching hospital's direct graduate
medical education (DGME) costs. Generally, a hospital's IME
adjustment depends on a hospital's teaching intensity as
measured by the ratio of the number of interns and residents
per bed. Prior to BBA 97, the number of residents that could be
counted for IME purposes included only those in the hospital
inpatient and outpatient departments. Effective October 1,
1997, under certain circumstances a hospital may now count
residents in non-hospital sites for the purposes of IME.
Medicare's DGME payment to teaching hospital is based on its
updated cost per resident (subject to a locality adjustment and
certain payment corridors), the weighted number of approved
full-time-equivalent (FTE) residents, and Medicare's share of
inpatient days in the hospital. Generally, the resident counts
of both IME and DGME payments are based on the number of
residents in approved allopathic and osteopathic teaching
programs that were reported by the hospital for the cost
reporting period ending in calendar year 1996. The DGME
resident limit is based on the unweighted resident counts.
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. Under certain conditions, an affiliated
group of hospitals under a specific arrangement may combine
their resident limits into an aggregate limit. Subject to these
resident limits, a teaching hospital's IME and DGME payments
are based on a three-year rolling average of resident counts,
that is, the resident count will be based on the average of the
resident count in the current year and the two preceding years.
The rolling average calculation includes podiatry and dental
residents.
EXPLANATION OF PROVISION
A teaching hospital's total number of potentially Medicare-
reimbursed resident positions would be reduced for cost
reporting periods, starting January 1, 2004, if the resident
reference level is less than its applicable resident limit. If
so, the reduction would equal to 75 percent of the difference
between the hospital's limit and its resident reference level.
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, 2002. 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, 2003.
The Secretary would be authorized to increase the
applicable resident limits for other hospitals by an aggregate
number that does not exceed the overall reduction in such
limits. 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, 2005.
The Secretary would consider the need for an increase in
the physician specialty and the location involved. 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-serve
basis. The hospital would have to demonstrate that the resident
positions would be filled; not more than 25 positions would be
given to any one hospital. These hospitals would be reimbursed
for DGME for the increase in resident positions at the locality
adjusted national average per resident amount. Changes in a
hospital's resident count established under this section would
increase 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 a new medical residency
training programs. The Secretary would be required to submit a
report, including recommendations, on whether to extend the
application deadline for increases in resident limits no later
than July 1, 2005.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
An unintended effect of the resident cap was to lock in a
maldistribution of DGME and IME resident training positions in
the country. Due to the strong link between the location of a
resident's training and their eventual practice, it is critical
to get more residents into training programs in rural areas and
small urban cities. This provision redistributes unused
residency slots, over a five-year period, to hospitals that
have either reached their cap or have been providing DGME
residencies without Medicare funding.
Section 407. Two-Year Extension of Hold Harmless Provisions for Small
Rural Hospitals and Sole Community Hospitals Under Prospective
Payment System for Hospital Outpatient Department Services
CURRENT LAW
The PPS for hospital outpatient departments (HOPDs) was
implemented in August 2000 for most acute care hospitals. Under
the HOPD PPS, Medicare pays for covered services using a fee
schedule based on ambulatory payment classifications (APCs).
Rural hospitals with no more than 100 beds are paid no less
under this PPS system than they would have received under the
prior reimbursement system for covered HOPD services because of
hold harmless provisions. The hold harmless provisions apply to
services provided before January 1, 2004.
EXPLANATION OF PROVISION
The hold harmless provisions governing HOPD reimbursement
for small rural hospitals would be extended to January 1, 2006.
The hold harmless provisions would be extended to sole
community hospitals located in a rural area starting for
services furnished on or after January 1, 2004 until January 1,
2006. The Secretary would be required to conduct a study to
determine if the costs by APC groups incurred by rural
providers exceed such costs incurred by urban providers. If
appropriate, the Secretary would provide a payment adjustment
to reflect the higher costs of rural providers by January 1,
2005.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
During the proposed rule for the start of the HOPD PPS, CMS
found that rural hospital costs were higher than other
hospitals. CMS did not recommend adjusting payments due to the
poor quality of the data. This continues the hold harmless from
any negative effect from the PPS for small rural hospitals and
extends it to sole community hospitals until the Secretary
reexamines this issue.
Section 408. Exclusion of Certain Rural Health Clinic and Federally
Qualified Health Center Services from the Prospective Payment
System for Skilled Nursing Facilities
CURRENT LAW
Under the PPS, skilled nursing facilities (SNFs) are paid a
predetermined amount to cover all services provided in a day,
including the costs associated with room and board, nursing,
therapy, and drugs; the daily payment would vary depending upon
a patient's therapy, nursing and special care needs as
established by one of 44 resource utilization groups (RUGs).
Certain services and items provided a SNF resident, such as
physicians' services, specified ambulance services,
chemotherapy items and services, and certain outpatient
services from a Medicare-participating hospital or critical
access hospital, are excluded from the SNF PPS and paid
separately under Part B.
EXPLANATION OF PROVISION
Services provided by a rural health clinic (RHCs) and a
federally qualified health center (FQHC) after January 1, 2004
would be excluded from SNF PPS, if such services were excluded
if furnished by an physician or practitioner who was not
affiliated with a RHC or FQHC.
EFFECTIVE DATE
The provision would apply to services furnished on or after
January 1, 2004.
REASON FOR CHANGE
In some rural areas, local physicians may be employed in a
rural health clinic or federally qualified health clinic. This
would allow them to get paid for their professional services to
skilled nursing patients like other physicians.
Section 409. Recognition of Attending Nurse Practitioners as Attending
Physicians To Serve Hospice Patients
CURRENT LAW
Medicare covers hospice services to care for the terminal
illnesses of the beneficiary. In general, beneficiaries who
elect the hospice benefit give up other Medicare services that
seek to treat the terminal illness or that duplicate services
provided by the hospice. Services are provided primarily in the
patient's home by a Medicare-approved hospice. Reasonable and
necessary medical and support services for the management of
the terminal illness are furnished under a written plan-of-care
established and periodically reviewed by the patient's
attending physician and the hospice. To be eligible for
Medicare's hospice care, a beneficiary must be certified as
terminally ill by an attending physician and the medical
director or other physician at the hospice and elect hospice
treatment. An attending physician who may be an employee of the
hospice is identified by the patient as having the most
significant role in the determination and delivery of his or
her medical care when the patient makes an election to receive
hospice care.
EXPLANATION OF PROVISION
A beneficiary would be able to identify a nurse
practitioner (who is not employed by the hospice) as an
attending physician. The nurse practitioner would not be able
to certify the beneficiary as terminally ill.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
In rural areas, the independent nurse practitioner provides
a significant amount of the care to patients up to and during
their terminal illness. This allows them to continue in their
clinical role with the patient.
Section 410. Improvement in Payments To Retain Emergency Capacity for
Ambulance Services in Rural Areas
CURRENT LAW
Traditionally, Medicare has paid suppliers of ambulance
services on a reasonable charge basis and paid provider-based
ambulances on a reasonable cost basis. BBA 97 provided for the
establishment of a national fee schedule, which was to be
implemented in phases. The required fee schedule became
effective April 1, 2002 with full implementation by January
2006. In the transition period, a gradually decreasing portion
of the payment is to be based on the prior payment methodology
(either reasonable costs or reasonable charges which were
subject to national limitation amounts).
The fee schedule payment amount equals the base rate for
the level of service plus payment for mileage and specified
adjustment factors. Additional mileage payments are made in
rural areas. BIPA increased payment for rural ambulance mileage
for distances greater than 17 miles and up to 50 miles for
services provided before January 1, 2004. The amount of the
increase was at least one-half of the payment per mile
established in the fee schedule for the first 17 miles of
transport.
EXPLANATION OF PROVISION
The Secretary would be required to increase the base rate
of the fee schedule for ground ambulance services that
originate in a qualified rural area to account for the higher
average costs incurred by providers furnishing a low volume of
services. A qualified rural area is a county that has not been
assigned to a metropolitan statistical area (MSA) with a
population density of Medicare beneficiaries in the lowest
quartile of all rural county populations.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The current adjustment may overpay rural ambulances in more
populated areas and underpays them in less populated areas.
Recent analyses by the General Accounting Office suggest that
it is fixed costs--represented by the base rate--not mileage
that are the significant factor for increased costs in rural
areas. In particular, the ambulances in the lowest 25 percent
of rural counties may have less than one trip per day.
Section 411. Two-Year Increase for Home Health Services Furnished in a
Rural Area
CURRENT LAW
The Medicare home health PPS, implemented on October 1,
2000, provides a standardized payment for a 60-day episode of
care furnished to a Medicare beneficiary. Medicare's payment is
adjusted to reflect the type and intensity of care furnished
and area wages as measured by the hospital wage index. BIPA
increased PPS payments by 10 percent for home health services
furnished in the home of beneficiaries living in rural areas
during the two-year period beginning April 1, 2001, through
March 31, 2003, without regard to certain budget-neutrality
provisions applying to 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 a five percent additional
payment for home health care services furnished in a rural area
during FY 2004 and 2005 without regard to certain budget-
neutrality requirements.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
MedPAC recommends extending the five percent add-on for
one-year while further analysis is done on rural agency home
health margins. The two-year extension is to provide Congress
with time to evaluate that information and decide what action
is needed, if any.
Section 412. 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 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)
results in savings of Federal grant funds or increased revenues
to the health center, (2) expands 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 in
enacting this exception. 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 public comment period of not more than 60 days.
EFFECTIVE DATE
Upon enactment
REASON FOR CHANGE
This would finalize policy under development at the
Department of Health and Human Services.
Section 413. GAO Study of Geographic Differences
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; and (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 weights for
the malpractice component. The study, including recommendations
concerning use of more current data and use of cost data rather
than price proxies, would be due to Congress within 1 year of
enactment.
EFFECTIVE DATE
Upon enactment.
Section 414. Treatment of Missing Cost Reporting Periods for Sole
Community Hospitals
CURRENT LAW
Sole community hospitals (SCHs) are hospitals that, because
of factors such as isolated location, weather conditions,
travel conditions, or absence of other hospitals, are the sole
source of inpatient services reasonably available in a
geographic area, or are located more than 35 road miles from
another hospital. The primary advantage of an SCH
classification is that these hospitals receive Medicare
payments based on the current national PPS national standardize
amount or on hospital-specific per discharge costs from either
FY 1982, FY1987 or FY1996 updated to the current year, whatever
amount would provide the highest Medicare reimbursement. The
FY1996 base year option became effective for discharges on or
after FY2001 on a phased in basis and would be fully
implemented for SCH discharges on or after FY2004.
EXPLANATION OF PROVISION
A hospital would not be able to be denied treatment as a
SCH or receive payment as a SCH because data are unavailable
for any cost reporting period due to changes in ownership,
changes in fiscal intermediaries, or other extraordinary
circumstances, so long as data from at least one applicable
base cost reporting period is available.
EFFECTIVE DATE
The provision would apply to cost reporting periods
beginning on or after January 1, 2004.
REASON FOR CHANGE
During changes in fiscal intermediaries or in a change of
ownership, historical information on a provider can be lost or
misplaced. The purpose of the sole community hospital program
is to provide for additional payment to protect access, which
should not be stymied due to human error. Since sole community
hospitals are paid the higher of any of the base years or the
Federal rate, this does not result in preferential payments for
these hospitals compared to other sole community hospitals.
Section 415. Extension of Telemedicine Demonstration Project
CURRENT LAW
BBA 97 authorized a telemedicine demonstration project for
beneficiaries with diabetes mellitus in medically underserved
rural or inner-city areas. BBRA required the Secretary to award
the demonstration to the best technical proposal as of the
bill's enactment date, no later than three months after
enactment without additional review. BBRA also clarified that
qualified medically underserved rural or urban inner-city areas
are federally designated medically underserved areas or Health
Provider Shortage Areas (HPSAs) at the time of enrollment in
the project. Furthermore, it made changes in the project's data
requirements, and limited beneficiary cost-sharing. The
demonstration would expire in February 2004.
EXPLANATION OF PROVISION
This provision would extend the demonstration for an
additional four years.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Difficulty finding appropriate participants delayed the
demonstration's start. This extension would provide additional
time to fully evaluate the clinical effectiveness of the
program, and to determine the long-term effectiveness of the
approach. It would also provide more time to collect clinical
data to evaluate the project's cost-effectiveness.
Section 416. Adjustment to the Medicare Inpatient Hospital PPS Wage
Index to Revise the Labor-Related Share of Such Index
CURRENT LAW
Hospitals' DRG payments are adjusted by the hospital wage
index. The adjusted portion of the payment is determined by the
labor share. The labor share has three components: wages (50.7
percent), fringe benefits (11 percent), and rest is the so-
called labor related costs.
EXPLANATION OF PROVISION
It reduces the labor share down to 62 percent of wages and
fringe benefits for those areas with wage index values under
1.0. All other areas are held harmless from the change in the
labor share.
EFFECTIVE DATE
October 1, 2003.
REASON FOR CHANGE
MedPAC and others have questioned whether some or all of
the labor related costs in the labor share should be included.
This eliminates these costs from the labor share for the areas
that benefit from such a change.
Section 417. Medicare Incentive Payment Program Improvements for
Physician Scarcity
CURRENT LAW
Under the Medicare Incentive Program, physicians receive a
10 percent bonus payment for services provided in health
professional shortage areas. Physicians are responsible for
indicating their eligibility for this bonus on their billing
forms.
EXPLANATION OF PROVISION
This provision would establish a new five percent bonus
payment program for physicians providing care to Medicare
beneficiaries in physician scarcity areas. The Secretary would
calculate two measures of scarcity. A primary care scarcity
area would be determined based on the number of primary care
physicians per Medicare beneficiary--the primary care ratio. A
specialty care scarcity area would be based on the number of
specialty care physicians per Medicare beneficiary--the
specialty care ratio. The number of physicians would be based
on physicians who actively practice medicine or osteopathy, and
would exclude physicians whose practice is exclusively for the
Federal Government, physicians who are retired, or physicians
who only provide administrative services.
The Secretary would rank each county or area based on its
primary care ratio. Primary care scarcity counties or areas
would be those counties or areas with the lowest primary care
ratios, such that 20 percent of Medicare beneficiaries reside
in these counties, when each county or area is weighted by the
number of Medicare beneficiaries in the county or area.
Specialty care scarcity counties or areas would be identified
in the same manner, using the specialty care ratio. There would
be no administrative or judicial review of the identification
of counties or areas, or of a specialty of any physician.
To the extent feasible, the Secretary would treat a rural
census tract of a metropolitan statistical area, as determined
under the most recent modification of the Goldsmith
Modification, as an equivalent area for purposes of qualifying
as a primary care scarcity area or specialty care scarcity
area.
The Secretary would be required to publish a list of all
areas which would qualify as primary care scarcity counties or
specialty care scarcity counties as part of the proposed and
final rules to implement the physician fee schedule.
The provision would also include improvement to the
Medicare Incentive Payment Program, which provides a 10 percent
bonus to physicians in shortage areas. The Secretary would be
required to establish procedures under which the Secretary, and
not the physician furnishing the service, would be responsible
for determining when a bonus payment should be made. As part of
the physician proposed and final rule for the physician fee
schedule, the Secretary would be required to include a list of
all areas which would qualify as a health professional shortage
area for the upcoming year.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The new five percent bonus for physicians in either primary
care scarcity counties or specialty care scarcity counties
would increase financial incentives for physicians to provide
care to Medicare beneficiaries in these areas with a shortage
of physicians. This bonus payment would make it easier to
recruit and retain physicians in these scarcity areas.
Improvements to the Medicare Incentive Program would shift
responsibility for identifying eligibility for the 10 percent
bonus from physicians to the Secretary.
E. Title V--Provisions Relating to Part A
Subtitle A--Inpatient Hospital Services
Section 501. Revision of Acute 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 annual change in the hospital market basket.
Congress establishes the update for Medicare's inpatient PPS
for operating costs, often several years in advance.
EXPLANATION OF PROVISION
Acute hospitals would receive a market basket update minus
0.4 percent for three years. This results in an average 3.1
percent update for FY2004 through FY2006, equivalent to market
basket minus 0.4 percent. The Secretary is also directed to
compile and clarify the procedures and policies for billing for
blood and blood costs in the hospital outpatient setting as
well as the operation of the collection of the blood
deductible.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
MedPAC unanimously recommended that Congress increase
payments by 3.1 percent instead of the scheduled 3.5 percent.
This results in a $3 billion increase in hospital payments for
FY 2004. This is 0.4 percent less than current law due to
expected increases in productivity.According to MedPAC, the
modest expected productivity increase for hospitals is lower than would
be considered to be sufficient for many private industries.
There is little precedent for hospitals to receive a full
market basket increase. Congress has only given hospitals the
full inflationary increase twice since the start of the
hospital prospective payment system. Congress has legislated
multiple-year changes in every Medicare bill except in the
Omnibus Budget Reconciliation Act of 1989. Finally, this is a
comparatively generous provision since Congress has typically
reduced the inflationary offset by 1.2 percent--three times
greater than the 0.4 percent recommended by MedPAC and
presented in the bill.
The proposal replaces a historical saw tooth pattern of
updates ranging from zero to full market basket to put
hospitals' Medicare payments on a predictable stable funding
path.
Section 502. 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 means of 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
providing 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; this
threshold 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 one percent of the total operating
inpatient payments, the add-on payments are reduced
prospectively.
Medicare pays hospitals additional amounts for atypical
cases that have extraordinarily high costs compared to most
discharges classified in the same DRG. The additional payment
amount is equal to 80 percent of the difference between the
hospital's entire cost for the stay and the threshold amount.
EXPLANATION OF PROVISION
The Secretary would be required to add new diagnosis and
procedure codes in April 1 of each year that would not be
required to affect Medicare's payment or DRG classification
until the fiscal year that begins after that date. 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 75
percent of one standard deviation for the DRG involved.
The Secretary would be required to provide additional
clarification in regulating the criteria used to determine
whether a new service represents an advance in technology that
substantially improves the existing diagnosis or treatment. The
Secretary would be required to deem that a technology provides
a substantial improvement on an existing treatment if the
technology in question: (1) is a drug or a biological that is
designated under section 506 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, or (2) is a medical
device for which an exemption has been granted under section
520(m) of such Act, or for which priority or expedited review
has been provided under section 515(d)(5). 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 add-on payment as the appropriate
reimbursement mechanism, the Secretary would be directed to
identify one or more DRGs 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 add-on payment would be
made; the application of the budget-neutrality requirement with
respect to annual DRG reclassifications and recalculation of
associated DRG weights would not be affected. The Secretary
would be required to increase the percentage associated with
add-on payments from 50 percent to the marginal rate or the
percentage that Medicare reimburses inpatient outlier cases.
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 were granted, the maximum time period otherwise
permitted for such classification as a new technology would be
extended by 12 months.
EFFECTIVE DATE
These provisions would be effective for classifications
beginning in FY2004.
REASON FOR CHANGE
CMS has only approved one new technology since these
provisions were passed. This provision would allow more
technologies to be covered and recognizes that the breakthrough
technologies are new costs to the system.
Section 503. Increase in 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 split between federal and local amounts before
October 1, 2003. From FY2004-FY2007, an increasing amount of
the payment rate would be based on federal national rates as
follows: during FY2004, payment would be 59 percent national
and 41 percent local; this would change to 67 percent national
and 33 percent local during FY2005 and 75 percent national and
25 percent local during FY2006 and subsequent years.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Puerto Ricans pay the full Hospital Insurance payroll tax
but they are not afforded equal Medicare payments to their
hospitals. This partially redresses the inequality between the
rates, and is consistent with the MedPAC recommendation.
Section 504. Wage Index Adjustment Reclassification Reform
CURRENT LAW
Acute hospitals may apply to the Medicare Geographic
Classification Review Board (MGCRB) for a change in
classification from a rural area to an urban area, or
reassignment from one urban area to another urban area, based
on the level of wages. The MGCRB was created to determine
whether a hospital should be redesignated to an area of close
proximity for purposes of using that area's standardized
amount, wage index, or both. If the MGCRB grants
reclassification, the new wage index would be used to calculate
Medicare's payment for inpatient and outpatient services.
Generally, hospitals must demonstrate a close proximity to the
areas where they seek to be reclassified. A hospital can meet
this criteria if one of two conditions are met: (1) an urban
hospital is no more than 15 miles and a rural hospital is no
more than 35 miles from the area where it wants to be
reclassified, or (2) at least 50 percent of the hospital's
employees are residents of the area. A rural referral center
(RRC) or a sole community hospital (SCH) or a hospital that is
both a RRC and a SCH does not have to meet the proximity
criteria. After establishing appropriate proximity, a hospital
may qualify for the payment rate of another area if it proves
that its incurred costs are comparable to those of hospitals in
that area under established criteria. To use an area's wage
index, a rural hospital must demonstrate that its average
hourly wage is equal to at least 82 percent of the average
hourly wage of hospitals in the area to which it seeks
redesignation; an urban hospital must demonstrate that its
average hourly wage is at least 84 percent of such an area. In
addition, an urban hospital cannot be reclassified unless its
average hourly wage is at least 108 percent of the average
hourly wage of the area in which it is located. This standard
is 106 percent for rural hospitals seeking reclassification to
another area.
For redesignations starting in FY2003, the average hourly
wage comparisons used to determine whether a hospital can use
another area's wage index are based on 3 years worth of lagged
data submitted by hospitals as part of their cost report. For
instance, FY2003 wage index reclassifications were based on
weighted three-year averages of average hourly wages using data
from FY1997, FY1998, and FY1999 cost reports. Wage index
reclassifications are effective for 3 years unless the hospital
notifies the MCGRB and withdraws or terminates its
reclassification.
EXPLANATION OF PROVISION
The Secretary would be required to establish an application
process and payment adjustment to recognize the commuting
patterns of hospital employees. A hospital that qualified for
such a payment adjustment would have average hourly wages that
exceed the average wages of the area in which it is located and
have at least ten percent of its employees living in one or
more areas that have higher wage index values. This qualifying
hospital would have its wage index value increased by the
average difference in wage index values between the higher
areas and its own, weighted by the percentage of its employees
who live in these areas. The process would be based on the
MGCRB reclassification process and schedule with respect to
data submitted. Such an adjustment would be effective for three
years unless a hospital withdraws or terminates its payment. A
hospital that receives a commuting wage adjustment would not
beeligible for reclassification into another area by the MCGRB for the
purposes of using its wage index or standardized amount. These
commuting wage adjustments would not affect the computation of the wage
index of the area in which the hospital is located or any other area.
It would also be exempt from certain budget neutrality requirements.
ENACTMENT DATE
Upon enactment.
REASON FOR CHANGE
Labor market areas may differ from the distance
requirements in the regulations on reclassification. Thus,
using commuting patterns of employees more clearly reflects the
underlying labor market that hospitals confront. This policy
will have the effect of blurring the current hard line of
payment adjustments between two adjacent MSAs.
Section 505. MedPAC Report on Specialty Hospitals
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
MedPAC would be required to conduct a study of specialty
hospitals compared with other similar general acute hospitals
including the number and extent of patients referred by
physicians with an investment interest in the facility, the
quality of care furnished, the impact of the specialty hospital
on the acute general hospital, and the differences in the scope
of services, Medicaid utilization and the amount of
uncompensated care that is furnished. The report, including
recommendations, would be due to Congress no later than 1 year
from enactment.
ENACTMENT DATE
Upon enactment.
Subtitle B--Other Services
Section 511. Payment for Covered Skilled Nursing Facility Services
CURRENT LAW
Medicare uses a system of daily rates to pay for care in a
skilled nursing facility (SNF). There are 44 daily rate
categories, known as resource utilization groups (RUGs), and
each group reflects a different case mix and intensity of
services, such as skilled nursing care and/or various therapies
and other services.
EXPLANATION OF PROVISION
The per diem RUG payment for a SNF resident with acquired
immune deficiency syndrome (AIDS) would be increased by 128
percent. This payment increase would not apply after the date
when the Secretary certifies that the SNF case mix adjustment
adequately compensates for the facility's increased costs
associated with caring for a resident with AIDS.
ENACTMENT DATE
The provision would be effective for services on or after
October 1, 2003.
REASON FOR CHANGE
According to prior work by the Urban Institute, AIDS
patients have much higher costs than other patients in the same
resource utilization groups in skilled nursing facilities. The
adjustment is based on that data analysis.
Section 512. Coverage of Hospice Consultation Services
CURRENT LAW
Current law authorized coverage of hospice services, in
lieu of certain other Medicare benefits, for terminally ill
beneficiaries who elect such coverage.
EXPLANATION OF PROVISION
Coverage of certain physicians' services for certain
terminally ill individuals would be authorized. Persons
entitled to these services would be individuals who have not
elected the hospice benefit and have not previously received
these physicians' services. Covered services would be those
furnished by a physician who is 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 similar services under
the physician fee schedule, excluding the practice expense
component.
EFFECTIVE DATE
The provision would apply to consultation services provided
by a hospice program on or after January 1, 2004.
REASON FOR CHANGE
Many patients, especially those with congestive heart
failure, are not educated about the option of receiving hospice
services to alleviate their pain and suffering. Moreover,
hospice lengths of stay keep dropping, suggesting that patients
are referred too late in their illness. This provision would
encourage physicians to talk more with patients about hospice.
F. Title VI--Provisions Relating to Part B
Subtitle A--Physicians' Services
Section 601. Revision 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, is 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 law provides a specific formula for calculating the
annual update to the conversion factor. The intent of the
formula is to place a restraint on overall increases in
spending for physicians' services. 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.
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 would 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 seven percent
or more than plus three 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.
The law also specifies a formula for calculating the SGR
that is based on changes in four factors: (1) the estimated
change in fees, (2) the estimated change in average number of
Part B enrollees (excluding Medicare+Choice beneficiaries), (3)
the estimated projected growth in real gross domestic product
(GDP) per capita, and (4) the estimated change in expenditure
due to changes in law or regulations. This formula is designed
to adjust for how well actual expenditures meet SGR target
expenditures.
Provisions in the Consolidated Appropriations Resolution of
2003 (P.L. 108-7) permitted redeterminations of SGR for prior
years to correct for faulty data for the number of FFS
beneficiaries in 1998 and 1999. As a result, the conversion
factor for 2003 was increased 1.6 percent over the 2002 level.
Other aspects of the formula for the annual payment rate were
not addressed.
CMS estimates an update of -4.2 percent for 2004, followed
by a smaller negative update in 2005.
EXPLANATION OF PROVISION
The update to the conversion factor for 2004 and 2005 would
be not less than 1.5 percent.
The formula for calculating the sustainable growth rate
would be modified. Starting in 2003, the GDP factor would be
based on the annual average change over the preceding 10 years
(a 10-year rolling average.) The current GDP factor measures
the 1-year change from the preceding year.
EFFECTIVE DATE
Upon enactment. The 10-year rolling average calculation of
the GDP would apply to computations of the SGR starting in
2003.
REASON FOR CHANGE
CMS actuaries project a -4.2 percent update for 2004 and a
smaller negative update for 2005. This provision would prevent
those negative updates from occurring, and provide for modest
increases in physician payment rates. These modest increases
would ensure continuing access to physician services for
Medicare beneficiaries.
The provision also includes a 10-year rolling average
calculation of GDP as a modest change to the update formula.
This change would promote stability in the physician updates
over time by limiting the volatility of the SGR payments, which
now oscillate dramatically based on year-to-year changes in
economic performance.
Section 602. Studies on Access to Physicians Services
CURRENT LAW
Periodic analyses by the Physician Payment Review
Commission, MedPAC, and CMS showed that access to physicians'
services remained generally adequate for most beneficiaries
through 1999. Detailed data is not available for a subsequent
period; however, several recent surveys show a decline in the
percentage of physicians accepting new Medicare patients.
EXPLANATION OF PROVISION
GAO would be required 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 beneficiaries as patients. GAO would
be required to submit a report to Congress on this study within
18 months of enactment. 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 Secretary would be required 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 the results of the study in a report to Congress no
later than 2 years of the date of enactment.
EFFECTIVE DATE
Upon enactment.
Section 603. 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
MedPAC would be required 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 care by Medicare beneficiaries to
physicians' services, 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.
Subtitle B--Preventive Services
Section 611. 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
Medicare would cover an initial free 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 (excluding clinical laboratory
tests) consistent with the recommendations of the United States
Preventive Services Task Force as determined by the Secretary.
A covered initial preventive physical examination would be one
performed no later than six months after the individual's
initial coverage date under Part B. Initial preventive physical
exams would be included in the definition of physicians'
services for purposes of the physician fee schedule. The Part B
deductible and coinsurance would be waived for initial
preventive physical exams.
EFFECTIVE DATE
The provision would apply to services furnished on or after
January 1, 2004 for those individuals whose coverage begins on
or after such date.
REASON FOR CHANGE
The US Preventive Services Task Force has recommended
coverage of a preventive physical exam. An initial physical
exam for new Medicare beneficiaries would permit identification
of any health problems and allow for initiation of appropriate
treatment, thereby reducing more acute and expensive
interactions with the health care system in the future.
Section 612. Coverage of Cholesterol and Blood Lipid Screening
CURRENT LAW
Medicare covers a number of preventive services. However,
it does not cover cholesterol and blood lipid screening.
EXPLANATION OF PROVISION
Medicare coverage of cholesterol and blood lipid screening
would be authorized. The screening would be defined as
diagnostic testing of cholesterol and other lipid levels of the
blood for the purpose of early detection of abnormal
cholesterol and other lipid levels. The Secretary would be
required to establish standards regarding the frequency and
type of these screening tests, but not more often than once
every two years.
EFFECTIVE DATE
The provision would apply to services furnished on or after
January 1, 2005.
REASON FOR CHANGE
The US Preventive Services Task Force has recommended
coverage of cholesterol and blood lipid screening for the
elderly. This preventive care benefit would allow for early
detection and treatment of health problems.
Section 613. Waiver of Deductible for Colorectal Cancer Screening Tests
CURRENT LAW
Covered colorectal screening tests for prevention purposes
include: (1) an annual fecal-occult blood test for individuals
age 50 and older, (2) flexible sigmoidoscopy every four years
for individuals age 50 and older, (3) colonoscopy for high-risk
individuals every two years and for other individuals every 10
years, and (4) screening barium enemas every four years for
individuals age 50 and older who are not at high risk of
developing colorectal cancer or every two years for high risk
individuals. Payment is made according to the applicable
payment system for the provider performing the test.
Colorectal cancer screening tests are subject to
beneficiary cost sharing amounts, including an annual
deductible and coinsurance amount.
EXPLANATION OF PROVISION
The Part B deductibles would be waived for colorectal
cancer screening tests.
EFFECTIVE DATE
The provision would apply to items and services furnished
on or after January 1, 2004.
REASON FOR CHANGE
Beneficiaries have not availed themselves of preventive
colorectal cancer screening tests to the extent anticipated
after Medicare coverage of these tests became available under
BBA 97. This provision would waive the deductible to increase
beneficiary use of these important screening tests.
Section 614. Improved Payment for Certain Mammography Services
CURRENT LAW
Screening mammography coverage includes the radiological
procedure as well as the physician's interpretation of the
results of the procedure. The usual Part B deductible is waived
for tests. Payment is made under the physician fee schedule.
Certain services paid under fee schedules or other payment
systems including ambulance services, services for patients
with end-stage renal disease paid under the ESRD composite
rate, professional services of physicians and non-physician
practitioners paid under the physician fee schedule, and
laboratory services paid under the clinical diagnostic
laboratory fee schedule are excluded from Medicare's HOPD PPS.
EXPLANATION OF PROVISION
Unilateral and bilateral diagnostic mammography as well as
screening mammography services would be excluded from the HOPD
PPS. The Secretary would be required to provide an appropriate
adjustment to the physician fee schedule for the technical
component of the diagnostic mammography based on the most
recent cost data available. This adjustment would be applied to
services provided on or after January 1, 2004.
EFFECTIVE DATE
The provision would apply to mammography performed on or
after January 1, 2004.
REASON FOR CHANGE
Mammography services are paid at a much lower rate under
the HOPD PPS than in the physician office. This establishes a
level playing field across sites of service, thereby increasing
beneficiary access to important preventive services.
Subtitle C--Other Services
Section 621. Hospital Outpatient Department (HOPD) Payment Reform
(a) Payment for Drugs
CURRENT LAW
Under the HOPD PPS, the unit of payment is the individual
service or procedure as assigned to one of about 570 ambulatory
payment classifications (APCs) groups. Services are classified
into APCs based on their Health Care Common Procedure Coding
System (HCPCS), a standardized coding system used to identify
products, supplies, and services for claims processing and
payment purposes. To the extent possible, integral services and
items including drugs are bundled or packaged within each APC.
For instance, an APC for a surgical procedure would include
operating and recovery room services, anesthesia and surgical
supplies. Medicare's payment for HOPD services is calculated by
multiplying the relative weight associated with an APC by a
geographically adjusted conversion factor. The conversion
factor is updated on a calendar year schedule and the annual
updates are based on the hospital market basket (MB).
Currently, the CY 2004 HOPD update would equal the projected
change in the MB.
Medicare pays for covered outpatient drugs in one of three
ways: (1) as a transitional pass-through, (2) as a separate
APC, or (3) packaged into an APC with other services.
Transitional pass-through payments are supplemental
payments to cover the incremental cost associated with certain
medical devices, drugs and biologicals that are inputs to an
existing service. The additional payment for a given item is
established for two or three years and then the costs are
incorporated into the APC relative weights. BBRA specified that
pass-through payments would be made for current orphan drugs,
as designated under section 526 of the Federal Food, Drug, and
Cosmetic Act; current cancer therapy drugs, biologicals, and
brachytherapy; current radiophamaceutical drugs and biological
products; and new drugs and biological agents.
Generally, CMS has established that a pass-through payment
for an eligible drug is based on the difference between 95
percent of its average wholesale price and the portion of the
otherwise applicable APC payment rate attributable to the
existing drug, subject to a budget neutrality provision. The
pass-through amount for new drugs with a substitute drug
recognized in a separate drug APC payment is the difference
between 95 percent of new drug AWP and the payment rate for the
comparable dose of the associated drug APC.
Hospital costs for these drugs are used to establish the
beneficiary copayment amounts as well as to project the amount
of pass-through spending to calculate the uniform reduction to
payments under the budget neutrality constraint. These hospital
costs are imputed by multiplying the drug's AWP by the
applicable cost to charge ratio, which varies by the class of
drug. Although transitional pass-through payments are subject
to a budget neutrality requirement, the applicable budget
neutrality requirement (2.5 percent through CY2003) was not
effective until April 2002.
Current drugs and biologicals that have been in
transitional pass-through status on or prior to January 1,
2000, were removed from that payment status effective January
1, 2003. CMS established separate APC payments for certain
drugs, including orphan drugs, blood and blood products, and
selected higher cost drugs in CY2003. CMS established a
threshold of $150 for a drug to qualify for a separate APC
payment as a higher-cost drug. Other drugs that had qualified
for a transitional pass-through payment were packaged in to
procedural APCs. For example, in some instances, brachytherapy
seeds (radioactive isotopes used in cancer treatments) were
packaged into payments for brachytherapy procedures.
Essentially, the payment rates for these drug-related APCs are
based on a relative weight calculated in the same way as
procedural APCs are calculated.
Temporary HCPCS codes are used exclusively to bill pass-
through payments for new technology items paid under the HOPD
PPS. These codes cannot be used to bill other Medicare payment
systems. These codes are added, changed or deleted on a
quarterly basis to expedite the processing of requests for
pass-through status.
EXPLANATION OF PROVISION
Starting for services furnished on or after January 1,
2004, certain covered HOPD drugs would be paid no more than 95
percent of AWP or less than the transition percentage of the
AWP from CY2004 through CY2006. In subsequent years, payment
would be equal to average price for the drug in the area and
year established by the competitive acquisition program under
1847A. The covered HOPD drugs affected by this provision are
radiopharmaceuticals and outpatient drugs that were paid on a
pass-through basis on or before December 31, 2002. These would
not include drugs for which pass-through payments are first
made on or after January 1, 2003, or those drugs for which a
temporary HCPCS code has not been assigned. Drugs for which a
temporary HCPCS code has not been assigned would be reimbursed
at 95 percent of AWP.
The transition percentage to AWP for sole-source drugs
manufactured by one entity is 83 percent in CY2004, 77 percent
in CY2005, and 71 percent in CY2006. The transition percentage
to AWP for innovator multiple source drugs is 81.5 percent in
CY2004, 75 percent in CY2005, and 68 percent in CY2006. The
transition percentage to AWP for multiple source drugs with
generic drug competitors is no more than 46 percent in CY2004
through CY2006. Generally, a multiple source drug is a covered
drug for which there are two or more therapeutically equivalent
drug products. An innovator multiple source drug is a multiple
source drug that was originally marketed under an original new
drug application approved by the Food and Drug Administration
(FDA). A sole source drug is not a multiple source drug. The
additional expenditures resulting from these provisions would
not be subject to the budget neutrality requirement.
Starting in CY2004, the Secretary would be required to
lower the threshold for establishing a separate APC group for
higher cost drugs from $150 to $50. These separate drug APC
groups would not be eligible for outlier payments because their
payment already increases when the dose increases.
Starting in CY2004, Medicare's transitional pass-through
payments for drugs and biologicals covered under a competitive
acquisition contract would reflect the amount paid under that
contract, not 95 percent of AWP.
REASON FOR CHANGE
A GAO study found significant problems with the
reimbursement for drugs and biologicals under the hospital
outpatient system. Some drugs were reimbursed a small amount of
AWP while others were paid far in excess of AWP. Hospital
charges were not designed to specifically capture the resource
costs for specific items. Some hospitals charge a flat markup
on all drugs; some hospitals charge a lower markup on low cost
drugs compared to high cost drugs while others do the opposite.
As a result, the APC drug prices ranged from paying 0.2 percent
of AWP to 29,000 percent of 95 percent AWP, and paid the median
generic drugs more than sole source drugs. This provision
establishes a glide path to the hospital acquisition cost
numbers from the Kathpol survey undertaken by CMS. Thereafter,
a level playing field with drug prices across sites of service
would be established. CMS is asked to collect data from
hospitals on their acquisition to be used to adjust the rates
if necessary.
(b) Special Payment for Brachytherapy
CURRENT LAW
Current drugs and biologicals that have been in
transitional pass-through status on or prior to January 1, 2000
were removed from that payment status effective January 1,
2003. CMS established separate APC payments for certain drugs,
including orphan drugs, blood and blood products, and selected
higher cost drugs in CY2003. CMS established a threshold of
$150 per claim for a drug to qualify for a separate APC payment
as a higher-cost drug. Other drugs that had qualified for a
transitional pass-through payment were packaged into procedural
APCs. For example, in some instances, brachytherapy seeds
(radioactive isotopes used in cancer treatments) were packaged
into payments for brachytherapy procedures. Essentially, the
payment rates for these drug-related APCs are based on a
relative weight calculated in the same way as procedural APCs
are calculated.
EXPLANATION OF PROVISION
From January 1, 2004 through December 31, 2006, Medicare's
payments for brachytherapy devices would equal the hospital's
charges adjusted to costs. The Secretary would be required to
create separate APCs to pay for these devices that reflect to
the number, isotope, and radioactive intensity of such devices.
This would include separate groups for palladium-103 and
iodine-125 devices. GAO would be required to study the
appropriateness of payments for brachytherapy devices and
submit a report including recommendations to Congress no later
than January 1, 2005.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The amount of seeds necessary to treat the patient can vary
significantly. This changes the payment methodology to reflect
differences in clinical resources.
(c) Functional Equivalence
CURRENT LAW
In the November 1, 2002, Federal Register final rule, CMS
decided that a new anemia treatment for cancer patients was no
longer eligible for pass-though payments because it was
functionally equivalent (although not structurally identical or
therapeutically equivalent) to an existing treatment. The
transitional pass-through rate for the drug was reduced to zero
starting for services in 2003.
EXPLANATION OF PROVISION
The Secretary would be prohibited from applying a
functional equivalence standard or any similar standard that
deems a particular drug or biological to be similar or
identical to another drug (and therefore ineligible for pass-
through payment status) without first developing these
standards by regulation. Such regulation would be required to:
(1) be published after a public comment period, (2) contain
criteria that provides for coordination with the Food and Drug
Administration, and (3) be based on scientific studies that
demonstrate the clinical relationship between the drugs in
question. This provision would apply to the application of a
functional equivalent determination on or after the date of
enactment. The provision prohibits the application of this
standard to a drug or biological prior to June 13, 2003.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The concept of functional equivalence is new to the
Medicare program and should be open to comment by Congress and
the public through proposed rulemaking. The FDA should be
involved since these are scientific issues for which CMS lacks
expertise.
(d) Hospital Acquisition Cost Study
CURRENT LAW
CMS estimates hospital costs to establish beneficiary
copayment amounts as well as to project the amount of pass-
through spending to calculate the uniform reduction to payments
under the budget neutrality constraint. These hospital costs
are imputed by multiplying AWP for the drug by the applicable
cost to charge ratio, which varies by the class of drug.
EXPLANATION OF PROVISION
The Secretary would be required to study the hospital
acquisition costs related to covered outpatient drugs that cost
$50 and more that are reimbursed under the HOPD PPS. The study
would encompass a representative sample of urban and rural
hospitals. The report should include recommendations on the
usefulness of the cost data and frequency of subsequent data
collection and would be due to Congress no later than January
1, 2006. The report should also discuss whether the data is
appropriate for making adjustments to payments made under the
competitive acquisition contract established by section 1847A
and whether separate estimates should be made for overhead
costs (i.e. handling and administering drugs).
EFFECTIVE DATE
Upon enactment.
Section 622. Payment for Ambulance Services
CURRENT LAW
Traditionally, Medicare has paid suppliers of ambulance
services on a reasonable charge basis and paid provider-based
ambulances on a reasonable cost basis. BBA 97 provided for the
establishment of a national fee schedule, which was to
implemented in phases, in an efficient and fair manner. The
required fee schedule became effective April 1, 2002, with full
implementation by January 2006. In the transition period, a
gradually decreasing portion of the payment is to be based on
the prior payment methodology (either reasonable costs or
reasonable charges).
The fee schedule payment amount equals the base rate for
the level of service plus payment for mileage and specified
adjustment factors. Additional mileage payments are made in
rural areas. BIPA increased payment for rural ambulance mileage
for distances greater than 17 miles and up to 50 miles for
services provided before January 1, 2004. The amount of the
increase was at least one-half of the payment per mile
established in the fee schedule for the first 17 miles of
transport.
EXPLANATION OF PROVISION
The phase-in methodology and schedule for full
implementation of the ambulance fee schedule would be modified.
The calculation of ambulance fees in the phase-in period would
incorporate a decreasing portion of the payment based on
regional fee schedules calculated for each of nine census
regions for those regions that lose financially under the fee
schedule. Generally, the regional fee schedules would be based
on the same methodology and data used to construct the national
fee schedule. For services provided in 2004, the blended rate
would be based on 20 percent of the national fee schedule and
80 percent of the regional fee schedule; in 2005 blended rate
would be based on a 40 percent national and 60 percent regional
split; in 2006, the blended rate would be based on a 60 percent
national and 40 percent regional split; from 2007-2009, the
blended rate would be based on an 80 percent national and 20
percent regional split; and in 2010 and subsequently, the
ambulance fee schedule would be based on the national fee
schedule.
Medicare's payments for ground ambulance services would be
increased by one quarter of the amount otherwise established
for trips longer than 50 miles occurring on or after January 1,
2004 and before January 1 2009. The payment increase would
apply regardless of where the transportation originated. GAO
would be required to submit an initial report to Congress on
the access and supply of ambulance services in regions and
states where ambulance payments are reduced by December 31,
2005. GAO would be required to submit a final report to
Congress by January 1, 2004.
EFFECTIVE DATE
The provision would apply to ambulance services furnished
on or after January 1, 2004.
REASON FOR CHANGE
New PPS systems cannot capture all the reasons for past
regional differences in cost. This proposal is modeled on the
transition of the hospital inpatient PPS and acts to slow down
the losses in regions that lose significantly under the new fee
schedule.
Section 623. Renal Dialysis Services
(a) Demonstration of Alternative Delivery Models
CURRENT LAW
The Secretary announced a demonstration project
establishing a disease-management program that would allow
organizations experienced with treating end-stage renal disease
(ESRD) patients to develop financing and delivery approaches to
better meet the needs of beneficiaries with ESRD. CMS is
soliciting a variety of types of organizations to coordinate
care to patients with ESRD, encourage the provision of disease-
management services for these patients, collect clinical
performance data and provide incentives for more effective
care.
EXPLANATION OF PROVISION
The provision would require the Secretary to establish an
advisory board for the ESRD disease management demonstration.
The advisory board would be comprised of representativespatient
organizations, clinicians, MedPAC, the National Kidney Foundation, the
National Institute of Diabetes and Digestive and Kidney Diseases of the
National Institutes of Health, ESRD networks, Medicare contractors to
monitor quality of care, providers of services and renal dialysis
facilities furnishing end-stage renal disease services, economists, and
researchers.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
This provision would allow more patient oversight of the
demonstration of changes to the payments system for such a
frail population.
(b) Restoring Composite Rate Exceptions for Pediatric
Facilities
CURRENT LAW
Prior to BIPA, an increase in the composite rate would
trigger an opportunity for facilities to request an exception
to the composite rate in order to receive higher payments. BIPA
prohibited the Secretary from granting new exceptions to the
composite rate from applications received after July 1, 2001.
EXPLANATION OF PROVISION
The prohibition on exceptions would not apply to pediatric
ESRD facilities as of October 1, 2002. Pediatric facilities
would be defined as a renal facility with 50 percent of its
patients under 18 years old.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Pediatric patients require more nursing oversight and more
time to receive dialysis treatment. This would recognize the
higher costs of facilities that treat these patients.
(c) Increase in Renal Dialysis Composite Rate for Services
Furnished in 2004
CURRENT LAW
Dialysis facilities providing care to beneficiaries with
end-stage renal disease (ESRD) receive a fixed prospectively
determined payment amount (the composite rate) for each
dialysis treatment. BBRA increased the composite rates by 1.2
percent for dialysis services furnished in both 2000 and 2001.
BIPA subsequently increased the mandated 2001 update to 2.4
percent, an increase that was to be implemented on the
following schedule in order to avoid a disruption in claims
processing: for services furnished from January through March,
2001, the 1.2 percent increase specified by BBRA applied; for
the remainder of 2001, a transition increase of 2.79 percent
applied. Effective January 1, 2002, the composite rates
reflected the 2.4 percent increase. There is no rate increase
scheduled for ESRD composite payment rate in 2004.
EXPLANATION OF PROVISION
The provision would increase the ESRD composite payment
rate by 1.6 percent for 2004.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Medicare Payment Advisory Commission recommended this
increase in the composite rate for 2004.
Section 624. One-Year 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. There are two beneficiary
limits. The first is a $1,500 per beneficiary annual cap for
all outpatient physical therapy services and speech language
pathology services. The second is a $1,500 per beneficiary
annual cap for all outpatient occupational therapy services.
Beginning in 2002, the amount increases by the Medicare
Economic Index (MEI), rounded to the nearest multiple of $10.
The limits do not apply to outpatient services provided by
hospitals. BBRA 99 percent suspended application of the therapy
limits in 2000 and 2001. BIPA extended the suspension through
2002. Although the therapy caps were scheduled for
implementation in January 2003, they are not yet being
enforced. CMS has scheduled implementation for July 2003.
Therapy patients must be under the care of a physician. The
physician or therapist must develop a treatment plan, and the
physician must review the plan periodically.
BBA 97 required the Secretary to report to Congress by
January 1, 2001, on recommendations for 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.
BIPA required the Secretary to conduct a study on the
implications of eliminating Medicare's in-room supervision
requirement for physical therapy assistants supervised by
physical therapists itsimplication on the physical therapy cap.
A report on the study was due within 18 months of enactment.
EXPLANATION OF PROVISION
Application of the therapy caps would be suspended during
CY 2004. The Secretary would be required to submit the reports
required by BBA 97 and BIPA by December 31, 2003. The Secretary
would be required 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,
2004. A final report, including recommendations, would be due
by October 1, 2004.
GAO would be required to conduct a study on access to
physical therapist services in states authorizing access to
such services without a physician referral 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 physical therapist
services within the facilities of the Department of Defense,
and (4) analyze the potential impact on beneficiaries and on
Medicare expenditures of eliminating the need for a physician
referral for physical therapist services under the Medicare
program. GAO would be required to submit a report to Congress
on the study within one year of enactment.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Secretary has not provided a recommendation to Congress
of criteria, with respect to conditions and diseases, under
which a waiver of therapy caps would apply for individual
Medicare beneficiaries. The implementation of therapy caps
would be waived for 2004 because the Secretary has failed to
provide a recommendation. The Secretary would have until
October 1, 2004 to provide a recommendation to Congress.
Section 625. Adjustment to Payments for Services Furnished in
Ambulatory Surgical Centers
CURRENT LAW
Medicare uses a fee schedule to pay for the facility
services related to a surgery provided in an ACS. The
associated physician services (surgery and anesthesia) are
reimbursed under the physician fee schedule. CMS maintains the
list of approved ASC procedures that is required to be updated
every 2 years. The Secretary is required to update ASC rates
based on a survey of the actual audited costs incurred by a
representative sample of ASCs every 5 years beginning no later
than January 1, 1995. Between revisions, the rates are to be
updated annually on a calendar year schedule using the CPI-U.
From FY1998 through FY2002, the update was established as the
CPI-U minus 2.0 percentage points, but not less than zero.
EXPLANATION OF PROVISION
The update would be reduced two percentage points for five
years. ASCs would get an increase calculated as the CPI-U minus
2.0 percentage points (but not less than zero) in each of the
fiscal years from 2004 through 2008.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
MedPAC made three recommendations regarding ASCs, including
a freeze on payments for 2004. This update would allow ASCs a
small increase in payments while a more permanent solution is
developed. The Committee urges CMS and ASCs to complete the
collection of recent ASC charge and cost data, so that the ASC
payment system can be analyzed and revised. Furthermore, the
Committee recognizes the inconsistency in payments to ASCs and
HOPD PPS rates for the same procedures. ASCs are urged to
cooperate with CMS in providing recent charge and cost data to
prevent changes to ASC payments that might not be supported if
full data were available.
Section 626. Payment for Certain Shoes and Inserts under the Fee
Schedule for Orthotics and Prosthetics
CURRENT LAW
Subject to specified limits and under certain
circumstances, Medicare would pay for extra-depth shoes with
inserts or custom molded shoes with inserts for an individual
with severe diabetic foot disease. Coverage is limited to one
of the following within a calendar year: (1) one pair of
custom-molded shoes (including inserts provided with such
shoes) and two additional pairs of inserts, or (2) one pair of
extra-depth shoes (not including inserts provided with such
shoes) and three pairs of inserts. An individual may substitute
modifications of custom-molded or extra-depth shoes instead of
obtaining one pair of inserts, other than the initial pair of
inserts. Footwear must be fitted and furnished by a podiatrist
or other qualified individual such as a pedorthist, orthotist,
or prosthetist. The certifying physician may not furnish the
therapeutic shoe unless the physician is the only qualified
individual in the area.
Payment is made on a reasonable charge basis, subject to
upper limits established by the Secretary. These limits are
based on 1988 amounts that were set forth in Section 1833(o) of
the Act and then adjusted by the same percentage increases
allowed for DME fees except that if the updated limit is not a
multiple of $1, it is rounded to the nearest multiple of $1.
The Secretary ora carrier may establish lower payment limits
than established by statute if shoes and inserts of an appropriate
quality are readily available at lower amounts.
Although updates in payment for diabetic shoes is related
to that used to increase the DME fee schedule, the shoes are
not subject to DME coverage rules or the DME fee schedule. In
addition, diabetic shoes are neither considered DME nor
orthotics, but a separate category of coverage under Medicare
Part B.
EXPLANATION OF PROVISION
Payment for diabetic shoes would be limited by the amount
that would be paid if they were considered to be a prosthetic
or orthotic device. The Secretary or a carrier would be able to
establish lower payment limits than these amounts if shoes and
inserts of an appropriate quality are readily available at
lower amounts. The Secretary would be required to establish a
payment amount for an individual substituting modifications to
the covered shoe that would assure that there is no net
increase in Medicare expenditures.
EFFECTIVE DATE
The provision would apply to items furnished on or after
January 1, 2004.
REASON FOR CHANGE
The payment for shoes was determined based on an arbitrary
amount set in the statute. The amount exceeded the retail price
for some comparable items. This treats diabetic shoes the same
as all other durable medical equipment.
Section 627. Waiver of Part B Late Enrollment Penalty for Certain
Military Retirees; Special Enrollment Period
CURRENT LAW
A late enrollment penalty is imposed on beneficiaries who
do not enroll in Medicare Part B upon becoming eligible for
Medicare.
EXPLANATION OF PROVISION
Congress enacted TRICARE for Life, which re-established
TRICARE health care coverage as a wraparound to Medicare for
military retirees, age 65 and older. To take advantage of the
TRICARE for Life program, military retirees must be enrolled in
Medicare Part B. There is a late enrollment penalty for
military retirees who do not enroll in Medicare Part B upon
becoming eligible for Medicare. This provision would waive the
late enrollment penalty for military retirees, 65 and older,
who enroll(ed) in the TRICARE for Life program from 2001-2004.
The Secretary would also be required to provide a special
enrollment period for these military retirees beginning as soon
as possible after enactment and ending December 31, 2004. For
the individual who enrolls during the special enrollment
period, coverage would begin on the first day of the month,
following the month in which the individual enrolled.
EFFECTIVE DATE
The provision would apply to premiums for months beginning
with January 2004. A method would be established to provide
rebates of premium penalties paid for by military retirees for
months on or after January 2004.
REASON FOR CHANGE
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 benefit became available for
the first time on January 1, 2001.
This provision would eliminate two barriers prevent many
retirees from accessing these benefits. First, many retirees
who received military care in military health facilities on a
space-available basis did not purchase Part B coverage when
initially eligible. Upon late enrollment, they must pay a 10
percent penalty for each year that enrollment was delayed.
Second, because Medicare enrollment is only available during an
annual open enrollment season, from January 1 to March 31 each
year, many retirees would have to wait until 2004 to secure
coverage.
The waiver of the late-enrollment penalty and provision for
a special enrollment period would remove these barriers.
Section 628. Part B Deductible
CURRENT LAW
Under Part B, Medicare generally pays 80 percent of the
approved amount for covered services after the beneficiary pays
an annual deductible of $100. The Part B deductible has set at
$100 since 1991.
EXPLANATION OF PROVISION
The Medicare Part B deductible would rise from $100 in 2003
to $104 in 2004, and grow with Medicare inflation thereafter.
As a result, the Part B deductible would grow at the same rate
as expenditures per capita for Part B services. The amount
would be rounded to the nearest dollar.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
In 1966, Medicare's $50 Part B deductible equaled about 45
percent of Part B charges. Today's $100 deductible equals about
three percent of such charges. Indexing the Part B deductible
to grow at the same rate as total Part B spending per
beneficiary would maintain the deductible at 3 percent of such
charges over time.
An unchanged Part B deductible is a benefit increase over
time, as costs of medical care rise. Beneficiaries pay about 25
percent of this benefit increase, through increased Part B
premiums; taxpayers finance the remaining 75 percent. The Part
B deductible has increased only three times since the beginning
of Medicare, when it was $50. The deductible has since been
increased to $60 in 1973, $75 in 1982, and $100 in 1991. About
one-half of beneficiaries are insulated from Part B deductibles
through Medigap, Medicaid, or employer-sponsored supplemental
insurance that covers the Part B deductible.
Section 629. Extension of Coverage of Intravenous Immune Globulin
(IVIG) for the Treatment of Primary Immune Deficiency Diseases
in the Home
CURRENT LAW
Currently, Medicare provides reimbursement under Part B for
the infusion of IVIG in a hospital outpatient or physician
office setting.
EXPLANATION OF CHANGE
The proposal would permit patients with primary immune
deficiency to receive IVIG at home instead of in the currently
covered settings. Unlike the other settings, however, home
coverage would include only the cost of the drug; patients
would be responsible for the cost of a nurse or other health
care professional to administer the infusion.
EFFECTIVE DATE
Applies to items furnished on or after January 1, 2004.
REASON FOR CHANGE
Primary immune deficiency diseases are inherited disorders
in which parts of the body's immune system are missing or do
not function properly. These disorders affect more than 50,000
Americans. In order to maintain their health, most primary
immune deficiency patients require monthly infusions of a
plasma derivative known as intravenous immune globulin (IVIG).
Without this life saving therapy, primary immune deficient
patients would be subject to serious infection, illness and
premature death.
Given their compromised immune systems, these patients are
particularly vulnerable to the many infections to which
individuals in a hospital or other health care facility are
exposed. Home coverage of these infusions for appropriate
patients would reduce this health risk and be significantly
more convenient.
The Balanced Budget Refinement Act directed the Department
of Health and Human Services to study the feasibility of
allowing the existing covered drug to be reimbursed when
delivered in the home. The study, conducted by the Lewin Group,
examined issues such as cost, safety, access to care, and the
practices of private insurers. The study concluded home
coverage of IVIG is appropriate.
G. Title VII--Provisions Relating to Parts A and B
Subtitle A--Home Health Services
Section 701. Update in Home Health Services
CURRENT LAW
Home health service payments are increased on a federal
fiscal year basis that begins in October. The FY 2004 statutory
update would be the full increase in the market basket index.
EXPLANATION OF PROVISION
This provision would increase home health agency payments
by the home health market basket percentage increase minus 0.4
percentage points for 2004 through 2006. The update for
subsequent years would be the full market basket percentage
increase. The provision would also change the time frame for
the update from the federal fiscal year to a calendar year
basis. The home health prospective payment rates would not
increase for the October 1 through December 31, 2003, period.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Medicare Payment Advisory Commission recommended that
Congress should eliminate the update to payment rates for home
health services for fiscal year 2004. The Medicare margins for
all agencies are 23.3 percent, even given the October 1, 2003
reduction. The mb-0.4 provides substantial payment increases
for home heath agencies. However, they would be lower than
current law and would provide stability.
Section 702. Establishment of Reduced Copayment for a Home Health
Service Episode of Care for Certain Beneficiaries
CURRENT LAW
The home health benefit does not have any cost sharing
requirement.
EXPLANATION OF PROVISION
This provision would establish a beneficiary copayment for
each 60-day episode of care beginning January 1, 2004. The
amount of the copayment 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. The copayment
amount would be rounded to the nearest multiple of five
dollars. For 2004, the copayment would be $40 unless the
Secretary provides the results of the statutory formula in a
timely manner. Medicare payment for each episode would be
reduced to reflect the copayment amount. Qualified Medicare
beneficiaries (low-income beneficiaries for whom Medicaid pays
Medicare premiums, deductibles, and coinsurance), beneficiaries
dually eligible for Medicare and Medicaid, and beneficiaries
receiving five or fewer home health visits per episode of care
would not face any cost-sharing requirements. Administrative
and judicial review of the calculated copayment amounts would
be prohibited.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Unlike almost all Part B services, the Medicare home health
benefit does not have a copayment. The typical beneficiary
receives about $3,000 worth of free home health care (CBO
estimate). At the same time, home health spending is increasing
rapidly rising almost 13 percent a year between 2004 and 2012
(CBO). In fact, the Congressional Budget Office estimates home
health spending will have almost tripled in size in that same
period. When spending increases, so do beneficiary premiums
because they are tied to program's costs.
Part of the reason for the spending increases it because it
is difficult to determine if the beneficiary really needs home
health (GAO and CMS). Requiring even nominal copays encourages
beneficiaries to use care more prudently.
For the 90 percent of beneficiaries that have supplemental
policies or other coverage, the Medicare program collects the
copayments by automatically crossing over the claim to their
insurance companies. Thus, the copayments generate little
administrative cost for an agency.
Section 703. MedPAC Study of Medicare Margins of Home Health Agencies
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The provision would require MedPAC to study payment margins
of home health agencies paid under the Medicare prospective
payment system. The study would examine whether systematic
differences in payment margins were related to differences in
case mix, as measured by home health resource groups (HHRGs).
MedPAC would be required to submit a report to Congress on the
study within two years of enactment.
EFFECTIVE DATE
Upon enactment.
Subtitle B--Direct Graduate Medical Education
Section 711. 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 hospitals number of full-time equivalent residents
and a hospital-specific historic cost per resident, updated for
inflation. BBRA changed Medicare's methodology for calculating
DGME payments to teaching hospitals to incorporate a new
benchmark set at the national average amount based on FY1997
hospital specific per resident amounts. Starting in FY2001,
hospitals received no less than 70 percent of a geographically
adjusted national average amount. BIPA increased this floor to
85 percent of the locality adjusted, updated, and weighted
national per resident amounts starting for cost report periods
beginning during FY2002. 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 two percentage
points. Currently, hospitals with per resident amounts between
85 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
The hospitals with per resident amounts above 140 percent
of the geographically adjusted national average amount would
not get an update from FY2004 through FY2013.
EFFECTIVE DATE
Upon enactment
REASON FOR CHANGE
The DGME amounts in these high cost hospitals are far
higher that can be explained by the cost of living and
legitimate difference in overhead. High quality medical
training is delivered in most facilities for a fraction of the
cost of high-cost institutions. The Medicare payments to these
institutions have nothing to do with actual costs of training
these physicians.
Subtitle C--Chronic Care Improvement
Section 721. Voluntary Chronic Care Improvement Under Traditional Fee-
for-Service
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a process for
providing chronic care improvement programs for Medicare
beneficiaries in FFS Medicare (Parts A and B) who have certain
chronic conditions such as congestive heart failure, diabetes,
chronic obstructive pulmonary disease, stroke or other diseases
as identified by the Secretary. The Secretary would establish
administrative regions, Chronic Care Improvement Administrative
regions (CCIAs) within the United States for chronic care
improvement programs. Within each CCIA, the Secretary would
select at least two contractors under a competitive bidding
process on the basis of the ability of each bidder to achieve
improved health outcomes of the participating beneficiaries and
improved financial outcomes of the Medicare program. A
contractor would be a disease improvement organization, health
insurer, provider organization, group of physicians, or any
other legal entity that the Secretary determines appropriate.
Contractors would be required to meet certain clinical, quality
improvement, financial, and other requirements specified by the
Secretary either directly or indirectly through the use of
subcontractors. The Secretary would be able to phase-in
implementation of the program beginning one-year after
enactment.
Each program would be required to have a method for
identifying targeted Medicare beneficiaries who would be
offered participation in the program. The Secretary would be
required to assist the program in identifying beneficiaries.
Each beneficiary would be assigned to only one contractor that
would be responsible for guiding beneficiaries in managing
their health including all co-morbidities. Initial contact with
a Medicare beneficiary would be from the Secretary who would
provide information about the program, including a description
of advantages in participating. The Secretary would inform the
beneficiary that the contractor would contact the beneficiary
directly concerning participation, the voluntary nature of
program participation, and a means of declining to participate
or decline being contacted by the program. Each program would
be required to develop an individualized, goal-oriented chronic
care improvement plan with the beneficiary. The chronic care
improvement plan would be required to contain: a single point
of contact to coordinate care; self-improvement education for
the individual and support education for health care providers,
primary caregivers, and family members; coordination between
prescription drug benefits, home health, and other health care
services; collaboration with physicians and other providers to
enhance communication of relevant clinical information; the use
of monitoring technologies, where appropriate; and information
about hospice care, pain and palliative care, and end-of-life
care, as appropriate. In developing the chronic care
improvement plan, programs would be required to use decision
support tools such as evidence-based practice guidelines and a
clinical information database to track and monitor each
beneficiary across care settings and evaluate outcomes. The
program would be required to meet any additional requirements
that the Secretary finds appropriate. Programs would be
accredited by qualified organizations to be deemed to have met
such requirements as specified by the Secretary.
Contractor payments for each chronic care improvement
program would be required to result in Medicare program outlays
that would otherwise have been incurred in the absence of the
program for the three-year contract period. The Secretary would
be required to assure that there would be no net aggregate
increase in Medicare payments, in entering into a contract for
the program over the three-year period. Contracts for chronic
care improvement programs would be treated as a risk-sharing
arrangement. In addition, payment to contractors would be
subject to the contractor meeting clinical and financial
performance standards established by the Secretary.
Program contractors would be required to report to the
Secretary on the quality of care and efficacy of the program in
terms of process measures (such as reductions in errors and re-
hospitalization rates), beneficiary and provider satisfaction,
health outcomes, and financial outcomes. The Secretary would be
required to submit to Congress annual reports on the program
including information on progress made toward national
coverage, common delivery models, and information on
improvements in health outcomes, as well as financial
efficiencies resulting from the program. The Secretary would
also be required to conduct a randomized clinical trial to
assess the potential for cost reductions under Medicare by
comparing costs of beneficiaries enrolled in chronic care
improvement programs and beneficiaries who are eligible to
participate but are not enrolled.
Appropriations of such sums as necessary to provide for
contracts with chronic care improvement programs would be
authorized from the Medicare Trust Funds.
EFFECTIVE DATE
The provision would be effective upon enactment and the
Secretary would be required to begin implementing the chronic
care improvement programs no later than one-year after
enactment.
REASON FOR CHANGE
Under current law, FFS Medicare does not offer coordinated
care programs for the chronically ill. Chronic care management
is an important issue, because 84 percent of seniors have one
or more chronic conditions. In addition, individuals with
chronic conditions account for 80 percent of all health care
spending, with two-thirds of Medicare spending being spent on
seniors with five or more chronic conditions. CMS has run
demonstration programs in the Medicare program, particularly
for high cost or especially frail adults. CMS is currently
managing more than a dozen demonstration programs on disease
and case management. A permanent program should be established
within FFS Medicare that offers chronic care management to
high-cost chronically ill seniors.
Section 722. Chronic Care Improvement Under Medicare Advantage and
Enhanced Fee-for-Service Programs
CURRENT LAW
Under the Medicare+Choice program, organizations are
required to have quality assurance programs that include
measuring outcomes, monitoring and evaluating high volume and
high risk services and the care of acute and chronic
conditions, and evaluating the effectiveness of the efforts.
EXPLANATION OF PROVISION
Each Medicare Advantage plan offered would be required to
have a chronic care improvement program for enrollees with
multiple or sufficiently severe chronic conditions such as
congestive heart failure, diabetes, chronic obstructive
pulmonary disease, stroke or other disease as identified by the
Secretary. The program would be required to have a method for
monitoring and identifying enrollees with multiple or
sufficiently severe chronic conditions and to develop with an
enrollee's consent an individualized, goal-oriented chronic
care improvement plan.
The chronic care improvement plan would be required to
include: a single point of contact to coordinate care; self-
improvement education for the individual and support education
for health care providers, primary caregivers, and family
members; coordination between prescription drug benefits, home
health, and other health care services; collaboration with
physicians and other providers to enhance communication of
relevant clinical information; the use of monitoring
technologies, where appropriate; and information about hospice
care, pain and palliative care, and end-of-life care, as
appropriate. In developing the chronic care improvement plan,
programs would be required to use decision support tools such
as evidence-based practice guidelines and a clinical
information database to track and monitor each beneficiary
across care settings and evaluate health outcomes. The program
would be required to meet any additional requirements that the
Secretary finds appropriate. Programs that have been accredited
by qualified organizations would be deemed to have met such
requirements as specified by the Secretary.
Each Medicare Advantage organization would be required to
report to the Secretary on the quality of care and efficacy of
the chronic care improvement program.
EFFECTIVE DATE
The provision would apply for contract years beginning on
or after one year after enactment.
REASON FOR CHANGE
Many Medicare Health Maintenance Organizations (HMOs)
already provide chronic care management programs. These
programs target high-cost beneficiaries suffering from one or
more chronic conditions and coordinate their care within plan.
This requirement for private plans would continue the chronic
care/disease management programs most Medicare HMOs already
have in place.
Section 723. Institute of Medicine Report
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to contract with the
Institute of Medicine of the National Academy of Sciences to
study the barriers to effective integrated chronic care
improvement for Medicare beneficiaries with multiple or severe
chronic conditions across settings and over time. The study
would examine the statutory and regulatory barriers to
coordinating care across settings for Medicare beneficiaries in
transition from one setting to another. The Institute of
Medicine would be required to submit the report of the study to
the Secretary and Congress no later than 18 months after
enactment.
EFFECTIVE DATE
Upon enactment.
Section 724. MedPAC Report
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
MedPAC would be required to evaluate the chronic care
improvement program. The evaluation would include a description
of the status concerning implementation of the program, the
quality of health care services provided to individuals
participating in the program, and the cost savings attributed
to implementation. The report of the evaluation would be
submitted to Congress not later than two years after
implementation of the program.
EFFECTIVE DATE
Upon enactment.
Subtitle D--Other Provisions
Section 731. Modifications to MedPAC
CURRENT LAW
The Medicare Payment Advisory Commission is a 17-member
body that reports and makes recommendations to Congress
regarding Medicare payment policies. The Comptroller General is
required to establish a public disclosure system for
Commissioners to disclose financial and other potential
conflicts of interest.
EXPLANATION OF PROVISION
MedPAC would be required to examine the budgetary
consequences of a recommendation before making the
recommendation and to review the factors affecting the
efficient provision of expenditures for services in different
health care sectors under FFS Medicare. MedPAC would be
required to submit two additional reports no later than June 1,
2003. The first report would study the need for current data,
and the sources of current data available, to determine the
solvency and financial circumstances of hospitals and other
Medicare providers. MedPAC would be required to examine data on
uncompensated care, as well as the share of uncompensated care
accounted for by the expenses for treating illegal aliens. The
second report would address investments and capital financing
of hospitals participating under Medicare and access to capital
financing for private and not-for-profit hospitals. The
provision would also require that members of the Commission be
treated as employees of Congress for purposes of financial
disclosure requirements.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Congress needs to ensure that the Commission remains the
objective impartial agency that it is today. Moreover, the
Commission cannot be removed from the same constraints that
Congress itself must face through considerations of the budget.
Section 732. Demonstration Project for Medical Adult Day Care Services
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 three-year
demonstration project would be conducted at not more than five
sites, selected by the Secretary, in states that license or
certify providers of medical adult day care services.
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
to furnish medical adult day care services and have furnished
such services to Medicare beneficiaries on a continuous basis
for a prior two-year period. 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 two-
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.
REASON FOR CHANGE
This demonstration would test the delivery of home health
services in a group setting. While many of these patients are
very frail, social interaction may prove to have a clinical
benefit. At the same time, the current quality standards remain
for delivering home health care.
Section 733. Improvements in National and Local Coverage Determination
Process To Respond to Changes in Technology
(a) National and Local Coverage Determination Process
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Subsection (a) would require the Secretary to make
available to the public the general guidelines used in making
national coverage determinations under Medicare. These
determinations would be required to include the way in which
the Secretary considers evidence to assess whether a procedure
or device is reasonable or necessary. The provision would
establish a time frame for decisions regarding national
coverage determinations of six months after a request when a
technology assessment is not required and 12 months when a
technology assessment is required and in which a clinical trial
is not requested. Following the six- or 12-month period, the
Secretary would be required to make a draft of the proposed
decision available in the HHS website or by other means; to
provide a 30-day public comment period; to make a final
decision on the request with 60 days following the conclusion
of the public comment period; and make the clinical evidence
and data used in making the decision available to the public.
In instances where the Medicare Coverage Advisory Committee
does not review a request for a national coverage
determination, the Secretary would be required to consult with
appropriate outside clinical experts.
The Secretary would also be required to develop a plan to
evaluate new local coverage determinations to decide which
local decisions should be adopted nationally and to decide to
what extent greater consistency can be achieved among local
coverage decisions, to require the Medicare contractors within
an area to consult on new local coverage policies, and to
disseminate information on local coverage determination among
Medicare contractors to reduce duplication of effort.
EFFECTIVE DATE
The provision would be effective for determinations as of
January 1, 2004.
REASON FOR CHANGE
The General Accounting Office reported in April 2003
problems with both the national coverage and local coverage
process. Even though CMS assigned a 90-day process for coverage
decisions, the average time was seven months with several
taking over a year. GAO recommended establishing new time
frames and a public process. GAO also found the local coverage
process resulted in inequities for beneficiaries and wasteful
duplication of administrative costs.
(b) Medicare Coverage of Routine Costs Associated With
Certain Clinical Trials
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Subsection (b) would provide for the coverage of the
routine costs of care for Medicare beneficiaries participating
in clinical trials that are conducted in accordance with an
investigational device exemption approved under section 530(g)
of the Federal Food, Drug, and Cosmetic Act.
EFFECTIVE DATE
The provision would be effective for clinical trials begun
before, on, or after the date of enactment and to items and
services furnished on or after enactment.
REASON FOR CHANGE
There is a discontinuity between the coverage of clinical
trials using breakthrough devices and the coverage afforded
other routine clinical trials. This provision would resolve
this problem.
(c) Issuance of Temporary National Codes
CURRENT LAW
The Secretary issues temporary national Health Care Common
Procedure Coding System (HCPCS) codes under Medicare Part B
that are used until permanent codes are established.
EXPLANATION OF PROVISION
Subsection (c) would require that the Secretary implement
revised procedures for the issuance of temporary national HCPCS
codes.
EFFECTIVE DATE
The provision would be effective not later than one year
after enactment.
REASON FOR CHANGE
Coding for HCPCs under Part B is a patchwork with temporary
codes allowed for some services and not for others. This would
create national uniformity.
Section 734. Extension of Treatment for Certain Physician Pathology
Services Under Medicare
CURRENT LAW
In general, independent laboratories cannot directly bill
for the technical component of pathology services provided to
Medicare beneficiaries who are inpatients or outpatients of
acute care hospitals. BIPA permitted independent laboratories
with existing arrangements with acute hospitals to bill
Medicare separately for the technical component of pathology
services provided to the hospitals' inpatients and outpatients.
The arrangement between the hospital and the independent
laboratory had to be in effect as of July 22, 1999. The direct
payments for these services apply to services furnished during
a two-year period starting on January 1, 2001 and ending
December 31, 2002.
EXPLANATION OF PROVISION
Medicare would make direct payments for the technical
component for these pathology services. A change in hospital
ownership would not affect these direct billing arrangements.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Many hospitals do not have on-site pathology services and
this provision would continue the prior arrangements.
H. Title VIII--Medicare Benefits Administration
Section 801. Establishment of Medicare Benefits Administration
CURRENT LAW
The authority for administering the Medicare program
resides with the Secretary of Health and Human Services. The
Secretary originally created the agency that administers the
Medicare and Medicaid programs in 1977 under his administrative
authority. Regulations regarding Medicare are required to be
promulgated by the Secretary. The Medicare statute requires the
President to appoint the Administrator of CMS (formerly known
as the Health Care Financing Administration) with the advice
and consent of the Senate. Title V of the U.S. Codes sets the
MBA Administrator's salary at level IV of the Executive
Schedule. The Medicare statute requires the CMS Administrator
to appoint a Chief Actuary who reports directly to such
Administrator and receives pay at the highest rate of basic pay
for the Senior Executive Service.
EXPLANATION OF PROVISION
The section would amend Title XVIII to add a new Section
1809 that, under subsection (a), would establish a new Medicare
Benefits Administration (MBA) within the Department of Health
and Human Services.
Subsection (b) would provide for an Administrator and
Deputy Administrator of the MBA. The President with the advice
and consent of the Senate would appoint both for 4-year terms.
If a successor did not take office at the end of the term, the
Administrator would continue in office until the successor
enters the office. In that event, the confirmed successor's
term would be the balance of the 4-year period. The
Administrator would be paid at level III of the Executive
Schedule and the Deputy Administrator at level IV of the
Executive Schedule. The Administrator would be responsible for
the exercise of all powers and the discharge of duties of the
MBA and has authority and control over all personnel. The
provision would permit the Administrator to prescribe such
rules and regulations as the Administrator determined necessary
or appropriate to carry out the functions of MBA, subject to
the Administrative Procedure Act. The Administrator would be
able to establish different organizational units within the MBA
except for any unit, component, or provision specifically
provided for by section 1809. The Administrator may assign
duties, delegate, or authorize re-delegations of authority to
MBA officers and employees as needed. The Secretary shall
ensure appropriate coordination between the Administrators of
MBA and CMS to administer the Medicare program. The provision
also would establish a position of Chief Actuary within the MBA
who would be appointed by the Administrator and paid at the
highest rate of basic pay for the Senior Executive Service. The
Chief Actuary would exercise such duties as are appropriate for
the office of Chief Actuary and in accordance with professional
standards of actuarial independence.
Subsection (c) would prescribe the duties of the
Administrator and administrative provisions relating to the
MBA. In administering parts C, D, and E of Medicare, the
Administrator would be required to negotiate, enter into, and
enforce contracts with PDP and MA-EFFS sponsors. The
Administrator would be required to carry out any duty provided
for under Part C, D, or E, including implementation of the
prescription drug discount card program and demonstration
programs (carried out in whole or in part under Part C, D, or
E). The provision specifically prohibits the Administrator from
requiring a particular formulary or instituting a price
structure for the reimbursement of covered drugs; from
interfering in any way with negotiations between PDP and MA-
EFFS sponsors, drug manufacturers, wholesalers, or other
suppliers of covered drugs; and from otherwise interfering with
the competitive nature of providing prescription drug coverage.
The Administrator would be required to submit a report to
Congress and the President on the administration of parts C, D,
and E during the previous year by not later than March 31 of
each year.
The Administrator, with the approval of the Secretary,
would be permitted to hire staff to administer the activities
of MBA without regard to chapter 31 of title 5 of the U.S. Code
B other than sections 3110, the prohibition against officials
hiring relatives, and 3112, the hiring preferences given to
veterans. The Administrator would be required to employ staff
with appropriate and necessary experience in negotiating
contracts in the private sector. The staff of MBA would be paid
without regard to chapter 51 (other than section 5101 requiring
classification of positions according to certain principles)
and chapter 53 (other than section 5301 relating to the
principles of pay systems) of title 5 of the U.S. Code. The
rate of compensation for staff of MBA would not be able to
exceed level IV of the Executive Schedule. The Administrator
would be limited in the number of full-time-equivalent (FTEs)
employees for the MBA to the number of FTEs within CMS
performing the functions being transferred at the time of
enactment. The Secretary, the Administrator of MBA, and the
Administrator of CMS would be required to establish an
appropriate transition of responsibility to re-delegate the
administration of Medicare part C from CMS to MBA. The
provision requires the Secretary to ensure that the
Administrator of CMS transfers such information and data as the
Administrator of MBA requires to carry out the duties of MBA.
Subsection (d) would require the Secretary to establish an
Office of Beneficiary Assistance within MBA to coordinate
Medicare beneficiary outreach and education activities, and
provide Medicare benefit and appeals information to Medicare
beneficiaries under parts C, D, and E.
Subsection (e) would establish the Medicare Policy Advisory
Board (the Board) within the MBA to advise, consult with, and
make recommendations to the Administrator regarding the
administration and payment policies of parts C, D, and E. The
Board would be required to report to Congress and to the
Administrator of MBA such reports as the Board determines
appropriate and may contain recommendations that the Board
considers appropriate regarding legislative or administrative
changes to improve the administration of parts C, D, and E
including: increasing competition under part C, D, or E for
services furnished to beneficiaries; improving efforts to
provide beneficiaries information and education about Medicare,
parts C, D, and E, and Medicare enrollment; evaluating
implementation of risk adjustment under parts C and E; and
improving competition and access to plans under parts C, D, and
E. The reports would be required to be published in the Federal
Register. The reports would be submitted directly to Congress
and no officer or agency of the government would be allowed to
require the Board to submit a report for approval, comments, or
review prior to submission to Congress. Not later than 90 days
after a report is submitted to the Administrator, the
Administrator would be required to submit to Congress and the
President an analysis of the recommendations made by the Board.
The analysis would be required to be published in the Federal
Register.
The Board would be made up of 7 members serving three-year
terms, with three members appointed by the President, two
appointed by the Speaker of the House of Representatives, and
two appointed by the President pro tempore of the Senate. Board
members may be reappointed but may not serve for more than 8
years. The Board shall elect the Chair to serve for three
years. The Board is required to meet at least three times a
year and at the call of the Chair.
The Board is required to have a director who, with the
approval of the Board, may appoint staff without regard to
certain sections of chapter 31 of title 5 of the United States
Code (which addresses authority for employment). In addition,
the director and staff may be paid without regard to certain
provisions of chapter 51 and 53 of title 5 which are related to
classification and pay rates and pay systems B although the
rate of compensation is capped at level IV of the Executive
Schedule. The Board may contract with and compensate government
and private agencies or persons to carry out its duties without
regard to section 3709 of the Revised Statutes (41 U.S.C. (5).
Subsection (f) authorizes an appropriation of such sums as
are necessary from the Federal Hospital Insurance Trust Fund
and from the Federal Supplementary Medical Insurance Trust Fund
(including the Prescription Drug Account) to carry out section
1808.
EFFECTIVE DATE
The provision would be effective upon enactment; however,
the enrollment and eligibility functions and implementation of
parts C and E would be effective January 1, 2006.
REASON FOR CHANGE
A new agency, the Medicare Benefits Administration, would
provide a more flexible and contemporary structure that is
citizen-centered, results-oriented, and market-based. The
administration of Parts C, D, and E would be separated from the
administration of other parts of Medicare to ensure appropriate
conduct of those parts of Medicare involving contracts with
private organizations.
Implementing the M+C program in the past, CMS's decisions
have made it difficult for private plans to participate in the
program. Indeed, CMS has an inherent conflict of interest in
administering traditional FFS while regulating the private
plans. Placing the administration of Parts C, D, and E under a
new MBA would create an agency whose main responsibility is the
implementation and operation of successful private plan
programs that enhance beneficiary choice.
The MBA would reshape the federal bureaucracy to better
coordinate health plans and the prescription drug benefit, and
replace a current system that is inefficient and outdated.
Civil service law reforms would permit the MBA to hire the
best possible staff, with private sector experience in
negotiating with plans. The MBA would have the ability to
create a modern workforce by paying for performance,
disciplining bad workers without lengthy appeals, and hiring
employees more quickly. These changes would promote general
government efficiency.
(c) Miscellaneous Administrative Provisions
CURRENT LAW
The Board of Trustees of the Medicare Trust Funds is
composed of the Commissioner of Social Security, the Secretary
of the Treasury, the Secretary of Labor, and the Secretary of
Health and Human Services and two members of the public. The
Administrator of the Centers for Medicare & Medicaid Services
serves as the Secretary of the Board of Trustees.
Title 5 of the U.S. Code sets the Administrator's salary at
level IV of the Executive Schedule.
EXPLANATION OF PROVISION
Paragraph (1) would add the Administrator of MBA as an ex
officio member of the Board of Trustees of the Medicare Trust
Funds.
Paragraph (2) would increase the pay level for the
Administrator of CMS from level IV of the Executive Schedule to
level III.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Administrator of the MBA should be a member of the
Board of Trustees to represent that part of Medicare involving
contracts with private entities. The Administrator of CMS
should be paid at the same level as the Administrator of the
MBA.
I. Title IX--Regulatory Relief
Subtitle A--Regulatory Reform
Section 901. Construction; Definition of Supplier
CURRENT LAW
Section 1861 of the Social Security Act contains
definitions of services, institutions, and so forth under
Medicare. Supplier is not explicitly defined.
EXPLANATION OF PROVISION
Nothing in this title would be construed as compromising or
affecting existing legal remedies for addressing fraud or
abuse, whether it be criminal prosecution, civil enforcement or
administrative remedies (including the False Claims Act) or to
prevent or impede HHS from its efforts to eliminate waste,
fraud, or abuse in Medicare. The provision also would clarify
that consolidation of the Medicare administrative contractors
does not consolidate the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance Trust Fund. The
provision would also clarify that term. A supplier means a
physician or other practitioner, a facility or other entity
(other than a provider of services) furnishing items or
services under Medicare.
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.
Section 902. Issuance of Regulations
CURRENT LAW
The Secretary must publish a list of all manual
instructions, interpretative rules, statements of policy, and
guidelines that are promulgated to carry out Medicare law in
the Federal Register no less frequently than every three
months.
There is no explicit statutory instruction on logical
outgrowth. The courts have repeatedly held that new matter in
final regulations must be a logical outgrowth of the proposed
rule and is an inherent aspect of notice and comment
rulemaking.
EXPLANATION OF PROVISION
The provision would require the Secretary, in consultation
with the Director of the Office of Management and Budget, to
establish and publish a regular timeline for the publication of
final regulations based on the previous publication of a
proposed rule or an interim final regulation. The timeframe
established would not be permitted to be longer than three
years, except under extraordinary circumstances. If the
Secretary were to vary the timeline he established, the
provision would require him to publish a notice in the Federal
Register the new timeline and an explanation of the variation.
In the case of interim final regulations, the provision would
require that if the Secretary did not meet his established
timeframe, then the interim final regulation would not be able
to continue in effect unless the Secretary published a notice
of continuation of the regulation that included an explanation
of why the regular timeline had not been complied with.
The provision also would require that a provision of a
final regulation that is not a logical outgrowth of the
proposed regulation or interim final regulation would be
treated as a proposed regulation. The provision would not be
able to take effect until public comment occurred and the
provision published as a final regulation.
EFFECTIVE DATE
The provision regarding the establishment of regulatory
timeframes would be effective upon enactment and would require
the Secretary to provide for an appropriate transition to take
into account the backlog of previously published interim final
regulation. The provision regarding logical outgrowth would be
effective for final regulations published on or 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 would 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
would 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.
Section 903. Compliance With Changes in Regulations and Policies
CURRENT LAW
No explicit statutory instruction. As a result of case law,
there is a strong presumption against retroactive rulemaking.
In Bowen v. Georgetown University Hospital, the Supreme Court
ruled that there must be explicit statutory authority to engage
in retroactive rulemaking.
EXPLANATION OF PROVISION
The provision would bar retroactive application of any
substantive changes in regulation, manual instructions,
interpretative rules, statements of policy, or guidelines
unless the Secretary determines retroactive application is
needed to comply with the statute or is in the public interest.
No substantive change would go into effect until 30 days after
the change is issued or published unless it would be needed to
comply with statutory changes or was in the public interest.
Compliance actions would be able to be taken for items and
services furnished only on or after the effective date of the
change. If a provider or supplier follows written guidance
provided by the Secretary or a Medicare contractor when
furnishing items or services or submitting a claim and the
guidance is inaccurate, the provider or supplier would not be
subject to sanction or repayment of overpayment (unless the
inaccurate information was due to a clerical or technical
operational error).
EFFECTIVE DATE
The prohibition of retroactive application of substantive
changes would apply to changes issued on or after the date of
enactment. The provisions affecting compliance with substantive
changes would apply to compliance actions undertaken on or
after the date of enactment. The reliance on guidance would
take effect upon enactment but would not apply to any sanction
for which notice was provided on or before the date of
enactment.
REASON FOR CHANGE
This provision would ensure that Medicare's rules are not
generally applied retroactively. It would also ensure providers
and suppliers have sufficient time to make any changes to
systems needed to comply with changes in regulations. This
provision would ensure that providers and suppliers, who, in
good faith, based on the information received from contractors,
would 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 904. Reports and Studies Relating to Regulatory Reform
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The GAO would be required to study the feasibility and
appropriateness of the Secretary providing legally binding
advisory opinions on appropriate interpretation and application
of Medicare regulations. The report would be due to Congress
one year after enactment.
The Secretary would be required to report to Congress every
two years on the administration of Medicare and areas of
inconsistency or conflict among various provisions under law
and regulation. The report would include recommendations for
legislation or administrative action that the Secretary
determines appropriate to further reduce such inconsistency or
conflicts. The first report would be due to Congress two years
after enactment.
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 911. Increased Flexibility in Medicare Administration
CURRENT LAW
The Secretary is authorized to enter into agreements with
fiscal intermediaries nominated by different provider
associations to make Medicare payments for health care services
furnished by institutional providers. For Medicare part B
claims, the Secretary is authorized to enter into contracts
only 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. The Secretary is also authorized to contract for
certain program safeguard activities under the Medicare
Integrity Program (MIP).
Certain terms and conditions of the contracting agreements
for fiscal intermediaries (FIs) 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.
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 PROVISION
This provision would add Section 1874A to the Social
Security Act and would permit the Secretary to competitively
contract with any eligible entity to serve as a Medicare
contractor. The provision would eliminate the distinction
between Part A contractors (fiscal intermediaries) and Part B
contractors (carriers) and take the separate authorities for
fiscal intermediaries and carriers and merge them into a single
authority for the new contractor. These new contractors would
be called Medicare Administrative Contractors (MACs) and would
assume all the functions of the current fiscal intermediaries
and carriers: determining the amount of Medicare payments
required to be made to providers and suppliers, making the
payments, providing education and outreach to beneficiaries,
providers and suppliers, communicating with providers and
suppliers, and additional functions as are necessary.
The Secretary would be permitted to renew the MAC contracts
annually for up to 5 years. All contracts would be required to
be re-competed at least every 5 years using competitive
processes. Federal Acquisition Regulations (FAR) would apply to
these contracts except to the extent any provisions are
inconsistent with a specific Medicare requirement, including
incentive contracts. The contracts would be required to contain
performance requirements that would be developed by the
Secretary who could consult with beneficiary, provider, and
supplier organizations, would be consistent with written
statements of work and would be used for evaluating contractor
performance. MAC would be required to furnish the Secretary
such timely information as he may require and to maintain and
provide access to records the Secretary finds necessary. The
Secretary could require a surety bond from the MAC or certain
officers or employees as the Secretary finds appropriate. The
Secretary would be prohibited from requiring that the MAC match
data from other activities for Medicare secondary payer
purposes.
The provision would limit liability of certifying and
disbursing officers and the Medicare Administrative Contractors
except in cases of reckless disregard or the intent to defraud
the United States. This limitation on liability would not limit
liability under the False Claims Act. The provision also
establishes circumstances where contractors and their employees
would be indemnified, both in the contract and as the Secretary
determines appropriate.
The provision would make numerous conforming amendments as
the authorities for the fiscal intermediaries and carriers are
stricken.
The Secretary would be required to submit a report to
Congress and the GAO by no later than October 1, 2004, that
describes the plan for implementing these provisions. The GAO
is required to evaluate the Secretary's plan and, within six
months of receiving the plan, report on the evaluation to
Congress and make any recommendations the Comptroller General
believes appropriate. The Secretary is also required to report
to Congress by October 1, 2008 on the status of implementing
the contracting reform provisions including the number of
contracts that have been competitively bid, the distribution of
functions among contracts and contractors, a timeline for
complete transition to full competition, and a detailed
description of how the Secretary has modified oversight and
management of Medicare contractors to adapt to full
competition.
Competitive bidding for the MACs would be required to begin
for annual contract periods that begin on or after October 1,
2011.
EFFECTIVE DATE
Upon enactment.
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.
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.
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 to existing law.
Section 912. Requirements for Information Security for Medicare
Administrative Contractors
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Medicare administrative contractors (as well as fiscal
intermediaries and carriers until the MACs are established)
would be required to implement a contractor-wide information
security program to provide information security for the
operation and assets of the contractor for Medicare functions.
The information security program would be required to meet
certain requirements for information security programs imposed
on Federal agencies under title 44 of the United States Code.
Medicare administrative contractors would be required to
undergo an annual independent evaluation of their information
security programs. Existing contractors would be required to
undergo the first independent evaluation within one year after
the date the contractor begins implementing the information
security program and new contractors would be required to have
such a program in place before beginning the claim
determination and payment activities. The results of the
independent evaluations would be submitted to the Secretary and
the HHS Inspector General. The Inspector General of HHS would
be required to report to Congress annually on the results of
the evaluations. The Secretary would be required to address the
results of the evaluations in required management reports.
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 networking 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;
in every year since 1997, the OIG has identified computer
security controls as a material weakness at CMS and its
contractors.
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 921. Provider Education and Technical Assistance
(a) Coordination of Education Funding
CURRENT LAW
Medicare provider education activities are funded through
the program management appropriation and through 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 coordinate the
educational activities through the Medicare contractors to
maximize the effectiveness of education efforts for providers
and suppliers and to report to Congress with a description and
evaluation of the steps taken to coordinate provider education
funding.
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
annual estimate of improper payments under FFS has been
established. 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 use specific claims
payment error rates (or similar methodology) to provide
incentives for contractors to implement effective education and
outreach programs for providers and suppliers and would require
the Comptroller General to study the adequacy of the
methodology and make recommendations to the Secretary and the
Secretary to report to Congress regarding how he intends to
used the methodology in assessing Medicare contractor
performance.
EFFECTIVE DATE
Upon enactment.
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
utilizationpractices 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 strategy for
communicating with beneficiaries, providers and suppliers.
Medicare contractors would be required to provide responses to
written inquiries that are clear, concise and accurate within
45 business days of the receipt of the inquiry. The Secretary
would be required to ensure that Medicare contractors have a
toll-free telephone number where beneficiaries, providers and
suppliers may obtain information regarding billing, coding,
claims, coverage, and other appropriate Medicare information.
Medicare contractors would be required to maintain a system for
identifying the person supplying information to beneficiaries,
providers and supplier and to monitor the accuracy,
consistency, and timeliness of the information provided. The
Secretary would be required to establish and make public
standards to monitor the accuracy, consistency, and timeliness
of written and telephone responses of Medicare contractors as
well as to evaluate the contractors against these standards.
EFFECTIVE DATE
The provision would be effective October 1, 2004.
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 FY2003, approximately $122 million was budget by CMS for
provider education and training.
EXPLANATION OF PROVISION
The provision would authorize $25 million to be
appropriated from the Medicare Trust Funds for fiscal years
2005 and 2006, and such sums as necessary for succeeding fiscal
years for Medicare contractors to increase education and
training activities for providers and suppliers. Medicare
contractors would be required to tailor education and training
activities to meet the special needs of small providers or
suppliers. The provision defines a small provider as an
institution with fewer than 25 full-time equivalents (FTEs) and
a small supplier as one with fewer than 10 FTEs.
EFFECTIVE DATE
Upon enactment.
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 statutory provision. CMS and Medicare contractors
currently maintain Internet sites.
EXPLANATION OF PROVISION
The provision would require that the Secretary and the
Medicare contractors maintain Internet sites to answer
frequently asked questions and provide published materials of
the contractors beginning October 1, 2004.
EFFECTIVE DATE
The provision would be effective October 1, 2004.
REASON FOR CHANGE
This provision would 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 PROVISION
The provision would bar Medicare contractors from using a
record of attendance (or non-attendance) at educational
activities to select or track providers or suppliers in
conducting any type of audit or prepayment review.
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 would be
subject to review.
Section 922. Small Provider Technical Assistance Demonstration Program
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a
demonstration program to provide technical assistance to small
providers and suppliers, when they have requested the
assistance, to improve compliance with Medicare requirements.
If errors are found, the Secretary would be barred from
recovering any overpayments barring evidence of fraud and if
the problem that is the subject of the compliance review has
been satisfactorily corrected within 30 days and the problem
remains corrected. A GAO study is required not later than two
years after the demonstration program begins. Appropriations
would be authorized for $1 million for FY 2005 and $6 million
for FY 2006 to carry out the demonstration.
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 would
also test whether encouraging technical assistance on the
front-end (to help providers and suppliers play by the rules)
could save the program money in the long-term by promoting
greater program compliance.
Section 923. Medicare Provider Ombudsman; Medicare Beneficiary
Ombudsman
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
A Medicare Provider Ombudsman would be required to be
appointed by the Secretary and located within the Department of
Health and Human Services. The Provider Ombudsman would be
required to provide confidential assistance to providers and
suppliers regarding complaints, grievances, requests for
information, and resolution of unclear or conflicting guidance
about Medicare. The Ombudsman would submit recommendations to
the Secretary regarding improving the administration of
Medicare, addressing recurring patterns of confusion under
Medicare, and ways to provide for an appropriate and consistent
response in cases of self-identified overpayments by providers
and suppliers. Such sums as necessary would be authorized to be
appropriated for FY2004 and subsequent years.
A Medicare Beneficiary Ombudsman would be required to be
appointed by the Secretary and located within HHS. The
Beneficiary Ombudsman would be required to have expertise and
experience in health care, education of, and assistance to
Medicare beneficiaries. The Beneficiary Ombudsman would be
required to receive complaints, grievances, and requests for
information submitted by Medicare beneficiaries. The
Beneficiary Ombudsman would also be required to assist
beneficiaries in collecting relevant information to seek an
appeal of a decision or determination made by the Secretary, a
Medicare contractor, or a Medicare+Choice organization and
assisting a beneficiary with any problems arising from un-
enrolling in a Medicare+Choice plan. The Beneficiary Ombudsman
would be required to work with state health insurance
counseling programs.
Appropriations would be authorized to be appropriated in
such sums, as are necessary for fiscal year 2004 and each
succeeding fiscal year to carry out the ombudsmen provisions.
This provision would also require the use of 1-800-Medicare
for all individuals seeking information about, or assistance
with Medicare. Rather than listing individual telephone numbers
for Medicare contractors in the Medicare handbook, only 1-800-
Medicare would be shown. The Comptroller General would be
required to study the accuracy and consistency of information
provided by the 1-800-Medicare line and to assess whether the
information sufficiently answers the questions of
beneficiaries. The report on the study would be required to be
submitted to Congress no later than one year after enactment.
EFFECTIVE DATE
The Secretary would be required to appoint both ombudsmen
no later than one year from the date of 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 would help providers navigate
Medicare's complicated rules and regulations.
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) or 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.
Beneficiaries confront a morass of bureaucracy and
regulation, with no clear individual to assist them. This new
ombudsman would help beneficiaries navigate Medicare's
complicated rules and regulations.
The Committees acknowledge that implementing these new
functions would have a cost and have accordingly authorized
necessary appropriations.
The beneficiary handbook currently provides a multitude of
phone numbers, which is very confusing for beneficiaries,
rather than a single number that can triage and transfer
beneficiaries to the appropriate person or entity. This
provision would promote better access to information for
beneficiaries.
Section 924. Beneficiary Outreach Demonstration Program
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Subsection (a) would require the Secretary to conduct a
three-year demonstration program where Medicare specialists
would provide assistance to beneficiaries in at least six local
Social Security offices (two would be located in rural areas)
that have a high volume of visits by Medicare beneficiaries.
The Secretary would be required to evaluate the results of the
demonstration regarding the feasibility and cost-effectiveness
of permanently out-stationing Medicare specialists at local
Social Security offices and report to Congress.
Subsection (b) would require that the Secretary establish a
demonstration project to test the administrative feasibility of
providing a process for Medicare beneficiaries, providers,
suppliers and other individuals or entities furnishing items or
services under Medicare to request and receive a determination
as to whether the item or service is covered under Medicare by
reasons of medical necessity, before the item or service
involved is furnished to the beneficiary. The Secretary would
be required to evaluate the demonstration and report to
Congress by January 1, 2006.
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 would test
whether such outsourced Medicare specialists improve
beneficiary utilization, understanding of the program, and
beneficiary satisfaction.
Section 925. Inclusion of Additional Information in Notices to
Beneficiaries About Skilled Nursing Facility Benefits
CURRENT LAW
Although the statute requires that beneficiaries receive a
statement listing the items and services for which payment has
been made, there is no explicit statutory instruction that
requires the notice to include information about the number of
days of coverage remaining in either the hospital or skilled
nursing facility (SNF) benefit or the spell of illness.
EXPLANATION OF PROVISION
The Secretary would be required to provide information
about the number of days of coverage remaining under the SNF
benefit and the spell of illness involved in the explanation of
Medicare benefits.
EFFECTIVE DATE
The provision would apply to notices provided on and after
the calendar quarter beginning more than six months after
enactment.
Section 926. Information on Medicare-Certified Skilled Nursing
Facilities in Hospital Discharge Plans
CURRENT LAW
The hospital discharge planning process requires evaluation
of a patient's likely need for post-hospital services including
hospice and home care.
EXPLANATION OF PROVISION
The Secretary would be required to make information
publicly available regarding whether SNFs are participating in
the Medicare program. Hospital discharge planning would be
required to evaluate a patient's need for SNF care.
EFFECTIVE DATE
The provision would apply to discharge plans made on or
after the date specified by the Secretary, but no later than
six months after the Secretary provides information regarding
SNFs that participate in the Medicare program.
Subtitle D--Appeals and Recovery
Section 931. Transfer of Responsibility for Medicare Appeals
CURRENT LAW
Denials of claims for Medicare payment may be appealed by
beneficiaries (or providers who are representing the
beneficiary) or in certain circumstances, providers or
suppliers directly. The third level of appeal is to an
Administrative Law Judge (ALJ). The Social Security
Administration employs ALJs that hear Medicare cases, a legacy
from the inception of the Medicare program, when Medicare was
part of Social Security.
EXPLANATION OF PROVISION
The Commissioner of SSA and the Secretary would be required
to develop a plan to transfer the functions of the ALJs who are
responsible for hearing Medicare cases from SSA to HHS. This
plan would be due to Congress no later than October 1, 2004. A
GAO evaluation of the plan would be due within six months of
the plan's submission. ALJ functions would be transferred no
earlier than July 1, 2005 and no later than October 1, 2005.
The Secretary would be required to place the ALJs in an
administrative office that is organizationally and functionally
separate from the Centers for Medicare & Medicaid Services and
the ALJs would be required to report to, and be under the
general supervision of the Secretary. No other official within
the Department would be permitted to supervise the ALJs. The
Secretary would be required to provide for appropriate
geographic distribution of ALJs, would have the authority to
hire ALJs and support staff, and would be required to enter
into arrangements with the Commissioner, as appropriate, to
share office space, support staff and other resources with
appropriate reimbursement.
Such sums are authorized to be appropriated as are
necessary for FY2005 and each subsequent fiscal year to
increase the number of ALJs, improve education and training of
ALJs and to increase the staff of the Departmental Appeals
Board (the final level of appeal).
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
Commissioner of SSA 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 932. Process for Expedited Access to Review
CURRENT LAW
In general, administrative appeals must be exhausted prior
to judicial review.
EXPLANATION OF PROVISION
The Secretary would be required to establish a process
where a provider, supplier, or a beneficiary may obtain access
to judicial review when a 3-member review panel (composed of
ALJs, members of the Departmental Appeals Board, or qualified
individuals from qualified independent contractors designated
by the Secretary) determines, within 60 days of a complete
written request, that it does not have the authority to decide
the question of law or regulation and where material facts are
not in dispute. The decision would not be subject to review by
the Secretary. Interest would be assessed on any amount in
controversy and would be awarded by the reviewing court in
favor of the prevailing party. This expedited access to
judicial review would also be permitted for cases where the
Secretary does not enter into or renew provider agreements.
Expedited review would also be established for certain
remedies imposed against SNFs including denied payments and
imposition of temporary management. The Secretary would be
required to develop a process for reinstating approval of nurse
aide training programs that have been terminated (before the
end of the mandatory two-year disapproval period). The
appropriation of such sums as needed for FY2005 and subsequent
years would be authorized to reduce by 50 percent the average
time for administrative determinations, to increase the number
of ALJs and appellate staff at the DAB, and to educate these
judges and their staffs on long-term care issues.
EFFECTIVE DATE
This provision would be effective for appeals filed on or
after October 1, 2004.
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 would 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.
Section 933. Revisions to Medicare Appeals Process
(a) Requiring Full and Early Presentation of Evidence
CURRENT LAW
No provision. New evidence can be presented at any stage of
the appeals process.
EXPLANATION OF PROVISION
The provision would require providers and suppliers to
present all evidence at the reconsideration that is conducted
by a QIC unless good cause precludes the introduction of the
evidence.
EFFECTIVE DATE
October 1, 2004.
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
No provision.
EXPLANATION OF PROVISION
The provision would provide for the use of beneficiaries'
medical records in qualified independent contractors
reconsiderations.
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
No statutory provision. Determinations and denials of
appeals currently include the policy, regulatory, or statutory
reason for the denial and information on how to appeal the
denial. The Benefits Improvement and Protection Act (BIPA) of
2000 changed the appeals process and created a new independent
review (the qualified independent contractors or QICs), which
has not yet been implemented.
EXPLANATION OF PROVISION
The provision would require that notice of and decisions
from determinations, redeterminations, reconsiderations, ALJ
appeals, and DAB appeals be written in a manner understandable
to a beneficiary and that includes, as appropriate, reasons for
the determination or decision and notice of the right to appeal
decisions and the process for further appeal. The initial
determination of a claim would also be specifically required to
include: the reasons for the determination, including whether a
local review policy or coverage determination was used and the
procedures for obtaining additional information (including,
upon request, the specific provision of the policy manual, or
regulation used in making the determination). Redeterminations,
the first level of appeal, would also specifically be required
to include: the specific reasons for the decision; as
appropriate a summary of the clinical or scientific evidence
used in making the redetermination; and a description of the
procedures for obtaining additional information concerning the
redetermination (including, upon request, the specific
provision of the policy manual, or regulation used in making
the determination).
EFFECTIVE DATE
Upon enactment.
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 a new and independent second level of
appeal called the qualified independent contractors. BIPA
called for at least 12 QICs. The QICs have not yet been
implemented.
EXPLANATION OF PROVISION
The provision would clarify eligibility requirements for
qualified independent contractors and their reviewer employees
including medical and legal expertise, independence
requirements, and the prohibition on compensation being linked
to decisions rendered. The required number of qualified
independent contractors would be reduced from not fewer than
twelve to not fewer than four.
EFFECTIVE DATE
The provisions regarding the eligibility requirements of
QICs and QIC reviews would be effective as if included in the
enactment of 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 934. Prepayment Review
CURRENT LAW
No explicit statutory instruction. Under administrative
authorities, CMS has instructed the contractors to use random
prepayment reviews to develop contractor-wide and program-wide
error rates. Non-random payment reviews are permitted in
certain circumstances laid out in instructions to the
contractors.
EXPLANATION OF PROVISION
Medicare contractors would be permitted to conduct random
prepayment reviews only to develop a contractor-wide or
program-wide error rate or such additional circumstances as the
Secretary provides for in regulations that were developed in
consultation with providers and suppliers. Random prepayment
review would only be permitted in accordance with standard
protocol developed by the Secretary. Nonrandom payment reviews
would be permitted only when there was a likelihood of
sustained or high level of payment error. The Secretary would
be required to issue regulations regarding the termination and
termination dates of non-randomprepayment review. Variation in
termination dates would be permitted depending upon the differences in
the circumstances triggering prepayment review.
EFFECTIVE DATE
The Secretary would be required to issue the required
regulations not later than one year after enactment. The
provision regarding the use of standard protocols when
conducting prepayment reviews would apply to random prepayment
reviews conducted on or after the date specified by the
Secretary (but not later than one year after enactment). The
remaining provisions would be effective one year after
enactment.
REASON FOR CHANGE
These provisions build greater consistency and
predictability into Medicare's rules for prepayment review,
while protecting program integrity.
Section 935. Recovery of Overpayments
CURRENT LAW
No explicit statutory instruction. Under administrative
authorities, CMS negotiates extended repayment plans with
providers that need additional time to repay Medicare
overpayments.
EXPLANATION OF PROVISION
In situations where repaying an Medicare overpayment within
30 days would be a hardship for a provider or supplier, the
Secretary would be required to enter into an extended repayment
plan of at least six months duration. The repayment plan would
not be permitted to go beyond three years (or five years in the
case of extreme hardship, as determined by the Secretary).
Interest would be required to accrue on the balance through the
repayment period. Hardship would be defined if, for providers
that file cost reports, the aggregate amount of the overpayment
exceeded 10 percent of the amount paid by Medicare to the
provider for the time period covered by the most recently
submitted cost report. In the case of a provider or supplier
that is not required to file a cost report, hardship would be
defined if the aggregate amount of the overpayment exceeded 10
percent of the amount paid under Medicare for the previous
calendar year. The Secretary would be required to develop rules
for the case of a provider or supplier that was not paid under
Medicare during the previous year or for only a portion of the
year. Any other repayment plans that a provider or supplier has
with the Secretary, would not be taken into account by the
Secretary in calculating hardship. If the Secretary has reason
to suspect that the provider or supplier may file for
bankruptcy or otherwise cease to do business or discontinue
participation in Medicare or there is an indication of fraud or
abuse, the Secretary would not be obligated to enter into an
extended repayment plan with the provider or supplier. If a
provider or supplier fails to make a payment according to the
repayment plan, the Secretary would be permitted to immediately
seek to offset or recover the total outstanding balance of the
repayment plan, including interest.
The Secretary would be prohibited from recouping any
overpayments until a reconsideration-level appeal (or a
redetermination by the fiscal intermediary or carrier if the
QICs are not yet in place) was decided, if a reconsideration
was requested. Interest would be required to be paid to the
provider if the appeal was successful (beginning from the time
the overpayment is recouped) or that interest would be required
to be paid to the Secretary if the appeal was unsuccessful (and
if the overpayment was not paid to the Secretary).
Extrapolation would be limited to those circumstances where
there is a sustained or high level of payment error, as defined
by the Secretary in regulation, or document educational
intervention has failed to correct the payment error.
Medicare contractors would be permitted to 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 in the case of a provider
or supplier with prior overpayments.
The Secretary would be able to use consent settlements to
settle projected overpayments under certain conditions.
Specifically the Secretary would be required to communicate
with the provider or supplier that medical record review has
indicated an overpayment exists, the nature of the problems
identified, the steps needed to address the problems, and
afford the provider or supplier 45 days to furnish additional
information regarding the medical records for the claims
reviewed. If, after reviewing the additional information an
overpayment continues to exist, the Secretary would be required
to provide notice and an explanation of the determination and
then may offer the provider two mechanisms to resolve the
overpayment: either an opportunity for a statistically valid
random sample or a consent settlement (without waiving any
appeal rights).
The Secretary would be required to establish a process to
provide notice to certain providers and suppliers in cases
where billing codes were over-utilized by members of that class
in certain areas, in consultation with organizations that
represent the affected provider or supplier class.
If post-payment audits were conducted, the Medicare
contractor would be required to provide the provider or
supplier with written notice of the intent to conduct the
audit. The contractor would further be required to give the
provider or supplier a full and understandable explanation of
the findings of the audit and permit the development of an
appropriate corrective action plan, inform the provider or
supplier of appeal rights and consent settlement options, and
give the provider or supplier the opportunity to provide
additional information to the contractor, unless notice or
findings would compromise any law enforcement activities.
The Secretary would be required to establish a standard
methodology for Medicare contractors to use in selecting a
sample of claims for review in cases of abnormal billing
patterns.
EFFECTIVE DATE
In general, the provisions would be effective upon
enactment. The limitation on extrapolation would apply to
samples initiated after the date that is one year after the
date of enactment. The Secretary would be required to establish
the process for notice of over-utilization of billing codes not
later than one year after enactment. The Secretary would be
required to establish a standard methodology for selecting
sample claims for abnormal billing patterns not later than one
year after enactment.
REASON FOR CHANGE
These provisions build greater consistency and
predictability into Medicare's rules for recovery of
overpayments, while protecting program integrity.
Section 936. Provider Enrollment Process; Right of Appeal
CURRENT LAW
No explicit statutory instruction. Under administrative
authorities, CMS has established provider enrollment processes
in instructions to the contractors.
EXPLANATION OF PROVISION
The Secretary would be required to establish in regulation
a provider enrollment process with hearing rights in the case
of a denial or non-renewal. The process would be required to
include deadlines for actions on applications for enrollment
and enrollment renewals. The Secretary would be required to
monitor the performance of the Medicare contractors in meeting
the deadlines he establishes. Before changing provider
enrollment forms, the Secretary would be required to consult
with providers and suppliers. The provision would also
establish hearing rights in cases where the applications have
been denied.
EFFECTIVE DATE
The enrollment process would be required to be established
within six months of enactment. The consultation process on
provider enrollment forms would be required for changes in the
form beginning January 1, 2004. The provision of hearing rights
would apply to denials that occur one year after enactment or
an earlier date specified by the Secretary.
REASON FOR CHANGE
This provision gives providers and suppliers an opportunity
to appeal denials of their applications to participate in the
Medicare program.
Section 937. Process for Correction of Minor Errors and Omissions on
Claims without Pursuing Appeals Process
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
This provision would require the Secretary to establish a
process so providers and suppliers could correct minor errors
in claims that were submitted for payment.
EFFECTIVE DATE
The proposal would require that the process be developed
not later than one year after 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 938. 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 non-covered
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.
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, an acceptable advance
notice of Medicare's possible denial of payment must be given
to the patient if the provider does not want to accept
financial responsibility for the service. 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.
EXPLANATION OF PROVISION
The Secretary would be required to establish a process
through regulation where physicians and beneficiaries can
establish whether Medicare covers certain categories of items
and services before such services are provided. An eligible
requestor would be a physician, but only in case of items and
services for which the physician is paid directly and a
Medicare beneficiary who receives an advance beneficiary notice
from a physician would receive direct payment for that service.
The provisions would establish that: (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) that contractors' advance 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. These provisions would not affect a Medicare
beneficiary's right not to seek an advance determination. The
prior determination process would be established in time to
address such requests that are filed by 18 months of enactment.
The Secretary would be required to collect data on the advance
determinations and to establish a beneficiary 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 would 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 V--Miscellaneous
Section 941. 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 for, or clinical examples of,
evaluation and management (E&M) physician services unless the
Secretary: (1) developed the guidelines in collaboration with
practicing physicians (both generalists and specialists) and
provided for an assessment of the proposed guidelines by the
physician community, (2) established a plan containing specific
goals, including a schedule, for improving the use of the
guidelines, (3) conducted pilot projects to test modifications
to the guidelines, (4) finds the guidelines have met
established objectives, and (5) established and implemented an
education program on the use of the guidelines with appropriate
outreach. The Secretary would make changes to existing E&M
guidelines to reduce paperwork burdens on physicians. The
provision establishes objectives for modifications of the E&M
guidelines: (1) identify clinically relevant documentation
needed to code accurately and assess coding levels accurately,
(2) decrease the non-clinically pertinent documentation in the
medical record, (3) increase reviewers accuracy, and (4)
educate physicians and reviewers.
The pilot projects would be required to be conducted on a
voluntary basis in consultation with practicing physicians
(both generalists and specialists) and be of sufficient length
to educate physicians and contractors on E&M guidelines. A
range of different projects would be established and include at
least one project: using a physician peer review method, using
an alternative method based on face-to-face encounter time with
the patient, in a rural area, outside a rural area, and where
physicians bill under physician services 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. Each pilot conducted would examine
the effect of the new E&M documentation guidelines on different
types of physician practices (including those with fewer than
10 full-time equivalent employees) and the costs of physician
compliance including education implementation, auditing, and
monitoring. The Secretary would be required to submit periodic
reports to Congress on these pilot projects.
The provision would require a study of an alternative
system for documenting physician claims. Specifically the
Secretary would be required to study developing a simpler
system for documenting claims for evaluation and management
services and to consider systems other than current coding and
documentation requirements. The Secretary would be required to
consultwith practicing physicians in designing and carrying out
the study. This study would be due to Congress no later than October 1,
2005. MedPAC would be required to analyze the results of the study and
report to Congress. The Secretary would also be required to study the
appropriateness of coding in cases of extended office visits in which
no diagnosis is made and report to Congress no later than October 1,
2005. The Secretary would be required to include in the report
recommendations on how to code appropriately for these visits in a
manner that takes into account the amount of time the physician spent
with the patient.
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 942. Improvement in Oversight of Technology and Coverage
(a) Council for Technology and Innovation
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a Council for
Technology and Innovation within CMS. The council would be
composed of senior CMS staff and clinicians with a chairperson
designated by the Secretary who reports to the CMS
Administrator. The Chairperson would serve as the Executive
Coordinator for Technology and Innovation would be the 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.
If the National Committee on Vital and Health Statistics
has not made a recommendation to the Secretary by enactment
regarding implementation of the ICD-10 coding system for
diagnosis and procedures, the Secretary may adopt such
standards one year after the date of enactment.
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.
The ICD-9 coding system was adopted in 1979, and remains in
effect for diagnosis and procedure coding in hospital inpatient
and outpatient settings. ICD-9 has ``run out'' of codes for
certain new procedures. For example, no code was available for
the anthrax attack in 2001. NCVHS began investigating adoption
of an updated coding system--ICD-10--in 1990. ICD-10 is more
clinically accurate, and has available codes for new
technologies and procedures. In 1996, as part of the Health
Insurance Portability and Accountability Act (HIPAA) of 1996,
Congress required NCVHS to make a recommendation on adoption
prior to Secretarial approval. To date, NCVHS still has not
issued a recommendation.
ICD-9 has run out of codes for new technologies and
procedures. ICD-10 has room for those procedures, which would
improve accuracy in claims processing. Every developed country
in the world except the US and Israel has adopted ICD-10 as the
standard coding system because it is superior to ICD-9. Some
hospitals are eager to adopt ICD-10 because ultimately they
believe it would improve efficiency. The Committee agrees,
although nothing in this provision requires the Secretary to
adopt the ICD-10 in any health care setting.
(b) 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 PROVISION
The Secretary would be required to establish procedures (by
regulation) for determining the basis for and amount of
payments for new clinical diagnostic laboratory tests. New
laboratory tests would be defined as those assigned a new, or
substantially revised Health Care Procedure Coding System
(HCPCS) code on or after January 1, 2005. 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 andrecommendations, (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
Effective for codes assigned on or after January 1, 2005.
(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 study which external data could be
collected by CMS in a shorter time frame for use in calculating
payments for inpatient hospital services. GAO could evaluate
feasibility and appropriateness of using quarterly samples or
special surveys and would include an analysis of whether other
executive agencies would be better suited to collect this
information. The report would be due to Congress no later than
October 1, 2004.
EFFECTIVE DATE
Upon enactment.
Section 943. Treatment of Hospitals for Certain Services Under Medicare
Secondary Payer (MSP) Provisions
CURRENT LAW
In certain instances when a beneficiary has other insurance
coverage, Medicare becomes the secondary insurance. Medicare
Secondary Payer 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 payer 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 it 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 944. 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 exists prior to asking about
insurance status of the patient.
Hospitals that are found to be in violation of Emergency
Medical Treatment and Active Labor Act (EMTALA) requirements
may face civil monetary penalties and termination of their
provider agreement. Prior to imposing a civil monetary penalty,
the Secretary is required to request a peer review organization
(PRO), currently called quality improvement organizations
(QIOs), to 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, the Secretary provides a
60-day period for the requested PRO review.
EMTALA is enforced by general guidelines issued by CMS.
Patients who present to the emergency room and request services
(or another person does so on their behalf) are required to be
screened and stabilized.
EXPLANATION OF PROVISIONS
Emergency room services provided to screen and stabilize a
Medicare beneficiary furnished after January 1, 2004, 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 or after the time of admission
or visit.
The Secretary would be required to establish a procedure to
notify hospitals and physicians 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 violations and provide a period
of 5 business days for such review. The PRO shall provide a
copy of the report on its findings to the hospital or physician
that is consistent with existing confidentiality requirements.
This provision would apply to terminations initiated on or
after enactment.
The provision also clarifies the responsibility of the
hospital when the individual does not request examination or
treatment for an emergency condition.
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 The Emergency Medical Treatment
and Labor Act: The Enforcement Process, at 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. Finally, it clarifies
CMS guidelines for persons or individuals who arrive at the
emergency room for non-emergency services.
Section 945. Emergency Medical Treatment and Active Labor (EMTALA) Task
Force
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
The Secretary would be required to establish a 17-member
technical advisory group under specified requirements to review
issues related to EMTALA. The advisory group would be comprised
of: the CMS Administrator; the OIG; four hospital
representatives who have EMTALA experience, (including 1 person
from a public hospital and two of whom have not experienced
EMTALA violations); five 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 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 as chairperson, (2) schedule its first meeting at the
direction of the Secretary and meet at least twice a year
subsequently, (3) terminate 30 months after the date of its
first meeting, and (4) be exempt from the Federal Advisory
Committee Act. 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 946. Authorizing Use of Arrangements To Provide Core Hospice
Services in Certain Circumstances
CURRENT LAW
A hospice is a public agency or private organization, which
is primarily engaged in providing and making available certain
care to a terminally ill Medicare beneficiary under a written
plan.
EXPLANATION OF PROVISIONS
A hospice would be permitted to: (1) enter into
arrangements with another hospice program to provide care in
extraordinary, exigent or other non-routine circumstances, such
as unanticipated high patient loads, staffing shortages due to
illness, or temporary travel by a patient outside the hospice's
service area, and (2) bill and be paid for the hospice care
provided under these arrangements.
EFFECTIVE DATE
For hospice care provided on or 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 947. 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
The provision would apply to hospitals as of July 1, 2004.
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 948. 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
The statutory reference in BIPA would be changed from the
Social Security Act to the Public Health Service Act. Other
BIPA references would be changed from a policy to a
determinations.
EFFECTIVE DATE
The provision would be effective as if included in BIPA.
Section 949. Conforming Authority To Waive A Program Exclusion
CURRENT LAW
The Secretary is required to exclude individuals and
entities from participation in Federal Health Programs that 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 finance program or operated by the Federal, State
or local government, or (4) convicted of a felony related to a
controlled substance.
EXPLANATION OF PROVISIONS
The Administrator of a Federal health program would be
permitted to waive certain 5-year exclusions if the exclusion
of a sole community physician or source of specialized services
in a community would impose a hardship. The mandatory
exclusions that could be waived would be those related to
convictions associated with program-related crimes, health care
fraud and controlled substances.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
The Office of Inspector General requested this technical
correction.
Section 950. Treatment of Certain Dental Claims
CURRENT LAW
The Medicare benefit does not include most dental services.
Some insurers may require a claim denial from Medicare before
accepting the dental claim for payment review, even if Medicare
does not cover the service.
EXPLANATION OF PROVISION
A group health plan providing supplemental or secondary
coverage to Medicare beneficiaries would not be able to require
dentists to obtain a claim denial from Medicare for non-covered
dental services before paying the claim.
EFFECTIVE DATE
The provision would be effective 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 Medicare does not cover most dental services. 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 951. Furnishing Hospitals With Information To Compute DSH
Formula
CURRENT LAW
Disproportionate share hospital (DSH) payments under
Medicare are calculated using a formula that includes the
number of patient days for patients eligible for Medicaid.
EXPLANATION OF PROVISION
The provision would require the Secretary to arrange for
the information such as number of paid or unpaid Medicaid days,
and the number of dual eligibles that hospitals need to
calculate the Medicare DSH payment formula.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Hospitals find it difficult to compute certain critical
numbers for the purposes of Medicare DSH such as unpaid days
used by Medicaid eligibles or Medicare dual eligibles. This
helps ensure accuracy for hospitals and for the Trust Fund.
Section 952. Revisions to Reassignment Provisions
CURRENT LAW
Under certain circumstances, a person or entity other than
the individual providing the service may receive Medicare
payments.
EXPLANATION OF PROVISION
Entities, as defined by the Secretary, could receive
Medicare payments for services provided by a physician or other
person if the service was provided under a contractual
arrangement and if the arrangement included joint and several
liability (liability for several parties) for overpayment and
the entities meet program integrity specifications determined
by the Secretary.
EFFECTIVE DATE
The provision would be effective for payments made on or
after one year after the date of enactment.
Section 953. Other Provisions
CURRENT LAW
No provisions.
EXPLANATION OF PROVISION
GAO Report on Physician Compensation. No later than six
months from enactment, GAO would be required to report to
Congress on the appropriateness of the updates in the
conversion factor including the appropriateness of the
sustainable growth rate (SGR) formula for 2002 and
subsequently. The report would examine the stability and the
predictability of the updates and rate as well as the
alternatives for use of the SGR in the updates. No later than
12 months from enactment, GAO would be required to report to
Congress on all aspects of physician compensation for Medicare
services. The report would review the alternatives for the
physician fee schedule.
Annual Publication of List of National Coverage
Determinations. The Secretary would be required to publish an
annual list of national coverage determinations made under
Medicare in the previous year. Included would be information on
how to get more information about the determinations. The list
would be published in an appropriate annual publication that is
publicly available.
GAO Report on Flexibility in Applying Home Health
Conditions of Participation to Patients Who Are Not Medicare
Beneficiaries. The GAO would be required to report to Congress
on the implications if the Medicare conditions of participation
for home health agencies were applied flexibly with respect to
groups or types of patients who are not Medicare beneficiaries.
The report would include an analysis of the potential impact of
this flexibility on clinical operations and the recipients of
such services and an analysis of methods for monitoring the
quality of care provided to these recipients. The report would
be due no later than six month after enactment.
OIG Report on Notices Relating to Use of Hospital Lifetime
Reserve Days. The Inspector General of HHS would be required to
report to Congress on the extent to which hospitals provide
notice to Medicare beneficiaries, in accordance with applicable
requirements, before they use the 60 lifetime reserve days
under the hospital benefit. The report would also include the
appropriateness and feasibility of hospitals providing a notice
to beneficiaries before they exhaust the lifetime reserve days.
The report would be due no later than one year after enactment.
EFFECTIVE DATE
Upon enactment.
Section 954. Temporary Suspension of OASIS Requirement for Collection
of Data on Non-Medicare and Non-Medicaid Claims
CURRENT LAW
Under the Conditions of Participation, home health agencies
are required to complete the OASIS form on all patients.
EXPLANATION OF PROVISION
The OASIS data collected on non-Medicare or non-Medicaid
patients is not collected or used by the Federal government.
This provision suspends collection until the Secretary has
published final regulations regarding the collection and use of
this data. Moreover it requires a study of how the data is used
by the agencies as well as recommendations from quality
assessment experts. Agencies may continue collecting the data
during the suspension.
EFFECTIVE DATE
Upon enactment.
REASON FOR CHANGE
Data mandates on the collection of data on non-Medicare and
non-Medicaid patients by the Federal government should be
carefully reviewed for privacy issues by the agency.
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. 2473.
MOTION TO REPORT THE BILL
The bill, H.R. 2473, as amended, was ordered favorably
reported by a rollcall vote of 25 yeas to 15 nays (with a
quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives 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. Levin........ ........ X .........
Mr. Houghton................... X ........ ......... Mr. Cardin....... ........ X .........
Mr. Herger..................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... ........ X .........
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... ........ X .........
Mr. Ramstad.................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... ........ X .........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... ........ X .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Portman.................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. English.................... X ........ ......... Mr. Pomeroy...... X ........ .........
Mr. Hayworth................... X ........ ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... X ........ ......... Ms. Tubbs Jones.. ........ X .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... X ........ .........
Mr. Ryan....................... X ........ .........
Mr. Cantor..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
VOTES ON AMENDMENTS
An amendment in the nature of a substitute by Chairman
Thomas was agreed to by a rollcall vote of 25 yeas to 15 nays.
The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives 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. Levin........ ........ X .........
Mr. Houghton................... X ........ ......... Mr. Cardin....... ........ X .........
Mr. Herger..................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... ........ X .........
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... ........ X .........
Mr. Ramstad.................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... ........ X .........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... ........ X .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Portman.................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. English.................... X ........ ......... Mr. Pomeroy...... X ........ .........
Mr. Hayworth................... X ........ ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... X ........ ......... Ms. Tubbs Jones.. ........ X .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... X ........ .........
Mr. Ryan....................... X ........ .........
Mr. Cantor..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
A rollcall vote was conducted on the following amendments
to the Chairman's amendment in the nature of a substitute.
An amendment by Mr. Cardin, which would amend section
1860D-5(d) of the Social Security Act as proposed to be
inserted by section 101, to require the U.S. Department of
Health and Human Services to takes such steps as may be
necessary to qualify and serve as a prescription drug plan
sponsor and to offer a prescription drug plan that offers
standard coverage throughout the United States, was defeated by
a rollcall vote of 15 yeas to 23 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ ........ ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. English.................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... ........ X ......... Ms. Tubbs Jones.. X ........ .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
Mr. Cantor..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. McDermott, to strike Subtitle C of
Title II, eliminating the privatization of plans, was defeated
by a rollcall vote of 14 yeas to 23 nays. The vote was as
follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ ........ ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. English.................... ........ X ......... Mr. Pomeroy...... X ........ .........
Mr. Hayworth................... ........ X ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... ........ X ......... Ms. Tubbs Jones.. ........ ........ .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
Mr. Cantor..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mrs. Johnson, which would amend section
1848(c)(2)(H) of the Social Security Act, as proposed to be
added by section 303(a)(1)(B), to direct the Secretary of
Health and Human Services to expedite the process for adjusting
existing CPT codes for costs associated with the administration
of covered drugs, was agreed to by a rollcall vote of 32 yeas
to 5 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Crane...................... X ........ ......... Mr. Stark........ ........ X .........
Mr. Shaw....................... ........ ........ ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... X ........ ......... Mr. Levin........ X ........ .........
Mr. Houghton................... X ........ ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... X ........ ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... ........ X .........
Mr. Ramstad.................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... ........ ........ .........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... X ........ ......... Mr. Doggett...... X ........ .........
Mr. English.................... X ........ ......... Mr. Pomeroy...... X ........ .........
Mr. Hayworth................... X ........ ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... X ........ ......... Ms. Tubbs Jones.. ........ ........ .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... X ........ .........
Mr. Ryan....................... X ........ .........
Mr. Cantor..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Doggett, which would amend section
1860D-3(c) of the Social Security Act as proposed to be
inserted by section 101, to require each participating
manufacturer of a covered outpatient drug to enter into
arrangements with prescription drug plan sponsors or entities
offering an MA-EFF prescription plan, was defeated by a
rollcall vote of 12 yeas to 23 nays The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... ........ X ......... Mr. Rangel....... X ........ .........
Mr. Crane...................... ........ X ......... Mr. Stark........ X ........ .........
Mr. Shaw....................... ........ ........ ......... Mr. Matsui....... X ........ .........
Mrs. Johnson................... ........ X ......... Mr. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... ........ ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... ........ ........ .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. English.................... ........ X ......... Mr. Pomeroy...... ........ X .........
Mr. Hayworth................... ........ X ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... ........ ........ ......... Ms. Tubbs Jones.. ........ ........ .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
Mr. Cantor..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An en bloc amendment by Mr. Collins, which would add at the
end of section 1851(j) of the Social Security Act, as added by
section 102(a), to apply fee-for-service Medicare+Choice rules
to prescription drug benefits; and as added by section 221(d),
to provide the same treatment for premiums for MA private fee-
for-service plans, was agreed to by a rollcall vote of 24 yeas
to 12 nays, with 2 voting present. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives 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. Levin........ ........ X .........
Mr. Houghton................... X ........ ......... Mr. Cardin....... ........ X .........
Mr. Herger..................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... ........ ........ X
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... ........ X .........
Mr. Ramstad.................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... ........ ........ .........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... ........ ........ .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... ........ ........ X
Mr. Portman.................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. English.................... X ........ ......... Mr. Pomeroy...... ........ X .........
Mr. Hayworth................... X ........ ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... X ........ ......... Ms. Tubbs Jones.. ........ X .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... X ........ .........
Mr. Ryan....................... X ........ .........
Mr. Cantor..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Messrs. Nussle and Pomeroy, which would add
the following new sections at the end of Title IV: Sec. 416--
Adjustment to the Medicare Inpatient Hospital PPS Wage Index to
Revise the Labor-Related Share of Such Index; and Sec. 417--
Medicare Incentive Payment Program Improvements for Physician
Scarcity, was agreed to by a rollcall vote of 39 yeas to 0
nays, with 1 voting present. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives 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. Levin........ X ........ .........
Mr. Houghton................... X ........ ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... X ........ ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... X ........ ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... X ........ .........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... X ........ .........
Mr. Collins.................... X ........ ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... X ........ ......... Mr. Doggett...... X ........ .........
Mr. English.................... X ........ ......... Mr. Pomeroy...... X ........ .........
Mr. Hayworth................... X ........ ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... X ........ ......... Ms. Tubbs Jones.. X ........ .........
Mr. Hulshof.................... X ........ .........
Mr. McInnis.................... X ........ .........
Mr. Lewis (KY)................. X ........ .........
Mr. Foley...................... X ........ .........
Mr. Brady...................... X ........ .........
Mr. Ryan....................... X ........ .........
Mr. Cantor..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
A substitute amendment by Mr. Stark was defeated by a
rollcall vote of 14 yeas to 26 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representatives 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. Levin........ X ........ .........
Mr. Houghton................... ........ X ......... Mr. Cardin....... X ........ .........
Mr. Herger..................... ........ X ......... Mr. McDermott.... X ........ .........
Mr. McCrery.................... ........ X ......... Mr. Kleczka...... X ........ .........
Mr. Camp....................... ........ X ......... Mr. Lewis (GA)... X ........ .........
Mr. Ramstad.................... ........ X ......... Mr. Neal......... X ........ .........
Mr. Nussle..................... ........ X ......... Mr. McNulty...... X ........ .........
Mr. Johnson.................... ........ X ......... Mr. Jefferson.... X ........ .........
Ms. Dunn....................... ........ X ......... Mr. Tanner....... ........ X .........
Mr. Collins.................... ........ X ......... Mr. Becerra...... X ........ .........
Mr. Portman.................... ........ X ......... Mr. Doggett...... X ........ .........
Mr. English.................... ........ X ......... Mr. Pomeroy...... ........ X .........
Mr. Hayworth................... ........ X ......... Mr. Sandlin...... ........ ........ .........
Mr. Weller..................... ........ X ......... Ms. Tubbs Jones.. X ........ .........
Mr. Hulshof.................... ........ X .........
Mr. McInnis.................... ........ X .........
Mr. Lewis (KY)................. ........ X .........
Mr. Foley...................... ........ X .........
Mr. Brady...................... ........ X .........
Mr. Ryan....................... ........ X .........
Mr. Cantor..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
The Congressional Budget Office has not submitted a final
score of the legislation at the time of the filing of this
report (July 15, 2003).
V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER HOUSE RULES
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 108th 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 xx).
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. 2473 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 * * *'').
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
Legislative Counsel has not prepared a Ramseyer at the time
of the filing of this report (July 15, 2003).
VII. DISSENTING VIEWS
We oppose the Republican Medicare bill reported by the
Committee on Ways and Means. This is not a bill designed to
ensure that seniors and people with disabilities get a long
overdue Medicare prescription drug benefit that is available
and affordable to all. Instead, it is an effort by the
Republican Majority to complete their ideological mission to
have Medicare ``wither on the vine''.
Despite the legislation's paltry benefit and fundamentally
flawed structure, our committee could have reported a bill
supported by a strong bipartisan majority with only two simple
changes that we offered as amendments. But Republicans rejected
our efforts to find a compromise. This absolute refusal to
negotiate reinforces our firm belief that privatizing Medicare
is their real goal in this so-called reform effort.
Prescription drug coverage
This legislation has a grossly inadequate drug benefit that
was designed to fit into the Republican budget, not the budget
of America's elderly and disabled citizens. If the majority
hadn't squandered trillions on tax breaks for the wealthy, we
would have had more resources to improve this benefit.
Unlike Medicare Part B, where every beneficiary pays the
same premium, the premium for prescription drug coverage would
not be set in the statute. Although Republicans claim that the
premium for this coverage will be $35 per person per month,
that is merely a guesstimate. Premiums could be much higher and
will vary in different areas of the country and even among
plans in the same area. Private insurance premiums in the
commercial market are rising at double-digit percentages each
year, with most insurers citing prescription drugs as the
primary driver. Unstable premiums translate into an unreliable
benefit for senior citizens and other Medicare beneficiaries
who are living on fixed incomes.
In addition, after the initial coverage limit of $2,000,
beneficiaries are forced to pay 100 percent of the cost until
total drug spending reaches $4,900, after which the plan will
pick up the costs. This patchwork quilt of coverage doesn't
exist today in any other public or private plan. Almost half of
all beneficiaries--48 percent--will fall into this gap and only
10 percent will have drug needs high enough to get the
catastrophic coverage on the other side of the gap. This means
that a senior citizen with average drug spending in 2006 would
find themselves with coverage for their medications until
August, after which they would receive no coverage for the rest
of the year while still paying a sizeable premium.
This legislation also would tie the level of benefits to
income. The point at which catastrophic coverage would begin
would be based on a beneficiary's income. People in the highest
category would have no coverage from $2,000 to $13,200 in drug
spending. If they needed more than $13,200 worth of drugs,
coverage would begin again. Given that wealthier beneficiaries
have already paid more through the payroll taxes during their
working years, this double taxation of Medicare benefits should
be rejected. Even worse, however, is that this misguided policy
would require the IRS and the Department of Health and Human
Services (HHS) to share sensitive income data on beneficiaries
for the first time. HHS would then have to give information to
the plan to indicate the level of the benefit for each
beneficiary, a de facto disclosure of income. It appears that
beneficiaries who refuse to authorize the sharing of this
information might be excluded from the drug coverage. It's an
offensive invasion of privacy that undermines the social
insurance nature of Medicare and it ought to be rejected.
While Republicans purport to protect those on the lower-
ends of the income scale, even those provisions fall far short.
Help for even the poorest seniors--those with incomes below
$8,980--is contingent on meeting an assets test. This means
that they will not get the extra help if they have even modest
savings ($4,000 or more). Data suggest that more than one-third
of otherwise eligible low-income beneficiaries would be
excluded as a result of this hidden hatchet.
Republican Members of the Ways and Means Committee and the
President of the United States are fond of saying that Medicare
beneficiaries should get the same choices as Members of
Congress do with respect to prescription drug coverage. They
like to say that as a rhetorical point, but their rhetoric
doesn't match the reality of this bill. As Members of Congress,
we get our health insurance through the Federal Employees
Health Benefits Plan like all federal employees. There isn't a
single plan option in FEHBP as bad as the one they're promoting
for seniors in Medicare.
We're also very concerned that the Republican Medicare bill
will cause employers to drop retiree prescription drug
coverage. The CongressionalBudget Office informed us at the
mark-up that those concerns are real. They estimate that 32% of
employers who are currently providing retiree prescription drug
benefits will drop that coverage if this bill becomes law as written.
That needs to be fixed in this bill as well. We should be using this
opportunity to reinforce the better coverage that is out there, not
erode it.
While there are many other problems in this legislation, we
are also particularly troubled by the fact that it does nothing
to guarantee lower prices. In fact, it includes language that
actually prohibits the Secretary of Health and Human Services
from ``interfering'' in negotiations between private plans and
drug companies. This is an extraordinary prohibition that
affects Medicare beneficiaries and taxpayers alike. It is
fiscally irresponsible.
Fundamental flaws
All of these are very serious concerns, but we would still
be willing to accept this bill as a good faith effort to add a
prescription drug benefit to Medicare if Republicans would
accept two changes. First, the bill must be amended to include
a uniform, defined prescription drug benefit that is
universally available through Medicare. Second, the bill must
reject proposals to privatize the program. These two changes
are critical.
No real Medicare drug benefit
The lack of a uniform nationally available, defined
prescription drug benefit in Medicare in the Republican bill is
a fundamental flaw. The bill relies solely on private plans to
provide the new prescription drug benefit. Unlike every other
benefit in Medicare--doctor's visits, hospitalizations, and
physical therapy as examples--a beneficiary would not have
coverage through Medicare for prescription drugs. Instead, a
Medicare enrollee would be ``entitled'' to purchase a private
prescription drug plan at varying prices around the country,
provided one was even available--and affordable--in their
community. That is not an entitlement at all.
On top of that, we're concerned the bill won't work.
Beneficiaries who want to remain in traditional Medicare would
theoretically purchase new private drug-only plans; all others
would get their prescription drugs through HMOs, PPOs and other
managed care plans. The bill would divide the country into
regions and would require that beneficiaries have the choice of
two private drug plans (only one of which need be a drug-only
plan) in each of those regions. But, there is no provision in
the bill to account for the possibility that two plans simply
won't appear in each region! It may be that no plans appear. As
President Bush's Medicare Administrator, Tom Scully, has said,
these drug-only plans ``don't exist in nature and won't work in
practice.'' We have yet to see any proof from the Republican
authors of this program or insurance companies that these plans
will materialize. In fact, Wall Street analysts, insurance
companies and pharmaceutical benefit managers have cast
considerable doubt on this scheme. The legislation would allow
the government to try to bribe the plans to participate, but if
they turned down that offer, there is no backup plan and
beneficiaries would have no place to buy coverage.
Even worse, if two plans do appear, but the HMO offers a
more affordable benefit than the drug-only plan, beneficiaries
in traditional Medicare may be left with no option but to give
up Medicare and enroll in an HMO to get prescription drug
coverage. That's wrong. We repeatedly inquired about what would
happen in such a situation, but failed to get any suitable
answer from the Republicans.
Democratic amendments
Add a guaranteed Medicare benefit. The first key change
necessary for us to support the Republican Medicare bill is to
provide a guaranteed drug benefit managed by Medicare in the
same way that we manage Medicare Part A (hospital services) and
Medicare Part B (physician services). We can accept that
private plans be allowed to compete to provide Medicare
benefits, but only if beneficiaries in traditional Medicare are
not disadvantaged as a result. All our amendment would do is
add a stable, defined drug benefit in Medicare that is
available everywhere in the country. The Republican private
plans could still operate as envisioned under this program, but
a Medicare option with a national, defined benefit would also
be in place in every community, regardless of how many private
plans were offering coverage in the area. That's the promise of
Medicare today with respect to health services and it should
hold true for medications as well.
Republicans shouldn't be threatened by this amendment. If
the private sector truly is more efficient and able to offer
better options than government-run Medicare, people will leave
the traditional Medicare plan and join the private sector
options developed in this Republican bill.
This is a sensible amendment that does nothing more than
maintain the promise of Medicare since its inception in 1965
and carry that promise into the future. However, Republicans
opposed this amendment on a strictly party linebasis.
Eliminate privatization of Medicare. The second fundamental
concern we have with the Republican bill is its goal to
privatize Medicare. Make no mistake about it. The ultimate goal
of this bill is to end Medicare's entitlement to defined
benefits. Providing a drug benefit to seniors is simply the
window dressing. It includes a whole scheme starting in 2010
that will end Medicare as a defined benefit universally
available at a uniform price for all of America's seniors and
people with disabilities. Instead, seniors' ability to get the
health care they need would depend upon their ability to afford
a plan that meets their needs. Beneficiaries who need or want
to stay in traditional Medicare will have to pay more to do so.
Remember, Medicare was created because the private health
care system would not provide affordable health insurance
coverage for seniors. We shouldn't be turning back the clock to
those times. But that's exactly what the Republican bill--as
written--will do.
The Bipartisan Commission on the Future of Medicare already
rejected this proposal. At that time, the Medicare Actuary
estimated that converting Medicare to a competitive model of
this nature would result in premium increases in traditional
Medicare of 47%.
Increasing Medicare premiums at that rate would absolutely
force seniors to leave the program--they wouldn't be able to
afford to stay. They would have to go into the ``competitive''
side of the program and join HMOs, PPOs or other similar
private plans. These private options restrict choice of
physicians, hospitals and other providers and enforce
limitations that don't exist in traditional Medicare. America's
seniors don't want to be forced into private health plans that
don't meet their needs and, more importantly, limit their
choice of physician and doctor. We won't support any bill that
takes away the security of Medicare. This section needs to go.
Again, we offered an amendment to eliminate it. We were
defeated on a party line vote.
Eliminate sweetheart deal for drug companies. This bill
creates a new bureaucracy to work with the private plans.
Embedded in the section establishing this new agency is a
provision that actually prohibits the Secretary of Health and
Human Services from ``interfering'' in negotiations between
private plans and drug companies. This is an unprecedented
restriction of authority for a government program of this
magnitude. With hundreds of billions of federal dollars at
stake, Republicans put their friends in the pharmaceutical
industry ahead of taxpayers.
During the anthrax crisis, Secretary Thompson negotiated
with the manufacturer of the antibiotic Cipro and cut prices by
more than half. The VA negotiates directly for prescription
drugs it purchases on behalf of veterans. Even the office that
is responsible for the Federal Employees Health Benefits plan
does not have its hands tied in this fashion. This is an
extraordinary prohibition that affects Medicare beneficiaries
and taxpayers alike. We offered an amendment to delete it. But
this, too, was defeated on a largely party-line vote.
The Republican bill fails senior citizens
Democrats have supported Medicare from day one--and have
consistently worked to improve it. We want a prescription drug
benefit added to the program. But, we won't go along with
allowing the promise of a drug benefit become the Trojan Horse
that ends Medicare as we know it. We are willing to work with
House Republicans on a more limited benefit than we know is
needed, but they have to be willing to protect the promise of
Medicare. The bill reported out of our Committee fails that
test, and is a bad deal for America's senior citizens and the
individuals with disabilities who depend on Medicare.
C. B. Rangel.
Robert T. Matsui.
Jim McDermott.
William J. Jefferson.
Stephanie Tubbs Jones.
Sander Levin.
Ben Cardin.
Max Sandlin.
Pete Stark.
Mike McNulty.
John Tanner.
Xavier Becerra.
Richard E. Neal.
Jerry Kleczka.
John Lewis.