[Congressional Bills 105th Congress]
[From the U.S. Government Printing Office]
[H.R. 2015 Enrolled Bill (ENR)]
Note this is a hand enrollment pursuant to Public Law 105-32.
H.R.2015
One Hundred Fifth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday,
the seventh day of January, one thousand nine hundred and ninety-seven
An Act
To provide for reconciliation pursuant to subsections (b)(1) and (c) of
section 105 of the concurrent resolution on the budget for fiscal year
1998.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Balanced Budget Act of 1997''.
SEC. 2. TABLE OF TITLES.
This Act is organized into titles as follows:
Title I--Food Stamp Provisions
Title II--Housing and Related Provisions
Title III--Communications and Spectrum Allocation Provisions
Title IV--Medicare, Medicaid, and Children's Health Provisions
Title V--Welfare and Related Provisions
Title VI--Education and Related Provisions
Title VII--Civil Service Retirement and Related Provisions
Title VIII--Veterans and Related Provisions
Title IX--Asset Sales, User Fees, and Miscellaneous Provisions
Title X--Budget Enforcement and Process Provisions
Title XI--District of Columbia Revitalization
TITLE I--FOOD STAMP PROVISIONS
SEC. 1001. EXEMPTION.
Section 6(o) of the Food Stamp Act of 1977 (7 U.S.C. 2015(o)) is
amended--
(1) in paragraph (2)(D), by striking ``or (5)'' and inserting
``(5), or (6)'';
(2) by redesignating paragraph (6) as paragraph (7); and
(3) by inserting after paragraph (5) the following:
``(6) 15-percent exemption.--
``(A) Definitions.--In this paragraph:
``(i) Caseload.--The term `caseload' means the average
monthly number of individuals receiving food stamps during
the 12-month period ending the preceding June 30.
``(ii) Covered individual.--The term `covered
individual' means a food stamp recipient, or an individual
denied eligibility for food stamp benefits solely due to
paragraph (2), who--
``(I) is not eligible for an exception under
paragraph (3);
``(II) does not reside in an area covered by a
waiver granted under paragraph (4);
``(III) is not complying with subparagraph (A),
(B), or (C) of paragraph (2);
``(IV) is not receiving food stamp benefits during
the 3 months of eligibility provided under paragraph
(2); and
``(V) is not receiving food stamp benefits under
paragraph (5).
``(B) General rule.--Subject to subparagraphs (C) through
(G), a State agency may provide an exemption from the
requirements of paragraph (2) for covered individuals.
``(C) Fiscal year 1998.--Subject to subparagraphs (E) and
(G), for fiscal year 1998, a State agency may provide a number
of exemptions such that the average monthly number of the
exemptions in effect during the fiscal year does not exceed 15
percent of the number of covered individuals in the State in
fiscal year 1998, as estimated by the Secretary, based on the
survey conducted to carry out section 16(c) for fiscal year
1996 and such other factors as the Secretary considers
appropriate due to the timing and limitations of the survey.
``(D) Subsequent fiscal years.--Subject to subparagraphs
(E) through (G), for fiscal year 1999 and each subsequent
fiscal year, a State agency may provide a number of exemptions
such that the average monthly number of the exemptions in
effect during the fiscal year does not exceed 15 percent of the
number of covered individuals in the State, as estimated by the
Secretary under subparagraph (C), adjusted by the Secretary to
reflect changes in the State's caseload and the Secretary's
estimate of changes in the proportion of food stamp recipients
covered by waivers granted under paragraph (4).
``(E) Caseload adjustments.--The Secretary shall adjust the
number of individuals estimated for a State under subparagraph
(C) or (D) during a fiscal year if the number of food stamp
recipients in the State varies from the State's caseload by
more than 10 percent, as determined by the Secretary.
``(F) Exemption adjustments.--During fiscal year 1999 and
each subsequent fiscal year, the Secretary shall increase or
decrease the number of individuals who may be granted an
exemption by a State agency under this paragraph to the extent
that the average monthly number of exemptions in effect in the
State for the preceding fiscal year under this paragraph is
lesser or greater than the average monthly number of exemptions
estimated for the State agency for such preceding fiscal year
under this paragraph.
``(G) Reporting requirement.--A State agency shall submit
such reports to the Secretary as the Secretary determines are
necessary to ensure compliance with this paragraph.''.
SEC. 1002. ADDITIONAL FUNDING FOR EMPLOYMENT AND TRAINING.
(a) In General.--Section 16(h) of the Food Stamp Act of 1977 (7
U.S.C. 2025(h)) is amended by striking paragraph (1) and inserting the
following:
``(1) In general.--
``(A) Amounts.--To carry out employment and training
programs, the Secretary shall reserve for allocation to State
agencies, to remain available until expended, from funds made
available for each fiscal year under section 18(a)(1) the
amount of--
``(i) for fiscal year 1996, $75,000,000;
``(ii) for fiscal year 1997, $79,000,000;
``(iii) for fiscal year 1998--
``(I) $81,000,000; and
``(II) an additional amount of $131,000,000;
``(iv) for fiscal year 1999--
``(I) $84,000,000; and
``(II) an additional amount of $131,000,000;
``(v) for fiscal year 2000--
``(I) $86,000,000; and
``(II) an additional amount of $131,000,000;
``(vi) for fiscal year 2001--
``(I) $88,000,000; and
``(II) an additional amount of $131,000,000; and
``(vii) for fiscal year 2002--
``(I) $90,000,000; and
``(II) an additional amount of $75,000,000.
``(B) Allocation.--
``(i) Allocation formula.--The Secretary shall allocate
the amounts reserved under subparagraph (A) among the State
agencies using a reasonable formula, as determined and
adjusted by the Secretary each fiscal year, to reflect--
``(I) changes in each State's caseload (as defined
in section 6(o)(6)(A));
``(II) for fiscal year 1998, the portion of food
stamp recipients who reside in each State who are not
eligible for an exception under section 6(o)(3); and
``(III) for each of fiscal years 1999 through 2002,
the portion of food stamp recipients who reside in each
State who are not eligible for an exception under
section 6(o)(3) and who--
``(aa) do not reside in an area subject to a
waiver granted by the Secretary under section
6(o)(4); or
``(bb) do reside in an area subject to a waiver
granted by the Secretary under section 6(o)(4), if
the State agency provides employment and training
services in the area to food stamp recipients who
are not eligible for an exception under section
6(o)(3).
``(ii) Estimated factors.--The Secretary shall estimate
the portion of food stamp recipients who reside in each
State who are not eligible for an exception under section
6(o)(3) based on the survey conducted to carry out
subsection (c) for fiscal year 1996 and such other factors
as the Secretary considers appropriate due to the timing
and limitations of the survey.
``(iii) Reporting requirement.--A State agency shall
submit such reports to the Secretary as the Secretary
determines are necessary to ensure compliance with this
paragraph.
``(C) Reallocation.--If a State agency will not expend all
of the funds allocated to the State agency for a fiscal year
under subparagraph (B), the Secretary shall reallocate the
unexpended funds to other States (during the fiscal year or the
subsequent fiscal year) as the Secretary considers appropriate
and equitable.
``(D) Minimum allocation.--Notwithstanding subparagraph
(B), the Secretary shall ensure that each State agency
operating an employment and training program shall receive not
less than $50,000 for each fiscal year.
``(E) Use of funds.--Of the amount of funds a State agency
receives under subparagraphs (A) through (D) for a fiscal year,
not less than 80 percent of the funds shall be used by the
State agency during the fiscal year to serve food stamp
recipients who--
``(i) are not eligible for an exception under section
6(o)(3); and
``(ii) are placed in and comply with a program
described in subparagraph (B) or (C) of section 6(o)(2).
``(F) Maintenance of effort.--To receive an allocation of
an additional amount made available under subclause (II) of
each of clauses (iii) through (vii) of subparagraph (A), a
State agency shall maintain the expenditures of the State
agency for employment and training programs and workfare
programs for any fiscal year under paragraph (2), and
administrative expenses described in section 20(g)(1), at a
level that is not less than the level of the expenditures by
the State agency to carry out the programs and such expenses
for fiscal year 1996.
``(G) Component costs.--The Secretary shall monitor State
agencies' expenditure of funds for employment and training
programs provided under this paragraph, including the costs of
individual components of State agencies' programs. The
Secretary may determine the reimbursable costs of employment
and training components, and, if the Secretary makes such a
determination, the Secretary shall determine that the amounts
spent or planned to be spent on the components reflect the
reasonable cost of efficiently and economically providing
components appropriate to recipient employment and training
needs, taking into account, as the Secretary deems appropriate,
prior expenditures on the components, the variability of costs
among State agencies' components, the characteristics of the
recipients to be served, and such other factors as the
Secretary considers necessary.''.
(b) Report to Congress.--Not later than 30 months after the date of
enactment of this Act, the Secretary of Agriculture shall submit to the
Committee on Agriculture of the House of Representatives and the
Committee on Agriculture, Nutrition, and Forestry of the Senate a
report regarding whether the amounts made available under section
16(h)(1)(A) of the Food Stamp Act of 1977 (as a result of the amendment
made by subsection (a)) have been used by State agencies to increase
the number of work slots for recipients subject to section 6(o) of the
Food Stamp Act of 1977 (7 U.S.C. 2015(o)) in employment and training
programs and workfare in the most efficient and effective manner
practicable.
SEC. 1003. DENIAL OF FOOD STAMPS FOR PRISONERS.
(a) State Plans.--
(1) In General.--Section 11(e) of the Food Stamp Act of 1977 (7
U.S.C. 2020(e)) is amended by striking paragraph (20) and inserting
the following:
``(20) that the State agency shall establish a system and take
action on a periodic basis--
``(A) to verify and otherwise ensure that an individual
does not receive coupons in more than 1 jurisdiction within the
State; and
``(B) to verify and otherwise ensure that an individual who
is placed under detention in a Federal, State, or local penal,
correctional, or other detention facility for more than 30 days
shall not be eligible to participate in the food stamp program
as a member of any household, except that--
``(i) the Secretary may determine that extraordinary
circumstances make it impracticable for the State agency to
obtain information necessary to discontinue inclusion of
the individual; and
``(ii) a State agency that obtains information
collected under section 1611(e)(1)(I)(i)(I) of the Social
Security Act (42 U.S.C. 1382(e)(1)(I)(i)(I)) pursuant to
section 1611(e)(1)(I)(ii)(II) of that Act (42 U.S.C.
1382(e)(1)(I)(ii)(II)), or under another program determined
by the Secretary to be comparable to the program carried
out under that section, shall be considered in compliance
with this subparagraph.''.
(2) Limits on disclosure and use of information.--Section
11(e)(8)(E) of the Food Stamp Act of 1977 (7 U.S.C. 2020(e)(8)(E))
is amended by striking ``paragraph (16)'' and inserting ``paragraph
(16) or (20)(B)''.
(3) Effective Date.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall take effect on the
date that is 1 year after the date of enactment of this Act.
(B) Extension.--The Secretary of Agriculture may grant a
State an extension of time to comply with the amendments made
by this subsection, not to exceed beyond the date that is 2
years after the date of enactment of this Act, if the chief
executive officer of the State submits a request for the
extension to the Secretary--
(i) stating the reasons why the State is not able to
comply with the amendments made by this subsection by the
date that is 1 year after the date of enactment of this
Act;
(ii) providing evidence that the State is making a good
faith effort to comply with the amendments made by this
subsection as soon as practicable; and
(iii) detailing a plan to bring the State into
compliance with the amendments made by this subsection as
soon as practicable but not later than the date of the
requested extension.
(b) Information Sharing.--Section 11 of the Food Stamp Act of 1977
(7 U.S.C. 2020) is amended by adding at the end the following:
``(q) Denial of Food Stamps for Prisoners.--The Secretary shall
assist States, to the maximum extent practicable, in implementing a
system to conduct computer matches or other systems to prevent
prisoners described in section 11(e)(20)(B) from participating in the
food stamp program as a member of any household.''.
SEC. 1004. NUTRITION EDUCATION.
Section 11(f) of the Food Stamp Act of 1977 (7 U.S.C. 2020(f)) is
amended--
(1) by striking ``(f) To encourage'' and inserting the
following:
``(f) Nutrition Education.--
``(1) In general.--To encourage''; and
(2) by adding at the end the following:
``(2) Grants.--
``(A) In general.--The Secretary shall make available not
more than $600,000 for each of fiscal years 1998 through 2001
to pay the Federal share of grants made to eligible private
nonprofit organizations and State agencies to carry out
subparagraph (B).
``(B) Eligibility.--A private nonprofit organization or
State agency shall be eligible to receive a grant under
subparagraph (A) if the organization or agency agrees--
``(i) to use the funds to direct a collaborative effort
to coordinate and integrate nutrition education into
health, nutrition, social service, and food distribution
programs for food stamp participants and other low-income
households; and
``(ii) to design the collaborative effort to reach
large numbers of food stamp participants and other low-
income households through a network of organizations,
including schools, child care centers, farmers' markets,
health clinics, and outpatient education services.
``(C) Preference.--In deciding between 2 or more private
nonprofit organizations or State agencies that are eligible to
receive a grant under subparagraph (B), the Secretary shall
give a preference to an organization or agency that conducted a
collaborative effort described in subparagraph (B) and received
funding for the collaborative effort from the Secretary before
the date of enactment of this paragraph.
``(D) Federal share.--
``(i) In general.--Subject to subparagraph (E), the
Federal share of a grant under this paragraph shall be 50
percent.
``(ii) No in-kind contributions.--The non-Federal share
of a grant under this paragraph shall be in cash.
``(iii) Private funds.--The non-Federal share of a
grant under this paragraph may include amounts from private
nongovernmental sources.
``(E) Limit on individual grant.--The Federal share of a
grant under subparagraph (A) may not exceed $200,000 for a
fiscal year.''.
SEC. 1005. REGULATIONS; EFFECTIVE DATE.
(a) Regulations.--Not later than 1 year after the date of enactment
of this Act, the Secretary of Agriculture shall promulgate such
regulations as are necessary to implement the amendments made by this
title.
(b) Effective Date.--The amendments made by sections 1001 and 1002
take effect on October 1, 1997, without regard to whether regulations
have been promulgated to implement the amendments made by such
sections.
TITLE II--HOUSING AND RELATED PROVISIONS
SEC. 2001. TABLE OF CONTENTS.
The table of contents for this title is as follows:
TITLE II--HOUSING AND RELATED PROVISIONS
Sec. 2001. Table of contents.
Sec. 2002. Extension of foreclosure avoidance and borrower assistance
provisions for FHA single family housing mortgage insurance
program.
Sec. 2003. Adjustment of maximum monthly rents for certain dwelling
units in new construction and substantial or moderate
rehabilitation projects assisted under section 8 rental
assistance program.
Sec. 2004. Adjustment of maximum monthly rents for non-turnover dwelling
units assisted under section 8 rental assistance program.
SEC. 2002. EXTENSION OF FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE
PROVISIONS FOR FHA SINGLE FAMILY HOUSING MORTGAGE
INSURANCE PROGRAM.
Section 407 of The Balanced Budget Downpayment Act, I (12 U.S.C.
1710 note) is amended--
(1) in subsection (c)--
(A) by striking ``only''; and
(B) by inserting ``, on, or after'' after ``before''; and
(2) by striking subsection (e).
SEC. 2003. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR CERTAIN DWELLING
UNITS IN NEW CONSTRUCTION AND SUBSTANTIAL OR MODERATE
REHABILITATION PROJECTS ASSISTED UNDER SECTION 8 RENTAL
ASSISTANCE PROGRAM.
The third sentence of section 8(c)(2)(A) of the United States
Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amended by inserting
before the period at the end the following: ``, and during fiscal year
1999 and thereafter''.
SEC. 2004. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR NON-TURNOVER
DWELLING UNITS ASSISTED UNDER SECTION 8 RENTAL ASSISTANCE
PROGRAM.
The last sentence of section 8(c)(2)(A) of the United States
Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amended by inserting
before the period at the end the following: ``, and during fiscal year
1999 and thereafter''.
TITLE III--COMMUNICATIONS AND SPECTRUM ALLOCATION PROVISIONS
SEC. 3001. DEFINITIONS.
(a) Common Terminology.--Except as otherwise provided in this
title, the terms used in this title have the meanings provided in
section 3 of the Communications Act of 1934 (47 U.S.C. 153), as amended
by this section.
(b) Additional Definitions.--Section 3 of the Communications Act of
1934 (47 U.S.C. 153) is amended--
(1) by redesignating paragraphs (49) through (51) as paragraphs
(50) through (52), respectively; and
(2) by inserting after paragraph (48) the following new
paragraph:
``(49) Television service.--
``(A) Analog television service.--The term `analog
television service' means television service provided pursuant
to the transmission standards prescribed by the Commission in
section 73.682(a) of its regulations (47 C.F.R. 73.682(a)).
``(B) Digital television service.--The term `digital
television service' means television service provided pursuant
to the transmission standards prescribed by the Commission in
section 73.682(d) of its regulations (47 C.F.R. 73.682(d)).''.
SEC. 3002. SPECTRUM AUCTIONS.
(a) Extension and Expansion of Auction Authority.--
(1) In general.--Section 309(j) of the Communications Act of
1934 (47 U.S.C. 309(j)) is amended--
(A) by striking paragraphs (1) and (2) and inserting in
lieu thereof the following:
``(1) General authority.--If, consistent with the obligations
described in paragraph (6)(E), mutually exclusive applications are
accepted for any initial license or construction permit, then,
except as provided in paragraph (2), the Commission shall grant the
license or permit to a qualified applicant through a system of
competitive bidding that meets the requirements of this subsection.
``(2) Exemptions.--The competitive bidding authority granted by
this subsection shall not apply to licenses or construction permits
issued by the Commission--
``(A) for public safety radio services, including private
internal radio services used by State and local governments and
non-government entities and including emergency road services
provided by not-for-profit organizations, that--
``(i) are used to protect the safety of life, health,
or property; and
``(ii) are not made commercially available to the
public;
``(B) for initial licenses or construction permits for
digital television service given to existing terrestrial
broadcast licensees to replace their analog television service
licenses; or
``(C) for stations described in section 397(6) of this
Act.'';
(B) in paragraph (3)--
(i) by inserting after the second sentence the
following new sentence: ``The Commission shall, directly or
by contract, provide for the design and conduct (for
purposes of testing) of competitive bidding using a
contingent combinatorial bidding system that permits
prospective bidders to bid on combinations or groups of
licenses in a single bid and to enter multiple alternative
bids within a single bidding round.'';
(ii) by striking ``and'' at the end of subparagraph
(C);
(iii) by striking the period at the end of subparagraph
(D) and inserting ``; and''; and
(iv) by adding at the end the following new
subparagraph:
``(E) ensure that, in the scheduling of any competitive
bidding under this subsection, an adequate period is allowed--
``(i) before issuance of bidding rules, to permit
notice and comment on proposed auction procedures; and
``(ii) after issuance of bidding rules, to ensure that
interested parties have a sufficient time to develop
business plans, assess market conditions, and evaluate the
availability of equipment for the relevant services.'';
(C) in paragraph (4)--
(i) by striking ``and'' at the end of subparagraph (D);
(ii) by striking the period at the end of subparagraph
(E) and inserting ``; and''; and
(iii) by adding at the end the following new
subparagraph:
``(F) prescribe methods by which a reasonable reserve price
will be required, or a minimum bid will be established, to
obtain any license or permit being assigned pursuant to the
competitive bidding, unless the Commission determines that such
a reserve price or minimum bid is not in the public
interest.'';
(D) in paragraph (8)(B)--
(i) by striking the third sentence; and
(ii) by adding at the end the following new sentence:
``No sums may be retained under this subparagraph during
any fiscal year beginning after September 30, 1998, if the
annual report of the Commission under section 4(k) for the
second preceding fiscal year fails to include in the
itemized statement required by paragraph (3) of such
section a statement of each expenditure made for purposes
of conducting competitive bidding under this subsection
during such second preceding fiscal year.'';
(E) in paragraph (11), by striking ``1998'' and inserting
``2007''; and
(F) in paragraph (13)(F), by striking ``September 30,
1998'' and inserting ``the date of enactment of the Balanced
Budget Act of 1997''.
(2) Termination of Lottery Authority.--Section 309(i) of the
Communications Act of 1934 (47 U.S.C. 309(i)) is amended--
(A) by striking paragraph (1) and inserting the following:
``(1) General authority.--Except as provided in paragraph (5),
if there is more than one application for any initial license or
construction permit, then the Commission shall have the authority
to grant such license or permit to a qualified applicant through
the use of a system of random selection.''; and
(B) by adding at the end the following new paragraph:
``(5) Termination of authority.--(A) Except as provided in
subparagraph (B), the Commission shall not issue any license or
permit using a system of random selection under this subsection
after July 1, 1997.
``(B) Subparagraph (A) of this paragraph shall not apply with
respect to licenses or permits for stations described in section
397(6) of this Act.''.
(3) Resolution of pending comparative licensing cases.--Section
309 of the Communications Act of 1934 (47 U.S.C. 309) is further
amended by adding at the end the following new subsection:
``(l) Applicability of Competitive Bidding to Pending Comparative
Licensing Cases.--With respect to competing applications for initial
licenses or construction permits for commercial radio or television
stations that were filed with the Commission before July 1, 1997, the
Commission shall--
``(1) have the authority to conduct a competitive bidding
proceeding pursuant to subsection (j) to assign such license or
permit;
``(2) treat the persons filing such applications as the only
persons eligible to be qualified bidders for purposes of such
proceeding; and
``(3) waive any provisions of its regulations necessary to
permit such persons to enter an agreement to procure the removal of
a conflict between their applications during the 180-day period
beginning on the date of enactment of the Balanced Budget Act of
1997.''.
(4) Conforming amendment.--Section 6002 of the Omnibus Budget
Reconciliation Act of 1993 is amended by striking subsection (e).
(5) Effective Date.--Except as otherwise provided therein, the
amendments made by this subsection are effective on July 1, 1997.
(b) Accelerated Availability for Auction of 1,710-1,755 Megahertz
from Initial Reallocation Report.--The band of frequencies located at
1,710-1,755 megahertz identified in the initial reallocation report
under section 113(a) of the National Telecommunications and Information
Administration Act (47 U.S.C. 923(a)) shall, notwithstanding the
timetable recommended under section 113(e) of such Act and section
115(b)(1) of such Act, be available in accordance with this subsection
for assignment for commercial use. The Commission shall assign licenses
for such use by competitive bidding commenced after January 1, 2001,
pursuant to section 309(j) of the Communications Act of 1934 (47 U.S.C.
309(j)).
(c) Commission Obligation To Make Additional Spectrum Available by
Auction.--
(1) In general.--The Commission shall complete all actions
necessary to permit the assignment by September 30, 2002, by
competitive bidding pursuant to section 309(j) of the
Communications Act of 1934 (47 U.S.C. 309(j)), of licenses for the
use of bands of frequencies that--
(A) in the aggregate span not less than 55 megahertz;
(B) are located below 3 gigahertz;
(C) have not, as of the date of enactment of this Act--
(i) been designated by Commission regulation for
assignment pursuant to such section;
(ii) been identified by the Secretary of Commerce
pursuant to section 113 of the National Telecommunications
and Information Administration Organization Act (47 U.S.C.
923);
(iii) been allocated for Federal Government use
pursuant to section 305 of the Communications Act of 1934
(47 U.S.C. 305);
(iv) been designated for reallocation under section 337
of the Communications Act of 1934 (as added by this Act);
or
(v) been allocated or authorized for unlicensed use
pursuant to part 15 of the Commission's regulations (47
C.F.R. Part 15), if the operation of services licensed
pursuant to competitive bidding would interfere with
operation of end-user products permitted under such
regulations;
(D) include frequencies at 2,110-2,150 megahertz; and
(E) include 15 megahertz from within the bands of
frequencies at 1,990-2,110 megahertz.
(2) Criteria for Reassignment.--In making available bands of
frequencies for competitive bidding pursuant to paragraph (1), the
Commission shall--
(A) seek to promote the most efficient use of the
electromagnetic spectrum;
(B) consider the cost of relocating existing uses to other
bands of frequencies or other means of communication;
(C) consider the needs of existing public safety radio
services (as such services are described in section
309(j)(2)(A) of the Communications Act of 1934, as amended by
this Act);
(D) comply with the requirements of international
agreements concerning spectrum allocations; and
(E) coordinate with the Secretary of Commerce when there is
any impact on Federal Government spectrum use.
(3) Use of bands at 2,110-2,150 megahertz.--The Commission
shall reallocate spectrum located at 2,110-2,150 megahertz for
assignment by competitive bidding unless the Commission determines
that auction of other spectrum (A) better serves the public
interest, convenience, and necessity, and (B) can reasonably be
expected to produce greater receipts. If the Commission makes such
a determination, then the Commission shall, within 2 years after
the date of enactment of this Act, identify an alternative 40
megahertz, and report to the Congress an identification of such
alternative 40 megahertz for assignment by competitive bidding.
(4) Use of 15 megahertz from bands at 1,990-2,110 megahertz.--
The Commission shall reallocate 15 megahertz from spectrum located
at 1,990-2,110 megahertz for assignment by competitive bidding
unless the President determines such spectrum cannot be reallocated
due to the need to protect incumbent Federal systems from
interference, and that allocation of other spectrum (A) better
serves the public interest, convenience, and necessity, and (B) can
reasonably be expected to produce comparable receipts. If the
President makes such a determination, then the President shall,
within 2 years after the date of enactment of this Act, identify
alternative bands of frequencies totalling 15 megahertz, and report
to the Congress an identification of such alternative bands for
assignment by competitive bidding.
(5) Notification to the Secretary of Commerce.--The Commission
shall attempt to accommodate incumbent licensees displaced under
this section by relocating them to other frequencies available for
allocation by the Commission. The Commission shall notify the
Secretary of Commerce whenever the Commission is not able to
provide for the effective relocation of an incumbent licensee to a
band of frequencies available to the Commission for assignment. The
notification shall include--
(A) specific information on the incumbent licensee;
(B) the bands the Commission considered for relocation of
the licensee;
(C) the reasons the licensee cannot be accommodated in such
bands; and
(D) the bands of frequencies identified by the Commission
that are--
(i) suitable for the relocation of such licensee; and
(ii) allocated for Federal Government use, but that
could be reallocated pursuant to part B of the National
Telecommunications and Information Administration
Organization Act (as amended by this Act).
(d) Identification and Reallocation of Frequencies.--
(1) In general.--Section 113 of the National Telecommunications
and Information Administration Organization Act (47 U.S.C. 923) is
amended by adding at the end thereof the following:
``(f) Additional Reallocation Report.--If the Secretary receives a
notice from the Commission pursuant to section 3002(c)(5) of the
Balanced Budget Act of 1997, the Secretary shall prepare and submit to
the President, the Commission, and the Congress a report recommending
for reallocation for use other than by Federal Government stations
under section 305 of the 1934 Act (47 U.S.C. 305), bands of frequencies
that are suitable for the licensees identified in the Commission's
notice. The Commission shall, not later than one year after receipt of
such report, prepare, submit to the President and the Congress, and
implement, a plan for the immediate allocation and assignment of such
frequencies under the 1934 Act to incumbent licensees described in the
Commission's notice.
``(g) Relocation of Federal Government Stations.--
``(1) In general.--In order to expedite the commercial use of
the electromagnetic spectrum and notwithstanding section 3302(b) of
title 31, United States Code, any Federal entity which operates a
Federal Government station may accept from any person payment of
the expenses of relocating the Federal entity's operations from one
or more frequencies to another frequency or frequencies, including
the costs of any modification, replacement, or reissuance of
equipment, facilities, operating manuals, or regulations incurred
by that entity. Such payments may be in advance of relocation and
may be in cash or in kind. Any such payment in cash shall be
deposited in the account of such Federal entity in the Treasury of
the United States or in a separate account authorized by law. Funds
deposited according to this paragraph shall be available, without
appropriation or fiscal year limitation, only for such expenses of
the Federal entity for which such funds were deposited under this
paragraph.
``(2) Process for relocation.--Any person seeking to relocate a
Federal Government station that has been assigned a frequency
within a band that has been allocated for mixed Federal and non-
Federal use, or that has been scheduled for reallocation to non-
Federal use, may submit a petition for such relocation to NTIA. The
NTIA shall limit or terminate the Federal Government station's
operating license within 6 months after receiving the petition if
the following requirements are met:
``(A) the person seeking relocation of the Federal
Government station has guaranteed to pay all relocation costs
incurred by the Federal entity, including all engineering,
equipment, site acquisition and construction, and regulatory
fee costs;
``(B) all activities necessary for implementing the
relocation have been completed, including construction of
replacement facilities (if necessary and appropriate) and
identifying and obtaining new frequencies for use by the
relocated Federal Government station (where such station is not
relocating to spectrum reserved exclusively for Federal use);
``(C) any necessary replacement facilities, equipment
modifications, or other changes have been implemented and
tested to ensure that the Federal Government station is able to
successfully accomplish its purposes; and
``(D) NTIA has determined that the proposed use of the
spectrum frequency band to which the Federal entity will
relocate its operations is--
``(i) consistent with obligations undertaken by the
United States in international agreements and with United
States national security and public safety interests; and
``(ii) suitable for the technical characteristics of
the band and consistent with other uses of the band.
In exercising its authority under clause (i) of this
subparagraph, NTIA shall consult with the Secretary of Defense,
the Secretary of State, or other appropriate officers of the
Federal Government.
``(3) Right to reclaim.--If within one year after the
relocation the Federal entity demonstrates to the Commission that
the new facilities or spectrum are not comparable to the facilities
or spectrum from which the Federal Government station was
relocated, the person who filed the petition under paragraph (2)
for such relocation shall take reasonable steps to remedy any
defects or pay the Federal entity for the expenses incurred in
returning the Federal Government station to the spectrum from which
such station was relocated.
``(h) Federal Action To Expedite Spectrum Transfer.--Any Federal
Government station which operates on electromagnetic spectrum that has
been identified in any reallocation report under this section shall, to
the maximum extent practicable through the use of the authority granted
under subsection (g) and any other applicable provision of law, take
action to relocate its spectrum use to other frequencies that are
reserved for Federal use or to consolidate its spectrum use with other
Federal Government stations in a manner that maximizes the spectrum
available for non-Federal use.
``(i) Definition.--For purposes of this section, the term `Federal
entity' means any department, agency, or other instrumentality of the
Federal Government that utilizes a Government station license obtained
under section 305 of the 1934 Act (47 U.S.C. 305).''.
(2) Section 114(a) of such Act (47 U.S.C. 924(a)) is amended--
(A) in paragraph (1), by striking ``(a) or (d)(1)'' and
inserting ``(a), (d)(1), or (f)''; and
(B) in paragraph (2), by striking ``either'' and inserting
``any''.
(e) Identification and Reallocation of Auctionable Frequencies.--
(1) Second report required.--Section 113(a) of the National
Telecommunications and Information Administration Organization Act
(47 U.S.C. 923(a)) is amended by inserting ``and within 6 months
after the date of enactment of the Balanced Budget Act of 1997''
after ``Act of 1993''.
(2) In general.--Section 113(b) of such Act (47 U.S.C. 923(b))
is amended--
(A) by striking the caption of paragraph (1) and inserting
``Initial reallocation report.--'';
(B) by inserting ``in the initial report required by
subsection (a)'' after ``recommend for reallocation'' in
paragraph (1);
(C) by inserting ``or (3)'' after ``paragraph (1)'' each
place it appears in paragraph (2); and
(D) by adding at the end thereof the following:
``(3) Second reallocation report.--In accordance with the
provisions of this section, the Secretary shall recommend for
reallocation in the second report required by subsection (a), for
use other than by Federal Government stations under section 305 of
the 1934 Act (47 U.S.C. 305), a band or bands of frequencies that--
``(A) in the aggregate span not less than 20 megahertz;
``(B) are located below 3 gigahertz; and
``(C) meet the criteria specified in paragraphs (1) through
(5) of subsection (a).''.
(3) Conforming amendment.--Section 113(d) of such Act (47
U.S.C. 923(d)) is amended by striking ``final report'' and
inserting ``initial report''.
(4) Allocation and assignment.--Section 115 of such Act (47
U.S.C. 925) is amended--
(A) by striking ``the report required by section 113(a)''
in subsection (b) and inserting ``the initial reallocation
report required by section 113(a)''; and
(B) by adding at the end thereof the following:
``(c) Allocation and Assignment of Frequencies Identified in the
Second Reallocation Report.--
``(1) Plan and implementation.--With respect to the frequencies
made available for reallocation pursuant to section 113(b)(3), the
Commission shall, not later than one year after receipt of the
second reallocation report required by section 113(a), prepare,
submit to the President and the Congress, and implement, a plan for
the immediate allocation and assignment under the 1934 Act of all
such frequencies in accordance with section 309(j) of such Act.
``(2) Contents.--The plan prepared by the Commission under
paragraph (1) shall consist of a schedule of allocation and
assignment of those frequencies in accordance with section 309(j)
of the 1934 Act in time for the assignment of those licenses or
permits by September 30, 2002.''.
SEC. 3003. AUCTION OF RECAPTURED BROADCAST TELEVISION SPECTRUM.
Section 309(j) of the Communications Act of 1934 (47 U.S.C. 309(j))
is amended by adding at the end the following new paragraph:
``(14) Auction of recaptured broadcast television spectrum.--
``(A) Limitations on terms of terrestrial television
broadcast licenses.--A television broadcast license that
authorizes analog television service may not be renewed to
authorize such service for a period that extends beyond
December 31, 2006.
``(B) Extension.--The Commission shall extend the date
described in subparagraph (A) for any station that requests
such extension in any television market if the Commission finds
that--
``(i) one or more of the stations in such market that
are licensed to or affiliated with one of the four largest
national television networks are not broadcasting a digital
television service signal, and the Commission finds that
each such station has exercised due diligence and satisfies
the conditions for an extension of the Commission's
applicable construction deadlines for digital television
service in that market;
``(ii) digital-to-analog converter technology is not
generally available in such market; or
``(iii) in any market in which an extension is not
available under clause (i) or (ii), 15 percent or more of
the television households in such market--
``(I) do not subscribe to a multichannel video
programming distributor (as defined in section 602)
that carries one of the digital television service
programming channels of each of the television stations
broadcasting such a channel in such market; and
``(II) do not have either--
``(a) at least one television receiver capable
of receiving the digital television service signals
of the television stations licensed in such market;
or
``(b) at least one television receiver of
analog television service signals equipped with
digital-to-analog converter technology capable of
receiving the digital television service signals of
the television stations licensed in such market.
``(C) Spectrum reversion and resale.--
``(i) The Commission shall--
``(I) ensure that, as licenses for analog
television service expire pursuant to subparagraph (A)
or (B), each licensee shall cease using electromagnetic
spectrum assigned to such service according to the
Commission's direction; and
``(II) reclaim and organize the electromagnetic
spectrum in a manner consistent with the objectives
described in paragraph (3) of this subsection.
``(ii) Licensees for new services occupying spectrum
reclaimed pursuant to clause (i) shall be assigned in
accordance with this subsection. The Commission shall
complete the assignment of such licenses, and report to the
Congress the total revenues from such competitive bidding,
by September 30, 2002.
``(D) Certain limitations on qualified bidders
prohibited.--In prescribing any regulations relating to the
qualification of bidders for spectrum reclaimed pursuant to
subparagraph (C)(i), the Commission, for any license that may
be used for any digital television service where the grade A
contour of the station is projected to encompass the entirety
of a city with a population in excess of 400,000 (as determined
using the 1990 decennial census), shall not--
``(i) preclude any party from being a qualified bidder
for such spectrum on the basis of--
``(I) the Commission's duopoly rule (47 C.F.R.
73.3555(b)); or
``(II) the Commission's newspaper cross-ownership
rule (47 C.F.R. 73.3555(d)); or
``(ii) apply either such rule to preclude such a party
that is a winning bidder in a competitive bidding for such
spectrum from using such spectrum for digital television
service.''.
SEC. 3004. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY SERVICES
LICENSES AND COMMERCIAL LICENSES.
Title III of the Communications Act of 1934 is amended by inserting
after section 336 (47 U.S.C. 336) the following new section:
``SEC. 337. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY SERVICES
LICENSES AND COMMERCIAL LICENSES.
``(a) In General.--Not later than January 1, 1998, the Commission
shall allocate the electromagnetic spectrum between 746 megahertz and
806 megahertz, inclusive, as follows:
``(1) 24 megahertz of that spectrum for public safety services
according to the terms and conditions established by the
Commission, in consultation with the Secretary of Commerce and the
Attorney General; and
``(2) 36 megahertz of that spectrum for commercial use to be
assigned by competitive bidding pursuant to section 309(j).
``(b) Assignment.--The Commission shall--
``(1) commence assignment of the licenses for public safety
services created pursuant to subsection (a) no later than September
30, 1998; and
``(2) commence competitive bidding for the commercial licenses
created pursuant to subsection (a) after January 1, 2001.
``(c) Licensing of Unused Frequencies for Public Safety Services.--
``(1) Use of unused channels for public safety services.--Upon
application by an entity seeking to provide public safety services,
the Commission shall waive any requirement of this Act or its
regulations implementing this Act (other than its regulations
regarding harmful interference) to the extent necessary to permit
the use of unassigned frequencies for the provision of public
safety services by such entity. An application shall be granted
under this subsection if the Commission finds that--
``(A) no other spectrum allocated to public safety services
is immediately available to satisfy the requested public safety
service use;
``(B) the requested use is technically feasible without
causing harmful interference to other spectrum users entitled
to protection from such interference under the Commission's
regulations;
``(C) the use of the unassigned frequency for the provision
of public safety services is consistent with other allocations
for the provision of such services in the geographic area for
which the application is made;
``(D) the unassigned frequency was allocated for its
present use not less than 2 years prior to the date on which
the application is granted; and
``(E) granting such application is consistent with the
public interest.
``(2) Applicability.--Paragraph (1) shall apply to any
application to provide public safety services that is pending or
filed on or after the date of enactment of the Balanced Budget Act
of 1997.
``(d) Conditions on Licenses.--In establishing service rules with
respect to licenses granted pursuant to this section, the Commission--
``(1) shall establish interference limits at the boundaries of
the spectrum block and service area;
``(2) shall establish any additional technical restrictions
necessary to protect full-service analog television service and
digital television service during a transition to digital
television service;
``(3) may permit public safety services licensees and
commercial licensees--
``(A) to aggregate multiple licenses to create larger
spectrum blocks and service areas; and
``(B) to disaggregate or partition licenses to create
smaller spectrum blocks or service areas; and
``(4) shall establish rules insuring that public safety
services licensees using spectrum reallocated pursuant to
subsection (a)(1) shall not be subject to harmful interference from
television broadcast licensees.
``(e) Removal and Relocation of Incumbent Broadcast Licensees.--
``(1) Channels 60 to 69.--Any person who holds a television
broadcast license to operate between 746 and 806 megahertz may not
operate at that frequency after the date on which the digital
television service transition period terminates, as determined by
the Commission.
``(2) Incumbent qualifying low-power stations.--After making
any allocation or assignment under this section, the Commission
shall seek to assure, consistent with the Commission's plan for
allotments for digital television service, that each qualifying
low-power television station is assigned a frequency below 746
megahertz to permit the continued operation of such station.
``(f) Definitions.--For purposes of this section:
``(1) Public safety services.--The term `public safety
services' means services--
``(A) the sole or principal purpose of which is to protect
the safety of life, health, or property;
``(B) that are provided--
``(i) by State or local government entities; or
``(ii) by nongovernmental organizations that are
authorized by a governmental entity whose primary mission
is the provision of such services; and
``(C) that are not made commercially available to the
public by the provider.
``(2) Qualifying low-power television stations.--A station is a
qualifying low-power television station if, during the 90 days
preceding the date of enactment of the Balanced Budget Act of
1997--
``(A) such station broadcast a minimum of 18 hours per day;
``(B) such station broadcast an average of at least 3 hours
per week of programming that was produced within the market
area served by such station; and
``(C) such station was in compliance with the requirements
applicable to low-power television stations.''.
SEC. 3005. FLEXIBLE USE OF ELECTROMAGNETIC SPECTRUM.
Section 303 of the Communications Act of 1934 (47 U.S.C. 303) is
amended by adding at the end thereof the following:
``(y) Have authority to allocate electromagnetic spectrum so as to
provide flexibility of use, if--
``(1) such use is consistent with international agreements to
which the United States is a party; and
``(2) the Commission finds, after notice and an opportunity for
public comment, that--
``(A) such an allocation would be in the public interest;
``(B) such use would not deter investment in communications
services and systems, or technology development; and
``(C) such use would not result in harmful interference
among users.''.
SEC. 3006. UNIVERSAL SERVICE FUND PAYMENT SCHEDULE.
(a) Appropriations to the Universal Service Fund.--
(1) Appropriation.--There is hereby appropriated to the
Commission $3,000,000,000 in fiscal year 2001, which shall be
disbursed on October 1, 2000, to the Administrator of the Federal
universal service support programs established pursuant to section
254 of the Communications Act of 1934 (47 U.S.C. 254), and which
may be expended by the Administrator in support of such programs as
provided pursuant to the rules implementing that section.
(2) Return to treasury.--The Administrator shall transfer
$3,000,000,000 from the funds collected for such support programs
to the General Fund of the Treasury on October 1, 2001.
(b) Fee Adjustments.--The Commission shall direct the Administrator
to adjust payments by telecommunications carriers and other providers
of interstate telecommunications so that the $3,000,000,000 of the
total payments by such carriers or providers to the Administrator for
fiscal year 2001 shall be deferred until October 1, 2001.
(c) Preservation of Authority.--Nothing in this section shall
affect the Administrator's authority to determine the amounts that
should be expended for universal service support programs pursuant to
section 254 of the Communications Act of 1934 and the rules
implementing that section.
(d) Definition.--For purposes of this section, the term
``Administrator'' means the Administrator designated by the Federal
Communications Commission to administer Federal universal service
support programs pursuant to section 254 of the Communications Act of
1934.
SEC. 3007. DEADLINE FOR COLLECTION
The Commission shall conduct the competitive bidding required under
this title or the amendments made by this title in a manner that
ensures that all proceeds of such bidding are deposited in accordance
with section 309(j)(8) of the Communications Act of 1934 not later than
September 30, 2002.
SEC. 3008. ADMINISTRATIVE PROCEDURES FOR SPECTRUM AUCTIONS.
Notwithstanding section 309(b) of the Communications Act of 1934
(47 U.S.C. 309(b)), no application for an instrument of authorization
for frequencies assigned under this title (or amendments made by this
title) shall be granted by the Commission earlier than 7 days following
issuance of public notice by the Commission of the acceptance for
filing of such application or of any substantial amendment thereto.
Notwithstanding section 309(d)(1) of such Act (47 U.S.C. 309(d)(1)),
the Commission may specify a period (no less than 5 days following
issuance of such public notice) for the filing of petitions to deny any
application for an instrument of authorization for such frequencies.
TITLE IV--MEDICARE, MEDICAID, AND CHILDREN'S HEALTH PROVISIONS
SEC. 4000. AMENDMENTS TO SOCIAL SECURITY ACT AND REFERENCES TO OBRA;
TABLE OF CONTENTS OF TITLE.
(a) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this title 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.
(b) References to OBRA.--In this title, the terms ``OBRA-1986'',
``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and ``OBRA-1993'' refer to
the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), the
Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203), the
Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239), the
Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66),
respectively.
(c) Table of Contents of Title.--The table of contents of this
title is as follows:
Sec. 4000. Amendments to Social Security Act and references to OBRA;
table of contents of title.
Subtitle A--Medicare+Choice Program
Chapter 1--Medicare+Choice Program
SUBCHAPTER A--MEDICARE+CHOICE PROGRAM
Sec. 4001. Establishment of Medicare+Choice program.
``Part C--Medicare+Choice Program
``Sec. 1851. Eligibility, election, and enrollment.
``Sec. 1852. Benefits and beneficiary protections.
``Sec. 1853. Payments to Medicare+Choice organizations.
``Sec. 1854. Premiums.
``Sec. 1855. Organizational and financial requirements for
Medicare+Choice organizations; provider-sponsored
organizations.
``Sec. 1856. Establishment of standards.
``Sec. 1857. Contracts with Medicare+Choice organizations.
``Sec. 1859. Definitions; miscellaneous provisions.
Sec. 4002. Transitional rules for current medicare HMO program.
Sec. 4003. Conforming changes in medigap program.
SUBCHAPTER B--SPECIAL RULES FOR MEDICARE+CHOICE MEDICAL SAVINGS
ACCOUNTS
Sec. 4006. Medicare+Choice MSA.
Chapter 2--Demonstrations
SUBCHAPTER A--MEDICARE+CHOICE COMPETITIVE PRICING DEMONSTRATION
PROJECT
Sec. 4011. Medicare prepaid competitive pricing demonstration project.
Sec. 4012. Administration through the Office of Competition; advisory
committee.
Sec. 4013. Project design based on FEHBP competitive bidding model.
SUBCHAPTER B--SOCIAL HEALTH MAINTENANCE ORGANIZATIONS
Sec. 4014. Social health maintenance organizations (SHMOs).
SUBCHAPTER C--MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY
RETIREES
Sec. 4015. Medicare subvention demonstration project for military
retirees.
SUBCHAPTER D--OTHER PROJECTS
Sec. 4016. Medicare coordinated care demonstration project.
Sec. 4017. Orderly transition of municipal health service demonstration
projects.
Sec. 4018. Medicare enrollment demonstration project.
Sec. 4019. Extension of certain medicare community nursing organization
demonstration projects.
Chapter 3--Commissions
Sec. 4021. National Bipartisan Commission on the Future of Medicare.
Sec. 4022. Medicare Payment Advisory Commission.
Chapter 4--Medigap Protections
Sec. 4031. Medigap protections.
Sec. 4032. Addition of high deductible medigap policies.
Chapter 5--Tax Treatment of Hospitals Participating in Provider-
Sponsored Organizations
Sec. 4041. Tax treatment of hospitals which participate in provider-
sponsored organizations.
Subtitle B--Prevention Initiatives
Sec. 4101. Screening mammography.
Sec. 4102. Screening pap smear and pelvic exams.
Sec. 4103. Prostate cancer screening tests.
Sec. 4104. Coverage of colorectal screening.
Sec. 4105. Diabetes self-management benefits.
Sec. 4106. Standardization of medicare coverage of bone mass
measurements.
Sec. 4107. Vaccines outreach expansion.
Sec. 4108. Study on preventive and enhanced benefits.
Subtitle C--Rural Initiatives
Sec. 4201. Medicare rural hospital flexibility program.
Sec. 4202. Prohibiting denial of request by rural referral centers for
reclassification on basis of comparability of wages.
Sec. 4203. Hospital geographic reclassification permitted for purposes
of disproportionate share payment adjustments.
Sec. 4204. Medicare-dependent, small rural hospital payment extension.
Sec. 4205. Rural health clinic services.
Sec. 4206. Medicare reimbursement for telehealth services.
Sec. 4207. Informatics, telemedicine, and education demonstration
project.
Subtitle D--Anti-Fraud and Abuse Provisions and Improvements in
Protecting Program Integrity
Chapter 1--Revisions To Sanctions for Fraud and Abuse
Sec. 4301. Permanent exclusion for those convicted of 3 health care
related crimes.
Sec. 4302. Authority to refuse to enter into medicare agreements with
individuals or entities convicted of felonies.
Sec. 4303. Exclusion of entity controlled by family member of a
sanctioned individual.
Sec. 4304. Imposition of civil money penalties.
Chapter 2--Improvements In Protecting Program Integrity
Sec. 4311. Improving information to medicare beneficiaries.
Sec. 4312. Disclosure of information and surety bonds.
Sec. 4313. Provision of certain identification numbers.
Sec. 4314. Advisory opinions regarding certain physician self-referral
provisions.
Sec. 4315. Replacement of reasonable charge methodology by fee
schedules.
Sec. 4316. Application of inherent reasonableness to all part B services
other than physicians' services.
Sec. 4317. Requirement to furnish diagnostic information.
Sec. 4318. Report by GAO on operation of fraud and abuse control
program.
Sec. 4319. Competitive bidding demonstration projects.
Sec. 4320. Prohibiting unnecessary and wasteful medicare payments for
certain items.
Sec. 4321. Nondiscrimination in post-hospital referral to home health
agencies and other entities.
Chapter 3--Clarifications And Technical Changes
Sec. 4331. Other fraud and abuse related provisions.
Subtitle E--Provisions Relating to Part A Only
Chapter 1--Payment of PPS Hospitals
Sec. 4401. PPS hospital payment update.
Sec. 4402. Maintaining savings from temporary reduction in capital
payments for PPS hospitals.
Sec. 4403. Disproportionate share.
Sec. 4404. Medicare capital asset sales price equal to book value.
Sec. 4405. Elimination of IME and DSH payments attributable to outlier
payments.
Sec. 4406. Increase base payment rate to Puerto Rico hospitals.
Sec. 4407. Certain hospital discharges to post acute care.
Sec. 4408. Reclassification of certain counties as large urban areas
under medicare program.
Sec. 4409. Geographic reclassification for certain disproportionately
large hospitals.
Sec. 4410. Floor on area wage index.
Chapter 2--Payment of PPS-Exempt Hospitals
SUBCHAPTER A--GENERAL PAYMENT PROVISIONS
Sec. 4411. Payment update.
Sec. 4412. Reductions to capital payments for certain PPS-exempt
hospitals and units.
Sec. 4413. Rebasing.
Sec. 4414. Cap on TEFRA limits.
Sec. 4415. Bonus and relief payments.
Sec. 4416. Change in payment and target amount for new providers.
Sec. 4417. Treatment of certain long-term care hospitals.
Sec. 4418. Treatment of certain cancer hospitals.
Sec. 4419. Elimination of exemptions for certain hospitals.
SUBCHAPTER B--PROSPECTIVE PAYMENT SYSTEM FOR PPS-EXEMPT HOSPITALS
Sec. 4421. Prospective payment for inpatient rehabilitation hospital
services.
Sec. 4422. Development of proposal on payments for long-term care
hospitals.
Chapter 3--Payment for Skilled Nursing Facilities
Sec. 4431. Extension of cost limits.
Sec. 4432. Prospective payment for skilled nursing facility services.
Chapter 4--Provisions Related to Hospice Services
Sec. 4441. Payments for hospice services.
Sec. 4442. Payment for home hospice care based on location where care is
furnished.
Sec. 4443. Hospice care benefits periods.
Sec. 4444. Other items and services included in hospice care.
Sec. 4445. Contracting with independent physicians or physician groups
for hospice care services permitted.
Sec. 4446. Waiver of certain staffing requirements for hospice care
programs in nonurbanized areas.
Sec. 4447. Limitation on liability of beneficiaries for certain hospice
coverage denials.
Sec. 4448. Extending the period for physician certification of an
individual's terminal illness.
Sec. 4449. Effective date.
Chapter 5--Other Payment Provisions
Sec. 4451. Reductions in payments for enrollee bad debt.
Sec. 4452. Permanent extension of hemophilia pass-through payment.
Sec. 4453. Reduction in part A medicare premium for certain public
retirees.
Sec. 4454. Coverage of services in religious nonmedical health care
institutions under the medicare and medicaid programs.
Subtitle F--Provisions Relating to Part B Only
Chapter 1--Services of Health Professionals
SUBCHAPTER A--PHYSICIANS' SERVICES
Sec. 4501. Establishment of single conversion factor for 1998.
Sec. 4502. Establishing update to conversion factor to match spending
under sustainable growth rate.
Sec. 4503. Replacement of volume performance standard with sustainable
growth rate.
Sec. 4504. Payment rules for anesthesia services.
Sec. 4505. Implementation of resource-based methodologies.
Sec. 4506. Dissemination of information on high per discharge relative
values for in-hospital physicians' services.
Sec. 4507. Use of private contracts by medicare beneficiaries.
SUBCHAPTER B--OTHER HEALTH CARE PROFESSIONALS
Sec. 4511. Increased medicare reimbursement for nurse practitioners and
clinical nurse specialists.
Sec. 4512. Increased medicare reimbursement for physician assistants.
Sec. 4513. No x-ray required for chiropractic services.
Chapter 2--Payment For Hospital Outpatient Department Services
Sec. 4521. Elimination of formula-driven overpayments (FDO) for certain
outpatient hospital services.
Sec. 4522. Extension of reductions in payments for costs of hospital
outpatient services.
Sec. 4523. Prospective payment system for hospital outpatient department
services.
Chapter 3--Ambulance Services
Sec. 4531. Payments for ambulance services.
Sec. 4532. Demonstration of coverage of ambulance services under
medicare through contracts with units of local government.
Chapter 4--Prospective Payment for Outpatient Rehabilitation Services
Sec. 4541. Prospective payment for outpatient rehabilitation services.
Chapter 5--Other Payment Provisions
Sec. 4551. Payments for durable medical equipment.
Sec. 4552. Oxygen and oxygen equipment.
Sec. 4553. Reduction in updates to payment amounts for clinical
diagnostic laboratory tests; study on laboratory tests.
Sec. 4554. Improvements in administration of laboratory tests benefit.
Sec. 4555. Updates for ambulatory surgical services.
Sec. 4556. Reimbursement for drugs and biologicals.
Sec. 4557. Coverage of oral anti-nausea drugs under chemotherapeutic
regimen.
Sec. 4558. Renal dialysis-related services.
Sec. 4559. Temporary coverage restoration for portable electrocardiogram
transportation.
Chapter 6--Part B Premium and Related Provisions
SUBCHAPTER A--DETERMINATION OF PART B PREMIUM AMOUNT
Sec. 4571. Part B premium.
SUBCHAPTER B--OTHER PROVISIONS RELATED TO PART B PREMIUM
Sec. 4581. Protections under the medicare program for disabled workers
who lose benefits under a group health plan.
Sec. 4582. Governmental entities eligible to elect to pay part B
premiums for eligible individuals.
Subtitle G--Provisions Relating to Parts A and B
Chapter 1--Home Health Services and Benefits
SUBCHAPTER A--PAYMENTS FOR HOME HEALTH SERVICES
Sec. 4601. Recapturing savings resulting from temporary freeze on
payment increases for home health services.
Sec. 4602. Interim payments for home health services.
Sec. 4603. Prospective payment for home health services.
Sec. 4604. Payment based on location where home health service is
furnished.
SUBCHAPTER B--HOME HEALTH BENEFITS
Sec. 4611. Modification of part A home health benefit for individuals
enrolled under part B.
Sec. 4612. Clarification of part-time or intermittent nursing care.
Sec. 4613. Study on definition of homebound.
Sec. 4614. Normative standards for home health claims denials.
Sec. 4615. No home health benefits based solely on drawing blood.
Sec. 4616. Reports to Congress regarding home health cost containment.
Chapter 2--Graduate Medical Education
SUBCHAPTER A--INDIRECT MEDICAL EDUCATION
Sec. 4621. Indirect graduate medical education payments.
Sec. 4622. Payment to hospitals of indirect medical education costs for
Medicare+Choice enrollees.
SUBCHAPTER B--DIRECT GRADUATE MEDICAL EDUCATION
Sec. 4623. Limitation on number of residents and rolling average FTE
count.
Sec. 4624. Payments to hospitals for direct costs of graduate medical
education of Medicare+Choice enrollees.
Sec. 4625. Permitting payment to nonhospital providers.
Sec. 4626. Incentive payments under plans for voluntary reduction in
number of residents.
Sec. 4627. Medicare special reimbursement rule for primary care combined
residency programs.
Sec. 4628. Demonstration project on use of consortia.
Sec. 4629. Recommendations on long-term policies regarding teaching
hospitals and graduate medical education.
Sec. 4630. Study of hospital overhead and supervisory physician
components of direct medical education costs.
Chapter 3--Provisions Relating to Medicare Secondary Payer
Sec. 4631. Permanent extension and revision of certain secondary payer
provisions.
Sec. 4632. Clarification of time and filing limitations.
Sec. 4633. Permitting recovery against third party administrators.
Chapter 4--Other Provisions
Sec. 4641. Placement of advance directive in medical record.
Sec. 4642. Increased certification period for certain organ procurement
organizations.
Sec. 4643. Office of the Chief Actuary in the Health Care Financing
Administration.
Sec. 4644. Conforming amendments to comply with congressional review of
agency rulemaking.
Subtitle H--Medicaid
Chapter 1--Managed Care
Sec. 4701. State option of using managed care; change in terminology.
Sec. 4702. Primary care case management services as State option without
need for waiver.
Sec. 4703. Elimination of 75:25 restriction on risk contracts.
Sec. 4704. Increased beneficiary protections.
Sec. 4705. Quality assurance standards.
Sec. 4706. Solvency standards.
Sec. 4707. Protections against fraud and abuse.
Sec. 4708. Improved administration.
Sec. 4709. 6-month guaranteed eligibility for all individuals enrolled
in managed care.
Sec. 4710. Effective dates.
Chapter 2--Flexibility In Payment of Providers
Sec. 4711. Flexibility in payment methods for hospital, nursing
facility, ICF/MR, and home health services.
Sec. 4712. Payment for center and clinic services.
Sec. 4713. Elimination of obstetrical and pediatric payment rate
requirements.
Sec. 4714. Medicaid payment rates for certain medicare cost-sharing.
Sec. 4715. Treatment of veterans' pensions under medicaid.
Chapter 3--Federal Payments to States
Sec. 4721. Reforming disproportionate share payments under State
medicaid programs.
Sec. 4722. Treatment of State taxes imposed on certain hospitals.
Sec. 4723. Additional funding for State emergency health services
furnished to undocumented aliens.
Sec. 4724. Elimination of waste, fraud, and abuse.
Sec. 4725. Increased FMAPs.
Sec. 4726. Increase in payment limitation for territories.
Chapter 4--Eligibility
Sec. 4731. State option of continuous eligibility for 12 months;
clarification of State option to cover children.
Sec. 4732. Payment of part B premiums.
Sec. 4733. State option to permit workers with disabilities to buy into
medicaid.
Sec. 4734. Penalty for fraudulent eligibility.
Sec. 4735. Treatment of certain settlement payments.
Chapter 5--Benefits
Sec. 4741. Elimination of requirement to pay for private insurance.
Sec. 4742. Physician qualification requirements.
Sec. 4743. Elimination of requirement of prior institutionalization with
respect to habilitation services furnished under a waiver for
home or community-based services.
Sec. 4744. Study and report on EPSDT benefit.
Chapter 6--Administration and Miscellaneous
Sec. 4751. Elimination of duplicative inspection of care requirements
for ICFS/MR and mental hospitals.
Sec. 4752. Alternative sanctions for noncompliant ICFS/MR.
Sec. 4753. Modification of MMIS requirements.
Sec. 4754. Facilitating imposition of State alternative remedies on
noncompliant nursing facilities.
Sec. 4755. Removal of name from nurse aide registry.
Sec. 4756. Medically accepted indication.
Sec. 4757. Continuation of State-wide section 1115 medicaid waivers.
Sec. 4758. Extension of moratorium.
Sec. 4759. Extension of effective date for State law amendment.
Subtitle I--Programs of All-Inclusive Care for the Elderly (PACE)
Sec. 4801. Coverage of PACE under the medicare program.
Sec. 4802. Establishment of PACE program as medicaid State option.
Sec. 4803. Effective date; transition.
Sec. 4804. Study and reports.
Subtitle J--State Children's Health Insurance Program
Chapter 1--State Children's Health Insurance Program
Sec. 4901. Establishment of program.
``TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM
``Sec. 2101. Purpose; State child health plans.
``Sec. 2102. General contents of State child health plan;
eligibility; outreach.
``Sec. 2103. Coverage requirements for children's health insurance.
``Sec. 2104. Allotments.
``Sec. 2105. Payments to States.
``Sec. 2106. Process for submission, approval, and amendment of
State child health plans.
``Sec. 2107. Strategic objectives and performance goals; plan
administration.
``Sec. 2108. Annual reports; evaluations.
``Sec. 2109. Miscellaneous provisions.
``Sec. 2110. Definitions.
Chapter 2--Expanded Coverage of Children Under Medicaid
Sec. 4911. Optional use of State child health assistance funds for
enhanced medicaid match for expanded medicaid eligibility.
Sec. 4912. Medicaid presumptive eligibility for low-income children.
Sec. 4913. Continuation of medicaid eligibility for disabled children
who lose SSI benefits.
Chapter 3--Diabetes Grant Programs
Sec. 4921. Special diabetes programs for children with Type I diabetes.
Sec. 4922. Special diabetes programs for Indians.
Sec. 4923. Report on diabetes grant programs.
Subtitle A--Medicare+Choice Program
CHAPTER 1--MEDICARE+CHOICE PROGRAM
Subchapter A--Medicare+Choice Program
SEC. 4001. ESTABLISHMENT OF MEDICARE+CHOICE PROGRAM.
Title XVIII is amended by redesignating part C as part D and by
inserting after part B the following new part:
``Part C--Medicare+Choice Program
``eligibility, election, and enrollment
``Sec. 1851. (a) Choice of Medicare Benefits Through
Medicare+Choice Plans.--
``(1) In general.--Subject to the provisions of this section,
each Medicare+Choice eligible individual (as defined in paragraph
(3)) is entitled to elect to receive benefits under this title--
``(A) through the original medicare fee-for-service program
under parts A and B, or
``(B) through enrollment in a Medicare+Choice plan under
this part.
``(2) Types of medicare+choice plans that may be available.--A
Medicare+Choice plan may be any of the following types of plans of
health insurance:
``(A) Coordinated care plans.--Coordinated care plans which
provide health care services, including but not limited to
health maintenance organization plans (with or without point of
service options), plans offered by provider-sponsored
organizations (as defined in section 1855(d)), and preferred
provider organization plans.
``(B) Combination of msa plan and contributions to
medicare+choice msa.--An MSA plan, as defined in section
1859(b)(3), and a contribution into a Medicare+Choice medical
savings account (MSA).
``(C) Private fee-for-service plans.--A Medicare+Choice
private fee-for-service plan, as defined in section 1859(b)(2).
``(3) Medicare+choice eligible individual.--
``(A) In general.--In this title, subject to subparagraph
(B), the term `Medicare+Choice eligible individual' means an
individual who is entitled to benefits under part A and
enrolled under part B.
``(B) Special rule for end-stage renal disease.--Such term
shall not include an individual medically determined to have
end-stage renal disease, except that an individual who develops
end-stage renal disease while enrolled in a Medicare+Choice
plan may continue to be enrolled in that plan.
``(b) Special Rules.--
``(1) Residence requirement.--
``(A) In general.--Except as the Secretary may otherwise
provide, an individual is eligible to elect a Medicare+Choice
plan offered by a Medicare+Choice organization only if the plan
serves the geographic area in which the individual resides.
``(B) Continuation of enrollment permitted.--Pursuant to
rules specified by the Secretary, the Secretary shall provide
that a plan may offer to all individuals residing in a
geographic area the option to continue enrollment in the plan,
notwithstanding that the individual no longer resides in the
service area of the plan, so long as the plan provides that
individuals exercising this option have, as part of the basic
benefits described in section 1852(a)(1)(A), reasonable access
within that geographic area to the full range of basic
benefits, subject to reasonable cost sharing liability in
obtaining such benefits.
``(2) Special rule for certain individuals covered under fehbp
or eligible for veterans or military health benefits, veterans.--
``(A) FEHBP.--An individual who is enrolled in a health
benefit plan under chapter 89 of title 5, United States Code,
is not eligible to enroll in an MSA plan until such time as the
Director of the Office of Management and Budget certifies to
the Secretary that the Office of Personnel Management has
adopted policies which will ensure that the enrollment of such
individuals in such plans will not result in increased
expenditures for the Federal Government for health benefit
plans under such chapter.
``(B) VA and dod.--The Secretary may apply rules similar to
the rules described in subparagraph (A) in the case of
individuals who are eligible for health care benefits under
chapter 55 of title 10, United States Code, or under chapter 17
of title 38 of such Code.
``(3) Limitation on eligibility of qualified medicare
beneficiaries and other medicaid beneficiaries to enroll in an msa
plan.--An individual who is a qualified medicare beneficiary (as
defined in section 1905(p)(1)), a qualified disabled and working
individual (described in section 1905(s)), an individual described
in section 1902(a)(10)(E)(iii), or otherwise entitled to medicare
cost-sharing under a State plan under title XIX is not eligible to
enroll in an MSA plan.
``(4) Coverage under msa plans on a demonstration basis.--
``(A) In general.--An individual is not eligible to enroll
in an MSA plan under this part--
``(i) on or after January 1, 2003, unless the
enrollment is the continuation of such an enrollment in
effect as of such date; or
``(ii) as of any date if the number of such individuals
so enrolled as of such date has reached 390,000.
Under rules established by the Secretary, an individual is not
eligible to enroll (or continue enrollment) in an MSA plan for
a year unless the individual provides assurances satisfactory
to the Secretary that the individual will reside in the United
States for at least 183 days during the year.
``(B) Evaluation.--The Secretary shall regularly evaluate
the impact of permitting enrollment in MSA plans under this
part on selection (including adverse selection), use of
preventive care, access to care, and the financial status of
the Trust Funds under this title.
``(C) Reports.--The Secretary shall submit to Congress
periodic reports on the numbers of individuals enrolled in such
plans and on the evaluation being conducted under subparagraph
(B). The Secretary shall submit such a report, by not later
than March 1, 2002, on whether the time limitation under
subparagraph (A)(i) should be extended or removed and whether
to change the numerical limitation under subparagraph (A)(ii).
``(c) Process for Exercising Choice.--
``(1) In general.--The Secretary shall establish a process
through which elections described in subsection (a) are made and
changed, including the form and manner in which such elections are
made and changed. Such elections shall be made or changed only
during coverage election periods specified under subsection (e) and
shall become effective as provided in subsection (f).
``(2) Coordination through medicare+choice organizations.--
``(A) Enrollment.--Such process shall permit an individual
who wishes to elect a Medicare+Choice plan offered by a
Medicare+Choice organization to make such election through the
filing of an appropriate election form with the organization.
``(B) Disenrollment.--Such process shall permit an
individual, who has elected a Medicare+Choice plan offered by a
Medicare+Choice organization and who wishes to terminate such
election, to terminate such election through the filing of an
appropriate election form with the organization.
``(3) Default.--
``(A) Initial election.--
``(i) In general.--Subject to clause (ii), an
individual who fails to make an election during an initial
election period under subsection (e)(1) is deemed to have
chosen the original medicare fee-for-service program
option.
``(ii) Seamless continuation of coverage.--The
Secretary may establish procedures under which an
individual who is enrolled in a health plan (other than
Medicare+Choice plan) offered by a Medicare+Choice
organization at the time of the initial election period and
who fails to elect to receive coverage other than through
the organization is deemed to have elected the
Medicare+Choice plan offered by the organization (or, if
the organization offers more than one such plan, such plan
or plans as the Secretary identifies under such
procedures).
``(B) Continuing periods.--An individual who has made (or
is deemed to have made) an election under this section is
considered to have continued to make such election until such
time as--
``(i) the individual changes the election under this
section, or
``(ii) the Medicare+Choice plan with respect to which
such election is in effect is discontinued or, subject to
subsection (b)(1)(B), no longer serves the area in which
the individual resides.
``(d) Providing Information To Promote Informed Choice.--
``(1) In general.--The Secretary shall provide for activities
under this subsection to broadly disseminate information to
medicare beneficiaries (and prospective medicare beneficiaries) on
the coverage options provided under this section in order to
promote an active, informed selection among such options.
``(2) Provision of notice.--
``(A) Open season notification.--At least 15 days before
the beginning of each annual, coordinated election period (as
defined in subsection (e)(3)(B)), the Secretary shall mail to
each Medicare+Choice eligible individual residing in an area
the following:
``(i) General information.--The general information
described in paragraph (3).
``(ii) List of plans and comparison of plan options.--A
list identifying the Medicare+Choice plans that are (or
will be) available to residents of the area and information
described in paragraph (4) concerning such plans. Such
information shall be presented in a comparative form.
``(iii) Additional information.--Any other information
that the Secretary determines will assist the individual in
making the election under this section.
The mailing of such information shall be coordinated, to the
extent practicable, with the mailing of any annual notice under
section 1804.
``(B) Notification to newly eligible medicare+choice
eligible individuals.--To the extent practicable, the Secretary
shall, not later than 30 days before the beginning of the
initial Medicare+Choice enrollment period for an individual
described in subsection (e)(1), mail to the individual the
information described in subparagraph (A).
``(C) Form.--The information disseminated under this
paragraph shall be written and formatted using language that is
easily understandable by medicare beneficiaries.
``(D) Periodic updating.--The information described in
subparagraph (A) shall be updated on at least an annual basis
to reflect changes in the availability of Medicare+Choice plans
and the benefits and Medicare+Choice monthly basic and
supplemental beneficiary premiums for such plans.
``(3) General information.--General information under this
paragraph, with respect to coverage under this part during a year,
shall include the following:
``(A) Benefits under original medicare fee-for-service
program option.--A general description of the benefits covered
under the original medicare fee-for-service program under parts
A and B, including--
``(i) covered items and services,
``(ii) beneficiary cost sharing, such as deductibles,
coinsurance, and copayment amounts, and
``(iii) any beneficiary liability for balance billing.
``(B) Election procedures.--Information and instructions on
how to exercise election options under this section.
``(C) Rights.--A general description of procedural rights
(including grievance and appeals procedures) of beneficiaries
under the original medicare fee-for-service program and the
Medicare+Choice program and the right to be protected against
discrimination based on health status-related factors under
section 1852(b).
``(D) Information on medigap and medicare select.--A
general description of the benefits, enrollment rights, and
other requirements applicable to medicare supplemental policies
under section 1882 and provisions relating to medicare select
policies described in section 1882(t).
``(E) Potential for contract termination.--The fact that a
Medicare+Choice organization may terminate its contract, refuse
to renew its contract, or reduce the service area included in
its contract, under this part, and the effect of such a
termination, nonrenewal, or service area reduction may have on
individuals enrolled with the Medicare+Choice plan under this
part.
``(4) Information comparing plan options.--Information under
this paragraph, with respect to a Medicare+Choice plan for a year,
shall include the following:
``(A) Benefits.--The benefits covered under the plan,
including the following:
``(i) Covered items and services beyond those provided
under the original medicare fee-for-service program.
``(ii) Any beneficiary cost sharing.
``(iii) Any maximum limitations on out-of-pocket
expenses.
``(iv) In the case of an MSA plan, differences in cost
sharing, premiums, and balance billing under such a plan
compared to under other Medicare+Choice plans.
``(v) In the case of a Medicare+Choice private fee-for-
service plan, differences in cost sharing, premiums, and
balance billing under such a plan compared to under other
Medicare+Choice plans.
``(vi) The extent to which an enrollee may obtain
benefits through out-of-network health care providers.
``(vii) The extent to which an enrollee may select
among in-network providers and the types of providers
participating in the plan's network.
``(viii) The organization's coverage of emergency and
urgently needed care.
``(B) Premiums.--The Medicare+Choice monthly basic
beneficiary premium and Medicare+Choice monthly supplemental
beneficiary premium, if any, for the plan or, in the case of an
MSA plan, the Medicare+Choice monthly MSA premium.
``(C) Service area.--The service area of the plan.
``(D) Quality and performance.--To the extent available,
plan quality and performance indicators for the benefits under
the plan (and how they compare to such indicators under the
original medicare fee-for-service program under parts A and B
in the area involved), including--
``(i) disenrollment rates for medicare enrollees
electing to receive benefits through the plan for the
previous 2 years (excluding disenrollment due to death or
moving outside the plan's service area),
``(ii) information on medicare enrollee satisfaction,
``(iii) information on health outcomes, and
``(iv) the recent record regarding compliance of the
plan with requirements of this part (as determined by the
Secretary).
``(E) Supplemental benefits.--Whether the organization
offering the plan includes mandatory supplemental benefits in
its base benefit package or offers optional supplemental
benefits and the terms and conditions (including premiums) for
such coverage.
``(5) Maintaining a toll-free number and internet site.--The
Secretary shall maintain a toll-free number for inquiries regarding
Medicare+Choice options and the operation of this part in all areas
in which Medicare+Choice plans are offered and an Internet site
through which individuals may electronically obtain information on
such options and Medicare+Choice plans.
``(6) Use of non-federal entities.--The Secretary may enter
into contracts with non-Federal entities to carry out activities
under this subsection.
``(7) Provision of information.--A Medicare+Choice organization
shall provide the Secretary with such information on the
organization and each Medicare+Choice plan it offers as may be
required for the preparation of the information referred to in
paragraph (2)(A).
``(e) Coverage Election Periods.--
``(1) Initial choice upon eligibility to make election if
medicare+choice plans available to individual.--If, at the time an
individual first becomes entitled to benefits under part A and
enrolled under part B, there is one or more Medicare+Choice plans
offered in the area in which the individual resides, the individual
shall make the election under this section during a period
specified by the Secretary such that if the individual elects a
Medicare+Choice plan during the period, coverage under the plan
becomes effective as of the first date on which the individual may
receive such coverage.
``(2) Open enrollment and disenrollment opportunities.--Subject
to paragraph (5)--
``(A) Continuous open enrollment and disenrollment through
2001.--At any time during 1998, 1999, 2000, and 2001, a
Medicare+Choice eligible individual may change the election
under subsection (a)(1).
``(B) Continuous open enrollment and disenrollment for
first 6 months during 2002.--
``(i) In general.--Subject to clause (ii), at any time
during the first 6 months of 2002, or, if the individual
first becomes a Medicare+Choice eligible individual during
2002, during the first 6 months during 2002 in which the
individual is a Medicare+Choice eligible individual, a
Medicare+Choice eligible individual may change the election
under subsection (a)(1).
``(ii) Limitation of one change.--An individual may
exercise the right under clause (i) only once. The
limitation under this clause shall not apply to changes in
elections effected during an annual, coordinated election
period under paragraph (3) or during a special enrollment
period under the first sentence of paragraph (4).
``(C) Continuous open enrollment and disenrollment for
first 3 months in subsequent years.--
``(i) In general.--Subject to clause (ii), at any time
during the first 3 months of a year after 2002, or, if the
individual first becomes a Medicare+Choice eligible
individual during a year after 2002, during the first 3
months of such year in which the individual is a
Medicare+Choice eligible individual, a Medicare+Choice
eligible individual may change the election under
subsection (a)(1).
``(ii) Limitation of one change during open enrollment
period each year.--An individual may exercise the right
under clause (i) only once during the applicable 3-month
period described in such clause in each year. The
limitation under this clause shall not apply to changes in
elections effected during an annual, coordinated election
period under paragraph (3) or during a special enrollment
period under paragraph (4).
``(3) Annual, coordinated election period.--
``(A) In general.--Subject to paragraph (5), each
individual who is eligible to make an election under this
section may change such election during an annual, coordinated
election period.
``(B) Annual, coordinated election period.--For purposes of
this section, the term `annual, coordinated election period'
means, with respect to a calendar year (beginning with 2000),
the month of November before such year.
``(C) Medicare+choice health information fairs.--In the
month of November of each year (beginning with 1999), in
conjunction with the annual coordinated election period defined
in subparagraph (B), the Secretary shall provide for a
nationally coordinated educational and publicity campaign to
inform Medicare+Choice eligible individuals about
Medicare+Choice plans and the election process provided under
this section.
``(D) Special information campaign in 1998.--During
November 1998 the Secretary shall provide for an educational
and publicity campaign to inform Medicare+Choice eligible
individuals about the availability of Medicare+Choice plans,
and eligible organizations with risk-sharing contracts under
section 1876, offered in different areas and the election
process provided under this section.
``(4) Special election periods.--Effective as of January 1,
2002, an individual may discontinue an election of a
Medicare+Choice plan offered by a Medicare+Choice organization
other than during an annual, coordinated election period and make a
new election under this section if--
``(A) the organization's or plan's certification under this
part has been terminated or the organization has terminated or
otherwise discontinued providing the plan in the area in which
the individual resides;
``(B) the individual is no longer eligible to elect the
plan because of a change in the individual's place of residence
or other change in circumstances (specified by the Secretary,
but not including termination of the individual's enrollment on
the basis described in clause (i) or (ii) of subsection
(g)(3)(B));
``(C) the individual demonstrates (in accordance with
guidelines established by the Secretary) that--
``(i) the organization offering the plan substantially
violated a material provision of the organization's
contract under this part in relation to the individual
(including the failure to provide an enrollee on a timely
basis medically necessary care for which benefits are
available under the plan or the failure to provide such
covered care in accordance with applicable quality
standards); or
``(ii) the organization (or an agent or other entity
acting on the organization's behalf) materially
misrepresented the plan's provisions in marketing the plan
to the individual; or
``(D) the individual meets such other exceptional
conditions as the Secretary may provide.
Effective as of January 1, 2002, an individual who, upon first
becoming eligible for benefits under part A at age 65, enrolls in a
Medicare+Choice plan under this part, the individual may
discontinue the election of such plan, and elect coverage under the
original fee-for-service plan, at any time during the 12-month
period beginning on the effective date of such enrollment.
``(5) Special rules for msa plans.--Notwithstanding the
preceding provisions of this subsection, an individual--
``(A) may elect an MSA plan only during--
``(i) an initial open enrollment period described in
paragraph (1),
``(ii) an annual, coordinated election period described
in paragraph (3)(B), or
``(iii) the month of November 1998;
``(B) subject to subparagraph (C), may not discontinue an
election of an MSA plan except during the periods described in
clause (ii) or (iii) of subparagraph (A) and under the first
sentence of paragraph (4); and
``(C) who elects an MSA plan during an annual, coordinated
election period, and who never previously had elected such a
plan, may revoke such election, in a manner determined by the
Secretary, by not later than December 15 following the date of
the election.
``(6) Open enrollment periods.--Subject to paragraph (5), a
Medicare+Choice organization--
``(A) shall accept elections or changes to elections during
the initial enrollment periods described in paragraph (1),
during the month of November 1998 and each subsequent year (as
provided in paragraph (3)), and during special election periods
described in the first sentence of paragraph (4); and
``(B) may accept other changes to elections at such other
times as the organization provides.
``(f) Effectiveness of Elections and Changes of Elections.--
``(1) During initial coverage election period.--An election of
coverage made during the initial coverage election period under
subsection (e)(1)(A) shall take effect upon the date the individual
becomes entitled to benefits under part A and enrolled under part
B, except as the Secretary may provide (consistent with section
1838) in order to prevent retroactive coverage.
``(2) During continuous open enrollment periods.--An election
or change of coverage made under subsection (e)(2) shall take
effect with the first day of the first calendar month following the
date on which the election is made.
``(3) Annual, coordinated election period.--An election or
change of coverage made during an annual, coordinated election
period (as defined in subsection (e)(3)(B)) in a year shall take
effect as of the first day of the following year.
``(4) Other periods.--An election or change of coverage made
during any other period under subsection (e)(4) shall take effect
in such manner as the Secretary provides in a manner consistent (to
the extent practicable) with protecting continuity of health
benefit coverage.
``(g) Guaranteed Issue and Renewal.--
``(1) In general.--Except as provided in this subsection, a
Medicare+Choice organization shall provide that at any time during
which elections are accepted under this section with respect to a
Medicare+Choice plan offered by the organization, the organization
will accept without restrictions individuals who are eligible to
make such election.
``(2) Priority.--If the Secretary determines that a
Medicare+Choice organization, in relation to a Medicare+Choice plan
it offers, has a capacity limit and the number of Medicare+Choice
eligible individuals who elect the plan under this section exceeds
the capacity limit, the organization may limit the election of
individuals of the plan under this section but only if priority in
election is provided--
``(A) first to such individuals as have elected the plan at
the time of the determination, and
``(B) then to other such individuals in such a manner that
does not discriminate, on a basis described in section 1852(b),
among the individuals (who seek to elect the plan).
The preceding sentence shall not apply if it would result in the
enrollment of enrollees substantially nonrepresentative, as
determined in accordance with regulations of the Secretary, of the
medicare population in the service area of the plan.
``(3) Limitation on termination of election.--
``(A) In general.--Subject to subparagraph (B), a
Medicare+Choice organization may not for any reason terminate
the election of any individual under this section for a
Medicare+Choice plan it offers.
``(B) Basis for termination of election.--A Medicare+Choice
organization may terminate an individual's election under this
section with respect to a Medicare+Choice plan it offers if--
``(i) any Medicare+Choice monthly basic and
supplemental beneficiary premiums required with respect to
such plan are not paid on a timely basis (consistent with
standards under section 1856 that provide for a grace
period for late payment of such premiums),
``(ii) the individual has engaged in disruptive
behavior (as specified in such standards), or
``(iii) the plan is terminated with respect to all
individuals under this part in the area in which the
individual resides.
``(C) Consequence of termination.--
``(i) Terminations for cause.--Any individual whose
election is terminated under clause (i) or (ii) of
subparagraph (B) is deemed to have elected the original
medicare fee-for-service program option described in
subsection (a)(1)(A).
``(ii) Termination based on plan termination or service
area reduction.--Any individual whose election is
terminated under subparagraph (B)(iii) shall have a special
election period under subsection (e)(4)(A) in which to
change coverage to coverage under another Medicare+Choice
plan. Such an individual who fails to make an election
during such period is deemed to have chosen to change
coverage to the original medicare fee-for-service program
option described in subsection (a)(1)(A).
``(D) Organization obligation with respect to election
forms.--Pursuant to a contract under section 1857, each
Medicare+Choice organization receiving an election form under
subsection (c)(2) shall transmit to the Secretary (at such time
and in such manner as the Secretary may specify) a copy of such
form or such other information respecting the election as the
Secretary may specify.
``(h) Approval of Marketing Material and Application Forms.--
``(1) Submission.--No marketing material or application form
may be distributed by a Medicare+Choice organization to (or for the
use of) Medicare+Choice eligible individuals unless--
``(A) at least 45 days before the date of distribution the
organization has submitted the material or form to the
Secretary for review, and
``(B) the Secretary has not disapproved the distribution of
such material or form.
``(2) Review.--The standards established under section 1856
shall include guidelines for the review of any material or form
submitted and under such guidelines the Secretary shall disapprove
(or later require the correction of) such material or form if the
material or form is materially inaccurate or misleading or
otherwise makes a material misrepresentation.
``(3) Deemed approval (1-stop shopping).--In the case of
material or form that is submitted under paragraph (1)(A) to the
Secretary or a regional office of the Department of Health and
Human Services and the Secretary or the office has not disapproved
the distribution of marketing material or form under paragraph
(1)(B) with respect to a Medicare+Choice plan in an area, the
Secretary is deemed not to have disapproved such distribution in
all other areas covered by the plan and organization except with
regard to that portion of such material or form that is specific
only to an area involved.
``(4) Prohibition of certain marketing practices.--Each
Medicare+Choice organization shall conform to fair marketing
standards, in relation to Medicare+Choice plans offered under this
part, included in the standards established under section 1856.
Such standards--
``(A) shall not permit a Medicare+Choice organization to
provide for cash or other monetary rebates as an inducement for
enrollment or otherwise, and
``(B) may include a prohibition against a Medicare+Choice
organization (or agent of such an organization) completing any
portion of any election form used to carry out elections under
this section on behalf of any individual.
``(i) Effect of Election of Medicare+Choice Plan Option.--
``(1) Payments to organizations.--Subject to sections
1852(a)(5), 1853(g), 1853(h), 1886(d)(11), and 1886(h)(3)(D),
payments under a contract with a Medicare+Choice organization under
section 1853(a) with respect to an individual electing a
Medicare+Choice plan offered by the organization shall be instead
of the amounts which (in the absence of the contract) would
otherwise be payable under parts A and B for items and services
furnished to the individual.
``(2) Only organization entitled to payment.--Subject to
sections 1853(e), 1853(g), 1853(h), 1857(f)(2), and 1886(d)(11),
and 1886(h)(3)(D), only the Medicare+Choice organization shall be
entitled to receive payments from the Secretary under this title
for services furnished to the individual.
``benefits and beneficiary protections
``Sec. 1852. (a) Basic Benefits.--
``(1) In general.--Except as provided in section 1859(b)(3) for
MSA plans, each Medicare+Choice plan shall provide to members
enrolled under this part, through providers and other persons that
meet the applicable requirements of this title and part A of title
XI--
``(A) 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, and
``(B) additional benefits required under section
1854(f)(1)(A).
``(2) Satisfaction of requirement.--
``(A) In general.--A Medicare+Choice plan (other than an
MSA plan) offered by a Medicare+Choice organization satisfies
paragraph (1)(A), with respect to benefits for items and
services furnished other than through a provider or other
person that has a contract with the organization offering the
plan, if the plan provides payment in an amount so that--
``(i) the sum of such payment amount and any cost
sharing provided for under the plan, is equal to at least
``(ii) the total dollar amount of payment for such
items and services as would otherwise be authorized under
parts A and B (including any balance billing permitted
under such parts).
``(B) Reference to related provisions.--For provision
relating to--
``(i) limitations on balance billing against
Medicare+Choice organizations for non-contract providers,
see sections 1852(k) and 1866(a)(1)(O), and
``(ii) limiting actuarial value of enrollee liability
for covered benefits, see section 1854(e).
``(3) Supplemental benefits.--
``(A) Benefits included subject to secretary's approval.--
Each Medicare+Choice organization may provide to individuals
enrolled under this part, other than under an MSA plan,
(without affording those individuals an option to decline the
coverage) supplemental health care benefits that the Secretary
may approve. The Secretary shall approve any such supplemental
benefits unless the Secretary determines that including such
supplemental benefits would substantially discourage enrollment
by Medicare+Choice eligible individuals with the organization.
``(B) At enrollees' option.--
``(i) In general.--Subject to clause (ii), a
Medicare+Choice organization may provide to individuals
enrolled under this part supplemental health care benefits
that the individuals may elect, at their option, to have
covered.
``(ii) Special rule for msa plans.--A Medicare+Choice
organization may not provide, under an MSA plan,
supplemental health care benefits that cover the deductible
described in section 1859(b)(2)(B). In applying the
previous sentence, health benefits described in section
1882(u)(2)(B) shall not be treated as covering such
deductible.
``(C) Application to Medicare+Choice private fee-for-
service plans.--Nothing in this paragraph shall be construed as
preventing a Medicare+Choice private fee-for-service plan from
offering supplemental benefits that include payment for some or
all of the balance billing amounts permitted consistent with
section 1852(k) and coverage of additional services that the
plan finds to be medically necessary.
``(4) Organization as secondary payer.--Notwithstanding any
other provision of law, a Medicare+Choice organization may (in the
case of the provision of items and services to an individual under
a Medicare+Choice plan under circumstances in which payment under
this title is made secondary pursuant to section 1862(b)(2)) charge
or authorize the provider of such services to charge, in accordance
with the charges allowed under a law, plan, or policy described in
such section--
``(A) the insurance carrier, employer, or other entity
which under such law, plan, or policy is to pay for the
provision of such services, or
``(B) such individual to the extent that the individual has
been paid under such law, plan, or policy for such services.
``(5) National coverage determinations.--If there is a national
coverage determination made in the period beginning on the date of
an announcement under section 1853(b) and ending on the date of the
next announcement under such section and the Secretary projects
that the determination will result in a significant change in the
costs to a Medicare+Choice organization of providing the benefits
that are the subject of such national coverage determination and
that such change in costs was not incorporated in the determination
of the annual Medicare+Choice capitation rate under section 1853
included in the announcement made at the beginning of such period,
then, unless otherwise required by law--
``(A) such determination shall not apply to contracts under
this part until the first contract year that begins after the
end of such period, and
``(B) if such coverage determination provides for coverage
of additional benefits or coverage under additional
circumstances, section 1851(i)(1) shall not apply to payment
for such additional benefits or benefits provided under such
additional circumstances until the first contract year that
begins after the end of such period.
``(b) Antidiscrimination.--
``(1) Beneficiaries.--
``(A) In general.--A Medicare+Choice organization may not
deny, limit, or condition the coverage or provision of benefits
under this part, for individuals permitted to be enrolled with
the organization under this part, based on any health status-
related factor described in section 2702(a)(1) of the Public
Health Service Act.
``(B) Construction.--Subparagraph (A) shall not be
construed as requiring a Medicare+Choice organization to enroll
individuals who are determined to have end-stage renal disease,
except as provided under section 1851(a)(3)(B).
``(2) Providers.--A Medicare+Choice organization shall not
discriminate with respect to participation, reimbursement, or
indemnification as to any provider who is acting within the scope
of the provider's license or certification under applicable State
law, solely on the basis of such license or certification. This
paragraph shall not be construed to prohibit a plan from including
providers only to the extent necessary to meet the needs of the
plan's enrollees or from establishing any measure designed to
maintain quality and control costs consistent with the
responsibilities of the plan.
``(c) Disclosure Requirements.--
``(1) Detailed description of plan provisions.--A
Medicare+Choice organization shall disclose, in clear, accurate,
and standardized form to each enrollee with a Medicare+Choice plan
offered by the organization under this part at the time of
enrollment and at least annually thereafter, the following
information regarding such plan:
``(A) Service area.--The plan's service area.
``(B) Benefits.--Benefits offered under the plan, including
information described in section 1851(d)(3)(A) and exclusions
from coverage and, if it is an MSA plan, a comparison of
benefits under such a plan with benefits under other
Medicare+Choice plans.
``(C) Access.--The number, mix, and distribution of plan
providers, out-of-network coverage (if any) provided by the
plan, and any point-of-service option (including the
supplemental premium for such option).
``(D) Out-of-area coverage.--Out-of-area coverage provided
by the plan.
``(E) Emergency coverage.--Coverage of emergency services,
including--
``(i) the appropriate use of emergency services,
including use of the 911 telephone system or its local
equivalent in emergency situations and an explanation of
what constitutes an emergency situation;
``(ii) the process and procedures of the plan for
obtaining emergency services; and
``(iii) the locations of (I) emergency departments, and
(II) other settings, in which plan physicians and hospitals
provide emergency services and post-stabilization care.
``(F) Supplemental benefits.--Supplemental benefits
available from the organization offering the plan, including--
``(i) whether the supplemental benefits are optional,
``(ii) the supplemental benefits covered, and
``(iii) the Medicare+Choice monthly supplemental
beneficiary premium for the supplemental benefits.
``(G) Prior authorization rules.--Rules regarding prior
authorization or other review requirements that could result in
nonpayment.
``(H) Plan grievance and appeals procedures.--All plan
appeal or grievance rights and procedures.
``(I) Quality assurance program.--A description of the
organization's quality assurance program under subsection (e).
``(2) Disclosure upon request.--Upon request of a
Medicare+Choice eligible individual, a Medicare+Choice organization
must provide the following information to such individual:
``(A) The general coverage information and general
comparative plan information made available under clauses (i)
and (ii) of section 1851(d)(2)(A).
``(B) Information on procedures used by the organization to
control utilization of services and expenditures.
``(C) Information on the number of grievances,
redeterminations, and appeals and on the disposition in the
aggregate of such matters.
``(D) An overall summary description as to the method of
compensation of participating physicians.
``(d) Access to Services.--
``(1) In general.--A Medicare+Choice organization offering a
Medicare+Choice plan may select the providers from whom the
benefits under the plan are provided so long as--
``(A) the organization makes such benefits available and
accessible to each individual electing the plan within the plan
service area with reasonable promptness and in a manner which
assures continuity in the provision of benefits;
``(B) when medically necessary the organization makes such
benefits available and accessible 24 hours a day and 7 days a
week;
``(C) the plan provides for reimbursement with respect to
services which are covered under subparagraphs (A) and (B) and
which are provided to such an individual other than through the
organization, if--
``(i) the services were not emergency services (as
defined in paragraph (3)), but (I) the services were
medically necessary and immediately required because of an
unforeseen illness, injury, or condition, and (II) it was
not reasonable given the circumstances to obtain the
services through the organization,
``(ii) the services were renal dialysis services and
were provided other than through the organization because
the individual was temporarily out of the plan's service
area, or
``(iii) the services are maintenance care or post-
stabilization care covered under the guidelines established
under paragraph (2);
``(D) the organization provides access to appropriate
providers, including credentialed specialists, for medically
necessary treatment and services; and
``(E) coverage is provided for emergency services (as
defined in paragraph (3)) without regard to prior authorization
or the emergency care provider's contractual relationship with
the organization.
``(2) Guidelines respecting coordination of post-stabilization
care.--A Medicare+Choice plan shall comply with such guidelines as
the Secretary may prescribe relating to promoting efficient and
timely coordination of appropriate maintenance and post-
stabilization care of an enrollee after the enrollee has been
determined to be stable under section 1867.
``(3) Definition of emergency services.--In this subsection--
``(A) In general.--The term `emergency services' means,
with respect to an individual enrolled with an organization,
covered inpatient and outpatient services that--
``(i) are furnished by a provider that is qualified to
furnish such services under this title, and
``(ii) are needed to evaluate or stabilize an emergency
medical condition (as defined in subparagraph (B)).
``(B) Emergency medical condition based on prudent
layperson.--The term `emergency medical condition' means a
medical condition manifesting itself by acute symptoms of
sufficient severity (including severe pain) such that a prudent
layperson, who possesses an average knowledge of health and
medicine, could reasonably expect the absence of immediate
medical attention to result in--
``(i) placing the health of the individual (or, with
respect to a pregnant woman, the health of the woman or her
unborn child) in serious jeopardy,
``(ii) serious impairment to bodily functions, or
``(iii) serious dysfunction of any bodily organ or
part.
``(4) Assuring access to services in medicare+choice
private fee-for-service plans.--In addition to any other
requirements under this part, in the case of a Medicare+Choice
private fee-for-service plan, the organization offering the
plan must demonstrate to the Secretary that the organization
has sufficient number and range of health care professionals
and providers willing to provide services under the terms of
the plan. The Secretary shall find that an organization has met
such requirement with respect to any category of health care
professional or provider if, with respect to that category of
provider--
``(A) the plan has established payment rates for
covered services furnished by that category of provider
that are not less than the payment rates provided for under
part A, part B, or both, for such services, or
``(B) the plan has contracts or agreements with a
sufficient number and range of providers within such
category to provide covered services under the terms of the
plan,
or a combination of both. The previous sentence shall not be
construed as restricting the persons from whom enrollees under
such a plan may obtain covered benefits.
``(e) Quality Assurance Program.--
``(1) In general.--Each Medicare+Choice organization must have
arrangements, consistent with any regulation, for an ongoing
quality assurance program for health care services it provides to
individuals enrolled with Medicare+Choice plans of the
organization.
``(2) Elements of program.--
``(A) In general.--The quality assurance program of an
organization with respect to a Medicare+Choice plan (other than
a Medicare+Choice private fee-for-service plan or a non-network
MSA plan) it offers shall--
``(i) stress health outcomes and provide for the
collection, analysis, and reporting of data (in accordance
with a quality measurement system that the Secretary
recognizes) that will permit measurement of outcomes and
other indices of the quality of Medicare+Choice plans and
organizations;
``(ii) monitor and evaluate high volume and high risk
services and the care of acute and chronic conditions;
``(iii) evaluate the continuity and coordination of
care that enrollees receive;
``(iv) be evaluated on an ongoing basis as to its
effectiveness;
``(v) include measures of consumer satisfaction;
``(vi) provide the Secretary with such access to
information collected as may be appropriate to monitor and
ensure the quality of care provided under this part;
``(vii) provide review by physicians and other health
care professionals of the process followed in the provision
of such health care services;
``(viii) provide for the establishment of written
protocols for utilization review, based on current
standards of medical practice;
``(ix) have mechanisms to detect both underutilization
and overutilization of services;
``(x) after identifying areas for improvement,
establish or alter practice parameters;
``(xi) take action to improve quality and assesses the
effectiveness of such action through systematic followup;
and
``(xii) make available information on quality and
outcomes measures to facilitate beneficiary comparison and
choice of health coverage options (in such form and on such
quality and outcomes measures as the Secretary determines
to be appropriate).
``(B) Elements of program for organizations offering
medicare+choice private fee-for-service plans and non-network
msa plans.--The quality assurance program of an organization
with respect to a Medicare+Choice private fee-for-service plan
or a non-network MSA plan it offers shall--
``(i) meet the requirements of clauses (i) through (vi)
of subparagraph (A);
``(ii) insofar as it provides for the establishment of
written protocols for utilization review, base such
protocols on current standards of medical practice; and
``(iii) have mechanisms to evaluate utilization of
services and inform providers and enrollees of the results
of such evaluation.
``(C) Definition of non-network msa plan.--In this
subsection, the term `non-network MSA plan' means an MSA plan
offered by a Medicare+Choice organization that does not provide
benefits required to be provided by this part, in whole or in
part, through a defined set of providers under contract, or
under another arrangement, with the organization.
``(3) External review.--
``(A) In general.--Each Medicare+Choice organization shall,
for each Medicare+Choice plan it operates, have an agreement
with an independent quality review and improvement organization
approved by the Secretary to perform functions of the type
described in sections 1154(a)(4)(B) and 1154(a)(14) with
respect to services furnished by Medicare+Choice plans for
which payment is made under this title. The previous sentence
shall not apply to a Medicare+Choice private fee-for-service
plan or a non-network MSA plan that does not employ utilization
review.
``(B) Nonduplication of accreditation.--Except in the case
of the review of quality complaints, and consistent with
subparagraph (C), the Secretary shall ensure that the external
review activities conducted under subparagraph (A) are not
duplicative of review activities conducted as part of the
accreditation process.
``(C) Waiver authority.--The Secretary may waive the
requirement described in subparagraph (A) in the case of an
organization if the Secretary determines that the organization
has consistently maintained an excellent record of quality
assurance and compliance with other requirements under this
part.
``(4) Treatment of accreditation.--The Secretary shall provide
that a Medicare+Choice organization is deemed to meet requirements
of paragraphs (1) and (2) of this subsection and subsection (h)
(relating to confidentiality and accuracy of enrollee records) if
the organization is accredited (and periodically reaccredited) by a
private organization under a process that the Secretary has
determined assures that the organization, as a condition of
accreditation, applies and enforces standards with respect to the
requirements involved that are no less stringent than the standards
established under section 1856 to carry out the respective
requirements.
``(f) Grievance Mechanism.--Each Medicare+Choice organization must
provide meaningful procedures for hearing and resolving grievances
between the organization (including any entity or individual through
which the organization provides health care services) and enrollees
with Medicare+Choice plans of the organization under this part.
``(g) Coverage Determinations, Reconsiderations, and Appeals.--
``(1) Determinations by organization.--
``(A) In general.--A Medicare+Choice organization shall
have a procedure for making determinations regarding whether an
individual enrolled with the plan of the organization under
this part is entitled to receive a health service under this
section and the amount (if any) that the individual is required
to pay with respect to such service. Subject to paragraph (3),
such procedures shall provide for such determination to be made
on a timely basis.
``(B) Explanation of determination.--Such a determination
that denies coverage, in whole in part, shall be in writing and
shall include a statement in understandable language of the
reasons for the denial and a description of the reconsideration
and appeals processes.
``(2) Reconsiderations.--
``(A) In general.--The organization shall provide for
reconsideration of a determination described in paragraph
(1)(B) upon request by the enrollee involved. The
reconsideration shall be within a time period specified by the
Secretary, but shall be made, subject to paragraph (3), not
later than 60 days after the date of the receipt of the request
for reconsideration.
``(B) Physician decision on certain reconsiderations.--A
reconsideration relating to a determination to deny coverage
based on a lack of medical necessity shall be made only by a
physician with appropriate expertise in the field of medicine
which necessitates treatment who is other than a physician
involved in the initial determination.
``(3) Expedited determinations and reconsiderations.--
``(A) Receipt of requests.--
``(i) Enrollee requests.--An enrollee in a
Medicare+Choice plan may request, either in writing or
orally, an expedited determination under paragraph (1) or
an expedited reconsideration under paragraph (2) by the
Medicare+Choice organization.
``(ii) Physician requests.--A physician, regardless
whether the physician is affiliated with the organization
or not, may request, either in writing or orally, such an
expedited determination or reconsideration.
``(B) Organization procedures.--
``(i) In general.--The Medicare+Choice organization
shall maintain procedures for expediting organization
determinations and reconsiderations when, upon request of
an enrollee, the organization determines that the
application of the normal time frame for making a
determination (or a reconsideration involving a
determination) could seriously jeopardize the life or
health of the enrollee or the enrollee's ability to regain
maximum function.
``(ii) Expedition required for physician requests.--In
the case of a request for an expedited determination or
reconsideration made under subparagraph (A)(ii), the
organization shall expedite the determination or
reconsideration if the request indicates that the
application of the normal time frame for making a
determination (or a reconsideration involving a
determination) could seriously jeopardize the life or
health of the enrollee or the enrollee's ability to regain
maximum function
``(iii) Timely response.--In cases described in clauses
(i) and (ii), the organization shall notify the enrollee
(and the physician involved, as appropriate) of the
determination or reconsideration under time limitations
established by the Secretary, but not later than 72 hours
of the time of receipt of the request for the determination
or reconsideration (or receipt of the information necessary
to make the determination or reconsideration), or such
longer period as the Secretary may permit in specified
cases.
``(4) Independent review of certain coverage denials.--The
Secretary shall contract with an independent, outside entity to
review and resolve in a timely manner reconsiderations that affirm
denial of coverage, in whole or in part.
``(5) Appeals.--An enrollee with a Medicare+Choice plan of a
Medicare+Choice organization under this part who is dissatisfied by
reason of the enrollee's failure to receive any health service to
which the enrollee believes the enrollee is entitled and at no
greater charge than the enrollee believes the enrollee is required
to pay is entitled, if the amount in controversy is $100 or more,
to a hearing before the Secretary to the same extent as is provided
in section 205(b), and in any such hearing the Secretary shall make
the organization a party. If the amount in controversy is $1,000 or
more, the individual or organization shall, upon notifying the
other party, be entitled to judicial review of the Secretary's
final decision as provided in section 205(g), and both the
individual and the organization shall be entitled to be parties to
that judicial review. In applying subsections (b) and (g) of
section 205 as provided in this paragraph, and in applying section
205(l) thereto, any reference therein to the Commissioner of Social
Security or the Social Security Administration shall be considered
a reference to the Secretary or the Department of Health and Human
Services, respectively.
``(h) Confidentiality and Accuracy of Enrollee Records.--Insofar as
a Medicare+Choice organization maintains medical records or other
health information regarding enrollees under this part, the
Medicare+Choice organization shall establish procedures--
``(1) to safeguard the privacy of any individually identifiable
enrollee information;
``(2) to maintain such records and information in a manner that
is accurate and timely, and
``(3) to assure timely access of enrollees to such records and
information.
``(i) Information on Advance Directives.--Each Medicare+Choice
organization shall meet the requirement of section 1866(f) (relating to
maintaining written policies and procedures respecting advance
directives).
``(j) Rules Regarding Provider Participation.--
``(1) Procedures.--Insofar as a Medicare+Choice organization
offers benefits under a Medicare+Choice plan through agreements
with physicians, the organization shall establish reasonable
procedures relating to the participation (under an agreement
between a physician and the organization) of physicians under such
a plan. Such procedures shall include--
``(A) providing notice of the rules regarding
participation,
``(B) providing written notice of participation decisions
that are adverse to physicians, and
``(C) providing a process within the organization for
appealing such adverse decisions, including the presentation of
information and views of the physician regarding such decision.
``(2) Consultation in medical policies.--A Medicare+Choice
organization shall consult with physicians who have entered into
participation agreements with the organization regarding the
organization's medical policy, quality, and medical management
procedures.
``(3) Prohibiting interference with provider advice to
enrollees.--
``(A) In general.--Subject to subparagraphs (B) and (C), a
Medicare+Choice organization (in relation to an individual
enrolled under a Medicare+Choice plan offered by the
organization under this part) shall not prohibit or otherwise
restrict a covered health care professional (as defined in
subparagraph (D)) from advising such an individual who is a
patient of the professional about the health status of the
individual or medical care or treatment for the individual's
condition or disease, regardless of whether benefits for such
care or treatment are provided under the plan, if the
professional is acting within the lawful scope of practice.
``(B) Conscience protection.--Subparagraph (A) shall not be
construed as requiring a Medicare+Choice plan to provide,
reimburse for, or provide coverage of a counseling or referral
service if the Medicare+Choice organization offering the plan--
``(i) objects to the provision of such service on moral
or religious grounds; and
``(ii) in the manner and through the written
instrumentalities such Medicare+Choice organization deems
appropriate, makes available information on its policies
regarding such service to prospective enrollees before or
during enrollment and to enrollees within 90 days after the
date that the organization or plan adopts a change in
policy regarding such a counseling or referral service.
``(C) Construction.--Nothing in subparagraph (B) shall be
construed to affect disclosure requirements under State law or
under the Employee Retirement Income Security Act of 1974.
``(D) Health care professional defined.--For purposes of
this paragraph, the term `health care professional' means a
physician (as defined in section 1861(r)) or other health care
professional if coverage for the professional's services is
provided under the Medicare+Choice plan for the services of the
professional. Such term includes a podiatrist, optometrist,
chiropractor, psychologist, dentist, physician assistant,
physical or occupational therapist and therapy assistant,
speech-language pathologist, audiologist, registered or
licensed practical nurse (including nurse practitioner,
clinical nurse specialist, certified registered nurse
anesthetist, and certified nurse-midwife), licensed certified
social worker, registered respiratory therapist, and certified
respiratory therapy technician.
``(4) Limitations on physician incentive plans.--
``(A) In general.--No Medicare+Choice organization may
operate any physician incentive plan (as defined in
subparagraph (B)) unless the following requirements are met:
``(i) No specific payment is made directly or
indirectly under the plan to a physician or physician group
as an inducement to reduce or limit medically necessary
services provided with respect to a specific individual
enrolled with the organization.
``(ii) If the plan places a physician or physician
group at substantial financial risk (as determined by the
Secretary) for services not provided by the physician or
physician group, the organization--
``(I) provides stop-loss protection for the
physician or group that is adequate and appropriate,
based on standards developed by the Secretary that take
into account the number of physicians placed at such
substantial financial risk in the group or under the
plan and the number of individuals enrolled with the
organization who receive services from the physician or
group, and
``(II) conducts periodic surveys of both
individuals enrolled and individuals previously
enrolled with the organization to determine the degree
of access of such individuals to services provided by
the organization and satisfaction with the quality of
such services.
``(iii) The organization provides the Secretary with
descriptive information regarding the plan, sufficient to
permit the Secretary to determine whether the plan is in
compliance with the requirements of this subparagraph.
``(B) Physician incentive plan defined.--In this paragraph,
the term `physician incentive plan' means any compensation
arrangement between a Medicare+Choice organization and a
physician or physician group that may directly or indirectly
have the effect of reducing or limiting services provided with
respect to individuals enrolled with the organization under
this part.
``(5) Limitation on provider indemnification.--A
Medicare+Choice organization may not provide (directly or
indirectly) for a health care professional, provider of services,
or other entity providing health care services (or group of such
professionals, providers, or entities) to indemnify the
organization against any liability resulting from a civil action
brought for any damage caused to an enrollee with a Medicare+Choice
plan of the organization under this part by the organization's
denial of medically necessary care.
``(6) Special rules for medicare+choice private fee-for-service
plans.--For purposes of applying this part (including subsection
(k)(1)) and section 1866(a)(1)(O), a hospital (or other provider of
services), a physician or other health care professional, or other
entity furnishing health care services is treated as having an
agreement or contract in effect with a Medicare+Choice organization
(with respect to an individual enrolled in a Medicare+Choice
private fee-for-service plan it offers), if--
``(A) the provider, professional, or other entity furnishes
services that are covered under the plan to such an enrollee;
and
``(B) before providing such services, the provider,
professional, or other entity --
``(i) has been informed of the individual's enrollment
under the plan, and
``(ii) either--
``(I) has been informed of the terms and conditions
of payment for such services under the plan, or
``(II) is given a reasonable opportunity to obtain
information concerning such terms and conditions,
in a manner reasonably designed to effect informed
agreement by a provider.
The previous sentence shall only apply in the absence of an
explicit agreement between such a provider, professional, or other
entity and the Medicare+Choice organization.
``(k) Treatment of Services Furnished by Certain Providers.--
``(1) In general.--Except as provided in paragraph (2), a
physician or other entity (other than a provider of services) that
does not have a contract establishing payment amounts for services
furnished to an individual enrolled under this part with a
Medicare+Choice organization described in section 1851(a)(2)(A)
shall accept as payment in full for covered services under this
title that are furnished to such an individual the amounts that the
physician or other entity could collect if the individual were not
so enrolled. Any penalty or other provision of law that applies to
such a payment with respect to an individual entitled to benefits
under this title (but not enrolled with a Medicare+Choice
organization under this part) also applies with respect to an
individual so enrolled.
``(2) Application to medicare+choice private fee-for-service
plans.--
``(A) Balance billing limits under medicare+choice private
fee-for-service plans in case of contract providers.--
``(i) In general.--In the case of an individual
enrolled in a Medicare+Choice private fee-for-service plan
under this part, a physician, provider of services, or
other entity that has a contract (including through the
operation of subsection (j)(6)) establishing a payment rate
for services furnished to the enrollee shall accept as
payment in full for covered services under this title that
are furnished to such an individual an amount not to exceed
(including any deductibles, coinsurance, copayments, or
balance billing otherwise permitted under the plan) an
amount equal to 115 percent of such payment rate.
``(ii) Procedures to enforce limits.--The
Medicare+Choice organization that offers such a plan shall
establish procedures, similar to the procedures described
in section 1848(g)(1)(A), in order to carry out the
previous sentence.
``(iii) Assuring enforcement.--If the Medicare+Choice
organization fails to establish and enforce procedures
required under clause (ii), the organization is subject to
intermediate sanctions under section 1857(g).
``(B) Enrollee liability for noncontract providers.--For
provision--
``(i) establishing minimum payment rate in the case of
noncontract providers under a Medicare+Choice private fee-
for-service plan, see section 1852(a)(2); or
``(ii) limiting enrollee liability in the case of
covered services furnished by such providers, see paragraph
(1) and section 1866(a)(1)(O).
``(C) Information on beneficiary liability.--
``(i) In general.--Each Medicare+Choice organization
that offers a Medicare+Choice private fee-for-service plan
shall provide that enrollees under the plan who are
furnished services for which payment is sought under the
plan are provided an appropriate explanation of benefits
(consistent with that provided under parts A and B and, if
applicable, under medicare supplemental policies) that
includes a clear statement of the amount of the enrollee's
liability (including any liability for balance billing
consistent with this subsection) with respect to payments
for such services.
``(ii) Advance notice before receipt of inpatient
hospital services and certain other services.--In addition,
such organization shall, in its terms and conditions of
payments to hospitals for inpatient hospital services and
for other services identified by the Secretary for which
the amount of the balancing billing under subparagraph (A)
could be substantial, require the hospital to provide to
the enrollee, before furnishing such services and if the
hospital imposes balance billing under subparagraph (A)--
``(I) notice of the fact that balance billing is
permitted under such subparagraph for such services,
and
``(II) a good faith estimate of the likely amount
of such balance billing (if any), with respect to such
services, based upon the presenting condition of the
enrollee.
``payments to medicare+choice organizations
``Sec. 1853. (a) Payments to Organizations.--
``(1) Monthly payments.--
``(A) In general.--Under a contract under section 1857 and
subject to subsections (e) and (f) and section 1859(e)(4), the
Secretary shall make monthly payments under this section in
advance to each Medicare+Choice organization, with respect to
coverage of an individual under this part in a Medicare+Choice
payment area for a month, in an amount equal to \1/12\ of the
annual Medicare+Choice capitation rate (as calculated under
subsection (c)) with respect to that individual for that area,
adjusted for such risk factors as age, disability status,
gender, institutional status, and such other factors as the
Secretary determines to be appropriate, so as to ensure
actuarial equivalence. The Secretary may add to, modify, or
substitute for such factors, if such changes will improve the
determination of actuarial equivalence.
``(B) Special rule for end-stage renal disease.--The
Secretary shall establish separate rates of payment to a
Medicare+Choice organization with respect to classes of
individuals determined to have end-stage renal disease and
enrolled in a Medicare+Choice plan of the organization. Such
rates of payment shall be actuarially equivalent to rates paid
to other enrollees in the Medicare+Choice payment area (or such
other area as specified by the Secretary). In accordance with
regulations, the Secretary shall provide for the application of
the seventh sentence of section 1881(b)(7) to payments under
this section covering the provision of renal dialysis treatment
in the same manner as such sentence applies to composite rate
payments described in such sentence.
``(2) Adjustment to reflect number of enrollees.--
``(A) In general.--The amount of payment under this
subsection may be retroactively adjusted to take into account
any difference between the actual number of individuals
enrolled with an organization under this part and the number of
such individuals estimated to be so enrolled in determining the
amount of the advance payment.
``(B) Special rule for certain enrollees.--
``(i) In general.--Subject to clause (ii), the
Secretary may make retroactive adjustments under
subparagraph (A) to take into account individuals enrolled
during the period beginning on the date on which the
individual enrolls with a Medicare+Choice organization
under a plan operated, sponsored, or contributed to by the
individual's employer or former employer (or the employer
or former employer of the individual's spouse) and ending
on the date on which the individual is enrolled in the
organization under this part, except that for purposes of
making such retroactive adjustments under this
subparagraph, such period may not exceed 90 days.
``(ii) Exception.--No adjustment may be made under
clause (i) with respect to any individual who does not
certify that the organization provided the individual with
the disclosure statement described in section 1852(c) at
the time the individual enrolled with the organization.
``(3) Establishment of risk adjustment factors.--
``(A) Report.--The Secretary shall develop, and submit to
Congress by not later than March 1, 1999, a report on the
method of risk adjustment of payment rates under this section,
to be implemented under subparagraph (C), that accounts for
variations in per capita costs based on health status. Such
report shall include an evaluation of such method by an
outside, independent actuary of the actuarial soundness of the
proposal.
``(B) Data collection.--In order to carry out this
paragraph, the Secretary shall require Medicare+Choice
organizations (and eligible organizations with risk-sharing
contracts under section 1876) to submit data regarding
inpatient hospital services for periods beginning on or after
July 1, 1997, and data regarding other services and other
information as the Secretary deems necessary for periods
beginning on or after July 1, 1998. The Secretary may not
require an organization to submit such data before January 1,
1998.
``(C) Initial implementation.--The Secretary shall first
provide for implementation of a risk adjustment methodology
that accounts for variations in per capita costs based on
health status and other demographic factors for payments by no
later than January 1, 2000.
``(D) Uniform application to all types of plans.--Subject
to section 1859(e)(4), the methodology shall be applied
uniformly without regard to the type of plan.
``(b) Annual Announcement of Payment Rates.--
``(1) Annual announcement.--The Secretary shall annually
determine, and shall announce (in a manner intended to provide
notice to interested parties) not later than March 1 before the
calendar year concerned--
``(A) the annual Medicare+Choice capitation rate for each
Medicare+Choice payment area for the year, and
``(B) the risk and other factors to be used in adjusting
such rates under subsection (a)(1)(A) for payments for months
in that year.
``(2) Advance notice of methodological changes.--At least 45
days before making the announcement under paragraph (1) for a year,
the Secretary shall provide for notice to Medicare+Choice
organizations of proposed changes to be made in the methodology
from the methodology and assumptions used in the previous
announcement and shall provide such organizations an opportunity to
comment on such proposed changes.
``(3) Explanation of assumptions.--In each announcement made
under paragraph (1), the Secretary shall include an explanation of
the assumptions and changes in methodology used in the announcement
in sufficient detail so that Medicare+Choice organizations can
compute monthly adjusted Medicare+Choice capitation rates for
individuals in each Medicare+Choice payment area which is in whole
or in part within the service area of such an organization.
``(c) Calculation of Annual Medicare+Choice Capitation Rates.--
``(1) In general.--For purposes of this part, subject to
paragraphs (6)(C) and (7), each annual Medicare+Choice capitation
rate, for a Medicare+Choice payment area for a contract year
consisting of a calendar year, is equal to the largest of the
amounts specified in the following subparagraph (A), (B), or (C):
``(A) Blended capitation rate.--The sum of--
``(i) the area-specific percentage (as specified under
paragraph (2) for the year) of the annual area-specific
Medicare+Choice capitation rate for the Medicare+Choice
payment area, as determined under paragraph (3) for the
year, and
``(ii) the national percentage (as specified under
paragraph (2) for the year) of the input-price-adjusted
annual national Medicare+Choice capitation rate, as
determined under paragraph (4) for the year,
multiplied by the budget neutrality adjustment factor
determined under paragraph (5).
``(B) Minimum amount.--12 multiplied by the following
amount:
``(i) For 1998, $367 (but not to exceed, in the case of
an area outside the 50 States and the District of Columbia,
150 percent of the annual per capita rate of payment for
1997 determined under section 1876(a)(1)(C) for the area).
``(ii) For a succeeding year, the minimum amount
specified in this clause (or clause (i)) for the preceding
year increased by the national per capita Medicare+Choice
growth percentage, described in paragraph (6)(A) for that
succeeding year.
``(C) Minimum percentage increase.--
``(i) For 1998, 102 percent of the annual per capita
rate of payment for 1997 determined under section
1876(a)(1)(C) for the Medicare+Choice payment area.
``(ii) For a subsequent year, 102 percent of the annual
Medicare+Choice capitation rate under this paragraph for
the area for the previous year.
``(2) Area-specific and national percentages.--For purposes of
paragraph (1)(A)--
``(A) for 1998, the `area-specific percentage' is 90
percent and the `national percentage' is 10 percent,
``(B) for 1999, the `area-specific percentage' is 82
percent and the `national percentage' is 18 percent,
``(C) for 2000, the `area-specific percentage' is 74
percent and the `national percentage' is 26 percent,
``(D) for 2001, the `area-specific percentage' is 66
percent and the `national percentage' is 34 percent,
``(E) for 2002, the `area-specific percentage' is 58
percent and the `national percentage' is 42 percent, and
``(F) for a year after 2002, the `area-specific percentage'
is 50 percent and the `national percentage' is 50 percent.
``(3) Annual area-specific medicare+choice capitation rate.--
``(A) In general.--For purposes of paragraph (1)(A),
subject to subparagraph (B), the annual area-specific
Medicare+Choice capitation rate for a Medicare+Choice payment
area--
``(i) for 1998 is, subject to subparagraph (D), the
annual per capita rate of payment for 1997 determined under
section 1876(a)(1)(C) for the area, increased by the
national per capita Medicare+Choice growth percentage for
1998 (described in paragraph (6)(A)); or
``(ii) for a subsequent year is the annual area-
specific Medicare+Choice capitation rate for the previous
year determined under this paragraph for the area,
increased by the national per capita Medicare+Choice growth
percentage for such subsequent year.
``(B) Removal of medical education from calculation of
adjusted average per capita cost.--
``(i) In general.--In determining the area-specific
Medicare+Choice capitation rate under subparagraph (A) for
a year (beginning with 1998), the annual per capita rate of
payment for 1997 determined under section 1876(a)(1)(C)
shall be adjusted to exclude from the rate the applicable
percent (specified in clause (ii)) of the payment
adjustments described in subparagraph (C).
``(ii) Applicable percent.--For purposes of clause (i),
the applicable percent for--
``(I) 1998 is 20 percent,
``(II) 1999 is 40 percent,
``(III) 2000 is 60 percent,
``(IV) 2001 is 80 percent, and
``(V) a succeeding year is 100 percent.
``(C) Payment adjustment.--
``(i) In general.--Subject to clause (ii), the payment
adjustments described in this subparagraph are payment
adjustments which the Secretary estimates were payable
during 1997--
``(I) for the indirect costs of medical education
under section 1886(d)(5)(B), and
``(II) for direct graduate medical education costs
under section 1886(h).
``(ii) Treatment of payments covered under state
hospital reimbursement system.--To the extent that the
Secretary estimates that an annual per capita rate of
payment for 1997 described in clause (i) reflects payments
to hospitals reimbursed under section 1814(b)(3), the
Secretary shall estimate a payment adjustment that is
comparable to the payment adjustment that would have been
made under clause (i) if the hospitals had not been
reimbursed under such section.
``(D) Treatment of areas with highly variable payment
rates.--In the case of a Medicare+Choice payment area for which
the annual per capita rate of payment determined under section
1876(a)(1)(C) for 1997 varies by more than 20 percent from such
rate for 1996, for purposes of this subsection the Secretary
may substitute for such rate for 1997 a rate that is more
representative of the costs of the enrollees in the area.
``(4) Input-price-adjusted annual national medicare+choice
capitation rate.--
``(A) In general.--For purposes of paragraph (1)(A), the
input-price-adjusted annual national Medicare+Choice capitation
rate for a Medicare+Choice payment area for a year is equal to
the sum, for all the types of medicare services (as classified
by the Secretary), of the product (for each such type of
service) of--
``(i) the national standardized annual Medicare+Choice
capitation rate (determined under subparagraph (B)) for the
year,
``(ii) the proportion of such rate for the year which
is attributable to such type of services, and
``(iii) an index that reflects (for that year and that
type of services) the relative input price of such services
in the area compared to the national average input price of
such services.
In applying clause (iii), the Secretary may, subject to
subparagraph (C), apply those indices under this title that are
used in applying (or updating) national payment rates for
specific areas and localities.
``(B) National standardized annual medicare+choice
capitation rate.--In subparagraph (A)(i), the `national
standardized annual Medicare+Choice capitation rate' for a year
is equal to--
``(i) the sum (for all Medicare+Choice payment areas)
of the product of--
``(I) the annual area-specific Medicare+Choice
capitation rate for that year for the area under
paragraph (3), and
``(II) the average number of medicare beneficiaries
residing in that area in the year, multiplied by the
average of the risk factor weights used to adjust
payments under subsection (a)(1)(A) for such
beneficiaries in such area; divided by
``(ii) the sum of the products described in clause
(i)(II) for all areas for that year.
``(C) Special rules for 1998.--In applying this paragraph
for 1998--
``(i) medicare services shall be divided into 2 types
of services: part A services and part B services;
``(ii) the proportions described in subparagraph
(A)(ii)--
``(I) for part A services shall be the ratio
(expressed as a percentage) of the national average
annual per capita rate of payment for part A for 1997
to the total national average annual per capita rate of
payment for parts A and B for 1997, and
``(II) for part B services shall be 100 percent
minus the ratio described in subclause (I);
``(iii) for part A services, 70 percent of payments
attributable to such services shall be adjusted by the
index used under section 1886(d)(3)(E) to adjust payment
rates for relative hospital wage levels for hospitals
located in the payment area involved;
``(iv) for part B services--
``(I) 66 percent of payments attributable to such
services shall be adjusted by the index of the
geographic area factors under section 1848(e) used to
adjust payment rates for physicians' services furnished
in the payment area, and
``(II) of the remaining 34 percent of the amount of
such payments, 40 percent shall be adjusted by the
index described in clause (iii); and
``(v) the index values shall be computed based only on
the beneficiary population who are 65 years of age or older
and who are not determined to have end stage renal disease.
The Secretary may continue to apply the rules described in this
subparagraph (or similar rules) for 1999.
``(5) Payment adjustment budget neutrality factor.--For
purposes of paragraph (1)(A), for each year, the Secretary shall
determine a budget neutrality adjustment factor so that the
aggregate of the payments under this part shall equal the aggregate
payments that would have been made under this part if payment were
based entirely on area-specific capitation rates.
``(6) National per capita medicare+choice growth percentage
defined.--
``(A) In general.--In this part, the `national per capita
Medicare+Choice growth percentage' for a year is the percentage
determined by the Secretary, by March 1st before the beginning
of the year involved, to reflect the Secretary's estimate of
the projected per capita rate of growth in expenditures under
this title for an individual entitled to benefits under part A
and enrolled under part B, reduced by the number of percentage
points specified in subparagraph (B) for the year. Separate
determinations may be made for aged enrollees, disabled
enrollees, and enrollees with end-stage renal disease.
``(B) Adjustment.--The number of percentage points
specified in this subparagraph is--
``(i) for 1998, 0.8 percentage points,
``(ii) for 1999, 0.5 percentage points,
``(iii) for 2000, 0.5 percentage points,
``(iv) for 2001, 0.5 percentage points,
``(v) for 2002, 0.5 percentage points, and
``(vi) for a year after 2002, 0 percentage points.
``(C) Adjustment for over or under projection of national
per capita medicare+choice growth percentage.--Beginning with
rates calculated for 1999, before computing rates for a year as
described in paragraph (1), the Secretary shall adjust all
area-specific and national Medicare+Choice capitation rates
(and beginning in 2000, the minimum amount) for the previous
year for the differences between the projections of the
national per capita Medicare+Choice growth percentage for that
year and previous years and the current estimate of such
percentage for such years.
``(7) Adjustment for national coverage determinations.--If the
Secretary makes a determination with respect to coverage under this
title that the Secretary projects will result in a significant
increase in the costs to Medicare+Choice of providing benefits
under contracts under this part (for periods after any period
described in section 1852(a)(5)), the Secretary shall adjust
appropriately the payments to such organizations under this part.
``(d) Medicare+Choice Payment Area Defined.--
``(1) In general.--In this part, except as provided in
paragraph (3), the term `Medicare+Choice payment area' means a
county, or equivalent area specified by the Secretary.
``(2) Rule for esrd beneficiaries.--In the case of individuals
who are determined to have end stage renal disease, the
Medicare+Choice payment area shall be a State or such other payment
area as the Secretary specifies.
``(3) Geographic adjustment.--
``(A) In general.--Upon written request of the chief
executive officer of a State for a contract year (beginning
after 1998) made by not later than February 1 of the previous
year, the Secretary shall make a geographic adjustment to a
Medicare+Choice payment area in the State otherwise determined
under paragraph (1)--
``(i) to a single statewide Medicare+Choice payment
area,
``(ii) to the metropolitan based system described in
subparagraph (C), or
``(iii) to consolidating into a single Medicare+Choice
payment area noncontiguous counties (or equivalent areas
described in paragraph (1)) within a State.
Such adjustment shall be effective for payments for months
beginning with January of the year following the year in which
the request is received.
``(B) Budget neutrality adjustment.--In the case of a State
requesting an adjustment under this paragraph, the Secretary
shall initially (and annually thereafter) adjust the payment
rates otherwise established under this section for
Medicare+Choice payment areas in the State in a manner so that
the aggregate of the payments under this section in the State
shall not exceed the aggregate payments that would have been
made under this section for Medicare+Choice payment areas in
the State in the absence of the adjustment under this
paragraph.
``(C) Metropolitan based system.--The metropolitan based
system described in this subparagraph is one in which--
``(i) all the portions of each metropolitan statistical
area in the State or in the case of a consolidated
metropolitan statistical area, all of the portions of each
primary metropolitan statistical area within the
consolidated area within the State, are treated as a single
Medicare+Choice payment area, and
``(ii) all areas in the State that do not fall within a
metropolitan statistical area are treated as a single
Medicare+Choice payment area.
``(D) Areas.--In subparagraph (C), the terms `metropolitan
statistical area', `consolidated metropolitan statistical
area', and `primary metropolitan statistical area' mean any
area designated as such by the Secretary of Commerce.
``(e) Special Rules for Individuals Electing MSA Plans.--
``(1) In general.--If the amount of the Medicare+Choice monthly
MSA premium (as defined in section 1854(b)(2)(C)) for an MSA plan
for a year is less than \1/12\ of the annual Medicare+Choice
capitation rate applied under this section for the area and year
involved, the Secretary shall deposit an amount equal to 100
percent of such difference in a Medicare+Choice MSA established
(and, if applicable, designated) by the individual under paragraph
(2).
``(2) Establishment and designation of medicare+choice medical
savings account as requirement for payment of contribution.--In the
case of an individual who has elected coverage under an MSA plan,
no payment shall be made under paragraph (1) on behalf of an
individual for a month unless the individual--
``(A) has established before the beginning of the month (or
by such other deadline as the Secretary may specify) a
Medicare+Choice MSA (as defined in section 138(b)(2) of the
Internal Revenue Code of 1986), and
``(B) if the individual has established more than one such
Medicare+Choice MSA, has designated one of such accounts as the
individual's Medicare+Choice MSA for purposes of this part.
Under rules under this section, such an individual may change the
designation of such account under subparagraph (B) for purposes of
this part.
``(3) Lump-sum deposit of medical savings account
contribution.--In the case of an individual electing an MSA plan
effective beginning with a month in a year, the amount of the
contribution to the Medicare+Choice MSA on behalf of the individual
for that month and all successive months in the year shall be
deposited during that first month. In the case of a termination of
such an election as of a month before the end of a year, the
Secretary shall provide for a procedure for the recovery of
deposits attributable to the remaining months in the year.
``(f) Payments From Trust Fund.--The payment to a Medicare+Choice
organization under this section for individuals enrolled under this
part with the organization and payments to a Medicare+Choice MSA under
subsection (e)(1) shall be made from the Federal Hospital Insurance
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund
in such proportion as the Secretary determines reflects the relative
weight that benefits under part A and under part B represents of the
actuarial value of the total benefits under this title. Monthly
payments otherwise payable under this section for October 2000 shall be
paid on the first business day of such month. Monthly payments
otherwise payable under this section for October 2001 shall be paid on
the last business day of September 2001. Monthly payments otherwise
payable under this section for October 2006 shall be paid on the first
business day of October 2006.
``(g) Special Rule for Certain Inpatient Hospital Stays.--In the
case of an individual who is receiving inpatient hospital services from
a subsection (d) hospital (as defined in section 1886(d)(1)(B)) as of
the effective date of the individual's--
``(1) election under this part of a Medicare+Choice plan
offered by a Medicare+Choice organization--
``(A) payment for such services until the date of the
individual's discharge shall be made under this title through
the Medicare+Choice plan or the original medicare fee-for-
service program option described in section 1851(a)(1)(A) (as
the case may be) elected before the election with such
organization,
``(B) the elected organization shall not be financially
responsible for payment for such services until the date after
the date of the individual's discharge, and
``(C) the organization shall nonetheless be paid the full
amount otherwise payable to the organization under this part;
or
``(2) termination of election with respect to a Medicare+Choice
organization under this part--
``(A) the organization shall be financially responsible for
payment for such services after such date and until the date of
the individual's discharge,
``(B) payment for such services during the stay shall not
be made under section 1886(d) or by any succeeding
Medicare+Choice organization, and
``(C) the terminated organization shall not receive any
payment with respect to the individual under this part during
the period the individual is not enrolled.
``(h) Special Rule for Hospice Care.--
``(1) Information.--A contract under this part shall require
the Medicare+Choice organization to inform each individual enrolled
under this part with a Medicare+Choice plan offered by the
organization about the availability of hospice care if--
``(A) a hospice program participating under this title is
located within the organization's service area; or
``(B) it is common practice to refer patients to hospice
programs outside such service area.
``(2) Payment.--If an individual who is enrolled with a
Medicare+Choice organization under this part makes an election
under section 1812(d)(1) to receive hospice care from a particular
hospice program--
``(A) payment for the hospice care furnished to the
individual shall be made to the hospice program elected by the
individual by the Secretary;
``(B) payment for other services for which the individual
is eligible notwithstanding the individual's election of
hospice care under section 1812(d)(1), including services not
related to the individual's terminal illness, shall be made by
the Secretary to the Medicare+Choice organization or the
provider or supplier of the service instead of payments
calculated under subsection (a); and
``(C) the Secretary shall continue to make monthly payments
to the Medicare+Choice organization in an amount equal to the
value of the additional benefits required under section
1854(f)(1)(A).
``premiums
``Sec. 1854. (a) Submission of Proposed Premiums and Related
Information.--
(1) In general.--Not later than May 1 of each year, each
Medicare+Choice organization shall submit to the Secretary, in a
form and manner specified by the Secretary and for each
Medicare+Choice plan for the service area in which it intends to be
offered in the following year--
``(A) the information described in paragraph (2), (3), or
(4) for the type of plan involved; and
``(B) the enrollment capacity (if any) in relation to the
plan and area.
``(2) Information required for coordinated care plans.--For a
Medicare+Choice plan described in section 1851(a)(2)(A), the
information described in this paragraph is as follows:
``(A) Basic (and additional) benefits.--For benefits
described in 1852(a)(1)(A)--
``(i) the adjusted community rate (as defined in
subsection (f)(3));
``(ii) the Medicare+Choice monthly basic beneficiary
premium (as defined in subsection (b)(2)(A));
``(iii) a description of deductibles, coinsurance, and
copayments applicable under the plan and the actuarial
value of such deductibles, coinsurance, and copayments,
described in subsection (e)(1)(A); and
``(iv) if required under subsection (f)(1), a
description of the additional benefits to be provided
pursuant to such subsection and the value determined for
such proposed benefits under such subsection.
``(B) Supplemental benefits.--For benefits described in
1852(a)(3)--
``(i) the adjusted community rate (as defined in
subsection (f)(3));
``(ii) the Medicare+Choice monthly supplemental
beneficiary premium (as defined in subsection (b)(2)(B));
and
``(iii) a description of deductibles, coinsurance, and
copayments applicable under the plan and the actuarial
value of such deductibles, coinsurance, and copayments,
described in subsection (e)(2).
``(3) Requirements for msa plans.--For an MSA plan described,
the information described in this paragraph is as follows:
``(A) Basic (and additional) benefits.--For benefits
described in 1852(a)(1)(A), the amount of the Medicare+Choice
monthly MSA premium.
``(B) Supplemental benefits.--For benefits described in
1852(a)(3), the amount of the Medicare+Choice monthly
supplementary beneficiary premium.
``(4) Requirements for private fee-for-service plans.--For a
Medicare+Choice plan described in section 1851(a)(2)(C) for
benefits described in 1852(a)(1)(A), the information described in
this paragraph is as follows:
``(A) Basic (and additional) benefits.--For benefits
described in 1852(a)(1)(A)--
``(i) the adjusted community rate (as defined in
subsection (f)(3));
``(ii) the amount of the Medicare+Choice monthly basic
beneficiary premium;
``(iii) a description of the deductibles, coinsurance,
and copayments applicable under the plan, and the actuarial
value of such deductibles, coinsurance, and copayments, as
described in subsection (e)(4)(A); and
``(iv) if required under subsection (f)(1), a
description of the additional benefits to be provided
pursuant to such subsection and the value determined for
such proposed benefits under such subsection.
``(B) Supplemental benefits.--For benefits described in
1852(a)(3), the amount of the Medicare+Choice monthly
supplemental beneficiary premium (as defined in subsection
(b)(2)(B)).
``(5) Review.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall review the adjusted community rates, the
amounts of the basic and supplemental premiums, and values
filed under this subsection and shall approve or disapprove
such rates, amounts, and value so submitted.
``(B) Exception.--The Secretary shall not review, approve,
or disapprove the amounts submitted under paragraph (3) or
subparagraphs (A)(ii) and (B) of paragraph (4).
``(b) Monthly Premium Charged.--
``(1) In general.--
``(A) Rule for other than msa plans.--The monthly amount of
the premium charged to an individual enrolled in a
Medicare+Choice plan (other than an MSA plan) offered by a
Medicare+Choice organization shall be equal to the sum of the
Medicare+Choice monthly basic beneficiary premium and the
Medicare+Choice monthly supplementary beneficiary premium (if
any).
``(B) MSA plans.--The monthly amount of the premium charged
to an individual enrolled in an MSA plan offered by a
Medicare+Choice organization shall be equal to the
Medicare+Choice monthly supplemental beneficiary premium (if
any).
``(2) Premium terminology defined.--For purposes of this part:
``(A) The Medicare+Choice monthly basic beneficiary
premium.--The term `Medicare+Choice monthly basic beneficiary
premium' means, with respect to a Medicare+Choice plan, the
amount authorized to be charged under subsection (e)(1) for the
plan, or, in the case of a Medicare+Choice private fee-for-
service plan, the amount filed under subsection (a)(4)(A)(ii).
``(B) Medicare+Choice monthly supplemental beneficiary
premium.--The term `Medicare+Choice monthly supplemental
beneficiary premium' means, with respect to a Medicare+Choice
plan, the amount authorized to be charged under subsection
(e)(2) for the plan or, in the case of a MSA plan or
Medicare+Choice private fee-for-service plan, the amount filed
under paragraph (3)(B) or (4)(B) of subsection (a).
``(C) Medicare+Choice monthly MSA premium.--The term
`Medicare+Choice monthly MSA premium' means, with respect to a
Medicare+Choice plan, the amount of such premium filed under
subsection (a)(3)(A) for the plan.
``(c) Uniform Premium.--The Medicare+Choice monthly basic and
supplemental beneficiary premium, the Medicare+Choice monthly MSA
premium charged under subsection (b) of a Medicare+Choice organization
under this part may not vary among individuals enrolled in the plan.
``(d) Terms and Conditions of Imposing Premiums.--Each
Medicare+Choice organization shall permit the payment of
Medicare+Choice monthly basic and supplemental beneficiary premiums on
a monthly basis, may terminate election of individuals for a
Medicare+Choice plan for failure to make premium payments only in
accordance with section 1851(g)(3)(B)(i), and may not provide for cash
or other monetary rebates as an inducement for enrollment or otherwise.
``(e) Limitation on Enrollee Liability.--
``(1) For basic and additional benefits.--In no event may--
``(A) the Medicare+Choice monthly basic beneficiary premium
(multiplied by 12) and the actuarial value of the deductibles,
coinsurance, and copayments applicable on average to
individuals enrolled under this part with a Medicare+Choice
plan described in section 1851(a)(2)(A) of an organization with
respect to required benefits described in section 1852(a)(1)(A)
and additional benefits (if any) required under subsection
(f)(1)(A) for a year, exceed
``(B) the actuarial value of the deductibles, coinsurance,
and copayments that would be applicable on average to
individuals entitled to benefits under part A and enrolled
under part B if they were not members of a Medicare+Choice
organization for the year.
``(2) For supplemental benefits.--If the Medicare+Choice
organization provides to its members enrolled under this part in a
Medicare+Choice plan described in section 1851(a)(2)(A) with
respect to supplemental benefits described in section 1852(a)(3),
the sum of the Medicare+Choice monthly supplemental beneficiary
premium (multiplied by 12) charged and the actuarial value of its
deductibles, coinsurance, and copayments charged with respect to
such benefits may not exceed the adjusted community rate for such
benefits (as defined in subsection (f)(3)).
``(3) Determination on other basis.--If the Secretary
determines that adequate data are not available to determine the
actuarial value under paragraph (1)(A) or (2), the Secretary may
determine such amount with respect to all individuals in same
geographic area, the State, or in the United States, eligible to
enroll in the Medicare+Choice plan involved under this part or on
the basis of other appropriate data.
``(4) Special rule for private fee-for-service plans.--With
respect to a Medicare+Choice private fee-for-service plan (other
than a plan that is an MSA plan), in no event may--
``(A) the actuarial value of the deductibles, coinsurance,
and copayments applicable on average to individuals enrolled
under this part with such a plan of an organization with
respect to required benefits described in section 1852(a)(1),
exceed
``(B) the actuarial value of the deductibles, coinsurance,
and copayments that would be applicable on average to
individuals entitled to benefits under part A and enrolled
under part B if they were not members of a Medicare+Choice
organization for the year.
``(f) Requirement for Additional Benefits.--
``(1) Requirement.--
``(A) In general.--Each Medicare+Choice organization (in
relation to a Medicare+Choice plan, other than an MSA plan, it
offers) shall provide that if there is an excess amount (as
defined in subparagraph (B)) for the plan for a contract year,
subject to the succeeding provisions of this subsection, the
organization shall provide to individuals such additional
benefits (as the organization may specify) in a value which the
Secretary determines is at least equal to the adjusted excess
amount (as defined in subparagraph (C)).
``(B) Excess amount.--For purposes of this paragraph, the
`excess amount', for an organization for a plan, is the amount
(if any) by which--
``(i) the average of the capitation payments made to
the organization under section 1853 for the plan at the
beginning of contract year, exceeds
``(ii) the actuarial value of the required benefits
described in section 1852(a)(1)(A) under the plan for
individuals under this part, as determined based upon an
adjusted community rate described in paragraph (3) (as
reduced for the actuarial value of the coinsurance,
copayments, and deductibles under parts A and B).
``(C) Adjusted excess amount.--For purposes of this
paragraph, the `adjusted excess amount', for an organization
for a plan, is the excess amount reduced to reflect any amount
withheld and reserved for the organization for the year under
paragraph (2).
``(D) Uniform application.--This paragraph shall be applied
uniformly for all enrollees for a plan.
``(E) Construction.--Nothing in this subsection shall be
construed as preventing a Medicare+Choice organization from
providing supplemental benefits (described in section
1852(a)(3)) that are in addition to the health care benefits
otherwise required to be provided under this paragraph and from
imposing a premium for such supplemental benefits.
``(2) Stabilization fund.--A Medicare+Choice organization may
provide that a part of the value of an excess amount described in
paragraph (1) be withheld and reserved in the Federal Hospital
Insurance Trust Fund and in the Federal Supplementary Medical
Insurance Trust Fund (in such proportions as the Secretary
determines to be appropriate) by the Secretary for subsequent
annual contract periods, to the extent required to stabilize and
prevent undue fluctuations in the additional benefits offered in
those subsequent periods by the organization in accordance with
such paragraph. Any of such value of the amount reserved which is
not provided as additional benefits described in paragraph (1)(A)
to individuals electing the Medicare+Choice plan of the
organization in accordance with such paragraph prior to the end of
such periods, shall revert for the use of such trust funds.
``(3) Adjusted community rate.--For purposes of this
subsection, subject to paragraph (4), the term `adjusted community
rate' for a service or services means, at the election of a
Medicare+Choice organization, either--
``(A) the rate of payment for that service or services
which the Secretary annually determines would apply to an
individual electing a Medicare+Choice plan under this part if
the rate of payment were determined under a `community rating
system' (as defined in section 1302(8) of the Public Health
Service Act, other than subparagraph (C)), or
``(B) such portion of the weighted aggregate premium, which
the Secretary annually estimates would apply to such an
individual, as the Secretary annually estimates is attributable
to that service or services,
but adjusted for differences between the utilization
characteristics of the individuals electing coverage under this
part and the utilization characteristics of the other enrollees
with the plan (or, if the Secretary finds that adequate data are
not available to adjust for those differences, the differences
between the utilization characteristics of individuals selecting
other Medicare+Choice coverage, or Medicare+Choice eligible
individuals in the area, in the State, or in the United States,
eligible to elect Medicare+Choice coverage under this part and the
utilization characteristics of the rest of the population in the
area, in the State, or in the United States, respectively).
``(4) Determination based on insufficient data.--For purposes
of this subsection, if the Secretary finds that there is
insufficient enrollment experience to determine an average of the
capitation payments to be made under this part at the beginning of
a contract period or to determine (in the case of a newly operated
provider-sponsored organization or other new organization) the
adjusted community rate for the organization, the Secretary may
determine such an average based on the enrollment experience of
other contracts entered into under this part and may determine such
a rate using data in the general commercial marketplace.
``(g) Prohibition of State Imposition of Premium Taxes.--No State
may impose a premium tax or similar tax with respect to payments to
Medicare+Choice organizations under section 1853.
``organizational and financial requirements for medicare+choice
organizations; provider-sponsored organizations
``Sec. 1855. (a) Organized and Licensed Under State Law.--
``(1) In general.--Subject to paragraphs (2) and (3), a
Medicare+Choice organization shall be 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 Medicare+Choice plan.
``(2) Special exception for provider-sponsored organizations.--
``(A) In general.--In the case of a provider-sponsored
organization that seeks to offer a Medicare+Choice plan in a
State, the Secretary shall waive the requirement of paragraph
(1) that the organization be licensed in that State if--
``(i) the organization files an application for such
waiver with the Secretary by not later than November 1,
2002, and
``(ii) the Secretary determines, based on the
application and other evidence presented to the Secretary,
that any of the grounds for approval of the application
described in subparagraph (B), (C), or (D) has been met.
``(B) Failure to act on licensure application on a timely
basis.--The ground for approval of such a waiver application
described in this subparagraph is that the State has failed to
complete action on a licensing application of the organization
within 90 days of the date of the State's receipt of a
substantially complete application. No period before the date
of the enactment of this section shall be included in
determining such 90-day period.
``(C) Denial of application based on discriminatory
treatment.--The ground for approval of such a waiver
application described in this subparagraph is that the State
has denied such a licensing application and--
``(i) the standards or review process imposed by the
State as a condition of approval of the license imposes any
material requirements, procedures, or standards (other than
solvency requirements) to such organizations that are not
generally applicable to other entities engaged in a
substantially similar business, or
``(ii) the State requires the organization, as a
condition of licensure, to offer any product or plan other
than a Medicare+Choice plan.
``(D) Denial of application based on application of
solvency requirements.--With respect to waiver applications
filed on or after the date of publication of solvency standards
under section 1856(a), the ground for approval of such a waiver
application described in this subparagraph is that the State
has denied such a licensing application based (in whole or in
part) on the organization's failure to meet applicable solvency
requirements and--
``(i) such requirements are not the same as the
solvency standards established under section 1856(a); or
``(ii) the State has imposed as a condition of approval
of the license documentation or information requirements
relating to solvency or other material requirements,
procedures, or standards relating to solvency that are
different from the requirements, procedures, and standards
applied by the Secretary under subsection (d)(2).
For purposes of this paragraph, the term `solvency
requirements' means requirements relating to solvency and other
matters covered under the standards established under section
1856(a).
``(E) Treatment of waiver.--In the case of a waiver granted
under this paragraph for a provider-sponsored organization with
respect to a State--
``(i) Limitation to state.--The waiver shall be
effective only with respect to that State and does not
apply to any other State.
``(ii) Limitation to 36-month period.--The waiver shall
be effective only for a 36-month period and may not be
renewed.
``(iii) Conditioned on compliance with consumer
protection and quality standards.--The continuation of the
waiver is conditioned upon the organization's compliance
with the requirements described in subparagraph (G).
``(iv) Preemption of state law.--Any provisions of law
of that State which relate to the licensing of the
organization and which prohibit the organization from
providing coverage pursuant to a contract under this part
shall be superseded.
``(F) Prompt action on application.--The Secretary shall
grant or deny such a waiver application within 60 days after
the date the Secretary determines that a substantially complete
waiver application has been filed. Nothing in this section
shall be construed as preventing an organization which has had
such a waiver application denied from submitting a subsequent
waiver application.
``(G) Application and enforcement of state consumer
protection and quality standards.--
``(i) In general.--A waiver granted under this
paragraph to an organization with respect to licensing
under State law is conditioned upon the organization's
compliance with all consumer protection and quality
standards insofar as such standards--
``(I) would apply in the State to the organization
if it were licensed under State law;
``(II) are generally applicable to other
Medicare+Choice organizations and plans in the State;
and
``(III) are consistent with the standards
established under this part.
Such standards shall not include any standard preempted
under section 1856(b)(3)(B).
``(ii) Incorporation into contract.--In the case of
such a waiver granted to an organization with respect to a
State, the Secretary shall incorporate the requirement that
the organization (and Medicare+Choice plans it offers)
comply with standards under clause (i) as part of the
contract between the Secretary and the organization under
section 1857.
``(iii) Enforcement.--In the case of such a waiver
granted to an organization with respect to a State, the
Secretary may enter into an agreement with the State under
which the State agrees to provide for monitoring and
enforcement activities with respect to compliance of such
an organization and its Medicare+Choice plans with such
standards. Such monitoring and enforcement shall be
conducted by the State in the same manner as the State
enforces such standards with respect to other
Medicare+Choice organizations and plans, without
discrimination based on the type of organization to which
the standards apply. Such an agreement shall specify or
establish mechanisms by which compliance activities are
undertaken, while not lengthening the time required to
review and process applications for waivers under this
paragraph.
``(H) Report.--By not later than December 31, 2001, the
Secretary shall submit to the Committee on Ways and Means and
the Committee on Commerce of the House of Representatives and
the Committee on Finance of the Senate a report regarding
whether the waiver process under this paragraph should be
continued after December 31, 2002. In making such
recommendation, the Secretary shall consider, among other
factors, the impact of such process on beneficiaries and on the
long-term solvency of the program under this title.
``(3) Licensure does not substitute for or constitute
certification.--The fact that an organization is licensed in
accordance with paragraph (1) does not deem the organization to
meet other requirements imposed under this part.
``(b) Assumption of Full Financial Risk.--The Medicare+Choice
organization shall assume full financial risk on a prospective basis
for the provision of the health care services for which benefits are
required to be provided under section 1852(a)(1), except that the
organization--
``(1) may obtain insurance or make other arrangements for the
cost of providing to any enrolled member such services the
aggregate value of which exceeds such aggregate level as the
Secretary specifies from time to time,
``(2) may obtain insurance or make other arrangements for the
cost of such services provided to its enrolled members other than
through the organization because medical necessity required their
provision before they could be secured through the organization,
``(3) may obtain insurance or make other arrangements for not
more than 90 percent of the amount by which its costs for any of
its fiscal years exceed 115 percent of its income for such fiscal
year, and
``(4) may make arrangements with physicians or other health
care professionals, health care institutions, or any combination of
such individuals or institutions to assume all or part of the
financial risk on a prospective basis for the provision of basic
health services by the physicians or other health professionals or
through the institutions.
``(c) Certification of Provision Against Risk of Insolvency for
Unlicensed PSOs.--
``(1) In general.--Each Medicare+Choice organization that is a
provider-sponsored organization, that is not licensed by a State
under subsection (a), and for which a waiver application has been
approved under subsection (a)(2), shall meet standards established
under section 1856(a) relating to the financial solvency and
capital adequacy of the organization.
``(2) Certification process for solvency standards for psos.--
The Secretary shall establish a process for the receipt and
approval of applications of a provider-sponsored organization
described in paragraph (1) for certification (and periodic
recertification) of the organization as meeting such solvency
standards. Under such process, the Secretary shall act upon such a
certification application not later than 60 days after the date the
application has been received.
``(d) Provider-Sponsored Organization Defined.--
``(1) In general.--In this part, the term `provider-sponsored
organization' means a public or private entity--
``(A) that is established or organized, and operated, by a
health care provider, or group of affiliated health care
providers,
``(B) that provides a substantial proportion (as defined by
the Secretary in accordance with paragraph (2)) of the health
care items and services under the contract under this part
directly through the provider or affiliated group of providers,
and
``(C) with respect to which the affiliated providers share,
directly or indirectly, substantial financial risk with respect
to the provision of such items and services and have at least a
majority financial interest in the entity.
``(2) Substantial proportion.--In defining what is a
`substantial proportion' for purposes of paragraph (1)(B), the
Secretary--
``(A) shall take into account the need for such an
organization to assume responsibility for providing--
``(i) significantly more than the majority of the items
and services under the contract under this section through
its own affiliated providers; and
``(ii) most of the remainder of the items and services
under the contract through providers with which the
organization has an agreement to provide such items and
services,
in order to assure financial stability and to address the
practical considerations involved in integrating the delivery
of a wide range of service providers;
``(B) shall take into account the need for such an
organization to provide a limited proportion of the items and
services under the contract through providers that are neither
affiliated with nor have an agreement with the organization;
and
``(C) may allow for variation in the definition of
substantial proportion among such organizations based on
relevant differences among the organizations, such as their
location in an urban or rural area.
``(3) Affiliation.--For purposes of this subsection, a provider
is `affiliated' with another provider if, through contract,
ownership, or otherwise--
``(A) one provider, directly or indirectly, controls, is
controlled by, or is under common control with the other,
``(B) both providers are part of a controlled group of
corporations under section 1563 of the Internal Revenue Code of
1986,
``(C) each provider is a participant in a lawful
combination under which each provider shares substantial
financial risk in connection with the organization's
operations, or
``(D) both providers are part of an affiliated service
group under section 414 of such Code.
``(4) Control.--For purposes of paragraph (3), control is
presumed to exist if one party, directly or indirectly, owns,
controls, or holds the power to vote, or proxies for, not less than
51 percent of the voting rights or governance rights of another.
``(5) Health care provider defined.--In this subsection, the
term `health care provider' means--
``(A) any individual who is engaged in the delivery of
health care services in a State and who is required by State
law or regulation to be licensed or certified by the State to
engage in the delivery of such services in the State, and
``(B) any entity that is engaged in the delivery of health
care services in a State and that, if it is required by State
law or regulation to be licensed or certified by the State to
engage in the delivery of such services in the State, is so
licensed.
``(6) Regulations.--The Secretary shall issue regulations to
carry out this subsection.
``establishment of standards
``Sec. 1856. (a) Establishment of Solvency Standards for Provider-
Sponsored Organizations.--
``(1) Establishment.--
``(A) In general.--The Secretary shall establish, on an
expedited basis and using a negotiated rulemaking process under
subchapter III of chapter 5 of title 5, United States Code,
standards described in section 1855(c)(1) (relating to the
financial solvency and capital adequacy of the organization)
that entities must meet to qualify as provider-sponsored
organizations under this part.
``(B) Factors to consider for solvency standards.--In
establishing solvency standards under subparagraph (A) for
provider-sponsored organizations, the Secretary shall consult
with interested parties and shall take into account--
``(i) the delivery system assets of such an
organization and ability of such an organization to provide
services directly to enrollees through affiliated
providers,
``(ii) alternative means of protecting against
insolvency, including reinsurance, unrestricted surplus,
letters of credit, guarantees, organizational insurance
coverage, partnerships with other licensed entities, and
valuation attributable to the ability of such an
organization to meet its service obligations through direct
delivery of care, and
``(iii) any standards developed by the National
Association of Insurance Commissioners specifically for
risk-based health care delivery organizations.
``(C) Enrollee protection against insolvency.--Such
standards shall include provisions to prevent enrollees from
being held liable to any person or entity for the
Medicare+Choice organization's debts in the event of the
organization's insolvency.
``(2) Publication of notice.--In carrying out the rulemaking
process under this subsection, the Secretary, after consultation
with the National Association of Insurance Commissioners, the
American Academy of Actuaries, organizations representative of
medicare beneficiaries, and other interested parties, shall publish
the notice provided for under section 564(a) of title 5, United
States Code, by not later than 45 days after the date of the
enactment of this section.
``(3) Target date for publication of rule.--As part of the
notice under paragraph (2), and for purposes of this subsection,
the `target date for publication' (referred to in section 564(a)(5)
of such title) shall be April 1, 1998.
``(4) Abbreviated period for submission of comments.--In
applying section 564(c) of such title under this subsection, `15
days' shall be substituted for `30 days'.
``(5) Appointment of negotiated rulemaking committee and
facilitator.--The Secretary shall provide for--
``(A) the appointment of a negotiated rulemaking committee
under section 565(a) of such title by not later than 30 days
after the end of the comment period provided for under section
564(c) of such title (as shortened under paragraph (4)), and
``(B) the nomination of a facilitator under section 566(c)
of such title by not later than 10 days after the date of
appointment of the committee.
``(6) Preliminary committee report.--The negotiated rulemaking
committee appointed under paragraph (5) shall report to the
Secretary, by not later than January 1, 1998, regarding the
committee's progress on achieving a consensus with regard to the
rulemaking proceeding and whether such consensus is likely to occur
before 1 month before the target date for publication of the rule.
If the committee reports that the committee has failed to make
significant progress towards such consensus or is unlikely to reach
such consensus by the target date, the Secretary may terminate such
process and provide for the publication of a rule under this
subsection through such other methods as the Secretary may provide.
``(7) Final committee report.--If the committee is not
terminated under paragraph (6), the rulemaking committee shall
submit a report containing a proposed rule by not later than 1
month before the target date of publication.
``(8) Interim, final effect.--The Secretary shall publish a
rule under this subsection in the Federal Register by not later
than the target date of publication. Such rule shall be effective
and final immediately on an interim basis, but is subject to change
and revision after public notice and opportunity for a period (of
not less than 60 days) for public comment. In connection with such
rule, the Secretary shall specify the process for the timely review
and approval of applications of entities to be certified as
provider-sponsored organizations pursuant to such rules and
consistent with this subsection.
``(9) Publication of rule after public comment.--The Secretary
shall provide for consideration of such comments and republication
of such rule by not later than 1 year after the target date of
publication.
``(b) Establishment of Other Standards.--
``(1) In general.--The Secretary shall establish by regulation
other standards (not described in subsection (a)) for
Medicare+Choice organizations and plans consistent with, and to
carry out, this part. The Secretary shall publish such regulations
by June 1, 1998. In order to carry out this requirement in a timely
manner, the Secretary may promulgate regulations that take effect
on an interim basis, after notice and pending opportunity for
public comment.
``(2) Use of current standards.--Consistent with the
requirements of this part, standards established under this
subsection shall be based on standards established under section
1876 to carry out analogous provisions of such section.
``(3) Relation to state laws.--
``(A) In general.--The standards established under this
subsection shall supersede any State law or regulation
(including standards described in subparagraph (B)) with
respect to Medicare+Choice plans which are offered by
Medicare+Choice organizations under this part to the extent
such law or regulation is inconsistent with such standards.
``(B) Standards specifically superseded.--State standards
relating to the following are superseded under this paragraph:
``(i) Benefit requirements.
``(ii) Requirements relating to inclusion or treatment
of providers.
``(iii) Coverage determinations (including related
appeals and grievance processes).
``contracts with medicare+choice organizations
``Sec. 1857. (a) In General.--The Secretary shall not permit the
election under section 1851 of a Medicare+Choice plan offered by a
Medicare+Choice organization under this part, and no payment shall be
made under section 1853 to an organization, unless the Secretary has
entered into a contract under this section with the organization with
respect to the offering of such plan. Such a contract with an
organization may cover more than 1 Medicare+Choice plan. Such contract
shall provide that the organization 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.
``(b) Minimum Enrollment Requirements.--
``(1) In general.--Subject to paragraph (2), the Secretary may
not enter into a contract under this section with a Medicare+Choice
organization unless the organization has--
``(A) at least 5,000 individuals (or 1,500 individuals in
the case of an organization that is a provider-sponsored
organization) who are receiving health benefits through the
organization, or
``(B) at least 1,500 individuals (or 500 individuals in the
case of an organization that is a provider-sponsored
organization) who are receiving health benefits through the
organization if the organization primarily serves individuals
residing outside of urbanized areas.
``(2) Application to msa plans.--In applying paragraph (1) in
the case of a Medicare+Choice organization that is offering an MSA
plan, paragraph (1) shall be applied by substituting covered lives
for individuals.
``(3) Allowing transition.--The Secretary may waive the
requirement of paragraph (1) during the first 3 contract years with
respect to an organization.
``(c) Contract Period and Effectiveness.--
``(1) Period.--Each contract under this section shall be for a
term of at least 1 year, as determined by the Secretary, and may be
made automatically renewable from term to term in the absence of
notice by either party of intention to terminate at the end of the
current term.
``(2) Termination authority.--In accordance with procedures
established under subsection (h), the Secretary may at any time
terminate any such contract if the Secretary determines that the
organization--
``(A) has failed substantially to carry out the contract;
``(B) is carrying out the contract in a manner inconsistent
with the efficient and effective administration of this part;
or
``(C) no longer substantially meets the applicable
conditions of this part.
``(3) Effective date of contracts.--The effective date of any
contract executed pursuant to this section shall be specified in
the contract, except that in no case shall a contract under this
section which provides for coverage under an MSA plan be effective
before January 1999 with respect to such coverage.
``(4) Previous terminations.--The Secretary may not enter into
a contract with a Medicare+Choice organization if a previous
contract with that organization under this section was terminated
at the request of the organization within the preceding 5-year
period, except in circumstances which warrant special
consideration, as determined by the Secretary.
``(5) Contracting authority.--The authority vested in the
Secretary by this part may be performed without regard to such
provisions of law or regulations relating to the making,
performance, amendment, or modification of contracts of the United
States as the Secretary may determine to be inconsistent with the
furtherance of the purpose of this title.
``(d) Protections Against Fraud and Beneficiary Protections.--
``(1) Periodic auditing.--The Secretary shall provide for the
annual auditing of the financial records (including data relating
to medicare utilization, costs, and computation of the adjusted
community rate) of at least one-third of the Medicare+Choice
organizations offering Medicare+Choice plans under this part. The
Comptroller General shall monitor auditing activities conducted
under this subsection.
``(2) Inspection and audit.--Each contract under this section
shall provide that the Secretary, or any person or organization
designated by the Secretary--
``(A) shall have the right to inspect or otherwise evaluate
(i) the quality, appropriateness, and timeliness of services
performed under the contract, and (ii) the facilities of the
organization when there is reasonable evidence of some need for
such inspection, and
``(B) shall have the right to audit and inspect any books
and records of the Medicare+Choice organization that pertain
(i) to the ability of the organization to bear the risk of
potential financial losses, or (ii) to services performed or
determinations of amounts payable under the contract.
``(3) Enrollee notice at time of termination.--Each contract
under this section shall require the organization to provide (and
pay for) written notice in advance of the contract's termination,
as well as a description of alternatives for obtaining benefits
under this title, to each individual enrolled with the organization
under this part.
``(4) Disclosure.--
``(A) In general.--Each Medicare+Choice organization shall,
in accordance with regulations of the Secretary, report to the
Secretary financial information which shall include the
following:
``(i) Such information as the Secretary may require
demonstrating that the organization has a fiscally sound
operation.
``(ii) A copy of the report, if any, filed with the
Health Care Financing Administration containing the
information required to be reported under section 1124 by
disclosing entities.
``(iii) A description of transactions, as specified by
the Secretary, between the organization and a party in
interest. Such transactions shall include--
``(I) any sale or exchange, or leasing of any
property between the organization and a party in
interest;
``(II) any furnishing for consideration of goods,
services (including management services), or facilities
between the organization and a party in interest, but
not including salaries paid to employees for services
provided in the normal course of their employment and
health services provided to members by hospitals and
other providers and by staff, medical group (or
groups), individual practice association (or
associations), or any combination thereof; and
``(III) any lending of money or other extension of
credit between an organization and a party in interest.
The Secretary may require that information reported respecting
an organization which controls, is controlled by, or is under
common control with, another entity be in the form of a
consolidated financial statement for the organization and such
entity.
``(B) Party in interest defined.--For the purposes of this
paragraph, the term `party in interest' means--
``(i) any director, officer, partner, or employee
responsible for management or administration of a
Medicare+Choice organization, any person who is directly or
indirectly the beneficial owner of more than 5 percent of
the equity of the organization, any person who is the
beneficial owner of a mortgage, deed of trust, note, or
other interest secured by, and valuing more than 5 percent
of the organization, and, in the case of a Medicare+Choice
organization organized as a nonprofit corporation, an
incorporator or member of such corporation under applicable
State corporation law;
``(ii) any entity in which a person described in clause
(i)--
``(I) is an officer or director;
``(II) is a partner (if such entity is organized as
a partnership);
``(III) has directly or indirectly a beneficial
interest of more than 5 percent of the equity; or
``(IV) has a mortgage, deed of trust, note, or
other interest valuing more than 5 percent of the
assets of such entity;
``(iii) any person directly or indirectly controlling,
controlled by, or under common control with an
organization; and
``(iv) any spouse, child, or parent of an individual
described in clause (i).
``(C) Access to information.--Each Medicare+Choice
organization shall make the information reported pursuant to
subparagraph (A) available to its enrollees upon reasonable
request.
``(5) Loan information.--The contract shall require the
organization to notify the Secretary of loans and other special
financial arrangements which are made between the organization and
subcontractors, affiliates, and related parties.
``(e) Additional Contract Terms.--
``(1) In general.--The contract shall contain such other terms
and conditions not inconsistent with this part (including requiring
the organization to provide the Secretary with such information) as
the Secretary may find necessary and appropriate.
``(2) Cost-sharing in enrollment-related costs.--
``(A) In general.--A Medicare+Choice organization shall pay
the fee established by the Secretary under subparagraph (B).
``(B) Authorization.--The Secretary is authorized to charge
a fee to each Medicare+Choice organization with a contract
under this part that is equal to the organization's pro rata
share (as determined by the Secretary) of the aggregate amount
of fees which the Secretary is directed to collect in a fiscal
year. Any amounts collected are authorized to be appropriated
only for the purpose of carrying out section 1851 (relating to
enrollment and dissemination of information) and section 4360
of the Omnibus Budget Reconciliation Act of 1990 (relating to
the health insurance counseling and assistance program).
``(C) Contingency.--For any fiscal year, the fees
authorized under subparagraph (B) are contingent upon enactment
in an appropriations act of a provision specifying the
aggregate amount of fees the Secretary is directed to collect
in a fiscal year. Fees collected during any fiscal year under
this paragraph shall be deposited and credited as offsetting
collections.
``(D) Limitation.--In any fiscal year the fees collected by
the Secretary under subparagraph (B) shall not exceed the
lesser of--
``(i) the estimated costs to be incurred by the
Secretary in the fiscal year in carrying out the activities
described in section 1851 and section 4360 of the Omnibus
Budget Reconciliation Act of 1990; or
``(ii)(I) $200,000,000 in fiscal year 1998;
``(II) $150,000,000 in fiscal year 1999; and
``(III) $100,000,000 in fiscal year 2000 and each
subsequent fiscal year.
``(f) Prompt Payment by Medicare+Choice Organization.--
``(1) Requirement.--A contract under this part shall require a
Medicare+Choice organization to provide prompt payment (consistent
with the provisions of sections 1816(c)(2) and 1842(c)(2)) of
claims submitted for services and supplies furnished to enrollees
pursuant to the contract, if the services or supplies are not
furnished under a contract between the organization and the
provider or supplier (or in the case of a Medicare+Choice private
fee-for-service plan, if a claim is submitted to such organization
by an enrollee).
``(2) Secretary's option to bypass noncomplying organization.--
In the case of a Medicare+Choice eligible organization which the
Secretary determines, after notice and opportunity for a hearing,
has failed to make payments of amounts in compliance with paragraph
(1), the Secretary may provide for direct payment of the amounts
owed to providers and suppliers (or, in the case of a
Medicare+Choice private fee-for-service plan, amounts owed to the
enrollees) for covered services and supplies furnished to
individuals enrolled under this part under the contract. If the
Secretary provides for the direct payments, the Secretary shall
provide for an appropriate reduction in the amount of payments
otherwise made to the organization under this part to reflect the
amount of the Secretary's payments (and the Secretary's costs in
making the payments).
``(g) Intermediate Sanctions.--
``(1) In general.--If the Secretary determines that a
Medicare+Choice organization with a contract under this section--
``(A) fails substantially to provide medically necessary
items and services that are required (under law or under the
contract) to be provided to an individual covered under the
contract, if the failure has adversely affected (or has
substantial likelihood of adversely affecting) the individual;
``(B) imposes premiums on individuals enrolled under this
part in excess of the amount of the Medicare+Choice monthly
basic and supplemental beneficiary premiums permitted under
section 1854;
``(C) acts to expel or to refuse to re-enroll an individual
in violation of the provisions of this part;
``(D) engages in any practice that would reasonably be
expected to have the effect of denying or discouraging
enrollment (except as permitted by this part) by eligible
individuals with the organization whose medical condition or
history indicates a need for substantial future medical
services;
``(E) misrepresents or falsifies information that is
furnished--
``(i) to the Secretary under this part, or
``(ii) to an individual or to any other entity under
this part;
``(F) fails to comply with the applicable requirements of
section 1852(j)(3) or 1852(k)(2)(A)(ii); or
``(G) employs or contracts with any individual or entity
that is excluded from participation under this title under
section 1128 or 1128A for the provision of health care,
utilization review, medical social work, or administrative
services or employs or contracts with any entity for the
provision (directly or indirectly) through such an excluded
individual or entity of such services;
the Secretary may provide, in addition to any other remedies
authorized by law, for any of the remedies described in paragraph
(2).
``(2) Remedies.--The remedies described in this paragraph are--
``(A) civil money penalties of not more than $25,000 for
each determination under paragraph (1) or, with respect to a
determination under subparagraph (D) or (E)(i) of such
paragraph, of not more than $100,000 for each such
determination, plus, with respect to a determination under
paragraph (1)(B), double the excess amount charged in violation
of such paragraph (and the excess amount charged shall be
deducted from the penalty and returned to the individual
concerned), and plus, with respect to a determination under
paragraph (1)(D), $15,000 for each individual not enrolled as a
result of the practice involved,
``(B) suspension of enrollment of individuals under this
part after the date the Secretary notifies the organization of
a determination under paragraph (1) and until the Secretary is
satisfied that the basis for such determination has been
corrected and is not likely to recur, or
``(C) suspension of payment to the organization under this
part for individuals enrolled after the date the Secretary
notifies the organization of a determination under paragraph
(1) and until the Secretary is satisfied that the basis for
such determination has been corrected and is not likely to
recur.
``(3) Other intermediate sanctions.--In the case of a
Medicare+Choice organization for which the Secretary makes a
determination under subsection (c)(2) the basis of which is not
described in paragraph (1), the Secretary may apply the following
intermediate sanctions:
``(A) Civil money penalties of not more than $25,000 for
each determination under subsection (c)(2) if the deficiency
that is the basis of the determination has directly adversely
affected (or has the substantial likelihood of adversely
affecting) an individual covered under the organization's
contract.
``(B) Civil money penalties of not more than $10,000 for
each week beginning after the initiation of civil money penalty
procedures by the Secretary during which the deficiency that is
the basis of a determination under subsection (c)(2) exists.
``(C) Suspension of enrollment of individuals under this
part after the date the Secretary notifies the organization of
a determination under subsection (c)(2) and until the Secretary
is satisfied that the deficiency that is the basis for the
determination has been corrected and is not likely to recur.
``(4) Civil money penalties.--The provisions of section 1128A
(other than subsections (a) and (b)) shall apply to a civil money
penalty under paragraph (2) or (3) in the same manner as they apply
to a civil money penalty or proceeding under section 1128A(a).
``(h) Procedures for Termination.--
``(1) In general.--The Secretary may terminate a contract with
a Medicare+Choice organization under this section in accordance
with formal investigation and compliance procedures established by
the Secretary under which--
``(A) the Secretary provides the organization with the
reasonable opportunity to develop and implement a corrective
action plan to correct the deficiencies that were the basis of
the Secretary's determination under subsection (c)(2); and
``(B) the Secretary provides the organization with
reasonable notice and opportunity for hearing (including the
right to appeal an initial decision) before terminating the
contract.
``(2) Exception for imminent and serious risk to health.--
Paragraph (1) shall not apply if the Secretary determines that a
delay in termination, resulting from compliance with the procedures
specified in such paragraph prior to termination, would pose an
imminent and serious risk to the health of individuals enrolled
under this part with the organization.
``definitions; miscellaneous provisions
``Sec. 1859. (a) Definitions Relating to Medicare+Choice
Organizations.--In this part--
``(1) Medicare+choice organization.--The term `Medicare+Choice
organization' means a public or private entity that is certified
under section 1856 as meeting the requirements and standards of
this part for such an organization.
``(2) Provider-sponsored organization.--The term `provider-
sponsored organization' is defined in section 1855(d)(1).
``(b) Definitions Relating to Medicare+Choice Plans.--
``(1) Medicare+choice plan.--The term `Medicare+Choice plan'
means health benefits coverage offered under a policy, contract, or
plan by a Medicare+Choice organization pursuant to and in
accordance with a contract under section 1857.
``(2) Medicare+Choice private fee-for-service plan.--The term
`Medicare+Choice private fee-for-service plan' means a
Medicare+Choice plan that--
``(A) 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;
``(B) does not vary such rates for such a provider based on
utilization relating to such provider; and
``(C) 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.
``(3) MSA plan.--
``(A) In general.--The term `MSA plan' means a
Medicare+Choice plan that--
``(i) provides reimbursement for at least the items and
services described in section 1852(a)(1) in a year but only
after the enrollee incurs countable expenses (as specified
under the plan) equal to the amount of an annual deductible
(described in subparagraph (B));
``(ii) counts as such expenses (for purposes of such
deductible) at least all amounts that would have been
payable under parts A and B, and that would have been
payable by the enrollee as deductibles, coinsurance, or
copayments, if the enrollee had elected to receive benefits
through the provisions of such parts; and
``(iii) provides, after such deductible is met for a
year and for all subsequent expenses for items and services
referred to in clause (i) in the year, for a level of
reimbursement that is not less than--
``(I) 100 percent of such expenses, or
``(II) 100 percent of the amounts that would have
been paid (without regard to any deductibles or
coinsurance) under parts A and B with respect to such
expenses,
whichever is less.
``(B) Deductible.--The amount of annual deductible under an
MSA plan--
``(i) for contract year 1999 shall be not more than
$6,000; and
``(ii) for a subsequent contract year shall be not more
than the maximum amount of such deductible for the previous
contract year under this subparagraph increased by the
national per capita Medicare+Choice growth percentage under
section 1853(c)(6) for the year.
If the amount of the deductible under clause (ii) is not a
multiple of $50, the amount shall be rounded to the nearest
multiple of $50.
``(c) Other References to Other Terms.--
``(1) Medicare+choice eligible individual.--The term
`Medicare+Choice eligible individual' is defined in section
1851(a)(3).
``(2) Medicare+choice payment area.--The term `Medicare+Choice
payment area' is defined in section 1853(d).
``(3) National per capita medicare+choice growth percentage.--
The `national per capita Medicare+Choice growth percentage' is
defined in section 1853(c)(6).
``(4) Medicare+choice monthly basic beneficiary premium;
medicare+choice monthly supplemental beneficiary premium.--The
terms `Medicare+Choice monthly basic beneficiary premium' and
`Medicare+Choice monthly supplemental beneficiary premium' are
defined in section 1854(a)(2).
``(d) Coordinated Acute and Long-Term Care Benefits Under a
Medicare+Choice Plan.--Nothing in this part shall be construed as
preventing a State from coordinating benefits under a medicaid plan
under title XIX with those provided under a Medicare+Choice plan in a
manner that assures continuity of a full-range of acute care and long-
term care services to poor elderly or disabled individuals eligible for
benefits under this title and under such plan.
``(e) Restriction on Enrollment for Certain Medicare+Choice
Plans.--
``(1) In general.--In the case of a Medicare+Choice religious
fraternal benefit society plan described in paragraph (2),
notwithstanding any other provision of this part to the contrary
and in accordance with regulations of the Secretary, the society
offering the plan may restrict the enrollment of individuals under
this part to individuals who are members of the church, convention,
or group described in paragraph (3)(B) with which the society is
affiliated.
``(2) Medicare+choice religious fraternal benefit society plan
described.--For purposes of this subsection, a Medicare+Choice
religious fraternal benefit society plan described in this
paragraph is a Medicare+Choice plan described in section
1851(a)(2)(A) that--
``(A) is offered by a religious fraternal benefit society
described in paragraph (3) only to members of the church,
convention, or group described in paragraph (3)(B); and
``(B) permits all such members to enroll under the plan
without regard to health status-related factors.
Nothing in this subsection shall be construed as waiving any plan
requirements relating to financial solvency.
``(3) Religious fraternal benefit society defined.--For
purposes of paragraph (2)(A), a `religious fraternal benefit
society' described in this section is an organization that--
``(A) is described in section 501(c)(8) of the Internal
Revenue Code of 1986 and is exempt from taxation under section
501(a) of such Act;
``(B) is affiliated with, carries out the tenets of, and
shares a religious bond with, a church or convention or
association of churches or an affiliated group of churches;
``(C) offers, in addition to a Medicare+Choice religious
fraternal benefit society plan, health coverage to individuals
not entitled to benefits under this title who are members of
such church, convention, or group; and
``(D) does not impose any limitation on membership in the
society based on any health status-related factor.
``(4) Payment adjustment.--Under regulations of the Secretary,
in the case of individuals enrolled under this part under a
Medicare+Choice religious fraternal benefit society plan described
in paragraph (2), the Secretary shall provide for such adjustment
to the payment amounts otherwise established under section 1854 as
may be appropriate to assure an appropriate payment level, taking
into account the actuarial characteristics and experience of such
individuals.''.
SEC. 4002. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO PROGRAM.
(a) Authorizing Transitional Waiver of 50:50 Rule.--Section 1876(f)
(42 U.S.C. 1395mm(f)) is amended--
(1) in paragraph (1)--
(A) by striking ``Each'' and inserting ``For contract
periods beginning before January 1, 1999, each''; and
(B) by striking ``or under a State plan approved under
title XIX'';
(2) in paragraph (2), by striking ``The Secretary'' and
inserting ``Subject to paragraph (4), the Secretary'', and
(3) by adding at the end the following:
``(4) Effective for contract periods beginning after December 31,
1996, the Secretary may waive or modify the requirement imposed by
paragraph (1) to the extent the Secretary finds that it is in the
public interest.''.
(b) Transition.--
(1) Risk-sharing contracts.--Section 1876 (42 U.S.C. 1395mm) is
amended by adding at the end the following new subsections:
``(k)(1) Except as provided in paragraph (2)--
``(A) on or after the date standards for Medicare+Choice
organizations and plans are first established under section
1856(b)(1), the Secretary shall not enter into any risk-sharing
contract under this section with an eligible organization; and
``(B) for any contract year beginning on or after January 1,
1999, the Secretary shall not renew any such contract.
``(2) An individual who is enrolled in part B only and is enrolled
in an eligible organization with a risk-sharing contract under this
section on December 31, 1998, may continue enrollment in such
organization in accordance with regulations described in section
1856(b)(1).
``(3) Notwithstanding subsection (a), the Secretary shall provide
that payment amounts under risk-sharing contracts under this section
for months in a year (beginning with January 1998) shall be computed--
``(A) with respect to individuals entitled to benefits under
both parts A and B, by substituting payment rates under section
1853(a) for the payment rates otherwise established under section
1876(a), and
``(B) with respect to individuals only entitled to benefits
under part B, by substituting an appropriate proportion of such
rates (reflecting the relative proportion of payments under this
title attributable to such part) for the payment rates otherwise
established under subsection (a).
``(4) The following requirements shall apply to eligible
organizations with risk-sharing contracts under this section in the
same manner as they apply to Medicare+Choice organizations under part
C:
``(A) Data collection requirements under section 1853(a)(3)(B).
``(B) Restrictions on imposition of premium taxes under section
1854(g) in relating to payments to such organizations under this
section.
``(C) The requirement to accept enrollment of new enrollees
during November 1998 under section 1851(e)(6).
``(D) Payments under section 1857(e)(2).''.
(2) Reasonable cost contracts.--
(A) Phase out of contracts.--Section 1876(h) (42 U.S.C.
1395mm(h)) is amended by adding at the end the following:
``(5)(A) After the date of the enactment of this paragraph, the
Secretary may not enter into a reasonable cost reimbursement contract
under this subsection (if the contract is not in effect as of such
date), except for a contract with an eligible organization which,
immediately previous to entering into such contract, had an agreement
in effect under section 1833(a)(1)(A).
``(B) The Secretary may not extend or renew a reasonable cost
reimbursement contract under this subsection for any period beyond
December 31, 2002.''.
(B) Report on impact.--By not later than January 1, 2001,
the Secretary of Health and Human Services shall submit to
Congress a report that analyzes the potential impact of
termination of reasonable cost reimbursement contracts,
pursuant to the amendment made by subparagraph (A), on medicare
beneficiaries enrolled under such contracts and on the medicare
program. The report shall include such recommendations
regarding any extension or transition with respect to such
contracts as the Secretary deems appropriate.
(c) Enrollment Transition Rule.--An individual who is enrolled on
December 31, 1998, with an eligible organization under section 1876 of
the Social Security Act (42 U.S.C. 1395mm) shall be considered to be
enrolled with that organization on January 1, 1999, under part C of
title XVIII of such Act if that organization has a contract under that
part for providing services on January 1, 1999 (unless the individual
has disenrolled effective on that date).
(d) Advance Directives.--Section 1866(f) (42 U.S.C. 1395cc(f)) is
amended--
(1) in paragraph (1)--
(A) by inserting ``1855(i),'' after ``1833(s),'', and
(B) by inserting ``, Medicare+Choice organization,'' after
``provider of services''; and
(2) in paragraph (2)(E), by inserting ``or a Medicare+Choice
organization'' after ``section 1833(a)(1)(A)''.
(e) Extension of Provider Requirement.--Section 1866(a)(1)(O) (42
U.S.C. 1395cc(a)(1)(O)) is amended--
(1) by striking ``in the case of hospitals and skilled nursing
facilities,'';
(2) by striking ``inpatient hospital and extended care'';
(3) by inserting ``with a Medicare+Choice organization under
part C or'' after ``any individual enrolled'';
(4) by striking ``(in the case of hospitals) or limits (in the
case of skilled nursing facilities)''; and
(5) by inserting ``(less any payments under sections
1886(d)(11) and 1886(h)(3)(D))'' after ``under this title''.
(f) Additional Conforming Changes.--
(1) Conforming references to previous part C.--Any reference in
law (in effect before the date of the enactment of this Act) to
part C of title XVIII of the Social Security Act is deemed a
reference to part D of such title (as in effect after such date).
(2) Secretarial 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 chapter.
(g) Immediate Effective Date for Certain Requirements for
Demonstrations.--Section 1857(e)(2) of the Social Security Act
(requiring contribution to certain costs related to the enrollment
process comparative materials) applies to demonstrations with respect
to which enrollment is effected or coordinated under section 1851 of
such Act.
(h) Transition Rule for PSO Enrollment.--In applying subsection
(g)(1) of section 1876 of the Social Security Act (42 U.S.C. 1395mm) to
a risk-sharing contract entered into with an eligible organization that
is a provider-sponsored organization (as defined in section 1855(d)(1)
of such Act, as inserted by section 5001) for a contract year beginning
on or after January 1, 1998, there shall be substituted for the minimum
number of enrollees provided under such section the minimum number of
enrollees permitted under section 1857(b)(1) of such Act (as so
inserted).
(i) Publication of New Capitation Rates.--Not later than 4 weeks
after the date of the enactment of this Act, the Secretary of Health
and Human Services shall announce the annual Medicare+Choice capitation
rates for 1998 under section 1853(b) of the Social Security Act.
(j) Elimination of Health Care Prepayment Plan Option for Entities
Eligible to Participate As Managed Care Organization.--
(1) Elimination of option.--
(A) In general.--Section 1833(a)(1)(A) (42 U.S.C.
1395l(a)(1)(A)) is amended by inserting ``(and either is
sponsored by a union or employer, or does not provide, or
arrange for the provision of, any inpatient hospital
services)'' after ``prepayment basis''.
(B) Effective date.--The amendment made by subparagraph (A)
applies to new contracts entered into after the date of
enactment of this Act and, with respect to contracts in effect
as of such date, shall apply to payment for services furnished
after December 31, 1998.
(2) Medigap conforming amendment.--Effective January 1, 1999,
section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended by striking
``, during the period beginning on the date specified in subsection
(p)(1)(C) and ending on December 31, 1995,''.
SEC. 4003. CONFORMING CHANGES IN MEDIGAP PROGRAM.
(a) Conforming Amendments to Medicare+Choice Changes.--
(1) In general.--Section 1882(d)(3)(A)(i) (42 U.S.C.
1395ss(d)(3)(A)(i)) is amended--
(A) in the matter before subclause (I), by inserting
``(including an individual electing a Medicare+Choice plan
under section 1851)'' after ``of this title''; and
(B) in subclause (II)--
(i) by inserting ``in the case of an individual not
electing a Medicare+Choice plan'' after ``(II)'', and
(ii) by inserting before the comma at the end the
following: ``or in the case of an individual electing a
Medicare+Choice plan, a medicare supplemental policy with
knowledge that the policy duplicates health benefits to
which the individual is otherwise entitled under the
Medicare+Choice plan or under another medicare supplemental
policy''.
(2) Conforming amendments.--Section 1882(d)(3)(B)(i)(I) (42
U.S.C. 1395ss(d)(3)(B)(i)(I)) is amended by inserting ``(including
any Medicare+Choice plan)'' after ``health insurance policies''.
(3) Medicare+choice plans not treated as medicare supplementary
policies.--Section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended
by inserting ``or a Medicare+Choice plan or'' after ``does not
include''.
(b) Additional Rules Relating to Individuals Enrolled in MSA Plans
and Private Fee-for-Service Plans.--Section 1882 (42 U.S.C. 1395ss) is
further amended by adding at the end the following new subsection:
``(u)(1) It is unlawful for a person to sell or issue a policy
described in paragraph (2) to an individual with knowledge that the
individual has in effect under section 1851 an election of an MSA plan
or a Medicare+Choice private fee-for-service plan.
``(2)(A) A policy described in this subparagraph is a health
insurance policy (other than a policy described in subparagraph (B))
that provides for coverage of expenses that are otherwise required to
be counted toward meeting the annual deductible amount provided under
the MSA plan.
``(B) A policy described in this subparagraph is any of the
following:
``(i) A policy that provides coverage (whether through
insurance or otherwise) for accidents, disability, dental care,
vision care, or long-term care.
``(ii) A policy of insurance to which substantially all of the
coverage relates to--
``(I) liabilities incurred under workers' compensation
laws,
``(II) tort liabilities,
``(III) liabilities relating to ownership or use of
property, or
``(IV) such other similar liabilities as the Secretary may
specify by regulations.
``(iii) A policy of insurance that provides coverage for a
specified disease or illness.
``(iv) A policy of insurance that pays a fixed amount per day
(or other period) of hospitalization.''.
Subchapter B--Special Rules for Medicare+Choice Medical Savings
Accounts
SEC. 4006. MEDICARE+CHOICE MSA.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to amounts specifically
excluded from gross income) is amended by redesignating section 138 as
section 139 and by inserting after section 137 the following new
section:
``SEC. 138. MEDICARE+CHOICE MSA.
``(a) Exclusion.--Gross income shall not include any payment to the
Medicare+Choice MSA of an individual by the Secretary of Health and
Human Services under part C of title XVIII of the Social Security Act.
``(b) Medicare+Choice MSA.--For purposes of this section, the term
`Medicare+Choice MSA' means a medical savings account (as defined in
section 220(d))--
``(1) which is designated as a Medicare+Choice MSA,
``(2) with respect to which no contribution may be made other
than--
``(A) a contribution made by the Secretary of Health and
Human Services pursuant to part C of title XVIII of the Social
Security Act, or
``(B) a trustee-to-trustee transfer described in subsection
(c)(4),
``(3) the governing instrument of which provides that trustee-
to-trustee transfers described in subsection (c)(4) may be made to
and from such account, and
``(4) which is established in connection with an MSA plan
described in section 1859(b)(3) of the Social Security Act.
``(c) Special Rules for Distributions.--
``(1) Distributions for qualified medical expenses.--In
applying section 220 to a Medicare+Choice MSA--
``(A) qualified medical expenses shall not include amounts
paid for medical care for any individual other than the account
holder, and
``(B) section 220(d)(2)(C) shall not apply.
``(2) Penalty for distributions from medicare+choice msa not
used for qualified medical expenses if minimum balance not
maintained.--
``(A) In general.--The tax imposed by this chapter for any
taxable year in which there is a payment or distribution from a
Medicare+Choice MSA which is not used exclusively to pay the
qualified medical expenses of the account holder shall be
increased by 50 percent of the excess (if any) of--
``(i) the amount of such payment or distribution, over
``(ii) the excess (if any) of--
``(I) the fair market value of the assets in such
MSA as of the close of the calendar year preceding the
calendar year in which the taxable year begins, over
``(II) an amount equal to 60 percent of the
deductible under the Medicare+Choice MSA plan covering
the account holder as of January 1 of the calendar year
in which the taxable year begins.
Section 220(f)(4) shall not apply to any payment or
distribution from a Medicare+Choice MSA.
``(B) Exceptions.--Subparagraph (A) shall not apply if the
payment or distribution is made on or after the date the
account holder--
``(i) becomes disabled within the meaning of section
72(m)(7), or
``(ii) dies.
``(C) Special rules.--For purposes of subparagraph (A)--
``(i) all Medicare+Choice MSAs of the account holder
shall be treated as 1 account,
``(ii) all payments and distributions not used
exclusively to pay the qualified medical expenses of the
account holder during any taxable year shall be treated as
1 distribution, and
``(iii) any distribution of property shall be taken
into account at its fair market value on the date of the
distribution.
``(3) Withdrawal of erroneous contributions.--Section 220(f)(2)
and paragraph (2) of this subsection shall not apply to any payment
or distribution from a Medicare+Choice MSA to the Secretary of
Health and Human Services of an erroneous contribution to such MSA
and of the net income attributable to such contribution.
``(4) Trustee-to-trustee transfers.--Section 220(f)(2) and
paragraph (2) of this subsection shall not apply to any trustee-to-
trustee transfer from a Medicare+Choice MSA of an account holder to
another Medicare+Choice MSA of such account holder.
``(d) Special Rules for Treatment of Account After Death of Account
Holder.--In applying section 220(f)(8)(A) to an account which was a
Medicare+Choice MSA of a decedent, the rules of section 220(f) shall
apply in lieu of the rules of subsection (c) of this section with
respect to the spouse as the account holder of such Medicare+Choice
MSA.
``(e) Reports.--In the case of a Medicare+Choice MSA, the report
under section 220(h)--
``(1) shall include the fair market value of the assets in such
Medicare+Choice MSA as of the close of each calendar year, and
``(2) shall be furnished to the account holder--
``(A) not later than January 31 of the calendar year
following the calendar year to which such reports relate, and
``(B) in such manner as the Secretary prescribes in such
regulations.
``(f) Coordination With Limitation on Number of Taxpayers Having
Medical Savings Accounts.--Subsection (i) of section 220 shall not
apply to an individual with respect to a Medicare+Choice MSA, and
Medicare+Choice MSA's shall not be taken into account in determining
whether the numerical limitations under section 220(j) are exceeded.''.
(b) Technical Amendments.--
(1) The last sentence of section 4973(d) of such Code is
amended by inserting ``or section 138(c)(3)'' after ``section
220(f)(3)''.
(2) Subsection (b) of section 220 of such Code is amended by
adding at the end the following new paragraph:
``(7) Medicare eligible individuals.--The limitation under this
subsection for any month with respect to an individual shall be
zero for the first month such individual is entitled to benefits
under title XVIII of the Social Security Act and for each month
thereafter.''.
(3) The table of sections for part III of subchapter B of
chapter 1 of such Code is amended by striking the last item and
inserting the following:
``Sec. 138. Medicare+Choice MSA.
``Sec. 139. Cross references to other Acts.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.
CHAPTER 2--DEMONSTRATIONS
Subchapter A--Medicare+Choice Competitive Pricing Demonstration Project
SEC. 4011. MEDICARE PREPAID COMPETITIVE PRICING DEMONSTRATION PROJECT.
(a) Establishment of Project.--The Secretary of Health and Human
Services (in this subchapter referred to as the ``Secretary'') shall
establish a demonstration project (in this subchapter referred to as
the ``project'') under which payments to Medicare+Choice organizations
in medicare payment areas in which the project is being conducted are
determined in accordance with a competitive pricing methodology
established under this subchapter.
(b) Designation of 7 Medicare Payment Areas Covered by Project.--
(1) In general.--The Secretary shall designate, in accordance
with the recommendations of the Competitive Pricing Advisory
Committee under paragraphs (2) and (3), medicare payment areas as
areas in which the project under this subchapter will be conducted.
In this section, the term ``Competitive Pricing Advisory
Committee'' means the Competitive Pricing Advisory Committee
established under section 4012(a).
(2) Initial designation of 4 areas.--
(A) In general.--The Competitive Pricing Advisory Committee
shall recommend to the Secretary, consistent with subparagraph
(B), the designation of 4 specific areas as medicare payment
areas to be included in the project. Such recommendations shall
be made in a manner so as to ensure that payments under the
project in 2 such areas will begin on January 1, 1999, and in 2
such areas will begin on January 1, 2000.
(B) Location of designation.--Of the 4 areas recommended
under subparagraph (A), 3 shall be in urban areas and 1 shall
be in a rural area.
(3) Designation of additional 3 areas.--Not later than December
31, 2001, the Competitive Pricing Advisory Committee may recommend
to the Secretary the designation of up to 3 additional, specific
medicare payment areas to be included in the project.
(c) Project Implementation.--
(1) In general.--Subject to paragraph (2), the Secretary shall
for each medicare payment area designated under subsection (b)--
(A) in accordance with the recommendations of the
Competitive Pricing Advisory Committee--
(i) establish the benefit design among plans offered in
such area, and
(ii) structure the method for selecting plans offered
in such area; and
(B) in consultation with such Committee--
(i) establish methods for setting the price to be paid
to plans, including, if the Secretaries determines
appropriate, the rewarding and penalizing of
Medicare+Choice plans in the area on the basis of the
attainment of, or failure to attain, applicable quality
standards, and
(ii) provide for the collection of plan information
(including information concerning quality and access to
care), the dissemination of information, and the methods of
evaluating the results of the project.
(2) Consultation.--The Secretary shall take into account the
recommendations of the area advisory committee established in
section 4012(b), in implementing a project design for any area,
except that no modifications may be made in the project design
without consultation with the Competitive Pricing Advisory
Committee. In no case may the Secretary change the designation of
an area based on recommendations of any area advisory committee.
(d) Monitoring and Report.--
(1) Monitoring impact.--Taking into consideration the
recommendations of the Competitive Pricing Advisory Committee and
the area advisory committees, the Secretary shall closely monitor
and measure the impact of the project in the different areas on the
price and quality of, and access to, medicare covered services,
choice of health plans, changes in enrollment, and other relevant
factors.
(2) Report.--Not later than December 31, 2002, the Secretary
shall submit to Congress a report on the progress under the project
under this subchapter, including a comparison of the matters
monitored under paragraph (1) among the different designated areas.
The report may include any legislative recommendations for
extending the project to the entire medicare population.
(e) Waiver Authority.--The Secretary of Health and Human Services
may waive such requirements of title XVIII of the Social Security Act
(as amended by this Act) as may be necessary for the purposes of
carrying out the project.
(f) Relationship to Other Authority.--Except pursuant to this
subchapter, the Secretary of Health and Human Services may not conduct
or continue any medicare demonstration project relating to payment of
health maintenance organizations, Medicare+Choice organizations, or
similar prepaid managed care entities on the basis of a competitive
bidding process or pricing system described in subsection (a).
(g) No Additional Costs to Medicare Program.--The aggregate
payments to Medicare+Choice organizations under the project for any
designated area for a fiscal year may not exceed the aggregate payments
to such organizations that would have been made under title XVIII of
the Social Security Act (42 U.S.C. 1395 et seq.), as amended by section
4001, if the project had not been conducted.
(h) Definitions.--Any term used in this subchapter which is also
used in part C of title XVIII of the Social Security Act, as amended by
section 4001, shall have the same meaning as when used in such part.
SEC. 4012. ADVISORY COMMITTEES.
(a) Competitive Pricing Advisory Committee.--
(1) In general.--Before implementing the project under this
subchapter, the Secretary shall appoint the Competitive Pricing
Advisory Committee, including independent actuaries, individuals
with expertise in competitive health plan pricing, and an employee
of the Office of Personnel Management with expertise in the
administration of the Federal Employees Health Benefit Program, to
make recommendations to the Secretary concerning the designation of
areas for inclusion in the project and appropriate research design
for implementing the project.
(2) Initial recommendations.--The Competitive Pricing Advisory
Committee initially shall submit recommendations regarding the area
selection, benefit design among plans offered, structuring choice
among health plans offered, methods for setting the price to be
paid to plans, collection of plan information (including
information concerning quality and access to care), information
dissemination, and methods of evaluating the results of the
project.
(3) Quality recommendation.--The Competitive Pricing Advisory
Committee shall study and make recommendations regarding the
feasibility of providing financial incentives and penalties to
plans operating under the project that meet, or fail to meet,
applicable quality standards.
(4) Advice during implementation.--Upon implementation of the
project, the Competitive Pricing Advisory Committee shall continue
to advise the Secretary on the application of the design in
different areas and changes in the project based on experience with
its operations.
(5) Sunset.--The Competitive Pricing Advisory Committee shall
terminate on December 31, 2004.
(b) Appointment of Area Advisory Committee.--Upon the designation
of an area for inclusion in the project, the Secretary shall appoint an
area advisory committee, composed of representatives of health plans,
providers, and medicare beneficiaries in the area, to advise the
Secretary concerning how the project will be implemented in the area.
Such advice may include advice concerning the marketing and pricing of
plans in the area and other salient factors. The duration of such a
committee for an area shall be for the duration of the operation of the
project in the area.
(c) Special application.--Notwithstanding section 9(c) of the
Federal Advisory Committee Act (5 U.S.C. App.), the Competitive Pricing
Advisory Commission and any area advisory committee (described in
subsection (b)) may meet as soon as the members of the commission or
committee, respectively, are appointed.
Subchapter B--Social Health Maintenance Organizations
SEC. 4014. SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS).
(a) Extension of Demonstration Project Authorities.--Section
4018(b) of the Omnibus Budget Reconciliation Act of 1987 is amended--
(1) in paragraph (1), by striking ``1997'' and inserting
``2000'', and
(2) in paragraph (4), by striking ``1998'' and inserting
``2001''.
(b) Expansion of Cap.--Section 13567(c) of the Omnibus Budget
Reconciliation Act of 1993 is amended by striking ``12,000'' and
inserting ``36,000''.
(c) Report on Integration and Transition.--
(1) In general.--The Secretary of Health and Human Services
shall submit to Congress, by not later than January 1, 1999, a plan
for the integration of health plans offered by social health
maintenance organizations (including SHMO I and SHMO II sites
developed under section 2355 of the Deficit Reduction Act of 1984
and under the amendment made by section 4207(b)(3)(B)(i) of OBRA-
1990, respectively) and similar plans as an option under the
Medicare+Choice program under part C of title XVIII of the Social
Security Act.
(2) Provision for transition.--Such plan shall include a
transition for social health maintenance organizations operating
under demonstration project authority under such section.
(3) Payment policy.--The report shall also include
recommendations on appropriate payment levels for plans offered by
such organizations, including an analysis of the application of
risk adjustment factors appropriate to the population served by
such organizations.
Subchapter C--Medicare Subvention Demonstration Project for Military
Retirees
SEC. 4015. MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY
RETIREES.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) (as amended
by sections 4603 and 4801) is amended by adding at the end the
following:
``MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY RETIREES
``Sec. 1896. (a) Definitions.--In this section:
``(1) Administering secretaries.--The term `administering
Secretaries' means the Secretary and the Secretary of Defense
acting jointly.
``(2) Demonstration project; project.--The terms `demonstration
project' and `project' mean the demonstration project carried out
under this section.
``(3) Designated provider.--The term `designated provider' has
the meaning given that term in section 721(5) of the National
Defense Authorization Act For Fiscal Year 1997 (Public Law 104-201;
110 Stat. 2593; 10 U.S.C. 1073 note).
``(4) Medicare-eligible military retiree or dependent.--The
term `medicare-eligible military retiree or dependent' means an
individual described in section 1074(b) or 1076(b) of title 10,
United States Code, who--
``(A) would be eligible for health benefits under section
1086 of such title by reason of subsection (c)(1) of such
section 1086 but for the operation of subsection (d) of such
section 1086;
``(B)(i) is entitled to benefits under part A of this
title; and
``(ii) if the individual was entitled to such benefits
before July 1, 1997, received health care items or services
from a health care facility of the uniformed services before
that date, but after becoming entitled to benefits under part A
of this title;
``(C) is enrolled for benefits under part B of this title;
and
``(D) has attained age 65.
``(5) Medicare health care services.--The term `medicare health
care services' means items or services covered under part A or B of
this title.
``(6) Military treatment facility.--The term `military
treatment facility' means a facility referred to in section 1074(a)
of title 10, United States Code.
``(7) TRICARE.--The term `TRICARE' has the same meaning as the
term `TRICARE program' under section 711 of the National Defense
Authorization Act for Fiscal Year 1996 (10 U.S.C. 1073 note).
``(8) Trust funds.--The term `trust funds' means the Federal
Hospital Insurance Trust Fund established in section 1817 and the
Federal Supplementary Medical Insurance Trust Fund established in
section 1841.
``(b) Demonstration Project.--
``(1) In general.--
``(A) Establishment.--The administering Secretaries are
authorized to establish a demonstration project (under an
agreement entered into by the administering Secretaries) under
which the Secretary shall reimburse the Secretary of Defense,
from the trust funds, for medicare health care services
furnished to certain medicare-eligible military retirees or
dependents in a military treatment facility or by a designated
provider.
``(B) Agreement.--The agreement entered into under
subparagraph (A) shall include at a minimum--
``(i) a description of the benefits to be provided to
the participants of the demonstration project established
under this section;
``(ii) a description of the eligibility rules for
participation in the demonstration project, including any
cost sharing requirements;
``(iii) a description of how the demonstration project
will satisfy the requirements under this title;
``(iv) a description of the sites selected under
paragraph (2);
``(v) a description of how reimbursement requirements
under subsection (i) and maintenance of effort requirements
under subsection (j) will be implemented in the
demonstration project;
``(vi) a statement that the Secretary shall have access
to all data of the Department of Defense that the Secretary
determines is necessary to conduct independent estimates
and audits of the maintenance of effort requirement, the
annual reconciliation, and related matters required under
the demonstration project;
``(vii) a description of any requirement that the
Secretary waives pursuant to subsection (d); and
``(viii) a certification, provided after review by the
administering Secretaries, that any entity that is
receiving payments by reason of the demonstration project
has sufficient--
``(I) resources and expertise to provide,
consistent with payments under subsection (i), the full
range of benefits required to be provided to
beneficiaries under the project; and
``(II) information and billing systems in place to
ensure the accurate and timely submission of claims for
benefits and to ensure that providers of services,
physicians, and other health care professionals are
reimbursed by the entity in a timely and accurate
manner.
``(2) Number of sites.--The project established under this
section shall be conducted in no more than 6 sites, designated
jointly by the administering Secretaries after review of all
TRICARE regions.
``(3) Restriction.--No new military treatment facilities will
be built or expanded with funds from the demonstration project.
``(4) Duration.--The administering Secretaries shall conduct
the demonstration project during the 3-year period beginning on
January 1, 1998.
``(5) Report.--At least 60 days prior to the commencement of
the demonstration project, the administering Secretaries shall
submit a copy of the agreement entered into under paragraph (1) to
the committees of jurisdiction under this title.
``(c) Crediting of Payments.--A payment received by the Secretary
of Defense under the demonstration project shall be credited to the
applicable Department of Defense medical appropriation (and within that
appropriation). Any such payment received during a fiscal year for
services provided during a prior fiscal year may be obligated by the
Secretary of Defense during the fiscal year during which the payment is
received.
``(d) Waiver of Certain Medicare Requirements.--
``(1) Authority.--
``(A) In general.--Except as provided under subparagraph
(B), the demonstration project shall meet all requirements of
Medicare+Choice plans under part C of this title and
regulations pertaining thereto, and other requirements for
receiving medicare payments, except that the prohibition of
payments to Federal providers of services under sections
1814(c) and 1835(d), and paragraphs (2) and (3) of section
1862(a) shall not apply.
``(B) Waiver.--Except as provided in paragraph (2), the
Secretary is authorized to waive any requirement described
under subparagraph (A), or approve equivalent or alternative
ways of meeting such a requirement, but only if such waiver or
approval--
``(i) reflects the unique status of the Department of
Defense as an agency of the Federal Government; and
``(ii) is necessary to carry out the demonstration
project.
``(2) Beneficiary protections and other matters.--The
demonstration project shall comply with the requirements of part C
of this title that relate to beneficiary protections and other
matters, including such requirements relating to the following
areas:
``(A) Enrollment and disenrollment.
``(B) Nondiscrimination.
``(C) Information provided to beneficiaries.
``(D) Cost-sharing limitations.
``(E) Appeal and grievance procedures.
``(F) Provider participation.
``(G) Access to services.
``(H) Quality assurance and external review.
``(I) Advance directives.
``(J) Other areas of beneficiary protections that the
Secretary determines are applicable to such project.
``(e) Inspector General.--Nothing in the agreement entered into
under subsection (b) shall limit the Inspector General of the
Department of Health and Human Services from investigating any matters
regarding the expenditure of funds under this title for the
demonstration project, including compliance with the provisions of this
title and all other relevant laws.
``(f) Voluntary Participation.--Participation of medicare-eligible
military retirees or dependents in the demonstration project shall be
voluntary.
``(g) TRICARE Health Care Plans.--
``(1) Modification of tricare contracts.--In carrying out the
demonstration project, the Secretary of Defense is authorized to
amend existing TRICARE contracts (including contracts with
designated providers) in order to provide the medicare health care
services to the medicare-eligible military retirees and dependents
enrolled in the demonstration project consistent with part C of
this title.
``(2) Health care benefits.--The administering Secretaries
shall prescribe the minimum health care benefits to be provided
under such a plan to medicare-eligible military retirees or
dependents enrolled in the plan. Those benefits shall include at
least all medicare health care services covered under this title.
``(h) Additional Plans.--Notwithstanding any provisions of title
10, United States Code, the administering Secretaries may agree to
include in the demonstration project any of the Medicare+Choice plans
described in section 1851(a)(2)(A), and such agreement may include an
agreement between the Secretary of Defense and the Medicare+Choice
organization offering such plan to provide medicare health care
services to medicare-eligible military retirees or dependents and for
such Secretary to receive payments from such organization for the
provision of such services.
``(i) Payments Based on Regular Medicare Payment Rates.--
``(1) In general.--Subject to the succeeding provisions of this
subsection, the Secretary shall reimburse the Secretary of Defense
for services provided under the demonstration project at a rate
equal to 95 percent of the amount paid to a Medicare+Choice
organization under part C of this title with respect to such an
enrollee. In cases in which a payment amount may not otherwise be
readily computed, the Secretary shall establish rules for computing
equivalent or comparable payment amounts.
``(2) Exclusion of certain amounts.--In computing the amount of
payment under paragraph (1), the following shall be excluded:
``(A) Special payments.--Any amount attributable to an
adjustment under subparagraphs (B) and (F) of section
1886(d)(5) and subsection (h) of such section.
``(B) Percentage of capital payments.--An amount determined
by the administering Secretaries for amounts attributable to
payments for capital-related costs under subsection (g) of such
section.
``(3) Periodic payments from medicare trust funds.--Payments
under this subsection shall be made--
``(A) on a periodic basis consistent with the periodicity
of payments under this title; and
``(B) in appropriate part, as determined by the Secretary,
from the trust funds.
``(4) Cap on amount.--The aggregate amount to be reimbursed
under this subsection pursuant to the agreement entered into
between the administering Secretaries under subsection (b) shall
not exceed a total of--
``(A) $50,000,000 for calendar year 1998;
``(B) $60,000,000 for calendar year 1999; and
``(C) $65,000,000 for calendar year 2000.
``(j) Maintenance of Effort.--
``(1) Monitoring effect of demonstration program on costs to
medicare program.--
``(A) In general.--The administering Secretaries, in
consultation with the Comptroller General, shall closely
monitor the expenditures made under the medicare program for
medicare-eligible military retirees or dependents during the
period of the demonstration project compared to the
expenditures that would have been made for such medicare-
eligible military retirees or dependents during that period if
the demonstration project had not been conducted. The agreement
entered into by the administering Secretaries under subsection
(b) shall require any participating military treatment facility
to maintain the level of effort for space available care to
medicare-eligible military retirees or dependents.
``(B) Annual report by the comptroller general.--Not later
than December 31 of each year during which the demonstration
project is conducted, the Comptroller General shall submit to
the administering Secretaries and the appropriate committees of
Congress a report on the extent, if any, to which the costs of
the Secretary under the medicare program under this title
increased during the preceding fiscal year as a result of the
demonstration project.
``(2) Required response in case of increase in costs.--
``(A) In general.--If the administering Secretaries find,
based on paragraph (1), that the expenditures under the
medicare program under this title increased (or are expected to
increase) during a fiscal year because of the demonstration
project, the administering Secretaries shall take such steps as
may be needed--
``(i) to recoup for the medicare program the amount of
such increase in expenditures; and
``(ii) to prevent any such increase in the future.
``(B) Steps.--Such steps--
``(i) under subparagraph (A)(i) shall include payment
of the amount of such increased expenditures by the
Secretary of Defense from the current medical care
appropriation of the Department of Defense to the trust
funds; and
``(ii) under subparagraph (A)(ii) shall include
suspending or terminating the demonstration project (in
whole or in part) or lowering the amount of payment under
subsection (i)(1).
``(k) Evaluation and Reports.--
``(1) Independent evaluation.--The Comptroller General of the
United States shall conduct an evaluation of the demonstration
project, and shall submit annual reports on the demonstration
project to the administering Secretaries and to the committees of
jurisdiction in the Congress. The first report shall be submitted
not later than 12 months after the date on which the demonstration
project begins operation, and the final report not later than 3\1/
2\ years after that date. The evaluation and reports shall include
an assessment, based on the agreement entered into under subsection
(b), of the following:
``(A) Any savings or costs to the medicare program under
this title resulting from the demonstration project.
``(B) The cost to the Department of Defense of providing
care to medicare-eligible military retirees and dependents
under the demonstration project.
``(C) A description of the effects of the demonstration
project on military treatment facility readiness and training
and the probable effects of the project on overall Department
of Defense medical readiness and training.
``(D) Any impact of the demonstration project on access to
care for active duty military personnel and their dependents.
``(E) An analysis of how the demonstration project affects
the overall accessibility of the uniformed services treatment
system and the amount of space available for point-of-service
care, and a description of the unintended effects (if any) upon
the normal treatment priority system.
``(F) Compliance by the Department of Defense with the
requirements under this title.
``(G) The number of medicare-eligible military retirees and
dependents opting to participate in the demonstration project
instead of receiving health benefits through another health
insurance plan (including benefits under this title).
``(H) A list of the health insurance plans and programs
that were the primary payers for medicare-eligible military
retirees and dependents during the year prior to their
participation in the demonstration project and the distribution
of their previous enrollment in such plans and programs.
``(I) Any impact of the demonstration project on private
health care providers and beneficiaries under this title that
are not enrolled in the demonstration project.
``(J) An assessment of the access to care and quality of
care for medicare-eligible military retirees and dependents
under the demonstration project.
``(K) An analysis of whether, and in what manner, easier
access to the uniformed services treatment system affects the
number of medicare-eligible military retirees and dependents
receiving medicare health care services.
``(L) Any impact of the demonstration project on the access
to care for medicare-eligible military retirees and dependents
who did not enroll in the demonstration project and for other
individuals entitled to benefits under this title.
``(M) A description of the difficulties (if any)
experienced by the Department of Defense in managing the
demonstration project and TRICARE contracts.
``(N) Any additional elements specified in the agreement
entered into under subsection (b).
``(O) Any additional elements that the Comptroller General
of the United States determines is appropriate to assess
regarding the demonstration project.
``(2) Report on extension and expansion of demonstration
project.--Not later than 6 months after the date of the submission
of the final report by the Comptroller General of the United States
under paragraph (1), the administering Secretaries shall submit to
Congress a report containing their recommendation as to--
``(A) whether there is a cost to the health care program
under this title in conducting the demonstration project, and
whether the demonstration project could be expanded without
there being a cost to such health care program or to the
Federal Government;
``(B) whether to extend the demonstration project or make
the project permanent; and
``(C) whether the terms and conditions of the project
should be continued (or modified) if the project is extended or
expanded.''.
(b) Implementation Plan for Veterans Subvention.--Not later than 12
months after the start of the demonstration project, the Secretary of
Health and Human Services and the Secretary of Veterans Affairs shall
jointly submit to Congress a detailed implementation plan for a
subvention demonstration project (that follows the model of the
demonstration project conducted under section 1896 of the Social
Security Act (as added by subsection (a)) to begin in 1999 for veterans
(as defined in section 101 of title 38, United States Code) that are
eligible for benefits under title XVIII of the Social Security Act.
Subchapter D--Other Projects
SEC. 4016. MEDICARE COORDINATED CARE DEMONSTRATION PROJECT.
(a) Demonstration Projects.--
(1) In general.--The Secretary of Health and Human Services (in
this section referred to as the ``Secretary'') shall conduct
demonstration projects for the purpose of evaluating methods, such
as case management and other models of coordinated care, that--
(A) improve the quality of items and services provided to
target individuals; and
(B) reduce expenditures under the medicare program under
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
for items and services provided to target individuals.
(2) Target individual defined.--In this section, the term
``target individual'' means an individual that has a chronic
illness, as defined and identified by the Secretary, and is
enrolled under the fee-for-service program under parts A and B of
title XVIII of the Social Security Act (42 U.S.C. 1395c et seq.;
1395j et seq.).
(b) Program Design.--
(1) Initial design.--The Secretary shall evaluate best
practices in the private sector of methods of coordinated care for
a period of 1 year and design the demonstration project based on
such evaluation.
(2) Number and project areas.--Not later than 2 years after the
date of enactment of this Act, the Secretary shall implement at
least 9 demonstration projects, including--
(A) 5 projects in urban areas;
(B) 3 projects in rural areas; and
(C) 1 project within the District of Columbia which is
operated by a nonprofit academic medical center that maintains
a National Cancer Institute certified comprehensive cancer
center.
(3) Expansion of projects; implementation of demonstration
project results.--
(A) Expansion of projects.--If the initial report under
subsection (c) contains an evaluation that demonstration
projects--
(i) reduce expenditures under the medicare program; or
(ii) do not increase expenditures under the medicare
program and increase the quality of health care services
provided to target individuals and satisfaction of
beneficiaries and health care providers;
the Secretary shall continue the existing demonstration
projects and may expand the number of demonstration projects.
(B) Implementation of demonstration project results.--If a
report under subsection (c) contains an evaluation as described
in subparagraph (A), the Secretary may issue regulations to
implement, on a permanent basis, the components of the
demonstration project that are beneficial to the medicare
program.
(c) Report to Congress.--
(1) In general.--Not later than 2 years after the Secretary
implements the initial demonstration projects under this section,
and biannually thereafter, the Secretary shall submit to Congress a
report regarding the demonstration projects conducted under this
section.
(2) Contents of report.--The report in paragraph (1) shall
include the following:
(A) A description of the demonstration projects conducted
under this section.
(B) An evaluation of--
(i) the cost-effectiveness of the demonstration
projects;
(ii) the quality of the health care services provided
to target individuals under the demonstration projects; and
(iii) beneficiary and health care provider satisfaction
under the demonstration project.
(C) Any other information regarding the demonstration
projects conducted under this section that the Secretary
determines to be appropriate.
(d) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) to such extent and for such period as the Secretary
determines is necessary to conduct demonstration projects.
(e) Funding.--
(1) Demonstration projects.--
(A) In general.--
(i) State projects.--Except as provided in clause (ii),
the Secretary shall provide for the transfer from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Insurance Trust Fund under title XVIII of the
Social Security Act (42 U.S.C. 1395i, 1395t), in such
proportions as the Secretary determines to be appropriate,
of such funds as are necessary for the costs of carrying
out the demonstration projects under this section.
(ii) Cancer hospital.--In the case of the project
described in subsection (b)(2)(C), amounts shall be
available only as provided in any Federal law making
appropriations for the District of Columbia.
(B) Limitation.--In conducting the demonstration project
under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
projects under this section were not implemented.
(2) Evaluation and report.--There are authorized to be
appropriated such sums as are necessary for the purpose of
developing and submitting the report to Congress under subsection
(c).
SEC. 4017. ORDERLY TRANSITION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION
PROJECTS.
Section 9215 of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended by section 6135 of OBRA-1989 and section 13557 of
OBRA-1993, is further amended--
(1) by inserting ``(a)'' before ``The Secretary'', and
(2) by adding at the end the following: ``Subject to subsection
(c), the Secretary may further extend such demonstration projects
through December 31, 2000, but only with respect to individuals who
received at least one service during the period beginning on
January 1, 1996, and ending on the date of the enactment of the
Balanced Budget Act of 1997.
``(b) The Secretary shall work with each such demonstration project
to develop a plan, to be submitted to the Committee on Ways and Means
and the Committee on Commerce of the House of Representatives and the
Committee on Finance of the Senate by March 31, 1998, for the orderly
transition of demonstration projects and the project participants to a
non-demonstration project health care delivery system, such as through
integration with a private or public health plan, including a medicaid
managed care or Medicare+Choice plan.
``(c) A demonstration project under subsection (a) which does not
develop and submit a transition plan under subsection (b) by March 31,
1998, or, if later, 6 months after the date of the enactment of the
Balanced Budget Act of 1997, shall be discontinued as of December 31,
1998. The Secretary shall provide appropriate technical assistance to
assist in the transition so that disruption of medical services to
project participants may be minimized.''.
SEC. 4018. MEDICARE ENROLLMENT DEMONSTRATION PROJECT.
(a) Demonstration Project.--
(1) Establishment.--The Secretary shall implement a
demonstration project (in this section referred to as the
``project'') for the purpose of evaluating the use of a third-party
contractor to conduct the Medicare+Choice plan enrollment and
disenrollment functions, as described in part C of title XVIII of
the Social Security Act (as added by section 4001 of this Act), in
an area.
(2) Consultation.--Before implementing the project under this
section, the Secretary shall consult with affected parties on--
(A) the design of the project;
(B) the selection criteria for the third-party contractor;
and
(C) the establishment of performance standards, as
described in paragraph (3).
(3) Performance standards.--
(A) In general.--The Secretary shall establish performance
standards for the accuracy and timeliness of the
Medicare+Choice plan enrollment and disenrollment functions
performed by the third-party contractor.
(B) Noncompliance.--In the event that the third-party
contractor is not in substantial compliance with the
performance standards established under subparagraph (A), such
enrollment and disenrollment functions shall be performed by
the Medicare+Choice plan until the Secretary appoints a new
third-party contractor.
(b) Report to Congress.--The Secretary shall periodically report to
Congress on the progress of the project conducted pursuant to this
section.
(c) Waiver Authority.--The Secretary shall waive compliance with
the requirements of part C of title XVIII of the Social Security Act
(as amended by section 4001 of this Act) to such extent and for such
period as the Secretary determines is necessary to conduct the project.
(d) Duration.--A demonstration project under this section shall be
conducted for a 3-year period.
(e) Separate From Other Demonstration Projects.--A project
implemented by the Secretary under this section shall not be conducted
in conjunction with any other demonstration project.
SEC. 4019. EXTENSION OF CERTAIN MEDICARE COMMUNITY NURSING ORGANIZATION
DEMONSTRATION PROJECTS.
Notwithstanding any other provision of law, demonstration projects
conducted under section 4079 of the Omnibus Budget Reconciliation Act
of 1987 may be conducted for an additional period of 2 years, and the
deadline for any report required relating to the results of such
projects shall be not later than 6 months before the end of such
additional period.
CHAPTER 3--COMMISSIONS
SEC. 4021. NATIONAL BIPARTISAN COMMISSION ON THE FUTURE OF MEDICARE.
(a) Establishment.--There is established a commission to be known
as the National Bipartisan Commission on the Future of Medicare (in
this section referred to as the ``Commission'').
(b) Duties of the Commission.--The Commission shall--
(1) review and analyze the long-term financial condition of the
medicare program under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.);
(2) identify problems that threaten the financial integrity of
the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund established under that
title (42 U.S.C. 1395i, 1395t), including--
(A) the financial impact on the medicare program of the
significant increase in the number of medicare eligible
individuals which will occur beginning approximately during
2010 and lasting for approximately 25 years, and
(B) the extent to which current medicare update indexes do
not accurately reflect inflation;
(3) analyze potential solutions to the problems identified
under paragraph (2) that will ensure both the financial integrity
of the medicare program and the provision of appropriate benefits
under such program, including methods used by other nations to
respond to comparable demographic patterns in eligibility for
health care benefits for elderly and disabled individuals and
trends in employment-related health care for retirees;
(4) make recommendations to restore the solvency of the Federal
Hospital Insurance Trust Fund and the financial integrity of the
Federal Supplementary Medical Insurance Trust Fund;
(5) make recommendations for establishing the appropriate
financial structure of the medicare program as a whole;
(6) make recommendations for establishing the appropriate
balance of benefits covered and beneficiary contributions to the
medicare program;
(7) make recommendations for the time periods during which the
recommendations described in paragraphs (4), (5), and (6) should be
implemented;
(8) make recommendations regarding the financing of graduate
medical education (GME), including consideration of alternative
broad-based sources of funding for such education and funding for
institutions not currently eligible for such GME support that
conduct approved graduate medical residency programs, such as
children's hospitals;
(9) make recommendations on modifying age-based eligibility to
correspond to changes in age-based eligibility under the OASDI
program and on the feasibility of allowing individuals between the
age of 62 and the medicare eligibility age to buy into the medicare
program;
(10) make recommendations on the impact of chronic disease and
disability trends on future costs and quality of services under the
current benefit, financing, and delivery system structure of the
medicare program;
(11) make recommendations regarding a comprehensive approach to
preserve the program; and
(12) review and analyze such other matters as the Commission
deems appropriate.
(c) Membership.--
(1) Number and appointment.--The Commission shall be composed
of 17 members, of whom--
(A) four shall be appointed by the President;
(B) six shall be appointed by the Majority Leader of the
Senate, in consultation with the Minority Leader of the Senate,
of whom not more than 4 shall be of the same political party;
(C) six shall be appointed by the Speaker of the House of
Representatives, in consultation with the Minority Leader of
the House of Representatives, of whom not more than 4 shall be
of the same political party; and
(D) one, who shall serve as Chairman of the Commission,
appointed jointly by the President, Majority Leader of the
Senate, and the Speaker of the House of Representatives.
(2) Deadline for appointment.--Members of the Commission shall
be appointed by not later than December 1, 1997.
(3) Terms of appointment.--The term of any appointment under
paragraph (1) to the Commission shall be for the life of the
Commission.
(4) Meetings.--The Commission shall meet at the call of its
Chairman or a majority of its members.
(5) Quorum.--A quorum shall consist of 8 members of the
Commission, except that 4 members may conduct a hearing under
subsection (e).
(6) Vacancies.--A vacancy on the Commission shall be filled in
the same manner in which the original appointment was made not
later than 30 days after the Commission is given notice of the
vacancy and shall not affect the power of the remaining members to
execute the duties of the Commission.
(7) Compensation.--Members of the Commission shall receive no
additional pay, allowances, or benefits by reason of their service
on the Commission.
(8) Expenses.--Each member of the Commission shall receive
travel expenses and per diem in lieu of subsistence in accordance
with sections 5702 and 5703 of title 5, United States Code.
(d) Staff and Support Services.--
(1) Executive director.--
(A) Appointment.--The Chairman shall appoint an executive
director of the Commission.
(B) Compensation.--The executive director shall be paid the
rate of basic pay for level V of the Executive Schedule.
(2) Staff.--With the approval of the Commission, the executive
director may appoint such personnel as the executive director
considers appropriate.
(3) Applicability of civil service laws.--The staff of the
Commission shall be appointed without regard to the provisions of
title 5, United States Code, governing appointments in the
competitive service, and shall be paid without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of such
title (relating to classification and General Schedule pay rates).
(4) Experts and consultants.--With the approval of the
Commission, the executive director may procure temporary and
intermittent services under section 3109(b) of title 5, United
States Code.
(5) Physical facilities.--The Administrator of the General
Services Administration shall locate suitable office space for the
operation of the Commission. The facilities shall serve as the
headquarters of the Commission and shall include all necessary
equipment and incidentals required for the proper functioning of
the Commission.
(e) Powers of Commission.--
(1) Hearings and other activities.--For the purpose of carrying
out its duties, the Commission may hold such hearings and undertake
such other activities as the Commission determines to be necessary
to carry out its duties.
(2) Studies by gao.--Upon the request of the Commission, the
Comptroller General shall conduct such studies or investigations as
the Commission determines to be necessary to carry out its duties.
(3) Cost estimates by congressional budget office and office of
the chief actuary of hcfa.--
(A) The Director of the Congressional Budget Office or the
Chief Actuary of the Health Care Financing Administration, or
both, shall provide to the Commission, upon the request of the
Commission, such cost estimates as the Commission determines to
be necessary to carry out its duties.
(B) The Commission shall reimburse the Director of the
Congressional Budget Office for expenses relating to the
employment in the office of the Director of such additional
staff as may be necessary for the Director to comply with
requests by the Commission under subparagraph (A).
(4) Detail of federal employees.--Upon the request of the
Commission, the head of any Federal agency is authorized to detail,
without reimbursement, any of the personnel of such agency to the
Commission to assist the Commission in carrying out its duties. Any
such detail shall not interrupt or otherwise affect the civil
service status or privileges of the Federal employee.
(5) Technical assistance.--Upon the request of the Commission,
the head of a Federal agency shall provide such technical
assistance to the Commission as the Commission determines to be
necessary to carry out its duties.
(6) Use of mails.--The Commission may use the United States
mails in the same manner and under the same conditions as Federal
agencies and shall, for purposes of the frank, be considered a
commission of Congress as described in section 3215 of title 39,
United States Code.
(7) Obtaining information.--The Commission may secure directly
from any Federal agency information necessary to enable it to carry
out its duties, if the information may be disclosed under section
552 of title 5, United States Code. Upon request of the Chairman of
the Commission, the head of such agency shall furnish such
information to the Commission.
(8) Administrative support services.--Upon the request of the
Commission, the Administrator of General Services shall provide to
the Commission on a reimbursable basis such administrative support
services as the Commission may request.
(9) Printing.--For purposes of costs relating to printing and
binding, including the cost of personnel detailed from the
Government Printing Office, the Commission shall be deemed to be a
committee of the Congress.
(f) Report.--Not later than March 1, 1999, the Commission shall
submit a report to the President and Congress which shall contain a
detailed statement of only those recommendations, findings, and
conclusions of the Commission that receive the approval of at least 11
members of the Commission.
(g) Termination.--The Commission shall terminate 30 days after the
date of submission of the report required in subsection (f).
(h) Authorization of Appropriations.--There are authorized to be
appropriated $1,500,000 to carry out this section. 60 percent of such
appropriation shall be payable from the Federal Hospital Insurance
Trust Fund, and 40 percent of such appropriation shall be payable from
the Federal Supplementary Medical Insurance Trust Fund under title
XVIII of the Social Security Act (42 U.S.C. 1395i, 1395t).
SEC. 4022. MEDICARE PAYMENT ADVISORY COMMISSION.
(a) In General.--Title XVIII is amended by inserting after section
1804 the following new section:
``medicare payment advisory commission
``Sec. 1805. (a) Establishment.--There is hereby established the
Medicare Payment Advisory Commission (in this section referred to as
the `Commission').
``(b) Duties.--
``(1) Review of payment policies and annual reports.--The
Commission shall--
``(A) review payment policies under this title, including
the topics described in paragraph (2);
``(B) make recommendations to Congress concerning such
payment policies;
``(C) by not later than March 1 of each year (beginning
with 1998), submit a report to Congress containing the results
of such reviews and its recommendations concerning such
policies; and
``(D) by not later than June 1 of each year (beginning with
1998), submit a report to Congress containing an examination of
issues affecting the medicare program, including the
implications of changes in health care delivery in the United
States and in the market for health care services on the
medicare program.
``(2) Specific topics to be reviewed.--
``(A) Medicare+choice program.--Specifically, the
Commission shall review, with respect to the Medicare+Choice
program under part C, the following:
``(i) The methodology for making payment to plans under
such program, including the making of differential payments
and the distribution of differential updates among
different payment areas.
``(ii) The mechanisms used to adjust payments for risk
and the need to adjust such mechanisms to take into account
health status of beneficiaries.
``(iii) The implications of risk selection both among
Medicare+Choice organizations and between the
Medicare+Choice option and the original medicare fee-for-
service option.
``(iv) The development and implementation of mechanisms
to assure the quality of care for those enrolled with
Medicare+Choice organizations.
``(v) The impact of the Medicare+Choice program on
access to care for medicare beneficiaries.
``(vi) Other major issues in implementation and further
development of the Medicare+Choice program.
``(B) Original medicare fee-for-service system.--
Specifically, the Commission shall review payment policies
under parts A and B, including--
``(i) the factors affecting expenditures for services
in different sectors, including the process for updating
hospital, skilled nursing facility, physician, and other
fees,
``(ii) payment methodologies, and
``(iii) their relationship to access and quality of
care for medicare beneficiaries.
``(C) Interaction of medicare payment policies with health
care delivery generally.--Specifically, the Commission shall
review the effect of payment policies under this title on the
delivery of health care services other than under this title
and assess the implications of changes in health care delivery
in the United States and in the general market for health care
services on the medicare program.
``(3) Comments on certain secretarial reports.--If the
Secretary submits to Congress (or a committee of Congress) a report
that is required by law and that relates to payment policies under
this title, the Secretary shall transmit a copy of the report to
the Commission. The Commission shall review the report and, not
later than 6 months after the date of submittal of the Secretary's
report to Congress, shall submit to the appropriate committees of
Congress written comments on such report. Such comments may include
such recommendations as the Commission deems appropriate.
``(4) Agenda and additional reviews.--The Commission shall
consult periodically with the chairmen and ranking minority members
of the appropriate committees of Congress regarding the
Commission's agenda and progress towards achieving the agenda. The
Commission may conduct additional reviews, and submit additional
reports to the appropriate committees of Congress, from time to
time on such topics relating to the program under this title as may
be requested by such chairmen and members and as the Commission
deems appropriate.
``(5) Availability of reports.--The Commission shall transmit
to the Secretary a copy of each report submitted under this
subsection and shall make such reports available to the public.
``(6) Appropriate committees of congress.--For purposes of this
section, the term `appropriate committees of Congress' means the
Committees on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the Senate.
``(c) Membership.--
``(1) Number and appointment.--The Commission shall be composed
of 15 members appointed by the Comptroller General.
``(2) Qualifications.--
``(A) In general.--The membership of the Commission shall
include individuals with national recognition for their
expertise in health finance and economics, actuarial science,
health facility management, health plans and integrated
delivery systems, reimbursement of health facilities,
allopathic and osteopathic physicians, and other providers of
health services, and other related fields, who provide a mix of
different professionals, broad geographic representation, and a
balance between urban and rural representatives.
``(B) Inclusion.--The membership of the Commission shall
include (but not be limited to) physicians and other health
professionals, employers, third-party payers, individuals
skilled in the conduct and interpretation of biomedical, health
services, and health economics research and expertise in
outcomes and effectiveness research and technology assessment.
Such membership shall also include representatives of consumers
and the elderly.
``(C) Majority nonproviders.--Individuals who are directly
involved in the provision, or management of the delivery, of
items and services covered under this title shall not
constitute a majority of the membership of the Commission.
``(D) Ethical disclosure.--The Comptroller General shall
establish a system for public disclosure by members of the
Commission of financial and other potential conflicts of
interest relating to such members.
``(3) Terms.--
``(A) In general.--The terms of members of the Commission
shall be for 3 years except that the Comptroller General shall
designate staggered terms for the members first appointed.
``(B) Vacancies.--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 Commission shall be filled in the
manner in which the original appointment was made.
``(4) Compensation.--While serving on the business of the
Commission (including traveltime), a member of the Commission shall
be entitled to compensation at the per diem equivalent of the rate
provided for level IV of the Executive Schedule under section 5315
of title 5, United States Code; and while so serving away from home
and the member's regular place of business, a member may be allowed
travel expenses, as authorized by the Chairman of the Commission.
Physicians serving as personnel of the Commission may be provided a
physician comparability allowance by the Commission in the same
manner as Government physicians may be provided such an allowance
by an agency under section 5948 of title 5, United States Code, and
for such purpose subsection (i) of such section shall apply to the
Commission in the same manner as it applies to the Tennessee Valley
Authority. For purposes of pay (other than pay of members of the
Commission) and employment benefits, rights, and privileges, all
personnel of the Commission shall be treated as if they were
employees of the United States Senate.
``(5) Chairman; vice chairman.--The Comptroller General shall
designate a member of the Commission, at the time of appointment of
the member as Chairman and a member as Vice Chairman for that term
of appointment, except that in the case of vacancy of the
Chairmanship or Vice Chairmanship, the Comptroller General may
designate another member for the remainder of that member's term.
``(6) Meetings.--The Commission shall meet at the call of the
Chairman.
``(d) Director and Staff; Experts and Consultants.--Subject to such
review as the Comptroller General deems necessary to assure the
efficient administration of the Commission, the Commission may--
``(1) employ and fix the compensation of an Executive Director
(subject to the approval of the Comptroller General) and such other
personnel as may be necessary to carry out its duties (without
regard to the provisions of title 5, United States Code, governing
appointments in the competitive service);
``(2) seek such assistance and support as may be required in
the performance of its duties from appropriate Federal departments
and agencies;
``(3) enter into contracts or make other arrangements, as may
be necessary for the conduct of the work of the Commission (without
regard to section 3709 of the Revised Statutes (41 U.S.C. 5));
``(4) make advance, progress, and other payments which relate
to the work of the Commission;
``(5) provide transportation and subsistence for persons
serving without compensation; and
``(6) prescribe such rules and regulations as it deems
necessary with respect to the internal organization and operation
of the Commission.
``(e) Powers.--
``(1) Obtaining official data.--The Commission may secure
directly from any department or agency of the United States
information necessary to enable it to carry out this section. Upon
request of the Chairman, the head of that department or agency
shall furnish that information to the Commission on an agreed upon
schedule.
``(2) Data collection.--In order to carry out its functions,
the Commission shall--
``(A) utilize existing information, both published and
unpublished, where possible, collected and assessed either by
its own staff or under other arrangements made in accordance
with this section,
``(B) carry out, or award grants or contracts for, original
research and experimentation, where existing information is
inadequate, and
``(C) adopt procedures allowing any interested party to
submit information for the Commission's use in making reports
and recommendations.
``(3) Access of gao to information.--The Comptroller General
shall have unrestricted access to all deliberations, records, and
nonproprietary data of the Commission, immediately upon request.
``(4) Periodic audit.--The Commission shall be subject to
periodic audit by the Comptroller General.
``(f) Authorization of Appropriations.--
``(1) Request for appropriations.--The Commission shall submit
requests for appropriations in the same manner as the Comptroller
General submits requests for appropriations, but amounts
appropriated for the Commission shall be separate from amounts
appropriated for the Comptroller General.
``(2) Authorization.--There are authorized to be appropriated
such sums as may be necessary to carry out the provisions of this
section. Sixty percent of such appropriation shall be payable from
the Federal Hospital Insurance Trust Fund, and 40 percent of such
appropriation shall be payable from the Federal Supplementary
Medical Insurance Trust Fund.''.
(b) Abolition of ProPAC and PPRC.--
(1) ProPAC.--
(A) In general.--Section 1886(e) (42 U.S.C. 1395ww(e)) is
amended--
(i) by striking paragraphs (2) and (6); and
(ii) in paragraph (3), by striking ``(A) The
Commission'' and all that follows through ``(B)''.
(B) Conforming amendment.--Section 1862 (42 U.S.C. 1395y)
is amended by striking ``Prospective Payment Assessment
Commission'' each place it appears in subsection (a)(1)(D) and
subsection (i) and inserting ``Medicare Payment Advisory
Commission''.
(2) PPRC.--
(A) In general.--Title XVIII is amended by striking section
1845 (42 U.S.C. 1395w-1).
(B) Elimination of certain reports.--Section 1848 (42
U.S.C. 1395w-4) is amended--
(i) by striking subparagraph (F) of subsection (d)(2),
(ii) by striking subparagraph (B) of subsection (f)(1),
and
(iii) in subsection (f)(3), by striking ``Physician
Payment Review Commission,''.
(C) Conforming amendments.--Section 1848 (42 U.S.C. 1395w-
4) is amended by striking ``Physician Payment Review
Commission'' and inserting ``Medicare Payment Advisory
Commission'' each place it appears in subsections
(c)(2)(B)(iii), (g)(6)(C), and (g)(7)(C).
(c) Effective Date; Transition.--
(1) In general.--The Comptroller General shall first provide
for appointment of members to the Medicare Payment Advisory
Commission (in this subsection referred to as ``MedPAC'') by not
later than September 30, 1997.
(2) Transition.--As quickly as possible after the date a
majority of members of MedPAC are first appointed, the Comptroller
General, in consultation with the Prospective Payment Assessment
Commission (in this subsection referred to as ``ProPAC'') and the
Physician Payment Review Commission (in this subsection referred to
as ``PPRC''), shall provide for the termination of the ProPAC and
the PPRC. As of the date of termination of the respective
Commissions, the amendments made by paragraphs (1) and (2),
respectively, of subsection (b) become effective. The Comptroller
General, to the extent feasible, shall provide for the transfer to
the MedPAC of assets and staff of the ProPAC and the PPRC, without
any loss of benefits or seniority by virtue of such transfers. Fund
balances available to the ProPAC or the PPRC for any period shall
be available to the MedPAC for such period for like purposes.
(3) Continuing responsibility for reports.--The MedPAC shall be
responsible for the preparation and submission of reports required
by law to be submitted (and which have not been submitted by the
date of establishment of the MedPAC) by the ProPAC and the PPRC,
and, for this purpose, any reference in law to either such
Commission is deemed, after the appointment of the MedPAC, to refer
to the MedPAC.
CHAPTER 4--MEDIGAP PROTECTIONS
SEC. 4031. MEDIGAP PROTECTIONS.
(a) Guaranteeing Issue Without Preexisting Conditions for
Continuously Covered Individuals.--Section 1882(s) (42 U.S.C.
1395ss(s)) is amended--
(1) in paragraph (3), by striking ``paragraphs (1) and (2)''
and inserting ``this subsection'',
(2) by redesignating paragraph (3) as paragraph (4), and
(3) by inserting after paragraph (2) the following new
paragraph:
``(3)(A) The issuer of a medicare supplemental policy--
``(i) may not deny or condition the issuance or effectiveness
of a medicare supplemental policy described in subparagraph (C)
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 subparagraph and who
submits evidence of the date of termination or disenrollment along with
the application for such medicare supplemental policy.
``(B) An individual described in this subparagraph is an individual
described in any of the following clauses:
``(i) The individual is enrolled under an employee welfare
benefit plan that provides health benefits that supplement the
benefits under this title and the plan terminates or ceases to
provide all such supplemental health benefits to the individual.
``(ii) The individual is enrolled with a Medicare+Choice
organization under a Medicare+Choice plan under part C, and there
are circumstances permitting discontinuance of the individual's
election of the plan under the first sentence of section
1851(e)(4).
``(iii) The individual is enrolled with an eligible
organization under a contract under section 1876, a similar
organization operating under demonstration project authority,
effective for periods before April 1, 1999, with an organization
under an agreement under section 1833(a)(1)(A), or with an
organization under a policy described in subsection (t), and such
enrollment ceases under the same circumstances that would permit
discontinuance of an individual's election of coverage under the
first sentence of section 1851(e)(4) and, in the case of a policy
described in subsection (t), there is no provision under applicable
State law for the continuation or conversion of coverage under such
policy.
``(iv) The individual is enrolled under a medicare supplemental
policy under this section and such enrollment ceases because--
``(I) of the bankruptcy or insolvency of the issuer or
because of other involuntary termination of coverage or
enrollment under such policy and there is no provision under
applicable State law for the continuation or conversion of such
coverage;
``(II) the issuer of the policy substantially violated a
material provision of the policy; or
``(III) the issuer (or an agent or other entity acting on
the issuer's behalf) materially misrepresented the policy's
provisions in marketing the policy to the individual.
``(v) The individual--
``(I) was enrolled under a medicare supplemental policy
under this section,
``(II) subsequently terminates such enrollment and enrolls,
for the first time, with any Medicare+Choice organization under
a Medicare+Choice plan under part C, any eligible organization
under a contract under section 1876, any similar organization
operating under demonstration project authority, or any policy
described in subsection (t), and
``(III) the subsequent enrollment under subclause (II) is
terminated by the enrollee during any period within the first
12 months of such enrollment (during which the enrollee is
permitted to terminate such subsequent enrollment under section
1851(e)).
``(vi) The individual, upon first becoming eligible for
benefits under part A at age 65, enrolls in a Medicare+Choice plan
under part C, and disenrolls from such plan by not later than 12
months after the effective date of such enrollment.
``(C)(i) Subject to clauses (ii) and (iii), a medicare supplemental
policy described in this subparagraph is a medicare supplemental policy
which has a benefit package classified as `A', `B', `C', or `F' under
the standards established under subsection (p)(2).
``(ii) Only for purposes of an individual described in subparagraph
(B)(v), a medicare supplemental policy described in this subparagraph
is the same medicare supplemental policy referred to in such
subparagraph in which the individual was most recently previously
enrolled, if available from the same issuer, or, if not so available, a
policy described in clause (i).
``(iii) Only for purposes of an individual described in
subparagraph (B)(vi), a medicare supplemental policy described in this
subparagraph shall include any medicare supplemental policy.
``(iv) For purposes of applying this paragraph in the case of a
State that provides for offering of benefit packages other than under
the classification referred to in clause (i), the references to benefit
packages in such clause are deemed references to comparable benefit
packages offered in such State.
``(D) At the time of an event described in subparagraph (B) because
of which an individual ceases enrollment or loses coverage or benefits
under a contract or agreement, policy, or plan, the organization that
offers the contract or agreement, the insurer offering the policy, or
the administrator of the plan, respectively, shall notify the
individual of the rights of the individual under this paragraph, and
obligations of issuers of medicare supplemental policies, under
subparagraph (A).''.
(b) Limitation on Imposition of Preexisting Condition Exclusion
During Initial Open Enrollment Period.--Section 1882(s)(2) (42 U.S.C.
1395ss(s)(2)) is amended--
(1) in subparagraph (B), by striking ``subparagraph (C)'' and
inserting ``subparagraphs (C) and (D)'', and
(2) by adding at the end the following new subparagraph:
``(D) In the case of a policy issued during the 6-month period
described in subparagraph (A) to an individual who is 65 years of age
or older as of the date of issuance and who as of the date of the
application for enrollment has a continuous period of creditable
coverage (as defined in 2701(c) of the Public Health Service Act) of--
``(i) at least 6 months, the policy may not exclude benefits
based on a pre-existing condition; or
``(ii) less than 6 months, if the policy excludes benefits
based on a preexisting condition, the policy shall reduce the
period of any preexisting condition exclusion by the aggregate of
the periods of creditable coverage (if any, as so defined)
applicable to the individual as of the enrollment date.
The Secretary shall specify the manner of the reduction under clause
(ii), based upon the rules used by the Secretary in carrying out
section 2701(a)(3) of such Act.''.
(c) Conforming Amendment.--Section 1882(d)(3)(A)(vi)(III) (42
U.S.C. 1395ss(d)(2)(A)(vi)(III)) is amended by inserting ``, a policy
described in clause (v),'' after ``Medicare supplemental policy''.
(d) Effective Dates.--
(1) Guaranteed issue.--The amendment made by subsection (a)
shall take effect on July 1, 1998.
(2) Limit on preexisting condition exclusions.--The amendment
made by subsection (b) shall apply to policies issued on or after
July 1, 1998.
(3) Conforming amendment.--The amendment made by subsection (c)
shall be effective as if included in the enactment of the Health
Insurance Portability and Accountability Act of 1996.
(e) Transition Provisions.--
(1) In general.--If the Secretary of Health and Human Services
identifies a State as requiring a change to its statutes or
regulations to conform its regulatory program to the changes made
by this section, the State regulatory program shall not be
considered to be out of compliance with the requirements of section
1882 of the Social Security Act due solely to failure to make such
change until the date specified in paragraph (4).
(2) NAIC standards.--If, within 9 months after the date of the
enactment of this Act, the National Association of Insurance
Commissioners (in this subsection referred to as the ``NAIC'')
modifies its NAIC Model Regulation relating to section 1882 of the
Social Security Act (referred to in such section as the 1991 NAIC
Model Regulation, as modified pursuant to section 171(m)(2) of the
Social Security Act Amendments of 1994 (Public Law 103-432) and as
modified pursuant to section 1882(d)(3)(A)(vi)(IV) of the Social
Security Act, as added by section 271(a) of the Health Insurance
Portability and Accountability Act of 1996 (Public Law 104-191) to
conform to the amendments made by this section, such revised
regulation incorporating the modifications shall be considered to
be the applicable NAIC model regulation (including the revised NAIC
model regulation and the 1991 NAIC Model Regulation) for the
purposes of such section.
(3) Secretary standards.--If the NAIC does not make the
modifications described in paragraph (2) within the period
specified in such paragraph, the Secretary of Health and Human
Services shall make the modifications described in such paragraph
and such revised regulation incorporating the modifications shall
be considered to be the appropriate Regulation for the purposes of
such section.
(4) Date specified.--
(A) In general.--Subject to subparagraph (B), the date
specified in this paragraph for a State is the earlier of--
(i) the date the State changes its statutes or
regulations to conform its regulatory program to the
changes made by this section, or
(ii) 1 year after the date the NAIC or the Secretary
first makes the modifications under paragraph (2) or (3),
respectively.
(B) Additional legislative action required.--In the case of
a State which the Secretary identifies as--
(i) requiring State legislation (other than legislation
appropriating funds) to conform its regulatory program to
the changes made in this section, but
(ii) having a legislature which is not scheduled to
meet in 1999 in a legislative session in which such
legislation may be considered,
the date specified in this paragraph is the first day of the
first calendar quarter beginning after the close of the first
legislative session of the State legislature that begins on or
after July 1, 1999. For purposes of the previous sentence, in
the case of a State that has a 2-year legislative session, each
year of such session shall be deemed to be a separate regular
session of the State legislature.
(f) Conforming Benefits to Changes in Terminology for Hospital
Outpatient Department Cost Sharing.--For purposes of apply section 1882
of the Social Security Act (42 U.S.C. 1395ss) and regulations referred
to in subsection (e), copayment amounts provided under section
1833(t)(5) of such Act with respect to hospital outpatient department
services shall be treated under medicare supplemental policies in the
same manner as coinsurance with respect to such services.
SEC. 4032. ADDITION OF HIGH DEDUCTIBLE MEDIGAP POLICIES.
(a) In General.--Section 1882(p) (42 U.S.C. 1395ss(p)) is amended--
(1) in paragraph (2)(C), by inserting ``plus the 2 plans
described in paragraph (11)(A)'' after ``exceed 10''; and
(2) by adding at the end the following:
``(11)(A) For purposes of paragraph (2), the benefit packages
described in this subparagraph are as follows:
``(i) The benefit package classified as `F' under the standards
established by such paragraph, except that it has a high deductible
feature.
``(ii) The benefit package classified as `J' under the
standards established by such paragraph, except that it has a high
deductible feature.
``(B) For purposes of subparagraph (A), a high deductible feature
is one which--
``(i) requires the beneficiary of the policy to pay annual out-
of-pocket expenses (other than premiums) in the amount specified in
subparagraph (C) before the policy begins payment of benefits, and
``(ii) covers 100 percent of covered out-of-pocket expenses
once such deductible has been satisfied in a year.
``(C) The amount specified in this subparagraph--
``(i) for 1998 and 1999 is $1,500, and
``(ii) for a subsequent year, is the amount specified in this
subparagraph for the previous year increased by the percentage
increase in the Consumer Price Index for all urban consumers (all
items; U.S. city average) for the 12-month period ending with
August of the preceding year.
If any amount determined under clause (ii) is not a multiple of $10, it
shall be rounded to the nearest multiple of $10.''.
(b) Effective Date.--
(1) In general.--The amendments made by subsection (a) shall
take effect the date of the enactment of this Act.
(2) Transition.--The provisions of section 4031(e) shall apply
with respect to this section in the same manner as they apply to
section 4031.
CHAPTER 5--TAX TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-
SPONSORED ORGANIZATIONS
SEC. 4041. TAX TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDER-
SPONSORED ORGANIZATIONS.
(a) In General.--Section 501 of the Internal Revenue Code of 1986
(relating to exemption from tax on corporations, certain trusts, etc.)
is amended by redesignating subsection (o) as subsection (p) and by
inserting after subsection (n) the following new subsection:
``(o) Treatment of Hospitals Participating in Provider-Sponsored
Organizations.--An organization shall not fail to be treated as
organized and operated exclusively for a charitable purpose for
purposes of subsection (c)(3) solely because a hospital which is owned
and operated by such organization participates in a provider-sponsored
organization (as defined in section 1853(e) of the Social Security
Act), whether or not the provider-sponsored organization is exempt from
tax. For purposes of subsection (c)(3), any person with a material
financial interest in such a provider-sponsored organization shall be
treated as a private shareholder or individual with respect to the
hospital.''
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act.
Subtitle B--Prevention Initiatives
SEC. 4101. SCREENING MAMMOGRAPHY.
(a) Providing Annual Screening Mammography for Women Over Age 39.--
Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is amended--
(1) in clause (iii), to read as follows:
``(iii) In the case of a woman over 39 years of age,
payment may not be made under this part for screening
mammography performed within 11 months following the month
in which a previous screening mammography was performed.'';
and
(2) by striking clauses (iv) and (v).
(b) Waiver of Deductible.--The first sentence of section 1833(b)
(42 U.S.C. 1395l(b)) is amended--
(1) by striking ``and'' before ``(4)'', and
(2) by inserting before the period at the end the following:
``, and (5) such deductible shall not apply with respect to
screening mammography (as described in section 1861(jj))''.
(c) Conforming Amendment.--Section 1834(c)(1)(C) (42 U.S.C.
1395m(c)(1)(C)) is amended by striking ``, subject to the deductible
established under section 1833(b),''.
(d) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 1998.
SEC. 4102. SCREENING PAP SMEAR AND PELVIC EXAMS.
(a) Coverage of Pelvic Exam; Increasing Frequency of Coverage of
Pap Smear.--Section 1861(nn) (42 U.S.C. 1395x(nn)) is amended--
(1) in the heading, by striking ``Smear'' and inserting
``Smear; Screening Pelvic Exam'';
(2) by inserting ``or vaginal'' after ``cervical'' each place
it appears;
(3) by striking ``(nn)'' and inserting ``(nn)(1)'';
(4) by striking ``3 years'' and all that follows and inserting
``3 years, or during the preceding year in the case of a woman
described in paragraph (3).''; and
(5) by adding at the end the following new paragraphs:
``(2) The term `screening pelvic exam' means a pelvic examination
provided to a woman if the woman involved has not had such an
examination during the preceding 3 years, or during the preceding year
in the case of a woman described in paragraph (3), and includes a
clinical breast examination.
``(3) A woman described in this paragraph is a woman who--
``(A) is of childbearing age and has had a test described in
this subsection during any of the preceding 3 years that indicated
the presence of cervical or vaginal cancer or other abnormality; or
``(B) is at high risk of developing cervical or vaginal cancer
(as determined pursuant to factors identified by the Secretary).''.
(b) Waiver of Deductible.--The first sentence of section 1833(b)
(42 U.S.C. 1395l(b)), as amended by section 4101(b), is amended--
(1) by striking ``and'' before ``(5)'', and
(2) by inserting before the period at the end the following:
``, and (6) such deductible shall not apply with respect to
screening pap smear and screening pelvic exam (as described in
section 1861(nn))''.
(c) Conforming Amendments.--Sections 1861(s)(14) and 1862(a)(1)(F)
(42 U.S.C. 1395x(s)(14), 1395y(a)(1)(F)) are each amended by inserting
``and screening pelvic exam'' after ``screening pap smear''.
(d) Payment Under Physician Fee Schedule.--Section 1848(j)(3) (42
U.S.C. 1395w-4(j)(3)) is amended by striking ``and (4)'' and inserting
``(4) and (14) (with respect to services described in section
1861(nn)(2))''.
(e) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 1998.
SEC. 4103. PROSTATE CANCER SCREENING TESTS.
(a) Coverage.--Section 1861 (42 U.S.C. 1395x) is amended--
(1) in subsection (s)(2)--
(A) by striking ``and'' at the end of subparagraphs (N) and
(O), and
(B) by inserting after subparagraph (O) the following new
subparagraph:
``(P) prostate cancer screening tests (as defined in subsection
(oo)); and''; and
(2) by adding at the end the following new subsection:
``Prostate Cancer Screening Tests
``(oo)(1) The term `prostate cancer screening test' means a test
that consists of any (or all) of the procedures described in paragraph
(2) provided for the purpose of early detection of prostate cancer to a
man over 50 years of age who has not had such a test during the
preceding year.
``(2) The procedures described in this paragraph are as follows:
``(A) A digital rectal examination.
``(B) A prostate-specific antigen blood test.
``(C) For years beginning after 2002, such other procedures as
the Secretary finds appropriate for the purpose of early detection
of prostate cancer, taking into account changes in technology and
standards of medical practice, availability, effectiveness, costs,
and such other factors as the Secretary considers appropriate.''.
(b) Payment for Prostate-specific Antigen Blood Test Under Clinical
Diagnostic Laboratory Test Fee Schedules.--Section 1833(h)(1)(A) (42
U.S.C. 1395l(h)(1)(A)) is amended by inserting after ``laboratory
tests'' the following: ``(including prostate cancer screening tests
under section 1861(oo) consisting of prostate-specific antigen blood
tests)''.
(c) Conforming Amendment.--Section 1862(a) (42 U.S.C. 1395y(a)) is
amended--
(1) in paragraph (1)--
(A) in subparagraph (E), by striking ``and'' at the end,
(B) in subparagraph (F), by striking the semicolon at the
end and inserting ``, and'', and
(C) by adding at the end the following new subparagraph:
``(G) in the case of prostate cancer screening tests (as
defined in section 1861(oo)), which are performed more frequently
than is covered under such section;''; and
(2) in paragraph (7), by striking ``paragraph (1)(B) or under
paragraph (1)(F)'' and inserting ``subparagraphs (B), (F), or (G)
of paragraph (1)''.
(d) Payment Under Physician Fee Schedule.--Section 1848(j)(3) (42
U.S.C. 1395w-4(j)(3)), as amended by section 4102, is amended by
inserting ``, (2)(P) (with respect to services described in
subparagraphs (A) and (C) of section 1861(oo)(2),'' after ``(2)(G)''
(e) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 2000.
SEC. 4104. COVERAGE OF COLORECTAL SCREENING.
(a) Coverage.--
(1) In general.--Section 1861 (42 U.S.C. 1395x), as amended by
section 4103(a), is amended--
(A) in subsection (s)(2)--
(i) by striking ``and'' at the end of subparagraph (P);
(ii) by adding ``and'' at the end of subparagraph (Q);
and
(iii) by adding at the end the following new
subparagraph:
``(R) colorectal cancer screening tests (as defined in
subsection (pp)); and''; and
(B) by adding at the end the following new subsection:
``Colorectal Cancer Screening Tests
``(pp)(1) The term `colorectal cancer screening test' means any of
the following procedures furnished to an individual for the purpose of
early detection of colorectal cancer:
``(A) Screening fecal-occult blood test.
``(B) Screening flexible sigmoidoscopy.
``(C) In the case of an individual at high risk for colorectal
cancer, screening colonoscopy.
``(D) Such other tests or procedures, and modifications to
tests and procedures under this subsection, with such frequency and
payment limits, as the Secretary determines appropriate, in
consultation with appropriate organizations.
``(2) In paragraph (1)(C), an `individual at high risk for
colorectal cancer' is an individual who, because of family history,
prior experience of cancer or precursor neoplastic polyps, a history of
chronic digestive disease condition (including inflammatory bowel
disease, Crohn's Disease, or ulcerative colitis), the presence of any
appropriate recognized gene markers for colorectal cancer, or other
predisposing factors, faces a high risk for colorectal cancer.''.
(2) Deadline for publication of determination on coverage of
screening barium enema.--Not later than the earlier of the date
that is January 1, 1998, or 90 days after the date of the enactment
of this Act, the Secretary of Health and Human Services shall
publish notice in the Federal Register with respect to the
determination under paragraph (1)(D) of section 1861(pp) of the
Social Security Act (42 U.S.C. 1395x(pp)), as added by paragraph
(1), on the coverage of a screening barium enema as a colorectal
cancer screening test under such section.
(b) Frequency Limits and Payment.--
(1) In general.--Section 1834 (42 U.S.C. 1395m) is amended by
inserting after subsection (c) the following new subsection:
``(d) Frequency Limits and Payment for Colorectal Cancer Screening
Tests.--
``(1) Screening fecal-occult blood tests.--
``(A) Payment amount.--The payment amount for colorectal
cancer screening tests consisting of screening fecal-occult
blood tests is equal to the payment amount established for
diagnostic fecal-occult blood tests under section 1833(h).
``(B) Frequency limit.--No payment may be made under this
part for a colorectal cancer screening test consisting of a
screening fecal-occult blood test--
``(i) if the individual is under 50 years of age; or
``(ii) if the test is performed within the 11 months
after a previous screening fecal-occult blood test.
``(2) Screening flexible sigmoidoscopies.--
``(A) Fee schedule.--With respect to colorectal cancer
screening tests consisting of screening flexible
sigmoidoscopies, payment under section 1848 shall be consistent
with payment under such section for similar or related
services.
``(B) Payment limit.--In the case of screening flexible
sigmoidoscopy services, payment under this part shall not
exceed such amount as the Secretary specifies, based upon the
rates recognized for diagnostic flexible sigmoidoscopy
services.
``(C) Facility payment limit.--
``(i) In general.--Notwithstanding subsections
(i)(2)(A) and (t) of section 1833, in the case of screening
flexible sigmoidoscopy services furnished on or after
January 1, 1999, that--
``(I) in accordance with regulations, may be
performed in an ambulatory surgical center and for
which the Secretary permits ambulatory surgical center
payments under this part, and
``(II) are performed in an ambulatory surgical
center or hospital outpatient department,
payment under this part shall be based on the lesser of the
amount under the fee schedule that would apply to such
services if they were performed in a hospital outpatient
department in an area or the amount under the fee schedule
that would apply to such services if they were performed in
an ambulatory surgical center in the same area.
``(ii) Limitation on deductible and coinsurance.--
Notwithstanding any other provision of this title, in the
case of a beneficiary who receives the services described
in clause (i)--
``(I) in computing the amount of any applicable
deductible or copayment, the computation of such
deductible or coinsurance shall be based upon the fee
schedule under which payment is made for the services,
and
``(II) the amount of such coinsurance is equal to
25 percent of the payment amount under the fee schedule
described in subclause (I).
``(D) Special rule for detected lesions.--If during the
course of such screening flexible sigmoidoscopy, a lesion or
growth is detected which results in a biopsy or removal of the
lesion or growth, payment under this part shall not be made for
the screening flexible sigmoidoscopy but shall be made for the
procedure classified as a flexible sigmoidoscopy with such
biopsy or removal.
``(E) Frequency limit.--No payment may be made under this
part for a colorectal cancer screening test consisting of a
screening flexible sigmoidoscopy--
``(i) if the individual is under 50 years of age; or
``(ii) if the procedure is performed within the 47
months after a previous screening flexible sigmoidoscopy.
``(3) Screening colonoscopy for individuals at high risk for
colorectal cancer.--
``(A) Fee schedule.--With respect to colorectal cancer
screening test consisting of a screening colonoscopy for
individuals at high risk for colorectal cancer (as defined in
section 1861(pp)(2)), payment under section 1848 shall be
consistent with payment amounts under such section for similar
or related services.
``(B) Payment limit.--In the case of screening colonoscopy
services, payment under this part shall not exceed such amount
as the Secretary specifies, based upon the rates recognized for
diagnostic colonoscopy services.
``(C) Facility payment limit.--
``(i) In general.--Notwithstanding subsections
(i)(2)(A) and (t) of section 1833, in the case of screening
colonoscopy services furnished on or after January 1, 1999,
that are performed in an ambulatory surgical center or a
hospital outpatient department, payment under this part
shall be based on the lesser of the amount under the fee
schedule that would apply to such services if they were
performed in a hospital outpatient department in an area or
the amount under the fee schedule that would apply to such
services if they were performed in an ambulatory surgical
center in the same area.
``(ii) Limitation on deductible and coinsurance.--
Notwithstanding any other provision of this title, in the
case of a beneficiary who receives the services described
in clause (i)--
``(I) in computing the amount of any applicable
deductible or coinsurance, the computation of such
deductible or coinsurance shall be based upon the fee
schedule under which payment is made for the services,
and
``(II) the amount of such coinsurance is equal to
25 percent of the payment amount under the fee schedule
described in subclause (I).
``(D) Special rule for detected lesions.--If during the
course of such screening colonoscopy, a lesion or growth is
detected which results in a biopsy or removal of the lesion or
growth, payment under this part shall not be made for the
screening colonoscopy but shall be made for the procedure
classified as a colonoscopy with such biopsy or removal.
``(E) Frequency limit.--No payment may be made under this
part for a colorectal cancer screening test consisting of a
screening colonoscopy for individuals at high risk for
colorectal cancer if the procedure is performed within the 23
months after a previous screening colonoscopy.''.
(c) Conforming Amendments.--(1) Paragraphs (1)(D) and (2)(D) of
section 1833(a) (42 U.S.C. 1395l(a)) are each amended by inserting ``or
section 1834(d)(1)'' after ``subsection (h)(1)''.
(2) Section 1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by
striking ``The Secretary'' and inserting ``Subject to section
1834(d)(1), the Secretary''.
(3) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by section
4103(c), is amended--
(A) in paragraph (1)--
(i) in subparagraph (F), by striking ``and'' at the end,
(ii) in subparagraph (G), by striking the semicolon at the
end and inserting ``, and'', and
(iii) by adding at the end the following new subparagraph:
``(H) in the case of colorectal cancer screening tests, which
are performed more frequently than is covered under section
1834(d);''; and
(B) in paragraph (7), by striking ``or (G)'' and inserting
``(G), or (H)''.
(d) Payment Under Physician Fee Schedule.--Section 1848(j)(3) (42
U.S.C. 1395w-4(j)(3)), as amended by sections 4102 and 4103, is amended
by inserting ``(2)(R) (with respect to services described in
subparagraphs (B) , (C), and (D) of section 1861(pp)(1)),'' before
``(3)''.
(e) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 1998.
SEC. 4105. DIABETES SELF-MANAGEMENT BENEFITS.
(a) Coverage of Diabetes Outpatient Self-management Training
Services.--
(1) In general.--Section 1861 (42 U.S.C. 1395x), as amended by
sections 4103(a) and 4104(a), is amended--
(A) in subsection (s)(2)--
(i) by striking ``and'' at the end of subparagraph (Q);
(ii) by adding ``and'' at the end of subparagraph (R);
and
(iii) by adding at the end the following new
subparagraph:
``(S) diabetes outpatient self-management training services (as
defined in subsection (qq)); and''; and
(B) by adding at the end the following new subsection:
``Diabetes Outpatient Self-Management Training Services
``(qq)(1) The term `diabetes outpatient self-management training
services' means educational and training services furnished (at such
times as the Secretary determines appropriate) to an individual with
diabetes by a certified provider (as described in paragraph (2)(A)) in
an outpatient setting by an individual or entity who meets the quality
standards described in paragraph (2)(B), but only if the physician who
is managing the individual's diabetic condition certifies that such
services are needed under a comprehensive plan of care related to the
individual's diabetic condition to ensure therapy compliance or to
provide the individual with necessary skills and knowledge (including
skills related to the self-administration of injectable drugs) to
participate in the management of the individual's condition.
``(2) In paragraph (1)--
``(A) a `certified provider' is a physician, or other
individual or entity designated by the Secretary, that, in addition
to providing diabetes outpatient self-management training services,
provides other items or services for which payment may be made
under this title; and
``(B) a physician, or such other individual or entity, meets
the quality standards described in this paragraph if the physician,
or individual or entity, meets quality standards established by the
Secretary, except that the physician or other individual or entity
shall be deemed to have met such standards if the physician or
other individual or entity meets applicable standards originally
established by the National Diabetes Advisory Board and
subsequently revised by organizations who participated in the
establishment of standards by such Board, or is recognized by an
organization that represents individuals (including individuals
under this title) with diabetes as meeting standards for furnishing
the services.''.
(2) Payment Under Physician Fee Schedule.--Section 1848(j)(3)
(42 U.S.C. 1395w-4(j)(3)) as amended in sections 4102, 4103, and
4104, is amended by inserting ``(2)(S),'' before ``(3),''.
(3) Consultation with organizations in establishing payment
amounts for services provided by physicians.--In establishing
payment amounts under section 1848 of the Social Security Act for
physicians' services consisting of diabetes outpatient self-
management training services, the Secretary of Health and Human
Services shall consult with appropriate organizations, including
such organizations representing individuals or medicare
beneficiaries with diabetes.
(b) Blood-testing Strips for Individuals With Diabetes.--
(1) Including strips and monitors as durable medical
equipment.--The first sentence of section 1861(n) (42 U.S.C.
1395x(n)) is amended by inserting before the semicolon the
following: ``, and includes blood-testing strips and blood glucose
monitors for individuals with diabetes without regard to whether
the individual has Type I or Type II diabetes or to the
individual's use of insulin (as determined under standards
established by the Secretary in consultation with the appropriate
organizations)''.
(2) 10 percent reduction in payments for testing strips.--
Section 1834(a)(2)(B)(iv) (42 U.S.C. 1395m(a)(2)(B)(iv)) is amended
by adding before the period the following: ``(reduced by 10
percent, in the case of a blood glucose testing strip furnished
after 1997 for an individual with diabetes)''.
(c) Establishment of Outcome Measures for Beneficiaries With
Diabetes.--
(1) In general.--The Secretary of Health and Human Services, in
consultation with appropriate organizations, shall establish
outcome measures, including glysolated hemoglobin (past 90-day
average blood sugar levels), for purposes of evaluating the
improvement of the health status of medicare beneficiaries with
diabetes mellitus.
(2) Recommendations for modifications to screening benefits.--
Taking into account information on the health status of medicare
beneficiaries with diabetes mellitus as measured under the outcome
measures established under paragraph (1), the Secretary shall from
time to time submit recommendations to Congress regarding
modifications to the coverage of services for such beneficiaries
under the medicare program.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to items and services
furnished on or after July 1, 1998.
(2) Testing strips.--The amendment made by subsection (b)(2)
shall apply with respect to blood glucose testing strips furnished
on or after January 1, 1998.
SEC. 4106. STANDARDIZATION OF MEDICARE COVERAGE OF BONE MASS
MEASUREMENTS.
(a) In General.--Section 1861 (42 U.S.C. 1395x), as amended by
sections 4103(a), 4104(a), and 4105(a), is amended--
(1) in subsection (s)--
(A) in paragraph (12)(C), by striking ``and'' at the end,
(B) by striking the period at the end of paragraph (14) and
inserting ``; and'',
(C) by redesignating paragraphs (15) and (16) as paragraphs
(16) and (17), respectively, and
(D) by inserting after paragraph (14) the following new
paragraph:
``(15) bone mass measurement (as defined in subsection
(rr)).''; and
(2) by inserting after subsection (qq) the following new
subsection:
``Bone Mass Measurement
``(rr)(1) The term `bone mass measurement' means a radiologic or
radioisotopic procedure or other procedure approved by the Food and
Drug Administration performed on a qualified individual (as defined in
paragraph (2)) for the purpose of identifying bone mass or detecting
bone loss or determining bone quality, and includes a physician's
interpretation of the results of the procedure.
``(2) For purposes of this subsection, the term `qualified
individual' means an individual who is (in accordance with regulations
prescribed by the Secretary)--
``(A) an estrogen-deficient woman at clinical risk for
osteoporosis;
``(B) an individual with vertebral abnormalities;
``(C) an individual receiving long-term glucocorticoid steroid
therapy;
``(D) an individual with primary hyperparathyroidism; or
``(E) an individual being monitored to assess the response to
or efficacy of an approved osteoporosis drug therapy.
``(3) The Secretary shall establish such standards regarding the
frequency with which a qualified individual shall be eligible to be
provided benefits for bone mass measurement under this title.''.
(b) Payment under Physician Fee Schedule.--Section 1848(j)(3) (42
U.S.C. 1395w-4(j)(3)), as amended by sections 4102, 4103, 4104 and
4105, is amended--
(1) by striking ``(4) and (14)'' and inserting ``(4), (14)''
and
(2) by inserting ``and (15)'' after ``1861(nn)(2))''.
(c) Conforming Amendments.--Sections 1864(a), 1902(a)(9)(C), and
1915(a)(1)(B)(ii)(I) (42 U.S.C. 1395aa(a), 1396a(a)(9)(C), and
1396n(a)(1)(B)(ii)(I)) are amended by striking ``paragraphs (15) and
(16)'' each place it appears and inserting ``paragraphs (16) and
(17)''.
(d) Effective Date.--The amendments made by this section shall
apply to bone mass measurements performed on or after July 1, 1998.
SEC. 4107. VACCINES OUTREACH EXPANSION.
(a) Extension of Influenza and Pneumococcal Vaccination Campaign.--
In order to increase utilization of pneumococcal and influenza vaccines
in medicare beneficiaries, the Influenza and Pneumococcal Vaccination
Campaign carried out by the Health Care Financing Administration in
conjunction with the Centers for Disease Control and Prevention and the
National Coalition for Adult Immunization, is extended until the end of
fiscal year 2002.
(b) Authorization of Appropriation.--There are hereby authorized to
be appropriated for each of fiscal years 1998 through 2002, $8,000,000
for the Campaign described in subsection (a). Of the amount so
authorized to be appropriated in each fiscal year, 60 percent of the
amount so appropriated shall be payable from the Federal Hospital
Insurance Trust Fund, and 40 percent shall be payable from the Federal
Supplementary Medical Insurance Trust Fund.
SEC. 4108. STUDY ON PREVENTIVE AND ENHANCED BENEFITS.
(a) Study.--The Secretary of Health and Human Services shall
request the National Academy of Sciences, and as appropriate in
conjunction with the United States Preventive Services Task Force, to
analyze the expansion or modification of preventive or other benefits
provided to medicare beneficiaries under title XVIII of the Social
Security Act. The analysis shall consider both the short term and long
term benefits, and costs to the medicare program, of such expansion or
modification.
(b) Report.--
(1) Initial report.--Not later than 2 years after the date of
the enactment of this Act, the Secretary shall submit a report on
the findings of the analysis conducted under subsection (a) to the
Committee on Ways and Means and the Committee on Commerce of the
House of Representatives and the Committee on Finance of the
Senate.
(2) Contents.--Such report shall include specific findings with
respect to coverage of at least the following benefits:
(A) Nutrition therapy services, including parenteral and
enteral nutrition and including the provision of such services
by a registered dietitian.
(B) Skin cancer screening.
(C) Medically necessary dental care.
(D) Routine patient care costs for beneficiaries enrolled
in approved clinical trial programs.
(E) Elimination of time limitation for coverage of
immunosuppressive drugs for transplant patients.
(3) Funding.--From funds appropriated to the Department of
Health and Human Services for fiscal years 1998 and 1999, the
Secretary shall provide for such funding as the Secretary
determines necessary for the conduct of the study by the National
Academy of Sciences under this section.
Subtitle C--Rural Initiatives
SEC. 4201. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.
(a) Medicare Rural Hospital Flexibility Program.--Section 1820 (42
U.S.C. 1395i-4) is amended to read as follows:
``medicare rural hospital flexibility program
``Sec. 1820. (a) Establishment.--Any State that submits an
application in accordance with subsection (b) may establish a medicare
rural hospital flexibility program described in subsection (c).
``(b) Application.--A State may establish a medicare rural hospital
flexibility program described in subsection (c) if the State submits to
the Secretary at such time and in such form as the Secretary may
require an application containing--
``(1) assurances that the State--
``(A) has developed, or is in the process of developing, a
State rural health care plan that--
``(i) provides for the creation of 1 or more rural
health networks (as defined in subsection (d)) in the
State;
``(ii) promotes regionalization of rural health
services in the State; and
``(iii) improves access to hospital and other health
services for rural residents of the State; and
``(B) has developed the rural health care plan described in
subparagraph (A) in consultation with the hospital association
of the State, rural hospitals located in the State, and the
State Office of Rural Health (or, in the case of a State in the
process of developing such plan, that assures the Secretary
that the State will consult with its State hospital
association, rural hospitals located in the State, and the
State Office of Rural Health in developing such plan);
``(2) assurances that the State has designated (consistent with
the rural health care plan described in paragraph (1)(A)), or is in
the process of so designating, rural nonprofit or public hospitals
or facilities located in the State as critical access hospitals;
and
``(3) such other information and assurances as the Secretary
may require.
``(c) Medicare Rural Hospital Flexibility Program Described.--
``(1) In general.--A State that has submitted an application in
accordance with subsection (b), may establish a medicare rural
hospital flexibility program that provides that--
``(A) the State shall develop at least 1 rural health
network (as defined in subsection (d)) in the State; and
``(B) at least 1 facility in the State shall be designated
as a critical access hospital in accordance with paragraph (2).
``(2) State designation of facilities.--
``(A) In general.--A State may designate 1 or more
facilities as a critical access hospital in accordance with
subparagraph (B).
``(B) Criteria for designation as critical access
hospital.--A State may designate a facility as a critical
access hospital if the facility--
``(i) is a nonprofit or public hospital and is located
in a county (or equivalent unit of local government) in a
rural area (as defined in section 1886(d)(2)(D)) that--
``(I) is located more than a 35-mile drive (or, in
the case of mountainous terrain or in areas with only
secondary roads available, a 15-mile drive) from a
hospital, or another facility described in this
subsection; or
``(II) is certified by the State as being a
necessary provider of health care services to residents
in the area;
``(ii) makes available 24-hour emergency care services
that a State determines are necessary for ensuring access
to emergency care services in each area served by a
critical access hospital;
``(iii) provides not more than 15 (or, in the case of a
facility under an agreement described in subsection (f),
25) acute care inpatient beds (meeting such standards as
the Secretary may establish) for providing inpatient care
for a period not to exceed 96 hours (unless a longer period
is required because transfer to a hospital is precluded
because of inclement weather or other emergency
conditions), except that a peer review organization or
equivalent entity may, on request, waive the 96-hour
restriction on a case-by-case basis;
``(iv) meets such staffing requirements as would apply
under section 1861(e) to a hospital located in a rural
area, except that--
``(I) the facility need not meet hospital standards
relating to the number of hours during a day, or days
during a week, in which the facility must be open and
fully staffed, except insofar as the facility is
required to make available emergency care services as
determined under clause (ii) and must have nursing
services available on a 24-hour basis, but need not
otherwise staff the facility except when an inpatient
is present;
``(II) the facility may provide any services
otherwise required to be provided by a full-time, on
site dietitian, pharmacist, laboratory technician,
medical technologist, and radiological technologist on
a part-time, off site basis under arrangements as
defined in section 1861(w)(1); and
``(III) the inpatient care described in clause
(iii) may be provided by a physician assistant, nurse
practitioner, or clinical nurse specialist subject to
the oversight of a physician who need not be present in
the facility; and
``(v) meets the requirements of section 1861(aa)(2)(I).
``(d) Definition of Rural Health Network.--
``(1) In general.--In this section, the term `rural health
network' means, with respect to a State, an organization consisting
of--
``(A) at least 1 facility that the State has designated or
plans to designate as a critical access hospital; and
``(B) at least 1 hospital that furnishes acute care
services.
``(2) Agreements.--
``(A) In general.--Each critical access hospital that is a
member of a rural health network shall have an agreement with
respect to each item described in subparagraph (B) with at
least 1 hospital that is a member of the network.
``(B) Items described.--The items described in this
subparagraph are the following:
``(i) Patient referral and transfer.
``(ii) The development and use of communications
systems including (where feasible)--
``(I) telemetry systems; and
``(II) systems for electronic sharing of patient
data.
``(iii) The provision of emergency and non-emergency
transportation among the facility and the hospital.
``(C) Credentialing and quality assurance.--Each critical
access hospital that is a member of a rural health network
shall have an agreement with respect to credentialing and
quality assurance with at least--
``(i) 1 hospital that is a member of the network;
``(ii) 1 peer review organization or equivalent entity;
or
``(iii) 1 other appropriate and qualified entity
identified in the State rural health care plan.
``(e) Certification by the Secretary.--The Secretary shall certify
a facility as a critical access hospital if the facility--
``(1) is located in a State that has established a medicare
rural hospital flexibility program in accordance with subsection
(c);
``(2) is designated as a critical access hospital by the State
in which it is located; and
``(3) meets such other criteria as the Secretary may require.
``(f) Permitting Maintenance of Swing Beds.--Nothing in this
section shall be construed to prohibit a State from designating or the
Secretary from certifying a facility as a critical access hospital
solely because, at the time the facility applies to the State for
designation as a critical access hospital, there is in effect an
agreement between the facility and the Secretary under section 1883
under which the facility's inpatient hospital facilities are used for
the provision of extended care services, so long as the total number of
beds that may be used at any time for the furnishing of either such
services or acute care inpatient services does not exceed 25 beds and
the number of beds used at any time for acute care inpatient services
does not exceed 15 beds. For purposes of the previous sentence, any bed
of a unit of the facility that is licensed as a distinct-part skilled
nursing facility at the time the facility applies to the State for
designation as a critical access hospital shall not be counted.
``(g) Grants.--
``(1) Medicare rural hospital flexibility program.--The
Secretary may award grants to States that have submitted
applications in accordance with subsection (b) for--
``(A) engaging in activities relating to planning and
implementing a rural health care plan;
``(B) engaging in activities relating to planning and
implementing rural health networks; and
``(C) designating facilities as critical access hospitals.
``(2) Rural emergency medical services.--
``(A) In general.--The Secretary may award grants to States
that have submitted applications in accordance with
subparagraph (B) for the establishment or expansion of a
program for the provision of rural emergency medical services.
``(B) Application.--An application is in accordance with
this subparagraph if the State submits to the Secretary at such
time and in such form as the Secretary may require an
application containing the assurances described in
subparagraphs (A)(ii), (A)(iii), and (B) of subsection (b)(1)
and paragraph (3) of that subsection.
``(h) Grandfathering of Certain Facilities.--
``(1) In general.--Any medical assistance facility operating in
Montana and any rural primary care hospital designated by the
Secretary under this section prior to the date of the enactment of
the Balanced Budget Act of 1997 shall be deemed to have been
certified by the Secretary under subsection (e) as a critical
access hospital if such facility or hospital is otherwise eligible
to be designated by the State as a critical access hospital under
subsection (c).
``(2) Continuation of medical assistance facility and rural
primary care hospital terms.--Notwithstanding any other provision
of this title, with respect to any medical assistance facility or
rural primary care hospital described in paragraph (1), any
reference in this title to a `critical access hospital' shall be
deemed to be a reference to a `medical assistance facility' or
`rural primary care hospital'.
``(i) Waiver of Conflicting Part A Provisions.--The Secretary is
authorized to waive such provisions of this part and part D as are
necessary to conduct the program established under this section.
``(j) Authorization of Appropriations.--There are authorized to be
appropriated from the Federal Hospital Insurance Trust Fund for making
grants to all States under subsection (g), $25,000,000 in each of the
fiscal years 1998 through 2002.''.
(b) Report on Alternative to 96-Hour Rule.--Not later than June 1,
1998, the Secretary of Health and Human Services shall submit to
Congress a report on the feasibility of, and administrative
requirements necessary to establish an alternative for certain medical
diagnoses (as determined by the Secretary) to the 96-hour limitation
for inpatient care in critical access hospitals required by section
1820(c)(2)(B)(iii) of the Social Security Act (42 U.S.C. 1395i-
4(c)(2)(B)(iii)), as added by subsection (a) of this section.
(c) Conforming Amendments Relating to Rural Primary Care Hospitals
and Critical Access Hospitals.--
(1) In general.--Title XI of the Social Security Act (42 U.S.C.
1301 et seq.) and title XVIII of that Act (42 U.S.C. 1395 et seq.)
are each amended by striking ``rural primary care'' each place it
appears and inserting ``critical access''.
(2) Definitions.--Section 1861(mm) of the Social Security Act
(42 U.S.C. 1395x(mm)) is amended to read as follows:
``critical access hospital; critical access hospital services
``(mm)(1) The term `critical access hospital' means a facility
certified by the Secretary as a critical access hospital under section
1820(e).
``(2) The term `inpatient critical access hospital services' means
items and services, furnished to an inpatient of a critical access
hospital by such facility, that would be inpatient hospital services if
furnished to an inpatient of a hospital by a hospital.
``(3) The term `outpatient critical access hospital services' means
medical and other health services furnished by a critical access
hospital on an outpatient basis.''.
(3) Part a payment.--Section 1814 of the Social Security Act
(42 U.S.C. 1395f) is amended--
(A) in subsection (a)(8), by striking ``72'' and inserting
``96''; and
(B) by amending subsection (l) to read as follows:
``Payment for Inpatient Critical Access Hospital Services
``(l) The amount of payment under this part for inpatient critical
access hospital services is the reasonable costs of the critical access
hospital in providing such services.''.
(4) Payment continued to designated eachs.--Section
1886(d)(5)(D) of the Social Security Act (42 U.S.C.
1395ww(d)(5)(D)) is amended--
(A) in clause (iii)(III), by inserting ``as in effect on
September 30, 1997'' before the period at the end; and
(B) in clause (v)--
(i) by inserting ``as in effect on September 30, 1997''
after ``1820(i)(1)''; and
(ii) by striking ``1820(g)'' and inserting ``1820(d)''.
(5) Part b payment.--Section 1834(g) of the Social Security Act
(42 U.S.C. 1395m(g)) is amended to read as follows:
``(g) Payment for Outpatient Critical Access Hospital Services.--
The amount of payment under this part for outpatient critical access
hospital services is the reasonable costs of the critical access
hospital in providing such services.''.
(6) Transition for MAF.--
(A) In general.--The Secretary of Health and Human Services
shall provide for an appropriate transition for a facility
that, as of the date of the enactment of this Act, operated as
a limited service rural hospital under a demonstration
described in section 4008(i)(1) of the Omnibus Budget
Reconciliation Act of 1990 (42 U.S.C. 1395b-1 note) from such
demonstration to the program established under subsection (a).
At the conclusion of the transition period described in
subparagraph (B), the Secretary shall end such demonstration.
(B) Transition period described.--
(i) Initial period.--Subject to clause (ii), the
transition period described in this subparagraph is the
period beginning on the date of the enactment of this Act
and ending on October 1, 1998.
(ii) Extension.--If the Secretary determines that the
transition is not complete as of October 1, 1998, the
Secretary shall provide for an appropriate extension of the
transition period.
(d) Effective Date.--The amendments made by this section shall
apply to services furnished on or after October 1, 1997.
SEC. 4202. PROHIBITING DENIAL OF REQUEST BY RURAL REFERRAL CENTERS FOR
RECLASSIFICATION ON BASIS OF COMPARABILITY OF WAGES.
(a) In General.--Section 1886(d)(10)(D) (42 U.S.C.
1395ww(d)(10)(D)) is amended--
(1) by redesignating clause (iii) as clause (iv); and
(2) by inserting after clause (ii) the following new clause:
``(iii) Under the guidelines published by the Secretary under
clause (i), in the case of a hospital which has ever been classified by
the Secretary as a rural referral center under paragraph (5)(C), the
Board may not reject the application of the hospital under this
paragraph on the basis of any comparison between the average hourly
wage of the hospital and the average hourly wage of hospitals in the
area in which it is located.''.
(b) Continuing Treatment of Previously Designated Centers.--
(1) In general.--Any hospital classified as a rural referral
center by the Secretary of Health and Human Services under section
1886(d)(5)(C) of the Social Security Act for fiscal year 1991 shall
be classified as such a rural referral center for fiscal year 1998
and each subsequent fiscal year.
(2) Budget neutrality.--The provisions of section 1886(d)(8)(D)
of the Social Security Act shall apply to reclassifications made
pursuant to paragraph (1) in the same manner as such provisions
apply to a reclassification under section 1886(d)(10) of such Act.
SEC. 4203. HOSPITAL GEOGRAPHIC RECLASSIFICATION PERMITTED FOR PURPOSES
OF DISPROPORTIONATE SHARE PAYMENT ADJUSTMENTS.
(a) In General.--For the period described in subsection (c), the
Medicare Geographic Classification Review Board shall consider the
application under section 1886(d)(10)(C)(i) of the Social Security Act
(42 U.S.C. 1395ww(d)(10)(C)(i)) of a hospital described in
1886(d)(1)(B) of such Act (42 U.S.C. 1395ww(d)(1)(B)) to change the
hospital's geographic classification for purposes of determining for a
fiscal year eligibility for and amount of additional payment amounts
under section 1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F)).
(b) Applicable Guidelines.--The Medicare Geographic Classification
Review Board shall apply the guidelines established for
reclassification under subclause (I) of section 1886(d)(10)(C)(i) of
such Act to reclassification by reason of subsection (a) until the
Secretary of Health and Human Services promulgates separate guidelines
for such reclassification.
(c) Period Described.--The period described in this subsection is
the period beginning on the date of the enactment of this Act and
ending 30 months after such date.
SEC. 4204. MEDICARE-DEPENDENT, SMALL RURAL HOSPITAL PAYMENT EXTENSION.
(a) Special Treatment Extended.--
(1) Payment methodology.--Section 1886(d)(5)(G) (42 U.S.C.
1395ww(d)(5)(G)) is amended--
(A) in clause (i), by striking ``October 1, 1994,'' and
inserting ``October 1, 1994, or beginning on or after October
1, 1997, and before October 1, 2001,''; and
(B) in clause (ii)(II), by striking ``October 1, 1994,''
and inserting ``October 1, 1994, or beginning on or after
October 1, 1997, and before October 1, 2001,''.
(2) Extension of target amount.--Section 1886(b)(3)(D) (42
U.S.C. 1395ww(b)(3)(D)) is amended--
(A) in the matter preceding clause (i), by striking
``September 30, 1994,'' and inserting ``September 30, 1994, and
for cost reporting periods beginning on or after October 1,
1997, and before October 1, 2001,'';
(B) in clause (ii), by striking ``and'' at the end;
(C) in clause (iii), by striking the period at the end and
inserting ``, and''; and
(D) by adding after clause (iii) the following new clause:
``(iv) with respect to discharges occurring during fiscal year
1998 through fiscal year 2000, the target amount for the preceding
year increased by the applicable percentage increase under
subparagraph (B)(iv).''.
(3) Permitting hospitals to decline reclassification.--Section
13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is amended by
striking ``or fiscal year 1994'' and inserting ``, fiscal year
1994, fiscal year 1998, fiscal year 1999, or fiscal year 2000''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply with respect to discharges occurring on or after October 1, 1997.
SEC. 4205. RURAL HEALTH CLINIC SERVICES.
(a) Per-Visit Payment Limits for Provider-Based Clinics.--
(1) Extension of limit.--
(A) In general.--The matter in section 1833(f) (42 U.S.C.
1395l(f)) preceding paragraph (1) is amended by striking
``independent rural health clinics'' and inserting ``rural
health clinics (other than such clinics in rural hospitals with
less than 50 beds)''.
(B) Effective date.--The amendment made by subparagraph (A)
applies to services furnished on or after January 1, 1998.
(2) Technical clarification.--Section 1833(f)(1) (42 U.S.C.
1395l(f)(1)) is amended by inserting ``per visit'' after ``$46''.
(b) Assurance of Quality Services.--
(1) In general.--Subparagraph (I) of the first sentence of
section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended to read as
follows:
``(I) has a quality assessment and performance improvement
program, and appropriate procedures for review of utilization
of clinic services, as the Secretary may specify,''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on January 1, 1998.
(c) Waiver of Certain Staffing Requirements Limited to Clinics in
Program.--
(1) In general.--Section 1861(aa)(7)(B) (42 U.S.C.
1395x(aa)(7)(B)) is amended by inserting before the period ``, or
if the facility has not yet been determined to meet the
requirements (including subparagraph (J) of the first sentence of
paragraph (2)) of a rural health clinic''.
(2) Effective date.--The amendment made by paragraph (1)
applies to waiver requests made on or after January 1, 1998.
(d) Refinement of Shortage Area Requirements.--
(1) Designation reviewed triennially.--Section 1861(aa)(2) (42
U.S.C. 1395x(aa)(2)) is amended in the second sentence, in the
matter in clause (i) preceding subclause (I)--
(A) by striking ``and that is designated'' and inserting
``and that, within the previous 3-year period, has been
designated''; and
(B) by striking ``or that is designated'' and inserting
``or designated''.
(2) Area must have shortage of health care practitioners.--
Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)), as amended by
paragraph (1), is further amended in the second sentence, in the
matter in clause (i) preceding subclause (I)--
(A) by striking the comma after ``personal health
services''; and
(B) by inserting ``and in which there are insufficient
numbers of needed health care practitioners (as determined by
the Secretary),'' after ``Bureau of the Census)''.
(3) Previously qualifying clinics grandfathered only to prevent
shortage.--
(A) In General.--Section 1861(aa)(2) of the Social Security
Act (42 U.S.C. 1395x(aa)(2)) is amended in the third sentence
by inserting before the period ``if it is determined, in
accordance with criteria established by the Secretary in
regulations, to be essential to the delivery of primary care
services that would otherwise be unavailable in the geographic
area served by the clinic''.
(B) Payment for certain physician assistant services.--
Section 1842(b)(6)(C) (42 U.S.C. 1395u(b)(6)(C)) is amended to
read as follows: ``(C) in the case of services described in
clause (i) of section 1861(s)(2)(K), payment shall be made to
either (i) the employer of the physician assistant involved, or
(ii) with respect to a physician assistant who was the owner of
a rural health clinic (as described in section 1861(aa)(2)) for
a continuous period beginning prior to the date of the
enactment of the Balanced Budget Act of 1997 and ending on the
date that the Secretary determines such rural health clinic no
longer meets the requirements of section 1861(aa)(2), for such
services provided before January 1, 2003, payment may be made
directly to the physician assistant; and''.
(4) Effective dates; implementing regulations.--
(A) In general.--Except as otherwise provided, the
amendments made by the preceding paragraphs take effect on the
date of the enactment of this Act.
(B) Current rural health clinics.--The amendments made by
the preceding paragraphs take effect, with respect to entities
that are rural health clinics under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.) on the date of enactment
of this Act, on the date of the enactment of this Act.
(C) Grandfathered clinics.--
(i) In general.--The amendment made by paragraph (3)(A)
shall take effect on the effective date of regulations
issued by the Secretary under clause (ii).
(ii) Regulations.--The Secretary shall issue final
regulations implementing paragraph (3)(A) that shall take
effect no later than January 1, 1999.
SEC. 4206. MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES.
(a) In General.--Not later than January 1, 1999, the Secretary of
Health and Human Services shall make payments from the Federal
Supplementary Medical Insurance Trust Fund under part B of title XVIII
of the Social Security Act (42 U.S.C. 1395j et seq.) in accordance with
the methodology described in subsection (b) for professional
consultation via telecommunications systems with a physician (as
defined in section 1861(r) of such Act (42 U.S.C. 1395x(r)) or a
practitioner (described in section 1842(b)(18)(C) of such Act (42
U.S.C. 1395u(b)(18)(C)) furnishing a service for which payment may be
made under such part to a beneficiary under the medicare program
residing in a county in a rural area (as defined in section
1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))) that is
designated as a health professional shortage area under section
332(a)(1)(A) of the Public Health Service Act (42 U.S.C.
254e(a)(1)(A)), notwithstanding that the individual physician or
practitioner providing the professional consultation is not at the same
location as the physician or practitioner furnishing the service to
that beneficiary.
(b) Methodology for Determining Amount of Payments.--Taking into
account the findings of the report required under section 192 of the
Health Insurance Portability and Accountability Act of 1996 (Public Law
104-191; 110 Stat. 1988), the findings of the report required under
paragraph (c), and any other findings related to the clinical efficacy
and cost-effectiveness of telehealth applications, the Secretary shall
establish a methodology for determining the amount of payments made
under subsection (a) within the following parameters:
(1) The payment shall shared between the referring physician or
practitioner and the consulting physician or practitioner. The
amount of such payment shall not be greater than the current fee
schedule of the consulting physician or practitioner for the health
care services provided.
(2) The payment shall not include any reimbursement for any
telephone line charges or any facility fees, and a beneficiary may
not be billed for any such charges or fees.
(3) The payment shall be made subject to the coinsurance and
deductible requirements under subsections (a)(1) and (b) of section
1833 of the Social Security Act (42 U.S.C. 1395l).
(4) The payment differential of section 1848(a)(3) of such Act
(42 U.S.C. 1395w-4(a)(3)) shall apply to services furnished by non-
participating physicians. The provisions of section 1848(g) of such
Act (42 U.S.C. 1395w-4(g)) and section 1842(b)(18) of such Act (42
U.S.C. 1395u(b)(18)) shall apply. Payment for such service shall be
increased annually by the update factor for physicians' services
determined under section 1848(d) of such Act (42 U.S.C. 1395w-
4(d)).
(c) Supplemental Report.--Not later than January 1, 1999, the
Secretary shall submit a report to Congress which shall contain a
detailed analysis of--
(1) how telemedicine and telehealth systems are expanding
access to health care services;
(2) the clinical efficacy and cost-effectiveness of
telemedicine and telehealth applications;
(3) the quality of telemedicine and telehealth services
delivered; and
(4) the reasonable cost of telecommunications charges incurred
in practicing telemedicine and telehealth in rural, frontier, and
underserved areas.
(d) Expansion of Telehealth Services for Certain Medicare
Beneficiaries.--
(1) In general.--Not later than January 1, 1999, the Secretary
shall submit a report to Congress that examines the possibility of
making payments from the Federal Supplementary Medical Insurance
Trust Fund under part B of title XVIII of the Social Security Act
(42 U.S.C. 1395j et seq.) for professional consultation via
telecommunications systems with such a physician or practitioner
furnishing a service for which payment may be made under such part
to a beneficiary described in paragraph (2), notwithstanding that
the individual physician or practitioner providing the professional
consultation is not at the same location as the physician or
practitioner furnishing the service to that beneficiary.
(2) Beneficiary described.--A beneficiary described in this
paragraph is a beneficiary under the medicare program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) who does
not reside in a rural area (as so defined) that is designated as a
health professional shortage area under section 332(a)(1)(A) of the
Public Health Service Act (42 U.S.C. 254e(a)(1)(A)), who is
homebound or nursing homebound, and for whom being transferred for
health care services imposes a serious hardship.
(3) Report.--The report described in paragraph (1) shall
contain a detailed statement of the potential costs and savings to
the medicare program of making the payments described in that
paragraph using various reimbursement schemes.
SEC. 4207. INFORMATICS, TELEMEDICINE, AND EDUCATION DEMONSTRATION
PROJECT.
(a) Purpose and Authorization.--
(1) In general.--Not later than 9 months after the date of
enactment of this section, the Secretary of Health and Human
Services shall provide for a demonstration project described in
paragraph (2).
(2) Description of project.--
(A) In general.--The demonstration project described in
this paragraph is a single demonstration project to use
eligible health care provider telemedicine networks to apply
high-capacity computing and advanced networks to improve
primary care (and prevent health care complications) to
medicare beneficiaries with diabetes mellitus who are residents
of medically underserved rural areas or residents of medically
underserved inner-city areas.
(B) Medically underserved defined.--As used in this
paragraph, the term ``medically underserved'' has the meaning
given such term in section 330(b)(3) of the Public Health
Service Act (42 U.S.C. 254b(b)(3)).
(3) Waiver.--The Secretary 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 (d).
(4) Duration of project.--The project shall be conducted over a
4-year period.
(b) Objectives of Project.--The objectives of the project include
the following:
(1) Improving patient access to and compliance with appropriate
care guidelines for individuals with diabetes mellitus through
direct telecommunications link with information networks in order
to improve patient quality-of-life and reduce overall health care
costs.
(2) Developing a curriculum to train health professionals
(particularly primary care health professionals) in the use of
medical informatics and telecommunications.
(3) Demonstrating the application of advanced technologies,
such as video-conferencing from a patient's home, remote monitoring
of a patient's medical condition, interventional informatics, and
applying individualized, automated care guidelines, to assist
primary care providers in assisting patients with diabetes in a
home setting.
(4) Application of medical informatics to residents with
limited English language skills.
(5) Developing standards in the application of telemedicine and
medical informatics.
(6) Developing a model for the cost-effective delivery of
primary and related care both in a managed care environment and in
a fee-for-service environment.
(c) Eligible Health Care Provider Telemedicine Network Defined.--
For purposes of this section, the term ``eligible health care provider
telemedicine network'' means a consortium that includes at least one
tertiary care hospital (but no more than 2 such hospitals), at least
one medical school, no more than 4 facilities in rural or urban areas,
and at least one regional telecommunications provider and that meets
the following requirements:
(1) The consortium is located in an area with a high
concentration of medical schools and tertiary care facilities in
the United States and has appropriate arrangements (within or
outside the consortium) with such schools and facilities,
universities, and telecommunications providers, in order to conduct
the project.
(2) The consortium submits to the Secretary an application at
such time, in such manner, and containing such information as the
Secretary may require, including a description of the use to which
the consortium would apply any amounts received under the project
and the source and amount of non-Federal funds used in the project.
(3) The consortium guarantees that it will be responsible for
payment for all costs of the project that are not paid under this
section and that the maximum amount of payment that may be made to
the consortium under this section shall not exceed the amount
specified in subsection (d)(3).
(d) Coverage as Medicare Part B Services.--
(1) In general.--Subject to the succeeding provisions of this
subsection, services related to the treatment or management of
(including prevention of complications from) diabetes for medicare
beneficiaries furnished under the project shall be considered to be
services covered under part B of title XVIII of the Social Security
Act.
(2) Payments.--
(A) In general.--Subject to paragraph (3), payment for such
services shall be made at a rate of 50 percent of the costs
that are reasonable and related to the provision of such
services. In computing such costs, the Secretary shall include
costs described in subparagraph (B), but may not include costs
described in subparagraph (C).
(B) Costs that may be included.--The costs described in
this subparagraph are the permissible costs (as recognized by
the Secretary) for the following:
(i) The acquisition of telemedicine equipment for use
in patients' homes (but only in the case of patients
located in medically underserved areas).
(ii) Curriculum development and training of health
professionals in medical informatics and telemedicine.
(iii) Payment of telecommunications costs (including
salaries and maintenance of equipment), including costs of
telecommunications between patients' homes and the eligible
network and between the network and other entities under
the arrangements described in subsection (c)(1).
(iv) Payments to practitioners and providers under the
medicare programs.
(C) Costs not included.--The costs described in this
subparagraph are costs for any of the following:
(i) The purchase or installation of transmission
equipment (other than such equipment used by health
professionals to deliver medical informatics services under
the project).
(ii) The establishment or operation of a
telecommunications common carrier network.
(iii) Construction (except for minor renovations
related to the installation of reimbursable equipment) or
the acquisition or building of real property.
(3) Limitation.--The total amount of the payments that may be
made under this section shall not exceed $30,000,000 for the period
of the project (described in subsection (a)(4)).
(4) Limitation on cost-sharing.--The project may not impose
cost sharing on a medicare beneficiary for the receipt of services
under the project in excess of 20 percent of the costs that are
reasonable and related to the provision of such services.
(e) Reports.--The Secretary shall submit to the Committee on Ways
and Means and the Committee Commerce of the House of Representatives
and the Committee on Finance of the Senate interim reports on the
project and a final report on the project within 6 months after the
conclusion of the project. The final report shall include an evaluation
of the impact of the use of telemedicine and medical informatics on
improving access of medicare beneficiaries to health care services, on
reducing the costs of such services, and on improving the quality of
life of such beneficiaries.
(f) Definitions.--For purposes of this section:
(1) Interventional informatics.--The term ``interventional
informatics'' means using information technology and virtual
reality technology to intervene in patient care.
(2) Medical informatics.--The term ``medical informatics''
means the storage, retrieval, and use of biomedical and related
information for problem solving and decision-making through
computing and communications technologies.
(3) Project.--The term ``project'' means the demonstration
project under this section.
Subtitle D--Anti-Fraud and Abuse Provisions and Improvements in
Protecting Program Integrity
CHAPTER 1--REVISIONS TO SANCTIONS FOR FRAUD AND ABUSE
SEC. 4301. PERMANENT EXCLUSION FOR THOSE CONVICTED OF 3 HEALTH CARE
RELATED CRIMES.
Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended--
(1) in subparagraph (A), by inserting ``or in the case
described in subparagraph (G)'' after ``subsection (b)(12)'';
(2) in subparagraphs (B) and (D), by striking ``In the case''
and inserting ``Subject to subparagraph (G), in the case''; and
(3) by adding at the end the following new subparagraph:
``(G) In the case of an exclusion of an individual under subsection
(a) based on a conviction occurring on or after the date of the
enactment of this subparagraph, if the individual has (before, on, or
after such date) been convicted--
``(i) on one previous occasion of one or more offenses for
which an exclusion may be effected under such subsection, the
period of the exclusion shall be not less than 10 years, or
``(ii) on 2 or more previous occasions of one or more offenses
for which an exclusion may be effected under such subsection, the
period of the exclusion shall be permanent.''.
SEC. 4302. AUTHORITY TO REFUSE TO ENTER INTO MEDICARE AGREEMENTS WITH
INDIVIDUALS OR ENTITIES CONVICTED OF FELONIES.
(a) Medicare Part A.--Section 1866(b)(2) (42 U.S.C. 1395cc(b)(2))
is amended--
(1) in subparagraph (B), by striking ``or'' at the end;
(2) in subparagraph (C), by striking the period at the end and
inserting ``, or''; and
(3) by adding at the end the following new subparagraph:
``(D) has ascertained that the provider has been convicted
of a felony under Federal or State law for an offense which the
Secretary determines is detrimental to the best interests of
the program or program beneficiaries.''.
(b) Medicare Part B.--Section 1842(h) (42 U.S.C. 1395u(h)) is
amended by adding at the end the following new paragraph:
``(8) The Secretary may refuse to enter into an agreement with a
physician or supplier under this subsection, or may terminate or refuse
to renew such agreement, in the event that such physician or supplier
has been convicted of a felony under Federal or State law for an
offense which the Secretary determines is detrimental to the best
interests of the program or program beneficiaries.''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act and apply to the entry
and renewal of contracts on or after such date.
SEC. 4303. EXCLUSION OF ENTITY CONTROLLED BY FAMILY MEMBER OF A
SANCTIONED INDIVIDUAL.
(a) In General.--Section 1128 (42 U.S.C. 1320a-7) is amended--
(1) in subsection (b)(8)(A)--
(A) in clause (i), by striking ``or'' at the end;
(B) in clause (ii), by striking the dash at the end and
inserting ``; or''; and
(C) by inserting after clause (ii) the following:
``(iii) who was described in clause (i) but is no longer so
described because of a transfer of ownership or control
interest, in anticipation of (or following) a conviction,
assessment, or exclusion described in subparagraph (B) against
the person, to an immediate family member (as defined in
subsection (j)(1)) or a member of the household of the person
(as defined in subsection (j)(2)) who continues to maintain an
interest described in such clause--''; and
(2) by adding at the end the following new subsection:
``(j) Definition of Immediate Family Member and Member of
Household.--For purposes of subsection (b)(8)(A)(iii):
``(1) The term `immediate family member' means, with respect to
a person--
``(A) the husband or wife of the person;
``(B) the natural or adoptive parent, child, or sibling of
the person;
``(C) the stepparent, stepchild, stepbrother, or stepsister
of the person;
``(D) the father-, mother-, daughter-, son-, brother-, or
sister-in-law of the person;
``(E) the grandparent or grandchild of the person; and
``(F) the spouse of a grandparent or grandchild of the
person.
``(2) The term `member of the household' means, with respect to
any person, any individual sharing a common abode as part of a
single family unit with the person, including domestic employees
and others who live together as a family unit, but not including a
roomer or boarder.''.
(b) Effective Date.--The amendments made by this section shall take
effect on the date that is 45 days after the date of the enactment of
this Act.
SEC. 4304. IMPOSITION OF CIVIL MONEY PENALTIES.
(a) Civil Money Penalties for Persons That Contract With Excluded
Individuals.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
(1) in paragraph (4), by striking ``or'' at the end;
(2) in paragraph (5), by adding ``or'' at the end; and
(3) by inserting after paragraph (5) the following new
paragraph:
``(6) arranges or contracts (by employment or otherwise) with
an individual or entity that the person knows or should know is
excluded from participation in a Federal health care program (as
defined in section 1128B(f)), for the provision of items or
services for which payment may be made under such a program;''.
(b) Civil Money Penalties for Kickbacks.--
(1) Permitting secretary to impose civil money penalty.--
Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by subsection
(a), is amended--
(A) in paragraph (5), by striking ``or'' at the end;
(B) in paragraph (6), by adding ``or'' at the end; and
(C) by adding after paragraph (6) the following new
paragraph:
``(7) commits an act described in paragraph (1) or (2) of
section 1128B(b);''.
(2) Description of civil money penalty applicable.--Section
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by paragraph (1), is
amended in the matter following paragraph (7)--
(A) by striking ``occurs).'' and inserting ``occurs; or in
cases under paragraph (7), $50,000 for each such act).''; and
(B) by inserting after ``of such claim'' the following:
``(or, in cases under paragraph (7), damages of not more than 3
times the total amount of remuneration offered, paid,
solicited, or received, without regard to whether a portion of
such remuneration was offered, paid, solicited, or received for
a lawful purpose)''.
(c) Effective Dates.--
(1) Contracts with excluded persons.--The amendments made by
subsection (a) shall apply to arrangements and contracts entered
into after the date of the enactment of this Act.
(2) Kickbacks.--The amendments made by subsection (b) shall
apply to acts committed after the date of the enactment of this
Act.
CHAPTER 2--IMPROVEMENTS IN PROTECTING PROGRAM INTEGRITY
SEC. 4311. IMPROVING INFORMATION TO MEDICARE BENEFICIARIES.
(a) Inclusion of Information Regarding Medicare Waste, Fraud, and
Abuse in Annual Notice.--
(1) In General.--Section 1804 (42 U.S.C. 1395b-2) is amended by
adding at the end the following new subsection:
``(c) The notice provided under subsection (a) shall include--
``(1) a statement which indicates that because errors do occur
and because medicare fraud, waste, and abuse is a significant
problem, beneficiaries should carefully check any explanation of
benefits or itemized statement furnished pursuant to section 1806
for accuracy and report any errors or questionable charges by
calling the toll-free phone number described in paragraph (4);
``(2) a statement of the beneficiary's right to request an
itemized statement for medicare items and services (as provided in
section 1806(b));
``(3) a description of the program to collect information on
medicare fraud and abuse established under section 203(b) of the
Health Insurance Portability and Accountability Act of 1996; and
``(4) a toll-free telephone number maintained by the Inspector
General in the Department of Health and Human Services for the
receipt of complaints and information about waste, fraud, and abuse
in the provision or billing of services under this title.''.
(2) Effective date.--The amendment made by this subsection
shall apply to notices provided on or after January 1, 1998.
(b) Clarification of Requirement To Provide Explanation of Medicare
Benefits.--
(1) In general.--Title XVIII is amended by inserting after
section 1805 (as added by section 4022) the following new section:
``explanation of medicare benefits
``Sec. 1806. (a) In General.--The Secretary shall furnish to each
individual for whom payment has been made under this title (or would be
made without regard to any deductible) a statement which--
``(1) lists the item or service for which payment has been made
and the amount of such payment for each item or service; and
``(2) includes a notice of the individual's right to request an
itemized statement (as provided in subsection (b)).
``(b) Request for Itemized Statement for Medicare Items and
Services.--
``(1) In general.--An individual may submit a written request
to any physician, provider, supplier, or any other person
(including an organization, agency, or other entity) for an
itemized statement for any item or service provided to such
individual by such person with respect to which payment has been
made under this title.
``(2) 30-day period to furnish statement.--
``(A) In general.--Not later than 30 days after the date on
which a request under paragraph (1) has been made, a person
described in such paragraph shall furnish an itemized statement
describing each item or service provided to the individual
requesting the itemized statement.
``(B) Penalty.--Whoever knowingly fails to furnish an
itemized statement in accordance with subparagraph (A) shall be
subject to a civil money penalty of not more than $100 for each
such failure. Such penalty 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.
``(3) Review of itemized statement.--
``(A) In general.--Not later than 90 days after the receipt
of an itemized statement furnished under paragraph (1), an
individual may submit a written request for a review of the
itemized statement to the Secretary.
``(B) Specific allegations.--A request for a review of the
itemized statement shall identify--
``(i) specific items or services that the individual
believes were not provided as claimed, or
``(ii) any other billing irregularity (including
duplicate billing).
``(4) Findings of secretary.--The Secretary shall, with respect
to each written request submitted under paragraph (3), determine
whether the itemized statement identifies specific items or
services that were not provided as claimed or any other billing
irregularity (including duplicate billing) that has resulted in
unnecessary payments under this title.
``(5) Recovery of amounts.--The Secretary shall take all
appropriate measures to recover amounts unnecessarily paid under
this title with respect to a statement described in paragraph
(4).''.
(2) Conforming amendment.--Subsection (a) of section 203 of the
Health Insurance Portability and Accountability Act of 1996 is
repealed.
(3) Effective dates.--
(A) Statement by secretary.--Paragraph (1) of section
1806(a) of the Social Security Act, as added by paragraph (1),
and the repeal made by paragraph (2) shall take effect on the
date of the enactment of this Act.
(B) Itemized statement.--Paragraph (2) of section 1806(a)
and section 1806(b) of the Social Security Act, as so added,
shall take effect not later than January 1, 1999.
SEC. 4312. DISCLOSURE OF INFORMATION AND SURETY BONDS.
(a) Disclosure of Information and Surety Bond Requirement for
Suppliers of Durable Medical Equipment.--Section 1834(a) (42 U.S.C.
1395m(a)) is amended by inserting after paragraph (15) the following
new paragraph:
``(16) Disclosure of information and surety bond.--The
Secretary shall not provide for the issuance (or renewal) of a
provider number for a supplier of durable medical equipment, for
purposes of payment under this part for durable medical equipment
furnished by the supplier, unless the supplier provides the
Secretary on a continuing basis--
``(A) with--
``(i) full and complete information as to the identity
of each person with an ownership or control interest (as
defined in section 1124(a)(3)) in the supplier or in any
subcontractor (as defined by the Secretary in regulations)
in which the supplier directly or indirectly has a 5
percent or more ownership interest; and
``(ii) to the extent determined to be feasible under
regulations of the Secretary, the name of any disclosing
entity (as defined in section 1124(a)(2)) with respect to
which a person with such an ownership or control interest
in the supplier is a person with such an ownership or
control interest in the disclosing entity; and
``(B) with a surety bond in a form specified by the
Secretary and in an amount that is not less than $50,000.
The Secretary may waive the requirement of a bond under
subparagraph (B) in the case of a supplier that provides a
comparable surety bond under State law.''.
(b) Surety Bond Requirement for Home Health Agencies.--
(1) In general.--Section 1861(o) (42 U.S.C. 1395x(o)) is
amended--
(A) in paragraph (6), by striking ``and'' at the end;
(B) by redesignating paragraph (7) as paragraph (8);
(C) by inserting after paragraph (6) the following new
paragraph:
``(7) provides the Secretary on a continuing basis with a
surety bond in a form specified by the Secretary and in an amount
that is not less than $50,000; and''; and
(D) by adding at the end the following: ``The Secretary may
waive the requirement of a surety bond under paragraph (7) in
the case of an agency or organization that provides a
comparable surety bond under State law.''.
(2) Conforming amendments.--Section 1861(v)(1)(H) (42 U.S.C.
1395x(v)(1)(H)) is amended--
(A) in clause (i), by striking ``the financial security
requirement described in subsection (o)(7)'' and inserting
``the surety bond requirement described in subsection (o)(7)
and the financial security requirement described in subsection
(o)(8)''; and
(B) in clause (ii), by striking ``the financial security
requirement described in subsection (o)(7) applies'' and
inserting ``the surety bond requirement described in subsection
(o)(7) and the financial security requirement described in
subsection (o)(8) apply''.
(3) Reference to current disclosure requirement.--For
additional provisions requiring home health agencies to disclose
information on ownership and control interests, see section 1124 of
the Social Security Act (42 U.S.C. 1320a-3).
(c) Authorizing Application of Disclosure and Surety Bond
Requirements to Other Health Care Providers.--Section 1834(a)(16) (42
U.S.C. 1395m(a)(16)), as added by subsection (a), is amended by adding
at the end the following: ``The Secretary, at the Secretary's
discretion, may impose the requirements of the first sentence with
respect to some or all providers of items or services under part A or
some or all suppliers or other persons (other than physicians or other
practitioners, as defined in section 1842(b)(18)(C)) who furnish items
or services under this part.''.
(d) Application to Comprehensive Outpatient Rehabilitation
Facilities (CORFs).--Section 1861(cc)(2) (42 U.S.C. 1395x(cc)(2)) is
amended--
(1) in subparagraph (H), by striking ``and'' at the end;
(2) by redesignating subparagraph (I) as subparagraph (J);
(3) by inserting after subparagraph (H) the following new
subparagraph:
``(I) provides the Secretary on a continuing basis with a
surety bond in a form specified by the Secretary and in an amount
that is not less than $50,000; and''; and
(4) by adding at the end the following flush sentence:
``The Secretary may waive the requirement of a surety bond under
subparagraph (I) in the case of a facility that provides a comparable
surety bond under State law.''.
(e) Application to Rehabilitation Agencies.--Section 1861(p) (42
U.S.C. 1395x(p)) is amended--
(1) in paragraph (4)(A)(v), by inserting after ``as the
Secretary may find necessary,'' the following: ``and provides the
Secretary on a continuing basis with a surety bond in a form
specified by the Secretary and in an amount that is not less than
$50,000,'', and
(2) by adding at the end the following: ``The Secretary may
waive the requirement of a surety bond under paragraph (4)(A)(v) in
the case of a clinic or agency that provides a comparable surety
bond under State law.''.
(f) Effective Dates.--
(1) Suppliers of durable medical equipment.--The amendment made
by subsection (a) shall apply to suppliers of durable medical
equipment with respect to such equipment furnished on or after
January 1, 1998.
(2) Home health agencies.--The amendments made by subsection
(b) shall apply to home health agencies with respect to services
furnished on or after January 1, 1998. The Secretary of Health and
Human Services shall modify participation agreements under section
1866(a)(1) of the Social Security Act (42 U.S.C. 1395cc(a)(1)) with
respect to home health agencies to provide for implementation of
such amendments on a timely basis.
(3) Other amendments.--The amendments made by subsections (c)
through (e) shall take effect on the date of the enactment of this
Act and may be applied with respect to items and services furnished
on or after January 1, 1998.
SEC. 4313. PROVISION OF CERTAIN IDENTIFICATION NUMBERS.
(a) Requirements To Disclose Employer Identification Numbers (EINS)
and Social Security Account Numbers (SSNs).--Section 1124(a)(1) (42
U.S.C. 1320a-3(a)(1)) is amended by inserting before the period at the
end the following: ``and supply the Secretary with the both the
employer identification number (assigned pursuant to section 6109 of
the Internal Revenue Code of 1986) and social security account number
(assigned under section 205(c)(2)(B)) of the disclosing entity, each
person with an ownership or control interest (as defined in subsection
(a)(3)), and any subcontractor in which the entity directly or
indirectly has a 5 percent or more ownership interest.
(b) Other Medicare Providers.--Section 1124A (42 U.S.C. 1320a-3a)
is amended--
(1) in subsection (a)--
(A) in paragraph (1), by striking ``and'' at the end;
(B) in paragraph (2), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following new paragraph:
``(3) including the employer identification number (assigned
pursuant to section 6109 of the Internal Revenue Code of 1986) and
social security account number (assigned under section
205(c)(2)(B)) of the disclosing part B provider and any person,
managing employee, or other entity identified or described under
paragraph (1) or (2).''; and
(2) in subsection (c)(1), by inserting ``(or, for purposes of
subsection (a)(3), any entity receiving payment)'' after ``on an
assignment-related basis''.
(c) Verification by Social Security Administration (SSA).--Section
1124A (42 U.S.C. 1320a-3a), as amended by subsection (b), is amended--
(1) by redesignating subsection (c) as subsection (d); and
(2) by inserting after subsection (b) the following new
subsection:
``(c) Verification.--
``(1) Transmittal by hhs.--The Secretary shall transmit--
``(A) to the Commissioner of Social Security information
concerning each social security account number (assigned under
section 205(c)(2)(B)), and
``(B) to the Secretary of the Treasury information
concerning each employer identification number (assigned
pursuant to section 6109 of the Internal Revenue Code of 1986),
supplied to the Secretary pursuant to subsection (a)(3) or section
1124(c) to the extent necessary for verification of such
information in accordance with paragraph (2).
``(2) Verification.--The Commissioner of Social Security and
the Secretary of the Treasury shall verify the accuracy of, or
correct, the information supplied by the Secretary to such official
pursuant to paragraph (1), and shall report such verifications or
corrections to the Secretary.
``(3) Fees for verification.--The Secretary shall reimburse the
Commissioner and Secretary of the Treasury, at a rate negotiated
between the Secretary and such official, for the costs incurred by
such official in performing the verification and correction
services described in this subsection.''.
(d) Report.--Before the amendments made by this section may become
effective, the Secretary of Health and Human Services shall submit to
Congress a report on steps the Secretary has taken to assure the
confidentiality of social security account numbers that will be
provided to the Secretary under such amendments.
(e) Effective Dates.--
(1) Disclosure requirements.--The amendment made by subsection
(a) shall apply to the application of conditions of participation,
and entering into and renewal of contracts and agreements,
occurring more than 90 days after the date of submission of the
report under subsection (d).
(2) Other providers.--The amendments made by subsection (b)
shall apply to payment for items and services furnished more than
90 days after the date of submission of such report.
SEC. 4314. ADVISORY OPINIONS REGARDING CERTAIN PHYSICIAN SELF-REFERRAL
PROVISIONS.
Section 1877(g) (42 U.S.C. 1395nn(g)) is amended by adding at the
end the following new paragraph:
``(6) Advisory opinions.--
``(A) In general.--The Secretary shall issue written
advisory opinions concerning whether a referral relating to
designated health services (other than clinical laboratory
services) is prohibited under this section. Each advisory
opinion issued by the Secretary shall be binding as to the
Secretary and the party or parties requesting the opinion.
``(B) Application of certain rules.--The Secretary shall,
to the extent practicable, apply the rules under subsections
(b)(3) and (b)(4) and take into account the regulations
promulgated under subsection (b)(5) of section 1128D in the
issuance of advisory opinions under this paragraph.
``(C) Regulations.--In order to implement this paragraph in
a timely manner, the Secretary may promulgate regulations that
take effect on an interim basis, after notice and pending
opportunity for public comment.
``(D) Applicability.--This paragraph shall apply to
requests for advisory opinions made after the date which is 90
days after the date of the enactment of this paragraph and
before the close of the period described in section
1128D(b)(6).''.
SEC. 4315. REPLACEMENT OF REASONABLE CHARGE METHODOLOGY BY FEE
SCHEDULES.
(a) Application of Fee Schedule.--Section 1842 (42 U.S.C. 1395u) is
amended by adding at the end the following new subsection:
``(s)(1) The Secretary may implement a statewide or other areawide
fee schedule to be used for payment of any item or service described in
paragraph (2) which is paid on a reasonable charge basis. Any fee
schedule established under this paragraph for such item or service
shall be updated each year by the percentage increase in the consumer
price index for all urban consumers (United States city average) for
the 12-month period ending with June of the preceding year, except that
in no event shall a fee schedule for an item described in paragraph
(2)(D) be updated before 2003.
``(2) The items and services described in this paragraph are as
follows:
``(A) Medical supplies.
``(B) Home dialysis supplies and equipment (as defined in
section 1881(b)(8)).
``(C) Therapeutic shoes.
``(D) Parenteral and enteral nutrients, equipment, and
supplies.
``(E) Electromyogram devices
``(F) Salivation devices.
``(G) Blood products.
``(H) Transfusion medicine.''.
(b) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)) is amended--
(A) by striking ``and (P)'' and inserting ``(P)''; and
(B) by striking the semicolon at the end and inserting the
following: ``, and (Q) with respect to items or services for
which fee schedules are established pursuant to section
1842(s), the amounts paid shall be 80 percent of the lesser of
the actual charge or the fee schedule established in such
section;''.
(c) Effective Dates.--The amendments made by this section to the
extent such amendments substitute fee schedules for reasonable charges,
shall apply to particular services as of the date specified by the
Secretary of Health and Human Services.
(d) Initial Budget Neutrality.--The Secretary, in developing a fee
schedule for particular services (under the amendments made by this
section), shall set amounts for the first year period to which the fee
schedule applies at a level so that the total payments under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) for those
services for that year period shall be approximately equal to the
estimated total payments if such fee schedule had not been implemented.
SEC. 4316. APPLICATION OF INHERENT REASONABLENESS TO ALL PART B
SERVICES OTHER THAN PHYSICIANS' SERVICES.
(a) In General.--Paragraphs (8) and (9) of section 1842(b) (42
U.S.C. 1395u(b)) are amended to read as follows:
``(8)(A)(i) The Secretary shall by regulation--
``(I) describe the factors to be used in determining the cases
(of particular items or services) in which the application of this
part (other than to physicians' services paid under section 1848)
results in the determination of an amount that, because of its
being grossly excessive or grossly deficient, is not inherently
reasonable, and
``(II) provide in those cases for the factors to be considered
in determining an amount that is realistic and equitable.
``(ii) Notwithstanding the determination made in clause (i), the
Secretary may not apply factors that would increase or decrease the
payment under this part during any year for any particular item or
service by more than 15 percent from such payment during the preceding
year except as provided in subparagraph (B).
``(B) The Secretary may make a determination under this
subparagraph that would result in an increase or decrease under
subparagraph (A) of more than 15 percent of the payment amount for a
year, but only if--
``(i) the Secretary's determination takes into account the
factors described in subparagraph (C) and any additional factors
the Secretary determines appropriate,
``(ii) the Secretary's determination takes into account the
potential impacts described in subparagraph (D), and
``(iii) the Secretary complies with the procedural requirements
of paragraph (9).
``(C) The factors described in this subparagraph are as follows:
``(i) The programs established under this title and title XIX
are the sole or primary sources of payment for an item or service.
``(ii) The payment amount does not reflect changing technology,
increased facility with that technology, or reductions in
acquisition or production costs.
``(iii) The payment amount for an item or service under this
part is substantially higher or lower than the payment made for the
item or service by other purchasers.
``(D) The potential impacts of a determination under subparagraph
(B) on quality, access, and beneficiary liability, including the likely
effects on assignment rates and participation rates.
``(9)(A) The Secretary shall consult with representatives of
suppliers or other individuals who furnish an item or service before
making a determination under paragraph (8)(B) with regard to that item
or service.
``(B) The Secretary shall publish notice of a proposed
determination under paragraph (8)(B) in the Federal Register--
``(i) specifying the payment amount proposed to be established
with respect to an item or service,
``(ii) explaining the factors and data that the Secretary took
into account in determining the payment amount so specified, and
``(iii) explaining the potential impacts described in paragraph
(8)(D).
``(C) After publication of the notice required by subparagraph (B),
the Secretary shall allow not less than 60 days for public comment on
the proposed determination.
``(D)(i) Taking into consideration the comments made by the public,
the Secretary shall publish in the Federal Register a final
determination under paragraph (8)(B) with respect to the payment amount
to be established with respect to the item or service.
``(ii) A final determination published pursuant to clause (i) shall
explain the factors and data that the Secretary took into consideration
in making the final determination.''.
(b) Conforming Amendment.--Section 1834(a)(10)(B) (42 U.S.C.
1395m(a)(10)(B)) is amended--
(1) by striking ``For covered items furnished on or after
January 1, 1991, the'' and inserting ``The'';
(2) by striking ``(other than subparagraph (D))''; and
(3) by striking all that follows ``payments under this
subsection'' and inserting a period.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 4317. REQUIREMENT TO FURNISH DIAGNOSTIC INFORMATION.
(a) Inclusion of Non-Physician Practitioners in Requirement To
Provide Diagnostic Codes for Physician Services.--Paragraphs (1) and
(2) of section 1842(p) (42 U.S.C. 1395u(p)) are each amended by
inserting ``or practitioner specified in subsection (b)(18)(C)'' after
``by a physician''.
(b) Requirement To Provide Diagnostic Information When Ordering
Certain Items or Services Furnished by Another Entity.--Section 1842(p)
(42 U.S.C. 1395u(p)), is amended by adding at the end the following new
paragraph:
``(4) In the case of an item or service defined in paragraph (3),
(6), (8), or (9) of subsection 1861(s) ordered by a physician or a
practitioner specified in subsection (b)(18)(C), but furnished by
another entity, if the Secretary (or fiscal agent of the Secretary)
requires the entity furnishing the item or service to provide
diagnostic or other medical information in order for payment to be made
to the entity, the physician or practitioner shall provide that
information to the entity at the time that the item or service is
ordered by the physician or practitioner.''.
(c) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 1998.
SEC. 4318. REPORT BY GAO ON OPERATION OF FRAUD AND ABUSE CONTROL
PROGRAM.
Section 1817(k)(6) (42 U.S.C. 1395i(k)(6)) is amended by inserting
``June 1, 1998, and'' after ``Not later than''.
SEC. 4319. COMPETITIVE BIDDING DEMONSTRATION PROJECTS.
(a) General Rule.--Part B of title XVIII (42 U.S.C. 1395j et seq.)
is amended by inserting after section 1846 the following new section:
``SEC. 1847. DEMONSTRATION PROJECTS FOR COMPETITIVE ACQUISITION OF
ITEMS AND SERVICES.
``(a) Establishment of Demonstration Project Bidding Areas.--
``(1) In general.--The Secretary shall implement not more than
5 demonstration projects under which competitive acquisition areas
are established for contract award purposes for the furnishing
under this part of the items and services described in subsection
(d).
``(2) Project requirements.--Each demonstration project under
paragraph (1)--
``(A) shall include such group of items and services as the
Secretary may prescribe,
``(B) shall be conducted in not more than 3 competitive
acquisition areas, and
``(C) shall be operated over a 3-year period.
``(3) Criteria for establishment of competitive acquisition
areas.--Each competitive acquisition area established under a
demonstration project implemented under paragraph (1)--
``(A) shall be, or shall be within, a metropolitan
statistical area (as defined by the Secretary of Commerce), and
``(B) shall be chosen based on the availability and
accessibility of entities able to furnish items and services,
and the probable savings to be realized by the use of
competitive bidding in the furnishing of items and services in
such area.
``(b) Awarding of Contracts in Areas.--
``(1) In general.--The Secretary shall conduct a competition
among individuals and entities supplying items and services
described in subsection (c) for each competitive acquisition area
established under a demonstration project implemented under
subsection (a).
``(2) Conditions for awarding contract.--The Secretary may not
award a contract to any entity under the competition conducted
pursuant to paragraph (1) to furnish an item or service unless the
Secretary finds that the entity meets quality standards specified
by the Secretary that the total amounts to be paid under the
contract are expected to be less than the total amounts that would
otherwise be paid.
``(3) Contents of contract.--A contract entered into with an
entity under the competition conducted pursuant to paragraph (1) is
subject to terms and conditions that the Secretary may specify.
``(4) Limit on number of contractors.--The Secretary may limit
the number of contractors in a competitive acquisition area to the
number needed to meet projected demand for items and services
covered under the contracts.
``(c) Expansion of Projects.--
``(1) Evaluations.--The Secretary shall evaluate the impact of
the implementation of the demonstration projects on medicare
program payments, access, diversity of product selection, and
quality. The Secretary shall make annual reports to the Committees
on Ways and Means and Commerce of the House of Representatives and
the Committee on Finance of the Senate on the results of the
evaluation described in the preceding sentence and a final report
not later than 6 months after the termination date specified in
subsection (e).
``(2) Expansion.--If the Secretary determines from the
evaluations under paragraph (1) that there is clear evidence that
any demonstration project--
``(A) results in a decrease in Federal expenditures under
this title, and
``(B) does not reduce program access, diversity of product
selection, and quality under this title,
the Secretary may expand the project to additional competitive
acquisition areas.
``(d) Services described.--The items and services to which this
section applies are all items and services covered under this part
(except for physicians' services as defined in section 1861(s)(1)) that
the Secretary may specify. At least one demonstration project shall
include oxygen and oxygen equipment.
``(e) Termination.--Notwithstanding any other provision of this
section, all projects under this section shall terminate not later than
December 31, 2002.''.
(b) Items and Services To Be Furnished Only Through Competitive
Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
(1) by striking ``or'' at the end of paragraph (15),
(2) by striking the period at the end of paragraph (16) and
inserting ``; or'', and
(3) by inserting after paragraph (16) the following new
paragraph:
``(17) where the expenses are for an item or service furnished
in a competitive acquisition area (as established by the Secretary
under section 1847(a)) by an entity other than an entity with which
the Secretary has entered into a contract under section 1847(b) for
the furnishing of such an item or service in that area, unless the
Secretary finds that the expenses were incurred in a case of urgent
need, or in other circumstances specified by the Secretary.''.
(c) Study by GAO.--The Comptroller of the United States shall study
the effectiveness of the establishment of competitive acquisition areas
under section 1847(a) of the Social Security Act, as added by this
section.
SEC. 4320. PROHIBITING UNNECESSARY AND WASTEFUL MEDICARE PAYMENTS FOR
CERTAIN ITEMS.
Section 1861(v) (42 U.S.C. 1395x(v)) is amended by adding at the
end the following new paragraph:
``(8) Items unrelated to patient care.--Reasonable costs do not
include costs for the following--
``(i) entertainment, including tickets to sporting and
other entertainment events;
``(ii) gifts or donations;
``(iii) personal use of motor vehicles;
``(iv) costs for fines and penalties resulting from
violations of Federal, State, or local laws; and
``(v) education expenses for spouses or other dependents of
providers of services, their employees or contractors.''.
SEC. 4321. NONDISCRIMINATION IN POST-HOSPITAL REFERRAL TO HOME HEALTH
AGENCIES AND OTHER ENTITIES.
(a) Notification of Availability of Home Health Agencies and Other
Entities As Part of Discharge Planning Process.--Section 1861(ee)(2)
(42 U.S.C. 1395x(ee)(2)) is amended--
(1) in subparagraph (D), by inserting before the period the
following: ``, including the availability of home health services
through individuals and entities that participate in the program
under this title and that serve the area in which the patient
resides and that request to be listed by the hospital as
available''; and
(2) by adding at the end the following new subparagraph:
``(H) Consistent with section 1802, the discharge plan shall--
``(i) not specify or otherwise limit the qualified provider
which may provide post-hospital home health services, and
``(ii) identify (in a form and manner specified by the
Secretary) any entity to whom the individual is referred in
which the hospital has a disclosable financial interest (as
specified by the Secretary consistent with section
1866(a)(1)(S)) or which has such an interest in the
hospital.''.
(b) Maintenance and Disclosure of Information on Post-Hospital Home
Health Agencies and Other Entities.--Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended--
(1) by striking ``and'' at the end of subparagraph (Q),
(2) by striking the period at the end of subparagraph (R), and
(3) by adding at the end the following new subparagraph:
``(S) in the case of a hospital that has a financial interest
(as specified by the Secretary in regulations) in an entity to
which individuals are referred as described in section
1861(ee)(2)(H)(ii), or in which such an entity has such a financial
interest, or in which another entity has such a financial interest
(directly or indirectly) with such hospital and such an entity, to
maintain and disclose to the Secretary (in a form and manner
specified by the Secretary) information on--
``(i) the nature of such financial interest,
``(ii) the number of individuals who were discharged from
the hospital and who were identified as requiring home health
services, and
``(iii) the percentage of such individuals who received
such services from such provider (or another such provider).''.
(c) Disclosure of Information to the Public.--Title XI is amended
by inserting after section 1145 the following new section:
``public disclosure of certain information on hospital financial
interest and referral patterns
``Sec. 1146. The Secretary shall make available to the public, in a
form and manner specified by the Secretary, information disclosed to
the Secretary pursuant to section 1866(a)(1)(S).''.
(d) Effective Dates.--
(1) The amendments made by subsection (a) shall apply to
discharges occurring on or after the date which is 90 days after
the date of the enactment of this Act.
(2) The Secretary of Health and Human Services shall issue
regulations by not later than the date which is 1 year after the
date of the enactment of this Act to carry out the amendments made
by subsections (b) and (c) and such amendments shall take effect as
of such date (on or after the issuance of such regulations) as the
Secretary specifies in such regulations.
CHAPTER 3--CLARIFICATIONS AND TECHNICAL CHANGES
SEC. 4331. OTHER FRAUD AND ABUSE RELATED PROVISIONS.
(a) Reference Correction.--(1) Section 1128D(b)(2)(D) (42 U.S.C.
1320a-7d(b)(2)(D)), as added by section 205 of the Health Insurance
Portability and Accountability Act of 1996, is amended by striking
``1128B(b)'' and inserting ``1128A(b)''.
(2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a-7e(g)(3)(C)) is amended
by striking ``Veterans' Administration'' and inserting ``Department of
Veterans Affairs''.
(b) Language in Definition of Conviction.--Section 1128E(g)(5) (42
U.S.C. 1320a-7e(g)(5)), as inserted by section 221(a) of the Health
Insurance Portability and Accountability Act of 1996, is amended by
striking ``paragraph (4)'' and inserting ``paragraphs (1) through
(4)''.
(c) Implementation of Exclusions.--Section 1128 (42 U.S.C. 1320a-7)
is amended--
(1) in subsection (a), by striking ``any program under title
XVIII and shall direct that the following individuals and entities
be excluded from participation in any State health care program (as
defined in subsection (h))'' and inserting ``any Federal health
care program (as defined in section 1128B(f))''; and
(2) in subsection (b), by striking ``any program under title
XVIII and may direct that the following individuals and entities be
excluded from participation in any State health care program'' and
inserting ``any Federal health care program (as defined in section
1128B(f))''.
(d) Sanctions for Failure to Report.--Section 1128E(b) (42 U.S.C.
1320a-7e(b)), as inserted by section 221(a) of the Health Insurance
Portability and Accountability Act of 1996, is amended by adding at the
end the following:
``(6) Sanctions for failure to report.--
``(A) Health plans.--Any health plan that fails to report
information on an adverse action required to be reported under
this subsection shall be subject to a civil money penalty of
not more than $25,000 for each such adverse action not
reported. Such penalty 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) Governmental agencies.--The Secretary shall provide
for a publication of a public report that identifies those
Government agencies that have failed to report information on
adverse actions as required to be reported under this
subsection.''.
(e) Clarification of Treatment of Certain Waivers and Payments of
Premiums.--Section 1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended--
(1) in subparagraph (A)(iii)--
(A) in subclause (I), by adding ``or'' at the end;
(B) in subclause (II), by striking ``or'' at the end; and
(C) by striking subclause (III);
(2) by redesignating subparagraphs (B) and (C) as subparagraphs
(C) and (D); and
(3) by inserting after subparagraph (A) the following:
``(B) any permissible waiver as specified in section
1128B(b)(3) or in regulations issued by the Secretary;''.
(f) Effective Dates.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall be effective as if included
in the enactment of the Health Insurance Portability and
Accountability Act of 1996.
(2) Federal health program.--The amendments made by subsection
(c) shall take effect on the date of the enactment of this Act.
(3) Sanction for failure to report.--The amendment made by
subsection (d) shall apply to failures occurring on or after the
date of the enactment of this Act.
Subtitle E--Provisions Relating to Part A Only
CHAPTER 1--PAYMENT OF PPS HOSPITALS
SEC. 4401. PPS HOSPITAL PAYMENT UPDATE.
(a) In General.--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 (XII), and
(2) by striking subclause (XIII) and inserting the following:
``(XIII) for fiscal year 1998, 0 percent,
``(XIV) for fiscal year 1999, the market basket percentage
increase minus 1.9 percentage points for hospitals in all areas,
``(XV) for fiscal year 2000, the market basket percentage
increase minus 1.8 percentage points for hospitals in all areas,
``(XVI) for each of fiscal years 2001 and 2002, the market
basket percentage increase minus 1.1 percentage point for hospitals
in all areas, and
``(XVII) for fiscal year 2003 and each subsequent fiscal year,
the market basket percentage increase for hospitals in all
areas.''.
(b) Temporary Relief for Certain Non-Teaching, Non-DSH Hospitals.--
(1) In general.--In the case of a hospital described in
paragraph (2) for its cost reporting period--
(A) beginning in fiscal year 1998 the amount of payment
made to the hospital under section 1886(d) of the Social
Security Act for discharges occurring during such fiscal year
only shall be increased as though the applicable percentage
increase (otherwise applicable to discharges occurring during
fiscal year 1998 under section 1886(b)(3)(B)(i)(XIII) of the
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XIII))) had
been increased by 0.5 percentage points; and
(B) beginning in fiscal year 1999 the amount of payment
made to the hospital under section 1886(d) of the Social
Security Act for discharges occurring during such fiscal year
only shall be increased as though the applicable percentage
increase (otherwise applicable to discharges occurring during
fiscal year 1999 under section 1886(b)(3)(B)(i)(XIII) of the
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XIII))) had
been increased by 0.3 percentage points.
Subparagraph (A) shall not apply in computing the increase under
subparagraph (B) and neither subparagraph shall affect payment for
discharges for any hospital occurring during a fiscal year after
fiscal year 1999. Payment increases under this subsection for
discharges occurring during a fiscal year are subject to settlement
after the close of the fiscal year.
(2) Hospitals covered.--A hospital described in this paragraph
for a cost reporting period is a hospital--
(A) that is described in paragraph (3) for such period;
(B) that is located in a State in which the amount of the
aggregate payments under section 1886(d) of such Act for
hospitals located in the State and described in paragraph (3)
for their cost reporting periods beginning during fiscal year
1995 is less than the aggregate allowable operating costs of
inpatient hospital services (as defined in section 1886(a)(4)
of such Act) for all such hospitals in such State with respect
to such cost reporting periods; and
(C) with respect to which the payments under section
1886(d) of such Act (42 U.S.C. 1395ww(d)) for discharges
occurring in the cost reporting period involved, as estimated
by the Secretary, is less than the allowable operating costs of
inpatient hospital services (as defined in section 1886(a)(4)
of such Act (42 U.S.C. 1395ww(a)(4)) for such hospital for such
period, as estimated by the Secretary.
(3) Non-teaching, non-DSH hospitals described.--A hospital
described in this paragraph for a cost reporting period is a
subsection (d) hospital (as defined in section 1886(d)(1)(B) of
such Act (42 U.S.C. 1395ww(d)(1)(B))) that--
(A) is not receiving any additional payment amount
described in section 1886(d)(5)(F) of such Act (42 U.S.C.
1395ww(d)(5)(F)) for discharges occurring during the period;
(B) is not receiving any additional payment under section
1886(d)(5)(B) of such Act (42 U.S.C. 1395ww(d)(5)(B)) or a
payment under section 1886(h) of such Act (42 U.S.C. 1395ww(h))
for discharges occurring during the period; and
(C) does not qualify for payment under section
1886(d)(5)(G) of such Act (42 U.S.C. 1395ww(d)(5)(G)) for the
period.
SEC. 4402. MAINTAINING SAVINGS FROM TEMPORARY REDUCTION IN CAPITAL
PAYMENTS FOR PPS HOSPITALS.
Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended by
adding at the end the following: ``In addition to the reduction
described in the preceding sentence, for discharges occurring on or
after October 1, 1997, the Secretary shall apply the budget neutrality
adjustment factor used to determine the Federal capital payment rate in
effect on September 30, 1995 (as described in section 412.352 of title
42 of the Code of Federal Regulations), to (i) the unadjusted standard
Federal capital payment rate (as described in section 412.308(c) of
that title, as in effect on September 30, 1997), and (ii) the
unadjusted hospital-specific rate (as described in section
412.328(e)(1) of that title, as in effect on September 30, 1997), and,
for discharges occurring on or after October 1, 1997, and before
September 30, 2002, reduce the rates described in clauses (i) and (ii)
by 2.1 percent.''.
SEC. 4403. DISPROPORTIONATE SHARE.
(a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F))
is amended--
(1) in clause (i) by inserting ``and before October 1, 1997''
after ``May 1, 1986'';
(2) in clause (ii), by striking ``The amount'' and inserting
``Subject to clause (ix), the amount''; and
(3) by adding at the end the following new clause:
``(ix) In the case of discharges occurring--
``(I) during fiscal year 1998, the additional payment amount
otherwise determined under clause (ii) shall be reduced by 1
percent;
``(II) during fiscal year 1999, such additional payment amount
shall be reduced by 2 percent;
``(III) during fiscal year 2000, such additional payment amount
shall be reduced by 3 percent;
``(IV) during fiscal year 2001, such additional payment amount
shall be reduced by 4 percent;
``(V) during fiscal year 2002, such additional payment amount
shall be reduced by 5 percent; and
``(VI) during fiscal year 2003 and each subsequent fiscal year,
such additional payment amount shall be reduced by 0 percent.''.
(b) Report on New Payment Formula.--
(1) Report.--Not later than 1 year after the date of the
enactment of this Act, the Secretary of Health and Human Services
shall submit to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate a report
that contains a formula for determining additional payment amounts
to hospitals under section 1886(d)(5)(F) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(F)).
(2) Factors in Determination of Formula.--In determining such
formula the Secretary shall--
(A) establish a single threshold for costs incurred by
hospitals in serving low-income patients, and
(B) consider the costs described in paragraph (3).
(3) The costs described in this paragraph are as follows:
(A) The costs incurred by the hospital during a period (as
determined by the Secretary) of furnishing hospital services to
individuals who are entitled to benefits under part A of title
XVIII of the Social Security Act and who receive supplemental
security income benefits under title XVI of such Act (excluding
any supplementation of those benefits by a State under section
1616 of such Act (42 U.S.C. 1382e)).
(B) The costs incurred by the hospital during a period (as
so determined) of furnishing hospital services to individuals
who receive medical assistance under the State plan under title
XIX of such Act and are not entitled to benefits under part A
of title XVIII of such Act (including individuals enrolled in a
managed care organization (as defined in section 1903(m)(1)(A)
of such Act (42 U.S.C. 1396b(m)(1)(A)) or any other managed
care plan under such title and individuals who receive medical
assistance under such title pursuant to a waiver approved by
the Secretary under section 1115 of such Act (42 U.S.C. 1315)).
(c) Data Collection.--In developing the formula described in
subsection (b), the Secretary of Health and Human Services may require
any subsection (d) hospital (as defined in section 1886(d)(1)(B) of the
Social Security Act (42 U.S.C. 1395ww(d)(1)(B))) receiving additional
payments by reason of section 1886(d)(5)(F) of such Act (42 U.S.C.
1395ww(d)(5)(F)) to submit to the Secretary any information that the
Secretary determines is necessary to develop such formula.
SEC. 4404. MEDICARE CAPITAL ASSET SALES PRICE EQUAL TO BOOK VALUE.
(a) In General.--Section 1861(v)(1)(O) (42 U.S.C. 1395x(v)(1)(O))
is amended--
(1) in clause (i)--
(A) by striking ``and (if applicable) a return on equity
capital'';
(B) by striking ``hospital or skilled nursing facility''
and inserting ``provider of services'';
(C) by striking ``clause (iv)'' and inserting ``clause
(iii)''; and
(D) by striking ``the lesser of the allowable acquisition
cost'' and all that follows and inserting ``the historical cost
of the asset, as recognized under this title, less depreciation
allowed, to the owner of record as of the date of enactment of
the Balanced Budget Act of 1997 (or, in the case of an asset
not in existence as of that date, the first owner of record of
the asset after that date).'';
(2) by striking clause (ii); and
(3) by redesignating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively.
(b) Effective Date.--The amendments made by subsection (a) apply to
changes of ownership that occur after the third month beginning after
the date of enactment of this section.
SEC. 4405. ELIMINATION OF IME AND DSH PAYMENTS ATTRIBUTABLE TO OUTLIER
PAYMENTS.
(a) Indirect Medical Education.--Section 1886(d)(5)(B)(i)(I) (42
U.S.C. 1395ww(d)(5)(B)(i)(I)) is amended by inserting ``, for cases
qualifying for additional payment under subparagraph (A)(i),'' before
``the amount paid to the hospital under subparagraph (A)''.
(b) Disproportionate Share Adjustments.--Section
1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is amended by
inserting ``, for cases qualifying for additional payment under
subparagraph (A)(i),'' before ``the amount paid to the hospital under
subparagraph (A)''.
(c) Cost Outlier Payments.--Section 1886(d)(5)(A)(ii) (42 U.S.C.
1395ww(d)(5)(A)(ii)) is amended by striking ``exceed the applicable DRG
prospective payment rate'' and inserting ``exceed the sum of the
applicable DRG prospective payment rate plus any amounts payable under
subparagraphs (B) and (F)''.
(d) Effective Date.--The amendments made by this section apply to
discharges occurring after September 30, 1997.
SEC. 4406. INCREASE BASE PAYMENT RATE TO PUERTO RICO HOSPITALS.
Section 1886(d)(9)(A) (42 U.S.C. 1395ww(d)(9)(A)) is amended--
(1) in the matter preceding clause (i), by striking ``in a
fiscal year beginning on or after October 1, 1987,'',
(2) in clause (i), by striking ``75 percent'' and inserting,
``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
(3) in clause (ii), by striking ``25 percent'' and inserting,
``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)''.
SEC. 4407. CERTAIN HOSPITAL DISCHARGES TO POST ACUTE CARE.
Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended--
(1) in subparagraph (I)(ii) by inserting ``not taking in
account the effect of subparagraph (J),'' after ``in a fiscal year,
''; and
(2) by adding at the end the following new subparagraph:
``(J)(i) The Secretary shall treat the term `transfer case' (as
defined in subparagraph (I)(ii)) as including the case of a qualified
discharge (as defined in clause (ii)), which is classified within a
diagnosis-related group described in clause (iii), and which occurs on
or after October 1, 1998. In the case of a qualified discharge for
which a substantial portion of the costs of care are incurred in the
early days of the inpatient stay (as defined by the Secretary), in no
case may the payment amount otherwise provided under this subsection
exceed an amount equal to the sum of--
``(I) 50 percent of the amount of payment under this subsection
for transfer cases (as established under subparagraph (I)(i)), and
``(II) 50 percent of the amount of payment which would have
been made under this subsection with respect to the qualified
discharge if no transfer were involved.
``(ii) For purposes of clause (i), subject to clause (iii), the
term `qualified discharge' means a discharge classified with a
diagnosis-related group (described in clause (iii)) of an individual
from a subsection (d) hospital, if upon such discharge the individual--
``(I) is admitted as an inpatient to a hospital or hospital
unit that is not a subsection (d) hospital for the provision of
inpatient hospital services;
``(II) is admitted to a skilled nursing facility;
``(III) is provided home health services from a home health
agency, if such services relate to the condition or diagnosis for
which such individual received inpatient hospital services from the
subsection (d) hospital, and if such services are provided within
an appropriate period (as determined by the Secretary); or
``(IV) for discharges occurring on or after October 1, 2000,
the individual receives post discharge services described in clause
(iv)(I).
``(iii) Subject to clause (iv), a diagnosis-related group described
in this clause is--
``(I) 1 of 10 diagnosis-related groups selected by the
Secretary based upon a high volume of discharges classified within
such groups and a disproportionate use of post discharge services
described in clause (ii); and
``(II) a diagnosis-related group specified by the Secretary
under clause (iv)(II).
``(iv) The Secretary shall include in the proposed rule published
under subsection (e)(5)(A) for fiscal year 2001, a description of the
effect of this subparagraph. The Secretary may include in the proposed
rule (and in the final rule published under paragraph (6)) for fiscal
year 2001 or a subsequent fiscal year, a description of--
``(I) post-discharge services not described in subclauses (I),
(II), and (III) of clause (ii), the receipt of which results in a
qualified discharge; and
``(II) diagnosis-related groups described in clause (iii)(I) in
addition to the 10 selected under such clause.''.
SEC. 4408. RECLASSIFICATION OF CERTAIN COUNTIES AS LARGE URBAN AREAS
UNDER MEDICARE PROGRAM.
(a) In General.--For purposes of section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)), the large urban area of Charlotte-
Gastonia-Rock Hill-North Carolina-South Carolina may be deemed to
include Stanly County, North Carolina.
(b) Effective Date.--This section shall apply with respect to
discharges occurring on or after October 1, 1997.
SEC. 4409. GEOGRAPHIC RECLASSIFICATION FOR CERTAIN DISPROPORTIONATELY
LARGE HOSPITALS.
(a) New Guidelines for Reclassification.--Notwithstanding the
guidelines published under section 1886(d)(10)(D)(i)(I) of the Social
Security Act (42 U.S.C. 1395ww(d)(10)(D)(i)(I)), the Secretary of
Health and Human Services shall publish and use alternative guidelines
under which a hospital described in subsection (b) qualifies for
geographic reclassification under such section for a fiscal year
beginning with fiscal year 1998.
(b) Hospitals Covered.--A hospital described in this subsection is
a hospital that demonstrates that--
(1) the average hourly wage paid by the hospital is not less
than 108 percent of the average hourly wage paid by all other
hospitals located in the Metropolitan Statistical Area (or the New
England County Metropolitan Area) in which the hospital is located;
(2) not less than 40 percent of the adjusted uninflated wages
paid by all hospitals located in such Area is attributable to wages
paid by the hospital; and
(3) the hospital submitted an application requesting
reclassification for purposes of wage index under section
1886(d)(10)(C) of such Act (42 U.S.C. 1395ww(d)(10)(C)) in each of
fiscal years 1992 through 1997 and that such request was approved
for each of such fiscal years.
SEC. 4410. FLOOR ON AREA WAGE INDEX.
(a) In General.--For purposes of section 1886(d)(3)(E) of the
Social Security Act (42 U.S.C. 1395ww(d)(3)(E)) for discharges
occurring on or after October 1, 1997, the area wage index applicable
under such section to any hospital which is not located in a rural area
(as defined in section 1886(d)(2)(D) of such Act (42 U.S.C.
1395ww(d)(2)(D)) may not be less than the area wage index applicable
under such section to hospitals located in rural areas in the State in
which the hospital is located.
(b) Implementation.--The Secretary of Health and Human Services
shall adjust the area wage index referred to in subsection (a) for
hospitals not described in such subsection in a manner which assures
that the aggregate payments made under section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)) in a fiscal year for the operating
costs of inpatient hospital services are not greater or less than those
which would have been made in the year if this section did not apply.
(c) Exclusion of Certain Wages.--In the case of a hospital that is
owned by a municipality and that was reclassified as an urban hospital
under section 1886(d)(10) of the Social Security Act for fiscal year
1996, in calculating the hospital's average hourly wage for purposes of
geographic reclassification under such section for fiscal year 1998,
the Secretary of Health and Human Services shall exclude the general
service wages and hours of personnel associated with a skilled nursing
facility that is owned by the hospital of the same municipality and
that is physically separated from the hospital to the extent that such
wages and hours of such personnel are not shared with the hospital and
are separately documented. A hospital that applied for and was denied
reclassification as an urban hospital for fiscal year 1998, but that
would have received reclassification had the exclusion required by this
section been applied to it, shall be reclassified as an urban hospital
for fiscal year 1998.
CHAPTER 2--PAYMENT OF PPS-EXEMPT HOSPITALS
Subchapter A--General Payment Provisions
SEC. 4411. PAYMENT UPDATE.
(a) In General.--Section 1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B))
is amended--
(1) in clause (ii)--
(A) by striking ``and'' at the end of subclause (V),
(B) by redesignating subclause (VI) as subclause (VIII);
and
(C) by inserting after subclause (V), the following
subclauses:
``(VI) for fiscal year 1998, is 0 percent;
``(VII) for fiscal years 1999 through 2002, is the applicable
update factor specified under clause (vi) for the fiscal year;
and''; and
(2) by adding at the end the following new clause:
``(vi) For purposes of clause (ii)(VII) for a fiscal year, if a
hospital's allowable operating costs of inpatient hospital services
recognized under this title for the most recent cost reporting period
for which information is available--
``(I) is equal to, or exceeds, 110 percent of the hospital's
target amount (as determined under subparagraph (A)) for such cost
reporting period, the applicable update factor specified under this
clause is the market basket percentage;
``(II) exceeds 100 percent, but is less than 110 percent, of
such target amount for the hospital, the applicable update factor
specified under this clause is 0 percent or, if greater, the market
basket percentage minus 0.25 percentage points for each percentage
point by which such allowable operating costs (expressed as a
percentage of such target amount) is less than 110 percent of such
target amount;
``(III) is equal to, or less than 100 percent, but exceeds \2/
3\ of such target amount for the hospital, the applicable update
factor specified under this clause is 0 percent or, if greater, the
market basket percentage minus 2.5 percentage points; or
``(IV) does not exceed \2/3\ of such target amount for the
hospital, the applicable update factor specified under this clause
is 0 percent.''.
(b) No Effect of Payment Reduction on Exceptions and Adjustments.--
Section 1886(b)(4)(A)(ii) (42 U.S.C. 1395ww(b)(4)(A)(ii)) is amended by
adding at the end the following new sentence: ``In making such
reductions, the Secretary shall treat the applicable update factor
described in paragraph (3)(B)(vi) for a fiscal year as being equal to
the market basket percentage for that year.''.
SEC. 4412. REDUCTIONS TO CAPITAL PAYMENTS FOR CERTAIN PPS-EXEMPT
HOSPITALS AND UNITS.
Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding at the
end the following new paragraph:
``(4) In determining the amount of the payments that are
attributable to portions of cost reporting periods occurring during
fiscal years 1998 through 2002 and that may be made under this title
with respect to capital-related costs of inpatient hospital services of
a hospital which is described in clause (i), (ii), or (iv) of
subsection (d)(1)(B) or a unit described in the matter after clause (v)
of such subsection, the Secretary shall reduce the amounts of such
payments otherwise determined under this title by 15 percent.''.
SEC. 4413. REBASING.
(a) Option of Rebasing for Hospitals In Operation Before 1990.--
Section 1886(b)(3)(42 U.S.C. 1395ww(b)(3)) is amended--
(1) in subparagraph (A) by striking ``subparagraphs (C), (D),
and (E)'' and inserting ``subparagraph (C) and succeeding
subparagraphs'', and
(2) by adding at the end the following new subparagraph:
``(F)(i) In the case of a hospital (or unit described in the matter
following clause (v) of subsection (d)(1)(B)) that received payment
under this subsection for inpatient hospital services furnished during
cost reporting periods beginning before October 1, 1990, that is within
a class of hospital described in clause (iii), and that elects (in a
form and manner determined by the Secretary) this subparagraph to apply
to the hospital, the target amount for the hospital's 12-month cost
reporting period beginning during fiscal year 1998 is equal to the
average described in clause (ii).
``(ii) The average described in this clause for a hospital or unit
shall be determined by the Secretary as follows:
``(I) The Secretary shall determine the allowable operating
costs for inpatient hospital services for the hospital or unit for
each of the 5 cost reporting periods for which the Secretary has
the most recent settled cost reports as of the date of the
enactment of this subparagraph.
``(II) The Secretary shall increase the amount determined under
subclause (I) for each cost reporting period by the applicable
percentage increase under subparagraph (B)(ii) for each subsequent
cost reporting period up to the cost reporting period described in
clause (i).
``(III) The Secretary shall identify among such 5 cost
reporting periods the cost reporting periods for which the amount
determined under subclause (II) is the highest, and the lowest.
``(IV) The Secretary shall compute the averages of the amounts
determined under subclause (II) for the 3 cost reporting periods
not identified under subclause (III).
``(iii) For purposes of this subparagraph, each of the following
shall be treated as a separate class of hospital:
``(I) Hospitals described in clause (i) of subsection (d)(1)(B)
and psychiatric units described in the matter following clause (v)
of such subsection.
``(II) Hospitals described in clause (ii) of such subsection
and rehabilitation units described in the matter following clause
(v) of such subsection.
``(III) Hospitals described in clause (iii) of such subsection.
``(IV) Hospitals described in clause (iv) of such subsection.
``(V) Hospitals described in clause (v) of such subsection.''.
(b) Certain Long-Term Care Hospitals.--Section 1886(b)(3) (42
U.S.C. 1395ww(b)(3)), as amended by subsection (a), is amended by
adding at the end the following new subparagraph:
``(G)(i) In the case of a qualified long-term care hospital (as
defined in clause (ii)) that elects (in a form and manner determined by
the Secretary) this subparagraph to apply to the hospital, the target
amount for the hospital's 12-month cost reporting period beginning
during fiscal year 1998 is equal to the allowable operating costs of
inpatient hospital services (as defined in subsection (a)(4))
recognized under this title for the hospital for the 12-month cost
reporting period beginning during fiscal year 1996, increased by the
applicable percentage increase for the cost reporting period beginning
during fiscal year 1997.
``(ii) In clause (i), a `qualified long-term care hospital' means,
with respect to a cost reporting period, a hospital described in clause
(iv) of subsection (d)(1)(B) during each of the 2 cost reporting
periods for which the Secretary has the most recent settled cost
reports as of the date of the enactment of this subparagraph for each
of which--
``(I) the hospital's allowable operating costs of inpatient
hospital services recognized under this title exceeded 115 percent
of the hospital's target amount, and
``(II) the hospital would have a disproportionate patient
percentage of at least 70 percent (as determined by the Secretary
under subsection (d)(5)(F)(vi)) if the hospital were a subsection
(d) hospital.''.
SEC. 4414. CAP ON TEFRA LIMITS.
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by section
4413, is amended by adding at the end the following new subparagraph:
``(H)(i) In the case of a hospital or unit that is within a class
of hospital described in clause (iv), the Secretary shall estimate the
75th percentile of the target amounts for such hospitals within such
class for cost reporting periods ending during fiscal year 1996.
``(ii) The Secretary shall update the amount determined under
clause (i), for each cost reporting period after the cost reporting
period described in such clause and up to the first cost reporting
period beginning on or after October 1, 1997, by a factor equal to the
market basket percentage increase.
``(iii) For cost reporting periods beginning during each of fiscal
years 1999 through 2002, the Secretary shall update such amount by a
factor equal to the market basket percentage increase.
``(iv) For purposes of this subparagraph, each of the following
shall be treated as a separate class of hospital:
``(I) Hospitals described in clause (i) of subsection (d)(1)(B)
and psychiatric units described in the matter following clause (v)
of such subsection.
``(II) Hospitals described in clause (ii) of such subsection
and rehabilitation units described in the matter following clause
(v) of such subsection.
``(III) Hospitals described in clause (iv) of such
subsection.''.
SEC. 4415. BONUS AND RELIEF PAYMENTS.
(a) Change in Bonus Payment.--Section 1886(b)(1) (42 U.S.C.
1395ww(b)(1)) is amended in subparagraph (A) by striking all that
follows ``plus--'' and inserting the following:
``(i) 15 percent of the amount by which the target amount
exceeds the amount of the operating costs, or
``(ii) 2 percent of the target amount,
whichever is less;''.
(b) Continuous Improvement Bonus Payments.--Section 1886(b) (42
U.S.C. 1395ww(b)) is amended--
(1) in paragraph (1), by inserting ``plus the amount, if any,
provided under paragraph (2)'' before ``except that in no case'';
and
(2) by inserting after paragraph (1), the following new
paragraph:
``(2)(A) In addition to the payment computed under paragraph (1),
in the case of an eligible hospital (described in subparagraph (B)) for
a cost reporting period beginning on or after October 1, 1997, the
amount of payment on a per discharge basis under paragraph (1) shall be
increased by the lesser of--
``(i) 50 percent of the amount by which the operating costs are
less than the expected costs (as defined in subparagraph (D)) for
the period; or
``(ii) 1 percent of the target amount for the period.
``(B) For purposes of this paragraph, an `eligible hospital' means
with respect to a cost reporting period, a hospital--
``(i) that has received payments under this subsection for at
least 3 full cost reporting periods before that cost reporting
period, and
``(ii) whose operating costs for the period are less than the
least of its target amount, its trended costs (as defined in
subparagraph (C)), or its expected costs (as defined in
subparagraph (D)) for the period.
``(C) For purposes of subparagraph (B)(ii), the term `trended
costs' means for a hospital cost reporting period ending in a fiscal
year--
``(i) in the case of a hospital for which its cost reporting
period ending in fiscal year 1996 was its third or subsequent full
cost reporting period for which it receives payments under this
subsection, the lesser of the operating costs or target amount for
that hospital for its cost reporting period ending in fiscal year
1996, or
``(ii) in the case of any other hospital, the operating costs
for that hospital for its third full cost reporting period for
which it receives payments under this subsection,
increased (in a compounded manner) for each succeeding fiscal year
(through the fiscal year involved) by the market basket percentage
increase for the fiscal year.
``(D) For purposes of this paragraph, the term `expected costs',
with respect to the cost reporting period ending in a fiscal year,
means the lesser of the operating costs of inpatient hospital services
or target amount per discharge for the previous cost reporting period
updated by the market basket percentage increase (as defined in
paragraph (3)(B)(iii)) for the fiscal year.''.
(c) Change in Relief Payments.--Section 1886(b)(1) (42 U.S.C.
1395ww(b)(1)), as amended in subsections (a) and (b), is further
amended--
(1) by redesignating subparagraph (B) as subparagraph (C)
(2) in subparagraph (C), as so redesignated--
(A) by striking ``greater than the target amount'' and
inserting ``greater than 110 percent of the target amount'',
and
(B) by striking ``exceed the target amount'' and inserting
``exceed 110 percent of the target amount'', and
(3) by inserting after subparagraph (A), the following new
subparagraph:
``(B) are greater than the target amount but do not exceed 110
percent of the target amount, the amount of the payment with
respect to those operating costs payable under part A on a per
discharge basis shall equal the target amount; or''.
(d) Report.--Not later than October 1, 1999, the Secretary of
Health and Human Services shall submit to the Committee on Ways and
Means of the House of Representatives and the Committee on Finance of
the Senate a report that describes the effect of the amendments to
section 1886(b)(1) of the Social Security Act (42 U.S.C. 1395ww(b)(1)),
made under this section, on psychiatric hospitals (as defined in
section 1886(d)(1)(B)(i) of such Act (42 U.S.C. 1395ww(d)(1)(B)(i))
that have approved medical residency training programs under title
XVIII of such Act (42 U.S.C. 1395 et seq.)).
(e) Effective Date.--The amendments made by subsections (a) and (c)
shall apply with respect to cost reporting periods beginning on or
after October 1, 1997.
SEC. 4416. CHANGE IN PAYMENT AND TARGET AMOUNT FOR NEW PROVIDERS.
Section 1886(b) (42 U.S.C. 1395ww(b)) is amended--
(1) by adding at the end the following new paragraph:
``(7)(A) Notwithstanding paragraph (1), in the case of a hospital
or unit that is within a class of hospital described in subparagraph
(B) which first receives payments under this section on or after
October 1, 1997--
``(i) for each of the first 2 cost reporting periods for which
the hospital has a settled cost report, the amount of the payment
with respect to operating costs described in paragraph (1) under
part A on a per discharge or per admission basis (as the case may
be) is equal to the lesser of--
``(I) the amount of operating costs for such respective
period, or
``(II) 110 percent of the national median of the target
amount for hospitals in the same class as the hospital for cost
reporting periods ending during fiscal year 1996, updated by
the hospital market basket increase percentage to the fiscal
year in which the hospital first received payments under this
section, as adjusted under subparagraph (C); and
``(ii) for purposes of computing the target amount for the
subsequent cost reporting period, the target amount for the
preceding cost reporting period is equal to the amount determined
under clause (i) for such preceding period.
``(B) For purposes of this paragraph, each of the following shall
be treated as a separate class of hospital:
``(i) Hospitals described in clause (i) of subsection (d)(1)(B)
and psychiatric units described in the matter following clause (v)
of such subsection.
``(ii) Hospitals described in clause (ii) of such subsection
and rehabilitation units described in the matter following clause
(v) of such subsection.
``(iii) Hospitals described in clause (iv) of such subsection.
``(C) In applying subparagraph (A)(i)(II) in the case of a hospital
or unit, the Secretary shall provide for an appropriate adjustment to
the labor-related portion of the amount determined under such
subparagraph to take into account differences between average wage-
related costs in the area of the hospital and the national average of
such costs within the same class of hospital.''; and
(2) in paragraph (3)(A), as amended in sections 4413 and 4414,
by inserting ``and in paragraph (7)(A)(ii),'' before ``for purposes
of''.
SEC. 4417. TREATMENT OF CERTAIN LONG-TERM CARE HOSPITALS.
(a) In General.--(1) Section 1886(d)(1)(B) (42 U.S.C.
1395ww(d)(1)(B)) is amended by adding at the end the following new
sentence: ``A hospital that was classified by the Secretary on or
before September 30, 1995, as a hospital described in clause (iv) shall
continue to be so classified notwithstanding that it is located in the
same building as, or on the same campus as, another hospital.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to discharges occurring on or after October 1, 1995.
(b) Certain Long-Term Care Hospitals That Treat Cancer Patients.--
(1) Section 1886(d)(1)(B)(iv) (42 U.S.C. 1395ww(d)(1)(B)(iv)) is
amended--
(A) by inserting ``(I)'' after ``(iv)''; and
(B) by adding at the end the following:
``(II) a hospital that first received payment under this
subsection in 1986 which has an average inpatient length of stay
(as determined by the Secretary) of greater than 20 days and that
has 80 percent or more of its annual medicare inpatient discharges
with a principal diagnosis that reflects a finding of neoplastic
disease in the 12-month cost reporting period ending in fiscal year
1997, or''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to cost reporting periods beginning on or after the date of the
enactment of this Act.
SEC. 4418. TREATMENT OF CERTAIN CANCER HOSPITALS.
(a) In General.--Section 1886(d)(1) (42 U.S.C. 1395ww(d)(1)) is
amended--
(1) in subparagraph (B)(v)--
(A) by inserting ``(I)'' after ``(v)'';
(B) by striking the semicolon at the end and inserting ``,
or''; and
(C) by adding at the end the following:
``(II) a hospital that was recognized as a comprehensive cancer
center or clinical cancer research center by the National Cancer
Institute of the National Institutes of Health as of April 20,
1983, that is located in a State which, as of December 19, 1989,
was not operating a demonstration project under section 1814(b),
that applied and was denied, on or before December 31, 1990, for
classification as a hospital involved extensively in treatment for
or research on cancer under this clause (as in effect on the day
before the date of the enactment of this subclause), that as of the
date of the enactment of this subclause, is licensed for less than
50 acute care beds, and that demonstrates for the 4-year period
ending on December 31, 1996, that at least 50 percent of its total
discharges have a principal finding of neoplastic disease, as
defined in subparagraph (E);'' and
(2) by adding at the end the following:
``(E) For purposes of subparagraph (B)(v)(II) only, the term
`principal finding of neoplastic disease' means the condition
established after study to be chiefly responsible for occasioning the
admission of a patient to a hospital, except that only discharges with
ICD-9-CM principal diagnosis codes of 140 through 239, V58.0, V58.1,
V66.1, V66.2, or 990 will be considered to reflect such a principal
diagnosis.''.
(b) Payment.--
(1) Application to cost reporting periods.--Any classification
by reason of section 1886(d)(1)(B)(v)(II) of the Social Security
Act (42 U.S.C. 1395ww(d)(1)(B)(v)(II)) (as added by subsection (a))
shall apply to all cost reporting periods beginning on or after
January 1, 1991.
(2) Base year.--Notwithstanding the provisions of section
1886(b)(3)(E) of such Act (42 U.S.C. 1395ww(b)(3)(E)) or other
provisions to the contrary, the base cost reporting period for
purposes of determining the target amount for any hospital
classified by reason of section 1886(d)(1)(B)(v)(II) of such Act
shall be either--
(A) the hospital's cost reporting period beginning during
fiscal year 1990, or
(B) pursuant to an election under 1886(b)(3)(G) of such Act
(42 U.S.C. 1395ww(b)(3)(G)), as added in section 4413(b), the
period provided for under such section.
(3) Deadline for payments.--Any payments owed to a hospital by
reason of this subsection shall be made expeditiously, but in no
event later than 1 year after the date of the enactment of this
Act.
SEC. 4419. ELIMINATION OF EXEMPTIONS FOR CERTAIN HOSPITALS.
(a) Reduction of Exemptions.--
(1) In general.--Section 1886(b)(4)(A)(i) (42 U.S.C.
1395ww(b)(4)(A)(i)) is amended in the first sentence by striking
``The Secretary shall provide for an exemption from, or an
exception and adjustment to, '' and inserting ``The Secretary shall
provide for an exception and adjustment to (and in the case of a
hospital or unit described in subsection (d)(1)(B)(iii), may
provide an exemption from)''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to hospitals or units that first qualify as a hospital or
unit described in section 1886(d)(1)(B) (42 U.S.C. 1395ww(d)(1)(B))
for cost reporting periods beginning on or after October 1, 1997.
(b) Report on Exceptions.--The Secretary of Health and Human
Services shall publish annually in the Federal Register a report
describing the total amount of payments made to hospitals by reason of
section 1886(b)(4) of the Social Security Act (42 U.S.C. 1395ww(b)(4)),
as amended by subsection (a), ending during the previous fiscal year.
Subchapter B--Prospective Payment System for PPS-Exempt Hospitals
SEC. 4421. PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION HOSPITAL
SERVICES.
(a) In General.--Section 1886 (42 U.S.C. 1395ww) is amended by
adding at the end the following new subsection:
``(j) Prospective Payment for Inpatient Rehabilitation Services.--
``(1) Payment during transition period.--
``(A) In general.--Notwithstanding section 1814(b), but
subject to the provisions of section 1813, the amount of the
payment with respect to the operating and capital costs of
inpatient hospital services of a rehabilitation hospital or a
rehabilitation unit (in this subsection referred to as a
`rehabilitation facility'), in a cost reporting period
beginning on or after October 1, 2000, and before October 1,
2002, is equal to the sum of--
``(i) the TEFRA percentage (as defined in subparagraph
(C)) of the amount that would have been paid under part A
with respect to such costs if this subsection did not
apply, and
``(ii) the prospective payment percentage (as defined
in subparagraph (C)) of the product of (I) the per unit
payment rate established under this subsection for the
fiscal year in which the payment unit of service occurs,
and (II) the number of such payment units occurring in the
cost reporting period.
``(B) Fully implemented system.--Notwithstanding section
1814(b), but subject to the provisions of section 1813, the
amount of the payment with respect to the operating and capital
costs of inpatient hospital services of a rehabilitation
facility for a payment unit in a cost reporting period
beginning on or after October 1, 2002, is equal to the per unit
payment rate established under this subsection for the fiscal
year in which the payment unit of service occurs.
``(C) TEFRA and prospective payment percentages
specified.--For purposes of subparagraph (A), for a cost
reporting period beginning--
``(i) on or after October 1, 2000, and before October
1, 2001, the `TEFRA percentage' is 66\2/3\ percent and the
`prospective payment percentage' is 33\1/3\ percent; and
``(ii) on or after October 1, 2001, and before October
1, 2002, the `TEFRA percentage' is 33\1/3\ percent and the
`prospective payment percentage' is 66\2/3\ percent.
``(D) Payment unit.--For purposes of this subsection, the
term `payment unit' means a discharge, day of inpatient
hospital services, or other unit of payment defined by the
Secretary.
``(2) Patient case mix groups.--
``(A) Establishment.--The Secretary shall establish--
``(i) classes of patients of rehabilitation facilities
(each in this subsection referred to as a `case mix
group'), based on such factors as the Secretary deems
appropriate, which may include impairment, age, related
prior hospitalization, comorbidities, and functional
capability of the patient; and
``(ii) a method of classifying specific patients in
rehabilitation facilities within these groups.
``(B) Weighting factors.--For each case mix group the
Secretary shall assign an appropriate weighting which reflects
the relative facility resources used with respect to patients
classified within that group compared to patients classified
within other groups.
``(C) Adjustments for case mix.--
``(i) In general.--The Secretary shall from time to
time adjust the classifications and weighting factors
established under this paragraph as appropriate to reflect
changes in treatment patterns, technology, case mix, number
of payment units for which payment is made under this
title, and other factors which may affect the relative use
of resources. Such adjustments shall be made in a manner so
that changes in aggregate payments under the classification
system are a result of real changes and are not a result of
changes in coding that are unrelated to real changes in
case mix.
``(ii) Adjustment.--Insofar as the Secretary determines
that such adjustments for a previous fiscal year (or
estimates that such adjustments for a future fiscal year)
did (or are likely to) result in a change in aggregate
payments under the classification system during the fiscal
year that are a result of changes in the coding or
classification of patients that do not reflect real changes
in case mix, the Secretary shall adjust the per payment
unit payment rate for subsequent years so as to eliminate
the effect of such coding or classification changes.
``(D) Data collection.--The Secretary is authorized to
require rehabilitation facilities that provide inpatient
hospital services to submit such data as the Secretary deems
necessary to establish and administer the prospective payment
system under this subsection.
``(3) Payment rate.--
``(A) In general.--The Secretary shall determine a
prospective payment rate for each payment unit for which such
rehabilitation facility is entitled to receive payment under
this title. Subject to subparagraph (B), such rate for payment
units occurring during a fiscal year shall be based on the
average payment per payment unit under this title for inpatient
operating and capital costs of rehabilitation facilities using
the most recent data available (as estimated by the Secretary
as of the date of establishment of the system) adjusted--
``(i) by updating such per-payment-unit amount to the
fiscal year involved by the weighted average of the
applicable percentage increases provided under subsection
(b)(3)(B)(ii) (for cost reporting periods beginning during
the fiscal year) covering the period from the midpoint of
the period for such data through the midpoint of fiscal
year 2000 and by an increase factor (described in
subparagraph (C)) specified by the Secretary for subsequent
fiscal years up to the fiscal year involved;
``(ii) by reducing such rates by a factor equal to the
proportion of payments under this subsection (as estimated
by the Secretary) based on prospective payment amounts
which are additional payments described in paragraph (4)
(relating to outlier and related payments);
``(iii) for variations among rehabilitation facilities
by area under paragraph (6);
``(iv) by the weighting factors established under
paragraph (2)(B); and
``(v) by such other factors as the Secretary determines
are necessary to properly reflect variations in necessary
costs of treatment among rehabilitation facilities.
``(B) Budget neutral rates.--The Secretary shall establish
the prospective payment amounts under this subsection for
payment units during fiscal years 2001 and 2002 at levels such
that, in the Secretary's estimation, the amount of total
payments under this subsection for such fiscal years (including
any payment adjustments pursuant to paragraphs (4) and (6))
shall be equal to 98 percent of the amount of payments that
would have been made under this title during the fiscal years
for operating and capital costs of rehabilitation facilities
had this subsection not been enacted. In establishing such
payment amounts, the Secretary shall consider the effects of
the prospective payment system established under this
subsection on the total number of payment units from
rehabilitation facilities and other factors described in
subparagraph (A).
``(C) Increase factor.--For purposes of this subsection for
payment units in each fiscal year (beginning with fiscal year
2001), the Secretary shall establish an increase factor. Such
factor shall be based on an appropriate percentage increase in
a market basket of goods and services comprising services for
which payment is made under this subsection, which may be the
market basket percentage increase described in subsection
(b)(3)(B)(iii).
``(4) Outlier and special payments.--
``(A) Outliers.--
``(i) In general.--The Secretary may provide for an
additional payment to a rehabilitation facility for
patients in a case mix group, based upon the patient being
classified as an outlier based on an unusual length of
stay, costs, or other factors specified by the Secretary.
``(ii) Payment based on marginal cost of care.--The
amount of such additional payment under clause (i) shall be
determined by the Secretary and shall approximate the
marginal cost of care beyond the cutoff point applicable
under clause (i).
``(iii) Total payments.--The total amount of the
additional payments made under this subparagraph for
payment units in a fiscal year may not exceed 5 percent of
the total payments projected or estimated to be made based
on prospective payment rates for payment units in that
year.
``(B) Adjustment.--The Secretary may provide for such
adjustments to the payment amounts under this subsection as the
Secretary deems appropriate to take into account the unique
circumstances of rehabilitation facilities located in Alaska
and Hawaii.
``(5) Publication.--The Secretary shall provide for publication
in the Federal Register, on or before August 1 before each fiscal
year (beginning with fiscal year 2001), of the classification and
weighting factors for case mix groups under paragraph (2) for such
fiscal year and a description of the methodology and data used in
computing the prospective payment rates under this subsection for
that fiscal year.
``(6) Area wage adjustment.--The Secretary shall adjust the
proportion (as estimated by the Secretary from time to time) of
rehabilitation facilities' costs which are attributable to wages
and wage-related costs, of the prospective payment rates computed
under paragraph (3) for area differences in wage levels by a factor
(established by the Secretary) reflecting the relative hospital
wage level in the geographic area of the rehabilitation facility
compared to the national average wage level for such facilities.
Not later than October 1, 2001 (and at least every 36 months
thereafter), the Secretary shall update the factor under the
preceding sentence on the basis of information available to the
Secretary (and updated as appropriate) of the wages and wage-
related costs incurred in furnishing rehabilitation services. Any
adjustments or updates made under this paragraph for a fiscal year
shall be made in a manner that assures that the aggregated payments
under this subsection in the fiscal year are not greater or less
than those that would have been made in the year without such
adjustment.
``(7) Limitation on review.--There shall be no administrative
or judicial review under section 1869, 1878, or otherwise of the
establishment of--
``(A) case mix groups, of the methodology for the
classification of patients within such groups, and of the
appropriate weighting factors thereof under paragraph (2),
``(B) the prospective payment rates under paragraph (3),
``(C) outlier and special payments under paragraph (4), and
``(D) area wage adjustments under paragraph (6).''.
(b) Conforming Amendments.--Section 1886(b) (42 U.S.C. 1395ww(b))
is amended--
(1) in paragraph (1), by inserting ``and other than a
rehabilitation facility described in subsection (j)(1)'' after
``subsection (d)(1)(B)'', and
(2) in paragraph (3)(B)(i), by inserting ``and subsection (j)''
after ``For purposes of subsection (d)''.
(c) Effective Date.--The amendments made by this section shall
apply to cost reporting periods beginning on or after October 1, 2000,
except that the Secretary of Health and Human Services may require the
submission of data under section 1886(j)(2)(D) of the Social Security
Act (as added by subsection (a)) on and after the date of the enactment
of this section.
SEC. 4422. DEVELOPMENT OF PROPOSAL ON PAYMENTS FOR LONG-TERM CARE
HOSPITALS.
(a) In General.--
(1) Legislative proposal.--The Secretary of Health and Human
Services shall develop a legislative proposal for establishing a
case-mix adjusted prospective payment system for payment of long-
term care hospitals described in section 1886(d)(1)(B)(iv) of the
Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(iv)) under the
medicare program. Such system shall include an adequate patient
classification system that reflects the differences in patient
resource use and costs among such hospitals.
(2) Collection of data and evaluation.--In developing the
legislative proposal described in paragraph (1), the Secretary--
(A) may require such long-term care hospitals to submit
such information to the Secretary as the Secretary may require
to develop the proposal; and
(B) shall consider several payment methodologies, including
the feasibility of expanding the current diagnosis-related
groups and prospective payment system established under section
1886(d) of the Social Security Act to apply to payments under
the medicare program to long-term care hospitals.
(b) Report.--Not later than October 1, 1999, the Secretary shall
submit to the appropriate committees of Congress a report that includes
the legislative proposal developed under subsection (a)(1).
CHAPTER 3--PAYMENT FOR SKILLED NURSING FACILITIES
SEC. 4431. EXTENSION OF COST LIMITS.
The last sentence of section 1888(a) (42 U.S.C. 1395yy(a)) is
amended by striking ``subsection'' the last place it appears and all
that follows and inserting ``subsection, except that the limits
effective for cost reporting periods beginning on or after October 1,
1997, shall be based on the limits effective for cost reporting periods
beginning on or after October 1, 1996.''.
SEC. 4432. PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY SERVICES.
(a) In General.--Section 1888 (42 U.S.C. 1395yy) is amended by
adding at the end the following new subsection:
``(e) Prospective Payment.--
``(1) Payment provision.--Notwithstanding any other provision
of this title, subject to paragraph (7), the amount of the payment
for all costs (as defined in paragraph (2)(B)) of covered skilled
nursing facility services (as defined in paragraph (2)(A)) for each
day of such services furnished--
``(A) in a cost reporting period during the transition
period (as defined in paragraph (2)(E)), is equal to the sum
of--
``(i) the non-Federal percentage of the facility-
specific per diem rate (computed under paragraph (3)), and
``(ii) the Federal percentage of the adjusted Federal
per diem rate (determined under paragraph (4)) applicable
to the facility; and
``(B) after the transition period is equal to the adjusted
Federal per diem rate applicable to the facility.
``(2) Definitions.--For purposes of this subsection:
``(A) Covered skilled nursing facility services.--
``(i) In general.--The term `covered skilled nursing
facility services'--
``(I) means post-hospital extended care services as
defined in section 1861(i) for which benefits are
provided under part A; and
``(II) includes all items and services (other than
services described in clause (ii)) for which payment
may be made under part B and which are furnished to an
individual who is a resident of a skilled nursing
facility during the period in which the individual is
provided covered post-hospital extended care services.
``(ii) Services excluded.--Services described in this
clause are physicians' services, services described by
clauses (i) through (iii) of section 1861(s)(2)(K),
certified nurse-midwife services, qualified psychologist
services, services of a certified registered nurse
anesthetist, items and services described in subparagraphs
(F) and (O) of section 1861(s)(2), and, only with respect
to services furnished during 1998, the transportation costs
of electrocardiogram equipment for electrocardiogram test
services (HCPCS Code R0076). Services described in this
clause do not include any physical, occupational, or
speech-language therapy services regardless of whether or
not the services are furnished by, or under the supervision
of, a physician or other health care professional.
``(B) All costs.--The term `all costs' means routine
service costs, ancillary costs, and capital-related costs of
covered skilled nursing facility services, but does not include
costs associated with approved educational activities.
``(C) Non-federal percentage; federal percentage.--For--
``(i) the first cost reporting period (as defined in
subparagraph (D)) of a facility, the `non-Federal
percentage' is 75 percent and the `Federal percentage' is
25 percent;
``(ii) the next cost reporting period of such facility,
the `non-Federal percentage' is 50 percent and the `Federal
percentage' is 50 percent; and
``(iii) the subsequent cost reporting period of such
facility, the `non-Federal percentage' is 25 percent and
the `Federal percentage' is 75 percent.
``(D) First cost reporting period.--The term `first cost
reporting period' means, with respect to a skilled nursing
facility, the first cost reporting period of the facility
beginning on or after July 1, 1998.
``(E) Transition period.--
``(i) In general.--The term `transition period' means,
with respect to a skilled nursing facility, the 3 cost
reporting periods of the facility beginning with the first
cost reporting period.
``(ii) Treatment of new skilled nursing facilities.--In
the case of a skilled nursing facility that first received
payment for services under this title on or after October
1, 1995, payment for such services shall be made under this
subsection as if all services were furnished after the
transition period.
``(3) Determination of facility specific per diem rates.--The
Secretary shall determine a facility-specific per diem rate for
each skilled nursing facility not described in paragraph (2)(E)(ii)
for a cost reporting period as follows:
``(A) Determining base payments.--The Secretary shall
determine, on a per diem basis, the total of--
``(i) the allowable costs of extended care services for
the facility for cost reporting periods beginning in fiscal
year 1995, including costs associated with facilities
described in subsection (d), with appropriate adjustments
(as determined by the Secretary) to non-settled cost
reports, and
``(ii) an estimate of the amounts that would be payable
under part B (disregarding any applicable deductibles,
coinsurance, and copayments) for covered skilled nursing
facility services described in paragraph (2)(A)(i)(II)
furnished during such period to an individual who is a
resident of the facility, regardless of whether or not the
payment was made to the facility or to another entity.
In making appropriate adjustments under clause (i), the
Secretary shall take into account exceptions and shall take
into account exemptions but, with respect to exemptions, only
to the extent that routine costs do not exceed 150 percent of
the routine cost limits otherwise applicable but for the
exemption.
``(B) Update to first cost reporting period.--
``(i) In general.--Subject to clause (ii), the
Secretary shall update the amount determined under
subparagraph (A), for each cost reporting period after the
cost reporting period described in subparagraph (A)(i) and
up to the first cost reporting period by a factor equal to
the skilled nursing facility market basket percentage
increase minus 1 percentage point.
``(ii) Certain demonstration projects.--In the case of
a facility participating in the Nursing Home Case-Mix and
Quality Demonstration (RUGS-III), there shall be
substituted for the amount described in clause (i) the
RUGS-III rate received by the facility for 1997.
``(C) Updating to applicable cost reporting period.--The
Secretary shall update the amount determined under subparagraph
(B) for each cost reporting period beginning with the first
cost reporting period and up to and including the cost
reporting period involved by a factor equal to the facility-
specific update factor.
``(D) Facility-specific update factor.--For purposes of
this paragraph, the `facility-specific update factor' for cost
reporting periods beginning during--
``(i) during each of fiscal years 1998 and 1999, is
equal to the skilled nursing facility market basket
percentage increase for such fiscal year minus 1 percentage
point, and
``(ii) during each subsequent fiscal year is equal to
the skilled nursing facility market basket percentage
increase for such fiscal year.
``(4) Federal per diem rate.--
``(A) Determination of historical per diem for
facilities.--For each skilled nursing facility that received
payments for post-hospital extended care services during a cost
reporting period beginning in fiscal year 1995 and that was
subject to (and not exempted from) the per diem limits referred
to in paragraph (1) or (2) of subsection (a) (and facilities
described in subsection (d)), the Secretary shall estimate, on
a per diem basis for such cost reporting period, the total of--
``(i) the allowable costs of extended care services
(excluding exceptions payments) for the facility for cost
reporting periods beginning in 1995 with appropriate
adjustments (as determined by the Secretary) to non-settled
cost reports, and
``(ii) an estimate of the amounts that would be payable
under part B (disregarding any applicable deductibles,
coinsurance, and copayments) for covered skilled nursing
facility services described in paragraph (2)(A)(i)(II)
furnished during such period to an individual who is a
resident of the facility, regardless of whether or not the
payment was made to the facility or to another entity.
``(B) Update to first fiscal year.--The Secretary shall
update the amount determined under subparagraph (A), for each
cost reporting period after the cost reporting period described
in subparagraph (A)(i) and up to the first cost reporting
period by a factor equal to the skilled nursing facility market
basket percentage increase reduced (on an annualized basis) by
1 percentage point.
``(C) Computation of standardized per diem rate.--The
Secretary shall standardize the amount updated under
subparagraph (B) for each facility by--
``(i) adjusting for variations among facilities by area
in the average facility wage level per diem, and
``(ii) adjusting for variations in case mix per diem
among facilities.
``(D) Computation of weighted average per diem rates.--
``(i) All facilities.--The Secretary shall compute a
weighted average per diem rate for all facilities by
computing an average of the standardized amounts computed
under subparagraph (C), weighted for each facility by the
number of days of extended care services furnished during
the cost reporting period referred to in subparagraph (A).
``(ii) Freestanding facilities.--The Secretary shall
compute a weighted average per diem rate for freestanding
facilities by computing an average of the standardized
amounts computed under subparagraph (C) only for such
facilities , weighted for each facility by the number of
days of extended care services furnished during the cost
reporting period referred to in subparagraph (A).
``(iii) Separate computation.--The Secretary may
compute and apply such averages separately for facilities
located in urban and rural areas (as defined in section
1886(d)(2)(D)).
``(E) Updating.--
``(i) Initial period.--For the initial period beginning
on July 1, 1998, and ending on September 30, 1999, the
Secretary shall compute for skilled nursing facilities an
unadjusted federal per diem rate equal to the average of
the weighted average per diem rates computed under clauses
(i) and (ii) of subparagraph (D), increased by skilled
nursing facility market basket percentage change for such
period minus 1 percentage point.
``(ii) Subsequent fiscal years.--The Secretary shall
compute an unadjusted federal per diem rate equal to the
federal per diem rate computed under this subparagraph--
``(I) for fiscal year 2000, the rate computed for
the initial period described in clause (i), increased
by the skilled nursing facility market basket
percentage change for the initial period minus 1
percentage point;
``(II) for each of fiscal years 2001 and 2002, the
rate computed for the previous fiscal year increased by
the skilled nursing facility market basket percentage
change for the fiscal year involved minus 1 percentage
point; and
``(III) for each subsequent fiscal year, the rate
computed for the previous fiscal year increased by the
skilled nursing facility market basket percentage
change for the fiscal year involved.
``(F) Adjustment for case mix creep.--Insofar as the
Secretary determines that the adjustments under subparagraph
(G)(i) for a previous fiscal year (or estimates that such
adjustments for a future fiscal year) did (or are likely to)
result in a change in aggregate payments under this subsection
during the fiscal year that are a result of changes in the
coding or classification of residents that do not reflect real
changes in case mix, the Secretary may adjust unadjusted
Federal per diem rates for subsequent fiscal years so as to
eliminate the effect of such coding or classification changes.
``(G) Determination of federal rate.--The Secretary shall
compute for each skilled nursing facility for each fiscal year
(beginning with the initial period described in subparagraph
(E)(i)) an adjusted Federal per diem rate equal to the
unadjusted Federal per diem rate determined under subparagraph
(E), as adjusted under subparagraph (F), and as further
adjusted as follows:
``(i) Adjustment for case mix.--The Secretary shall
provide for an appropriate adjustment to account for case
mix. Such adjustment shall be based on a resident
classification system, established by the Secretary, that
accounts for the relative resource utilization of different
patient types. The case mix adjustment shall be based on
resident assessment data and other data that the Secretary
considers appropriate.
``(ii) Adjustment for geographic variations in labor
costs.--The Secretary shall adjust the portion of such per
diem rate attributable to wages and wage-related costs for
the area in which the facility is located compared to the
national average of such costs using an appropriate wage
index as determined by the Secretary. Such adjustment shall
be done in a manner that does not result in aggregate
payments under this subsection that are greater or less
than those that would otherwise be made if such adjustment
had not been made.
``(H) Publication of information on per diem rates.--The
Secretary shall provide for publication in the Federal
Register, before May 1, 1998 (with respect to fiscal period
described in subparagraph (E)(i)) and before the August 1
preceding each succeeding fiscal year (with respect to that
succeeding fiscal year), of--
``(i) the unadjusted Federal per diem rates to be
applied to days of covered skilled nursing facility
services furnished during the fiscal year,
``(ii) the case mix classification system to be applied
under subparagraph (G)(i) with respect to such services
during the fiscal year, and
``(iii) the factors to be applied in making the area
wage adjustment under subparagraph (G)(ii) with respect to
such services.
``(5) Skilled nursing facility market basket index and
percentage.--For purposes of this subsection:
``(A) Skilled nursing facility market basket index.--The
Secretary shall establish a skilled nursing facility market
basket index that reflects changes over time in the prices of
an appropriate mix of goods and services included in covered
skilled nursing facility services.
``(B) Skilled nursing facility market basket percentage.--
The term `skilled nursing facility market basket percentage'
means, for a fiscal year or other annual period and as
calculated by the Secretary, the percentage change in the
skilled nursing facility market basket index (established under
subparagraph (A)) from the midpoint of the prior fiscal year
(or period) to the midpoint of the fiscal year (or other
period) involved.
``(6) Submission of resident assessment data.--A skilled
nursing facility, or a facility described in paragraph (7)(B),
shall provide the Secretary, in a manner and within the timeframes
prescribed by the Secretary, the resident assessment data necessary
to develop and implement the rates under this subsection. For
purposes of meeting such requirement, a skilled nursing facility,
or a facility described in paragraph (7), may submit the resident
assessment data required under section 1819(b)(3), using the
standard instrument designated by the State under section
1819(e)(5).
``(7) Transition for medicare swing bed hospitals.--
``(A) In general.--The Secretary shall determine an
appropriate manner in which to apply this subsection to the
facilities described in subparagraph (B), taking into account
the purposes of this subsection, and shall provide that at the
end of the transition period (as defined in paragraph (2)(E))
such facilities shall be paid only under this subsection.
Payment shall not be made under this subsection to such
facilities for cost reporting periods beginning before such
date (not earlier than July 1, 1999) as the Secretary
specifies.
``(B) Facilities described.--The facilities described in
this subparagraph are facilities that have in effect an
agreement described in section 1883, for which payment is made
for the furnishing of extended care services on a reasonable
cost basis under section 1814(l) (as in effect on and after
such date).
``(8) Limitation on review.--There shall be no administrative
or judicial review under section 1869, 1878, or otherwise of--
``(A) the establishment of Federal per diem rates under
paragraph (4), including the computation of the standardized
per diem rates under paragraph (4)(C), adjustments and
corrections for case mix under paragraphs (4)(F) and (4)(G)(i),
and adjustments for variations in labor-related costs under
paragraph (4)(G)(ii);
``(B) the establishment of facility specific rates before
January 1, 1999, (except any determination of costs paid under
part A of this title); and
``(C) the establishment of transitional amounts under
paragraph (7).''.
(b) Consolidated Billing.--
(1) For snf services.--Section 1862(a) (42 U.S.C. 1395y(a)), as
amended by 4319(b), is amended--
(A) by striking ``or'' at the end of paragraph (16),
(B) by striking the period at the end of paragraph (17) and
inserting ``; or'', and
(C) by inserting after paragraph (17) the following new
paragraph:
``(18) which are covered skilled nursing facility services
described in section 1888(e)(2)(A)(i) and which are furnished to an
individual who is a resident of a skilled nursing facility or of a
part of a facility that includes a skilled nursing facility (as
determined under regulations), by an entity other than the skilled
nursing facility, unless the services are furnished under
arrangements (as defined in section 1861(w)(1)) with the entity
made by the skilled nursing facility.''.
(2) Requiring payment for all part b items and services to be
made to facility.--The first sentence of section 1842(b)(6) (42
U.S.C. 1395u(b)(6)) is amended--
(A) by striking ``and (D)'' and inserting ``(D)''; and
(B) by striking the period at the end and inserting the
following: ``, and (E) in the case of an item or service (other
than services described in section 1888(e)(2)(A)(ii)) furnished
to an individual who (at the time the item or service is
furnished) is a resident of a skilled nursing facility or of a
part of a facility that includes a skilled nursing facility (as
determined under regulations), payment shall be made to the
facility (without regard to whether or not the item or service
was furnished by the facility, by others under arrangement with
them made by the facility, under any other contracting or
consulting arrangement, or otherwise).''.
(3) Payment rules.--Section 1888(e) (42 U.S.C. 1395yy(e)), as
added by subsection (a), is amended by adding at the end the
following:
``(9) Payment for certain services.--In the case of an item or
service furnished to a resident of a skilled nursing facility or a
part of a facility that includes a skilled nursing facility (as
determined under regulations) for which payment would (but for this
paragraph) be made under part B in an amount determined in
accordance with section 1833(a)(2)(B), the amount of the payment
under such part shall be the amount provided under the fee schedule
for such item or service.
``(10) Required coding.--No payment may be made under part B
for items and services (other than services described in paragraph
(2)(A)(ii)) furnished to an individual who is a resident of a
skilled nursing facility or of a part of a facility that includes a
skilled nursing facility (as determined under regulations), unless
the claim for such payment includes a code (or codes) under a
uniform coding system specified by the Secretary that identifies
the items or services furnished.''.
(4) Facility provider number required on claims submitted by
physicians.--Section 1842 (42 U.S.C. 1395u) is amended by adding at
the end the following new section:
``(t) Each request for payment, or bill submitted, for an item or
service furnished by a physician to an individual who is a resident of
a skilled nursing facility or of a part of a facility that includes a
skilled nursing facility (as determined under regulations), for which
payment may be made under this part shall include the facility's
medicare provider number.''.
(5) Conforming amendments.--
(A) Section 1819(b)(3)(C)(i) (42 U.S.C. 1395i-
3(b)(3)(C)(i)) is amended by striking ``Such'' and inserting
``Subject to the timeframes prescribed by the Secretary under
section 1888(e)(6), such''.
(B) Section 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended
by striking ``(2);'' and inserting ``(2) and section
1842(b)(6)(E);''.
(C) Section 1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is
amended by inserting ``or section 1888(e)(9)'' after ``section
1886''.
(D) Section 1861(h) (42 U.S.C 1395x(h)) is amended--
(i) in the opening paragraph, by striking ``paragraphs
(3) and (6)'' and inserting ``paragraphs (3), (6), and
(7)'', and
(ii) in paragraph (7), after ``skilled nursing
facilities'', by inserting ``, or by others under
arrangements with them made by the facility''.
(E) Section 1861(v)(7)(D) (42 U.S.C. 1395x(v)(7)(D)) is
amended by inserting ``subsections (a) through (c) of'' before
``section 1888.''.
(F) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is
amended--
(i) by redesignating clauses (i) and (ii) as subclauses
(I) and (II) respectively,
(ii) by inserting ``(i)'' after ``(H)'', and
(iii) by adding after clause (i), as so redesignated,
the following new clause:
``(ii) in the case of skilled nursing facilities which provide
covered skilled nursing facility services--
``(I) that are furnished to an individual who is a resident
of the skilled nursing facility, and
``(II) for which the individual is entitled to have payment
made under this title,
to have items and services (other than services described in
section 1888(e)(2)(A)(ii)) furnished by the skilled nursing
facility or otherwise under arrangements (as defined in section
1861(w)(1)) made by the skilled nursing facility,''.
(G) Section 1883(a)(2)(B)(ii)(II) (42 U.S.C.
1395tt(a)(2)(B)(ii)(II)) is amended by inserting ``subsections
(a) through (d) of'' before ``section 1888''.
(H) Section 1888(d)(1) (42 U.S.C. 1395yy(d)(1)) is amended
by striking ``Any skilled nursing facility'' and inserting
``Subject to subsection (e), any skilled nursing facility''.
(c) Medical Review Process.--In order to ensure that medicare
beneficiaries are furnished appropriate services in skilled nursing
facilities, the Secretary of Health and Human Services shall establish
and implement a thorough medical review process to examine the effects
of the amendments made by this section on the quality of covered
skilled nursing facility services furnished to medicare beneficiaries.
In developing such a medical review process, the Secretary shall place
a particular emphasis on the quality of non-routine covered services
and physicians' services for which payment is made under title XVIII of
the Social Security Act.
(d) Effective Date.--The amendments made by this section are
effective for cost reporting periods beginning on or after July 1,
1998; except that the amendments made by subsection (b) shall apply to
items and services furnished on or after July 1, 1998.
CHAPTER 4--PROVISIONS RELATED TO HOSPICE SERVICES
SEC. 4441. PAYMENTS FOR HOSPICE SERVICES.
(a) Payment Update.--Section 1814(i)(1)(C)(ii) (42 U.S.C.
1395f(i)(1)(C)(ii)) is amended--
(1) in subclause (V), by striking ``and'' at the end;
(2) by redesignating subclause (VI) as subclause (VII); and
(3) by inserting after subclause (V) the following new
subclause:
``(VI) for each of fiscal years 1998 through 2002, the market
basket percentage increase for the fiscal year involved minus 1.0
percentage points; and''.
(b) Collection of Data.--Section 1814(i) (42 U.S.C. 1395f(i)) is
amended by adding at the end the following new paragraph:
``(3) Hospice programs providing hospice care for which payment is
made under this subsection shall submit to the Secretary such data with
respect to the costs for providing such care for each fiscal year,
beginning with fiscal year 1999, as the Secretary determines
necessary.''.
SEC. 4442. PAYMENT FOR HOME HOSPICE CARE BASED ON LOCATION WHERE CARE
IS FURNISHED.
(a) In General.--Section 1814(i)(2) (42 U.S.C. 1395f(i)(2)) is
amended by adding at the end the following:
``(D) A hospice program shall submit claims for payment for hospice
care furnished in an individual's home under this title only on the
basis of the geographic location at which the service is furnished, as
determined by the Secretary.''.
(b) Effective Date.--The amendment made by subsection (a) applies
to cost reporting periods beginning on or after October 1, 1997.
SEC. 4443. HOSPICE CARE BENEFITS PERIODS.
(a) Restructuring of Benefit Period.--Section 1812 (42 U.S.C.
1395d) is amended in subsections (a)(4) and (d)(1) by striking ``, a
subsequent period of 30 days, and a subsequent extension period'' and
inserting ``and an unlimited number of subsequent periods of 60 days
each''.
(b) Conforming Amendments.--(1) Section 1812 (42 U.S.C. 1395d) is
amended in subsection (d)(2)(B) by striking ``90- or 30-day period or a
subsequent extension period'' and inserting ``90-day period or a
subsequent 60-day period''.
(2) Section 1814(a)(7)(A) (42 U.S.C. 1395f(a)(7)(A)) is amended--
(A) in clause (i), by inserting ``and'' at the end;
(B) in clause (ii)--
(i) by striking ``30-day'' and inserting ``60-day''; and
(ii) by striking ``, and'' at the end and inserting a
period; and
(C) by striking clause (iii).
SEC. 4444. OTHER ITEMS AND SERVICES INCLUDED IN HOSPICE CARE.
(a) In General.--Section 1861(dd)(1) (42 U.S.C. 1395x(dd)(1)) is
amended--
(1) in subparagraph (G), by striking ``and'' at the end;
(2) in subparagraph (H), by striking the period at the end and
inserting ``, and''; and
(3) by inserting after subparagraph (H) the following:
``(I) any other item or service which is specified in the plan
and for which payment may otherwise be made under this title.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply with respect to items or services furnished on or after April 1,
1998.
SEC. 4445. CONTRACTING WITH INDEPENDENT PHYSICIANS OR PHYSICIAN GROUPS
FOR HOSPICE CARE SERVICES PERMITTED.
Section 1861(dd)(2) (42 U.S.C. 1395x(dd)(2)) is amended--
(1) in subparagraph (A)(ii)(I), by striking ``(F),''; and
(2) in subparagraph (B)(i), by inserting ``or, in the case of a
physician described in subclause (I), under contract with'' after
``employed by''.
SEC. 4446. WAIVER OF CERTAIN STAFFING REQUIREMENTS FOR HOSPICE CARE
PROGRAMS IN NONURBANIZED AREAS.
Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is amended--
(1) in subparagraph (B), by inserting ``or (C)'' after
``subparagraph (A)'' each place it appears; and
(2) by adding at the end the following:
``(C) The Secretary may waive the requirements of paragraph
(2)(A)(i) and (2)(A)(ii) for an agency or organization with respect to
the services described in paragraph (1)(B) and, with respect to dietary
counseling, paragraph (1)(H), if such agency or organization--
``(i) is located in an area which is not an urbanized area (as
defined by the Bureau of Census), and
``(ii) demonstrates to the satisfaction of the Secretary that
the agency or organization has been unable, despite diligent
efforts, to recruit appropriate personnel.''.
SEC. 4447. LIMITATION ON LIABILITY OF BENEFICIARIES FOR CERTAIN HOSPICE
COVERAGE DENIALS.
Section 1879(g) (42 U.S.C. 1395pp(g)) is amended--
(1) by redesignating paragraphs (1) and (2) as subparagraphs
(A) and (B), respectively, and moving such subparagraphs 2 ems to
the right;
(2) by striking ``is,'' and inserting ``is--'';
(3) by making the remaining text of subsection (g), as amended,
that follows ``is--'' a new paragraph (1) and indenting such
paragraph 2 ems to the right;
(4) by striking the period at the end and inserting ``; and'';
and
(5) by adding at the end the following new paragraph:
``(2) with respect to the provision of hospice care to an
individual, a determination that the individual is not terminally
ill.''.
SEC. 4448. EXTENDING THE PERIOD FOR PHYSICIAN CERTIFICATION OF AN
INDIVIDUAL'S TERMINAL ILLNESS.
Section 1814(a)(7)(A)(i) (42 U.S.C. 1395f(a)(7)(A)(i)) is amended
in the matter following subclause (II) by striking ``, not later than 2
days after hospice care is initiated (or, if each certify verbally not
later than 2 days after hospice care is initiated, not later than 8
days after such care is initiated)'' and inserting ``at the beginning
of the period''.
SEC. 4449. EFFECTIVE DATE.
Except as otherwise provided in this chapter, the amendments made
by this chapter apply to benefits provided on or after the date of the
enactment of this chapter, regardless of whether or not an individual
has made an election under section 1812(d) of the Social Security Act
(42 U.S.C. 1395d(d)) before such date.
CHAPTER 5--OTHER PAYMENT PROVISIONS
SEC. 4451. REDUCTIONS IN PAYMENTS FOR ENROLLEE BAD DEBT.
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at
the end the following new subparagraph:
``(T) In determining such reasonable costs for hospitals, no
reduction in copayments under section 1833(t)(5)(B) shall be treated as
a bad debt and the amount of bad debts otherwise treated as allowable
costs which are attributable to the deductibles and coinsurance amounts
under this title shall be reduced--
``(i) for cost reporting periods beginning during fiscal year
1998, by 25 percent of such amount otherwise allowable,
``(ii) for cost reporting periods beginning during fiscal year
1999, by 40 percent of such amount otherwise allowable, and
``(iii) for cost reporting periods beginning during a
subsequent fiscal year, by 45 percent of such amount otherwise
allowable.''.
SEC. 4452. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH PAYMENT.
Section 6011(d) of OBRA-1989 (as amended by section 13505 of OBRA-
1993) is amended by striking ``and shall expire September 30, 1994.''
and inserting ``and on or before September 30, 1994, and on or after
October 1, 1997.''.
SEC. 4453. REDUCTION IN PART A MEDICARE PREMIUM FOR CERTAIN PUBLIC
RETIREES.
(a) In General.--Section 1818(d) (42 U.S.C. 1395i-2(d)) is
amended--
(1) in paragraph (2), by striking ``paragraph (4)'' and
inserting ``paragraphs (4) and (5)''; and
(2) by adding at the end the following new paragraph:
``(5)(A) The amount of the monthly premium shall be zero in the
case of an individual who is a person described in subparagraph (B) for
a month, if--
``(i) the individual's premium under this section for the month
is not (and will not be) paid for, in whole or in part, by a State
(under title XIX or otherwise), a political subdivision of a State,
or an agency or instrumentality of one or more States or political
subdivisions thereof; and
``(ii) in each of 84 months before such month, the individual
was enrolled in this part under this section and the payment of the
individual's premium under this section for the month was not paid
for, in whole or in part, by a State (under title XIX or
otherwise), a political subdivision of a State, or an agency or
instrumentality of one or more States or political subdivisions
thereof.
``(B) A person described in this subparagraph for a month is a
person who establishes to the satisfaction of the Secretary that, as of
the last day of the previous month--
``(i)(I) the person was receiving cash benefits under a
qualified State or local government retirement system (as defined
in subparagraph (C)) on the basis of the person's employment in one
or more positions covered under any such system, and (II) the
person would have at least 40 quarters of coverage under title II
if remuneration for medicare qualified government employment (as
defined in paragraph (1) of section 210(p), but determined without
regard to paragraph (3) of such section) paid to such person were
treated as wages paid to such person and credited for purposes of
determining quarters of coverage under section 213;
``(ii)(I) the person was married (and had been married for the
previous 1-year period) to an individual who is described in clause
(i), or (II) the person met the requirement of clause (i)(II) and
was married (and had been married for the previous 1-year period)
to an individual described in clause (i)(I);
``(iii) the person had been married to an individual for a
period of at least 1 year (at the time of such individual's death)
if (I) the individual was described in clause (i) at the time of
the individual's death, or (II) the person met the requirement of
clause (i)(II) and the individual was described in clause (i)(I) at
the time of the individual's death; or
``(iv) the person is divorced from an individual and had been
married to the individual for a period of at least 10 years (at the
time of the divorce) if (I) the individual was described in clause
(i) at the time of the divorce, or (II) the person met the
requirement of clause (i)(II) and the individual was described in
clause (i)(I) at the time of the divorce.
``(C) For purposes of subparagraph (B)(i)(I), the term `qualified
State or local government retirement system' means a retirement system
that--
``(i) is established or maintained by a State or political
subdivision thereof, or an agency or instrumentality of one or more
States or political subdivisions thereof;
``(ii) covers positions of some or all employees of such a
State, subdivision, agency, or instrumentality; and
``(iii) does not adjust cash retirement benefits based on
eligibility for a reduction in premium under this paragraph.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to premiums for months beginning with January 1998, and months
before such month may be taken into account for purposes of meeting the
requirement of section 1818(d)(5)(B)(iii) of the Social Security Act,
as added by subsection (a).
SEC. 4454. COVERAGE OF SERVICES IN RELIGIOUS NONMEDICAL HEALTH CARE
INSTITUTIONS UNDER THE MEDICARE AND MEDICAID PROGRAMS.
(a) Medicare Coverage.--
(1) In general.--Section 1861 (42 U.S.C. 1395x) (as amended by
sections 4103 and 4106) is amended--
(A) in the sixth sentence of subsection (e)--
(i) by striking ``includes'' and all that follows up to
``but only'' and inserting ``includes a religious
nonmedical health care institution (as defined in
subsection (ss)(1)),'', and
(ii) by inserting ``consistent with section 1821''
before the period;
(B) in subsection (y)--
(i) by amending the heading to read as follows:
``Extended Care in Religious Nonmedical Health Care Institutions'',
(ii) in paragraph (1), by striking ``includes'' and all
that follows up to ``but only'' and inserting ``includes a
religious nonmedical health care institution (as defined in
subsection (ss)(1)),'', and
(iii) by inserting ``consistent with section 1821''
before the period; and
(C) by adding at the end the following:
``Religious Nonmedical Health Care Institution
``(ss)(1) The term `religious nonmedical health care institution'
means an institution that--
``(A) is described in subsection (c)(3) of section 501 of
the Internal Revenue Code of 1986 and is exempt from taxes
under subsection (a) of such section;
``(B) is lawfully operated under all applicable Federal,
State, and local laws and regulations;
``(C) provides only nonmedical nursing items and services
exclusively to patients who choose to rely solely upon a
religious method of healing and for whom the acceptance of
medical health services would be inconsistent with their
religious beliefs;
``(D) provides such nonmedical items and services
exclusively through nonmedical nursing personnel who are
experienced in caring for the physical needs of such patients;
``(E) provides such nonmedical items and services to
inpatients on a 24-hour basis;
``(F) on the basis of its religious beliefs, does not
provide through its personnel or otherwise medical items and
services (including any medical screening, examination,
diagnosis, prognosis, treatment, or the administration of
drugs) for its patients;
``(G)(i) is not owed by, under common ownership with, or
has an ownership interest in, a provider of medical treatment
of services;
``(ii) is not affiliated with--
``(I) a provider of medical treatment or services, or
``(II) an individual who has an ownership interest in a
provider of medical treatment or services;
``(H) has in effect a utilization review plan which--
``(i) provides for the review of admissions to the
institution, of the duration of stays therein, of cases of
continuous extended duration, and of the items and services
furnished by the institution,
``(ii) requires that such reviews be made by an
appropriate committee of the institution that includes the
individuals responsible for overall administration and for
supervision of nursing personnel at the institution,
``(iii) provides that records be maintained of the
meetings, decisions, and actions of such committee, and
``(iv) meets such other requirements as the Secretary
finds necessary to establish an effective utilization
review plan;
``(I) provides the Secretary with such information as the
Secretary may require to implement section 1821, including
information relating to quality of care and coverage
determinations; and
``(J) meets such other requirements as the Secretary finds
necessary in the interest of the health and safety of
individuals who are furnished services in the institution.
``(2) To the extent that the Secretary finds that the accreditation
of an institution by a State, regional, or national agency or
association provides reasonable assurances that any or all of the
requirements of paragraph (1) are met or exceeded, the Secretary may
treat such institution as meeting the condition or conditions with
respect to which the Secretary made such finding.
``(3)(A)(i) In administering this subsection and section 1821, the
Secretary shall not require any patient of a religious nonmedical
health care institution to undergo medical screening, examination,
diagnosis, prognosis, or treatment or to accept any other medical
health care service, if such patient (or legal representative of the
patient) objects thereto on religious grounds.
``(ii) Clause (i) shall not be construed as preventing the
Secretary from requiring under section 1821(a)(2) the provision of
sufficient information regarding an individual's condition as a
condition for receipt of benefits under part A for services provided in
such an institution.
``(B)(i) In administering this subsection and section 1821, the
Secretary shall not subject a religious nonmedical health care
institution or its personnel to any medical supervision, regulation, or
control, insofar as such supervision, regulation, or control would be
contrary to the religious beliefs observed by the institution or such
personnel.
``(ii) Clause (i) shall not be construed as preventing the
Secretary from reviewing items and services billed by the institution
to the extent the Secretary determines such review to be necessary to
determine whether such items and services were not covered under part
A, are excessive, or are fraudulent.
``(4)(A) For purposes of paragraph (1)(G)(i), an ownership interest
of less than 5 percent shall not be taken into account.
``(B) For purposes of paragraph (1)(G)(ii), none of the following
shall be considered to create an affiliation:
``(i) An individual serving as an uncompensated director,
trustee, officer, or other member of the governing body of a
religious nonmedical health care institution.
``(ii) An individual who is a director, trustee, officer,
employee, or staff member of a religious nonmedical health care
institution having a family relationship with an individual who is
affiliated with (or has an ownership interest in) a provider of
medical treatment or services.
``(iii) An individual or entity furnishing goods or services as
a vendor to both providers of medical treatment or services and
religious nonmedical health care institutions.''.
(2) Conditions of coverage.--Part A of title XVIII is amended
by adding at the end the following new section:
``conditions for coverage of religious nonmedical health care
institutional services
``Sec. 1821. (a) In General.--Subject to subsections (c) and (d),
payment under this part may be made for inpatient hospital services or
post-hospital extended care services furnished an individual in a
religious nonmedical health care institution only if--
``(1) the individual has an election in effect for such
benefits under subsection (b); and
``(2) the individual has a condition such that the individual
would qualify for benefits under this part for inpatient hospital
services or extended care services, respectively, if the individual
were an inpatient or resident in a hospital or skilled nursing
facility that was not such an institution.
``(b) Election.--
``(1) In general.--An individual may make an election under
this subsection in a form and manner specified by the Secretary
consistent with this subsection. Unless otherwise provided, such an
election shall take effect immediately upon its execution. Such an
election, once made, shall continue in effect until revoked.
``(2) Form.--The election form under this subsection shall
include the following:
``(A) A written statement, signed by the individual (or
such individual's legal representative), that--
``(i) the individual is conscientiously opposed to
acceptance of nonexcepted medical treatment; and
``(ii) the individual's acceptance of nonexcepted
medical treatment would be inconsistent with the
individual's sincere religious beliefs.
``(B) A statement that the receipt of nonexcepted medical
services shall constitute a revocation of the election and may
limit further receipt of services described in subsection (a).
``(3) Revocation.--An election under this subsection by an
individual may be revoked by voluntarily notifying the Secretary in
writing of such revocation and shall be deemed to be revoked if the
individual receives nonexcepted medical treatment for which
reimbursement is made under this title.
``(4) Limitation on subsequent elections.--Once an individual's
election under this subsection has been made and revoked twice--
``(A) the next election may not become effective until the
date that is 1 year after the date of most recent previous
revocation, and
``(B) any succeeding election may not become effective
until the date that is 5 years after the date of the most
recent previous revocation.
``(5) Excepted medical treatment.--For purposes of this
subsection:
``(A) Excepted medical treatment.--The term `excepted
medical treatment' means medical care or treatment (including
medical and other health services)--
``(i) received involuntarily, or
``(ii) required under Federal or State law or law of a
political subdivision of a State.
``(B) Nonexcepted medical treatment.--The term `nonexcepted
medical treatment' means medical care or treatment (including
medical and other health services) other than excepted medical
treatment.
``(c) Monitoring and Safeguard Against Excessive Expenditures.--
``(1) Estimate of expenditures.--Before the beginning of each
fiscal year (beginning with fiscal year 2000), the Secretary shall
estimate the level of expenditures under this part for services
described in subsection (a) for that fiscal year.
``(2) Adjustment in payments.--
``(A) Proportional adjustment.--If the Secretary determines
that the level estimated under paragraph (1) for a fiscal year
will exceed the trigger level (as defined in subparagraph (C))
for that fiscal year, the Secretary shall, subject to
subparagraph (B), provide for such a proportional reduction in
payment amounts under this part for services described in
subsection (a) for the fiscal year involved as will assure that
such level (taking into account any adjustment under
subparagraph (B)) does not exceed the trigger level for that
fiscal year.
``(B) Alternative adjustments.--The Secretary may, instead
of making some or all of the reduction described in
subparagraph (A), impose such other conditions or limitations
with respect to the coverage of covered services (including
limitations on new elections of coverage and new facilities) as
may be appropriate to reduce the level of expenditures
described in paragraph (1) to the trigger level.
``(C) Trigger level.--For purposes of this subsection--
``(i) In general.--Subject to adjustment under
paragraph (3)(B), the `trigger level' for a year is the
unadjusted trigger level described in clause (ii).
``(ii) Unadjusted trigger level.--The `unadjusted
trigger level' for--
``(I) fiscal year 1998, is $20,000,000, or
``(II) a succeeding fiscal year is the amount
specified under this clause for the previous fiscal
year increased by the percentage increase in the
consumer price index for all urban consumers (all
items; United States city average) for the 12-month
period ending with July preceding the beginning of the
fiscal year.
``(D) Prohibition of administrative and judicial review.--
There shall be no administrative or judicial review under
section 1869, 1878, or otherwise of the estimation of
expenditures under subparagraph (A) or the application of
reduction amounts under subparagraph (B).
``(E) Effect on billing.--Notwithstanding any other
provision of this title, in the case of a reduction in payment
provided under this subsection for services of a religious
nonmedical health care institution provided to an individual,
the amount that the institution is otherwise permitted to
charge the individual for such services is increased by the
amount of such reduction.
``(3) Monitoring expenditure level.--
``(A) In general.--The Secretary shall monitor the
expenditure level described in paragraph (2)(A) for each fiscal
year (beginning with fiscal year 1999).
``(B) Adjustment in trigger level.--
``(i) In general.--If the Secretary determines that
such level for a fiscal year exceeded, or was less than,
the trigger level for that fiscal year, then, subject to
clause (ii), the trigger level for the succeeding fiscal
year shall be reduced, or increased, respectively, by the
amount of such excess or deficit.
``(ii) Limitation on carryforward.--In no case may the
increase effected under clause (i) for a fiscal year exceed
$50,000,000.
``(d) Sunset.--If the Secretary determines that the level of
expenditures described in subsection (c)(1) for 3 consecutive fiscal
years (with the first such year being not earlier than fiscal year
2002) exceeds the trigger level for such expenditures for such years
(as determined under subsection (c)(2)), benefits shall be paid under
this part for services described in subsection (a) and furnished on or
after the first January 1 that occurs after such 3 consecutive years
only with respect to an individual who has an election in effect under
subsection (b) as of such January 1 and only during the duration of
such election.
``(e) Annual Report.--At the beginning of each fiscal year
(beginning with fiscal year 1999), the Secretary shall submit to the
Committee on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate an annual report on coverage and
expenditures for services described in subsection (a) under this part
and under State plans under title XIX. Such report shall include--
``(1) level of expenditures described in subsection (c)(1) for
the previous fiscal year and estimated for the fiscal year
involved;
``(2) trends in such level; and
``(3) facts and circumstances of any significant change in such
level from the level in previous fiscal years.''.
(b) Medicaid.--
(1) The third sentence of section 1902(a) (42 U.S.C. 1396a(a))
is amended by striking all that follows ``shall not apply'' and
inserting ``to a religious nonmedical health care institution (as
defined in section 1861(ss)(1)).''.
(2) Section 1908(e)(1) (42 U.S.C. 1396g-1(e)(1)) is amended by
striking all that follows ``does not include'' and inserting ``a
religious nonmedical health care institution (as defined in section
1861(ss)(1)).''.
(c) Conforming Amendments.--
(1) Section 1122(h) (42 U.S.C. 1320a-1(h)) is amended by
striking all that follows ``shall not apply to'' and inserting ``a
religious nonmedical health care institution (as defined in section
1861(ss)(1)).''.
(2) Section 1162 (42 U.S.C. 1320c-11) is amended--
(A) by amending the heading to read as follows:
``exemptions for religious nonmedical health care institutions''; and
(B) by striking all that follows ``shall not apply with
respect to a'' and inserting ``religious nonmedical health care
institution (as defined in section 1861(ss)(1)).''.
(d) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act and shall apply to
items and services furnished on or after such date. By not later than
July 1, 1998, the Secretary of Health and Human Services shall first
issue regulations to carry out such amendments. Such regulations may be
issued so they are effective on an interim basis pending notice and
opportunity for public comment. For periods before the effective date
of such regulations, such regulations shall recognize elections entered
into in good faith in order to comply with the requirements of section
1821(b) of the Social Security Act.
Subtitle F--Provisions Relating to Part B Only
CHAPTER 1--SERVICES OF HEALTH PROFESSIONALS
Subchapter A--Physicians' Services
SEC. 4501. ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 1998.
(a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is
amended--
(1) by redesignating subparagraph (C) as subparagraph (D), and
(2) by inserting after subparagraph (B) the following:
``(C) Special rules for 1998.--The single conversion factor
for 1998 under this subsection shall be the conversion factor
for primary care services for 1997, increased by the
Secretary's estimate of the weighted average of the three
separate updates that would otherwise occur were it not for the
enactment of chapter 1 of subtitle F of title IV of the
Balanced Budget Act of 1997.''.
(b) Conforming Amendments.--Section 1848 (42 U.S.C. 1395w-4) is
amended--
(1) by striking ``(or factors)'' each place it appears in
subsection (d)(1)(A) and (d)(1)(D)(ii) (as redesignated by
subsection (a)(1)),
(2) in subsection (d)(1)(A), by striking ``or updates'',
(3) in subsection (d)(1)(D) (as redesignated by subsection
(a)(1)), by striking ``(or updates)'' each place it appears, and
(4) in subsection (j)(1), by striking ``The term'' and
inserting ``For services furnished before January 1, 1998, the
term''.
SEC. 4502. ESTABLISHING UPDATE TO CONVERSION FACTOR TO MATCH SPENDING
UNDER SUSTAINABLE GROWTH RATE.
(a) Update.--
(1) In general.--Section 1848(d)(3) (42 U.S.C. 1395w-4(d)(3))
is amended to read as follows:
``(3) Update.--
``(A) In general.--Unless otherwise provided by law,
subject to subparagraph (D) and the budget-neutrality factor
determined by the Secretary under subsection (c)(2)(B)(ii), the
update to the single conversion factor established in paragraph
(1)(C) for a year beginning with 1999 is equal to the product
of--
``(i) 1 plus the Secretary's estimate of the percentage
increase in the MEI (as defined in section 1842(i)(3)) for
the year (divided by 100), and
``(ii) 1 plus the Secretary's estimate of the update
adjustment factor for the year (divided by 100),
minus 1 and multiplied by 100.
``(B) Update adjustment factor.--For purposes of
subparagraph (A)(ii), the `update adjustment factor' for a year
is equal (as estimated by the Secretary) to--
``(i) the difference between (I) the sum of the allowed
expenditures for physicians' services (as determined under
subparagraph (C)) for the period beginning April 1, 1997,
and ending on March 31 of the year involved, and (II) the
amount of actual expenditures for physicians' services
furnished during the period beginning April 1, 1997, and
ending on March 31 of the preceding year; divided by
``(ii) the actual expenditures for physicians' services
for the 12-month period ending on March 31 of the preceding
year, increased by the sustainable growth rate under
subsection (f) for the fiscal year which begins during such
12-month period.
``(C) Determination of allowed expenditures.--For purposes
of this paragraph, the allowed expenditures for physicians'
services for the 12-month period ending with March 31 of--
``(i) 1997 is equal to the actual expenditures for
physicians' services furnished during such 12-month period,
as estimated by the Secretary; or
``(ii) a subsequent year is equal to the allowed
expenditures for physicians' services for the previous
year, increased by the sustainable growth rate under
subsection (f) for the fiscal year which begins during such
12-month period.
``(D) Restriction on variation from medicare economic
index.--Notwithstanding the amount of the update adjustment
factor determined under subparagraph (B) for a year, the update
in the conversion factor under this paragraph for the year may
not be--
``(i) greater than 100 times the following amount:
(1.03 + (MEI percentage/100)) -1; or
``(ii) less than 100 times the following amount: (0.93
+ (MEI percentage/100)) -1,
where `MEI percentage' means the Secretary's estimate of the
percentage increase in the MEI (as defined in section
1842(i)(3)) for the year involved.''.
(2) Effective date.--The amendment made by this subsection
shall apply to the update for years beginning with 1999.
(b) Elimination of Report.--Section 1848(d) (42 U.S.C. 1395w-4(d))
is amended by striking paragraph (2).
SEC. 4503. REPLACEMENT OF VOLUME PERFORMANCE STANDARD WITH SUSTAINABLE
GROWTH RATE.
(a) In General.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended
by striking paragraphs (2) through (5) and inserting the following:
``(2) Specification of growth rate.--The sustainable growth
rate for all physicians' services for a fiscal year (beginning with
fiscal year 1998) shall be equal to the product of--
``(A) 1 plus the Secretary's estimate of the weighted
average percentage increase (divided by 100) in the fees for
all physicians' services in the fiscal year involved,
``(B) 1 plus the Secretary's estimate of the percentage
change (divided by 100) in the average number of individuals
enrolled under this part (other than Medicare+Choice plan
enrollees) from the previous fiscal year to the fiscal year
involved,
``(C) 1 plus the Secretary's estimate of the projected
percentage growth in real gross domestic product per capita
(divided by 100) from the previous fiscal year to the fiscal
year involved, and
``(D) 1 plus the Secretary's estimate of the percentage
change (divided by 100) in expenditures for all physicians'
services in the fiscal year (compared with the previous fiscal
year) which will result from changes in law and regulations,
determined without taking into account estimated changes in
expenditures resulting from the update adjustment factor
determined under subsection (d)(3)(B),
minus 1 and multiplied by 100.
``(3) Definitions.--In this subsection:
``(A) Services included in physicians' services.--The term
`physicians' services' includes other items and services (such
as clinical diagnostic laboratory tests and radiology
services), specified by the Secretary, that are commonly
performed or furnished by a physician or in a physician's
office, but does not include services furnished to a
Medicare+Choice plan enrollee.
``(B) Medicare+choice plan enrollee.--The term
`Medicare+Choice plan enrollee' means, with respect to a fiscal
year, an individual enrolled under this part who has elected to
receive benefits under this title for the fiscal year through a
Medicare+Choice plan offered under part C, and also includes an
individual who is receiving benefits under this part through
enrollment with an eligible organization with a risk-sharing
contract under section 1876.''.
(b) Conforming Amendment.--So much of section 1848(f) (42 U.S.C.
1395w-4(f)) as precedes paragraph (2) is amended to read as follows:
``(f) Sustainable Growth Rate.--
``(1) Publication.--The Secretary shall cause to have published
in the Federal Register the sustainable growth rate for each fiscal
year beginning with fiscal year 1998. Such publication shall occur
by not later than August 1 before each fiscal year, except that
such rate for fiscal year 1998 shall be published not later than
November 1, 1997.''.
SEC. 4504. PAYMENT RULES FOR ANESTHESIA SERVICES.
(a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)), as
amended by section 4501(a), is amended--
(1) in subparagraph (C), by striking ``The single'' and
inserting ``Except as provided in subparagraph (D), the single'';
(2) by redesignating subparagraph (D) as subparagraph (E); and
(3) by inserting after subparagraph (C) the following new
subparagraph:
``(D) Special rules for anesthesia services.--The separate
conversion factor for anesthesia services for a year shall be
equal to 46 percent of the single conversion factor established
for other physicians' services, except as adjusted for changes
in work, practice expense, or malpractice relative value
units.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to services furnished on or after January 1, 1998.
SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES.
(a) 1-Year Delay in Implementation.--Section 1848(c) (42 U.S.C.
1395w-4(c)) is amended--
(1) in paragraph (2)(C)(ii), in the matter before subclause (I)
and after subclause (II), by striking ``1998'' and inserting
``1999'' each place it appears; and
(2) in paragraph (3)(C)(ii), by striking ``1998'' and inserting
``1999''.
(b) Phased-in Implementation.--
(1) In general.--Section 1848(c)(2)(C)(ii) (42 U.S.C. 1395w-
4(c)(2)(C)(ii)) is further amended--
(A) by striking the comma at the end of clause (ii) and
inserting a period and the following:
``For 1999, such number of units shall be determined based
75 percent on such product and based 25 percent on the
relative practice expense resources involved in furnishing
the service. For 2000, such number of units shall be
determined based 50 percent on such product and based 50
percent on such relative practice expense resources. For
2001, such number of units shall be determined based 25
percent on such product and based 75 percent on such
relative practice expense resources. For a subsequent year,
such number of units shall be determined based entirely on
such relative practice expense resources.''.
(2) Conforming amendment.--Section 1848(c)(3)(C)(ii) (42 U.S.C.
1395w-4(c)(3)(C)(ii)), as amended by subsection (a)(2), is amended
by striking ``1999'' and inserting ``2002''.
(c) Review by Comptroller General.--The Comptroller General of the
United States shall review and evaluate the proposed rule on resource-
based methodology for practice expenses issued by the Secretary of
Health and Human Services. The Comptroller General shall, within 6
months of the date of the enactment of this Act, report to the
Committees on Commerce and Ways and Means of the House of
Representatives and the Committee on Finance of the Senate the results
of its evaluation, including an analysis of--
(1) the adequacy of the data used in preparing the rule,
(2) categories of allowable costs,
(3) methods for allocating direct and indirect expenses,
(4) the potential impact of the rule on beneficiary access to
services, and
(5) any other matters related to the appropriateness of
resource-based methodology for practice expenses.
The Comptroller General shall consult with representatives of
physicians' organizations with respect to matters of both data and
methodology.
(d) Requirements for Developing New Resource-Based Practice Expense
Relative Value Units.--
(1) Development.--For purposes of section 1848(c)(2)(C)(ii) of
the Social Security Act, the Secretary of Health and Human Services
shall develop new resource-based relative value units. In
developing such units the Secretary shall--
(A) utilize, to the maximum extent practicable, generally
accepted cost accounting principles which (i) recognize all
staff, equipment, supplies, and expenses, not just those which
can be tied to specific procedures, and (ii) use actual data on
equipment utilization and other key assumptions;
(B) consult with organizations representing physicians
regarding methodology and data to be used; and
(C) develop a refinement process to be used during each of
the 4 years of the transition period.
(2) Report.--The Secretary shall transmit a report by March 1,
1998, on the development of resource-based relative value units
under paragraph (1) to the Committee on Ways and Means and the
Committee on Commerce of the House of Representatives and the
Committee on Finance of the Senate. The report shall include a
presentation of data to be used in developing the value units and
an explanation of the methodology.
(3) Notice of proposed rulemaking.--The Secretary shall publish
a notice of proposed rulemaking with the new resource-based
relative value units on or before May 1, 1998, and shall allow for
a 90-day public comment period.
(4) Items included.--The new proposed rule shall consider the
following:
(A) Impact projections which compare new proposed payment
amounts on data on actual physician practice expenses.
(B) Impact projections for hospital-based and other
specialties, geographic payment localities, and urban versus
rural localities.
(e) Adjustments to Relative Value Units for 1998.--Section
1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended by adding at the end
the following new subparagraph:
``(G) Adjustments in relative value units for 1998.--
``(i) In general.--The Secretary shall--
``(I) subject to clauses (iv) and (v), reduce the
practice expense relative value units applied to any
services described in clause (ii) furnished in 1998 to
a number equal to 110 percent of the number of work
relative value units, and
``(II) increase the practice expense relative value
units for office visit procedure codes during 1998 by a
uniform percentage which the Secretary estimates will
result in an aggregate increase in payments for such
services equal to the aggregate decrease in payments by
reason of subclause (I).
``(ii) Services covered.--For purposes of clause (i),
the services described in this clause are physicians'
services that are not described in clause (iii) and for
which--
``(I) there are work relative value units, and
``(II) the number of practice expense relative
value units (determined for 1998) exceeds 110 percent
of the number of work relative value units (determined
for such year).
``(iii) Excluded services.--For purposes of clause
(ii), the services described in this clause are services
which the Secretary determines at least 75 percent of which
are provided under this title in an office setting.
``(iv) Limitation on aggregate reallocation.--If the
application of clause (i)(I) would result in an aggregate
amount of reductions under such clause in excess of
$390,000,000, such clause shall be applied by substituting
for 110 percent such greater percentage as the Secretary
estimates will result in the aggregate amount of such
reductions equaling $390,000,000.
``(v) No reduction for certain services.--Practice
expense relative value units for a procedure performed in
an office or in a setting out of an office shall not be
reduced under clause (i) if the in-office or out-of-office
practice expense relative value, respectively, for the
procedure would increase under the proposed rule on
resource-based practice expenses issued by the Secretary on
June 18, 1997 (62 Federal Register 33158 et seq.).''.
(f) Application of Resource-Based Methodology to Malpractice
Relative Value Units.--
(1) In general.--Section 1848(c)(2)(C)(iii) (42 U.S.C. 1395w-
4(c)(2)(C)(iii)) is amended--
(A) in paragraph (2)(C)(iii)--
(i) by inserting ``for the service for years before
2000'' before ``equal'', and
(ii) by striking the period at the end and inserting a
comma and by adding at the end the following flush matter:
``and for years beginning with 2000 based on the
malpractice expense resources involved in furnishing the
service.''; and
(B) in paragraph (3)(C)(iii), by striking ``The
malpractice'' and inserting ``For years before 1999, the
malpractice''.
(2) Application of certain budget neutrality provisions.--In
implementing the amendment made by paragraph (1)(A)(ii), the
provisions of clauses (ii)(II) and (iii) of section 1848(c)(2)(B)
of the Social Security Act (42 U.S.C. 1395w-4(c)(2)(B)) shall apply
in the same manner as they apply to adjustments under clause
(ii)(I) of such section.
SEC. 4506. DISSEMINATION OF INFORMATION ON HIGH PER DISCHARGE RELATIVE
VALUES FOR IN-HOSPITAL PHYSICIANS' SERVICES.
(a) Determination and Notice Concerning Hospital-Specific Per
Discharge Relative Values.--
(1) In general.--For 1999 and 2001 the Secretary of Health and
Human Services shall determine for each hospital--
(A) the hospital-specific per discharge relative value
under subsection (b); and
(B) whether the hospital-specific relative value is
projected to be excessive (as determined based on such value
represented as a percentage of the median of hospital-specific
per discharge relative values determined under subsection (b)).
(2) Notice to subset of medical staffs; evaluation of
responses.--The Secretary shall notify the medical executive
committee of a subset of the hospitals identified under paragraph
(1)(B) as having an excessive hospital-specific relative value, of
the determinations made with respect to the medical staff under
paragraph (1). The Secretary shall evaluate the responses of the
hospitals so notified with the responses of other hospitals so
identified that were not so notified.
(b) Determination of Hospital-Specific Per Discharge Relative
Values.--
(1) In general.--For purposes of this section, the hospital-
specific per discharge relative value for the medical staff of a
hospital (other than a teaching hospital) for a year shall be equal
to the average per discharge relative value (as determined under
section 1848(c)(2) of the Social Security Act (42 U.S.C. 1395w-
4(c)(2)) for physicians' services furnished to inpatients of the
hospital by the hospital's medical staff (excluding interns and
residents) during the second year preceding that calendar year,
adjusted for variations in case-mix among hospitals and
disproportionate share status and teaching status among hospitals
(as determined by the Secretary under paragraph (3)).
(2) Special rule for teaching hospitals.--The hospital-specific
relative value projected for a teaching hospital in a year shall be
equal to the sum of--
(A) the average per discharge relative value (as determined
under section 1848(c)(2) of such Act) for physicians' services
furnished to inpatients of the hospital by the hospital's
medical staff (excluding interns and residents) during the
second year preceding that calendar year, and
(B) the equivalent per discharge relative value (as
determined under such section) for physicians' services
furnished to inpatients of the hospital by interns and
residents of the hospital during the second year preceding that
calendar year, adjusted for variations in case-mix among
hospitals, and in disproportionate share status and teaching
status among hospitals (as determined by the Secretary under
paragraph (3)).
The Secretary shall determine the equivalent relative value unit
per discharge for interns and residents based on the best available
data and may make such adjustment in the aggregate.
(3) Adjustment for teaching and disproportionate share
hospitals.--The Secretary shall adjust the allowable per discharge
relative values otherwise determined under this subsection to take
into account the needs of teaching hospitals and hospitals
receiving additional payments under subparagraphs (F) and (G) of
section 1886(d)(5) of the Social Security Act (42 U.S.C.
1395ww(d)(5)). The adjustment for teaching status or
disproportionate share shall not be less than zero.
(c) Definitions.--For purposes of this section:
(1) Hospital.--The term ``hospital'' means a subsection (d)
hospital as defined in section 1886(d) of the Social Security Act
(42 U.S.C. 1395ww(d)) .
(2) Medical staff.--An individual furnishing a physician's
service is considered to be on the medical staff of a hospital--
(A) if (in accordance with requirements for hospitals
established by the Joint Commission on Accreditation of Health
Organizations)--
(i) the individual is subject to bylaws, rules, and
regulations established by the hospital to provide a
framework for the self-governance of medical staff
activities,
(ii) subject to the bylaws, rules, and regulations, the
individual has clinical privileges granted by the
hospital's governing body, and
(iii) under the clinical privileges, the individual may
provide physicians' services independently within the scope
of the individual's clinical privileges, or
(B) if the physician provides at least one service to an
individual entitled to benefits under this title in that
hospital.
(3) Physicians' services.--The term ``physicians' services''
means the services described in section 1848(j)(3) of the Social
Security Act (42 U.S.C. 1395w-4(j)(3)).
(4) Rural area; urban area.--The terms ``rural area'' and
``urban area'' have the meaning given those terms under section
1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D)).
(5) Secretary.--The term ``Secretary'' means the Secretary of
Health and Human Services.
(6) Teaching hospital.--The term ``teaching hospital'' means a
hospital which has a teaching program approved as specified in
section 1861(b)(6) of the Social Security Act (42 U.S.C.
1395x(b)(6)).
SEC. 4507. USE OF PRIVATE CONTRACTS BY MEDICARE BENEFICIARIES.
(a) Items or Services Provided Through Private Contracts.--
(1) In general.--Section 1802 (42 U.S.C. 1395a) is amended by
adding at the end the following new subsection:
``(b) Use of Private Contracts by Medicare Beneficiaries.--
``(1) In general.--Subject to the provisions of this
subsection, nothing in this title shall prohibit a physician or
practitioner from entering into a private contract with a medicare
beneficiary for any item or service--
``(A) for which no claim for payment is to be submitted
under this title, and
``(B) for which the physician or practitioner receives--
``(i) no reimbursement under this title directly or on
a capitated basis, and
``(ii) receives no amount for such item or service from
an organization which receives reimbursement for such item
or service under this title directly or on a capitated
basis.
``(2) Beneficiary protections.--
``(A) In general.--Paragraph (1) shall not apply to any
contract unless--
``(i) the contract is in writing and is signed by the
medicare beneficiary before any item or service is provided
pursuant to the contract;
``(ii) the contract contains the items described in
subparagraph (B); and
``(iii) the contract is not entered into at a time when
the medicare beneficiary is facing an emergency or urgent
health care situation.
``(B) Items required to be included in contract.--Any
contract to provide items and services to which paragraph (1)
applies shall clearly indicate to the medicare beneficiary that
by signing such contract the beneficiary--
``(i) agrees not to submit a claim (or to request that
the physician or practitioner submit a claim) under this
title for such items or services even if such items or
services are otherwise covered by this title;
``(ii) agrees to be responsible, whether through
insurance or otherwise, for payment of such items or
services and understands that no reimbursement will be
provided under this title for such items or services;
``(iii) acknowledges that no limits under this title
(including the limits under section 1848(g)) apply to
amounts that may be charged for such items or services;
``(iv) acknowledges that Medigap plans under section
1882 do not, and other supplemental insurance plans may
elect not to, make payments for such items and services
because payment is not made under this title; and
``(v) acknowledges that the medicare beneficiary has
the right to have such items or services provided by other
physicians or practitioners for whom payment would be made
under this title.
Such contract shall also clearly indicate whether the physician
or practitioner is excluded from participation under the
medicare program under section 1128.
``(3) Physician or practitioner requirements.--
``(A) In general.--Paragraph (1) shall not apply to any
contract entered into by a physician or practitioner unless an
affidavit described in subparagraph (B) is in effect during the
period any item or service is to be provided pursuant to the
contract.
``(B) Affidavit.--An affidavit is described in this
subparagraph if--
``(i) the affidavit identifies the physician or
practitioner and is in writing and is signed by the
physician or practitioner;
``(ii) the affidavit provides that the physician or
practitioner will not submit any claim under this title for
any item or service provided to any medicare beneficiary
(and will not receive any reimbursement or amount described
in paragraph (1)(B) for any such item or service) during
the 2-year period beginning on the date the affidavit is
signed; and
``(iii) a copy of the affidavit is filed with the
Secretary no later than 10 days after the first contract to
which such affidavit applies is entered into.
``(C) Enforcement.--If a physician or practitioner signing
an affidavit under subparagraph (B) knowingly and willfully
submits a claim under this title for any item or service
provided during the 2-year period described in subparagraph
(B)(ii) (or receives any reimbursement or amount described in
paragraph (1)(B) for any such item or service) with respect to
such affidavit--
``(i) this subsection shall not apply with respect to
any items and services provided by the physician or
practitioner pursuant to any contract on and after the date
of such submission and before the end of such period; and
``(ii) no payment shall be made under this title for
any item or service furnished by the physician or
practitioner during the period described in clause (i) (and
no reimbursement or payment of any amount described in
paragraph (1)(B) shall be made for any such item or
service).
``(4) Limitation on actual charge and claim submission
requirement not applicable.--Section 1848(g) shall not apply with
respect to any item or service provided to a medicare beneficiary
under a contract described in paragraph (1).
``(5) Definitions.--In this subsection:
``(A) Medicare beneficiary.--The term `medicare
beneficiary' means an individual who is entitled to benefits
under part A or enrolled under part B.
``(B) Physician.--The term `physician' has the meaning
given such term by section 1861(r)(1).
``(C) Practitioner.--The term `practitioner' has the
meaning given such term by section 1842(b)(18)(C).''
(2) Conforming amendments.--
(A) Section 1802 (42 U.S.C. 1395a) is amended by striking
``Any'' and inserting ``(a) Basic Freedom of Choice.--Any''.
(B) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by
sections 4319(b) and 4432, is amended by striking ``or'' at the
end of paragraph (17), by striking the period at the end of
paragraph (18) and inserting ``; or'', and by adding after
paragraph (18) the following new paragraph:
``(19) which are for items or services which are furnished
pursuant to a private contract described in section 1802(b).''.
(b) Report.--Not later than October 1, 2001, the Secretary of
Health and Human Services shall submit a report to Congress on the
effect on the program under this title of private contracts entered
into under the amendment made by subsection (a). Such report shall
include--
(1) analyses regarding--
(A) the fiscal impact of such contracts on total Federal
expenditures under title XVIII of the Social Security Act and
on out-of-pocket expenditures by medicare beneficiaries for
health services under such title; and
(B) the quality of the health services provided under such
contracts; and
(2) recommendations as to whether medicare beneficiaries should
continue to be able to enter private contracts under section
1802(b) of such Act (as added by subsection (a)) and if so, what
legislative changes, if any should be made to improve such
contracts.
(c) Effective Date.--The amendment made by subsection (a) shall
apply with respect to contracts entered into on and after January 1,
1998.
Subchapter B--Other Health Care Professionals
SEC. 4511. INCREASED MEDICARE REIMBURSEMENT FOR NURSE PRACTITIONERS AND
CLINICAL NURSE SPECIALISTS.
(a) Removal of Restrictions on Settings.--
(1) In general.--Clause (ii) of section 1861(s)(2)(K) (42
U.S.C. 1395x(s)(2)(K)) is amended to read as follows:
``(ii) services which would be physicians' services if
furnished by a physician (as defined in subsection (r)(1)) and
which are performed by a nurse practitioner or clinical nurse
specialist (as defined in subsection (aa)(5)) working in
collaboration (as defined in subsection (aa)(6)) with a physician
(as defined in subsection (r)(1)) which the nurse practitioner or
clinical nurse specialist is legally authorized to perform by the
State in which the services are performed, and such services and
supplies furnished as an incident to such services as would be
covered under subparagraph (A) if furnished incident to a
physician's professional service, but only if no facility or other
provider charges or is paid any amounts with respect to the
furnishing of such services;''.
(2) Conforming amendments.--(A) Section 1861(s)(2)(K) (42
U.S.C. 1395x(s)(2)(K)) is further amended--
(i) in clause (i), by inserting ``and such services and
supplies furnished as incident to such services as would be
covered under subparagraph (A) if furnished incident to a
physician's professional service; and'' after ``are
performed,''; and
(ii) by striking clauses (iii) and (iv).
(B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended by
striking ``clauses (i) or (iii) of subsection (s)(2)(K)'' and
inserting ``subsection (s)(2)(K)''.
(C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended by
striking ``section 1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)'' and
inserting ``section 1861(s)(2)(K)''.
(D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is
amended by striking ``section 1861(s)(2)(K)(i) or
1861(s)(2)(K)(iii)'' and inserting ``section 1861(s)(2)(K)''.
(E) Section 1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)),
as added by section 4432(a) (relating to prospective payment system
for rehabilitation hospitals), is amended by striking ``through
(iii)'' and inserting ``and (ii)''.
(b) Increased Payment.--
(1) Fee schedule amount.--Subparagraph (O) of section
1833(a)(1) (42 U.S.C. 1395l(a)(1)) is amended to read as follows:
``(O) with respect to services described in section
1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical nurse
specialist services), the amounts paid shall be equal to 80 percent
of (i) the lesser of the actual charge or 85 percent of the fee
schedule amount provided under section 1848, or (ii) in the case of
services as an assistant at surgery, the lesser of the actual
charge or 85 percent of the amount that would otherwise be
recognized if performed by a physician who is serving as an
assistant at surgery; and''.
(2) Conforming amendments.--Section 1833(r) (42 U.S.C.
1395l(r)) is amended--
(A) in paragraph (1), by striking ``section
1861(s)(2)(K)(iii) (relating to nurse practitioner or clinical
nurse specialist services provided in a rural area)'' and
inserting ``section 1861(s)(2)(K)(ii) (relating to nurse
practitioner or clinical nurse specialist services)'';
(B) by striking paragraph (2);
(C) in paragraph (3), by striking ``section
1861(s)(2)(K)(iii)'' and inserting ``section
1861(s)(2)(K)(ii)''; and
(D) by redesignating paragraph (3) as paragraph (2).
(c) Direct Payment for Nurse Practitioners and Clinical Nurse
Specialists.--Section 1832(a)(2)(B)(iv) (42 U.S.C. 1395k(a)(2)(B)(iv))
is amended by striking ``provided in a rural area (as defined in
section 1886(d)(2)(D))'' and inserting ``but only if no facility or
other provider charges or is paid any amounts with respect to the
furnishing of such services''.
(d) Definition of Clinical Nurse Specialist Clarified.--Section
1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended--
(1) by inserting ``(A)'' after ``(5)'';
(2) by striking ``The term `physician assistant''' and all that
follows through ``who performs'' and inserting ``The term
`physician assistant' and the term `nurse practitioner' mean, for
purposes of this title, a physician assistant or nurse practitioner
who performs''; and
(3) by adding at the end the following new subparagraph:
``(B) The term `clinical nurse specialist' means, for purposes of
this title, an individual who--
``(i) is a registered nurse and is licensed to practice nursing
in the State in which the clinical nurse specialist services are
performed; and
``(ii) holds a master's degree in a defined clinical area of
nursing from an accredited educational institution.''.
(e) Effective Date.--The amendments made by this section shall
apply with respect to services furnished and supplies provided on and
after January 1, 1998.
SEC. 4512. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN ASSISTANTS.
(a) Removal of Restriction on Settings.--Section 1861(s)(2)(K)(i)
(42 U.S.C. 1395x(s)(2)(K)(i)), as amended by section 4511, is amended--
(1) by striking ``(I) in a hospital'' and all that follows
through ``shortage area,'', and
(2) by adding at the end the following: ``but only if no
facility or other provider charges or is paid any amounts with
respect to the furnishing of such services,''.
(b) Increased Payment.--
(1) Fee schedule amount.--Section 1833(a)(1)(O) (42 U.S.C.
1395l(a)(1)(O)), as amended by section 4511, is further amended--
(A) by striking ``section 1861(s)(2)(K)(ii)'' and inserting
``1861(s)(2)(K)'', and
(B) by striking ``nurse practitioner or clinical nurse
specialist services'' and inserting ``services furnished by
physician assistants, nurse practitioners, or clinic nurse
specialists''.
(2) Conforming amendment.--Paragraph (12) of section 1842(b)
(42 U.S.C. 1395u(b)) is repealed.
(c) Removal of Restriction on Employment Relationship.--Section
1842(b)(6) (42 U.S.C. 1395u(b)(6)), as amended by section 4205, is
amended by adding at the end the following new sentence: ``For purposes
of subparagraph (C) of the first sentence of this paragraph, an
employment relationship may include any independent contractor
arrangement, and employer status shall be determined in accordance with
the law of the State in which the services described in such clause are
performed.''.
(d) Effective Date.--The amendments made by this section shall
apply with respect to services furnished and supplies provided on and
after January 1, 1998.
SEC. 4513. NO X-RAY REQUIRED FOR CHIROPRACTIC SERVICES.
(a) In General.--Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) is
amended by striking ``demonstrated by X-ray to exist''.
(b) Effective Date.--The amendment made by subsection (a) applies
to services furnished on or after January 1, 2000.
(c) Utilization Guidelines.--The Secretary of Health and Human
Services shall develop and implement utilization guidelines relating to
the coverage of chiropractic services under part B of title XVIII of
the Social Security Act in cases in which a subluxation has not been
demonstrated by X-ray to exist.
CHAPTER 2--PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES
SEC. 4521. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS (FDO) FOR CERTAIN
OUTPATIENT HOSPITAL SERVICES.
(a) Elimination of FDO for Ambulatory Surgical Center Procedures.--
Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is
amended--
(1) by striking ``of 80 percent''; and
(2) by striking the period at the end and inserting the
following: ``, less the amount a provider may charge as described
in clause (ii) of section 1866(a)(2)(A).''.
(b) Elimination of FDO for Radiology Services and Diagnostic
Procedures.--Section 1833(n)(1)(B)(i) (42 U.S.C. 1395l(n)(1)(B)(i)) is
amended--
(1) by striking ``of 80 percent'', and
(2) by inserting before the period at the end the following:
``, less the amount a provider may charge as described in clause
(ii) of section 1866(a)(2)(A)''.
(c) Effective Date.--The amendments made by this section shall
apply to services furnished during portions of cost reporting periods
occurring on or after October 1, 1997.
SEC. 4522. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF HOSPITAL
OUTPATIENT SERVICES.
(a) Reduction in Payments for Capital-Related Costs.--Section
1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is amended by
striking ``through 1998'' and inserting ``through 1999 and during
fiscal year 2000 before January 1, 2000''.
(b) Reduction in Payments for Other Costs.--Section
1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is amended by
striking ``through 1998'' and inserting ``through 1999 and during
fiscal year 2000 before January 1, 2000''.
SEC. 4523. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.
(a) In General.--Section 1833 (42 U.S.C. 1395l) is amended by
adding at the end the following:
``(t) Prospective Payment System for Hospital Outpatient Department
Services.--
``(1) Amount of payment.--
``(A) In general.--With respect to covered OPD services (as
defined in subparagraph (B)) furnished during a year beginning
with 1999, the amount of payment under this part shall be
determined under a prospective payment system established by
the Secretary in accordance with this subsection.
``(B) Definition of covered opd services.--For purposes of
this subsection, the term `covered OPD services'--
``(i) means hospital outpatient services designated by
the Secretary;
``(ii) subject to clause (iii), includes inpatient
hospital services designated by the Secretary that are
covered under this part and furnished to a hospital
inpatient who (I) is entitled to benefits under part A but
has exhausted benefits for inpatient hospital services
during a spell of illness, or (II) is not so entitled; but
``(iii) does not include any therapy services described
in subsection (a)(8) or ambulance services, for which
payment is made under a fee schedule described in section
1834(k) or section 1834(l).
``(2) System requirements.--Under the payment system--
``(A) the Secretary shall develop a classification system
for covered OPD services;
``(B) the Secretary may establish groups of covered OPD
services, within the classification system described in
subparagraph (A), so that services classified within each group
are comparable clinically and with respect to the use of
resources;
``(C) the Secretary shall, using data on claims from 1996
and using data from the most recent available cost reports,
establish relative payment weights for covered OPD services
(and any groups of such services described in subparagraph (B))
based on median hospital costs and shall determine projections
of the frequency of utilization of each such service (or group
of services) in 1999;
``(D) the Secretary shall determine a wage adjustment
factor to adjust the portion of payment and coinsurance
attributable to labor-related costs for relative differences in
labor and labor-related costs across geographic regions in a
budget neutral manner;
``(E) the Secretary shall establish other adjustments, in a
budget neutral manner, as determined to be necessary to ensure
equitable payments, such as outlier adjustments or adjustments
for certain classes of hospitals; and
``(F) the Secretary shall develop a method for controlling
unnecessary increases in the volume of covered OPD services.
``(3) Calculation of base amounts.--
``(A) Aggregate amounts that would be payable if
deductibles were disregarded.--The Secretary shall estimate the
sum of--
``(i) the total amounts that would be payable from the
Trust Fund under this part for covered OPD services in
1999, determined without regard to this subsection, as
though the deductible under section 1833(b) did not apply,
and
``(ii) the total amounts of copayments estimated to be
paid under this subsection by beneficiaries to hospitals
for covered OPD services in 1999, as though the deductible
under section 1833(b) did not apply.
``(B) Unadjusted copayment amount.--
``(i) In general.--For purposes of this subsection,
subject to clause (ii), the `unadjusted copayment amount'
applicable to a covered OPD service (or group of such
services) is 20 percent of the national median of the
charges for the service (or services within the group)
furnished during 1996, updated to 1999 using the
Secretary's estimate of charge growth during the period.
``(ii) Adjusted to be 20 percent when fully phased
in.--If the pre-deductible payment percentage for a covered
OPD service (or group of such services) furnished in a year
would be equal to or exceed 80 percent, then the unadjusted
copayment amount shall be 20 percent of amount determined
under subparagraph (D).
``(iii) Rules for new services.--The Secretary shall
establish rules for establishment of an unadjusted
copayment amount for a covered OPD service not furnished
during 1996, based upon its classification within a group
of such services.
``(C) Calculation of conversion factors.--
``(i) For 1999.--
``(I) In general.--The Secretary shall establish a
1999 conversion factor for determining the medicare OPD
fee schedule amounts for each covered OPD service (or
group of such services) furnished in 1999. Such
conversion factor shall be established on the basis of
the weights and frequencies described in paragraph
(2)(C) and in such a manner that the sum for all
services and groups of the products (described in
subclause (II) for each such service or group) equals
the total projected amount described in subparagraph
(A).
``(II) Product described.--The Secretary shall
determine for each service or group the product of the
medicare OPD fee schedule amounts (taking into account
appropriate adjustments described in paragraphs (2)(D)
and (2)(E)) and the estimated frequencies for such
service or group.
``(ii) Subsequent years.--Subject to paragraph (8)(B),
the Secretary shall establish a conversion factor for
covered OPD services furnished in subsequent years in an
amount equal to the conversion factor established under
this subparagraph and applicable to such services furnished
in the previous year increased by the OPD fee schedule
increase factor specified under clause (iii) for the year
involved.
``(iii) OPD fee schedule increase factor.--For purposes
of this subparagraph, the `OPD fee schedule increase
factor' for services furnished in a year is equal to the
market basket percentage increase applicable under section
1886(b)(3)(B)(iii) to hospital discharges occurring during
the fiscal year ending in such year, reduced by 1
percentage point for such factor for services furnished in
each of 2000, 2001, and 2002. In applying the previous
sentence for years beginning with 2000, the Secretary may
substitute for the market basket percentage increase an
annual percentage increase that is computed and applied
with respect to covered OPD services furnished in a year in
the same manner as the market basket percentage increase is
determined and applied to inpatient hospital services for
discharges occurring in a fiscal year.
``(D) Calculation of medicare opd fee schedule amounts.--
The Secretary shall compute a medicare OPD fee schedule amount
for each covered OPD service (or group of such services)
furnished in a year, in an amount equal to the product of--
``(i) the conversion factor computed under subparagraph
(C) for the year, and
``(ii) the relative payment weight (determined under
paragraph (2)(C)) for the service or group.
``(E) Pre-deductible payment percentage.--The pre-
deductible payment percentage for a covered OPD service (or
group of such services) furnished in a year is equal to the
ratio of--
``(i) the medicare OPD fee schedule amount established
under subparagraph (D) for the year, minus the unadjusted
copayment amount determined under subparagraph (B) for the
service or group, to
``(ii) the medicare OPD fee schedule amount determined
under subparagraph (D) for the year for such service or
group.
``(4) Medicare payment amount.--The amount of payment made from
the Trust Fund under this part for a covered OPD service (and such
services classified within a group) furnished in a year is
determined as follows:
``(A) Fee schedule adjustments.--The medicare OPD fee
schedule amount (computed under paragraph (3)(D)) for the
service or group and year is adjusted for relative differences
in the cost of labor and other factors determined by the
Secretary, as computed under paragraphs (2)(D) and (2)(E).
``(B) Subtract applicable deductible.--Reduce the adjusted
amount determined under subparagraph (A) by the amount of the
deductible under section 1833(b), to the extent applicable.
``(C) Apply payment proportion to remainder.--The amount of
payment is the amount so determined under subparagraph (B)
multiplied by the pre-deductible payment percentage (as
determined under paragraph (3)(E)) for the service or group and
year involved.
``(5) Copayment amount.--
``(A) In general.--Except as provided in subparagraph (B),
the copayment amount under this subsection is the amount by
which the amount described in paragraph (4)(B) exceeds the
amount of payment determined under paragraph (4)(C).
``(B) Election to offer reduced copayment amount.--The
Secretary shall establish a procedure under which a hospital,
before the beginning of a year (beginning with 1999), may elect
to reduce the copayment amount otherwise established under
subparagraph (A) for some or all covered OPD services to an
amount that is not less than 20 percent of the medicare OPD fee
schedule amount (computed under paragraph (3)(D)) for the
service involved. Under such procedures, such reduced copayment
amount may not be further reduced or increased during the year
involved and the hospital may disseminate information on the
reduction of copayment amount effected under this subparagraph.
``(C) No impact on deductibles.--Nothing in this paragraph
shall be construed as affecting a hospital's authority to waive
the charging of a deductible under section 1833(b).
``(6) Periodic review and adjustments components of prospective
payment system.--
``(A) Periodic review.--The Secretary may periodically
review and revise the groups, the relative payment weights, and
the wage and other adjustments described in paragraph (2) to
take into account changes in medical practice, changes in
technology, the addition of new services, new cost data, and
other relevant information and factors.
``(B) Budget neutrality adjustment.--If the Secretary makes
adjustments under subparagraph (A), then the adjustments for a
year may not cause the estimated amount of expenditures under
this part for the year to increase or decrease from the
estimated amount of expenditures under this part that would
have been made if the adjustments had not been made.
``(C) Update factor.--If the Secretary determines under
methodologies described in paragraph (2)(F) that the volume of
services paid for under this subsection increased beyond
amounts established through those methodologies, the Secretary
may appropriately adjust the update to the conversion factor
otherwise applicable in a subsequent year.
``(7) Special rule for ambulance services.--The Secretary shall
pay for hospital outpatient services that are ambulance services on
the basis described in the matter in subsection (a)(1) preceding
subparagraph (A), or, if applicable, the fee schedule established
under section 1834(l).
``(8) Special rules for certain hospitals.--In the case of
hospitals described in section 1886(d)(1)(B)(v)--
``(A) the system under this subsection shall not apply to
covered OPD services furnished before January 1, 2000; and
``(B) the Secretary may establish a separate conversion
factor for such services in a manner that specifically takes
into account the unique costs incurred by such hospitals by
virtue of their patient population and service intensity.
``(9) Limitation on review.--There shall be no administrative
or judicial review under section 1869, 1878, or otherwise of--
``(A) the development of the classification system under
paragraph (2), including the establishment of groups and
relative payment weights for covered OPD services, of wage
adjustment factors, other adjustments, and methods described in
paragraph (2)(F);
``(B) the calculation of base amounts under paragraph (3);
``(C) periodic adjustments made under paragraph (6); and
``(D) the establishment of a separate conversion factor
under paragraph (8)(B).''.
(b) Coinsurance.--Section 1866(a)(2)(A)(ii) (42 U.S.C.
1395cc(a)(2)(A)(ii)) is amended by adding at the end the following:
``In the case of items and services for which payment is made under
part B under the prospective payment system established under section
1833(t), clause (ii) of the first sentence shall be applied by
substituting for 20 percent of the reasonable charge, the applicable
copayment amount established under section 1833(t)(5).''.
(c) Treatment of Reduction in Copayment Amount.--Section
1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended--
(1) by striking ``or'' at the end of subparagraph (B),
(2) by striking the period at the end of subparagraph (C) and
inserting ``; or'', and
(3) by adding at the end the following new subparagraph:
``(D) a reduction in the copayment amount for covered OPD
services under section 1833(t)(5)(B).''.
(d) Conforming Amendments.--
(1) Approved asc procedures performed in hospital outpatient
departments.--
(A)(i) Section 1833(i)(3)(A) (42 U.S.C. 1395l(i)(3)(A)) is
amended--
(I) by inserting ``before January 1, 1999,'' after
``furnished'', and
(II) by striking ``in a cost reporting period''.
(ii) The amendment made by clause (i) shall apply to
services furnished on or after January 1, 1999.
(B) Section 1833(a)(4) (42 U.S.C. 1395l(a)(4)) is amended
by inserting ``or subsection (t)'' before the semicolon.
(2) Radiology and other diagnostic procedures.--
(A) Section 1833(n)(1)(A) (42 U.S.C. 1395l(n)(1)(A)) is
amended by inserting ``and before January 1, 1999,'' after
``October 1, 1988,'' and after ``October 1, 1989,''.
(B) Section 1833(a)(2)(E) (42 U.S.C. 1395l(a)(2)(E)) is
amended by inserting ``or, for services or procedures performed
on or after January 1, 1999, subsection (t)'' before the
semicolon.
(3) Other hospital outpatient services.--Section 1833(a)(2)(B)
(42 U.S.C. 1395l(a)(2)(B)) is amended--
(A) in clause (i), by inserting ``furnished before January
1, 1999,'' after ``(i)'',
(B) in clause (ii), by inserting ``before January 1,
1999,'' after ``furnished'',
(C) by redesignating clause (iii) as clause (iv), and
(D) by inserting after clause (ii), the following new
clause:
``(iii) if such services are furnished on or after
January 1, 1999, the amount determined under subsection
(t), or''.
CHAPTER 3--AMBULANCE SERVICES
SEC. 4531. PAYMENTS FOR AMBULANCE SERVICES.
(a) Interim Reductions.--
(1) Payments determined on reasonable cost basis.--Section
1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by section 4451, is
amended by adding at the end the following new subparagraph:
``(U) In determining the reasonable cost of ambulance
services (as described in subsection (s)(7)) provided during
fiscal year 1998, during fiscal year 1999, and during so much
of fiscal year 2000 as precedes January 1, 2000, the Secretary
shall not recognize the costs per trip in excess of costs
recognized as reasonable for ambulance services provided on a
per trip basis during the previous fiscal year (after
application of this subparagraph), increased by the percentage
increase in the consumer price index for all urban consumers
(U.S. city average) as estimated by the Secretary for the 12-
month period ending with the midpoint of the fiscal year
involved reduced by 1.0 percentage point. For ambulance
services provided after June 30, 1998, the Secretary may
provide that claims for such services must include a code (or
codes) under a uniform coding system specified by the Secretary
that identifies the services furnished.''.
(2) Payments determined on reasonable charge basis.--Section
1842(b) (42 U.S.C. 1395u(b)) is amended by adding at the end the
following new paragraph:
``(19) For purposes of section 1833(a)(1), the reasonable charge
for ambulance services (as described in section 1861(s)(7)) provided
during calendar year 1998 and calendar year 1999 may not exceed the
reasonable charge for such services provided during the previous
calendar year (after application of this paragraph), increased by the
percentage increase in the consumer price index for all urban consumers
(U.S. city average) as estimated by the Secretary for the 12-month
period ending with the midpoint of the year involved reduced by 1.0
percentage point.''.
(b) Establishment of Prospective Fee Schedule.--
(1) Payment in accordance with fee schedule.--Section
1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by section 4315(b),
is amended--
(A) by striking ``and (Q)'' and inserting ``(Q)''; and
(B) by striking the semicolon at the end and inserting the
following: ``, and (R) with respect to ambulance service, the
amounts paid shall be 80 percent of the lesser of the actual
charge for the services or the amount determined by a fee
schedule established by the Secretary under section 1834(l);''.
(2) Establishment of schedule.--Section 1834 (42 U.S.C. 1395m),
as amended by section 4541, is amended by adding at the end the
following new subsection:
``(l) Establishment of Fee Schedule for Ambulance Services.--
``(1) In general.--The Secretary shall establish a fee schedule
for payment for ambulance services whether provided directly by a
supplier or provider or under arrangement with a provider under
this part through a negotiated rulemaking process described in
title 5, United States Code, and in accordance with the
requirements of this subsection.
``(2) Considerations.--In establishing such fee schedule, the
Secretary shall--
``(A) establish mechanisms to control increases in
expenditures for ambulance services under this part;
``(B) establish definitions for ambulance services which
link payments to the type of services provided;
``(C) consider appropriate regional and operational
differences;
``(D) consider adjustments to payment rates to account for
inflation and other relevant factors; and
``(E) phase in the application of the payment rates under
the fee schedule in an efficient and fair manner.
``(3) Savings.--In establishing such fee schedule, the
Secretary shall--
``(A) ensure that the aggregate amount of payments made for
ambulance services under this part during 2000 does not exceed
the aggregate amount of payments which would have been made for
such services under this part during such year if the
amendments made by section 4531(a) of the Balanced Budget Act
of 1997 continued in effect, except that in making such
determination the Secretary shall assume an update in such
payments for 2002 equal to percentage increase in the consumer
price index for all urban consumers (U.S. city average) for the
12-month period ending with June of the previous year reduced
in the case of 2001 and 2002 by 1.0 percentage points; and
``(B) set the payment amounts provided under the fee
schedule for services furnished in 2001 and each subsequent
year at amounts equal to the payment amounts under the fee
schedule for services furnished during the previous year,
increased by the percentage increase in the consumer price
index for all urban consumers (U.S. city average) for the 12-
month period ending with June of the previous year reduced in
the case of 2001 and 2002 by 1.0 percentage points.
``(4) Consultation.--In establishing the fee schedule for
ambulance services under this subsection, the Secretary shall
consult with various national organizations representing
individuals and entities who furnish and regulate ambulance
services and share with such organizations relevant data in
establishing such schedule.
``(5) Limitation on review.--There shall be no administrative
or judicial review under section 1869 or otherwise of the amounts
established under the fee schedule for ambulance services under
this subsection, including matters described in paragraph (2).
``(6) Restraint on billing.--The provisions of subparagraphs
(A) and (B) of section 1842(b)(18) shall apply to ambulance
services for which payment is made under this subsection in the
same manner as they apply to services provided by a practitioner
described in section 1842(b)(18)(C).
``(7) Coding system.--The Secretary may require the claim for
any services for which the amount of payment is determined under
this subsection to include a code (or codes) under a uniform coding
system specified by the Secretary that identifies the services
furnished.''.
(3) Effective date.--The amendments made by this subsection
shall apply to services furnished on or after January 1, 2000.
(c) Authorizing Payment for Paramedic Intercept Service Providers
in Rural Communities.--In promulgating regulations to carry out section
1861(s)(7) of the Social Security Act (42 U.S.C. 1395x(s)(7)) with
respect to the coverage of ambulance service, the Secretary of Health
and Human Services may include coverage of advanced life support
services (in this subsection referred to as ``ALS intercept services'')
provided by a paramedic intercept service provider in a rural area if
the following conditions are met:
(1) The ALS intercept services are provided under a contract
with one or more volunteer ambulance services and are medically
necessary based on the health condition of the individual being
transported.
(2) The volunteer ambulance service involved--
(A) is certified as qualified to provide ambulance service
for purposes of such section,
(B) provides only basic life support services at the time
of the intercept, and
(C) is prohibited by State law from billing for any
services.
(3) The entity supplying the ALS intercept services--
(A) is certified as qualified to provide such services
under the medicare program under title XVIII of the Social
Security Act, and
(B) bills all recipients who receive ALS intercept services
from the entity, regardless of whether or not such recipients
are medicare beneficiaries.
SEC. 4532. DEMONSTRATION OF COVERAGE OF AMBULANCE SERVICES UNDER
MEDICARE THROUGH CONTRACTS WITH UNITS OF LOCAL
GOVERNMENT.
(a) Demonstration Project Contracts with Local Governments.--The
Secretary of Health and Human Services shall establish up to 3
demonstration projects under which, at the request of a unit of local
government, the Secretary enters into a contract with the unit of local
government under which--
(1) the unit of local government furnishes (or arranges for the
furnishing of) ambulance services for which payment may be made
under part B of title XVIII of the Social Security Act for
individuals residing in the unit of local government who are
enrolled under such part, except that the unit of local government
may not enter into the contract unless the contract covers at least
80 percent of the individuals residing in the unit of local
government who are enrolled under such part but not in a
Medicare+Choice plan;
(2) any individual or entity furnishing ambulance services
under the contract meets the requirements otherwise applicable to
individuals and entities furnishing such services under such part;
and
(3) for each month during which the contract is in effect, the
Secretary makes a capitated payment to the unit of local government
in accordance with subsection (b).
The projects may extend over a period of not to exceed 3 years each.
(b) Amount of Payment.--
(1) In general.--The amount of the monthly payment made for
months occurring during a calendar year to a unit of local
government under a demonstration project contract under subsection
(a) shall be equal to the product of--
(A) the Secretary's estimate of the number of individuals
covered under the contract for the month; and
(B) \1/12\ of the capitated payment rate for the year
established under paragraph (2).
(2) Capitated payment rate defined.--In this subsection, the
``capitated payment rate'' applicable to a contract under this
subsection for a calendar year is equal to 95 percent of--
(A) for the first calendar year for which the contract is
in effect, the average annual per capita payment made under
part B of title XVIII of the Social Security Act with respect
to ambulance services furnished to such individuals during the
3 most recent calendar years for which data on the amount of
such payment is available; and
(B) for a subsequent year, the amount provided under this
paragraph for the previous year increased by the percentage
increase in the consumer price index for all urban consumers
(U.S. city average) for the 12-month period ending with June of
the previous year.
(c) Other Terms of Contract.--The Secretary and the unit of local
government may include in a contract under this section such other
terms as the parties consider appropriate, including--
(1) covering individuals residing in additional units of local
government (under arrangements entered into between such units and
the unit of local government involved);
(2) permitting the unit of local government to transport
individuals to non-hospital providers if such providers are able to
furnish quality services at a lower cost than hospital providers;
or
(3) implementing such other innovations as the unit of local
government may propose to improve the quality of ambulance services
and control the costs of such services.
(d) Contract Payments in Lieu of Other Benefits.--Payments under a
contract to a unit of local government under this section shall be
instead of the amounts which (in the absence of the contract) would
otherwise be payable under part B of title XVIII of the Social Security
Act for the services covered under the contract which are furnished to
individuals who reside in the unit of local government.
(e) Report on Effects of Capitated Contracts.--
(1) Study.--The Secretary shall evaluate the demonstration
projects conducted under this section. Such evaluation shall
include an analysis of the quality and cost-effectiveness of
ambulance services furnished under the projects.
(2) Report.--Not later than January 1, 2000, the Secretary
shall submit a report to Congress on the study conducted under
paragraph (1), and shall include in the report such recommendations
as the Secretary considers appropriate, including recommendations
regarding modifications to the methodology used to determine the
amount of payments made under such contracts and extending or
expanding such projects.
CHAPTER 4--PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITATION SERVICES
SEC. 4541. PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITATION SERVICES.
(a) Payment Based on Fee Schedule.--
(1) Special payment rules.--Section 1833(a) (42 U.S.C.
1395l(a)) is amended--
(A) in paragraph (2) in the matter before subparagraph (A),
by inserting ``(C),'' before ``(D)'';
(B) in paragraph (3), by striking ``subparagraphs (D) and
(E) of section 1832(a)(2)'' and inserting ``section
1832(a)(2)(D)'';
(C) in paragraph (6), by striking ``and'' at the end;
(D) in paragraph (7), by striking the period at the end and
inserting a semicolon; and
(E) by adding at the end the following new paragraphs:
``(8) in the case of--
``(A) outpatient physical therapy services (which includes
outpatient speech-language pathology services) and outpatient
occupational therapy services furnished--
``(i) by a rehabilitation agency, public health agency,
clinic, comprehensive outpatient rehabilitation facility,
or skilled nursing facility,
``(ii) by a home health agency to an individual who is
not homebound, or
``(iii) by another entity under an arrangement with an
entity described in clause (i) or (ii); and
``(B) outpatient physical therapy services (which includes
outpatient speech-language pathology services) and outpatient
occupational therapy services furnished--
``(i) by a hospital to an outpatient or to a hospital
inpatient who is entitled to benefits under part A but has
exhausted benefits for inpatient hospital services during a
spell of illness or is not so entitled to benefits under
part A, or
``(ii) by another entity under an arrangement with a
hospital described in clause (i),
the amounts described in section 1834(k); and
``(9) in the case of services described in section
1832(a)(2)(E) that are not described in paragraph (8), the amounts
described in section 1834(k).''.
(2) Payment rates.--Section 1834 (42 U.S.C. 1395m) is amended
by adding at the end the following new subsection:
``(k) Payment for Outpatient Therapy Services and Comprehensive
Outpatient Rehabilitation Services.--
``(1) In general.--With respect to services described in
section 1833(a)(8) or 1833(a)(9) for which payment is determined
under this subsection, the payment basis shall be--
``(A) for services furnished during 1998, the amount
determined under paragraph (2); or
``(B) for services furnished during a subsequent year, 80
percent of the lesser of--
``(i) the actual charge for the services, or
``(ii) the applicable fee schedule amount (as defined
in paragraph (3)) for the services.
``(2) Payment in 1998 based upon adjusted reasonable costs.--
The amount under this paragraph for services is the lesser of--
``(A) the charges imposed for the services, or
``(B) the adjusted reasonable costs (as defined in
paragraph (4)) for the services,
less 20 percent of the amount of the charges imposed for such
services.
``(3) Applicable fee schedule amount.--In this subsection, the
term `applicable fee schedule amount' means, with respect to
services furnished in a year, the amount determined under the fee
schedule established under section 1848 for such services furnished
during the year or, if there is no such fee schedule established
for such services, the amount determined under the fee schedule
established for such comparable services as the Secretary
specifies.
``(4) Adjusted reasonable costs.--In paragraph (2), the term
`adjusted reasonable costs' means, with respect to any services,
reasonable costs determined for such services, reduced by 10
percent. The 10-percent reduction shall not apply to services
described in section 1833(a)(8)(B) (relating to services provided
by hospitals).
``(5) Uniform coding.--For claims for services submitted on or
after April 1, 1998, for which the amount of payment is determined
under this subsection, the claim shall include a code (or codes)
under a uniform coding system specified by the Secretary that
identifies the services furnished.
``(6) Restraint on billing.--The provisions of subparagraphs
(A) and (B) of section 1842(b)(18) shall apply to therapy services
for which payment is made under this subsection in the same manner
as they apply to services provided by a practitioner described in
section 1842(b)(18)(C).''.
(3) Conforming change in billing.--Section 1866(a)(2)(A)(ii)
(42 U.S.C. 1395cc(a)(2)(A)(ii)) is amended by adding at the end the
following: ``In the case of services described in section
1833(a)(8) or section 1833(a)(9) for which payment is made under
part B under section 1834(k), clause (ii) of the first sentence
shall be applied by substituting for 20 percent of the reasonable
charge for such services 20 percent of the lesser of the actual
charge or the applicable fee schedule amount (as defined in such
section) for such services.''.
(b) Application of Standards to Outpatient Occupational and
Physical Therapy Services Provided As an Incident to a Physician's
Professional Services.--Section 1862(a), as amended by sections
4319(b), 4432(b), and 4507(a)(2)(B), (42 U.S.C. 1395y(a)) is amended--
(1) by striking ``or'' at the end of paragraph (18);
(2) by striking the period at the end of paragraph (19) and
inserting ``; or''; and
(3) by inserting after paragraph (19) the following:
``(20) in the case of outpatient occupational therapy services
or outpatient physical therapy services furnished as an incident to
a physician's professional services (as described in section
1861(s)(2)(A)), that do not meet the standards and conditions
(other than any licensing requirement specified by the Secretary)
under the second sentence of section 1861(p) (or under such
sentence through the operation of section 1861(g)) as such
standards and conditions would apply to such therapy services if
furnished by a therapist.''.
(c) Applying Financial Limitation to All Rehabilitation Services.--
Section 1833(g) (42 U.S.C. 1395l(g)) is amended--
(1) in the first sentence, by striking ``services described in
the second sentence of section 1861(p)'' and inserting ``physical
therapy services of the type described in section 1861(p), but not
described in section 1833(a)(8)(B), and physical therapy services
of such type which are furnished by a physician or as incident to
physicians' services'', and
(2) in the second sentence, by striking ``outpatient
occupational therapy services which are described in the second
sentence of section 1861(p) through the operation of section
1861(g)'' and inserting ``occupational therapy services (of the
type that are described in section 1861(p) (but not described in
section 1833(a)(8)(B)) through the operation of section 1861(g) and
of such type which are furnished by a physician or as incident to
physicians' services)''.
(d) Indexing Limitation.--
(1) In general.--Section 1833(g) (42 U.S.C. 1395l(g)), as
amended by subsection (c), is further amended--
(A) by striking ``$900'' each place it appears and
inserting ``the amount specified in paragraph (2) for the
year'',
(B) by inserting ``(1)'' after ``(g)'',
(C) by designating the last sentence as a paragraph (3),
and
(D) by inserting before paragraph (3), as so designated,
the following:
``(2) The amount specified in this paragraph--
``(A) for 1999, 2000, and 2001, is $1,500, and
``(B) for a subsequent year is the amount specified in this
paragraph for the preceding year increased by the percentage
increase in the MEI (as defined in section 1842(i)(3)) for such
subsequent year;
except that if an increase under subparagraph (B) for a year is not a
multiple of $10, it shall be rounded to the nearest multiple of $10.''.
(2) Report.--By not later than January 1, 2001, the Secretary
of Health and Human Services shall submit to Congress a report that
includes recommendations on the establishment of a revised coverage
policy of outpatient physical therapy services and outpatient
occupational therapy services under the Social Security Act based
on classification of individuals by diagnostic category and prior
use of services, in both inpatient and outpatient settings, in
place of the uniform dollar limitations specified in section
1833(g) of such Act, as amended by paragraph (1). The
recommendations shall include how such a system of durational
limits by diagnostic category might be implemented in a budget-
neutral manner.
(e) Effective Dates.--
(1) The amendments made by subsections (a)(1), (a)(2), and (b)
apply to services furnished on or after January 1, 1998, including
portions of cost reporting periods occurring on or after such date,
except that section 1834(k) of the Social Security Act (as added by
subsection (a)(2)) shall not apply to services described in section
1833(a)(8)(B) of such Act (as added by subsection (a)(1)) that are
furnished during 1998.
(2) The amendments made by subsections (a)(3) and (c) apply to
services furnished on or after January 1, 1999.
(3) The amendments made by subsection (d)(1) apply to expenses
incurred on or after January 1, 1999.
CHAPTER 5--OTHER PAYMENT PROVISIONS
SEC. 4551. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.
(a) Reduction in Payment Amounts for Items of Durable Medical
Equipment.--
(1) Freeze in update for covered items.--Section 1834(a)(14)
(42 U.S.C. 1395m(a)(14)) is amended--
(A) in subparagraph (A), by striking ``and'' at the end;
(B) in subparagraph (B)--
(i) by striking ``a subsequent year'' and inserting
``1993, 1994, 1995, 1996, and 1997'', and
(ii) by striking the period at the end and inserting a
semicolon; and
(C) by adding at the end the following new subparagraphs:
``(C) for each of the years 1998 through 2002, 0 percentage
points; and
``(D) for a subsequent year, the percentage increase in the
consumer price index for all urban consumers (U.S. urban
average) for the 12-month period ending with June of the
previous year.''.
(2) Update for orthotics and prosthetics.--Section
1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
(A) in clause (iii), by striking ``, and'' at the end and
inserting a semicolon;
(B) in clause (iv), by striking ``a subsequent year'' and
inserting ``1996 and 1997''; and
(C) by adding at the end the following new clauses:
``(v) for each of the years 1998 through 2002, 1
percent, and
``(vi) for a subsequent year, the percentage increase
in the consumer price index for all urban consumers (United
States city average) for the 12-month period ending with
June of the previous year;''.
(b) Payment Freeze for Parenteral and Enteral Nutrients, Supplies,
and Equipment.--In determining the amount of payment under part B of
title XVIII of the Social Security Act with respect to parenteral and
enteral nutrients, supplies, and equipment during each of the years
1998 through 2002, the charges determined to be reasonable with respect
to such nutrients, supplies, and equipment may not exceed the charges
determined to be reasonable with respect to such nutrients, supplies,
and equipment during 1995.
(c) Upgraded Durable Medical Equipment.--
(1) In general.--Section 1834(a) (42 U.S.C. 1395m(a)), as
amended by section 4312(a), is amended by inserting after paragraph
(16) the following new paragraph:
``(17) Certain upgraded items.--
``(A) Individual's right to choose upgraded item.--
Notwithstanding any other provision of this title, the
Secretary may issue regulations under which an individual may
purchase or rent from a supplier an item of upgraded durable
medical equipment for which payment would be made under this
subsection if the item were a standard item.
``(B) Payments to supplier.--In the case of the purchase or
rental of an upgraded item under subparagraph (A)--
``(i) the supplier shall receive payment under this
subsection with respect to such item as if such item were a
standard item; and
``(ii) the individual purchasing or renting the item
shall pay the supplier an amount equal to the difference
between the supplier's charge and the amount under clause
(i).
In no event may the supplier's charge for an upgraded item
exceed the applicable fee schedule amount (if any) for such
item.
``(C) Consumer protection safeguards.--Any regulations
under subparagraph (A) shall provide for consumer protection
standards with respect to the furnishing of upgraded equipment
under subparagraph (A). Such regulations shall provide for--
``(i) determination of fair market prices with respect
to an upgraded item;
``(ii) full disclosure of the availability and price of
standard items and proof of receipt of such disclosure
information by the beneficiary before the furnishing of the
upgraded item;
``(iii) conditions of participation for suppliers in
the billing arrangement;
``(iv) sanctions of suppliers who are determined to
engage in coercive or abusive practices, including
exclusion; and
``(v) such other safeguards as the Secretary determines
are necessary.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to purchases or rentals after the effective date of any
regulations issued pursuant to such amendment.
SEC. 4552. OXYGEN AND OXYGEN EQUIPMENT.
(a) In General.--Section 1834(a)(9)(B) (42 U.S.C. 1395m(a)(9)(B))
is amended--
(1) in clause (iii), by striking ``and'' at the end;
(2) in clause (iv)--
(A) by striking ``each subsequent year'' and inserting
``1995, 1996, and 1997'', and
(B) by striking the period at the end and inserting a
semicolon; and
(3) by adding at the end the following new clauses:
``(v) for 1998, 75 percent of the amount determined
under this subparagraph for 1997; and
``(vi) for 1999 and each subsequent year, 70 percent of
the amount determined under this subparagraph for 1997.''.
(b) Establishment of Classes for Payment.--Section 1848(a)(9) (42
U.S.C. 1395m(a)(9)) is amended by adding at the end the following new
subparagraph:
``(D) Authority to create classes.--
``(i) In general.--Subject to clause (ii), the
Secretary may establish separate classes for any item of
oxygen and oxygen equipment and separate national limited
monthly payment rates for each of such classes.
``(ii) Budget neutrality.--The Secretary may take
actions under clause (i) only to the extent such actions do
not result in expenditures for any year to be more or less
than the expenditures which would have been made if such
actions had not been taken.''.
(c) Standards.--The Secretary shall as soon as practicable
establish service standards for persons seeking payment under part B of
title XVIII of the Social Security Act for the providing of oxygen and
oxygen equipment to beneficiaries within their homes.
(d) Access to Home Oxygen Equipment.--
(1) Study.--The Comptroller General of the United States shall
study issues relating to access to home oxygen equipment and shall,
within 18 months after the date of the enactment of this Act,
report to the Committees on Commerce and Ways and Means of the
House of Representatives and the Committee on Finance of the Senate
the results of the study, including recommendations (if any) for
legislation.
(2) Peer review evaluation.--The Secretary of Health and Human
Services shall arrange for peer review organizations established
under section 1154 of the Social Security Act to evaluate access
to, and quality of, home oxygen equipment.
(e) Effective Date.--
(1) Oxygen.--The amendments made by subsection (a) shall apply
to items furnished on and after January 1, 1998.
(2) Other provisions.--The amendments made by this section
other than subsection (a) shall take effect on the date of the
enactment of this Act.
SEC. 4553. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR CLINICAL
DIAGNOSTIC LABORATORY TESTS; STUDY ON LABORATORY TESTS.
(a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C.
1395l(h)(2)(A)(ii)(IV)) is amended by inserting ``and 1998 through
2002'' after ``1995''.
(b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) (42
U.S.C. 1395l(h)(4)(B)) is amended--
(1) in clause (vi), by striking ``and'' at the end;
(2) in clause (vii)--
(A) by inserting ``and before January 1, 1998,'' after
``1995,'', and
(B) by striking the period at the end and inserting ``,
and''; and
(3) by adding at the end the following new clause:
``(viii) after December 31, 1997, is equal to 74 percent of
such median.''.
(c) Study and Report on Clinical Laboratory Tests.--
(1) In general.--The Secretary shall request the Institute of
Medicine of the National Academy of Sciences to conduct a study of
payments under part B of title XVIII of the Social Security Act for
clinical laboratory tests. The study shall include a review of the
adequacy of the current methodology and recommendations regarding
alternative payment systems. The study shall also analyze and
discuss the relationship between such payment systems and access to
high quality laboratory tests for medicare beneficiaries, including
availability and access to new testing methodologies.
(2) Report to congress.--The Secretary shall, not later than 2
years after the date of enactment of this section, report to the
Committees on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the Senate the
results of the study described in paragraph (1), including any
recommendations for legislation.
SEC. 4554. IMPROVEMENTS IN ADMINISTRATION OF LABORATORY TESTS BENEFIT.
(a) Selection of Regional Carriers.--
(1) In general.--The Secretary of Health and Human Services (in
this section referred to as the ``Secretary'') shall--
(A) divide the United States into no more than 5 regions,
and
(B) designate a single carrier for each such region,
for the purpose of payment of claims under part B of title XVIII of
the Social Security Act with respect to clinical diagnostic
laboratory tests furnished on or after such date (not later than
July 1, 1999) as the Secretary specifies.
(2) Designation.--In designating such carriers, the Secretary
shall consider, among other criteria--
(A) a carrier's timeliness, quality, and experience in
claims processing, and
(B) a carrier's capacity to conduct electronic data
interchange with laboratories and data matches with other
carriers.
(3) Single data resource.--The Secretary shall select one of
the designated carriers to serve as a central statistical resource
for all claims information relating to such clinical diagnostic
laboratory tests handled by all the designated carriers under such
part.
(4) Allocation of claims.--The allocation of claims for
clinical diagnostic laboratory tests to particular designated
carriers shall be based on whether a carrier serves the geographic
area where the laboratory specimen was collected or other method
specified by the Secretary.
(5) Secretarial exclusion.--Paragraph (1) shall not apply with
respect to clinical diagnostic laboratory tests furnished by
physician office laboratories if the Secretary determines that such
offices would be unduly burdened by the application of billing
responsibilities with respect to more than one carrier.
(b) Adoption of National Policies for Clinical Laboratory Tests
Benefit.--
(1) In general.--Not later than January 1, 1999, the Secretary
shall first adopt, consistent with paragraph (2), national coverage
and administrative policies for clinical diagnostic laboratory
tests under part B of title XVIII of the Social Security Act, using
a negotiated rulemaking process under subchapter III of chapter 5
of title 5, United States Code.
(2) Considerations in design of national policies.--The
policies under paragraph (1) shall be designed to promote program
integrity and national uniformity and simplify administrative
requirements with respect to clinical diagnostic laboratory tests
payable under such part in connection with the following:
(A) Beneficiary information required to be submitted with
each claim or order for laboratory tests.
(B) The medical conditions for which a laboratory test is
reasonable and necessary (within the meaning of section
1862(a)(1)(A) of the Social Security Act).
(C) The appropriate use of procedure codes in billing for a
laboratory test, including the unbundling of laboratory
services.
(D) The medical documentation that is required by a
medicare contractor at the time a claim is submitted for a
laboratory test in accordance with section 1833(e) of the
Social Security Act.
(E) Recordkeeping requirements in addition to any
information required to be submitted with a claim, including
physicians' obligations regarding such requirements.
(F) Procedures for filing claims and for providing
remittances by electronic media.
(G) Limitation on frequency of coverage for the same tests
performed on the same individual.
(3) Changes in laboratory policies pending adoption of national
policy.--During the period that begins on the date of the enactment
of this Act and ends on the date the Secretary first implements
national policies pursuant to regulations promulgated under this
subsection, a carrier under such part may implement changes
relating to requirements for the submission of a claim for clinical
diagnostic laboratory tests.
(4) Use of interim policies.--After the date the Secretary
first implements such national policies, the Secretary shall permit
any carrier to develop and implement interim policies of the type
described in paragraph (1), in accordance with guidelines
established by the Secretary, in cases in which a uniform national
policy has not been established under this subsection and there is
a demonstrated need for a policy to respond to aberrant utilization
or provision of unnecessary tests. Except as the Secretary
specifically permits, no policy shall be implemented under this
paragraph for a period of longer than 2 years.
(5) Interim national policies.--After the date the Secretary
first designates regional carriers under subsection (a), the
Secretary shall establish a process under which designated carriers
can collectively develop and implement interim national policies of
the type described in paragraph (1). No such policy shall be
implemented under this paragraph for a period of longer than 2
years.
(6) Biennial review process.--Not less often than once every 2
years, the Secretary shall solicit and review comments regarding
changes in the national policies established under this subsection.
As part of such biennial review process, the Secretary shall
specifically review and consider whether to incorporate or
supersede interim policies developed under paragraph (4) or (5).
Based upon such review, the Secretary may provide for appropriate
changes in the national policies previously adopted under this
subsection.
(7) Requirement and notice.--The Secretary shall ensure that
any policies adopted under paragraph (3), (4), or (5) shall apply
to all laboratory claims payable under part B of title XVIII of the
Social Security Act, and shall provide for advance notice to
interested parties and a 45-day period in which such parties may
submit comments on the proposed change.
(c) Inclusion of Laboratory Representative on Carrier Advisory
Committees.--The Secretary shall direct that any advisory committee
established by a carrier to advise such carrier with respect to
coverage and administrative policies under part B of title XVIII of the
Social Security Act shall include an individual to represent the
independent clinical laboratories and such other laboratories as the
Secretary deems appropriate. The Secretary shall consider
recommendations from national and local organizations that represent
independent clinical laboratories in such selection.
SEC. 4555. UPDATES FOR AMBULATORY SURGICAL SERVICES.
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended by
inserting at the end the following new sentence: ``In each of the
fiscal years 1998 through 2002, the increase under this subparagraph
shall be reduced (but not below zero) by 2.0 percentage points.''.
SEC. 4556. REIMBURSEMENT FOR DRUGS AND BIOLOGICALS.
(a) In General.--Section 1842 (42 U.S.C. 1395u) is amended by
inserting after subsection (n) the following new subsection:
``(o)(1) If a physician's, supplier's, or any other person's bill
or request for payment for services includes a charge for a drug or
biological for which payment may be made under this part and the drug
or biological is not paid on a cost or prospective payment basis as
otherwise provided in this part, the amount payable for the drug or
biological is equal to 95 percent of the average wholesale price.
``(2) If payment for a drug or biological is made to a licensed
pharmacy approved to dispense drugs or biologicals under this part, the
Secretary may pay a dispensing fee (less the applicable deductible and
coinsurance amounts) to the pharmacy.''.
(b) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)), as amended by sections 4315(b) and 4531(b)(1), is
amended--
(1) by striking ``and (R)'' and inserting ``(R)''; and
(2) by striking the semicolon at the end and inserting the
following: ``, and (S) with respect to drugs and biologicals not
paid on a cost or prospective payment basis as otherwise provided
in this part (other than items and services described in
subparagraph (B)), the amounts paid shall be 80 percent of the
lesser of the actual charge or the payment amount established in
section 1842(o);''.
(c) Study and report.--The Secretary of Health and Human Services
shall study the effect on the average wholesale price of drugs and
biologicals of the amendments made by subsection (a) and shall report
to the Committees on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the Senate the result
of such study not later than July 1, 1999.
(d) Effective Date.--The amendments made by subsections (a) and (b)
shall apply to drugs and biologicals furnished on or after January 1,
1998.
SEC. 4557. COVERAGE OF ORAL ANTI-NAUSEA DRUGS UNDER CHEMOTHERAPEUTIC
REGIMEN.
(a) In General.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as
amended by sections 4104 and 4105, is amended--
(1) by striking ``and'' at the end of subparagraph (R); and
(2) by inserting after subparagraph (S) the following new
subparagraph:
``(T) an oral drug (which is approved by the Federal Food and
Drug Administration) prescribed for use as an acute anti-emetic
used as part of an anticancer chemotherapeutic regimen if the drug
is administered by a physician (or as prescribed by a physician)--
``(i) for use immediately before, at, or within 48 hours
after the time of the administration of the anticancer
chemotherapeutic agent; and
``(ii) as a full replacement for the anti-emetic therapy
which would otherwise be administered intravenously.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to items and services furnished on or after January 1, 1998.
SEC. 4558. RENAL DIALYSIS-RELATED SERVICES.
(a) Auditing of Cost Reports.--Beginning with cost reports for
1996, the Secretary shall audit cost reports of each renal dialysis
provider at least once every 3 years.
(b) Implementation of Quality Standards.--The Secretary of Health
and Human Services shall develop, by not later than January 1, 1999,
and implement, by not later than January 1, 2000, a method to measure
and report quality of renal dialysis services provided under the
medicare program under title XVIII of the Social Security Act.
SEC. 4559. TEMPORARY COVERAGE RESTORATION FOR PORTABLE
ELECTROCARDIOGRAM TRANSPORTATION.
(a) In General.--Effective only for electrocardiogram tests
furnished during 1998, the Secretary of Health and Human Services shall
restore separate payment, under part B of title XVIII of the Social
Security Act, for the transportation of electrocardiogram equipment
(HCPCS code R0076) based upon payment methods in effect for such
service as of December 31, 1996.
(b) Determination.--By not later than July 1, 1998, the Secretary
of Health and Human Services shall make a recommendation to the
Committees on Commerce and Ways and Means of the House of
Representatives and the Committee on Finance of the Senate as to
whether coverage of portable electrocardiogram transportation should be
provided under part B of title XVIII of the Social Security Act. In
making such recommendation, the Secretary shall take into account the
study of coverage of portable electrocardiogram transportation
conducted by the Comptroller General of the United States and other
relevant information, including information submitted by interested
parties.
CHAPTER 6--PART B PREMIUM AND RELATED PROVISIONS
Subchapter A--Determination of Part B Premium Amount
SEC. 4571. PART B PREMIUM.
(a) In General.--Section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) is
amended by striking the first 3 sentences and inserting the following:
``The Secretary, during September of each year, shall determine and
promulgate a monthly premium rate for the succeeding calendar year that
is equal to 50 percent of the monthly actuarial rate for enrollees age
65 and over, determined according to paragraph (1), for that succeeding
calendar year.''.
(b) Conforming and Technical Amendments.--
(1) Section 1839.--Section 1839 (42 U.S.C. 1395r) is amended--
(A) in subsection (a)(2), by striking ``(b) and (e)'' and
inserting ``(b), (c), and (f)'';
(B) in the last sentence of subsection (a)(3)--
(i) by inserting ``rate'' after ``premium'', and
(ii) by striking ``and the derivation of the dollar
amounts specified in this paragraph'';
(C) in the first sentence of subsection (b), by striking
``or (e)'';
(D) by striking subsection (e); and
(E) by redesignating subsection (g) as subsection (e) and
inserting that subsection after subsection (d).
(2) Section 1844.--Subparagraphs (A)(i) and (B)(i) of section
1844(a)(1) (42 U.S.C. 1395w(a)(1)) are each amended by striking
``or 1839(e), as the case may be''.
Subchapter B--Other Provisions Related to Part B Premium
SEC. 4581. PROTECTIONS UNDER THE MEDICARE PROGRAM FOR DISABLED WORKERS
WHO LOSE BENEFITS UNDER A GROUP HEALTH PLAN.
(a) No Premium Penalty for Late Enrollment.--The first sentence of
section 1839(b) (42 U.S.C. 1395r(b)) is amended by inserting ``and not
pursuant to a special enrollment period under section 1837(i)(4)''
after ``section 1837)''.
(b) Special Medicare Enrollment Period.--
(1) In general.--Section 1837(i) (42 U.S.C. 1395p(i)) is
amended by adding at the end the following new paragraph:
``(4)(A) In the case of an individual who is entitled to benefits
under part A pursuant to section 226(b) and--
``(i) who at the time the individual first satisfies paragraph
(1) of section 1836--
``(I) is enrolled in a group health plan described in
section 1862(b)(1)(A)(v) by reason of the individual's current
or former employment or by reason of the current or former
employment status of a member of the individual's family, and
``(II) has elected not to enroll (or to be deemed enrolled)
under this section during the individual's initial enrollment
period; and
``(ii) whose continuous enrollment under such group health plan
is involuntarily terminated at a time when the enrollment under the
plan is not by reason of the individual's current employment or by
reason of the current employment of a member of the individual's
family,
there shall be a special enrollment period described in subparagraph
(B).
``(B) The special enrollment period referred to in subparagraph (A)
is the 6-month period beginning on the first day of the month which
includes the date of the enrollment termination described in
subparagraph (A)(ii).''.
(2) Coverage period.--Section 1838(e) (42 U.S.C. 1395q(e)) is
amended--
(A) by inserting ``or 1837(i)(4)(B)'' after ``1837(i)(3)''
the first place it appears, and
(B) by inserting ``or specified in section
1837(i)(4)(A)(i)'' after ``1837(i)(3)'' the second place it
appears.
(c) Effective Date.--The amendments made by this section shall
apply to involuntary terminations of coverage under a group health plan
occurring on or after the date of the enactment of this Act.
SEC. 4582. GOVERNMENTAL ENTITIES ELIGIBLE TO ELECT TO PAY PART B
PREMIUMS FOR ELIGIBLE INDIVIDUALS.
Section 1839(e)(1) (as amended by section 4571(b)) is amended--
(1) by inserting ``(or any appropriate State or local
governmental entity specified by the Secretary)'' after ``State''
the first place it appears, and
(2) by inserting ``(or such entity)'' after ``State'' the
second and third place it appears.
Subtitle G--Provisions Relating to Parts A and B
CHAPTER 1--HOME HEALTH SERVICES AND BENEFITS
Subchapter A--Payments For Home Health Services
SEC. 4601. RECAPTURING SAVINGS RESULTING FROM TEMPORARY FREEZE ON
PAYMENT INCREASES FOR HOME HEALTH SERVICES.
(a) Basing Updates to Per Visit Cost Limits on Limits for Fiscal
Year 1993.--Section 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended
by adding at the end the following:
``(iv) In establishing limits under this subparagraph for cost
reporting periods beginning after September 30, 1997, the Secretary
shall not take into account any changes in the home health market
basket, as determined by the Secretary, with respect to cost reporting
periods which began on or after July 1, 1994, and before July 1,
1996.''.
(b) No Exceptions Permitted Based on Amendment.--The Secretary of
Health and Human Services shall not consider the amendment made by
subsection (a) in making any exemptions and exceptions pursuant to
section 1861(v)(1)(L)(ii) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(ii)).
SEC. 4602. INTERIM PAYMENTS FOR HOME HEALTH SERVICES.
(a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) (42 U.S.C.
1395x(v)(1)(L)(i)) is amended--
(1) by moving the indentation of subclauses (I) through (III)
2-ems to the left;
(2) in subclause (I), by inserting ``of the mean of the labor-
related and nonlabor per visit costs for freestanding home health
agencies'' before the comma at the end;
(3) in subclause (II), by striking ``, or'' and inserting ``of
such mean,'';
(4) in subclause (III)--
(A) by inserting ``and before October 1, 1997,'' after
``July 1, 1987,'', and
(B) by striking the comma at the end and inserting ``of
such mean, or''; and
(5) by striking the matter following subclause (III) and
inserting the following:
``(IV) October 1, 1997, 105 percent of the median of the labor-
related and nonlabor per visit costs for freestanding home health
agencies.''.
(b) Delay in Updates.--Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by inserting ``, or on or after July 1,
1997, and before October 1, 1997'' after ``July 1, 1996''.
(c) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 U.S.C.
1395x(v)(1)(L)) (as amended by section 4601(a)) is amended by adding at
the end the following new clauses:
``(v) For services furnished by home health agencies for cost
reporting periods beginning on or after October 1, 1997, the Secretary
shall provide for an interim system of limits. Payment shall not exceed
the costs determined under the preceding provisions of this
subparagraph or, if lower, the product of--
``(I) an agency-specific per beneficiary annual limitation
calculated based 75 percent on 98 percent of the reasonable costs
(including nonroutine medical supplies) for the agency's 12-month
cost reporting period ending during fiscal year 1994, and based 25
percent on 98 percent of the standardized regional average of such
costs for the agency's census division, as applied to such agency,
for cost reporting periods ending during fiscal year 1994, such
costs updated by the home health market basket index; and
``(II) the agency's unduplicated census count of patients
(entitled to benefits under this title) for the cost reporting
period subject to the limitation.
``(vi) For services furnished by home health agencies for cost
reporting periods beginning on or after October 1, 1997, the following
rules apply:
``(I) For new providers and those providers without a 12-month
cost reporting period ending in fiscal year 1994, the per
beneficiary limitation shall be equal to the median of these limits
(or the Secretary's best estimates thereof) applied to other home
health agencies as determined by the Secretary. A home health
agency that has altered its corporate structure or name shall not
be considered a new provider for this purpose.
``(II) For beneficiaries who use services furnished by more
than one home health agency, the per beneficiary limitations shall
be prorated among the agencies.
``(vii)(I) Not later than January 1, 1998, the Secretary shall
establish per visit limits applicable for fiscal year 1998, and not
later than April 1, 1998, the Secretary shall establish per beneficiary
limits under clause (v)(I) for fiscal year 1998.
``(II) Not later than August 1 of each year (beginning in 1998) the
Secretary shall establish the limits applicable under this subparagraph
for services furnished during the fiscal year beginning October 1 of
the year.''.
(d) Development of Case Mix System.--The Secretary of Health and
Human Services shall expand research on a prospective payment system
for home health agencies under the medicare program that ties
prospective payments to a unit of service, including an intensive
effort to develop a reliable case mix adjuster that explains a
significant amount of the variances in costs.
(e) Submission of Data for Case Mix System.--Effective for cost
reporting periods beginning on or after October 1, 1997, the Secretary
of Health and Human Services may require all home health agencies to
submit additional information that the Secretary considers necessary
for the development of a reliable case mix system.
SEC. 4603. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) (as amended
by section 4801) is amended by adding at the end the following:
``prospective payment for home health services
``Sec. 1895. (a) In General.--Notwithstanding section 1861(v), the
Secretary shall provide, for cost reporting periods beginning on or
after October 1, 1999, for payments for home health services in
accordance with a prospective payment system established by the
Secretary under this section.
``(b) System of Prospective Payment for Home Health Services.--
``(1) In general.--The Secretary shall establish under this
subsection a prospective payment system for payment for all costs
of home health services. Under the system under this subsection all
services covered and paid on a reasonable cost basis under the
medicare home health benefit as of the date of the enactment of the
this section, including medical supplies, shall be paid for on the
basis of a prospective payment amount determined under this
subsection and applicable to the services involved. In implementing
the system, the Secretary may provide for a transition (of not
longer than 4 years) during which a portion of such payment is
based on agency-specific costs, but only if such transition does
not result in aggregate payments under this title that exceed the
aggregate payments that would be made if such a transition did not
occur.
``(2) Unit of payment.--In defining a prospective payment
amount under the system under this subsection, the Secretary shall
consider an appropriate unit of service and the number, type, and
duration of visits provided within that unit, potential changes in
the mix of services provided within that unit and their cost, and a
general system design that provides for continued access to quality
services.
``(3) Payment basis.--
``(A) Initial basis.--
``(i) In general.--Under such system the Secretary
shall provide for computation of a standard prospective
payment amount (or amounts). Such amount (or amounts) shall
initially be based on the most current audited cost report
data available to the Secretary and shall be computed in a
manner so that the total amounts payable under the system
for fiscal year 2000 shall be equal to the total amount
that would have been made if the system had not been in
effect but if the reduction in limits described in clause
(ii) had been in effect. Such amount shall be standardized
in a manner that eliminates the effect of variations in
relative case mix and wage levels among different home
health agencies in a budget neutral manner consistent with
the case mix and wage level adjustments provided under
paragraph (4)(A). Under the system, the Secretary may
recognize regional differences or differences based upon
whether or not the services or agency are in an urbanized
area.
``(ii) Reduction.--The reduction described in this
clause is a reduction by 15 percent in the cost limits and
per beneficiary limits described in section 1861(v)(1)(L),
as those limits are in effect on September 30, 1999.
``(B) Annual update.--
``(i) In general.--The standard prospective payment
amount (or amounts) shall be adjusted for each fiscal year
(beginning with fiscal year 2001) in a prospective manner
specified by the Secretary by the home health market basket
percentage increase applicable to the fiscal year involved.
``(ii) Home health market basket percentage increase.--
For purposes of this subsection, the term `home health
market basket percentage increase' means, with respect to a
fiscal year, a percentage (estimated by the Secretary
before the beginning of the fiscal year) determined and
applied with respect to the mix of goods and services
included in home health services in the same manner as the
market basket percentage increase under section
1886(b)(3)(B)(iii) is determined and applied to the mix of
goods and services comprising inpatient hospital services
for the fiscal year.
``(C) Adjustment for outliers.--The Secretary shall reduce
the standard prospective payment amount (or amounts) under this
paragraph applicable to home health services furnished during a
period by such proportion as will result in an aggregate
reduction in payments for the period equal to the aggregate
increase in payments resulting from the application of
paragraph (5) (relating to outliers).
``(4) Payment computation.--
``(A) In general.--The payment amount for a unit of home
health services shall be the applicable standard prospective
payment amount adjusted as follows:
``(i) Case mix adjustment.--The amount shall be
adjusted by an appropriate case mix adjustment factor
(established under subparagraph (B)).
``(ii) Area wage adjustment.--The portion of such
amount that the Secretary estimates to be attributable to
wages and wage-related costs shall be adjusted for
geographic differences in such costs by an area wage
adjustment factor (established under subparagraph (C)) for
the area in which the services are furnished or such other
area as the Secretary may specify.
``(B) Establishment of case mix adjustment factors.--The
Secretary shall establish appropriate case mix adjustment
factors for home health services in a manner that explains a
significant amount of the variation in cost among different
units of services.
``(C) Establishment of area wage adjustment factors.--The
Secretary shall establish area wage adjustment factors that
reflect the relative level of wages and wage-related costs
applicable to the furnishing of home health services in a
geographic area compared to the national average applicable
level. Such factors may be the factors used by the Secretary
for purposes of section 1886(d)(3)(E).
``(5) Outliers.--The Secretary may provide for an addition or
adjustment to the payment amount otherwise made in the case of
outliers because of unusual variations in the type or amount of
medically necessary care. The total amount of the additional
payments or payment adjustments made under this paragraph with
respect to a fiscal year may not exceed 5 percent of the total
payments projected or estimated to be made based on the prospective
payment system under this subsection in that year.
``(6) Proration of prospective payment amounts.--If a
beneficiary elects to transfer to, or receive services from,
another home health agency within the period covered by the
prospective payment amount, the payment shall be prorated between
the home health agencies involved.
``(c) Requirements for Payment Information.--With respect to home
health services furnished on or after October 1, 1998, no claim for
such a service may be paid under this title unless--
``(1) the claim has the unique identifier (provided under
section 1842(r)) for the physician who prescribed the services or
made the certification described in section 1814(a)(2) or
1835(a)(2)(A); and
``(2) in the case of a service visit described in paragraph
(1), (2), (3), or (4) of section 1861(m), the claim contains a code
(or codes) specified by the Secretary that identifies the length of
time of the service visit, as measured in 15 minute increments.
``(d) Limitation on Review.--There shall be no administrative or
judicial review under section 1869, 1878, or otherwise of--
``(1) the establishment of a transition period under subsection
(b)(1);
``(2) the definition and application of payment units under
subsection (b)(2);
``(3) the computation of initial standard prospective payment
amounts under subsection (b)(3)(A) (including the reduction
described in clause (ii) of such subsection);
``(4) the establishment of the adjustment for outliers under
subsection (b)(3)(C);
``(5) the establishment of case mix and area wage adjustments
under subsection (b)(4); and
``(6) the establishment of any adjustments for outliers under
subsection (b)(5).''.
(b) Elimination of Periodic Interim Payments for Home Health
Agencies.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--
(1) by inserting ``and'' at the end of subparagraph (C),
(2) by striking subparagraph (D), and
(3) by redesignating subparagraph (E) as subparagraph (D).
(c) Conforming Amendments.--
(1) Payments under part a.--Section 1814(b) (42 U.S.C.
1395f(b)) is amended in the matter preceding paragraph (1) by
striking ``and 1886'' and inserting ``1886, and 1895''.
(2) Treatment of items and services paid under part b.--
(A) Payments under part b.--Section 1833(a)(2) (42 U.S.C.
1395l(a)(2)) is amended--
(i) by amending subparagraph (A) to read as follows:
``(A) with respect to home health services (other than a
covered osteoporosis drug) (as defined in section 1861(kk)),
the amount determined under the prospective payment system
under section 1895;'';
(ii) by striking ``and'' at the end of subparagraph
(E);
(iii) by adding ``and'' at the end of subparagraph (F);
and
(iv) by adding at the end the following new
subparagraph:
``(G) with respect to items and services described in
section 1861(s)(10)(A), the lesser of--
``(i) the reasonable cost of such services, as
determined under section 1861(v), or
``(ii) the customary charges with respect to such
services,
or, if such services are furnished by a public provider of
services, or by another provider which demonstrates to the
satisfaction of the Secretary that a significant portion of its
patients are low-income (and requests that payment be made
under this provision), free of charge or at nominal charges to
the public, the amount determined in accordance with section
1814(b)(2);''.
(B) Requiring payment for all items and services to be made
to agency.--
(i) In general.--The first sentence of section
1842(b)(6) (42 U.S.C. 1395u(b)(6)) (as amended by section
4432(b)(2)) is amended--
(I) by striking ``and (E)'' and inserting ``(E)'';
and
(II) by striking the period at the end and
inserting the following: ``, and (F) in the case of
home health services furnished to an individual who (at
the time the item or service is furnished) is under a
plan of care of a home health agency, payment shall be
made to the agency (without regard to whether or not
the item or service was furnished by the agency, by
others under arrangement with them made by the agency,
or when any other contracting or consulting
arrangement, or otherwise).''.
(ii) Conforming amendment.--Section 1832(a)(1) (42
U.S.C. 1395k(a)(1)) (as amended by section 4432(b)(5)(B))
is amended by striking ``section 1842(b)(6)(E);'' and
inserting ``subparagraphs (E) and (F) of section
1842(b)(6);''.
(C) Exclusions from coverage.--Section 1862(a) (42 U.S.C.
1395y(a)) (as amended by sections 4319(b), 4432(b),
4507(a)(2)(B) and 4541(b)) is amended--
(i) by striking ``or'' at the end of paragraph (19);
(ii) by striking the period at the end of paragraph
(20) and inserting ``; or''; and
(iii) by inserting after paragraph (20) the following:
``(21) where such expenses are for home health services
furnished to an individual who is under a plan of care of the home
health agency if the claim for payment for such services is not
submitted by the agency.''.
(d) Effective Date.--Except as otherwise provided, the amendments
made by this section shall apply to cost reporting periods beginning on
or after October 1, 1999.
(e) Contingency.--If the Secretary of Health and Human Services for
any reason does not establish and implement the prospective payment
system for home health services described in section 1895(b) of the
Social Security Act (as added by subsection (a)) for cost reporting
periods described in subsection (d), for such cost reporting periods
the Secretary shall provide for a reduction by 15 percent in the cost
limits and per beneficiary limits described in section 1861(v)(1)(L) of
such Act, as those limits would otherwise be in effect on September 30,
1999.
SEC. 4604. PAYMENT BASED ON LOCATION WHERE HOME HEALTH SERVICE IS
FURNISHED.
(a) Conditions of Participation.--Section 1891 (42 U.S.C. 1395bbb)
is amended by adding at the end the following:
``(g) Payment on Basis of Location of Service.--A home health
agency shall submit claims for payment for home health services under
this title only on the basis of the geographic location at which the
service is furnished, as determined by the Secretary.''.
(b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by striking ``agency is located'' and
inserting ``service is furnished''.
(c) Effective Date.--The amendments made by this section apply to
cost reporting periods beginning on or after October 1, 1997.
Subchapter B--Home Health Benefits
SEC. 4611. MODIFICATION OF PART A HOME HEALTH BENEFIT FOR INDIVIDUALS
ENROLLED UNDER PART B.
(a) In General.--Section 1812 (42 U.S.C. 1395d) is amended--
(1) in subsection (a)(3), by striking ``home health services''
and inserting ``for individuals not enrolled in part B, home health
services, and for individuals so enrolled, post-institutional home
health services furnished during a home health spell of illness for
up to 100 visits during such spell of illness''; and
(2) in subsection (b), by adding after and below paragraph (3)
the following:
``Payment under this part for post-institutional home health services
furnished an individual during a home health spell of illness may not
be made for such services beginning after such services have been
furnished for a total of 100 visits such spell.''.
(b) Post-Institutional Home Health Services Defined.--Section 1861
(42 U.S.C. 1395x), as amended by sections 4103(a), 4104(a), 4105(a),
4106(a), and 4454, is amended by adding at the end the following:
``Post-Institutional Home Health Services; Home Health Spell of Illness
``(tt)(1) The term `post-institutional home health services' means
home health services furnished to an individual--
``(A) after discharge from a hospital or rural primary care
hospital in which the individual was an inpatient for not less than
3 consecutive days before such discharge if such home health
services were initiated within 14 days after the date of such
discharge; or
``(B) after discharge from a skilled nursing facility in which
the individual was provided post-hospital extended care services if
such home health services were initiated within 14 days after the
date of such discharge.
``(2) The term `home health spell of illness' with respect to any
individual means a period of consecutive days--
``(A) beginning with the first day (not included in a previous
home health spell of illness) (i) on which such individual is
furnished post-institutional home health services, and (ii) which
occurs in a month for which the individual is entitled to benefits
under part A, and
``(B) ending with the close of the first period of 60
consecutive days thereafter on each of which the individual is
neither an inpatient of a hospital or rural primary care hospital
nor an inpatient of a facility described in section 1819(a)(1) or
subsection (y)(1) nor provided home health services.''.
(c) Maintaining Appeal Rights for Home Health Services.--Section
1869(b)(2)(B) (42 U.S.C. 1395ff(b)(2)(B)) is amended by inserting ``(or
$100 in the case of home health services)'' after ``$500''.
(d) Maintaining Seamless Administration Through Fiscal
Intermediaries.--Section 1842(b)(2) (42 U.S.C. 1395u(b)(2)) is amended
by adding at the end the following:
``(E) With respect to the payment of claims for home health
services under this part that, but for the amendments made by section
4611 of the Balanced Budget Act of 1997, would be payable under part A
instead of under this part, the Secretary shall continue administration
of such claims through fiscal intermediaries under section 1816.''.
(e) Transition.--
(1) In general.--Notwithstanding any provision of title XVIII
of the Social Security Act, the Secretary of Health and Human
Services shall establish a transition for the aggregate amount of
expenditures that are transferred from part A, to part B, of title
XVIII of the Social Security Act, as a result of the amendments
made by this section, during each of the years during the period
beginning with 1998 and ending with 2002 according to this
subsection. Under the transition for each such year, the Secretary
shall effect such transfer, between the trust funds under such
parts, as will result in only the proportion (specified in
paragraph (2)) of such aggregate expenditures for the year being
transferred from such part A to such part B.
(2) Proportion specified.--The proportion specified in this
paragraph for--
(A) 1998 is \1/6\,
(B) 1999 is \1/3\,
(C) 2000 is \1/2\,
(D) 2001 is \2/3\, and
(E) 2002 is \5/6\.
(3) Application in establishing monthly premiums for 1998
through 2003.--
(A) In general.--For purposes only of computing the monthly
premium under section 1839 of the Social Security Act (42
U.S.C. 1395r), the monthly actuarial rate for enrollees age 65
and over shall be computed as though any reference in paragraph
(1) of this subsection to 2002 were a reference to 2003 and as
if the following proportions were substituted for the
proportions specified in paragraph (2):
(i) For 1998, \1/7\.
(ii) For 1999, \2/7\.
(iii) For 2000, \3/7\.
(iv) For 2001, \4/7\.
(v) For 2002, \5/7\.
(vi) For 2003, \6/7\.
(B) No impact on government contribution.--Subparagraph (A)
does not apply in determining the amount of the Government
contribution under section 1844 of the Social Security Act (42
U.S.C. 1395w).
(f) Effective Date.--The amendments made by this section apply to
services furnished on or after January 1, 1998. For purpose of applying
such amendments, any home health spell of illness that began, but not
did not end, before such date shall be considered to have begun as of
such date.
SEC. 4612. CLARIFICATION OF PART-TIME OR INTERMITTENT NURSING CARE.
(a) In General.--Section 1861(m) (42 U.S.C. 1395x(m)) is amended by
adding at the end the following: ``For purposes of paragraphs (1) and
(4), the term `part-time or intermittent services' means skilled
nursing and home health aide services furnished any number of days per
week as long as they are furnished (combined) less than 8 hours each
day and 28 or fewer hours each week (or, subject to review on a case-
by-case basis as to the need for care, less than 8 hours each day and
35 or fewer hours per week). For purposes of sections 1814(a)(2)(C) and
1835(a)(2)(A), `intermittent' means skilled nursing care that is either
provided or needed on fewer than 7 days each week, or less than 8 hours
of each day for periods of 21 days or less (with extensions in
exceptional circumstances when the need for additional care is finite
and predictable).''.
(b) Effective Date.--The amendment made by subsection (a) applies
to services furnished on or after October 1, 1997.
SEC. 4613. STUDY ON DEFINITION OF HOMEBOUND.
(a) Study.--The Secretary of Health and Human Services shall
conduct a study of the criteria that should be applied, and the method
of applying such criteria, in the determination of whether an
individual is homebound for purposes of qualifying for receipt of
benefits for home health services under the medicare program. Such
criteria shall include the extent and circumstances under which a
person may be absent from the home but nonetheless qualify.
(b) Report.--Not later than October 1, 1998, the Secretary shall
submit a report to Congress on the study conducted under subsection
(a). The report shall include specific recommendations on such criteria
and methods.
SEC. 4614. NORMATIVE STANDARDS FOR HOME HEALTH CLAIMS DENIALS.
(a) In General.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)) (as
amended by section 4104(c)) is amended--
(1) by striking ``and'' at the end of subparagraph (G),
(2) by striking the semicolon at the end of subparagraph (H)
and inserting ``, and'', and
(3) by inserting after subparagraph (H) the following new
subparagraph:
``(I) the frequency and duration of home health services which
are in excess of normative guidelines that the Secretary shall
establish by regulation;''.
(b) Notification.--The Secretary of Health and Human Services may
establish a process for notifying a physician in cases in which the
number of home health visits, furnished under title XVIII of the Social
Security Act pursuant to a prescription or certification of the
physician, significantly exceeds such threshold (or thresholds) as the
Secretary specifies. The Secretary may adjust such threshold to reflect
demonstrated differences in the need for home health services among
different beneficiaries.
(c) Effective Date.--The amendments made by this section apply to
services furnished on or after October 1, 1997.
SEC. 4615. NO HOME HEALTH BENEFITS BASED SOLELY ON DRAWING BLOOD.
(a) In General.--Sections 1814(a)(2)(C) and 1835(a)(2)(A) (42
U.S.C. 1395f(a)(2)(C), 1395n(a)(2)(A)) are each amended by inserting
``(other than solely venipuncture for the purpose of obtaining a blood
sample)'' after ``skilled nursing care''.
(b) Effective Date.--The amendments made by subsection (a) apply to
home health services furnished after the 6-month period beginning after
the date of enactment of this Act.
SEC. 4616. REPORTS TO CONGRESS REGARDING HOME HEALTH COST CONTAINMENT.
(a) Estimate.--Not later than October 1, 1997, the Secretary of
Health and Human Services shall submit to the Committees on Commerce
and Ways and Means of the House of Representatives and the Committee on
Finance of the Senate a report that includes an estimate of the outlays
that will be made under parts A and B of title XVIII of the Social
Security Act for the provision of home health services during each of
fiscal years 1998 through 2002.
(b) Annual Report.--Not later than the end of each of years 1999
through 2002, the Secretary shall submit to such Committees a report
that compares the actual outlays under such parts for such services
during the fiscal year ending in the year, to the outlays estimated
under subsection (a) for such fiscal year. If the Secretary finds that
such actual outlays were greater than such estimated outlays for the
fiscal year, the Secretary shall include in the report recommendations
regarding beneficiary copayments for home health services provided
under the medicare program or such other methods as will reduce the
growth in outlays for home health services under the medicare program.
CHAPTER 2--GRADUATE MEDICAL EDUCATION
Subchapter A--Indirect Medical Education
SEC. 4621. INDIRECT GRADUATE MEDICAL EDUCATION PAYMENTS.
(a) Multiyear Transition Regarding Percentages.--
(1) In general.--Section 1886(d)(5)(B)(ii) (42 U.S.C.
1395ww(d)(5)(B)(ii)) is amended to read as follows:
``(ii) For purposes of clause (i)(II), the indirect
teaching adjustment factor is equal to c <greek-e> (((1+r) to
the nth power) - 1), where `r' is the ratio of the hospital's
full-time equivalent interns and residents to beds and `n'
equals .405. For discharges occurring--
``(I) on or after October 1, 1988, and before October
1, 1997, `c' is equal to 1.89;
``(II) during fiscal year 1998, `c' is equal to 1.72;
``(III) during fiscal year 1999, `c' is equal to 1.6;
``(IV) during fiscal year 2000, `c' is equal to 1.47;
and
``(V) on or after October 1, 2000, `c' is equal to
1.35.''.
(2) Conforming amendment relating to determination of
standardized amount.--Section 1886(d)(2)(C)(i) (42 U.S.C.
1395ww(d)(2)(C)(i)) is amended by adding at the end the following:
``except that the Secretary shall not take into account any
reduction in the amount of additional payments under paragraph
(5)(B)(ii) resulting from the amendment made by section 4621(a)(1)
of the Balanced Budget Act of 1997,''.
(b) Limitation on Number of Residents for Certain Fiscal Years.--
(1) In general.--Section 1886(d)(5)(B) (42 U.S.C.
1395ww(d)(5)(B)) is amended by adding after clause (iv) the
following:
``(v) In determining the adjustment with respect to a
hospital for discharges occurring on or after October 1, 1997,
the total number of full-time equivalent interns and residents
in the fields of allopathic and osteopathic medicine in either
a hospital or nonhospital setting may not exceed the number of
such full-time equivalent interns and residents in the hospital
with respect to the hospital's most recent cost reporting
period ending on or before December 31, 1996.
``(vi) For purposes of clause (ii)--
``(I) `r' may not exceed the ratio of the number of
interns and residents, subject to the limit under clause
(v), with respect to the hospital for its most recent cost
reporting period to the hospital's available beds (as
defined by the Secretary) during that cost reporting
period, and
``(II) for the hospital's cost reporting periods
beginning on or after October 1, 1997, subject to the
limits described in clauses (iv) and (v), the total number
of full-time equivalent residents for payment purposes
shall equal the average of the actual full-time equivalent
resident count for the cost reporting period and the
preceding two cost reporting periods.
In the case of the first cost reporting period beginning on or
after October 1, 1997, subclause (II) shall be applied by using
the average for such period and the preceding cost reporting
period.
``(vii) If any cost reporting period beginning on or after
October 1, 1997, is not equal to twelve months, the Secretary shall
make appropriate modifications to ensure that the average full-time
equivalent residency count pursuant to subclause (II) of clause
(vi) is based on the equivalent of full twelve-month cost reporting
periods.
``(viii) Rules similar to the rules of subsection (h)(4)(H)
shall apply for purposes of clauses (v) and (vi).''.
(2) Payment for interns and residents providing off-site
services.--Section 1886(d)(5)(B)(iv) (42 U.S.C.
1395ww(d)(5)(B)(iv)) is amended to read as follows:
``(iv) Effective for discharges occurring on or after October
1, 1997, all the time spent by an intern or resident in patient
care activities under an approved medical residency training
program at an entity in a nonhospital setting shall be counted
towards the determination of full-time equivalency if the hospital
incurs all, or substantially all, of the costs for the training
program in that setting.''.
SEC. 4622. PAYMENT TO HOSPITALS OF INDIRECT MEDICAL EDUCATION COSTS FOR
MEDICARE+CHOICE ENROLLEES.
Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by adding at the
end the following:
``(11) Additional payments for managed care enrollees.--
``(A) In general.--For portions of cost reporting periods
occurring on or after January 1, 1998, the Secretary shall
provide for an additional payment amount for each applicable
discharge of any subsection (d) hospital that has an approved
medical residency training program.
``(B) Applicable discharge.--For purposes of this
paragraph, the term `applicable discharge' means the discharge
of any individual who is enrolled under a risk-sharing contract
with an eligible organization under section 1876 and who is
entitled to benefits under part A or any individual who is
enrolled with a Medicare+Choice organization under part C.
``(C) Determination of amount.--The amount of the payment
under this paragraph with respect to any applicable discharge
shall be equal to the applicable percentage (as defined in
subsection (h)(3)(D)(ii)) of the estimated average per
discharge amount that would otherwise have been paid under
paragraph (5)(B) if the individuals had not been enrolled as
described in subparagraph (B).
``(D) Special rule for hospitals under reimbursement
system.--The Secretary shall establish rules for the
application of this paragraph to a hospital reimbursed under a
reimbursement system authorized under section 1814(b)(3) in the
same manner as it would apply to the hospital if it were not
reimbursed under such section.''.
Subchapter B--Direct Graduate Medical Education
SEC. 4623. LIMITATION ON NUMBER OF RESIDENTS AND ROLLING AVERAGE FTE
COUNT.
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by adding
after subparagraph (E) the following:
``(F) Limitation on number of residents in allopathic and
osteopathic medicine.--Such rules shall provide that for
purposes of a cost reporting period beginning on or after
October 1, 1997, the total number of full-time equivalent
residents before application of weighting factors (as
determined under this paragraph) with respect to a hospital's
approved medical residency training program in the fields of
allopathic medicine and osteopathic medicine may not exceed the
number of such full-time equivalent residents for the
hospital's most recent cost reporting period ending on or
before December 31, 1996.
``(G) Counting interns and residents for fy 1998 and
subsequent years.--
``(i) In general.--For cost reporting periods beginning
during fiscal years beginning on or after October 1, 1997,
subject to the limit described in subparagraph (F), the
total number of full-time equivalent residents for
determining a hospital's graduate medical education payment
shall equal the average of the actual full-time equivalent
resident counts for the cost reporting period and the
preceding two cost reporting periods.
``(ii) Adjustment for short periods.--If any cost
reporting period beginning on or after October 1, 1997, is
not equal to twelve months, the Secretary shall make
appropriate modifications to ensure that the average full-
time equivalent resident counts pursuant to clause (i) are
based on the equivalent of full twelve-month cost reporting
periods.
``(iii) Transition rule for 1998.--In the case of a
hospital's first cost reporting period beginning on or
after October 1, 1997, clause (i) shall be applied by using
the average for such period and the preceding cost
reporting period.
``(H) Special rules for application of subparagraphs (f)
and (g).--
``(i) New facilities.--The Secretary shall, consistent
with the principles of subparagraphs (F) and (G), prescribe
rules for the application of such subparagraphs in the case
of medical residency training programs established on or
after January 1, 1995. In promulgating such rules for
purposes of subparagraph (F), the Secretary shall give
special consideration to facilities that meet the needs of
underserved rural areas.
``(ii) Aggregation.--The Secretary may prescribe rules
which allow institutions which are members of the same
affiliated group (as defined by the Secretary) to elect to
apply the limitation of subparagraph (F) on an aggregate
basis.
``(iii) Data collection.--The Secretary may require any
entity that operates a medical residency training program
and to which subparagraphs (F) and (G) apply to submit to
the Secretary such additional information as the Secretary
considers necessary to carry out such subparagraphs.''.
SEC. 4624. PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF GRADUATE MEDICAL
EDUCATION OF MEDICARE+CHOICE ENROLLEES.
Section 1886(h)(3) (42 U.S.C. 1395ww(h)(3)) is amended by adding
after subparagraph (C) the following:
``(D) Payment for managed care enrollees.--
``(i) In general.--For portions of cost reporting
periods occurring on or after January 1, 1998, the
Secretary shall provide for an additional payment amount
under this subsection for services furnished to individuals
who are enrolled under a risk-sharing contract with an
eligible organization under section 1876 and who are
entitled to part A or with a Medicare+Choice organization
under part C. The amount of such a payment shall equal the
applicable percentage of the product of--
``(I) the aggregate approved amount (as defined in
subparagraph (B)) for that period; and
``(II) the fraction of the total number of
inpatient-bed days (as established by the Secretary)
during the period which are attributable to such
enrolled individuals.
``(ii) Applicable percentage.--For purposes of clause
(i), the applicable percentage is--
``(I) 20 percent in 1998,
``(II) 40 percent in 1999,
``(III) 60 percent in 2000, and
``(IV) 80 percent in 2001, and
``(V) 100 percent in 2002 and subsequent years.
``(iii) Special rule for hospitals under reimbursement
system.--The Secretary shall establish rules for the
application of this subparagraph to a hospital reimbursed
under a reimbursement system authorized under section
1814(b)(3) in the same manner as it would apply to the
hospital if it were not reimbursed under such section.''.
SEC. 4625. PERMITTING PAYMENT TO NONHOSPITAL PROVIDERS.
(a) In General.--Section 1886 (42 U.S.C. 1395ww), as amended by
section 4421(a), is amended by adding at the end the following:
``(k) Payment to Nonhospital Providers.--
``(1) In general.--For cost reporting periods beginning on or
after October 1, 1997, the Secretary may establish rules for
payment to qualified nonhospital providers for their direct costs
of medical education, if those costs are incurred in the operation
of an approved medical residency training program described in
subsection (h). Such rules shall specify the amounts, form, and
manner in which such payments will be made and the portion of such
payments that will be made from each of the trust funds under this
title.
``(2) Qualified nonhospital providers.--For purposes of this
subsection, the term `qualified nonhospital providers' means--
``(A) a Federally qualified health center, as defined in
section 1861(aa)(4);
``(B) a rural health clinic, as defined in section
1861(aa)(2);
``(C) Medicare+Choice organizations; and
``(D) such other providers (other than hospitals) as the
Secretary determines to be appropriate.''.
(b) Prohibition on Double Payments.--Section 1886(h)(3)(B) (42
U.S.C. 1395ww(h)(3)(B)) is amended by adding at the end the following:
``The Secretary shall reduce the aggregate approved amount to the
extent payment is made under subsection (k) for residents included
in the hospital's count of full-time equivalent residents.''.
SEC. 4626. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY REDUCTION IN
NUMBER OF RESIDENTS.
(a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is amended
by adding at the end the following new paragraph:
``(6) Incentive payment under plans for voluntary reduction in
number of residents.--
``(A) In general.--In the case of a voluntary residency
reduction plan for which an application is approved under
subparagraph (B), subject to subparagraph (F), each hospital
which is part of the qualifying entity submitting the plan
shall be paid an applicable hold harmless percentage (as
specified in subparagraph (E)) of the sum of--
``(i) the amount (if any) by which--
``(I) the amount of payment which would have been
made under this subsection if there had been a 5-
percent reduction in the number of full-time equivalent
residents in the approved medical education training
programs of the hospital as of June 30, 1997, exceeds
``(II) the amount of payment which is made under
this subsection, taking into account the reduction in
such number effected under the reduction plan; and
``(ii) the amount of the reduction in payment under
subsection (d)(5)(B) for the hospital that is attributable
to the reduction in number of residents effected under the
plan below 95 percent of the number of full-time equivalent
residents in such programs of the hospital as of June 30,
1997.
The determination of the amounts under clauses (i) and (ii) for
any year shall be made on the basis of the provisions of this
title in effect on the application deadline date for the first
calendar year to which the reduction plan applies.
``(B) Approval of plan applications.--The Secretary may not
approve the application of an qualifying entity unless--
``(i) the application is submitted in a form and manner
specified by the Secretary and by not later than November
1, 1999,
``(ii) the application provides for the operation of a
plan for the reduction in the number of full-time
equivalent residents in the approved medical residency
training programs of the entity consistent with the
requirements of subparagraph (D);
``(iii) the entity elects in the application the period
of residency training years (not greater than 5) over which
the reduction will occur;
``(iv) the entity will not reduce the proportion of its
residents in primary care (to the total number of
residents) below such proportion as in effect as of the
applicable time described in subparagraph (D)(v); and
``(v) the Secretary determines that the application and
the entity and such plan meet such other requirements as
the Secretary specifies in regulations.
``(C) Qualifying entity.--For purposes of this paragraph,
any of the following may be a qualifying entity:
``(i) Individual hospitals operating one or more
approved medical residency training programs.
``(ii) Two or more hospitals that operate such programs
and apply for treatment under this paragraph as a single
qualifying entity.
``(iii) A qualifying consortium (as described in
section 4628 of the Balanced Budget Act of 1997).
``(D) Residency reduction requirements.--
``(i) Individual hospital applicants.--In the case of a
qualifying entity described in subparagraph (C)(i), the
number of full-time equivalent residents in all the
approved medical residency training programs operated by or
through the entity shall be reduced as follows:
``(I) If the base number of residents exceeds 750
residents, by a number equal to at least 20 percent of
such base number.
``(II) Subject to subclause (IV), if the base
number of residents exceeds 600 but is less than 750
residents, by 150 residents.
``(III) Subject to subclause (IV), if the base
number of residents does not exceed 600 residents, by a
number equal to at least 25 percent of such base
number.
``(IV) In the case of a qualifying entity which is
described in clause (v) and which elects treatment
under this subclause, by a number equal to at least 20
percent of the base number.
``(ii) Joint applicants.--In the case of a qualifying
entity described in subparagraph (C)(ii), the number of
full-time equivalent residents in the aggregate for all the
approved medical residency training programs operated by or
through the entity shall be reduced as follows:
``(I) Subject to subclause (II), by a number equal
to at least 25 percent of the base number.
``(II) In the case of such a qualifying entity
which is described in clause (v) and which elects
treatment under this subclause, by a number equal to at
least 20 percent of the base number.
``(iii) Consortia.--In the case of a qualifying entity
described in subparagraph (C)(iii), the number of full-time
equivalent residents in the aggregate for all the approved
medical residency training programs operated by or through
the entity shall be reduced by a number equal to at least
20 percent of the base number.
``(iv) Manner of reduction.--The reductions specified
under the preceding provisions of this subparagraph for a
qualifying entity shall be below the base number of
residents for that entity and shall be fully effective not
later than the 5th residency training year in which the
application under subparagraph (B) is effective.
``(v) Entities providing assurance of increase in
primary care residents.--An entity is described in this
clause if--
``(I) the base number of residents for the entity
is less than 750 or the entity is described in
subparagraph (C)(ii); and
``(II) the entity represents in its application
under subparagraph (B) that it will increase the number
of full-time equivalent residents in primary care by at
least 20 percent (from such number included in the base
number of residents) by not later than the 5th
residency training year in which the application under
subparagraph (B) is effective.
If a qualifying entity fails to comply with the
representation described in subclause (II) by the end of
such 5th residency training year, the entity shall be
subject to repayment of all amounts paid under this
paragraph, in accordance with procedures established to
carry out subparagraph (F).
``(vi) Base number of residents defined.--For purposes
of this paragraph, the term `base number of residents'
means, with respect to a qualifying entity (or its
participating hospitals) operating approved medical
residency training programs, the number of full-time
equivalent residents in such programs (before application
of weighting factors) of the entity as of the most recent
residency training year ending before June 30, 1997, or, if
less, for any subsequent residency training year that ends
before the date the entity makes application under this
paragraph.
``(E) Applicable hold harmless percentage.--For purposes of
subparagraph (A), the `applicable hold harmless percentage' for
the--
``(i) first and second residency training years in
which the reduction plan is in effect, 100 percent,
``(ii) third such year, 75 percent,
``(iii) fourth such year, 50 percent, and
``(iv) fifth such year, 25 percent.
``(F) Penalty for noncompliance.--
``(i) In general.--No payment may be made under this
paragraph to a hospital for a residency training year if
the hospital has failed to reduce the number of full-time
equivalent residents (in the manner required under
subparagraph (D)) to the number agreed to by the Secretary
and the qualifying entity in approving the application
under this paragraph with respect to such year.
``(ii) Increase in number of residents in subsequent
years.--If payments are made under this paragraph to a
hospital, and if the hospital increases the number of full-
time equivalent residents above the number of such
residents permitted under the reduction plan as of the
completion of the plan, then, as specified by the
Secretary, the entity is liable for repayment to the
Secretary of the total amounts paid under this paragraph to
the entity.
``(G) Treatment of rotating residents.--In applying this
paragraph, the Secretary shall establish rules regarding the
counting of residents who are assigned to institutions the
medical residency training programs in which are not covered
under approved applications under this paragraph.''.
(b) Relation to Demonstration Projects and Authority.--
(1) Section 1886(h)(6) of the Social Security Act, added by
subsection (a), other than subparagraph (F)(ii) thereof, shall not
apply to any residency training program with respect to which a
demonstration project described in paragraph (3) has been approved
by the Health Care Financing Administration as of May 27, 1997.
(2) Effective May 27, 1997, the Secretary of Health and Human
Services is not authorized to approve any demonstration project
described in paragraph (3) for any residency training year
beginning before July 1, 2006.
(3) A demonstration project described in this paragraph is a
project that primarily provides for additional payments under title
XVIII of the Social Security Act in connection with a reduction in
the number of residents in a medical residency training program.
(c) Interim, Final Regulations.--In order to carry out the
amendment made by subsection (a) in a timely manner, the Secretary of
Health and Human Services may first promulgate regulations, that take
effect on an interim basis, after notice and pending opportunity for
public comment, by not later than 6 months after the date of the
enactment of this Act.
SEC. 4627. MEDICARE SPECIAL REIMBURSEMENT RULE FOR PRIMARY CARE
COMBINED RESIDENCY PROGRAMS.
(a) In General.--Section 1886(h)(5)(G) of the Social Security Act
(42 U.S.C. 1395ww(h)(5)(G)) is amended--
(1) in clause (i), by striking ``and (iii)'' and inserting ``,
(iii), and (iv)''; and
(2) by adding at the end the following:
``(iv) Special rule for certain primary care combined
residency programs.--(I) In the case of a resident enrolled
in a combined medical residency training program in which
all of the individual programs (that are combined) are for
training a primary care resident (as defined in
subparagraph (H)), the period of board eligibility shall be
the minimum number of years of formal training required to
satisfy the requirements for initial board eligibility in
the longest of the individual programs plus one additional
year.
``(II) A resident enrolled in a combined medical
residency training program that includes an obstetrics and
gynecology program shall qualify for the period of board
eligibility under subclause (I) if the other programs such
resident combines with such obstetrics and gynecology
program are for training a primary care resident.''.
(b) Effective Date.--The amendments made by subsection (a) apply to
combined medical residency training programs in effect for residency
years beginning on or after July 1, 1997.
SEC. 4628. DEMONSTRATION PROJECT ON USE OF CONSORTIA.
(a) In General.--The Secretary of Health and Human Services (in
this section referred to as the ``Secretary'') shall establish a
demonstration project under which, instead of making payments to
teaching hospitals pursuant to section 1886(h) of the Social Security
Act, the Secretary shall make payments under this section to each
consortium that meets the requirements of subsection (b) and that
applies to be included under the project.
(b) Qualifying Consortia.--For purposes of subsection (a), a
consortium meets the requirements of this subsection if the consortium
is in compliance with the following:
(1) The consortium consists of a teaching hospital with one or
more approved medical residency training programs and one or more
of the following entities:
(A) A school of allopathic medicine or osteopathic
medicine.
(B) Another teaching hospital, which may be a children's
hospital.
(C) A Federally qualified health center.
(D) A medical group practice.
(E) A managed care entity.
(F) An entity furnishing outpatient services.
(G) Such other entity as the Secretary determines to be
appropriate.
(2) The members of the consortium have agreed to participate in
the programs of graduate medical education that are operated by the
entities in the consortium.
(3) With respect to the receipt by the consortium of payments
made pursuant to this section, the members of the consortium have
agreed on a method for allocating the payments among the members.
(4) The consortium meets such additional requirements as the
Secretary may establish.
(c) Amount and Source of Payment.--The total of payments to a
qualifying consortium for a fiscal year pursuant to subsection (a)
shall not exceed the amount that would have been paid under section
1886 (h) or (k) of the Social Security Act for the teaching hospital
(or hospitals) in the consortium. Such payments shall be made in such
proportion from each of the trust funds established under title XVIII
of such Act as the Secretary specifies.
SEC. 4629. RECOMMENDATIONS ON LONG-TERM POLICIES REGARDING TEACHING
HOSPITALS AND GRADUATE MEDICAL EDUCATION.
(a) In General.--The Medicare Payment Advisory Commission
(established under section 1805 of the Social Security Act and in this
section referred to as the ``Commission'') shall examine and develop
recommendations on whether and to what extent medicare payment policies
and other Federal policies regarding teaching hospitals and graduate
medical education should be changed. Such recommendations shall include
recommendations regarding each of the following:
(1) Possible methodologies for making payments for graduate
medical education and the selection of entities to receive such
payments. Matters considered under this paragraph shall include--
(A) issues regarding children's hospitals and approved
medical residency training programs in pediatrics, and
(B) whether and to what extent payments are being made (or
should be made) for training in the nursing and other allied
health professions.
(2) Federal policies regarding international medical graduates.
(3) The dependence of schools of medicine on service-generated
income.
(4) Whether and to what extent the needs of the United States
regarding the supply of physicians, in the aggregate and in
different specialties, will change during the 10-year period
beginning on October 1, 1997, and whether and to what extent any
such changes will have significant financial effects on teaching
hospitals.
(5) Methods for promoting an appropriate number, mix, and
geographical distribution of health professionals.
(b) Consultation.--In conducting the study under subsection (a),
the Commission shall consult with the Council on Graduate Medical
Education and individuals with expertise in the area of graduate
medical education, including--
(1) deans from allopathic and osteopathic schools of medicine;
(2) chief executive officers (or equivalent administrative
heads) from academic health centers, integrated health care
systems, approved medical residency training programs, and teaching
hospitals that sponsor approved medical residency training
programs;
(3) chairs of departments or divisions from allopathic and
osteopathic schools of medicine, schools of dentistry, and approved
medical residency training programs in oral surgery;
(4) individuals with leadership experience from representative
fields of non-physician health professionals;
(5) individuals with substantial experience in the study of
issues regarding the composition of the health care workforce of
the United States; and
(6) individuals with expertise in health care payment policies.
(c) Report.--Not later than 2 years after the date of the enactment
of this Act, the Commission shall submit to the Congress a report
providing its recommendations under this section and the reasons and
justifications for such recommendations.
SEC. 4630. STUDY OF HOSPITAL OVERHEAD AND SUPERVISORY PHYSICIAN
COMPONENTS OF DIRECT MEDICAL EDUCATION COSTS.
(a) In General.--The Secretary of Health and Human Services shall
conduct a study with respect to--
(1) variations among hospitals in the hospital overhead and
supervisory physician components of their direct medical education
costs taken into account under section 1886(h) of the Social
Security Act, and
(2) the reasons for such variations.
(b) Report.--Not later than 1 year after the date of the enactment
of this Act, the Secretary shall report the results of the study
conducted under subsection (a) to the appropriate committees of
Congress, including recommendations for legislation reducing variations
described in subsection (a) that the Secretary finds inappropriate.
CHAPTER 3--PROVISIONS RELATING TO MEDICARE SECONDARY PAYER
SEC. 4631. PERMANENT EXTENSION AND REVISION OF CERTAIN SECONDARY PAYER
PROVISIONS.
(a) Application to Disabled Individuals in Large Group Health
Plans.--
(1) In general.--Section 1862(b)(1)(B) (42 U.S.C.
1395y(b)(1)(B)) is amended--
(A) in clause (i), by striking ``clause (iv)'' and
inserting ``clause (iii)'';
(B) by striking clause (iii); and
(C) by redesignating clause (iv) as clause (iii).
(2) Conforming amendments.--Paragraphs (1) through (3) of
section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence of
section 1839(b) (42 U.S.C. 1395r(b)) are each amended by striking
``1862(b)(1)(B)(iv)'' each place it appears and inserting
``1862(b)(1)(B)(iii)''.
(b) Individuals With End Stage Renal Disease.--Section
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended--
(1) in the last sentence by striking ``October 1, 1998'' and
inserting ``the date of enactment of the Balanced Budget Act of
1997''; and
(2) by adding at the end the following: ``Effective for items
and services furnished on or after the date of enactment of the
Balanced Budget Act of 1997, (with respect to periods beginning on
or after the date that is 18 months prior to such date), clauses
(i) and (ii) shall be applied by substituting `30-month' for `12-
month' each place it appears.''.
(c) IRS-SSA-HCFA Data Match.--
(1) Social security act.--Section 1862(b)(5)(C) (42 U.S.C.
1395y(b)(5)(C)) is amended by striking clause (iii).
(2) Internal revenue code.--Section 6103(l)(12) of the Internal
Revenue Code of 1986 is amended by striking subparagraph (F).
SEC. 4632. CLARIFICATION OF TIME AND FILING LIMITATIONS.
(a) Extension of Claims Filing Period.--Section 1862(b)(2)(B) (42
U.S.C. 1395y(b)(2)(B)) is amended by adding at the end the following
new clause:
``(v) Claims-filing period.--Notwithstanding any other
time limits that may exist for filing a claim under an
employer group health plan, the United States may seek to
recover conditional payments in accordance with this
subparagraph where the request for payment is submitted to
the entity required or responsible under this subsection to
pay with respect to the item or service (or any portion
thereof) under a primary plan within the 3-year period
beginning on the date on which the item or service was
furnished.''.
(b) Effective Date.--The amendments made by this section apply to
items and services furnished on or after the date of the enactment of
this Act.
SEC. 4633. PERMITTING RECOVERY AGAINST THIRD PARTY ADMINISTRATORS.
(a) Permitting Recovery Against Third Party Administrators of
Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C.
1395y(b)(2)(B)(ii)) is amended--
(1) by striking ``under this subsection to pay'' and inserting
``(directly, as a third-party administrator, or otherwise) to make
payment''; and
(2) by adding at the end the following: ``The United States may
not recover from a third-party administrator under this clause in
cases where the third-party administrator would not be able to
recover the amount at issue from the employer or group health plan
and is not employed by or under contract with the employer or group
health plan at the time the action for recovery is initiated by the
United States or for whom it provides administrative services due
to the insolvency or bankruptcy of the employer or plan.''.
(b) Clarification of Beneficiary Liability.--Section 1862(b)(1) (42
U.S.C. 1395y(b)(1)) is amended by adding at the end the following new
subparagraph:
``(F) Limitation on beneficiary liability.--An individual
who is entitled to benefits under this title and is furnished
an item or service for which such benefits are incorrectly paid
is not liable for repayment of such benefits under this
paragraph unless payment of such benefits was made to the
individual.''.
(c) Effective Date.--The amendments made by this section apply to
items and services furnished on or after the date of the enactment of
this Act.
CHAPTER 4--OTHER PROVISIONS
SEC. 4641. PLACEMENT OF ADVANCE DIRECTIVE IN MEDICAL RECORD.
(a) In General.--Section 1866(f)(1)(B) (42 U.S.C. 1395cc(f)(1)(B))
is amended by striking ``in the individual's medical record'' and
inserting ``in a prominent part of the individual's current medical
record''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to provider agreements entered into, renewed, or extended on or
after such date (not later than 1 year after the date of the enactment
of this Act) as the Secretary of Health and Human Services specifies.
SEC. 4642. INCREASED CERTIFICATION PERIOD FOR CERTAIN ORGAN PROCUREMENT
ORGANIZATIONS.
Section 1138(b)(1)(A)(ii) (42 U.S.C. 1320b-8(b)(1)(A)(ii)) is
amended by striking ``two years'' and inserting ``2 years (4 years if
the Secretary determines appropriate for an organization on the basis
of its past practices)''.
SEC. 4643. OFFICE OF THE CHIEF ACTUARY IN THE HEALTH CARE FINANCING
ADMINISTRATION.
Section 1117 (42 U.S.C. 1317) is amended--
(1) in the heading, by inserting ``and chief actuary'' after
``the administrator'';
(2) by inserting ``(a)'' before ``The Administrator''; and
(3) by adding at the end the following:
``(b)(1) There is established in the Health Care Financing
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 shall
exercise such duties as are appropriate for the office of the Chief
Actuary and in accordance with professional standards of actuarial
independence. The Chief Actuary may be removed only for cause.
``(2) 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.''.
SEC. 4644. CONFORMING AMENDMENTS TO COMPLY WITH CONGRESSIONAL REVIEW OF
AGENCY RULEMAKING.
(a) DRG Prospective Payment Rate Methodology.--
(1) In general.--Section 1886(d)(6) (42 U.S.C. 1395ww(d)(6)) is
amended by striking ``September 1'' and inserting ``August 1''.
(2) Transition rule for fiscal year 1998.--With respect to the
publication in the Federal Register of the DRG prospective payment
rate methodology under such section for fiscal year 1998, the term
``60 days'' in section 801(a)(3)(A) and section 802(a) of title 5,
United States Code, is deemed to be a reference to ``30 days''.
(b) Hospital Payment Updates.--
(1) In general.--Section 1886(e) (42 U.S.C. 1395ww(e) is
amended--
(A) in paragraph (5)(A) by striking ``May 1'' and inserting
``April 1''; and
(B) in paragraph (5)(B) by striking ``September 1'' and
inserting ``August 1''.
(2) Transition rule for fiscal year 1998.--With respect to the
publication in the Federal Register of the appropriate change
factor for inpatient hospital services for discharges in fiscal
year 1998 under section 1886(e)(5)(B) (42 U.S.C. 1395ww(e)(5)(B)),
the term ``60 days'' in section 801(a)(3)(A) and section 802(a) of
title 5, United States Code, is deemed to be a reference to ``30
days''.
(c) Applications for Geographic Reclassification.--
(1) In general.--Section 1886(d)(10)(C) (42 U.S.C.
1395ww(d)(10)(C)) is amended in clause (ii), by striking ``the
first day of the preceding fiscal year.'' and inserting ``the first
day of the 13-month period ending on September 30 of the preceding
fiscal year.''
(2) Special rule for applications received in fiscal year
1997.--In the case of an application for a change in geographic
classification under such section for fiscal year 1999, the
Secretary of Health and Human Services shall shorten the deadlines
under such section so as to permit completion of a final decision
by the Secretary by June 15, 1998.
(d) Physician Fee Schedule.--Section 1848(b)(1) (42 U.S.C. 1395w-
4(b)(1)) is amended by striking ``Before January 1 of each year
beginning with 1992'' and inserting ``Before November 1 of the
preceding year, for each year beginning with 1998''.
Subtitle H--Medicaid
CHAPTER 1--MANAGED CARE
SEC. 4701. STATE OPTION OF USING MANAGED CARE; CHANGE IN TERMINOLOGY.
(a) Use of Managed Care Generally.--Title XIX is amended by
redesignating section 1932 as section 1933 and by inserting after
section 1931 the following new section:
``provisions relating to managed care
``Sec. 1932. (a) State Option To Use Managed Care.--
``(1) Use of medicaid managed care organizations and primary
care case managers.--
``(A) In general.--Subject to the succeeding provisions of
this section, and notwithstanding paragraph (1), (10)(B), or
(23)(A) of section 1902(a), a State--
``(i) may require an individual who is eligible for
medical assistance under the State plan under this title to
enroll with a managed care entity as a condition of
receiving such assistance (and, with respect to assistance
furnished by or under arrangements with such entity, to
receive such assistance through the entity), if--
``(I) the entity and the contract with the State
meet the applicable requirements of this section and
section 1903(m) or section 1905(t), and
``(II) the requirements described in the succeeding
paragraphs of this subsection are met; and
``(ii) may restrict the number of provider agreements
with managed care entities under the State plan if such
restriction does not substantially impair access to
services.
``(B) Definition of managed care entity.--In this section,
the term `managed care entity' means--
``(i) a medicaid managed care organization, as defined
in section 1903(m)(1)(A), that provides or arranges for
services for enrollees under a contract pursuant to section
1903(m); and
``(ii) a primary care case manager, as defined in
section 1905(t)(2).
``(2) Special rules.--
``(A) Exemption of certain children with special needs.--A
State may not require under paragraph (1) the enrollment in a
managed care entity of an individual under 19 years of age
who--
``(i) is eligible for supplemental security income
under title XVI;
``(ii) is described in section 501(a)(1)(D);
``(iii) is described in section 1902(e)(3);
``(iv) is receiving foster care or adoption assistance
under part E of title IV; or
``(v) is in foster care or otherwise in an out-of-home
placement.
``(B) Exemption of medicare beneficiaries.--A State may not
require under paragraph (1) the enrollment in a managed care
entity of an individual who is a qualified medicare beneficiary
(as defined in section 1905(p)(1)) or an individual otherwise
eligible for benefits under title XVIII.
``(C) Indian enrollment.--A State may not require under
paragraph (1) the enrollment in a managed care entity of an
individual who is an Indian (as defined in section 4(c) of the
Indian Health Care Improvement Act of 1976 (25 U.S.C. 1603(c))
unless the entity is one of the following (and only if such
entity is participating under the plan):
``(i) The Indian Health Service.
``(ii) An Indian health program operated by an Indian
tribe or tribal organization pursuant to a contract, grant,
cooperative agreement, or compact with the Indian Health
Service pursuant to the Indian Self-Determination Act (25
U.S.C. 450 et seq.).
``(iii) An urban Indian health program operated by an
urban Indian organization pursuant to a grant or contract
with the Indian Health Service pursuant to title V of the
Indian Health Care Improvement Act (25 U.S.C. 1601 et
seq.).
``(3) Choice of coverage.--
``(A) In general.--A State must permit an individual to
choose a managed care entity from not less than two such
entities that meet the applicable requirements of this section,
and of section 1903(m) or section 1905(t).
``(B) State option.--At the option of the State, a State
shall be considered to meet the requirements of subparagraph
(A) in the case of an individual residing in a rural area, if
the State requires the individual to enroll with a managed care
entity if such entity--
``(i) permits the individual to receive such assistance
through not less than two physicians or case managers (to
the extent that at least two physicians or case managers
are available to provide such assistance in the area), and
(ii) permits the individual to obtain such assistance
from any other provider in appropriate circumstances (as
established by the State under regulations of the
Secretary).
``(C) Treatment of certain county-operated health insuring
organizations.--A State shall be considered to meet the
requirement of subparagraph (A) if--
``(i) the managed care entity in which the individual
is enrolled is a health-insuring organization which--
``(I) first became operational prior to January 1,
1986, or
``(II) is described in section 9517(c)(3) of the
Omnibus Budget Reconciliation Act of 1985 (as added by
section 4734(2) of the Omnibus Budget Reconciliation
Act of 1990), and
``(ii) the individual is given a choice between at
least two providers within such entity.
``(4) Process for enrollment and termination and change of
enrollment.--As conditions under paragraph (1)(A)--
``(A) In general.--The State, enrollment broker (if any),
and managed care entity shall permit an individual eligible for
medical assistance under the State plan under this title who is
enrolled with the entity under this title to terminate (or
change) such enrollment--
``(i) for cause at any time (consistent with section
1903(m)(2)(A)(vi)), and
``(ii) without cause--
``(I) during the 90-day period beginning on the
date the individual receives notice of such enrollment,
and
``(II) at least every 12 months thereafter.
``(B) Notice of termination rights.--The State shall
provide for notice to each such individual of the opportunity
to terminate (or change) enrollment under such conditions. Such
notice shall be provided at least 60 days before each annual
enrollment opportunity described in subparagraph (A)(ii)(II).
``(C) Enrollment priorities.--In carrying out paragraph
(1)(A), the State shall establish a method for establishing
enrollment priorities in the case of a managed care entity that
does not have sufficient capacity to enroll all such
individuals seeking enrollment under which individuals already
enrolled with the entity are given priority in continuing
enrollment with the entity.
``(D) Default enrollment process.--In carrying out
paragraph (1)(A), the State shall establish a default
enrollment process--
``(i) under which any such individual who does not
enroll with a managed care entity during the enrollment
period specified by the State shall be enrolled by the
State with such an entity which has not been found to be
out of substantial compliance with the applicable
requirements of this section and of section 1903(m) or
section 1905(t); and
``(ii) that takes into consideration--
``(I) maintaining existing provider-individual
relationships or relationships with providers that have
traditionally served beneficiaries under this title;
and
``(II) if maintaining such provider relationships
is not possible, the equitable distribution of such
individuals among qualified managed care entities
available to enroll such individuals, consistent with
the enrollment capacities of the entities.
``(5) Provision of information.--
``(A) Information in easily understood form.--Each State,
enrollment broker, or managed care entity shall provide all
enrollment notices and informational and instructional
materials relating to such an entity under this title in a
manner and form which may be easily understood by enrollees and
potential enrollees of the entity who are eligible for medical
assistance under the State plan under this title.
``(B) Information to enrollees and potential enrollees.--
Each managed care entity that is a medicaid managed care
organization shall, upon request, make available to enrollees
and potential enrollees in the organization's service area
information concerning the following:
``(i) Providers.--The identity, locations,
qualifications, and availability of health care providers
that participate with the organization.
``(ii) Enrollee rights and responsibilities.--The
rights and responsibilities of enrollees.
``(iii) Grievance and appeal procedures.--The
procedures available to an enrollee and a health care
provider to challenge or appeal the failure of the
organization to cover a service.
``(iv) Information on covered items and services.--All
items and services that are available to enrollees under
the contract between the State and the organization that
are covered either directly or through a method of referral
and prior authorization. Each managed care entity that is a
primary care case manager shall, upon request, make
available to enrollees and potential enrollees in the
organization's service area the information described in
clause (iii).
``(C) Comparative information.--A State that requires
individuals to enroll with managed care entities under
paragraph (1)(A) shall annually (and upon request) provide,
directly or through the managed care entity, to such
individuals a list identifying the managed care entities that
are (or will be) available and information (presented in a
comparative, chart-like form) relating to the following for
each such entity offered:
``(i) Benefits and cost-sharing.--The benefits covered
and cost-sharing imposed by the entity.
``(ii) Service area.--The service area of the entity.
``(iii) Quality and performance.--To the extent
available, quality and performance indicators for the
benefits under the entity.
``(D) Information on benefits not covered under managed
care arrangement.--A State, directly or through managed care
entities, shall, on or before an individual enrolls with such
an entity under this title, inform the enrollee in a written
and prominent manner of any benefits to which the enrollee may
be entitled to under this title but which are not made
available to the enrollee through the entity. Such information
shall include information on where and how such enrollees may
access benefits not made available to the enrollee through the
entity.''.
(b) Change in Terminology.--
(1) In general.--Section 1903(m)(1)(A) (42 U.S.C. 1396b(m)) is
amended--
(A) by striking ``The term'' and all that follows through
``and--'' and inserting ``The term `medicaid managed care
organization' means a health maintenance organization, an
eligible organization with a contract under section 1876 or a
Medicare+Choice organization with a contract under part C of
title XVIII, a provider sponsored organization, or any other
public or private organization, which meets the requirement of
section 1902(w) and--''; and
(B) by adding after and below clause (ii) the following:
``An organization that is a qualified health maintenance organization
(as defined in section 1310(d) of the Public Health Service Act) is
deemed to meet the requirements of clauses (i) and (ii).''.
(2) Conforming changes in terminology.--(A) Each of the following
provisions is amended by striking ``health maintenance
organization'' and inserting ``medicaid managed care
organization'':
(i) Section 1902(a)(23) (42 U.S.C. 1396a(a)(23)).
(ii) Section 1902(a)(57) (42 U.S.C. 1396a(a)(57)).
(iii) Section 1902(p)(2) (42 U.S.C. 1396a(p)(2)).
(iv) Section 1902(w)(2)(E) (42 U.S.C. 1396a(w)(2)(E)).
(v) Section 1903(k) (42 U.S.C. 1396b(k)).
(vi) In section 1903(m)(1)(B).
(vii) In subparagraphs (A)(i) and (H)(i) of section
1903(m)(2) (42 U.S.C. 1396b(m)(2)).
(viii) Section 1903(m)(4)(A) (42 U.S.C. 1396b(m)(4)(A)),
the first place it appears.
(ix) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-
6(b)(4)(D)(iv)).
(x) Section 1927(j)(1) (42 U.S.C. 1396r-8(j)(1)) is amended
by striking ``***Health Maintenance Organizations, including
those organizations'' and inserting ``health maintenance
organizations, including medicaid managed care organizations''.
(B) Section 1903(m)(2)(H) (42 U.S.C. 1396b(m)(2)(H)) is
amended, in the matter following clause (iii), by striking ``health
maintenance''.
(C) Clause (viii) of section 1903(w)(7)(A) (42 U.S.C.
1396b(w)(7)(A)) is amended to read as follows:
``(viii) Services of a medicaid managed care
organization with a contract under section 1903(m).''.
(D) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv))
is amended--
(i) in the heading, by striking ``hmo'' and inserting
``medicaid managed care organization''; and
(ii) by inserting ``and the applicable requirements of
section 1932'' before the period at the end.
(c) Compliance of Contract With New Requirements.--Section
1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is amended--
(1) by striking ``and'' at the end of clause (x),
(2) by striking the period at the end of clause (xi) and
inserting ``; and''; and
(3) by adding at the end the following:
``(xi) such contract, and the entity complies with the
applicable requirements of section 1932.''.
(d) Conforming Amendments to Freedom-of-Choice and Termination of
Enrollment Requirements.--
(1) Section 1902(a)(23) (42 U.S.C. 1396a(a)(23)), as amended by
section 4724(d), is amended by striking ``and in section 1915'' and
inserting ``, in section 1915, and in section 1932(a)''.
(2) Section 1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended--
(A) in paragraph (A)(vi)--
(i) by striking ``except as provided under subparagraph
(F),'',
(ii) by striking ``without cause'' and all that follows
through ``for such termination'' and inserting ``in
accordance with section 1932(a)(4);'',
(iii) by inserting ``in accordance with such section''
after ``provides for notification''; and
(B) by striking subparagraph (F).
SEC. 4702. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE OPTION
WITHOUT NEED FOR WAIVER.
(a) In General.--Section 1905 (42 U.S.C. 1396d) is amended--
(1) in subsection (a)--
(A) by striking ``and'' at the end of paragraph (24);
(B) by redesignating paragraph (25) as paragraph (26) and
by striking the period at the end of such paragraph and
inserting a comma; and
(C) by inserting after paragraph (24) the following new
paragraph:
``(25) primary care case management services (as defined in
subsection (t)); and''; and
(2) by adding at the end the following new subsection:
``(t)(1) The term `primary care case management services' means
case-management related services (including locating, coordinating, and
monitoring of health care services) provided by a primary care case
manager under a primary care case management contract.
``(2) The term `primary care case manager' means any of the
following that provides services of the type described in paragraph (1)
under a contract referred to in such paragraph:
``(A) A physician, a physician group practice, or an entity
employing or having other arrangements with physicians to provide
such services.
``(B) At State option--
``(i) a nurse practitioner (as described in section
1905(a)(21));
``(ii) a certified nurse-midwife (as defined in section
1861(gg)); or
``(iii) a physician assistant (as defined in section
1861(aa)(5)).
``(3) The term `primary care case management contract' means a
contract between a primary care case manager and a State under which
the manager undertakes to locate, coordinate, and monitor covered
primary care (and such other covered services as may be specified under
the contract) to all individuals enrolled with the manager, and which--
``(A) provides for reasonable and adequate hours of operation,
including 24-hour availability of information, referral, and
treatment with respect to medical emergencies;
``(B) restricts enrollment to individuals residing sufficiently
near a service delivery site of the manager to be able to reach
that site within a reasonable time using available and affordable
modes of transportation;
``(C) provides for arrangements with, or referrals to,
sufficient numbers of physicians and other appropriate health care
professionals to ensure that services under the contract can be
furnished to enrollees promptly and without compromise to quality
of care;
``(D) prohibits discrimination on the basis of health status or
requirements for health care services in enrollment, disenrollment,
or reenrollment of individuals eligible for medical assistance
under this title;
``(E) provides for a right for an enrollee to terminate
enrollment in accordance with section 1932(a)(4); and
``(F) complies with the other applicable provisions of section
1932.
``(4) For purposes of this subsection, the term `primary care'
includes all health care services customarily provided in accordance
with State licensure and certification laws and regulations, and all
laboratory services customarily provided by or through, a general
practitioner, family medicine physician, internal medicine physician,
obstetrician/gynecologist, or pediatrician.''.
(b) Conforming Amendments.--
(1) Application of reenrollment provisions to pccms.--Section
1903(m)(2)(H) (42 U.S.C. 1396b(m)(2)(H)) is amended--
(A) in clause (i), by inserting before the comma the
following: ``or with a primary care case manager with a
contract described in section 1905(t)(3)''; and
(B) by inserting before the period at the end the
following: ``or with the manager described in such clause if
the manager continues to have a contract described in section
1905(t)(3) with the State''.
(2) Conforming cross-reference.--Section 1902(j) (42 U.S.C.
1396a(j)) is amended by striking ``paragraphs (1) through (25)''
and inserting ``a numbered paragraph of''.
SEC. 4703. ELIMINATION OF 75:25 RESTRICTION ON RISK CONTRACTS.
(a) In General.--Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A))
is amended by striking clause (ii).
(b) Conforming Amendments.--
(1) Section 1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended--
(A) by striking subparagraphs (C), (D), and (E); and
(B) in subparagraph (G), by striking ``clauses (i) and
(ii)'' and inserting ``clause (i)''.
(2) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv))
is amended by striking ``less than 50 percent'' and all that
follows up to the period at the end.
SEC. 4704. INCREASED BENEFICIARY PROTECTIONS.
(a) In General.--Section 1932, as added by section 4701(a), is
amended by adding at the end the following:
``(b) Beneficiary Protections.--
``(1) Specification of benefits.--Each contract with a managed
care entity under section 1903(m) or under section 1905(t)(3) shall
specify the benefits the provision (or arrangement) for which the
entity is responsible.
``(2) Assuring coverage to emergency services.--
``(A) In general.--Each contract with a medicaid managed
care organization under section 1903(m) and each contract with
a primary care case manager under section 1905(t)(3) shall
require the organization or manager--
``(i) to provide coverage for emergency services (as
defined in subparagraph (B)) without regard to prior
authorization or the emergency care provider's contractual
relationship with the organization or manager, and
``(ii) to comply with guidelines established under
section 1852(d)(2) (respecting coordination of post-
stabilization care) in the same manner as such guidelines
apply to Medicare+Choice plans offered under part C of
title XVIII.
The requirement under clause (ii) shall first apply 30 days
after the date of promulgation of the guidelines referred to in
such clause.
``(B) Emergency services defined.--In subparagraph (A)(i),
the term `emergency services' means, with respect to an
individual enrolled with an organization, covered inpatient and
outpatient services that--
``(i) are furnished by a provider that is qualified to
furnish such services under this title, and
``(ii) are needed to evaluate or stabilize an emergency
medical condition (as defined in subparagraph (C)).
``(C) Emergency medical condition defined.--In subparagraph
(B)(ii), the term `emergency medical condition' means a medical
condition manifesting itself by acute symptoms of sufficient
severity (including severe pain) such that a prudent layperson,
who possesses an average knowledge of health and medicine,
could reasonably expect the absence of immediate medical
attention to result in--
``(i) placing the health of the individual (or, with
respect to a pregnant woman, the health of the woman or her
unborn child) in serious jeopardy,
``(ii) serious impairment to bodily functions, or
``(iii) serious dysfunction of any bodily organ or
part.
``(3) Protection of enrollee-provider communications.--
``(A) In general.--Subject to subparagraphs (B) and (C),
under a contract under section 1903(m) a medicaid managed care
organization (in relation to an individual enrolled under the
contract) shall not prohibit or otherwise restrict a covered
health care professional (as defined in subparagraph (D)) from
advising such an individual who is a patient of the
professional about the health status of the individual or
medical care or treatment for the individual's condition or
disease, regardless of whether benefits for such care or
treatment are provided under the contract, if the professional
is acting within the lawful scope of practice.
``(B) Construction.--Subparagraph (A) shall not be
construed as requiring a medicaid managed care organization to
provide, reimburse for, or provide coverage of, a counseling or
referral service if the organization--
``(i) objects to the provision of such service on moral
or religious grounds; and
``(ii) in the manner and through the written
instrumentalities such organization deems appropriate,
makes available information on its policies regarding such
service to prospective enrollees before or during
enrollment and to enrollees within 90 days after the date
that the organization adopts a change in policy regarding
such a counseling or referral service.
Nothing in this subparagraph shall be construed to affect
disclosure requirements under State law or under the Employee
Retirement Income Security Act of 1974.
``(C) Health care professional defined.--For purposes of
this paragraph, the term `health care professional' means a
physician (as defined in section 1861(r)) or other health care
professional if coverage for the professional's services is
provided under the contract referred to in subparagraph (A) for
the services of the professional. Such term includes a
podiatrist, optometrist, chiropractor, psychologist, dentist,
physician assistant, physical or occupational therapist and
therapy assistant, speech-language pathologist, audiologist,
registered or licensed practical nurse (including nurse
practitioner, clinical nurse specialist, certified registered
nurse anesthetist, and certified nurse-midwife), licensed
certified social worker, registered respiratory therapist, and
certified respiratory therapy technician.
``(4) Grievance procedures.--Each medicaid managed care
organization shall establish an internal grievance procedure under
which an enrollee who is eligible for medical assistance under the
State plan under this title, or a provider on behalf of such an
enrollee, may challenge the denial of coverage of or payment for
such assistance.
``(5) Demonstration of adequate capacity and services.--Each
medicaid managed care organization shall provide the State and the
Secretary with adequate assurances (in a time and manner determined
by the Secretary) that the organization, with respect to a service
area, has the capacity to serve the expected enrollment in such
service area, including assurances that the organization--
``(A) offers an appropriate range of services and access to
preventive and primary care services for the population
expected to be enrolled in such service area, and
``(B) maintains a sufficient number, mix, and geographic
distribution of providers of services.
``(6) Protecting enrollees against liability for payment.--Each
medicaid managed care organization shall provide that an individual
eligible for medical assistance under the State plan under this
title who is enrolled with the organization may not be held
liable--
``(A) for the debts of the organization, in the event of
the organization's insolvency,
``(B) for services provided to the individual--
``(i) in the event of the organization failing to
receive payment from the State for such services; or
``(ii) in the event of a health care provider with a
contractual, referral, or other arrangement with the
organization failing to receive payment from the State or
the organization for such services, or
``(C) for payments to a provider that furnishes covered
services under a contractual, referral, or other arrangement
with the organization in excess of the amount that would be
owed by the individual if the organization had directly
provided the services.
``(7) Antidiscrimination.--A medicaid managed care organization
shall not discriminate with respect to participation,
reimbursement, or indemnification as to any provider who is acting
within the scope of the provider's license or certification under
applicable State law, solely on the basis of such license or
certification. This paragraph shall not be construed to prohibit an
organization from including providers only to the extent necessary
to meet the needs of the organization's enrollees or from
establishing any measure designed to maintain quality and control
costs consistent with the responsibilities of the organization.
``(8) Compliance with certain maternity and mental health
requirements.--Each medicaid managed care organization shall comply
with the requirements of subpart 2 of part A of title XXVII of the
Public Health Service Act insofar as such requirements apply and
are effective with respect to a health insurance issuer that offers
group health insurance coverage.''.
(b) Protection of Enrollees Against Balance Billing Through
Subcontractors.--Section 1128B(d)(1) (42 U.S.C. 1320a-7b(d)(1)) is
amended by inserting ``(or, in the case of services provided to an
individual enrolled with a medicaid managed care organization under
title XIX under a contract under section 1903(m) or under a
contractual, referral, or other arrangement under such contract, at a
rate in excess of the rate permitted under such contract)'' before the
comma at the end.
SEC. 4705. QUALITY ASSURANCE STANDARDS.
(a) In General.--Section 1932 is further amended by adding at the
end the following:
``(c) Quality Assurance Standards.--
``(1) Quality assessment and improvement strategy.--
``(A) In general.--If a State provides for contracts with
medicaid managed care organizations under section 1903(m), the
State shall develop and implement a quality assessment and
improvement strategy consistent with this paragraph. Such
strategy shall include the following:
``(i) Access standards.--Standards for access to care
so that covered services are available within reasonable
timeframes and in a manner that ensures continuity of care
and adequate primary care and specialized services
capacity.
``(ii) Other measures.--Examination of other aspects of
care and service directly related to the improvement of
quality of care (including grievance procedures and
marketing and information standards).
``(iii) Monitoring procedures.--Procedures for
monitoring and evaluating the quality and appropriateness
of care and services to enrollees that reflect the full
spectrum of populations enrolled under the contract and
that includes requirements for provision of quality
assurance data to the State using the data and information
set that the Secretary has specified for use under part C
of title XVIII or such alternative data as the Secretary
approves, in consultation with the State.
``(iv) Periodic review.--Regular, periodic examinations
of the scope and content of the strategy.
``(B) Standards.--The strategy developed under subparagraph
(A) shall be consistent with standards that the Secretary first
establishes within 1 year after the date of the enactment of
this section. Such standards shall not preempt any State
standards that are more stringent than such standards.
Guidelines relating to quality assurance that are applied under
section 1915(b)(1) shall apply under this subsection until the
effective date of standards for quality assurance established
under this subparagraph.
``(C) Monitoring.--The Secretary shall monitor the
development and implementation of strategies under subparagraph
(A).
``(D) Consultation.--The Secretary shall conduct activities
under subparagraphs (B) and (C) in consultation with the
States.
``(2) External independent review of managed care activities.--
``(A) Review of contracts.--
``(i) In general.--Each contract under section 1903(m)
with a medicaid managed care organization shall provide for
an annual (as appropriate) external independent review
conducted by a qualified independent entity of the quality
outcomes and timeliness of, and access to, the items and
services for which the organization is responsible under
the contract. The requirement for such a review shall not
apply until after the date that the Secretary establishes
the identification method described in clause (ii).
``(ii) Qualifications of reviewer.--The Secretary, in
consultation with the States, shall establish a method for
the identification of entities that are qualified to
conduct reviews under clause (i).
``(iii) Use of protocols.--The Secretary, in
coordination with the National Governors' Association,
shall contract with an independent quality review
organization (such as the National Committee for Quality
Assurance) to develop the protocols to be used in external
independent reviews conducted under this paragraph on and
after January 1, 1999.
``(iv) Availability of results.--The results of each
external independent review conducted under this
subparagraph shall be available to participating health
care providers, enrollees, and potential enrollees of the
organization, except that the results may not be made
available in a manner that discloses the identity of any
individual patient.
``(B) Nonduplication of accreditation.--A State may provide
that, in the case of a medicaid managed care organization that
is accredited by a private independent entity (such as those
described in section 1852(e)(4)) or that has an external review
conducted under section 1852(e)(3), the external review
activities conducted under subparagraph (A) with respect to the
organization shall not be duplicative of review activities
conducted as part of the accreditation process or the external
review conducted under such section.
``(C) Deemed compliance for medicare managed care
organizations.--At the option of a State, the requirements of
subparagraph (A) shall not apply with respect to a medicaid
managed care organization if the organization is an eligible
organization with a contract in effect under section 1876 or a
Medicare+Choice organization with a contract in effect under C
of title XVIII and the organization has had a contract in
effect under section 1903(m) at least during the previous 2-
year period.
(b) Increased FFP for External Quality Review Organizations.--
Section 1903(a)(3)(C) (42 U.S.C. 1396b(a)(3)(C)) is amended--
(1) by inserting ``(i)'' after ``(C)'', and
(2) by adding at the end the following new clause:
``(ii) 75 percent of the sums expended with respect to
costs incurred during such quarter (as found necessary by the
Secretary for the proper and efficient administration of the
State plan) as are attributable to the performance of
independent external reviews conducted under section
1932(c)(2); and''.
(c) Studies and Reports.--
(1) GAO study and report on quality assurance and accreditation
standards.--
(A) Study.--The Comptroller General of the United States
shall conduct a study and analysis of the quality assurance
programs and accreditation standards applicable to managed care
entities operating in the private sector, or to such entities
that operate under contracts under the medicare program under
title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.). Such study shall determine--
(i) if such programs and standards include
consideration of the accessibility and quality of the
health care items and services delivered under such
contracts to low-income individuals; and
(ii) the appropriateness of applying such programs and
standards to medicaid managed care organizations under
section 1932(c) of such Act.
(B) Report.--The Comptroller General shall submit a report
to the Committee on Commerce of the House of Representatives
and the Committee on Finance of the Senate on the study
conducted under subparagraph (A).
(2) Study and report on services provided to individuals with
special health care needs.--
(A) Study.--The Secretary of Health and Human Services, in
consultation with States, managed care organizations, the
National Academy of State Health Policy, representatives of
beneficiaries with special health care needs, experts in
specialized health care, and others, shall conduct a study
concerning safeguards (if any) that may be needed to ensure
that the health care needs of individuals with special health
care needs and chronic conditions who are enrolled with
medicaid managed care organizations are adequately met.
(B) Report.--Not later than 2 years after the date of the
enactment of this Act, the Secretary shall submit to Committees
described in paragraph (1)(B) a report on such study.
SEC. 4706. SOLVENCY STANDARDS.
Section 1903(m)(1) (42 U.S.C. 1396b(m)(1)) is amended--
(1) in subparagraph (A)(ii), by inserting ``, meets the
requirements of subparagraph (C)(i) (if applicable),'' after
``provision is satisfactory to the State'', and
(2) by adding at the end the following:
``(C)(i) Subject to clause (ii), a provision meets the requirements
of this subparagraph for an organization if the organization meets
solvency standards established by the State for private health
maintenance organizations or is licensed or certified by the State as a
risk-bearing entity.
``(ii) Clause (i) shall not apply to an organization if--
``(I) the organization is not responsible for the provision
(directly or through arrangements with providers of services) of
inpatient hospital services and physicians' services;
``(II) the organization is a public entity;
``(III) the solvency of the organization is guaranteed by the
State; or
``(IV) the organization is (or is controlled by) one or more
Federally-qualified health centers and meets solvency standards
established by the State for such an organization.
For purposes of subclause (IV), the term `control' means the
possession, whether direct or indirect, of the power to direct or cause
the direction of the management and policies of the organization
through membership, board representation, or an ownership interest
equal to or greater than 50.1 percent.''.
SEC. 4707. PROTECTIONS AGAINST FRAUD AND ABUSE.
(a) In General.--Section 1932 (42 U.S.C. 1396v) is further amended
by adding at the end the following:
``(d) Protections Against Fraud and Abuse.--
``(1) Prohibiting affiliations with individuals debarred by
Federal agencies.--
``(A) In general.--A managed care entity may not
knowingly--
``(i) have a person described in subparagraph (C) as a
director, officer, partner, or person with beneficial
ownership of more than 5 percent of the entity's equity, or
``(ii) have an employment, consulting, or other
agreement with a person described in such subparagraph for
the provision of items and services that are significant
and material to the entity's obligations under its contract
with the State.
``(B) Effect of noncompliance.--If a State finds that a
managed care entity is not in compliance with clause (i) or
(ii) of subparagraph (A), the State--
``(i) shall notify the Secretary of such noncompliance;
``(ii) may continue an existing agreement with the
entity unless the Secretary (in consultation with the
Inspector General of the Department of Health and Human
Services) directs otherwise; and
``(iii) may not renew or otherwise extend the duration
of an existing agreement with the entity unless the
Secretary (in consultation with the Inspector General of
the Department of Health and Human Services) provides to
the State and to Congress a written statement describing
compelling reasons that exist for renewing or extending the
agreement.
``(C) Persons described.--A person is described in this
subparagraph if such person--
``(i) is debarred, suspended, or otherwise excluded
from participating in procurement activities under the
Federal Acquisition Regulation or from participating in
nonprocurement activities under regulations issued pursuant
to Executive Order No. 12549 or under guidelines
implementing such order; or
``(ii) is an affiliate (as defined in such Act) of a
person described in clause (i).
``(2) Restrictions on marketing.--
``(A) Distribution of materials.--
``(i) In general.--A managed care entity, with respect
to activities under this title, may not distribute directly
or through any agent or independent contractor marketing
materials within any State--
``(I) without the prior approval of the State, and
``(II) that contain false or materially misleading
information.
The requirement of subclause (I) shall not apply with
respect to a State until such date as the Secretary
specifies in consultation with such State.
``(ii) Consultation in review of market materials.--In
the process of reviewing and approving such materials, the
State shall provide for consultation with a medical care
advisory committee.
``(B) Service market.--A managed care entity shall
distribute marketing materials to the entire service area of
such entity covered under the contract under section 1903(m) or
section 1903(t)(3).
``(C) Prohibition of tie-ins.--A managed care entity, or
any agency of such entity, may not seek to influence an
individual's enrollment with the entity in conjunction with the
sale of any other insurance.
``(D) Prohibiting marketing fraud.--Each managed care
entity shall comply with such procedures and conditions as the
Secretary prescribes in order to ensure that, before an
individual is enrolled with the entity, the individual is
provided accurate oral and written information sufficient to
make an informed decision whether or not to enroll.
``(E) Prohibition of `cold-call' marketing.--Each managed
care entity shall not, directly or indirectly, conduct door-to-
door, telephonic, or other `cold-call' marketing of enrollment
under this title.
``(3) State conflict-of-interest safeguards in medicaid risk
contracting.--A medicaid managed care organization may not enter
into a contract with any State under section 1903(m) unless the
State has in effect conflict-of-interest safeguards with respect to
officers and employees of the State with responsibilities relating
to contracts with such organizations or to the default enrollment
process described in subsection (a)(4)(C)(ii) that are at least as
effective as the Federal safeguards provided under section 27 of
the Office of Federal Procurement Policy Act (41 U.S.C. 423),
against conflicts of interest that apply with respect to Federal
procurement officials with comparable responsibilities with respect
to such contracts.
``(4) Use of unique physician identifier for participating
physicians.--Each medicaid managed care organization shall require
each physician providing services to enrollees eligible for medical
assistance under the State plan under this title to have a unique
identifier in accordance with the system established under section
1173(b).
``(e) Sanctions for Noncompliance.--
``(1) Use of intermediate sanctions by the state to enforce
requirements.--
``(A) In general.--A State may not enter into or renew a
contract under section 1903(m) unless the State has established
intermediate sanctions, which may include any of the types
described in paragraph (2), other than the termination of a
contract with a medicaid managed care organization, which the
State may impose against a medicaid managed care organization
with such a contract, if the organization--
``(i) fails substantially to provide medically
necessary items and services that are required (under law
or under such organization's contract with the State) to be
provided to an enrollee covered under the contract;
``(ii) imposes premiums or charges on enrollees in
excess of the premiums or charges permitted under this
title;
``(iii) acts to discriminate among enrollees on the
basis of their health status or requirements for health
care services, including expulsion or refusal to reenroll
an individual, except as permitted by this title, or
engaging in any practice that would reasonably be expected
to have the effect of denying or discouraging enrollment
with the organization by eligible individuals whose medical
condition or history indicates a need for substantial
future medical services;
``(iv) misrepresents or falsifies information that is
furnished--
``(I) to the Secretary or the State under this
title; or
``(II) to an enrollee, potential enrollee, or a
health care provider under such title; or
``(v) fails to comply with the applicable requirements
of section 1903(m)(2)(A)(x).
The State may also impose such intermediate sanction against a
managed care entity if the State determines that the entity
distributed directly or through any agent or independent
contractor marketing materials in violation of subsection
(d)(2)(A)(i)(II).
``(B) Rule of construction.--Clause (i) of subparagraph (A)
shall not apply to the provision of abortion services, except
that a State may impose a sanction on any medicaid managed care
organization that has a contract to provide abortion services
if the organization does not provide such services as provided
for under the contract.
``(2) Intermediate sanctions.--The sanctions described in this
paragraph are as follows:
``(A) Civil money penalties as follows:
``(i) Except as provided in clause (ii), (iii), or
(iv), not more than $25,000 for each determination under
paragraph (1)(A).
``(ii) With respect to a determination under clause
(iii) or (iv)(I) of paragraph (1)(A), not more than
$100,000 for each such determination.
``(iii) With respect to a determination under paragraph
(1)(A)(ii), double the excess amount charged in violation
of such subsection (and the excess amount charged shall be
deducted from the penalty and returned to the individual
concerned).
``(iv) Subject to clause (ii), with respect to a
determination under paragraph (1)(A)(iii), $15,000 for each
individual not enrolled as a result of a practice described
in such subsection.
``(B) The appointment of temporary management--
``(i) to oversee the operation of the medicaid managed
care organization upon a finding by the State that there is
continued egregious behavior by the organization or there
is a substantial risk to the health of enrollees; or
``(ii) to assure the health of the organization's
enrollees, if there is a need for temporary management
while--
``(I) there is an orderly termination or
reorganization of the organization; or
``(II) improvements are made to remedy the
violations found under paragraph (1),
except that temporary management under this subparagraph
may not be terminated until the State has determined that
the medicaid managed care organization has the capability
to ensure that the violations shall not recur.
``(C) Permitting individuals enrolled with the managed care
entity to terminate enrollment without cause, and notifying
such individuals of such right to terminate enrollment.
``(D) Suspension or default of all enrollment of
individuals under this title after the date the Secretary or
the State notifies the entity of a determination of a violation
of any requirement of section 1903(m) or this section.
``(E) Suspension of payment to the entity under this title
for individuals enrolled after the date the Secretary or State
notifies the entity of such a determination and until the
Secretary or State is satisfied that the basis for such
determination has been corrected and is not likely to recur.
``(3) Treatment of chronic substandard entities.--In the case
of a medicaid managed care organization which has repeatedly failed
to meet the requirements of section 1903(m) and this section, the
State shall (regardless of what other sanctions are provided)
impose the sanctions described in subparagraphs (B) and (C) of
paragraph (2).
``(4) Authority to terminate contract.--
``(A) In general.--In the case of a managed care entity
which has failed to meet the requirements of this part or a
contract under section 1903(m) or 1905(t)(3), the State shall
have the authority to terminate such contract with the entity
and to enroll such entity's enrollees with other managed care
entities (or to permit such enrollees to receive medical
assistance under the State plan under this title other than
through a managed care entity).
``(B) Availability of hearing prior to termination of
contract.--A State may not terminate a contract with a managed
care entity under subparagraph (A) unless the entity is
provided with a hearing prior to the termination.
``(C) Notice and right to disenroll in cases of termination
hearing.--A State may--
``(i) notify individuals enrolled with a managed care
entity which is the subject of a hearing to terminate the
entity's contract with the State of the hearing, and
``(ii) in the case of such an entity, permit such
enrollees to disenroll immediately with the entity without
cause.
``(5) Other protections for managed care entities against
sanctions imposed by state.--Before imposing any sanction against a
managed care entity other than termination of the entity's
contract, the State shall provide the entity with notice and such
other due process protections as the State may provide, except that
a State may not provide a managed care entity with a pre-
termination hearing before imposing the sanction described in
paragraph (2)(B).''.
(b) Limitation on Availability of FFP for Use of Enrollment
Brokers.--Section 1903(b) (42 U.S.C. 1396b(b)) is amended by adding at
the end the following:
``(4) Amounts expended by a State for the use an enrollment broker
in marketing medicaid managed care organizations and other managed care
entities to eligible individuals under this title shall be considered,
for purposes of subsection (a)(7), to be necessary for the proper and
efficient administration of the State plan but only if the following
conditions are met with respect to the broker:
``(A) The broker is independent of any such entity and of any
health care providers (whether or not any such provider
participates in the State plan under this title) that provide
coverage of services in the same State in which the broker is
conducting enrollment activities.
``(B) No person who is an owner, employee, consultant, or has a
contract with the broker either has any direct or indirect
financial interest with such an entity or health care provider or
has been excluded from participation in the program under this
title or title XVIII or debarred by any Federal agency, or subject
to a civil money penalty under this Act.''.
(c) Application of Disclosure Requirements to Managed Care
Entities.--Section 1124(a)(2)(A) (42 U.S.C. 1320a-3(a)(2)(A)) is
amended by inserting ``a managed care entity, as defined in section
1932(a)(1)(B),'' after ``renal disease facility,''.
SEC. 4708. IMPROVED ADMINISTRATION.
(a) Change in Threshold Amount for Contracts Requiring Secretary's
Prior Approval.--Section 1903(m)(2)(A)(iii) (42 U.S.C.
1396b(m)(2)(A)(iii)) is amended by striking ``$100,000'' and inserting
``$1,000,000 for 1998 and, for a subsequent year, the amount
established under this clause for the previous year increased by the
percentage increase in the consumer price index for all urban consumers
over the previous year''.
(b) Permitting Same Copayments in Health Maintenance Organizations
as in Fee-for-Service.--Section 1916 (42 U.S.C. 1396o) is amended--
(1) in subsection (a)(2)(D), by striking ``or services
furnished'' and all that follows through ``enrolled,''; and
(2) in subsection (b)(2)(D), by striking ``or (at the option''
and all that follows through ``enrolled,''.
(c) Assuring Timeliness of Provider Payments.--Section 1932 is
further amended by adding at the end the following:
``(f) Timeliness of Payment.--A contract under section 1903(m) with
a medicaid managed care organization shall provide that the
organization shall make payment to health care providers for items and
services which are subject to the contract and that are furnished to
individuals eligible for medical assistance under the State plan under
this title who are enrolled with the organization on a timely basis
consistent with the claims payment procedures described in section
1902(a)(37)(A), unless the health care provider and the organization
agree to an alternate payment schedule.''.
(d) Clarification of Application of FFP Denial Rules to Payments
Made Pursuant to Managed Care Entities.--Section 1903(i) (42 U.S.C.
1396b(i)) is amended by adding at the end the following new sentence:
``Paragraphs (1), (2), (16), (17), and (18) shall apply with respect to
items or services furnished and amounts expended by or through a
managed care entity (as defined in section 1932(a)(1)(B)) in the same
manner as such paragraphs apply to items or services furnished and
amounts expended directly by the State.''.
SEC. 4709. 6-MONTH GUARANTEED ELIGIBILITY FOR ALL INDIVIDUALS ENROLLED
IN MANAGED CARE.
Section 1902(e)(2) (42 U.S.C. 1396a(e)(2)) is amended--
(1) by striking ``who is enrolled'' and all that follows
through ``section 1903(m)(2)(A)'' and inserting ``who is enrolled
with a medicaid managed care organization (as defined in section
1903(m)(1)(A)), with a primary care case manager (as defined in
section 1905(t)),''; and
(2) by inserting before the period ``or by or through the case
manager''.
SEC. 4710. EFFECTIVE DATES.
(a) General Effective Date.--Except as otherwise provided in this
chapter and section 4759, the amendments made by this chapter shall
take effect on the date of the enactment of this Act and shall apply to
contracts entered into or renewed on or after October 1, 1997.
(b) Specific Effective Dates.--Subject to subsection (c) and
section 4759--
(1) PCCM option.--The amendments made by section 4702 shall
apply to primary care case management services furnished on or
after October 1, 1997.
(2) 75:25 rule.--The amendments made by section 4703 apply to
contracts under section 1903(m) of the Social Security Act (42
U.S.C. 1396b(m)) on and after June 20, 1997.
(3) Quality standards.--Section 1932(c)(1) of the Social
Security Act, as added by section 4705(a), shall take effect on
January 1, 1999.
(4) Solvency standards.--
(A) In general.--The amendments made by section 4706 shall
apply to contracts entered into or renewed on or after October
1, 1998.
(B) Transition rule.--In the case of an organization that
as of the date of the enactment of this Act has entered into a
contract under section 1903(m) of the Social Security Act with
a State for the provision of medical assistance under title XIX
of such Act under which the organization assumes full financial
risk and is receiving capitation payments, the amendment made
by section 4706 shall not apply to such organization until 3
years after the date of the enactment of this Act.
(5) Sanctions for noncompliance.--Section 1932(e) of the Social
Security Act, as added by section 4707(a), shall apply to contracts
entered into or renewed on or after April 1, 1998.
(6) Limitation on ffp for enrollment brokers.--The amendment
made by section 4707(b) shall apply to amounts expended on or after
October 1, 1997.
(7) 6-month guaranteed eligibility.--The amendments made by
section 4709 shall take effect on October 1, 1997.
(c) Nonapplication to Waivers.--Nothing in this chapter (or the
amendments made by this chapter) shall be construed as affecting the
terms and conditions of any waiver, or the authority of the Secretary
of Health and Human Services with respect to any such waiver, under
section 1115 or 1915 of the Social Security Act (42 U.S.C. 1315,
1396n).
CHAPTER 2--FLEXIBILITY IN PAYMENT OF PROVIDERS
SEC. 4711. FLEXIBILITY IN PAYMENT METHODS FOR HOSPITAL, NURSING
FACILITY, ICF/MR, AND HOME HEALTH SERVICES.
(a) Repeal of Boren Requirements.--Section 1902(a)(13) (42 U.S.C.
1396a(a)(13)) is amended--
(1) by striking all that precedes subparagraph (D) and
inserting the following:
``(13) provide--
``(A) for a public process for determination of rates of
payment under the plan for hospital services, nursing facility
services, and services of intermediate care facilities for the
mentally retarded under which--
``(i) proposed rates, the methodologies underlying the
establishment of such rates, and justifications for the
proposed rates are published,
``(ii) providers, beneficiaries and their
representatives, and other concerned State residents are
given a reasonable opportunity for review and comment on
the proposed rates, methodologies, and justifications,
``(iii) final rates, the methodologies underlying the
establishment of such rates, and justifications for such
final rates are published, and
``(iv) in the case of hospitals, such rates take into
account (in a manner consistent with section 1923) the
situation of hospitals which serve a disproportionate
number of low-income patients with special needs;'';
(2) by redesignating subparagraphs (D) and (E) as subparagraphs
(B) and (C), respectively;
(3) in subparagraph (B), as so redesignated, by adding ``and''
at the end;
(4) in subparagraph (C), as so redesignated, by striking
``and'' at the end; and
(5) by striking subparagraph (F).
(b) Study and Report.--
(1) Study.--The Secretary of Health and Human Services shall
study the effect on access to, and the quality of, services
provided to beneficiaries of the rate-setting methods used by
States pursuant to section 1902(a)(13)(A) of the Social Security
Act (42 U.S.C. 1396a(a)(13)(A)), as amended by subsection (a).
(2) Report.--Not later than 4 years after the date of the
enactment of this Act, the Secretary of Health and Human Services
shall submit a report to the appropriate committees of Congress on
the conclusions of the study conducted under paragraph (1),
together with any recommendations for legislation as a result of
such conclusions.
(c) Conforming Amendments.--
(1) Section 1905(o)(3) (42 U.S.C. 1396d(o)(3)) is amended by
striking ``amount described in section 1902(a)(13)(D)'' and
inserting ``amount determined in section 1902(a)(13)(B)''.
(2) Section 1923 (42 U.S.C. 1396r-4) is amended, in subsections
(a)(1) and (e)(1), by striking ``1902(a)(13)(A)'' each place it
appears and inserting ``1902(a)(13)(A)(iv)''.
(d) Effective Date.--This section shall take effect on the date of
the enactment of this Act and the amendments made by subsections (a)
and (c) shall apply to payment for items and services furnished on or
after October 1, 1997.
SEC. 4712. PAYMENT FOR CENTER AND CLINIC SERVICES.
(a) Phase-Out of Payment Based on Reasonable Costs.--Section
1902(a)(13)(C) (42 U.S.C. 1396a(a)(13)(C)), as redesignated by section
4711(a)(2), is amended by inserting ``(or 95 percent for services
furnished during fiscal year 2000, 90 percent for services furnished
during fiscal year 2001, 85 percent for services furnished during
fiscal year 2002, or 70 percent for services furnished during fiscal
year 2003)'' after ``100 percent''.
(b) Transitional Supplemental Payment for Services Furnished Under
Certain Managed Care Contracts.--
(1) In general.--Section 1902(a)(13)(C) (42 U.S.C.
1396a(a)(13)(C)), as so redesignated, is further amended--
(A) by inserting ``(i)'' after ``(C)'', and
(B) by inserting before the semicolon at the end the
following: ``and (ii) in carrying out clause (i) in the case of
services furnished by a Federally-qualified health center or a
rural health clinic pursuant to a contract between the center
and an organization under section 1903(m), for payment to the
center or clinic at least quarterly by the State of a
supplemental payment equal to the amount (if any) by which the
amount determined under clause (i) exceeds the amount of the
payments provided under such contract''.
(2) Conforming amendment to managed care contract
requirement.--Clause (ix) of section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is amended to read as follows:
``(ix) such contract provides, in the case of an entity that
has entered into a contract for the provision of services with a
Federally-qualified health center or a rural health clinic, that
the entity shall provide payment that is not less than the level
and amount of payment which the entity would make for the services
if the services were furnished by a provider which is not a
Federally-qualified health center or a rural health clinic;''.
(3) Effective date.--The amendments made by this subsection
shall apply to services furnished on or after October 1, 1997.
(c) End of Transitional Payment Rules.--Effective for services
furnished on or after October 1, 2003--
(1) subparagraph (C) of section 1902(a)(13) (42 U.S.C.
1396a(a)(13)), as so redesignated, is repealed, and
(2) clause (ix) of section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is repealed.
(d) Flexibility in Coverage of Non-Freestanding Look-Alikes.--
(1) In general.--Section 1905(l)(2)(B)(iii) (42 U.S.C.
1396d(l)(2)(B)(iii)) is amended by inserting ``including
requirements of the Secretary that an entity may not be owned,
controlled, or operated by another entity,'' after ``such a
grant,''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to services furnished on or after the date of the enactment
of this Act.
SEC. 4713. ELIMINATION OF OBSTETRICAL AND PEDIATRIC PAYMENT RATE
REQUIREMENTS.
(a) In General.--Section 1926 (42 U.S.C. 1396r-7) is repealed.
(b) Effective Date.--The repeal made by subsection (a) shall apply
to services furnished on or after October 1, 1997.
SEC. 4714. MEDICAID PAYMENT RATES FOR CERTAIN MEDICARE COST-SHARING.
(a) Clarification Regarding State Liability for Medicare Cost-
Sharing.--
(1) In general.--Section 1902(n) (42 U.S.C. 1396a(n)) is
amended--
(A) by inserting ``(1)'' after ``(n)'', and
(B) by adding at the end the following:
``(2) In carrying out paragraph (1), a State is not required to
provide any payment for any expenses incurred relating to payment for
deductibles, coinsurance, or copayments for medicare cost-sharing to
the extent that payment under title XVIII for the service would exceed
the payment amount that otherwise would be made under the State plan
under this title for such service if provided to an eligible recipient
other than a medicare beneficiary.
``(3) In the case in which a State's payment for medicare cost-
sharing for a qualified medicare beneficiary with respect to an item or
service is reduced or eliminated through the application of paragraph
(2)--
``(A) for purposes of applying any limitation under title XVIII
on the amount that the beneficiary may be billed or charged for the
service, the amount of payment made under title XVIII plus the
amount of payment (if any) under the State plan shall be considered
to be payment in full for the service;
``(B) the beneficiary shall not have any legal liability to
make payment to a provider or to an organization described in
section 1903(m)(1)(A) for the service; and
``(C) any lawful sanction that may be imposed upon a provider
or such an organization for excess charges under this title or
title XVIII shall apply to the imposition of any charge imposed
upon the individual in such case.
This paragraph shall not be construed as preventing payment of any
medicare cost-sharing by a medicare supplemental policy or an employer
retiree health plan on behalf of an individual.''.
(2) Conforming clarification.--Section 1905(p)(3) (42 U.S.C.
1396d(p)(3)) is amended by inserting ``(subject to section
1902(n)(2))'' after ``means''.
(b) Limitation on Medicare Providers.--
(1) Provider agreements.--Section 1866(a)(1)(A) (42 U.S.C.
1395cc(a)(1)(A)) is amended--
(A) by inserting ``(i)'' after ``(A)'', and
(B) by inserting before the comma at the end the following:
``, and (ii) not to impose any charge that is prohibited under
section 1902(n)(3)''.
(2) Nonparticipating providers.--Section 1848(g)(3)(A) (42
U.S.C. 1395w-4(g)(3)(A)) is amended by inserting before the period
at the end the following: ``and the provisions of section
1902(n)(3)(A) apply to further limit permissible charges under this
section''.
(c) Effective Date.--The amendments made by this section shall
apply to payment for (and with respect to provider agreements with
respect to) items and services furnished on or after the date of the
enactment of this Act. The amendments made by subsection (a) shall also
apply to payment by a State for items and services furnished before
such date if such payment is the subject of a law suit that is based on
the provisions of sections 1902(n) and 1905(p) of the Social Security
Act and that is pending as of, or is initiated after, the date of the
enactment of this Act.
SEC. 4715. TREATMENT OF VETERANS' PENSIONS UNDER MEDICAID.
(a) Post-Eligibility Treatment.--Section 1902(r)(1) (42 U.S.C.
1396a(r)(1)) is amended--
(1) by inserting ``(A)'' after ``(r)(1)'',
(2) by inserting ``, the treatment described in subparagraph
(B) shall apply,'' after ``under such a waiver'';
(3) by striking ``and,'' and inserting ``, and''; and
(4) by adding at the end the following:
``(B)(i) In the case of a veteran who does not have a spouse or a
child, if the veteran--
``(I) receives, after the veteran has been determined to be
eligible for medical assistance under the State plan under this
title, a veteran's pension in excess of $90 per month, and
``(II) resides in a State veterans home with respect to which
the Secretary of Veterans Affairs makes per diem payments for
nursing home care pursuant to section 1741(a) of title 38, United
States Code,
any such pension payment, including any payment made due to the need
for aid and attendance, or for unreimbursed medical expenses, that is
in excess of $90 per month shall be counted as income only for the
purpose of applying such excess payment to the State veterans home's
cost of providing nursing home care to the veteran.
``(ii) The provisions of clause (i) shall apply with respect to a
surviving spouse of a veteran who does not have a child in the same
manner as they apply to a veteran described in such clause.''.
(b) Effective Date.--The amendments made by this section shall
apply on and after October 1, 1997.
CHAPTER 3--FEDERAL PAYMENTS TO STATES
SEC. 4721. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER STATE
MEDICAID PROGRAMS.
(a) Adjustment of State DSH Allotments.--
(1) In general.--Section 1923(f) (42 U.S.C. 1396r-4(f)) is
amended to read as follows:
``(f) Limitation on Federal Financial Participation.--
``(1) In general.--Payment under section 1903(a) shall not be
made to a State with respect to any payment adjustment made under
this section for hospitals in a State for quarters in a fiscal year
in excess of the disproportionate share hospital (in this
subsection referred to as `DSH') allotment for the State for the
fiscal year, as specified in paragraphs (2) and (3).
``(2) State dsh allotments for fiscal years 1998 through
2002.--The DSH allotment for a State for each fiscal year during
the period beginning with fiscal year 1998 and ending with fiscal
year 2002 is determined in accordance with the following table:
----------------------------------------------------------------------------------------------------------------
DSH Allotment (in millions of dollars)
State or District -------------------------------------------------
FY 98 FY 99 FY 00 FY 01 FY 02
----------------------------------------------------------------------------------------------------------------
Alabama 293 269 248 246 246
Alaska 10 10 10 9 9
Arizona 81 81 81 81 81
Arkansas 2 2 2 2 2
California 1,085 1,068 986 931 877
Colorado 93 85 79 74 74
Connecticut 200 194 164 160 160
Delaware 4 4 4 4 4
District of Columbia 23 23 23 23 23
Florida 207 203 197 188 160
Georgia 253 248 241 228 215
Hawaii 0 0 0 0 0
Idaho 1 1 1 1 1
Illinois 203 199 193 182 172
Indiana 201 197 191 181 171
Iowa 8 8 8 8 8
Kansas 51 49 42 36 33
Kentucky 137 134 130 123 116
Louisiana 880 795 713 658 631
Maine 103 99 84 84 84
Maryland 72 70 68 64 61
Massachusetts 288 282 273 259 244
Michigan 249 244 237 224 212
Minnesota 16 16 16 16 16
Mississippi 143 141 136 129 122
Missouri 436 423 379 379 379
Montana 0.2 0.2 0.2 0.2 0.2
Nebraska 5 5 5 5 5
Nevada 37 37 37 37 37
New Hampshire 140 136 130 130 130
New Jersey 600 582 515 515 515
New Mexico 5 5 5 5 5
New York 1,512 1,482 1,436 1,361 1,285
North Carolina 278 272 264 250 236
North Dakota 1 1 1 1 1
Ohio 382 374 363 344 325
Oklahoma 16 16 16 16 16
Oregon 20 20 20 20 20
Pennsylvania 529 518 502 476 449
Rhode Island 62 60 58 55 52
South Carolina 313 303 262 262 262
South Dakota 1 1 1 1 1
Tennessee 0 0 0 0 0
Texas 979 950 806 765 765
Utah 3 3 3 3 3
Vermont 18 18 18 18 18
Virginia 70 68 66 63 59
Washington 174 171 166 157 148
West Virginia 64 63 61 58 54
Wisconsin 7 7 7 7 7
Wyoming 0 0 0 0 0.
----------------------------------------------------------------------------------------------------------------
``(3) State dsh allotments for fiscal year 2003 and
thereafter.--
``(A) In general.--The DSH allotment for any State for
fiscal year 2003 and each succeeding fiscal year is equal to
the DSH allotment for the State for the preceding fiscal year
under paragraph (2) or this paragraph, increased, subject to
subparagraph (B), by the percentage change in the consumer
price index for all urban consumers (all items; U.S. city
average), for the previous fiscal year.
``(B) Limitation.--The DSH allotment for a State shall not
be increased under subparagraph (A) for a fiscal year to the
extent that such an increase would result in the DSH allotment
for the year exceeding the greater of--
``(i) the DSH allotment for the previous year, or
``(ii) 12 percent of the total amount of expenditures
under the State plan for medical assistance during the
fiscal year.
``(4) Definition of state.-- In this subsection, the term
`State' means the 50 States and the District of Columbia.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to payment adjustments attributable to DSH allotments for
fiscal years beginning with fiscal year 1998.
(b) Limitation on Payments to Institutions For Mental Diseases.--
Section 1923 of the Social Security Act (42 U.S.C. 1396r-4) is amended
by adding at the end the following:
``(h) Limitation on Certain State DSH Expenditures.--
``(1) In general.--Payment under section 1903(a) shall not be
made to a State with respect to any payment adjustments made under
this section for quarters in a fiscal year (beginning with fiscal
year 1998) to institutions for mental diseases or other mental
health facilities, to the extent the aggregate of such adjustments
in the fiscal year exceeds the lesser of the following:
``(A) 1995 imd dsh payment adjustments.--The total State
DSH expenditures that are attributable to fiscal year 1995 for
payments to institutions for mental diseases and other mental
health facilities (based on reporting data specified by the
State on HCFA Form 64 as mental health DSH, and as approved by
the Secretary).
``(B) Applicable percentage of 1995 total dsh payment
allotment.--The amount of such payment adjustments which are
equal to the applicable percentage of the Federal share of
payment adjustments made to hospitals in the State under
subsection (c) that are attributable to the 1995 DSH allotment
for the State for payments to institutions for mental diseases
and other mental health facilities (based on reporting data
specified by the State on HCFA Form 64 as mental health DSH,
and as approved by the Secretary).
``(2) Applicable percentage.--
``(A) In general.--For purposes of paragraph (1), the
applicable percentage with respect to--
``(i) each of fiscal years 1998, 1999, and 2000, is the
percentage determined under subparagraph (B); or
``(ii) a succeeding fiscal year is the lesser of the
percentage determined under subparagraph (B) or the
following percentage:
``(I) For fiscal year 2001, 50 percent.
``(II) For fiscal year 2002, 40 percent.
``(III) For each succeeding fiscal year, 33
percent.
``(B) 1995 percentage.--The percentage determined under
this subparagraph is the ratio (determined as a percentage)
of--
``(i) the Federal share of payment adjustments made to
hospitals in the State under subsection (c) that are
attributable to the 1995 DSH allotment for the State (as
reported by the State not later than January 1, 1997, on
HCFA Form 64, and as approved by the Secretary) for
payments to institutions for mental diseases and other
mental health facilities, to
``(ii) the State 1995 DSH spending amount.
``(C) State 1995 dsh spending amount.--For purposes of
subparagraph (B)(ii), the `State 1995 DSH spending amount',
with respect to a State, is the Federal medical assistance
percentage (for fiscal year 1995) of the payment adjustments
made under subsection (c) under the State plan that are
attributable to the fiscal year 1995 DSH allotment for the
State (as reported by the State not later than January 1, 1997,
on HCFA Form 64, and as approved by the Secretary).''.
(c) Description of Targeting Payments.--Section 1923(a)(2) (42
U.S.C. 1396r-4(a)(2)) is amended by adding at the end the following:
``(D) A State plan under this title shall not be considered to
meet the requirements of section 1902(a)(13)(A)(iv) (insofar as it
requires payments to hospitals to take into account the situation
of hospitals that serve a disproportionate number of low-income
patients with special needs), as of October 1, 1998, unless the
State has submitted to the Secretary by such date a description of
the methodology used by the State to identify and to make payments
to disproportionate share hospitals, including children's
hospitals, on the basis of the proportion of low-income and
medicaid patients served by such hospitals. The State shall provide
an annual report to the Secretary describing the disproportionate
share payments to each such disproportionate share hospital.''.
(d) Direct Payment by State for Managed Care Enrollees.--Section
1923 (42 U.S.C. 1396r-4) is amended by adding at the end the following:
``(i) Requirement for Direct Payment.--
``(1) In general.--No payment may be made under section
1903(a)(1) with respect to a payment adjustment made under this
section, for services furnished by a hospital on or after October
1, 1997, with respect to individuals eligible for medical
assistance under the State plan who are enrolled with a managed
care entity (as defined in section 1932(a)(1)(B)) or under any
other managed care arrangement unless a payment, equal to the
amount of the payment adjustment--
``(A) is made directly to the hospital by the State; and
``(B) is not used to determine the amount of a prepaid
capitation payment under the State plan to the entity or
arrangement with respect to such individuals.
``(2) Exception for current arrangements.--Paragraph (1) shall
not apply to a payment adjustment provided pursuant to a payment
arrangement in effect on July 1, 1997.''.
(e) Transition Rule.--Effective July 1, 1997, section 1923(g)(2)(A)
of the Social Security Act (42 U.S.C. 1396r-4(g)(2)(A)) shall be
applied to the State of California as though--
(1) ``(or that begins on or after July 1, 1997, and before July
1, 1999)'' were inserted in such section after ``January 1,
1995,''; and
(2) ``(or 175 percent in the case of a State fiscal year that
begins on or after July 1, 1997, and before July 1, 1999)'' were
inserted in such section after ``200 percent''.
SEC. 4722. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN HOSPITALS.
(a) Exception From Tax Does Not Disqualify as Broad-Based Tax.--
Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amended--
(1) in subparagraph (B), by striking ``and (E)'' and inserting
``(E), and (F)''; and
(2) by adding at the end the following:
``(F) In no case shall a tax not qualify as a broad-based health
care related tax under this paragraph because it does not apply to a
hospital that is described in section 501(c)(3) of the Internal Revenue
Code of 1986 and exempt from taxation under section 501(a) of such Code
and that does not accept payment under the State plan under this title
or under title XVIII.''.
(b) Reduction in Federal Financial Participation in Case of
Imposition of Tax.--Section 1903(b) (42 U.S.C. 1396b(b)), as amended by
section 4707(b), is amended by adding at the end the following:
``(5) Notwithstanding the preceding provisions of this section, the
amount determined under subsection (a)(1) for any State shall be
decreased in a quarter by the amount of any health care related taxes
(described in section 1902(w)(3)(A)) that are imposed on a hospital
described in subsection (w)(3)(F) in that quarter.''.
(c) Waiver of Certain Provider Tax Provisions.--Notwithstanding any
other provision of law, taxes, fees, or assessments, as defined in
section 1903(w)(3)(A) of the Social Security Act (42 U.S.C.
1396b(w)(3)(A)), that were collected by the State of New York from a
health care provider before June 1, 1997, and for which a waiver of the
provisions of subparagraph (B) or (C) of section 1903(w)(3) of such Act
has been applied for, or that would, but for this subsection require
that such a waiver be applied for, in accordance with subparagraph (E)
of such section, and, (if so applied for) upon which action by the
Secretary of Health and Human Services (including any judicial review
of any such proceeding) has not been completed as of July 23, 1997, are
deemed to be permissible health care related taxes and in compliance
with the requirements of subparagraphs (B) and (C) of section
1903(w)(3) of such Act.
(d) Effective Date.--The amendments made by subsection (a) shall
apply to taxes imposed before, on, or after the date of the enactment
of this Act and the amendment made by subsection (b) shall apply to
taxes imposed on or after such date.
SEC. 4723. ADDITIONAL FUNDING FOR STATE EMERGENCY HEALTH SERVICES
FURNISHED TO UNDOCUMENTED ALIENS.
(a) Total Amount Available for Allotment.--There are available for
allotments under this section for each of the 4 consecutive fiscal
years (beginning with fiscal year 1998) $25,000,000 for payments to
certain States under this section.
(b) State Allotment Amount.--
(1) In general.--The Secretary of Health and Human Services
shall compute an allotment for each fiscal year beginning with
fiscal year 1998 and ending with fiscal year 2001 for each of the
12 States with the highest number of undocumented aliens. The
amount of such allotment for each such State for a fiscal year
shall bear the same ratio to the total amount available for
allotments under subsection (a) for the fiscal year as the ratio of
the number of undocumented aliens in the State in the fiscal year
bears to the total of such numbers for all such States for such
fiscal year. The amount of allotment to a State provided under this
paragraph for a fiscal year that is not paid out under subsection
(c) shall be available for payment during the subsequent fiscal
year.
(2) Determination.--For purposes of paragraph (1), the number
of undocumented aliens in a State under this section shall be
determined based on estimates of the resident illegal alien
population residing in each State prepared by the Statistics
Division of the Immigration and Naturalization Service as of
October 1992 (or as of such later date if such date is at least 1
year before the beginning of the fiscal year involved).
(c) Use of Funds.--From the allotments made under subsection (b),
the Secretary shall pay to each State amounts the State demonstrates
were paid by the State (or by a political subdivision of the State) for
emergency health services furnished to undocumented aliens.
(d) State Defined.--For purposes of this section, the term
``State'' includes the District of Columbia.
(e) State Entitlement.--This section constitutes budget authority
in advance of appropriations Acts and represents the obligation of the
Federal Government to provide for the payment to States of amounts
provided under this section.
SEC. 4724. ELIMINATION OF WASTE, FRAUD, AND ABUSE.
(a) Ban on Spending for Nonhealth Related Items.--Section 1903(i)
(42 U.S.C. 1396b(i)) is amended--
(1) in paragraphs (2) and (16), by striking the period at the
end and inserting ``; or'';
(2) in paragraphs (10)(B), (11), and (13), by adding ``or'' at
the end; and
(3) by inserting after paragraph (16), the following:
``(17) with respect to any amount expended for roads, bridges,
stadiums, or any other item or service not covered under a State
plan under this title.''.
(b) Surety Bond Requirement for Home Health Agencies.--
(1) In general.--Section 1903(i) (42 U.S.C. 1396b(i)), as
amended by subsection (a), is amended--
(A) in paragraph (17), by striking the period at the end
and inserting ``; or''; and
(B) by inserting after paragraph (17), the following:
``(18) with respect to any amount expended for home health care
services provided by an agency or organization unless the agency or
organization provides the State agency on a continuing basis a
surety bond in a form specified by the Secretary under paragraph
(7) of section 1861(o) and in an amount that is not less than
$50,000 or such comparable surety bond as the Secretary may permit
under the last sentence of such section.''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to home health care services furnished on or after January 1,
1998.
(c) Conflict of Interest Safeguards.--
(1) In general.--Section 1902(a)(4)(C) (42 U.S.C.
1396a(a)(4)(C)) is amended--
(A) by striking ``and (C)'' and inserting ``(C)'';
(B) by striking ``local officer or employee'' and inserting
``local officer, employee, or independent contractor'';
(C) by striking ``such an officer or employee'' the first 2
places it appears and inserting ``such an officer, employee, or
contractor''; and
(D) by inserting before the semicolon the following: ``,
and (D) that each State or local officer, employee, or
independent contractor who is responsible for selecting,
awarding, or otherwise obtaining items and services under the
State plan shall be subject to safeguards against conflicts of
interest that are at least as stringent as the safeguards that
apply under section 27 of the Office of Federal Procurement
Policy Act (41 U.S.C. 423) to persons described in subsection
(a)(2) of such section of that Act''.
(2) Effective date.--The amendments made by paragraph (1) shall
take effect on January 1, 1998.
(d) Authority To Refuse To Enter Into Medicaid Agreements With
Individuals or Entities Convicted of Felonies.--Section 1902(a)(23) (42
U.S.C. 1396(a)) is amended--
(1) by striking ``except as provided in subsection (g) and in
section 1915 and except in the case of Puerto Rico, the Virgin
Islands, and Guam,''; and
(2) by inserting before the semicolon at the end the following:
``, except as provided in subsection (g) and in section 1915,
except that this paragraph shall not apply in the case of Puerto
Rico, the Virgin Islands, and Guam, and except that nothing in this
paragraph shall be construed as requiring a State to provide
medical assistance for such services furnished by a person or
entity convicted of a felony under Federal or State law for an
offense which the State agency determines is inconsistent with the
best interests of beneficiaries under the State plan''.
(e) Monitoring Payments for Dual Eligibles.--The Administrator of
the Health Care Financing Administration shall develop mechanisms to
improve the monitoring of, and to prevent, inappropriate payments under
the medicaid program under title XIX of the Social Security Act (42
U.S.C. 1396 et seq.) in the case of individuals who are dually eligible
for benefits under such program and under the medicare program under
title XVIII of such Act (42 U.S.C. 1395 et seq.).
(f) Beneficiary and Program Protection Against Waste, Fraud, and
Abuse.--Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
(1) by striking ``and'' at the end of paragraph (62);
(2) by striking the period at the end of paragraph (63) and
inserting ``; and''; and
(3) by inserting after paragraph (63) the following:
``(64) provide, not later than 1 year after the date of the
enactment of this paragraph, a mechanism to receive reports from
beneficiaries and others and compile data concerning alleged
instances of waste, fraud, and abuse relating to the operation of
this title;''.
(g) Disclosure of Information and Surety Bond Requirement for
Suppliers of Durable Medical Equipment.--
(1) Requirement.--Section 1902(a) (42 U.S.C. 1396a(a)), as
amended by subsection (f), is amended--
(A) by striking ``and'' at the end of paragraph (63);
(B) by striking the period at the end of paragraph (64) and
inserting ``; and''; and
(C) by inserting after paragraph (64) the following:
``(65) provide that the State shall issue provider numbers for
all suppliers of medical assistance consisting of durable medical
equipment, as defined in section 1861(n), and the State shall not
issue or renew such a supplier number for any such supplier
unless--
``(A)(i) full and complete information as to the identity
of each person with an ownership or control interest (as
defined in section 1124(a)(3)) in the supplier or in any
subcontractor (as defined by the Secretary in regulations) in
which the supplier directly or indirectly has a 5 percent or
more ownership interest; and
``(ii) to the extent determined to be feasible under
regulations of the Secretary, the name of any disclosing entity
(as defined in section 1124(a)(2)) with respect to which a
person with such an ownership or control interest in the
supplier is a person with such an ownership or control interest
in the disclosing entity; and
``(B) a surety bond in a form specified by the Secretary
under section 1834(a)(16)(B) and in an amount that is not less
than $50,000 or such comparable surety bond as the Secretary
may permit under the second sentence of such section.''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to suppliers of medical assistance consisting of durable
medical equipment furnished on or after January 1, 1998.
SEC. 4725. INCREASED FMAPS.
(a) Alaska.--Notwithstanding the first sentence of section 1905(b)
of the Social Security Act (42 U.S.C. 1396d(b)), the Federal medical
assistance percentage determined under such sentence for Alaska shall
be 59.8 percent but only with respect to--
(1) items and services furnished under a State plan under title
XIX or under a State child health plan under title XXI of such Act
during fiscal years 1998, 1999, and 2000;
(2) payments made on a capitation or other risk-basis under
such titles for coverage occurring during such period; and
(3) payments under title XIX of such Act attributable to DSH
allotments for such State determined under section 1923(f) of such
Act (42 U.S.C. 1396r-4(f)) for such fiscal years.
(b) District of Columbia.--
(1) In general.--The first sentence of section 1905(b) (42
U.S.C. 1396d(b)) is amended--
(A) by striking ``and (2)'' and inserting ``, (2)'', and
(B) by inserting before the period at the end the
following: ``, and (3) for purposes of this title and title
XXI, the Federal medical assistance percentage for the District
of Columbia shall be 70 percent''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to--
(A) items and services furnished on or after October 1,
1997;
(B) payments made on a capitation or other risk-basis for
coverage occurring on or after such date; and
(C) payments attributable to DSH allotments for such States
determined under section 1923(f) of such Act (42 U.S.C. 1396r-
4(f)) for fiscal years beginning with fiscal year 1998.
SEC. 4726. INCREASE IN PAYMENT LIMITATION FOR TERRITORIES.
Section 1108 (42 U.S.C. 1308) is amended--
(1) in subsection (f), by striking ``The'' and inserting
``Subject to subsection (g), the''; and
(2) by adding at the end the following:
``(g) Medicaid Payments to Territories for Fiscal Year 1998 and
Thereafter.--
``(1) Fiscal year 1998.--With respect to fiscal year 1998, the
amounts otherwise determined for Puerto Rico, the Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa under
subsection (f) for such fiscal year shall be increased by the
following amounts:
``(A) For Puerto Rico, $30,000,000.
``(B) For the Virgin Islands, $750,000.
``(C) For Guam, $750,000.
``(D) For the Northern Mariana Islands, $500,000.
``(E) For American Samoa, $500,000.
``(2) Fiscal year 1999 and thereafter.--Notwithstanding
subsection (f), with respect to fiscal year 1999 and any fiscal
year thereafter, the total amount certified by the Secretary under
title XIX for payment to--
``(A) Puerto Rico shall not exceed the sum of the amount
provided in this subsection for the preceding fiscal year
increased by the percentage increase in the medical care
component of the Consumer Price Index for all urban consumers
(as published by the Bureau of Labor Statistics) for the 12-
month period ending in March preceding the beginning of the
fiscal year, rounded to the nearest $100,000;
``(B) the Virgin Islands shall not exceed the sum of the
amount provided in this subsection for the preceding fiscal
year increased by the percentage increase referred to in
subparagraph (A), rounded to the nearest $10,000;
``(C) Guam shall not exceed the sum of the amount provided
in this subsection for the preceding fiscal year increased by
the percentage increase referred to in subparagraph (A),
rounded to the nearest $10,000;
``(D) the Northern Mariana Islands shall not exceed the sum
of the amount provided in this subsection for the preceding
fiscal year increased by the percentage increase referred to in
subparagraph (A), rounded to the nearest $10,000; and
``(E) American Samoa shall not exceed the sum of the amount
provided in this subsection for the preceding fiscal year
increased by the percentage increase referred to in
subparagraph (A), rounded to the nearest $10,000.''.
CHAPTER 4--ELIGIBILITY
SEC. 4731. STATE OPTION OF CONTINUOUS ELIGIBILITY FOR 12 MONTHS;
CLARIFICATION OF STATE OPTION TO COVER CHILDREN.
(a) Continuous Eligibility Option.--Section 1902(e) (42 U.S.C.
1396a(e)) is amended by adding at the end the following new paragraph:
``(12) At the option of the State, the plan may provide that an
individual who is under an age specified by the State (not to exceed 19
years of age) and who is determined to be eligible for benefits under a
State plan approved under this title under subsection (a)(10)(A) shall
remain eligible for those benefits until the earlier of--
``(A) the end of a period (not to exceed 12 months) following
the determination; or
``(B) the time that the individual exceeds that age.''.
(b) Clarification of State Option To Cover All Children Under 19
Years of Age.--Section 1902(l)(1)(D) (42 U.S.C. 1396a(l)(1)(D)) is
amended by inserting ``(or, at the option of a State, after any earlier
date)'' after ``children born after September 30, 1983''.
(c) Effective Date.--The amendments made by this section shall
apply to medical assistance for items and services furnished on or
after October 1, 1997.
SEC. 4732. PAYMENT OF PART B PREMIUMS.
(a) Eligibility.--Section 1902(a)(10)(E) (42 U.S.C.
1396a(a)(10)(E)) is amended--
(1) by striking ``and'' at the end of clause (ii); and
(2) by inserting after clause (iii) the following:
``(iv) subject to sections 1933 and 1905(p)(4), for making
medical assistance available (but only for premiums payable
with respect to months during the period beginning with January
1998, and ending with December 2002)--
``(I) for medicare cost-sharing described in section
1905(p)(3)(A)(ii) for individuals who would be qualified
medicare beneficiaries described in section 1905(p)(1) but
for the fact that their income exceeds the income level
established by the State under section 1905(p)(2) and is at
least 120 percent, but less than 135 percent, of the
official poverty line (referred to in such section) for a
family of the size involved and who are not otherwise
eligible for medical assistance under the State plan, and
``(II) for the portion of medicare cost-sharing
described in section 1905(p)(3)(A)(ii) that is attributable
to the operation of the amendments made by (and subsection
(e)(3) of) section 4611 of the Balanced Budget Act of 1997
for individuals who would be described in subclause (I) if
`135 percent' and `175 percent' were substituted for `120
percent' and `135 percent' respectively; and''.
(b) Conforming Amendment.--Section 1905(b) (42 U.S.C. 1396d(b)) is
amended by striking ``The term'' and inserting ``Subject to section
1933(d), the term''.
(c) Terms and Conditions of Coverage.--Title XIX (42 U.S.C. 1395 et
seq.), as amended by section 4701(a), is amended by redesignating
section 1933 as section 1934 and by inserting after section 1932 the
following new section:
``state coverage of medicare cost-sharing for additional low-income
medicare beneficiaries
``Sec. 1933. (a) In General.--A State plan under this title shall
provide, under section 1902(a)(10)(E)(iv) and subject to the succeeding
provisions of this section and through a plan amendment, for medical
assistance for payment of the cost of medicare cost-sharing described
in such section on behalf of all individuals described in such section
(in this section referred to as `qualifying individuals') who are
selected to receive such assistance under subsection (b).
``(b) Selection of Qualifying Individuals.--A State shall select
qualifying individuals, and provide such individuals with assistance,
under this section consistent with the following:
``(1) All qualifying individuals may apply.--The State shall
permit all qualifying individuals to apply for assistance during a
calendar year.
``(2) Selection on first-come, first-served basis.--
``(A) In general.--For each calendar year (beginning with
1998), from (and to the extent of) the amount of the allocation
under subsection (c) for the State for the fiscal year ending
in such calendar year, the State shall select qualifying
individuals who apply for the assistance in the order in which
they apply.
``(B) Carryover.--For calendar years after 1998, the State
shall give preference to individuals who were provided such
assistance (or other assistance described in section
1902(a)(10)(E)) in the last month of the previous year and who
continue to be (or become) qualifying individuals.
``(3) Limit on number of individuals based on allocation.--The
State shall limit the number of qualifying individuals selected
with respect to assistance in a calendar year so that the aggregate
amount of such assistance provided to such individuals in such year
is estimated to be equal to (but not exceed) the State's allocation
under subsection (c) for the fiscal year ending in such calendar
year.
``(4) Receipt of assistance during duration of year.--If a
qualifying individual is selected to receive assistance under this
section for a month in year, the individual is entitled to receive
such assistance for the remainder of the year if the individual
continues to be a qualifying individual. The fact that an
individual is selected to receive assistance under this section at
any time during a year does not entitle the individual to continued
assistance for any succeeding year.
``(c) Allocation.--
``(1) Total allocation.--The total amount available for
allocation under this section for--
``(A) fiscal year 1998 is $200,000,000;
``(B) fiscal year 1999 is $250,000,000;
``(C) fiscal year 2000 is $300,000,000;
``(D) fiscal year 2001 is $350,000,000; and
``(E) fiscal year 2002 is $400,000,000.
``(2) Allocation to states.--The Secretary shall provide for
the allocation of the total amount described in paragraph (1) for a
fiscal year, among the States that executed a plan amendment in
accordance with subsection (a), based upon the Secretary's estimate
of the ratio of--
``(A) an amount equal to the sum of--
``(i) twice the total number of individuals described
in section 1902(a)(10)(E)(iv)(I) in the State, and
``(ii) the total number of individuals described in
section 1902(a)(10)(E)(iv)(II) in the State; to
``(B) the sum of the amounts computed under subparagraph
(A) for all eligible States.
``(d) Applicable FMAP.--With respect to assistance described in
section 1902(a)(10)(E)(iv) furnished in a State for calendar quarters
in a calendar year --
``(1) to the extent that such assistance does not exceed the
State's allocation under subsection (c) for the fiscal year ending
in the calendar year, the Federal medical assistance percentage
shall be equal to 100 percent; and
``(2) to the extent that such assistance exceeds such
allocation, the Federal medical assistance percentage is 0 percent.
``(e) Limitation on Entitlement.--Except as specifically provided
under this section, nothing in this title shall be construed as
establishing any entitlement of individuals described in section
1902(a)(10)(E)(iv) to assistance described in such section.
``(f) Coverage of Costs Through Part B of the Medicare Program.--
For each fiscal year, the Secretary shall provide for the transfer from
the Federal Supplementary Medical Insurance Trust Fund under section
1841 to the appropriate account in the Treasury that provides for
payments under section 1903(a) with respect to medical assistance
provided under this section, of an amount equivalent to the total of
the amount of payments made under such section that is attributable to
this section and such transfer shall be treated as an expenditure from
such Trust Fund for purposes of section 1839.''.
SEC. 4733. STATE OPTION TO PERMIT WORKERS WITH DISABILITIES TO BUY INTO
MEDICAID.
Section 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)) is
amended--
(1) in subclause (XI), by striking ``or'' at the end;
(2) in subclause (XII), by adding ``or'' at the end; and
(3) by adding at the end the following:
``(XIII) who are in families whose income is less
than 250 percent of the income 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, and who
but for earnings in excess of the limit established
under section 1905(q)(2)(B), would be considered to be
receiving supplemental security income (subject,
notwithstanding section 1916, to payment of premiums or
other cost-sharing charges (set on a sliding scale
based on income) that the State may determine);''.
SEC. 4734. PENALTY FOR FRAUDULENT ELIGIBILITY.
Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by section 217
of the Health Insurance Portability and Accountability Act of 1996
(Public Law 104-191; 110 Stat. 2008), is amended--
(1) by striking paragraph (6) and inserting the following:
``(6) for a fee knowingly and willfully counsels or assists an
individual to dispose of assets (including by any transfer in
trust) in order for the individual to become eligible for medical
assistance under a State plan under title XIX, if disposing of the
assets results in the imposition of a period of ineligibility for
such assistance under section 1917(c),''; and
(2) in clause (ii) of the matter following such paragraph, by
striking ``failure, or conversion by any other person'' and
inserting ``failure, conversion, or provision of counsel or
assistance by any other person''.
SEC. 4735. TREATMENT OF CERTAIN SETTLEMENT PAYMENTS.
(a) In General.--Notwithstanding any other provision of law, the
payments described in subsection (b) shall not be considered income or
resources in determining eligibility for, or the amount of benefits
under, a State plan of medical assistance approved under title XIX of
the Social Security Act.
(b) Payments Described.--The payments described in this subsection
are--
(1) payments made from any fund established pursuant to a class
settlement in the case of Susan Walker v. Bayer Corporation, et
al., 96-C-5024 (N.D. Ill.); and
(2) payments made pursuant to a release of all claims in a
case--
(A) that is entered into in lieu of the class settlement
referred to in paragraph (1); and
(B) that is signed by all affected parties in such case on
or before the later of--
(i) December 31, 1997, or
(ii) the date that is 270 days after the date on which
such release is first sent to the persons (or the legal
representative of such persons) to whom the payment is to
be made.
CHAPTER 5--BENEFITS
SEC. 4741. ELIMINATION OF REQUIREMENT TO PAY FOR PRIVATE INSURANCE.
(a) Repeal of State Plan Provision.--Section 1902(a)(25) (42 U.S.C.
1396a(a)(25)) is amended--
(1) by striking subparagraph (G); and
(2) by redesignating subparagraphs (H) and (I) as subparagraphs
(G) and (H), respectively.
(b) Making Provision Optional.--Section 1906 (42 U.S.C. 1396e) is
amended--
(1) in subsection (a)--
(A) by striking ``For purposes of section 1902(a)(25)(G)
and subject to subsection (d), each'' and inserting ``Each'';
(B) in paragraph (1), by striking ``shall'' and inserting
``may''; and
(C) in paragraph (2), by striking ``shall'' and inserting
``may''; and
(2) by striking subsection (d).
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 4742. PHYSICIAN QUALIFICATION REQUIREMENTS.
(a) In General.--Section 1903(i) (42 U.S.C. 1396b(i)) is amended by
striking paragraph (12).
(b) Effective Date.--The amendment made by subsection (a) shall
apply to services furnished on or after the date of the enactment of
this Act.
SEC. 4743. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONALIZATION
WITH RESPECT TO HABILITATION SERVICES FURNISHED UNDER A
WAIVER FOR HOME OR COMMUNITY-BASED SERVICES.
(a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) is
amended, in the matter preceding subparagraph (A), by striking ``, with
respect to individuals who receive such services after discharge from a
nursing facility or intermediate care facility for the mentally
retarded''.
(b) Effective Date.--The amendment made by subsection (a) apply to
services furnished on or after October 1, 1997.
SEC. 4744. STUDY AND REPORT ON EPSDT BENEFIT.
(a) Study.--
(1) In general.--The Secretary of Health and Human Services, in
consultation with Governors, directors of State medicaid programs,
the American Academy of Actuaries, and representatives of
appropriate provider and beneficiary organizations, shall conduct a
study of the provision of early and periodic screening, diagnostic,
and treatment services under the medicaid program under title XIX
of the Social Security Act in accordance with the requirements of
section 1905(r) of such Act (42 U.S.C. 1396d(r)).
(2) Required contents.--The study conducted under paragraph (1)
shall include examination of the actuarial value of the provision
of such services under the medicaid program and an examination of
the portions of such actuarial value that are attributable to
paragraph (5) of section 1905(r) of such Act and to the second
sentence of such section.
(b) Report.--Not later than 12 months after the date of the
enactment of this Act, the Secretary of Health and Human Services shall
submit a report to Congress on the results of the study conducted under
subsection (a).
CHAPTER 6--ADMINISTRATION AND MISCELLANEOUS
SEC. 4751. ELIMINATION OF DUPLICATIVE INSPECTION OF CARE REQUIREMENTS
FOR ICFS/MR AND MENTAL HOSPITALS.
(a) Mental Hospitals.--Section 1902(a)(26) (42 U.S.C. 1396a(a)(26))
is amended--
(1) by striking ``provide--
``(A) with respect to each patient'' and inserting
``provide, with respect to each patient''; and
(2) by striking subparagraphs (B) and (C).
(b) ICFS/MR.--Section 1902(a)(31) (42 U.S.C. 1396a(a)(31)) is
amended--
(1) by striking ``provide--
``(A) with respect to each patient'' and inserting
``provide, with respect to each patient''; and
(2) by striking subparagraphs (B) and (C).
(c) Effective Date.--The amendments made by this section take
effect on the date of the enactment of this Act.
SEC. 4752. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT ICFS/MR.
(a) In General.--Section 1902(i)(1)(B) (42 U.S.C. 1396a(i)(1)(B))
is amended by striking ``provide'' and inserting ``establish
alternative remedies if the State demonstrates to the Secretary's
satisfaction that the alternative remedies are effective in deterring
noncompliance and correcting deficiencies, and may provide''.
(b) Effective Date.--The amendment made by subsection (a) takes
effect on the date of the enactment of this Act.
SEC. 4753. MODIFICATION OF MMIS REQUIREMENTS.
(a) In General.--Section 1903(r) (42 U.S.C. 1396b(r)) is amended--
(1) by striking all that precedes paragraph (5) and inserting
the following:
``(r)(1) In order to receive payments under subsection (a) for use
of automated data systems in administration of the State plan under
this title, a State must have in operation mechanized claims processing
and information retrieval systems that meet the requirements of this
subsection and that the Secretary has found--
``(A) are adequate to provide efficient, economical, and
effective administration of such State plan;
``(B) are compatible with the claims processing and information
retrieval systems used in the administration of title XVIII, and
for this purpose--
``(i) have a uniform identification coding system for
providers, other payees, and beneficiaries under this title
or title XVIII;
``(ii) provide liaison between States and carriers and
intermediaries with agreements under title XVIII to
facilitate timely exchange of appropriate data; and
``(iii) provide for exchange of data between the States
and the Secretary with respect to persons sanctioned under
this title or title XVIII;
``(C) are capable of providing accurate and timely data;
``(D) are complying with the applicable provisions of part C of
title XI;
``(E) are designed to receive provider claims in standard
formats to the extent specified by the Secretary; and
``(F) effective for claims filed on or after January 1, 1999,
provide for electronic transmission of claims data in the format
specified by the Secretary and consistent with the Medicaid
Statistical Information System (MSIS) (including detailed
individual enrollee encounter data and other information that the
Secretary may find necessary).'';
(2) in paragraph (5)--
(A) by striking subparagraph (B);
(B) by striking all that precedes clause (i) and inserting
the following:
``(2) In order to meet the requirements of this paragraph,
mechanized claims processing and information retrieval systems must
meet the following requirements:'';
(C) in clause (iii), by striking ``under paragraph (6)'';
and
(D) by redesignating clauses (i) through (iii) as
paragraphs (A) through (C); and
(3) by striking paragraphs (6), (7), and (8).
(b) Conforming Amendments.--Section 1902(a)(25)(A)(ii) (42 U.S.C.
1396a(a)(25)(A)(ii)) is amended by striking all that follows ``shall''
and inserting the following: ``be integrated with, and be monitored as
a part of the Secretary's review of, the State's mechanized claims
processing and information retrieval systems required under section
1903(r);''.
(c) Effective Date.--Except as otherwise specifically provided, the
amendments made by this section shall take effect on January 1, 1998.
SEC. 4754. FACILITATING IMPOSITION OF STATE ALTERNATIVE REMEDIES ON
NONCOMPLIANT NURSING FACILITIES.
(a) In General.--Section 1919(h)(3)(D) (42 U.S.C. 1396r(h)(3)(D))
is amended--
(1) by inserting ``and'' at the end of clause (i);
(2) by striking ``, and'' at the end of clause (ii) and
inserting a period; and
(3) by striking clause (iii).
(b) Effective Date.--The amendments made by subsection (a) take
effect on the date of the enactment of this Act.
SEC. 4755. REMOVAL OF NAME FROM NURSE AIDE REGISTRY.
(a) Medicare.--Section 1819(g)(1) (42 U.S.C. 1395i-3(g)(1)) is
amended--
(1) by redesignating subparagraph (D) as subparagraph (E), and
(2) by inserting after subparagraph (C) the following:
``(D) Removal of name from nurse aide registry.--
``(i) In general.--In the case of a finding of neglect
under subparagraph (C), the State shall establish a
procedure to permit a nurse aide to petition the State to
have his or her name removed from the registry upon a
determination by the State that--
``(I) the employment and personal history of the
nurse aide does not reflect a pattern of abusive
behavior or neglect; and
``(II) the neglect involved in the original finding
was a singular occurrence.
``(ii) Timing of determination.--In no case shall a
determination on a petition submitted under clause (i) be
made prior to the expiration of the 1-year period beginning
on the date on which the name of the petitioner was added
to the registry under subparagraph (C).''.
(b) Medicaid.--Section 1919(g)(1) (42 U.S.C. 1396r(g)(1)) is
amended--
(1) by redesignating subparagraph (D) as subparagraph (E), and
(2) by inserting after subparagraph (C) the following:
``(D) Removal of name from nurse aide registry.--
``(i) In general.--In the case of a finding of neglect
under subparagraph (C), the State shall establish a
procedure to permit a nurse aide to petition the State to
have his or her name removed from the registry upon a
determination by the State that--
``(I) the employment and personal history of the
nurse aide does not reflect a pattern of abusive
behavior or neglect; and
``(II) the neglect involved in the original finding
was a singular occurrence.
``(ii) Timing of determination.--In no case shall a
determination on a petition submitted under clause (i) be
made prior to the expiration of the 1-year period beginning
on the date on which the name of the petitioner was added
to the registry under subparagraph (C).''.
(c) Retroactive Review.--The procedures developed by a State under
the amendments made by subsection (a) and (b) shall permit an
individual to petition for a review of any finding made by a State
under section 1819(g)(1)(C) or 1919(g)(1)(C) of the Social Security Act
(42 U.S.C. 1395i-3(g)(1)(C) or 1396r(g)(1)(C)) after January 1, 1995.
SEC. 4756. MEDICALLY ACCEPTED INDICATION.
Section 1927(g)(1)(B)(i) (42 U.S.C. 1396r-8(g)(1)(B)(i)) is
amended--
(1) by striking ``and'' at the end of subclause (II),
(2) by redesignating subclause (III) as subclause (IV), and
(3) by inserting after subclause (II) the following:
``(III) the DRUGDEX Information System; and''.
SEC. 4757. CONTINUATION OF STATE-WIDE SECTION 1115 MEDICAID WAIVERS.
(a) In General.--Section 1115 (42 U.S.C. 1315) is amended by adding
at the end the following new subsection:
``(e)(1) The provisions of this subsection shall apply to the
extension of any State-wide comprehensive demonstration project (in
this subsection referred to as `waiver project') for which a waiver of
compliance with requirements of title XIX is granted under subsection
(a).
``(2) During the 6-month period ending 1 year before the date the
waiver under subsection (a) with respect to a waiver project would
otherwise expire, the chief executive officer of the State which is
operating the project may submit to the Secretary a written request for
an extension, of up to 3 years, of the project.
``(3) If the Secretary fails to respond to the request within 6
months after the date it is submitted, the request is deemed to have
been granted.
``(4) If such a request is granted, the deadline for submittal of a
final report under the waiver project is deemed to have been extended
until the date that is 1 year after the date the waiver project would
otherwise have expired.
``(5) The Secretary shall release an evaluation of each such
project not later than 1 year after the date of receipt of the final
report.
``(6) Subject to paragraphs (4) and (7), the extension of a waiver
project under this subsection shall be on the same terms and conditions
(including applicable terms and conditions relating to quality and
access of services, budget neutrality, data and reporting requirements,
and special population protections) that applied to the project before
its extension under this subsection.
``(7) If an original condition of approval of a waiver project was
that Federal expenditures under the project not exceed the Federal
expenditures that would otherwise have been made, the Secretary shall
take such steps as may be necessary to ensure that, in the extension of
the project under this subsection, such condition continues to be met.
In applying the previous sentence, the Secretary shall take into
account the Secretary's best estimate of rates of change in
expenditures at the time of the extension.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to demonstration projects initially approved before, on, or after
the date of the enactment of this Act.
SEC. 4758. EXTENSION OF MORATORIUM.
Section 6408(a)(3) of the Omnibus Budget Reconciliation Act of
1989, as amended by section 13642 of the Omnibus Budget Reconciliation
Act of 1993, is amended by striking ``December 31, 1995'' and inserting
``December 31, 2002''.
SEC. 4759. EXTENSION OF EFFECTIVE DATE FOR STATE LAW AMENDMENT.
In the case of a State plan under title XIX of the Social Security
Act which the Secretary of Health and Human Services determines
requires State legislation in order for the plan to meet the additional
requirements imposed by the amendments made by a provision of this
subtitle, the State plan shall not be regarded as failing to comply
with the requirements of such title solely on the basis of its failure
to meet these additional requirements before the first day of the first
calendar quarter beginning after the close of the first regular session
of the State legislature that begins after the date of the enactment of
this Act. For purposes of the previous sentence, in the case of a State
that has a 2-year legislative session, each year of the session is
considered to be a separate regular session of the State legislature.
Subtitle I--Programs of All-Inclusive Care for the Elderly (PACE)
SEC. 4801. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.
Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is
amended by adding at the end the following new section:
``payments to, and coverage of benefits under, programs of all-
inclusive care for the elderly (pace)
``Sec. 1894. (a) Receipt of Benefits Through Enrollment in PACE
Program; Definitions for PACE Program Related Terms.--
``(1) Benefits through enrollment in a pace program.--In
accordance with this section, in the case of an individual who is
entitled to benefits under part A or enrolled under part B and who
is a PACE program eligible individual (as defined in paragraph (5))
with respect to a PACE program offered by a PACE provider under a
PACE program agreement--
``(A) the individual may enroll in the program under this
section; and
``(B) so long as the individual is so enrolled and in
accordance with regulations--
``(i) the individual shall receive benefits under this
title solely through such program; and
``(ii) the PACE provider is entitled to payment under
and in accordance with this section and such agreement for
provision of such benefits.
``(2) PACE program defined.--For purposes of this section, the
term `PACE program' means a program of all-inclusive care for the
elderly that meets the following requirements:
``(A) Operation.--The entity operating the program is a
PACE provider (as defined in paragraph (3)).
``(B) Comprehensive benefits.--The program provides
comprehensive health care services to PACE program eligible
individuals in accordance with the PACE program agreement and
regulations under this section.
``(C) Transition.--In the case of an individual who is
enrolled under the program under this section and whose
enrollment ceases for any reason (including that the individual
no longer qualifies as a PACE program eligible individual, the
termination of a PACE program agreement, or otherwise), the
program provides assistance to the individual in obtaining
necessary transitional care through appropriate referrals and
making the individual's medical records available to new
providers.
``(3) PACE provider defined.--
``(A) In general.--For purposes of this section, the term
`PACE provider' means an entity that--
``(i) subject to subparagraph (B), is (or is a distinct
part of) a public entity or a private, nonprofit entity
organized for charitable purposes under section 501(c)(3)
of the Internal Revenue Code of 1986; and
``(ii) has entered into a PACE program agreement with
respect to its operation of a PACE program.
``(B) Treatment of private, for-profit providers.--Clause
(i) of subparagraph (A) shall not apply--
``(i) to entities subject to a demonstration project
waiver under subsection (h); and
``(ii) after the date the report under section 4804(b)
of the Balanced Budget Act of 1997 is submitted, unless the
Secretary determines that any of the findings described in
subparagraph (A), (B), (C), or (D) of paragraph (2) of such
section are true.
``(4) PACE program agreement defined.--For purposes of this
section, the term `PACE program agreement' means, with respect to a
PACE provider, an agreement, consistent with this section, section
1934 (if applicable), and regulations promulgated to carry out such
sections, between the PACE provider and the Secretary, or an
agreement between the PACE provider and a State administering
agency for the operation of a PACE program by the provider under
such sections.
``(5) PACE program eligible individual defined.--For purposes
of this section, the term `PACE program eligible individual' means,
with respect to a PACE program, an individual who--
``(A) is 55 years of age or older;
``(B) subject to subsection (c)(4), is determined under
subsection (c) to require the level of care required under the
State medicaid plan for coverage of nursing facility services;
``(C) resides in the service area of the PACE program; and
``(D) meets such other eligibility conditions as may be
imposed under the PACE program agreement for the program under
subsection (e)(2)(A)(ii).
``(6) PACE protocol.--For purposes of this section, the term
`PACE protocol' means the Protocol for the Program of All-inclusive
Care for the Elderly (PACE), as published by On Lok, Inc., as of
April 14, 1995, or any successor protocol that may be agreed upon
between the Secretary and On Lok, Inc.
``(7) PACE demonstration waiver program defined.--For purposes
of this section, the term `PACE demonstration waiver program' means
a demonstration program under either of the following sections (as
in effect before the date of their repeal):
``(A) Section 603(c) of the Social Security Amendments of
1983 (Public Law 98-21), as extended by section 9220 of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (Public
Law 99-272).
``(B) Section 9412(b) of the Omnibus Budget Reconciliation
Act of 1986 (Public Law 99-509).
``(8) State administering agency defined.--For purposes of this
section, the term `State administering agency' means, with respect
to the operation of a PACE program in a State, the agency of that
State (which may be the single agency responsible for
administration of the State plan under title XIX in the State)
responsible for administering PACE program agreements under this
section and section 1934 in the State.
``(9) Trial period defined.--
``(A) In general.--For purposes of this section, the term
`trial period' means, with respect to a PACE program operated
by a PACE provider under a PACE program agreement, the first 3
contract years under such agreement with respect to such
program.
``(B) Treatment of entities previously operating pace
demonstration waiver programs.--Each contract year (including a
year occurring before the effective date of this section)
during which an entity has operated a PACE demonstration waiver
program shall be counted under subparagraph (A) as a contract
year during which the entity operated a PACE program as a PACE
provider under a PACE program agreement.
``(10) Regulations.--For purposes of this section, the term
`regulations' refers to interim final or final regulations
promulgated under subsection (f) to carry out this section and
section 1934.
``(b) Scope of Benefits; Beneficiary Safeguards.--
``(1) In general.--Under a PACE program agreement, a PACE
provider shall--
``(A) provide to PACE program eligible individuals enrolled
with the provider, regardless of source of payment and directly
or under contracts with other entities, at a minimum--
``(i) all items and services covered under this title
(for individuals enrolled under this section) and all items
and services covered under title XIX, but without any
limitation or condition as to amount, duration, or scope
and without application of deductibles, copayments,
coinsurance, or other cost-sharing that would otherwise
apply under this title or such title, respectively; and
``(ii) all additional items and services specified in
regulations, based upon those required under the PACE
protocol;
``(B) provide such enrollees access to necessary covered
items and services 24 hours per day, every day of the year;
``(C) provide services to such enrollees through a
comprehensive, multidisciplinary health and social services
delivery system which integrates acute and long-term care
services pursuant to regulations; and
``(D) specify the covered items and services that will not
be provided directly by the entity, and to arrange for delivery
of those items and services through contracts meeting the
requirements of regulations.
``(2) Quality assurance; patient safeguards.--The PACE program
agreement shall require the PACE provider to have in effect at a
minimum--
``(A) a written plan of quality assurance and improvement,
and procedures implementing such plan, in accordance with
regulations; and
``(B) written safeguards of the rights of enrolled
participants (including a patient bill of rights and procedures
for grievances and appeals) in accordance with regulations and
with other requirements of this title and Federal and State law
that are designed for the protection of patients.
``(c) Eligibility Determinations.--
``(1) In general.--The determination of whether an individual
is a PACE program eligible individual--
``(A) shall be made under and in accordance with the PACE
program agreement; and
``(B) who is entitled to medical assistance under title
XIX, shall be made (or who is not so entitled, may be made) by
the State administering agency.
``(2) Condition.--An individual is not a PACE program eligible
individual (with respect to payment under this section) unless the
individual's health status has been determined by the Secretary or
the State administering agency, in accordance with regulations, to
be comparable to the health status of individuals who have
participated in the PACE demonstration waiver programs. Such
determination shall be based upon information on health status and
related indicators (such as medical diagnoses and measures of
activities of daily living, instrumental activities of daily
living, and cognitive impairment) that are part of a uniform
minimum data set collected by PACE providers on potential PACE
program eligible individuals.
``(3) Annual eligibility recertifications.--
``(A) In general.--Subject to subparagraph (B), the
determination described in subsection (a)(5)(B) for an
individual shall be reevaluated at least annually.
``(B) Exception.--The requirement of annual reevaluation
under subparagraph (A) may be waived during a period in
accordance with regulations in those cases where the State
administering agency determines that there is no reasonable
expectation of improvement or significant change in an
individual's condition during the period because of the
severity of chronic condition, or degree of impairment of
functional capacity of the individual involved.
``(4) Continuation of eligibility.--An individual who is a PACE
program eligible individual may be deemed to continue to be such an
individual notwithstanding a determination that the individual no
longer meets the requirement of subsection (a)(5)(B) if, in
accordance with regulations, in the absence of continued coverage
under a PACE program the individual reasonably would be expected to
meet such requirement within the succeeding 6-month period.
``(5) Enrollment; disenrollment.--
``(A) Voluntary disenrollment at any time.--The enrollment
and disenrollment of PACE program eligible individuals in a
PACE program shall be pursuant to regulations and the PACE
program agreement and shall permit enrollees to voluntarily
disenroll without cause at any time.
``(B) Limitations on disenrollment.--
``(i) In general.--Regulations promulgated by the
Secretary under this section and section 1934, and the PACE
program agreement, shall provide that the PACE program may
not disenroll a PACE program eligible individual except--
``(I) for nonpayment of premiums (if applicable) on
a timely basis; or
``(II) for engaging in disruptive or threatening
behavior, as defined in such regulations (developed in
close consultation with State administering agencies).
``(ii) No disenrollment for noncompliant behavior.--
Except as allowed under regulations promulgated to carry
out clause (i)(II), a PACE program may not disenroll a PACE
program eligible individual on the ground that the
individual has engaged in noncompliant behavior if such
behavior is related to a mental or physical condition of
the individual. For purposes of the preceding sentence, the
term `noncompliant behavior' includes repeated
noncompliance with medical advice and repeated failure to
appear for appointments.
``(iii) Timely review of proposed nonvoluntary
disenrollment.--A proposed disenrollment, other than a
voluntary disenrollment, shall be subject to timely review
and final determination by the Secretary or by the State
administering agency (as applicable), prior to the proposed
disenrollment becoming effective.
``(d) Payments to PACE Providers on a Capitated Basis.--
``(1) In general.--In the case of a PACE provider with a PACE
program agreement under this section, except as provided in this
subsection or by regulations, the Secretary shall make prospective
monthly payments of a capitation amount for each PACE program
eligible individual enrolled under the agreement under this section
in the same manner and from the same sources as payments are made
to a Medicare+Choice organization under section 1853 (or, for
periods beginning before January 1, 1999, to an eligible
organization under a risk-sharing contract under section 1876).
Such payments shall be subject to adjustment in the manner
described in section 1853(a)(2) or section 1876(a)(1)(E), as the
case may be.
``(2) Capitation amount.--The capitation amount to be applied
under this subsection for a provider for a contract year shall be
an amount specified in the PACE program agreement for the year.
Such amount shall be based upon payment rates established for
purposes of payment under section 1853 (or, for periods before
January 1, 1999, for purposes of risk-sharing contracts under
section 1876) and shall be adjusted to take into account the
comparative frailty of PACE enrollees and such other factors as the
Secretary determines to be appropriate. Such amount under such an
agreement shall be computed in a manner so that the total payment
level for all PACE program eligible individuals enrolled under a
program is less than the projected payment under this title for a
comparable population not enrolled under a PACE program.
``(e) PACE Program Agreement.--
``(1) Requirement.--
``(A) In general.--The Secretary, in close cooperation with
the State administering agency, shall establish procedures for
entering into, extending, and terminating PACE program
agreements for the operation of PACE programs by entities that
meet the requirements for a PACE provider under this section,
section 1934, and regulations.
``(B) Numerical limitation.--
``(i) In general.--The Secretary shall not permit the
number of PACE providers with which agreements are in
effect under this section or under section 9412(b) of the
Omnibus Budget Reconciliation Act of 1986 to exceed--
``(I) 40 as of the date of the enactment of this
section; or
``(II) as of each succeeding anniversary of such
date, the numerical limitation under this subparagraph
for the preceding year plus 20.
Subclause (II) shall apply without regard to the actual
number of agreements in effect as of a previous anniversary
date.
``(ii) Treatment of certain private, for-profit
providers.--The numerical limitation in clause (i) shall
not apply to a PACE provider that--
``(I) is operating under a demonstration project
waiver under subsection (h); or
``(II) was operating under such a waiver and
subsequently qualifies for PACE provider status
pursuant to subsection (a)(3)(B)(ii).
``(2) Service area and eligibility.--
``(A) In general.--A PACE program agreement for a PACE
program--
``(i) shall designate the service area of the program;
``(ii) may provide additional requirements for
individuals to qualify as PACE program eligible individuals
with respect to the program;
``(iii) shall be effective for a contract year, but may
be extended for additional contract years in the absence of
a notice by a party to terminate and is subject to
termination by the Secretary and the State administering
agency at any time for cause (as provided under the
agreement);
``(iv) shall require a PACE provider to meet all
applicable State and local laws and requirements; and
``(v) shall contain such additional terms and
conditions as the parties may agree to, so long as such
terms and conditions are consistent with this section and
regulations.
``(B) Service area overlap.--In designating a service area
under a PACE program agreement under subparagraph (A)(i), the
Secretary (in consultation with the State administering agency)
may exclude from designation an area that is already covered
under another PACE program agreement, in order to avoid
unnecessary duplication of services and avoid impairing the
financial and service viability of an existing program.
``(3) Data collection; development of outcome measures.--
``(A) Data collection.--
``(i) In general.--Under a PACE program agreement, the
PACE provider shall--
``(I) collect data;
``(II) maintain, and afford the Secretary and the
State administering agency access to, the records
relating to the program, including pertinent financial,
medical, and personnel records; and
``(III) make available to the Secretary and the
State administering agency reports that the Secretary
finds (in consultation with State administering
agencies) necessary to monitor the operation, cost, and
effectiveness of the PACE program under this section
and section 1934 .
``(ii) Requirements during trial period.--During the
first 3 years of operation of a PACE program (either under
this section or under a PACE demonstration waiver program),
the PACE provider shall provide such additional data as the
Secretary specifies in regulations in order to perform the
oversight required under paragraph (4)(A).
``(B) Development of outcome measures.--Under a PACE
program agreement, the PACE provider, the Secretary, and the
State administering agency shall jointly cooperate in the
development and implementation of health status and quality of
life outcome measures with respect to PACE program eligible
individuals.
``(4) Oversight.--
``(A) Annual, close oversight during trial period.--During
the trial period (as defined in subsection (a)(9)) with respect
to a PACE program operated by a PACE provider, the Secretary
(in cooperation with the State administering agency) shall
conduct a comprehensive annual review of the operation of the
PACE program by the provider in order to assure compliance with
the requirements of this section and regulations. Such a review
shall include--
``(i) an on-site visit to the program site;
``(ii) comprehensive assessment of a provider's fiscal
soundness;
``(iii) comprehensive assessment of the provider's
capacity to provide all PACE services to all enrolled
participants;
``(iv) detailed analysis of the entity's substantial
compliance with all significant requirements of this
section and regulations; and
``(v) any other elements the Secretary or State
administering agency considers necessary or appropriate.
``(B) Continuing oversight.--After the trial period, the
Secretary (in cooperation with the State administering agency)
shall continue to conduct such review of the operation of PACE
providers and PACE programs as may be appropriate, taking into
account the performance level of a provider and compliance of a
provider with all significant requirements of this section and
regulations.
``(C) Disclosure.--The results of reviews under this
paragraph shall be reported promptly to the PACE provider,
along with any recommendations for changes to the provider's
program, and shall be made available to the public upon
request.
``(5) Termination of pace provider agreements.--
``(A) In general.--Under regulations--
``(i) the Secretary or a State administering agency may
terminate a PACE program agreement for cause; and
``(ii) a PACE provider may terminate an agreement after
appropriate notice to the Secretary, the State agency, and
enrollees.
``(B) Causes for termination.--In accordance with
regulations establishing procedures for termination of PACE
program agreements, the Secretary or a State administering
agency may terminate a PACE program agreement with a PACE
provider for, among other reasons, the fact that--
``(i) the Secretary or State administering agency
determines that--
``(I) there are significant deficiencies in the
quality of care provided to enrolled participants; or
``(II) the provider has failed to comply
substantially with conditions for a program or provider
under this section or section 1934; and
``(ii) the entity has failed to develop and
successfully initiate, within 30 days of the date of the
receipt of written notice of such a determination, a plan
to correct the deficiencies, or has failed to continue
implementation of such a plan.
``(C) Termination and transition procedures.--An entity
whose PACE provider agreement is terminated under this
paragraph shall implement the transition procedures required
under subsection (a)(2)(C).
``(6) Secretary's oversight; enforcement authority.--
``(A) In general.--Under regulations, if the Secretary
determines (after consultation with the State administering
agency) that a PACE provider is failing substantially to comply
with the requirements of this section and regulations, the
Secretary (and the State administering agency) may take any or
all of the following actions:
``(i) Condition the continuation of the PACE program
agreement upon timely execution of a corrective action
plan.
``(ii) Withhold some or all further payments under the
PACE program agreement under this section or section 1934
with respect to PACE program services furnished by such
provider until the deficiencies have been corrected.
``(iii) Terminate such agreement.
``(B) Application of intermediate sanctions.--Under
regulations, the Secretary may provide for the application
against a PACE provider of remedies described in section
1857(g)(2) (or, for periods before January 1, 1999, section
1876(i)(6)(B)) or 1903(m)(5)(B) in the case of violations by
the provider of the type described in section 1857(g)(1) (or
section 1876(i)(6)(A) for such periods) or 1903(m)(5)(A),
respectively (in relation to agreements, enrollees, and
requirements under this section or section 1934, respectively).
``(7) Procedures for termination or imposition of sanctions.--
Under regulations, the provisions of section 1857(h) (or for
periods before January 1, 1999, section 1876(i)(9)) shall apply to
termination and sanctions respecting a PACE program agreement and
PACE provider under this subsection in the same manner as they
apply to a termination and sanctions with respect to a contract and
a Medicare+Choice organization under part C (or for such periods an
eligible organization under section 1876).
``(8) Timely consideration of applications for pace program
provider status.--In considering an application for PACE provider
program status, the application shall be deemed approved unless the
Secretary, within 90 days after the date of the submission of the
application to the Secretary, either denies such request in writing
or informs the applicant in writing with respect to any additional
information that is needed in order to make a final determination
with respect to the application. After the date the Secretary
receives such additional information, the application shall be
deemed approved unless the Secretary, within 90 days of such date,
denies such request.
``(f) Regulations.--
``(1) In general.--The Secretary shall issue interim final or
final regulations to carry out this section and section 1934.
``(2) Use of pace protocol.--
``(A) In general.--In issuing such regulations, the
Secretary shall, to the extent consistent with the provisions
of this section, incorporate the requirements applied to PACE
demonstration waiver programs under the PACE protocol.
``(B) Flexibility.--In order to provide for reasonable
flexibility in adapting the PACE service delivery model to the
needs of particular organizations (such as those in rural areas
or those that may determine it appropriate to use nonstaff
physicians according to State licensing law requirements) under
this section and section 1934, the Secretary (in close
consultation with State administering agencies) may modify or
waive provisions of the PACE protocol so long as any such
modification or waiver is not inconsistent with and would not
impair the essential elements, objectives, and requirements of
this section, but may not modify or waive any of the following
provisions:
``(i) The focus on frail elderly qualifying individuals
who require the level of care provided in a nursing
facility.
``(ii) The delivery of comprehensive, integrated acute
and long-term care services.
``(iii) The interdisciplinary team approach to care
management and service delivery.
``(iv) Capitated, integrated financing that allows the
provider to pool payments received from public and private
programs and individuals.
``(v) The assumption by the provider of full financial
risk.
``(3) Application of certain additional beneficiary and program
protections.--
``(A) In general.--In issuing such regulations and subject
to subparagraph (B), the Secretary may apply with respect to
PACE programs, providers, and agreements such requirements of
part C (or, for periods before January 1, 1999, section 1876)
and sections 1903(m) and 1932 relating to protection of
beneficiaries and program integrity as would apply to
Medicare+Choice organizations under part C (or for such periods
eligible organizations under risk-sharing contracts under
section 1876) and to medicaid managed care organizations under
prepaid capitation agreements under section 1903(m).
``(B) Considerations.--In issuing such regulations, the
Secretary shall--
``(i) take into account the differences between
populations served and benefits provided under this section
and under part C (or, for periods before January 1, 1999,
section 1876) and section 1903(m);
``(ii) not include any requirement that conflicts with
carrying out PACE programs under this section; and
``(iii) not include any requirement restricting the
proportion of enrollees who are eligible for benefits under
this title or title XIX.
``(4) Construction.--Nothing in this subsection shall be
construed as preventing the Secretary from including in regulations
provisions to ensure the health and safety of individuals enrolled
in a PACE program under this section that are in addition to those
otherwise provided under paragraphs (2) and (3).
``(g) Waivers of Requirements.--With respect to carrying out a PACE
program under this section, the following requirements of this title
(and regulations relating to such requirements) are waived and shall
not apply:
``(1) Section 1812, insofar as it limits coverage of
institutional services.
``(2) Sections 1813, 1814, 1833, and 1886, insofar as such
sections relate to rules for payment for benefits.
``(3) Sections 1814(a)(2)(B), 1814(a)(2)(C), and 1835(a)(2)(A),
insofar as they limit coverage of extended care services or home
health services.
``(4) Section 1861(i), insofar as it imposes a 3-day prior
hospitalization requirement for coverage of extended care services.
``(5) Paragraphs (1) and (9) of section 1862(a), insofar as
they may prevent payment for PACE program services to individuals
enrolled under PACE programs.
``(h) Demonstration Project for For-Profit Entities.--
``(1) In general.--In order to demonstrate the operation of a
PACE program by a private, for-profit entity, the Secretary (in
close consultation with State administering agencies) shall grant
waivers from the requirement under subsection (a)(3) that a PACE
provider may not be a for-profit, private entity.
``(2) Similar terms and conditions.--
``(A) In general.--Except as provided under subparagraph
(B), and paragraph (1), the terms and conditions for operation
of a PACE program by a provider under this subsection shall be
the same as those for PACE providers that are nonprofit,
private organizations.
``(B) Numerical limitation.--The number of programs for
which waivers are granted under this subsection shall not
exceed 10. Programs with waivers granted under this subsection
shall not be counted against the numerical limitation specified
in subsection (e)(1)(B).
``(i) Miscellaneous Provisions.--Nothing in this section or section
1934 shall be construed as preventing a PACE provider from entering
into contracts with other governmental or nongovernmental payers for
the care of PACE program eligible individuals who are not eligible for
benefits under part A, or enrolled under part B, or eligible for
medical assistance under title XIX.''.
SEC. 4802. ESTABLISHMENT OF PACE PROGRAM AS MEDICAID STATE OPTION.
(a) In General.--Title XIX is amended--
(1) in section 1905(a) (42 U.S.C. 1396d(a)), as amended by
section 4702(a)(1)--
(A) by striking ``and'' at the end of paragraph (25);
(B) by redesignating paragraph (26) as paragraph (27); and
(C) by inserting after paragraph (25) the following new
paragraph:
``(26) services furnished under a PACE program under section
1934 to PACE program eligible individuals enrolled under the
program under such section; and'';
(2) by redesignating section 1934, as redesignated by section
4732, as section 1935; and
(3) by inserting after section 1933, as added by such section,
the following new section:
``program of all-inclusive care for the elderly (pace)
``Sec. 1934. (a) State Option.--
``(1) In general.--A State may elect to provide medical
assistance under this section with respect to PACE program services
to PACE program eligible individuals who are eligible for medical
assistance under the State plan and who are enrolled in a PACE
program under a PACE program agreement. Such individuals need not
be eligible for benefits under part A, or enrolled under part B, of
title XVIII to be eligible to enroll under this section. In the
case of an individual enrolled with a PACE program pursuant to such
an election--
``(A) the individual shall receive benefits under the plan
solely through such program, and
``(B) the PACE provider shall receive payment in accordance
with the PACE program agreement for provision of such benefits.
A State may establish a numerical limit on the number of
individuals who may be enrolled in a PACE program under a PACE
program agreement.
``(2) PACE program defined.--For purposes of this section, the
term `PACE program' means a program of all-inclusive care for the
elderly that meets the following requirements:
``(A) Operation.--The entity operating the program is a
PACE provider (as defined in paragraph (3)).
``(B) Comprehensive benefits.--The program provides
comprehensive health care services to PACE program eligible
individuals in accordance with the PACE program agreement and
regulations under this section.
``(C) Transition.--In the case of an individual who is
enrolled under the program under this section and whose
enrollment ceases for any reason (including that the individual
no longer qualifies as a PACE program eligible individual, the
termination of a PACE program agreement, or otherwise), the
program provides assistance to the individual in obtaining
necessary transitional care through appropriate referrals and
making the individual's medical records available to new
providers.
``(3) PACE provider defined.--
``(A) In general.--For purposes of this section, the term
`PACE provider' means an entity that--
``(i) subject to subparagraph (B), is (or is a distinct
part of) a public entity or a private, nonprofit entity
organized for charitable purposes under section 501(c)(3)
of the Internal Revenue Code of 1986, and
``(ii) has entered into a PACE program agreement with
respect to its operation of a PACE program.
``(B) Treatment of private, for-profit providers.--Clause
(i) of subparagraph (A) shall not apply--
``(i) to entities subject to a demonstration project
waiver under subsection (h); and
``(ii) after the date the report under section 4804(b)
of the Balanced Budget Act of 1997 is submitted, unless the
Secretary determines that any of the findings described in
subparagraph (A), (B), (C), or (D) of paragraph (2) of such
section are true.
``(4) PACE program agreement defined.--For purposes of this
section, the term `PACE program agreement' means, with respect to a
PACE provider, an agreement, consistent with this section, section
1894 (if applicable), and regulations promulgated to carry out such
sections, among the PACE provider, the Secretary, and a State
administering agency for the operation of a PACE program by the
provider under such sections.
``(5) PACE program eligible individual defined.--For purposes
of this section, the term `PACE program eligible individual' means,
with respect to a PACE program, an individual who--
``(A) is 55 years of age or older;
``(B) subject to subsection (c)(4), is determined under
subsection (c) to require the level of care required under the
State medicaid plan for coverage of nursing facility services;
``(C) resides in the service area of the PACE program; and
``(D) meets such other eligibility conditions as may be
imposed under the PACE program agreement for the program under
subsection (e)(2)(A)(ii).
``(6) PACE protocol.--For purposes of this section, the term
`PACE protocol' means the Protocol for the Program of All-inclusive
Care for the Elderly (PACE), as published by On Lok, Inc., as of
April 14, 1995, or any successor protocol that may be agreed upon
between the Secretary and On Lok, Inc.
``(7) PACE demonstration waiver program defined.--For purposes
of this section, the term `PACE demonstration waiver program' means
a demonstration program under either of the following sections (as
in effect before the date of their repeal):
``(A) Section 603(c) of the Social Security Amendments of
1983 (Public Law 98-21), as extended by section 9220 of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (Public
Law 99-272).
``(B) Section 9412(b) of the Omnibus Budget Reconciliation
Act of 1986 (Public Law 99-509).
``(8) State administering agency defined.--For purposes of this
section, the term `State administering agency' means, with respect
to the operation of a PACE program in a State, the agency of that
State (which may be the single agency responsible for
administration of the State plan under this title in the State)
responsible for administering PACE program agreements under this
section and section 1894 in the State.
``(9) Trial period defined.--
``(A) In general.--For purposes of this section, the term
`trial period' means, with respect to a PACE program operated
by a PACE provider under a PACE program agreement, the first 3
contract years under such agreement with respect to such
program.
``(B) Treatment of entities previously operating pace
demonstration waiver programs.--Each contract year (including a
year occurring before the effective date of this section)
during which an entity has operated a PACE demonstration waiver
program shall be counted under subparagraph (A) as a contract
year during which the entity operated a PACE program as a PACE
provider under a PACE program agreement.
``(10) Regulations.--For purposes of this section, the term
`regulations' refers to interim final or final regulations
promulgated under subsection (f) to carry out this section and
section 1894.
``(b) Scope of Benefits; Beneficiary Safeguards.--
``(1) In general.--Under a PACE program agreement, a PACE
provider shall--
``(A) provide to PACE program eligible individuals,
regardless of source of payment and directly or under contracts
with other entities, at a minimum--
``(i) all items and services covered under title XVIII
(for individuals enrolled under section 1894) and all items
and services covered under this title, but without any
limitation or condition as to amount, duration, or scope
and without application of deductibles, copayments,
coinsurance, or other cost-sharing that would otherwise
apply under such title or this title, respectively; and
``(ii) all additional items and services specified in
regulations, based upon those required under the PACE
protocol;
``(B) provide such enrollees access to necessary covered
items and services 24 hours per day, every day of the year;
``(C) provide services to such enrollees through a
comprehensive, multidisciplinary health and social services
delivery system which integrates acute and long-term care
services pursuant to regulations; and
``(D) specify the covered items and services that will not
be provided directly by the entity, and to arrange for delivery
of those items and services through contracts meeting the
requirements of regulations.
``(2) Quality assurance; patient safeguards.--The PACE program
agreement shall require the PACE provider to have in effect at a
minimum--
``(A) a written plan of quality assurance and improvement,
and procedures implementing such plan, in accordance with
regulations, and
``(B) written safeguards of the rights of enrolled
participants (including a patient bill of rights and procedures
for grievances and appeals) in accordance with regulations and
with other requirements of this title and Federal and State law
designed for the protection of patients.
``(c) Eligibility Determinations.--
``(1) In general.--The determination of--
``(A) whether an individual is a PACE program eligible
individual shall be made under and in accordance with the PACE
program agreement, and
``(B) who is entitled to medical assistance under this
title shall be made (or who is not so entitled, may be made) by
the State administering agency.
``(2) Condition.--An individual is not a PACE program eligible
individual (with respect to payment under this section) unless the
individual's health status has been determined by the Secretary or
the State administering agency, in accordance with regulations, to
be comparable to the health status of individuals who have
participated in the PACE demonstration waiver programs. Such
determination shall be based upon information on health status and
related indicators (such as medical diagnoses and measures of
activities of daily living, instrumental activities of daily
living, and cognitive impairment) that are part of a uniform
minimum data set collected by PACE providers on potential eligible
individuals.
``(3) Annual eligibility recertifications.--
``(A) In general.--Subject to subparagraph (B), the
determination described in subsection (a)(5)(B) for an
individual shall be reevaluated at least annually.
``(B) Exception.--The requirement of annual reevaluation
under subparagraph (A) may be waived during a period in
accordance with regulations in those cases in which the State
administering agency determines that there is no reasonable
expectation of improvement or significant change in an
individual's condition during the period because of the
severity of chronic condition, or degree of impairment of
functional capacity of the individual involved.
``(4) Continuation of eligibility.--An individual who is a PACE
program eligible individual may be deemed to continue to be such an
individual notwithstanding a determination that the individual no
longer meets the requirement of subsection (a)(5)(B) if, in
accordance with regulations, in the absence of continued coverage
under a PACE program the individual reasonably would be expected to
meet such requirement within the succeeding 6-month period.
``(5) Enrollment; disenrollment.--
``(A) Voluntary disenrollment at any time.--The enrollment
and disenrollment of PACE program eligible individuals in a
PACE program shall be pursuant to regulations and the PACE
program agreement and shall permit enrollees to voluntarily
disenroll without cause at any time.
``(B) Limitations on disenrollment.--
``(i) In general.--Regulations promulgated by the
Secretary under this section and section 1894, and the PACE
program agreement, shall provide that the PACE program may
not disenroll a PACE program eligible individual except--
``(I) for nonpayment of premiums (if applicable) on
a timely basis; or
``(II) for engaging in disruptive or threatening
behavior, as defined in such regulations (developed in
close consultation with State administering agencies).
``(ii) No disenrollment for noncompliant behavior.--
Except as allowed under regulations promulgated to carry
out clause (i)(II), a PACE program may not disenroll a PACE
program eligible individual on the ground that the
individual has engaged in noncompliant behavior if such
behavior is related to a mental or physical condition of
the individual. For purposes of the preceding sentence, the
term `noncompliant behavior' includes repeated
noncompliance with medical advice and repeated failure to
appear for appointments.
``(iii) Timely review of proposed nonvoluntary
disenrollment.--A proposed disenrollment, other than a
voluntary disenrollment, shall be subject to timely review
and final determination by the Secretary or by the State
administering agency (as applicable), prior to the proposed
disenrollment becoming effective.
``(d) Payments to PACE Providers on a Capitated Basis.--
``(1) In general.--In the case of a PACE provider with a PACE
program agreement under this section, except as provided in this
subsection or by regulations, the State shall make prospective
monthly payments of a capitation amount for each PACE program
eligible individual enrolled under the agreement under this
section.
``(2) Capitation amount.--The capitation amount to be applied
under this subsection for a provider for a contract year shall be
an amount specified in the PACE program agreement for the year.
Such amount shall be an amount, specified under the PACE agreement,
which is less than the amount that would otherwise have been made
under the State plan if the individuals were not so enrolled and
shall be adjusted to take into account the comparative frailty of
PACE enrollees and such other factors as the Secretary determines
to be appropriate. The payment under this section shall be in
addition to any payment made under section 1894 for individuals who
are enrolled in a PACE program under such section.
``(e) PACE Program Agreement.--
``(1) Requirement.--
``(A) In general.--The Secretary, in close cooperation with
the State administering agency, shall establish procedures for
entering into, extending, and terminating PACE program
agreements for the operation of PACE programs by entities that
meet the requirements for a PACE provider under this section,
section 1894, and regulations.
``(B) Numerical limitation.--
``(i) In general.--The Secretary shall not permit the
number of PACE providers with which agreements are in
effect under this section or under section 9412(b) of the
Omnibus Budget Reconciliation Act of 1986 to exceed--
``(I) 40 as of the date of the enactment of this
section, or
``(II) as of each succeeding anniversary of such
date, the numerical limitation under this subparagraph
for the preceding year plus 20.
Subclause (II) shall apply without regard to the actual
number of agreements in effect as of a previous anniversary
date.
``(ii) Treatment of certain private, for-profit
providers.--The numerical limitation in clause (i) shall
not apply to a PACE provider that--
``(I) is operating under a demonstration project
waiver under subsection (h), or
``(II) was operating under such a waiver and
subsequently qualifies for PACE provider status
pursuant to subsection (a)(3)(B)(ii).
``(2) Service area and eligibility.--
``(A) In general.--A PACE program agreement for a PACE
program--
``(i) shall designate the service area of the program;
``(ii) may provide additional requirements for
individuals to qualify as PACE program eligible individuals
with respect to the program;
``(iii) shall be effective for a contract year, but may
be extended for additional contract years in the absence of
a notice by a party to terminate, and is subject to
termination by the Secretary and the State administering
agency at any time for cause (as provided under the
agreement);
``(iv) shall require a PACE provider to meet all
applicable State and local laws and requirements; and
``(v) shall contain such additional terms and
conditions as the parties may agree to, so long as such
terms and conditions are consistent with this section and
regulations.
``(B) Service area overlap.--In designating a service area
under a PACE program agreement under subparagraph (A)(i), the
Secretary (in consultation with the State administering agency)
may exclude from designation an area that is already covered
under another PACE program agreement, in order to avoid
unnecessary duplication of services and avoid impairing the
financial and service viability of an existing program.
``(3) Data collection; development of outcome measures.--
``(A) Data collection.--
``(i) In general.--Under a PACE program agreement, the
PACE provider shall--
``(I) collect data;
``(II) maintain, and afford the Secretary and the
State administering agency access to, the records
relating to the program, including pertinent financial,
medical, and personnel records; and
``(III) submit to the Secretary and the State
administering agency such reports as the Secretary
finds (in consultation with State administering
agencies) necessary to monitor the operation, cost, and
effectiveness of the PACE program.
``(ii) Requirements during trial period.--During the
first 3 years of operation of a PACE program (either under
this section or under a PACE demonstration waiver program),
the PACE provider shall provide such additional data as the
Secretary specifies in regulations in order to perform the
oversight required under paragraph (4)(A).
``(B) Development of outcome measures.--Under a PACE
program agreement, the PACE provider, the Secretary, and the
State administering agency shall jointly cooperate in the
development and implementation of health status and quality of
life outcome measures with respect to PACE program eligible
individuals.
``(4) Oversight.--
``(A) Annual, close oversight during trial period.--During
the trial period (as defined in subsection (a)(9)) with respect
to a PACE program operated by a PACE provider, the Secretary
(in cooperation with the State administering agency) shall
conduct a comprehensive annual review of the operation of the
PACE program by the provider in order to assure compliance with
the requirements of this section and regulations. Such a review
shall include--
``(i) an onsite visit to the program site;
``(ii) comprehensive assessment of a provider's fiscal
soundness;
``(iii) comprehensive assessment of the provider's
capacity to provide all PACE services to all enrolled
participants;
``(iv) detailed analysis of the entity's substantial
compliance with all significant requirements of this
section and regulations; and
``(v) any other elements the Secretary or the State
administering agency considers necessary or appropriate.
``(B) Continuing oversight.--After the trial period, the
Secretary (in cooperation with the State administering agency)
shall continue to conduct such review of the operation of PACE
providers and PACE programs as may be appropriate, taking into
account the performance level of a provider and compliance of a
provider with all significant requirements of this section and
regulations.
``(C) Disclosure.--The results of reviews under this
paragraph shall be reported promptly to the PACE provider,
along with any recommendations for changes to the provider's
program, and shall be made available to the public upon
request.
``(5) Termination of pace provider agreements.--
``(A) In general.--Under regulations--
``(i) the Secretary or a State administering agency may
terminate a PACE program agreement for cause, and
``(ii) a PACE provider may terminate such an agreement
after appropriate notice to the Secretary, the State
administering agency, and enrollees.
``(B) Causes for termination.--In accordance with
regulations establishing procedures for termination of PACE
program agreements, the Secretary or a State administering
agency may terminate a PACE program agreement with a PACE
provider for, among other reasons, the fact that--
``(i) the Secretary or State administering agency
determines that--
``(I) there are significant deficiencies in the
quality of care provided to enrolled participants; or
``(II) the provider has failed to comply
substantially with conditions for a program or provider
under this section or section 1894; and
``(ii) the entity has failed to develop and
successfully initiate, within 30 days of the date of the
receipt of written notice of such a determination, a plan
to correct the deficiencies, or has failed to continue
implementation of such a plan.
``(C) Termination and transition procedures.--An entity
whose PACE provider agreement is terminated under this
paragraph shall implement the transition procedures required
under subsection (a)(2)(C).
``(6) Secretary's oversight; enforcement authority.--
``(A) In general.--Under regulations, if the Secretary
determines (after consultation with the State administering
agency) that a PACE provider is failing substantially to comply
with the requirements of this section and regulations, the
Secretary (and the State administering agency) may take any or
all of the following actions:
``(i) Condition the continuation of the PACE program
agreement upon timely execution of a corrective action
plan.
``(ii) Withhold some or all further payments under the
PACE program agreement under this section or section 1894
with respect to PACE program services furnished by such
provider until the deficiencies have been corrected.
``(iii) Terminate such agreement.
``(B) Application of intermediate sanctions.--Under
regulations, the Secretary may provide for the application
against a PACE provider of remedies described in section
1857(g)(2) (or, for periods before January 1, 1999, section
1876(i)(6)(B)) or 1903(m)(5)(B) in the case of violations by
the provider of the type described in section 1857(g)(1) (or
1876(i)(6)(A) for such periods) or 1903(m)(5)(A), respectively
(in relation to agreements, enrollees, and requirements under
section 1894 or this section, respectively).
``(7) Procedures for termination or imposition of sanctions.--
Under regulations, the provisions of section 1857(h) (or for
periods before January 1, 1999, section 1876(i)(9)) shall apply to
termination and sanctions respecting a PACE program agreement and
PACE provider under this subsection in the same manner as they
apply to a termination and sanctions with respect to a contract and
a Medicare+Choice organization under part C of title XVIII (or for
such periods an eligible organization under section 1876).
``(8) Timely consideration of applications for pace program
provider status.--In considering an application for PACE provider
program status, the application shall be deemed approved unless the
Secretary, within 90 days after the date of the submission of the
application to the Secretary, either denies such request in writing
or informs the applicant in writing with respect to any additional
information that is needed in order to make a final determination
with respect to the application. After the date the Secretary
receives such additional information, the application shall be
deemed approved unless the Secretary, within 90 days of such date,
denies such request.
``(f) Regulations.--
``(1) In general.--The Secretary shall issue interim final or
final regulations to carry out this section and section 1894.
``(2) Use of pace protocol.--
``(A) In general.--In issuing such regulations, the
Secretary shall, to the extent consistent with the provisions
of this section, incorporate the requirements applied to PACE
demonstration waiver programs under the PACE protocol.
``(B) Flexibility.--In order to provide for reasonable
flexibility in adapting the PACE service delivery model to the
needs of particular organizations (such as those in rural areas
or those that may determine it appropriate to use nonstaff
physicians according to State licensing law requirements) under
this section and section 1894, the Secretary (in close
consultation with State administering agencies) may modify or
waive provisions of the PACE protocol so long as any such
modification or waiver is not inconsistent with and would not
impair the essential elements, objectives, and requirements of
this section, but may not modify or waive any of the following
provisions:
``(i) The focus on frail elderly qualifying individuals
who require the level of care provided in a nursing
facility.
``(ii) The delivery of comprehensive, integrated acute
and long-term care services.
``(iii) The interdisciplinary team approach to care
management and service delivery.
``(iv) Capitated, integrated financing that allows the
provider to pool payments received from public and private
programs and individuals.
``(v) The assumption by the provider of full financial
risk.
``(3) Application of certain additional beneficiary and program
protections.--
``(A) In general.--In issuing such regulations and subject
to subparagraph (B), the Secretary may apply with respect to
PACE programs, providers, and agreements such requirements of
part C of title XVIII (or, for periods before January 1, 1999,
section 1876) and sections 1903(m) and 1932 relating to
protection of beneficiaries and program integrity as would
apply to Medicare+Choice organizations under such part C (or
for such periods eligible organizations under risk-sharing
contracts under section 1876) and to medicaid managed care
organizations under prepaid capitation agreements under section
1903(m).
``(B) Considerations.--In issuing such regulations, the
Secretary shall--
``(i) take into account the differences between
populations served and benefits provided under this section
and under part C of title XVIII (or, for periods before
January 1, 1999, section 1876) and section 1903(m);
``(ii) not include any requirement that conflicts with
carrying out PACE programs under this section; and
``(iii) not include any requirement restricting the
proportion of enrollees who are eligible for benefits under
this title or title XVIII.
``(4) Construction.--Nothing in this subsection shall be
construed as preventing the Secretary from including in regulations
provisions to ensure the health and safety of individuals enrolled
in a PACE program under this section that are in addition to those
otherwise provided under paragraphs (2) and (3).
``(g) Waivers of Requirements.--With respect to carrying out a PACE
program under this section, the following requirements of this title
(and regulations relating to such requirements) shall not apply:
``(1) Section 1902(a)(1), relating to any requirement that PACE
programs or PACE program services be provided in all areas of a
State.
``(2) Section 1902(a)(10), insofar as such section relates to
comparability of services among different population groups.
``(3) Sections 1902(a)(23) and 1915(b)(4), relating to freedom
of choice of providers under a PACE program.
``(4) Section 1903(m)(2)(A), insofar as it restricts a PACE
provider from receiving prepaid capitation payments.
``(5) Such other provisions of this title that, as added or
amended by the Balanced Budget Act of 1997, the Secretary
determines are inapplicable to carrying out a PACE program under
this section.
``(h) Demonstration Project for For-Profit Entities.--
``(1) In general.--In order to demonstrate the operation of a
PACE program by a private, for-profit entity, the Secretary (in
close consultation with State administering agencies) shall grant
waivers from the requirement under subsection (a)(3) that a PACE
provider may not be a for-profit, private entity.
``(2) Similar terms and conditions.--
``(A) In general.--Except as provided under subparagraph
(B), and paragraph (1), the terms and conditions for operation
of a PACE program by a provider under this subsection shall be
the same as those for PACE providers that are nonprofit,
private organizations.
``(B) Numerical limitation.--The number of programs for
which waivers are granted under this subsection shall not
exceed 10. Programs with waivers granted under this subsection
shall not be counted against the numerical limitation specified
in subsection (e)(1)(B).
``(i) Post-Eligibility Treatment of Income.--A State may provide
for post-eligibility treatment of income for individuals enrolled in
PACE programs under this section in the same manner as a State treats
post-eligibility income for individuals receiving services under a
waiver under section 1915(c).
``(j) Miscellaneous Provisions.--Nothing in this section or section
1894 shall be construed as preventing a PACE provider from entering
into contracts with other governmental or nongovernmental payers for
the care of PACE program eligible individuals who are not eligible for
benefits under part A, or enrolled under part B, of title XVIII or
eligible for medical assistance under this title.''.
(b) Conforming Amendments.--
(1) Section 1924(a)(5) (42 U.S.C. 1396r-5(a)(5)) is amended--
(A) in the heading, by striking ``from organizations
receiving certain waivers'' and inserting ``under pace
programs''; and
(B) by striking ``from any organization'' and all that
follows and inserting ``under a PACE demonstration waiver
program (as defined in section 1934(a)(7)) or under a PACE
program under section 1934 or 1894.''.
(2) Section 1903(f)(4)(C) (42 U.S.C. 1396b(f)(4)(C)) is amended
by inserting ``or who is a PACE program eligible individual
enrolled in a PACE program under section 1934,'' after ``section
1902(a)(10)(A),''.
SEC. 4803. EFFECTIVE DATE; TRANSITION.
(a) Timely Issuance of Regulations; Effective Date.--The Secretary
of Health and Human Services shall promulgate regulations to carry out
this subtitle in a timely manner. Such regulations shall be designed so
that entities may establish and operate PACE programs under sections
1894 and 1934 of the Social Security Act (as added by sections 4801 and
4802 of this subtitle) for periods beginning not later than 1 year
after the date of the enactment of this Act.
(b) Expansion and Transition for PACE Demonstration Project
Waivers.--
(1) Expansion in current number and extension of demonstration
projects.--Section 9412(b) of the Omnibus Budget Reconciliation Act
of 1986, as amended by section 4118(g) of the Omnibus Budget
Reconciliation Act of 1987, is amended--
(A) in paragraph (1), by inserting before the period at the
end the following: ``, except that the Secretary shall grant
waivers of such requirements to up to the applicable numerical
limitation specified in sections 1894(e)(1)(B) and
1934(e)(1)(B) of the Social Security Act''; and
(B) in paragraph (2)--
(i) in subparagraph (A), by striking ``, including
permitting the organization to assume progressively (over
the initial 3-year period of the waiver) the full financial
risk''; and
(ii) in subparagraph (C), by adding at the end the
following: ``In granting further extensions, an
organization shall not be required to provide for reporting
of information which is only required because of the
demonstration nature of the project.''.
(2) Elimination of replication requirement.--Section
9412(b)(2)(B) of such Act, as so amended, shall not apply to
waivers granted under such section after the date of the enactment
of this Act.
(3) Timely consideration of applications.--In considering an
application for waivers under such section before the effective
date of the repeals under subsection (d), subject to the numerical
limitation under the amendment made by paragraph (1), the
application shall be deemed approved unless the Secretary of Health
and Human Services, within 90 days after the date of its submission
to the Secretary, either denies such request in writing or informs
the applicant in writing with respect to any additional information
which is needed in order to make a final determination with respect
to the application. After the date the Secretary receives such
additional information, the application shall be deemed approved
unless the Secretary, within 90 days of such date, denies such
request.
(c) Priority and Special Consideration in Application.--During the
3-year period beginning on the date of the enactment of this Act:
(1) Provider status.--The Secretary of Health and Human
Services shall give priority in processing applications of entities
to qualify as PACE programs under section 1894 or 1934 of the
Social Security Act--
(A) first, to entities that are operating a PACE
demonstration waiver program (as defined in sections 1894(a)(7)
and 1934(a)(7) of such Act); and
(B) then to entities that have applied to operate such a
program as of May 1, 1997.
(2) New waivers.--The Secretary shall give priority, in the
awarding of additional waivers under section 9412(b) of the Omnibus
Budget Reconciliation Act of 1986--
(A) to any entities that have applied for such waivers
under such section as of May 1, 1997; and
(B) to any entity that, as of May 1, 1997, has formally
contracted with a State to provide services for which payment
is made on a capitated basis with an understanding that the
entity was seeking to become a PACE provider.
(3) Special consideration.--The Secretary shall give special
consideration, in the processing of applications described in
paragraph (1) and the awarding of waivers described in paragraph
(2), to an entity which as of May 1, 1997, through formal
activities (such as entering into contracts for feasibility
studies) has indicated a specific intent to become a PACE provider.
(d) Repeal of Current PACE Demonstration Project Waiver
Authority.--
(1) In general.--Subject to paragraph (2), the following
provisions of law are repealed:
(A) Section 603(c) of the Social Security Amendments of
1983 (Public Law 98-21).
(B) Section 9220 of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (Public Law 99-272).
(C) Section 9412(b) of the Omnibus Budget Reconciliation
Act of 1986 (Public Law 99-509).
(2) Delay in application to current waivers.--
(A) In general.--Subject to subparagraph (B), in the case
of waivers granted with respect to a PACE program before the
initial effective date of regulations described in subsection
(a), the repeals made by paragraph (1) shall not apply until
the end of a transition period (of up to 24 months) that begins
on the initial effective date of such regulations, and that
allows sufficient time for an orderly transition from
demonstration project authority to general authority provided
under the amendments made by this subtitle.
(B) State option to seek extension of current period.--A
State may elect to maintain the PACE programs which (as of the
date of the enactment of this Act) were operating in the State
under the authority described in paragraph (1) until a date
(specified by the State) that is not later than 3 years after
the initial effective date of regulations described in
subsection (a). If a State makes such an election, the repeals
made by paragraph (1) shall not apply to the programs until the
date so specified, but only so long as such programs continue
to operate under the same terms and conditions as apply to such
programs as of the date of the enactment of this Act, and
subparagraph (A) shall not apply to such programs.
SEC. 4804. STUDY AND REPORTS.
(a) Study.--
(1) In general.--The Secretary of Health and Human Services (in
close consultation with State administering agencies, as defined in
sections 1894(a)(8) and 1934(a)(8) of the Social Security Act)
shall conduct a study of the quality and cost of providing PACE
program services under the medicare and medicaid programs under the
amendments made by this subtitle.
(2) Study of private, for-profit providers.--Such study shall
specifically compare the costs, quality, and access to services by
entities that are private, for-profit entities operating under
demonstration projects waivers granted under sections 1894(h) and
1934(h) of the Social Security Act with the costs, quality, and
access to services of other PACE providers.
(b) Report.--
(1) In general.--Not later than 4 years after the date of the
enactment of this Act, the Secretary shall provide for a report to
Congress on the impact of such amendments on quality and cost of
services. The Secretary shall include in such report such
recommendations for changes in the operation of such amendments as
the Secretary deems appropriate.
(2) Treatment of private, for-profit providers.--The report
shall include specific findings on whether any of the following
findings is true:
(A) The number of covered lives enrolled with entities
operating under demonstration project waivers under sections
1894(h) and 1934(h) of the Social Security Act is fewer than
800 (or such lesser number as the Secretary may find
statistically sufficient to make determinations respecting
findings described in the succeeding subparagraphs).
(B) The population enrolled with such entities is less
frail than the population enrolled with other PACE providers.
(C) Access to or quality of care for individuals enrolled
with such entities is lower than such access or quality for
individuals enrolled with other PACE providers.
(D) The application of such section has resulted in an
increase in expenditures under the medicare or medicaid
programs above the expenditures that would have been made if
such section did not apply.
(c) Information Included in Annual Recommendations.--The Medicare
Payment Advisory Commission shall include in its annual report under
section 1805(b)(1)(B) of the Social Security Act recommendations on the
methodology and level of payments made to PACE providers under sections
1894(d) and 1934(d) of such Act and on the treatment of private, for-
profit entities as PACE providers.
Subtitle J--State Children's Health Insurance Program
CHAPTER 1--STATE CHILDREN'S HEALTH INSURANCE PROGRAM
SEC. 4901. ESTABLISHMENT OF PROGRAM.
(a) Establishment.--The Social Security Act is amended by adding at
the end the following new title:
``TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM
``SEC. 2101. PURPOSE; STATE CHILD HEALTH PLANS.
``(a) Purpose.--The purpose of this title is to provide funds to
States to enable them to initiate and expand the provision of child
health assistance to uninsured, low-income children in an effective and
efficient manner that is coordinated with other sources of health
benefits coverage for children. Such assistance shall be provided
primarily for obtaining health benefits coverage through--
``(1) obtaining coverage that meets the requirements of section
2103, or
``(2) providing benefits under the State's medicaid plan under
title XIX,
or a combination of both.
``(b) State Child Health Plan Required.--A State is not eligible
for payment under section 2105 unless the State has submitted to the
Secretary under section 2106 a plan that--
``(1) sets forth how the State intends to use the funds
provided under this title to provide child health assistance to
needy children consistent with the provisions of this title, and
``(2) has been approved under section 2106.
``(c) State Entitlement.--This title constitutes budget authority
in advance of appropriations Acts and represents the obligation of the
Federal Government to provide for the payment to States of amounts
provided under section 2104.
``(d) Effective Date.--No State is eligible for payments under
section 2105 for child health assistance for coverage provided for
periods beginning before October 1, 1997.
``SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; ELIGIBILITY;
OUTREACH.
``(a) General Background and Description.--A State child health
plan shall include a description, consistent with the requirements of
this title, of--
``(1) the extent to which, and manner in which, children in the
State, including targeted low-income children and other classes of
children classified by income and other relevant factors, currently
have creditable health coverage (as defined in section 2110(c)(2));
``(2) current State efforts to provide or obtain creditable
health coverage for uncovered children, including the steps the
State is taking to identify and enroll all uncovered children who
are eligible to participate in public health insurance programs and
health insurance programs that involve public-private partnerships;
``(3) how the plan is designed to be coordinated with such
efforts to increase coverage of children under creditable health
coverage;
``(4) the child health assistance provided under the plan for
targeted low-income children, including the proposed methods of
delivery, and utilization control systems;
``(5) eligibility standards consistent with subsection (b);
``(6) outreach activities consistent with subsection (c); and
``(7) methods (including monitoring) used--
``(A) to assure the quality and appropriateness of care,
particularly with respect to well-baby care, well-child care,
and immunizations provided under the plan, and
``(B) to assure access to covered services, including
emergency services.
``(b) General Description of Eligibility Standards and
Methodology.--
``(1) Eligibility standards.--
``(A) In general.--The plan shall include a description of
the standards used to determine the eligibility of targeted
low-income children for child health assistance under the plan.
Such standards may include (to the extent consistent with this
title) those relating to the geographic areas to be served by
the plan, age, income and resources (including any standards
relating to spenddowns and disposition of resources),
residency, disability status (so long as any standard relating
to such status does not restrict eligibility), access to or
coverage under other health coverage, and duration of
eligibility. Such standards may not discriminate on the basis
of diagnosis.
``(B) Limitations on eligibility standards.--Such
eligibility standards--
``(i) shall, within any defined group of covered
targeted low-income children, not cover such children with
higher family income without covering children with a lower
family income, and
``(ii) may not deny eligibility based on a child having
a preexisting medical condition.
``(2) Methodology.--The plan shall include a description of
methods of establishing and continuing eligibility and enrollment.
``(3) Eligibility screening; coordination with other health
coverage programs.--The plan shall include a description of
procedures to be used to ensure--
``(A) through both intake and followup screening, that only
targeted low-income children are furnished child health
assistance under the State child health plan;
``(B) that children found through the screening to be
eligible for medical assistance under the State medicaid plan
under title XIX are enrolled for such assistance under such
plan;
``(C) that the insurance provided under the State child
health plan does not substitute for coverage under group health
plans;
``(D) the provision of child health assistance to targeted
low-income children in the State who are Indians (as defined in
section 4(c) of the Indian Health Care Improvement Act, 25
U.S.C. 1603(c)); and
``(E) coordination with other public and private programs
providing creditable coverage for low-income children.
``(4) Nonentitlement.--Nothing in this title shall be construed
as providing an individual with an entitlement to child health
assistance under a State child health plan.
``(c) Outreach and Coordination.--A State child health plan shall
include a description of the procedures to be used by the State to
accomplish the following:
``(1) Outreach.--Outreach to families of children likely to be
eligible for child health assistance under the plan or under other
public or private health coverage programs to inform these families
of the availability of, and to assist them in enrolling their
children in, such a program.
``(2) Coordination with other health insurance programs.--
Coordination of the administration of the State program under this
title with other public and private health insurance programs.
``SEC. 2103. COVERAGE REQUIREMENTS FOR CHILDREN'S HEALTH INSURANCE.
``(a) Required Scope of Health Insurance Coverage.--The child
health assistance provided to a targeted low-income child under the
plan in the form described in paragraph (1) of section 2101(a) shall
consist, consistent with subsection (c)(5), of any of the following:
``(1) Benchmark coverage.--Health benefits coverage that is
equivalent to the benefits coverage in a benchmark benefit package
described in subsection (b).
``(2) Benchmark-equivalent coverage.--Health benefits coverage
that meets the following requirements:
``(A) Inclusion of basic services.--The coverage includes
benefits for items and services within each of the categories
of basic services described in subsection (c)(1).
``(B) Aggregate actuarial value equivalent to benchmark
package.--The coverage has an aggregate actuarial value that is
at least actuarially equivalent to one of the benchmark benefit
packages.
``(C) Substantial actuarial value for additional services
included in benchmark package.--With respect to each of the
categories of additional services described in subsection
(c)(2) for which coverage is provided under the benchmark
benefit package used under subparagraph (B), the coverage has
an actuarial value that is equal to at least 75 percent of the
actuarial value of the coverage of that category of services in
such package.
``(3) Existing comprehensive state-based coverage.--Health
benefits coverage under an existing comprehensive State-based
program, described in subsection (d)(1).
``(4) Secretary-approved coverage.--Any other health benefits
coverage that the Secretary determines, upon application by a
State, provides appropriate coverage for the population of targeted
low-income children proposed to be provided such coverage.
``(b) Benchmark Benefit Packages.--The benchmark benefit packages
are as follows:
``(1) FEHBP-equivalent children's health insurance coverage.--
The standard Blue Cross/Blue Shield preferred provider option
service benefit plan, described in and offered under section
8903(1) of title 5, United States Code.
``(2) State employee coverage.--A health benefits coverage plan
that is offered and generally available to State employees in the
State involved.
``(3) Coverage offered through hmo.--The health insurance
coverage plan that--
``(A) is offered by a health maintenance organization (as
defined in section 2791(b)(3) of the Public Health Service
Act), and
``(B) has the largest insured commercial, non-medicaid
enrollment of covered lives of such coverage plans offered by
such a health maintenance organization in the State involved.
``(c) Categories of Services; Determination of Actuarial Value of
Coverage.--
``(1) Categories of basic services.--For purposes of this
section, the categories of basic services described in this
paragraph are as follows:
``(A) Inpatient and outpatient hospital services.
``(B) Physicians' surgical and medical services.
``(C) Laboratory and x-ray services.
``(D) Well-baby and well-child care, including age-
appropriate immunizations.
``(2) Categories of additional services.--For purposes of this
section, the categories of additional services described in this
paragraph are as follows:
``(A) Coverage of prescription drugs.
``(B) Mental health services.
``(C) Vision services.
``(D) Hearing services.
``(3) Treatment of other categories.--Nothing in this
subsection shall be construed as preventing a State child health
plan from providing coverage of benefits that are not within a
category of services described in paragraph (1) or (2).
``(4) Determination of actuarial value.--The actuarial value of
coverage of benchmark benefit packages, coverage offered under the
State child health plan, and coverage of any categories of
additional services under benchmark benefit packages and under
coverage offered by such a plan, shall be set forth in an actuarial
opinion in an actuarial report that has been prepared--
``(A) by an individual who is a member of the American
Academy of Actuaries;
``(B) using generally accepted actuarial principles and
methodologies;
``(C) using a standardized set of utilization and price
factors;
``(D) using a standardized population that is
representative of privately insured children of the age of
children who are expected to be covered under the State child
health plan;
``(E) applying the same principles and factors in comparing
the value of different coverage (or categories of services);
``(F) without taking into account any differences in
coverage based on the method of delivery or means of cost
control or utilization used; and
``(G) taking into account the ability of a State to reduce
benefits by taking into account the increase in actuarial value
of benefits coverage offered under the State child health plan
that results from the limitations on cost sharing under such
coverage.
The actuary preparing the opinion shall select and specify in the
memorandum the standardized set and population to be used under
subparagraphs (C) and (D).
``(5) Construction on prohibited coverage.--Nothing in this
section shall be construed as requiring any health benefits
coverage offered under the plan to provide coverage for items or
services for which payment is prohibited under this title,
notwithstanding that any benchmark benefit package includes
coverage for such an item or service.
``(d) Description of Existing Comprehensive State-Based Coverage.--
``(1) In general.--A program described in this paragraph is a
child health coverage program that--
``(A) includes coverage of a range of benefits;
``(B) is administered or overseen by the State and receives
funds from the State;
``(C) is offered in New York, Florida, or Pennsylvania; and
``(D) was offered as of the date of the enactment of this
title.
``(2) Modifications.--A State may modify a program described in
paragraph (1) from time to time so long as it continues to meet the
requirement of subparagraph (A) and does not reduce the actuarial
value of the coverage under the program below the lower of--
``(A) the actuarial value of the coverage under the program
as of the date of the enactment of this title, or
``(B) the actuarial value described in subsection
(a)(2)(B),
evaluated as of the time of the modification.
``(e) Cost-Sharing.--
``(1) Description; general conditions.--
``(A) Description.--A State child health plan shall include
a description, consistent with this subsection, of the amount
(if any) of premiums, deductibles, coinsurance, and other cost
sharing imposed. Any such charges shall be imposed pursuant to
a public schedule.
``(B) Protection for lower income children.--The State
child health plan may only vary premiums, deductibles,
coinsurance, and other cost sharing based on the family income
of targeted low-income children in a manner that does not favor
children from families with higher income over children from
families with lower income.
``(2) No cost sharing on benefits for preventive services.--The
State child health plan may not impose deductibles, coinsurance, or
other cost sharing with respect to benefits for services within the
category of services described in subsection (c)(1)(D).
``(3) Limitations on premiums and cost-sharing.--
``(A) Children in families with income below 150 percent of
poverty line.--In the case of a targeted low-income child whose
family income is at or below 150 percent of the poverty line,
the State child health plan may not impose--
``(i) an enrollment fee, premium, or similar charge
that exceeds the maximum monthly charge permitted
consistent with standards established to carry out section
1916(b)(1) (with respect to individuals described in such
section); and
``(ii) a deductible, cost sharing, or similar charge
that exceeds an amount that is nominal (as determined
consistent with regulations referred to in section
1916(a)(3), with such appropriate adjustment for inflation
or other reasons as the Secretary determines to be
reasonable).
``(B) Other children.--For children not described in
subparagraph (A), subject to paragraphs (1)(B) and (2), any
premiums, deductibles, cost sharing or similar charges imposed
under the State child health plan may be imposed on a sliding
scale related to income, except that the total annual aggregate
cost-sharing with respect to all targeted low-income children
in a family under this title may not exceed 5 percent of such
family's income for the year involved.
``(4) Relation to medicaid requirements.--Nothing in this
subsection shall be construed as affecting the rules relating to
the use of enrollment fees, premiums, deductions, cost sharing, and
similar charges in the case of targeted low-income children who are
provided child health assistance in the form of coverage under a
medicaid program under section 2101(a)(2).
``(f) Application of Certain Requirements.--
``(1) Restriction on application of preexisting condition
exclusions.--
``(A) In general.--Subject to subparagraph (B), the State
child health plan shall not permit the imposition of any
preexisting condition exclusion for covered benefits under the
plan.
``(B) Group health plans and group health insurance
coverage.--If the State child health plan provides for benefits
through payment for, or a contract with, a group health plan or
group health insurance coverage, the plan may permit the
imposition of a preexisting condition exclusion but only
insofar as it is permitted under the applicable provisions of
part 7 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974 and title XXVII of the Public
Health Service Act.
``(2) Compliance with other requirements.--Coverage offered
under this section shall comply with the requirements of subpart 2
of part A of title XXVII of the Public Health Service Act insofar
as such requirements apply with respect to a health insurance
issuer that offers group health insurance coverage.
``SEC. 2104. ALLOTMENTS.
``(a) Appropriation; Total Allotment.--For the purpose of providing
allotments to States under this section, there is appropriated, out of
any money in the Treasury not otherwise appropriated--
``(1) for fiscal year 1998, $4,275,000,000;
``(2) for fiscal year 1999, $4,275,000,000;
``(3) for fiscal year 2000, $4,275,000,000;
``(4) for fiscal year 2001, $4,275,000,000;
``(5) for fiscal year 2002, $3,150,000,000;
``(6) for fiscal year 2003, $3,150,000,000;
``(7) for fiscal year 2004, $3,150,000,000;
``(8) for fiscal year 2005, $4,050,000,000;
``(9) for fiscal year 2006, $4,050,000,000; and
``(10) for fiscal year 2007, $5,000,000,000.
``(b) Allotments to 50 States and District of Columbia.--
``(1) In general.--Subject to paragraph (4) and subsection (d),
of the amount available for allotment under subsection (a) for a
fiscal year, reduced by the amount of allotments made under
subsection (c) for the fiscal year, the Secretary shall allot to
each State (other than a State described in such subsection) with a
State child health plan approved under this title the same
proportion as the ratio of--
``(A) the product of (i) the number of children described
in paragraph (2) for the State for the fiscal year and (ii) the
State cost factor for that State (established under paragraph
(3)); to
``(B) the sum of the products computed under subparagraph
(A).
``(2) Number of children.--
``(A) In general.--The number of children described in this
paragraph for a State for--
``(i) each of fiscal years 1998 through 2000 is equal
to the number of low-income children in the State with no
health insurance coverage for the fiscal year;
``(ii) fiscal year 2001 is equal to--
``(I) 75 percent of the number of low-income
children in the State for the fiscal year with no
health insurance coverage, plus
``(II) 25 percent of the number of low-income
children in the State for the fiscal year; and
``(iii) each succeeding fiscal year is equal to--
``(I) 50 percent of the number of low-income
children in the State for the fiscal year with no
health insurance coverage, plus
``(II) 50 percent of the number of low-income
children in the State for the fiscal year.
``(B) Determination of number of children.--For purposes of
subparagraph (A), a determination of the number of low-income
children (and of such children who have no health insurance
coverage) for a State for a fiscal year shall be made on the
basis of the arithmetic average of the number of such children,
as reported and defined in the 3 most recent March supplements
to the Current Population Survey of the Bureau of the Census
before the beginning of the fiscal year.
``(3) Adjustment for geographic variations in health costs.--
``(A) In general.--For purposes of paragraph (1)(A)(ii),
the `State cost factor' for a State for a fiscal year equal to
the sum of--
``(i) 0.15, and
``(ii) 0.85 multiplied by the ratio of--
``(I) the annual average wages per employee for the
State for such year (as determined under subparagraph
(B)), to
``(II) the annual average wages per employee for
the 50 States and the District of Columbia.
``(B) Annual average wages per employee.--For purposes of
subparagraph (A), the `annual average wages per employee' for a
State, or for all the States. for a fiscal year is equal to the
average of the annual wages per employee for the State or for
the 50 States and the District of Columbia for employees in the
health services industry (SIC code 8000), as reported by the
Bureau of Labor Statistics of the Department of Labor for each
of the most recent 3 years before the beginning of the fiscal
year involved.
``(4) Floor for states.--Subject to paragraph (5), in no case
shall the amount of the allotment under this subsection for one of
the 50 States or the District of Columbia for a year be less than
$2,000,000. To the extent that the application of the previous
sentence results in an increase in the allotment to a State above
the amount otherwise provided, the allotments for the other States
and the District of Columbia under this subsection shall be reduced
in a pro rata manner (but not below $2,000,000) so that the total
of such allotments in a fiscal year does not exceed the amount
otherwise provided for allotment under paragraph (1) for that
fiscal year.
``(c) Allotments to Territories.--
``(1) In general.--Of the amount available for allotment under
subsection (a) for a fiscal year, subject to subsection (d), the
Secretary shall allot 0.25 percent among each of the commonwealths
and territories described in paragraph (3) in the same proportion
as the percentage specified in paragraph (2) for such commonwealth
or territory bears to the sum of such percentages for all such
commonwealths or territories so described.
``(2) Percentage.--The percentage specified in this paragraph
for--
``(A) Puerto Rico is 91.6 percent,
``(B) Guam is 3.5 percent,
``(C) Virgin Islands is 2.6 percent,
``(D) American Samoa is 1.2 percent, and
``(E) the Northern Mariana Islands is 1.1 percent.
``(3) Commonwealths and territories.--A commonwealth or
territory described in this paragraph is any of the following if it
has a State child health plan approved under this title:
``(A) Puerto Rico.
``(B) Guam.
``(C) the Virgin Islands.
``(D) American Samoa.
``(E) the Northern Mariana Islands.
``(d) Certain Medicaid Expenditures Counted Against Individual
State Allotments.--The amount of the allotment otherwise provided to a
State under subsection (b) or (c) for a fiscal year shall be reduced by
the sum of--
``(1) the amount (if any) of the payments made to that State
under section 1903(a) for calendar quarters during such fiscal year
that is attributable to the provision of medical assistance to a
child during a presumptive eligibility period under section 1920A,
and
``(2) the amount of payments under such section during such
period that is attributable to the provision of medical assistance
to a child for which payment is made under section 1903(a)(1) on
the basis of an enhanced FMAP under section 1905(b).
``(e) 3-Year Availability of Amounts Allotted.--Amounts allotted to
a State pursuant to this section for a fiscal year shall remain
available for expenditure by the State through the end of the second
succeeding fiscal year; except that amounts reallotted to a State under
subsection (f) shall be available for expenditure by the State through
the end of the fiscal year in which they are reallotted.
``(f) Procedure for Redistribution of Unused Allotments.--The
Secretary shall determine an appropriate procedure for redistribution
of allotments from States that were provided allotments under this
section for a fiscal year but that do not expend all of the amount of
such allotments during the period in which such allotments are
available for expenditure under subsection (e), to States that have
fully expended the amount of their allotments under this section.
``SEC. 2105. PAYMENTS TO STATES.
``(a) In General.--Subject to the succeeding provisions of this
section, the Secretary shall pay to each State with a plan approved
under this title, from its allotment under section 2104 (taking into
account any adjustment under section 2104(d)), an amount for each
quarter equal to the enhanced FMAP of expenditures in the quarter--
``(1) for child health assistance under the plan for targeted
low-income children in the form of providing health benefits
coverage that meets the requirements of section 2103; and
``(2) only to the extent permitted consistent with subsection
(c)--
``(A) for payment for other child health assistance for
targeted low-income children;
``(B) for expenditures for health services initiatives
under the plan for improving the health of children (including
targeted low-income children and other low-income children);
``(C) for expenditures for outreach activities as provided
in section 2102(c)(1) under the plan; and
``(D) for other reasonable costs incurred by the State to
administer the plan.
``(b) Enhanced FMAP.--For purposes of subsection (a), the `enhanced
FMAP', for a State for a fiscal year, is equal to the Federal medical
assistance percentage (as defined in the first sentence of section
1905(b)) for the State increased by a number of percentage points equal
to 30 percent of the number of percentage points by which (1) such
Federal medical assistance percentage for the State, is less than (2)
100 percent; but in no case shall the enhanced FMAP for a State exceed
85 percent.
``(c) Limitation on Certain Payments for Certain Expenditures.--
``(1) General limitations.--Funds provided to a State under
this title shall only be used to carry out the purposes of this
title (as described in section 2101), and any health insurance
coverage provided with such funds may include coverage of abortion
only if necessary to save the life of the mother or if the
pregnancy is the result of an act of rape or incest.
``(2) Limitation on expenditures not used for medicaid or
health insurance assistance.--
``(A) In general.--Except as provided in this paragraph,
payment shall not be made under subsection (a) for expenditures
for items described in subsection (a) (other than paragraph
(1)) for a quarter in a fiscal year to the extent the total of
such expenditures exceeds 10 percent of the sum of--
``(i) the total Federal payments made under subsection
(a) for such quarter in the fiscal year, and
``(ii) the total Federal payments made under section
1903(a)(1) based on an enhanced FMAP described in section
1905(u)(2) for such quarter.
``(B) Waiver authorized for cost-effective alternative.--
The limitation under subparagraph (A) on expenditures for items
described in subsection (a)(2) shall not apply to the extent
that a State establishes to the satisfaction of the Secretary
that--
``(i) coverage provided to targeted low-income children
through such expenditures meets the requirements of section
2103;
``(ii) the cost of such coverage is not greater, on an
average per child basis, than the cost of coverage that
would otherwise be provided under section 2103; and
``(iii) such coverage is provided through the use of a
community-based health delivery system, such as through
contracts with health centers receiving funds under section
330 of the Public Health Service Act or with hospitals such
as those that receive disproportionate share payment
adjustments under section 1886(d)(5)(F) or 1923.
``(3) Waiver for purchase of family coverage.--Payment may be
made to a State under subsection (a)(1) for the purchase of family
coverage under a group health plan or health insurance coverage
that includes coverage of targeted low-income children only if the
State establishes to the satisfaction of the Secretary that--
``(A) purchase of such coverage is cost-effective relative
to the amounts that the State would have paid to obtain
comparable coverage only of the targeted low-income children
involved, and
``(B) such coverage shall not be provided if it would
otherwise substitute for health insurance coverage that would
be provided to such children but for the purchase of family
coverage.
``(4) Use of non-federal funds for state matching
requirement.--Amounts provided by the Federal Government, or
services assisted or subsidized to any significant extent by the
Federal Government, may not be included in determining the amount
of non-Federal contributions required under subsection (a).
``(5) Offset of receipts attributable to premiums and other
cost-sharing.--For purposes of subsection (a), the amount of the
expenditures under the plan shall be reduced by the amount of any
premiums and other cost-sharing received by the State.
``(6) Prevention of duplicative payments.--
``(A) Other health plans.--No payment shall be made to a
State under this section for expenditures for child health
assistance provided for a targeted low-income child under its
plan to the extent that a private insurer (as defined by the
Secretary by regulation and including a group health plan (as
defined in section 607(1) of the Employee Retirement Income
Security Act of 1974), a service benefit plan, and a health
maintenance organization) would have been obligated to provide
such assistance but for a provision of its insurance contract
which has the effect of limiting or excluding such obligation
because the individual is eligible for or is provided child
health assistance under the plan.
``(B) Other federal governmental programs.--Except as
otherwise provided by law, no payment shall be made to a State
under this section for expenditures for child health assistance
provided for a targeted low-income child under its plan to the
extent that payment has been made or can reasonably be expected
to be made promptly (as determined in accordance with
regulations) under any other federally operated or financed
health care insurance program, other than an insurance program
operated or financed by the Indian Health Service, as
identified by the Secretary. For purposes of this paragraph,
rules similar to the rules for overpayments under section
1903(d)(2) shall apply.
``(7) Limitation on payment for abortions.--
``(A) In general.--Payment shall not be made to a State
under this section for any amount expended under the State plan
to pay for any abortion or to assist in the purchase, in whole
or in part, of health benefit coverage that includes coverage
of abortion.
``(B) Exception.--Subparagraph (A) shall not apply to an
abortion only if necessary to save the life of the mother or if
the pregnancy is the result of an act of rape or incest.
``(C) Rule of construction.--Nothing in this section shall
be construed as affecting the expenditure by a State, locality,
or private person or entity of State, local, or private funds
(other than funds expended under the State plan) for any
abortion or for health benefits coverage that includes coverage
of abortion.
``(d) Maintenance of Effort.--
``(1) In medicaid eligibility standards.--No payment may be
made under subsection (a) with respect to child health assistance
provided under a State child health plan if the State adopts income
and resource standards and methodologies for purposes of
determining a child's eligibility for medical assistance under the
State plan under title XIX that are more restrictive than those
applied as of June 1, 1997.
``(2) In amounts of payment expended for certain state-funded
health insurance programs for children.--
``(A) In general.--The amount of the allotment for a State
in a fiscal year (beginning with fiscal year 1999) shall be
reduced by the amount by which--
``(i) the total of the State children's health
insurance expenditures in the preceding fiscal year, is
less than
``(ii) the total of such expenditures in fiscal year
1996.
``(B) State children's health insurance expenditures.--The
term `State children's health insurance expenditures' means the
following:
``(i) The State share of expenditures under this title.
``(ii) The State share of expenditures under title XIX
that are attributable to an enhanced FMAP under section
1905(u).
``(iii) State expenditures under health benefits
coverage under an existing comprehensive State-based
program, described section 2103(d).
``(e) Advance Payment; Retrospective Adjustment.--The Secretary may
make payments under this section for each quarter on the basis of
advance estimates of expenditures submitted by the State and such other
investigation as the Secretary may find necessary, and may reduce or
increase the payments as necessary to adjust for any overpayment or
underpayment for prior quarters.
``SEC. 2106. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT OF STATE
CHILD HEALTH PLANS.
``(a) Initial Plan.--
``(1) In general.--As a condition of receiving payment under
section 2105, a State shall submit to the Secretary a State child
health plan that meets the applicable requirements of this title.
``(2) Approval.--Except as the Secretary may provide under
subsection (e), a State plan submitted under paragraph (1)--
``(A) shall be approved for purposes of this title, and
``(B) shall be effective beginning with a calendar quarter
that is specified in the plan, but in no case earlier than
October 1, 1997.
``(b) Plan Amendments.--
``(1) In general.--A State may amend, in whole or in part, its
State child health plan at any time through transmittal of a plan
amendment.
``(2) Approval.--Except as the Secretary may provide under
subsection (e), an amendment to a State plan submitted under
paragraph (1)--
``(A) shall be approved for purposes of this title, and
``(B) shall be effective as provided in paragraph (3).
``(3) Effective dates for amendments.--
``(A) In general.--Subject to the succeeding provisions of
this paragraph, an amendment to a State plan shall take effect
on one or more effective dates specified in the amendment.
``(B) Amendments relating to eligibility or benefits.--
``(i) Notice requirement.--Any plan amendment that
eliminates or restricts eligibility or benefits under the
plan may not take effect unless the State certifies that it
has provided prior public notice of the change, in a form
and manner provided under applicable State law.
``(ii) Timely transmittal.--Any plan amendment that
eliminates or restricts eligibility or benefits under the
plan shall not be effective for longer than a 60-day period
unless the amendment has been transmitted to the Secretary
before the end of such period.
``(C) Other amendments.--Any plan amendment that is not
described in subparagraph (B) and that becomes effective in a
State fiscal year may not remain in effect after the end of
such fiscal year (or, if later, the end of the 90-day period on
which it becomes effective) unless the amendment has been
transmitted to the Secretary.
``(c) Disapproval of Plans and Plan Amendments.--
``(1) Prompt review of plan submittals.--The Secretary shall
promptly review State plans and plan amendments submitted under
this section to determine if they substantially comply with the
requirements of this title.
``(2) 90-day approval deadlines.--A State plan or plan
amendment is considered approved unless the Secretary notifies the
State in writing, within 90 days after receipt of the plan or
amendment, that the plan or amendment is disapproved (and the
reasons for disapproval) or that specified additional information
is needed.
``(3) Correction.--In the case of a disapproval of a plan or
plan amendment, the Secretary shall provide a State with a
reasonable opportunity for correction before taking financial
sanctions against the State on the basis of such disapproval.
``(d) Program Operation.--
``(1) In general.--The State shall conduct the program in
accordance with the plan (and any amendments) approved under
subsection (c) and with the requirements of this title.
``(2) Violations.--The Secretary shall establish a process for
enforcing requirements under this title. Such process shall provide
for the withholding of funds in the case of substantial
noncompliance with such requirements. In the case of an enforcement
action against a State under this paragraph, the Secretary shall
provide a State with a reasonable opportunity for correction before
taking financial sanctions against the State on the basis of such
an action.
``(e) Continued Approval.--An approved State child health plan
shall continue in effect unless and until the State amends the plan
under subsection (b) or the Secretary finds, under subsection (d),
substantial noncompliance of the plan with the requirements of this
title.
``SEC. 2107. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN
ADMINISTRATION.
``(a) Strategic Objectives and Performance Goals.--
``(1) Description.--A State child health plan shall include a
description of--
``(A) the strategic objectives,
``(B) the performance goals, and
``(C) the performance measures,
the State has established for providing child health assistance to
targeted low-income children under the plan and otherwise for
maximizing health benefits coverage for other low-income children
and children generally in the State.
``(2) Strategic objectives.--Such plan shall identify specific
strategic objectives relating to increasing the extent of
creditable health coverage among targeted low-income children and
other low-income children.
``(3) Performance goals.--Such plan shall specify one or more
performance goals for each such strategic objective so identified.
``(4) Performance measures.--Such plan shall describe how
performance under the plan will be--
``(A) measured through objective, independently verifiable
means, and
``(B) compared against performance goals, in order to
determine the State's performance under this title.
``(b) Records, Reports, Audits, and Evaluation.--
``(1) Data collection, records, and reports.--A State child
health plan shall include an assurance that the State will collect
the data, maintain the records, and furnish the reports to the
Secretary, at the times and in the standardized format the
Secretary may require in order to enable the Secretary to monitor
State program administration and compliance and to evaluate and
compare the effectiveness of State plans under this title.
``(2) State assessment and study.--A State child health plan
shall include a description of the State's plan for the annual
assessments and reports under section 2108(a) and the evaluation
required by section 2108(b).
``(3) Audits.--A State child health plan shall include an
assurance that the State will afford the Secretary access to any
records or information relating to the plan for the purposes of
review or audit.
``(c) Program Development Process.--A State child health plan shall
include a description of the process used to involve the public in the
design and implementation of the plan and the method for ensuring
ongoing public involvement.
``(d) Program Budget.--A State child health plan shall include a
description of the budget for the plan. The description shall be
updated periodically as necessary and shall include details on the
planned use of funds and the sources of the non-Federal share of plan
expenditures, including any requirements for cost-sharing by
beneficiaries.
``(e) Application of Certain General Provisions.--The following
sections of this Act shall apply to States under this title in the same
manner as they apply to a State under title XIX:
``(1) Title xix provisions.--
``(A) Section 1902(a)(4)(C) (relating to conflict of
interest standards).
``(B) Paragraphs (2), (16), and (17) of section 1903(i)
(relating to limitations on payment).
``(C) Section 1903(w) (relating to limitations on provider
taxes and donations).
``(2) Title xi provisions.--
``(A) Section 1115 (relating to waiver authority).
``(B) Section 1116 (relating to administrative and judicial
review), but only insofar as consistent with this title.
``(C) Section 1124 (relating to disclosure of ownership and
related information).
``(D) Section 1126 (relating to disclosure of information
about certain convicted individuals).
``(E) Section 1128A (relating to civil monetary penalties).
``(F) Section 1128B(d) (relating to criminal penalties for
certain additional charges).
``(G) Section 1132 (relating to periods within which claims
must be filed).
``SEC. 2108. ANNUAL REPORTS; EVALUATIONS.
``(a) Annual Report.--The State shall--
``(1) assess the operation of the State plan under this title
in each fiscal year, including the progress made in reducing the
number of uncovered low-income children; and
``(2) report to the Secretary, by January 1 following the end
of the fiscal year, on the result of the assessment.
``(b) State Evaluations.--
``(1) In general.--By March 31, 2000, each State that has a
State child health plan shall submit to the Secretary an evaluation
that includes each of the following:
``(A) An assessment of the effectiveness of the State plan
in increasing the number of children with creditable health
coverage.
``(B) A description and analysis of the effectiveness of
elements of the State plan, including--
``(i) the characteristics of the children and families
assisted under the State plan including age of the
children, family income, and the assisted child's access to
or coverage by other health insurance prior to the State
plan and after eligibility for the State plan ends,
``(ii) the quality of health coverage provided
including the types of benefits provided,
``(iii) the amount and level (including payment of part
or all of any premium) of assistance provided by the State,
``(iv) the service area of the State plan,
``(v) the time limits for coverage of a child under the
State plan,
``(vi) the State's choice of health benefits coverage
and other methods used for providing child health
assistance, and
``(vii) the sources of non-Federal funding used in the
State plan.
``(C) An assessment of the effectiveness of other public
and private programs in the State in increasing the
availability of affordable quality individual and family health
insurance for children.
``(D) A review and assessment of State activities to
coordinate the plan under this title with other public and
private programs providing health care and health care
financing, including medicaid and maternal and child health
services.
``(E) An analysis of changes and trends in the State that
affect the provision of accessible, affordable, quality health
insurance and health care to children.
``(F) A description of any plans the State has for
improving the availability of health insurance and health care
for children.
``(G) Recommendations for improving the program under this
title.
``(H) Any other matters the State and the Secretary
consider appropriate.
``(2) Report of the secretary.--The Secretary shall submit to
Congress and make available to the public by December 31, 2001, a
report based on the evaluations submitted by States under paragraph
(1), containing any conclusions and recommendations the Secretary
considers appropriate.
``SEC. 2109. MISCELLANEOUS PROVISIONS.
``(a) Relation to Other Laws.--
``(1) HIPAA.--Health benefits coverage provided under section
2101(a)(1) (and coverage provided under a waiver under section
2105(c)(2)(B)) shall be treated as creditable coverage for purposes
of part 7 of subtitle B of title II of the Employee Retirement
Income Security Act of 1974, title XXVII of the Public Health
Service Act, and subtitle K of the Internal Revenue Code of 1986.
``(2) ERISA.--Nothing in this title shall be construed as
affecting or modifying section 514 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1144) with respect to a
group health plan (as defined in section 2791(a)(1) of the Public
Health Service Act (42 U.S.C. 300gg-91(a)(1)).
``SEC. 2110. DEFINITIONS.
``(a) Child Health Assistance.--For purposes of this title, the
term `child health assistance' means payment for part or all of the
cost of health benefits coverage for targeted low-income children that
includes any of the following (and includes, in the case described in
section 2105(a)(2)(A), payment for part or all of the cost of providing
any of the following), as specified under the State plan:
``(1) Inpatient hospital services.
``(2) Outpatient hospital services.
``(3) Physician services.
``(4) Surgical services.
``(5) Clinic services (including health center services) and
other ambulatory health care services.
``(6) Prescription drugs and biologicals and the administration
of such drugs and biologicals, only if such drugs and biologicals
are not furnished for the purpose of causing, or assisting in
causing, the death, suicide, euthanasia, or mercy killing of a
person.
``(7) Over-the-counter medications.
``(8) Laboratory and radiological services.
``(9) Prenatal care and prepregnancy family planning services
and supplies.
``(10) Inpatient mental health services, other than services
described in paragraph (18) but including services furnished in a
State-operated mental hospital and including residential or other
24-hour therapeutically planned structured services.
``(11) Outpatient mental health services, other than services
described in paragraph (19) but including services furnished in a
State-operated mental hospital and including community-based
services.
``(12) Durable medical equipment and other medically-related or
remedial devices (such as prosthetic devices, implants, eyeglasses,
hearing aids, dental devices, and adaptive devices).
``(13) Disposable medical supplies.
``(14) Home and community-based health care services and
related supportive services (such as home health nursing services,
home health aide services, personal care, assistance with
activities of daily living, chore services, day care services,
respite care services, training for family members, and minor
modifications to the home).
``(15) Nursing care services (such as nurse practitioner
services, nurse midwife services, advanced practice nurse services,
private duty nursing care, pediatric nurse services, and
respiratory care services) in a home, school, or other setting.
``(16) Abortion only if necessary to save the life of the
mother or if the pregnancy is the result of an act of rape or
incest.
``(17) Dental services.
``(18) Inpatient substance abuse treatment services and
residential substance abuse treatment services.
``(19) Outpatient substance abuse treatment services.
``(20) Case management services.
``(21) Care coordination services.
``(22) Physical therapy, occupational therapy, and services for
individuals with speech, hearing, and language disorders.
``(23) Hospice care.
``(24) Any other medical, diagnostic, screening, preventive,
restorative, remedial, therapeutic, or rehabilitative services
(whether in a facility, home, school, or other setting) if
recognized by State law and only if the service is--
``(A) prescribed by or furnished by a physician or other
licensed or registered practitioner within the scope of
practice as defined by State law,
``(B) performed under the general supervision or at the
direction of a physician, or
``(C) furnished by a health care facility that is operated
by a State or local government or is licensed under State law
and operating within the scope of the license.
``(25) Premiums for private health care insurance coverage.
``(26) Medical transportation.
``(27) Enabling services (such as transportation, translation,
and outreach services) only if designed to increase the
accessibility of primary and preventive health care services for
eligible low-income individuals.
``(28) Any other health care services or items specified by the
Secretary and not excluded under this section.
``(b) Targeted Low-Income Child Defined.--For purposes of this
title--
``(1) In general.--Subject to paragraph (2), the term `targeted
low-income child' means a child--
``(A) who has been determined eligible by the State for
child health assistance under the State plan;
``(B)(i) who is a low-income child, or
``(ii) is a child whose family income (as determined under
the State child health plan) exceeds the medicaid applicable
income level (as defined in paragraph (4)), but does not exceed
50 percentage points above the medicaid applicable income
level; and
``(C) who is not found to be eligible for medical
assistance under title XIX or covered under a group health plan
or under health insurance coverage (as such terms are defined
in section 2791 of the Public Health Service Act).
``(2) Children excluded.--Such term does not include--
``(A) a child who is an inmate of a public institution or a
patient in an institution for mental diseases; or
``(B) a child who is a member of a family that is eligible
for health benefits coverage under a State health benefits plan
on the basis of a family member's employment with a public
agency in the State.
``(3) Special rule.--A child shall not be considered to be
described in paragraph (1)(C) notwithstanding that the child is
covered under a health insurance coverage program that has been in
operation since before July 1, 1997, and that is offered by a State
which receives no Federal funds for the program's operation.
``(4) Medicaid applicable income level.--The term `medicaid
applicable income level' means, with respect to a child, the
effective income level (expressed as a percent of the poverty line)
that has been specified under the State plan under title XIX
(including under a waiver authorized by the Secretary or under
section 1902(r)(2)), as of June 1, 1997, for the child to be
eligible for medical assistance under section 1902(l)(2) for the
age of such child.
``(c) Additional Definitions.--For purposes of this title:
``(1) Child.--The term `child' means an individual under 19
years of age.
``(2) Creditable health coverage.--The term `creditable health
coverage' has the meaning given the term `creditable coverage'
under section 2701(c) of the Public Health Service Act (42 U.S.C.
300gg(c)) and includes coverage that meets the requirements of
section 2103 provided to a targeted low-income child under this
title or under a waiver approved under section 2105(c)(2)(B)
(relating to a direct service waiver).
``(3) Group health plan; health insurance coverage; etc.--The
terms `group health plan', `group health insurance coverage', and
`health insurance coverage' have the meanings given such terms in
section 2191 of the Public Health Service Act.
``(4) Low-income.--The term `low-income child' means a child
whose family income is at or below 200 percent of the poverty line
for a family of the size involved.
``(5) Poverty line defined.--The term `poverty line' has the
meaning given such term in section 673(2) of the Community Services
Block Grant Act (42 U.S.C. 9902(2)), including any revision
required by such section.
``(6) Preexisting condition exclusion.--The term `preexisting
condition exclusion' has the meaning given such term in section
2701(b)(1)(A) of the Public Health Service Act (42 U.S.C.
300gg(b)(1)(A)).
``(7) State child health plan; plan.--Unless the context
otherwise requires, the terms `State child health plan' and `plan'
mean a State child health plan approved under section 2106.
``(8) Uncovered child.--The term `uncovered child' means a
child that does not have creditable health coverage.''.
(b) Conforming Amendments.--
(1) Definition of state.--Section 1101(a)(1) is amended--
(A) by striking ``and XIX'' and inserting ``XIX, and XXI'',
and
(B) by striking ``title XIX'' and inserting ``titles XIX
and XXI''.
(2) Treatment as state health care program.--Section 1128(h)
(42 U.S.C. 1320a-7(h)) is amended by--
(A) in paragraph (2), by striking ``or'' at the end;
(B) in paragraph (3), by striking the period and inserting
``, or''; and
(C) by adding at the end the following:
``(4) a State child health plan approved under title XXI.''.
CHAPTER 2--EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID
SEC. 4911. OPTIONAL USE OF STATE CHILD HEALTH ASSISTANCE FUNDS FOR
ENHANCED MEDICAID MATCH FOR EXPANDED MEDICAID
ELIGIBILITY.
(a) Increased FMAP for Medical Assistance for Expanded Coverage of
Targeted Low-Income Children.--Section 1905 of the Social Security Act
(42 U.S.C. 1396d), as amended by section 4702(a)(2), is amended--
(1) in subsection (b), by adding at the end the following new
sentence: ``Notwithstanding the first sentence of this subsection,
in the case of a State plan that meets the condition described in
subsection (u)(1), with respect to expenditures described in
subsection (u)(2)(A) or subsection (u)(3) the Federal medical
assistance percentage is equal to the enhanced FMAP described in
section 2105(b).''; and
(2) by adding at the end the following new subsection:
``(u)(1) The conditions described in this paragraph for a State
plan are as follows:
``(A) The State is complying with the requirement of section
2105(d)(1).
``(B) The plan provides for such reporting of information about
expenditures and payments attributable to the operation of this
subsection as the Secretary deems necessary in order to carry out
paragraph (2) and section 2104(d).
``(2)(A) For purposes of subsection (b), the expenditures described
in this subparagraph are expenditures for medical assistance for
optional targeted low-income children described in subparagraph (C),
but not in excess, for a State for a fiscal year, of the amount
described in subparagraph (B) for the State and fiscal year.
``(B) The amount described in this subparagraph, for a State for a
fiscal year, is the amount of the State's allotment under section 2104
(not taking into account reductions under section 2104(d)(2)) for the
fiscal year reduced by the amount of any payments made under section
2105 to the State from such allotment for such fiscal year.
``(C) For purposes of this paragraph, the term `optional targeted
low-income child' means a targeted low-income child as defined in
section 2110(b)(1) who would not qualify for medical assistance under
the State plan under this title based on such plan as in effect on
April 15, 1997 (but taking into account the expansion of age of
eligibility effected through the operation of section 1902(l)(2)(D)).
``(3) For purposes of subsection (b), the expenditures described in
this subparagraph are expenditures for medical assistance for children
who are born before October 1, 1983, and who would be described in
section 1902(l)(1)(D) if they had been born on or after such date, and
who are not eligible for such assistance under the State plan under
this title based on such State plan as in effect as of April 15,
1997.''.
(b) Establishment of Optional Eligibility Category.--Section
1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended by
section 4733, is amended--
(1) in subclause (XII), by striking ``or'' at the end;
(2) in subclause (XIII), by adding ``or'' at the end; and
(3) by adding at the end the following:
``(XIV) who are optional targeted low-income
children described in section 1905(u)(2)(C);''.
(c) Effective Date.--The amendments made by this section shall
apply to medical assistance for items and services furnished on or
after October 1, 1997.
SEC. 4912. MEDICAID PRESUMPTIVE ELIGIBILITY FOR LOW-INCOME CHILDREN.
(a) In General.--Title XIX of the Social Security Act is amended by
inserting after section 1920 the following new section:
``presumptive eligibility for children
``Sec. 1920A. (a) A State plan approved under section 1902 may
provide for making medical assistance with respect to health care items
and services covered under the State plan available to a child during a
presumptive eligibility period.
``(b) For purposes of this section:
``(1) The term `child' means an individual under 19 years of
age.
``(2) The term `presumptive eligibility period' means, with
respect to a child, the period that--
``(A) begins with the date on which a qualified entity
determines, on the basis of preliminary information, that the
family income of the child does not exceed the applicable
income level of eligibility under the State plan, and
``(B) ends with (and includes) the earlier of--
``(i) the day on which a determination is made with
respect to the eligibility of the child for medical
assistance under the State plan, or
``(ii) in the case of a child on whose behalf an
application is not filed by the last day of the month
following the month during which the entity makes the
determination referred to in subparagraph (A), such last
day.
``(3)(A) Subject to subparagraph (B), the term `qualified
entity' means any entity that--
``(i)(I) is eligible for payments under a State plan
approved under this title and provides items and services
described in subsection (a) or (II) is authorized to determine
eligibility of a child to participate in a Head Start program
under the Head Start Act (42 U.S.C. 9821 et seq.), eligibility
of a child to receive child care services for which financial
assistance is provided under the Child Care and Development
Block Grant Act of 1990 (42 U.S.C. 9858 et seq.), eligibility
of an infant or child to receive assistance under the special
supplemental nutrition program for women, infants, and children
(WIC) under section 17 of the Child Nutrition Act of 1966 (42
U.S.C. 1786); and
``(ii) is determined by the State agency to be capable of
making determinations of the type described in paragraph
(1)(A).
``(B) The Secretary may issue regulations further limiting
those entities that may become qualified entities in order to
prevent fraud and abuse and for other reasons.
``(C) Nothing in this section shall be construed as preventing
a State from limiting the classes of entities that may become
qualified entities, consistent with any limitations imposed under
subparagraph (B).
``(c)(1) The State agency shall provide qualified entities with--
``(A) such forms as are necessary for an application to be made
on behalf of a child for medical assistance under the State plan,
and
``(B) information on how to assist parents, guardians, and
other persons in completing and filing such forms.
``(2) A qualified entity that determines under subsection (b)(1)(A)
that a child is presumptively eligible for medical assistance under a
State plan shall--
``(A) notify the State agency of the determination within 5
working days after the date on which determination is made, and
``(B) inform the parent or custodian of the child at the time
the determination is made that an application for medical
assistance under the State plan is required to be made by not later
than the last day of the month following the month during which the
determination is made.
``(3) In the case of a child who is determined by a qualified
entity to be presumptively eligible for medical assistance under a
State plan, the parent, guardian, or other person shall make
application on behalf of the child for medical assistance under such
plan by not later than the last day of the month following the month
during which the determination is made, which application may be the
application used for the receipt of medical assistance by individuals
described in section 1902(l)(1).
``(d) Notwithstanding any other provision of this title, medical
assistance for items and services described in subsection (a) that--
``(1) are furnished to a child--
``(A) during a presumptive eligibility period,
``(B) by a entity that is eligible for payments under the
State plan; and
``(2) are included in the care and services covered by a State
plan;
shall be treated as medical assistance provided by such plan for
purposes of section 1903.''.
(b) Conforming Amendments.--
(1) Section 1902(a)(47) (42 U.S.C. 1396a(a)(47)) is amended by
inserting before the semicolon at the end the following: ``and
provide for making medical assistance for items and services
described in subsection (a) of section 1920A available to children
during a presumptive eligibility period in accordance with such
section''.
(2) Section 1903(u)(1)(D)(v) (42 U.S.C. 1396b(u)(1)(D)(v)) is
amended by inserting before the period at the end the following:
``or for items and services described in subsection (a) of section
1920A provided to a child during a presumptive eligibility period
under such section''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 4913. CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED CHILDREN
WHO LOSE SSI BENEFITS.
(a) In General.--Section 1902(a)(10)(A)(i)(II) (42 U.S.C.
1396a(a)(10)(A)(i)(II)) is amended by inserting ``(or were being paid
as of the date of the enactment of section 211(a) of the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L.
104-193)) and would continue to be paid but for the enactment of that
section'' after ``title XVI''.
(b) Effective Date.--The amendment made by subsection (a) applies
to medical assistance furnished on or after July 1, 1997.
CHAPTER 3--DIABETES GRANT PROGRAMS
SEC. 4921. SPECIAL DIABETES PROGRAMS FOR CHILDREN WITH TYPE