[House Report 107-550]
[From the U.S. Government Publishing Office]
107th Congress Rept. 107-550
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002 (TITLE II &
IV: MEDICARE+CHOICE REVITALIZATION AND COMPETITION PROGRAM; PROVISIONS
RELATING TO PART A)
_______
June 26, 2002.--Ordered to be printed
_______
Mr. Tauzin, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 4985]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 4985) to amend title XVIII of the Social
Security Act to revitalize the Medicare+Choice program,
establish a Medicare+Choice competition program, and to improve
payments to hospitals and other providers under part A of the
medicare program, having considered the same report favorably
thereon without amendment and recommend that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 8
Statement of General Performance Goals and Objectives............ 8
New Budget Authority, Entitlement Authority, and Tax Expenditures 8
Committee Cost Estimate.......................................... 8
Congressional Budget Office Estimate............................. 8
Federal Mandates Statement....................................... 8
Advisory Committee Statement..................................... 8
Constitutional Authority Statement............................... 8
Applicability to Legislative Branch.............................. 9
Section-by-Section Analysis of the Legislation................... 9
Changes in Existing Law Made by the Bill, as Reported............ 16
Dissenting Views................................................. 44
Purpose and Summary
The purpose of H.R. 4985 is to stabilize and revitalize the
Medicare+Choice program. The bill also begins the first stage
of modernizing the Medicare program by instituting a bidding
system for health plans that participate in Medicare. It also
creates demonstration programs that place private plans on a
level playing field with the traditional Medicare fee-for-
service program. H.R. 4985 also makes needed updates to
Medicare inpatient hospital reimbursements.
Background and Need for Legislation
In 1997, Congress passed the Balanced Budget Act (BBA) of
1997, which included the creation of the Medicare+Choice
program. This legislation redesigned the system for setting
Medicare payment rates for managed health care plans that
contract with Medicare. The goals in creating Medicare+Choice
were to expand health plans to marketswhere access to managed
care plans was limited or nonexistent, and to offer new types of health
plans in all areas.
Medicare+Choice is an important program for many seniors in
the Medicare program. Currently, about 5.8 million, or about
15.6 percent of beneficiaries, are enrolled in a
Medicare+Choice plan. This amount is less than were enrolled
last year when about 17% of Medicare beneficiaries were
enrolled in Medicare+Choice. The precipitous decline in
Medicare+Choice enrollment is largely due to the significant
number of health plans, about 316, that have left the program
or significantly reduced benefits in the last three years.
Medicare+Choice plans have left the program for a variety
of reasons. One of the reasons plans have left is related to
inadequate payment from Medicare, in combination with rising
provider cost increases and difficulties in maintaining
adequate provider networks. In 2001, the vast majority of plans
received their reimbursement through the minimum update payment
methodology. Unfortunately, these minimum increases in
reimbursement lag considerably behind the medical inflation
rate, and more importantly, the payment increases received by
fee-for service providers in the same counties. Another
complicating factor in keeping Medicare+Choice plans in the
program has been the complicated and burdensome regulatory
environment. Therefore, it is critical to infuse the program
with additional resources to ensure that beneficiaries will
continue to have a choice in their health plans.
Today, Medicare covers just over half of the average
senior's annual medical expenses and the benefits package is
lacking. For instance, the benefit is administered in two
separate parts (Parts A and B), has split deductibles based on
the location of service and lacks many important health
benefits. It takes months and sometimes years for the program
to cover new medical treatments, and often covering new
treatments requires an act of Congress.
In order to sustain Medicare and modernize the program a
new structure for the program is needed. The Committee has held
several hearings on methods to modernize the program. In
particular, some people have expressed interest in moving to a
system that would be similar to the Federal Employees Health
Benefits Plan (FEHBP). Under this structure beneficiaries would
pick from a number of competing plans that offer comprehensive
benefits. Health plans would be paid based on bids in
comparison to the fee-for-service benchmark payment amounts.
Hearings
The Committee on Energy and Commerce has not held hearings
on this legislation.
Committee Consideration
On Friday, June 21, 2002, the Full Committee met in open
markup session and favorably ordered reported a Committee Print
on Medicare+Choice Revitalization and Medicare+Choice
Competition Program, by a roll call vote of 26 yeas and 15
nays, without amendment, a quorum being present. Chairman
Tauzin then introduced H.R. 4985 to reflect the Committee's
action.
Committee Votes
Clause 3(b) of Rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
following are the recorded votes taken on the motion by Mr.
Tauzin to order H.R. 4985 reported to the House, and on the
amendments offered to the measure, including the names of those
members voting for and against.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of Rule XIII of the Rules of the
House of Representatives, the Committee has not held oversight
or legislative hearings on this legislation.
Statement of General Performance Goals and Objectives
H.R. 4985 will revitalize the Medicare+Choice program by
making a new payment option available to Medicare+Choice plans.
The legislation also makes permanent changes to underlying
burdensomeMedicare regulations. The legislation further
institutes a competitive bidding structure for plans beginning in 2005,
and creates a small demonstration program for areas with significant
Medicare+Choice penetration. Finally, H.R. 4985 updates payments for
inpatient hospital services to ensure adequate reimbursement levels for
these services.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of Rule XIII of the Rules
of the House of Representatives, the Committee finds that H.R.
4985, to amend title XVIII of the Social Security Act to
revitalize the Medicare+Choice Program, establish a
Medicare+Choice competition program, and to improve payments to
hospitals and other providers under part A of the Medicare
Program, would result in no new or increased budget authority,
entitlement authority, or tax expenditures or revenues.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974, which is
included in the report to accompany H.R. 4984.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of Rule XIII of the Rules of the
House of Representatives, the cost estimate provided by the
Congressional Budget Office pursuant to section 402 of the
Congressional Budget Act of 1974 is included in the report to
accompany H.R. 4984.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act. The estimate is included in the report to accompany H.R.
4984.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8, clause 3, which grants Congress the power
to regulate commerce with foreign nations, among the several
States, and with the Indian tribes.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE COMPETITION
PROGRAM
Subtitle A--Medicare+Choice Revitalization
Section 201. Medicare+Choice Improvements
This section adds the option for Medicare+Choice plans to
be paid at 100% fee-for-service rates for 2003 and 2004,
excluding direct graduate medical education costs. Payments for
2003 and 2004 also factor in indirect medical education costs
and costs associated with delivering benefits to covered
individuals that use Veterans Affairs or the Department of
Defense medical services. This section allows for the blend
payment rate to be calculated from the number of beneficiaries
that are enrolled in a M+C plan in a particular area, for 2003
and 2004. It also eliminates the application of budget
neutrality for M+C payments for2003 and 2004. This section also
increases the minimum update payment amount from 2% to 3% for 2003 and
2004. It adjusts the area-specific M+C rate for DOD and VA military
facility services to Medicare-eligible beneficiaries.
This section also requires MedPAC to conduct a study on the
variation in costs that occur in different areas due to the
particulars of the AAPCC payment formula and also to assess the
risk adjustment mechanisms used in calculating AAPCC payment
amounts.
This section is effective upon enactment.
Section 202. Making Permanent Change in Medicare+Choice Reporting
Deadlines and Annual, Coordinated Election Period
Section 202 permanently extends some of the deadline
changes that were temporarily changed by P.L. 107-188. CMS
would make its annual announcement of payment rates no later
than the 2nd Monday in May of each year. The deadline for plans
to submit their information would be no later than the 2nd
Monday in September. The annual coordinated election period
would take place from November 15 through December 31 of each
year.
This section is effective upon enactment.
Section 203. Avoiding Duplicative State Regulation
Section 203 ensures that M+C plans will not be subject to
duplicate State laws. Federal standards will supersede any
State law or regulation (other than State licensing laws or
State laws relating to plan solvency).
This section is effective upon enactment.
Section 204. Specialized Medicare+Choice Plans for Special Needs
Beneficiaries
Section 204 establishes a new M+C option--specialized M+C
plans for special needs beneficiaries (such as the EverCare
demonstration). Special needs beneficiaries are defined as
those M+C eligible individuals who are institutionalized,
entitled to Medicaid, or meet requirements determined by the
Secretary. Enrollment in specialized M+C plans could be limited
to special needs beneficiaries until January 1, 2007. The
Medicare Benefits Administrator would be required to report to
Congress by December 31, 2005 providing an assessment of the
impact of these plans. The Secretary would be required to issue
final regulations establishing requirements for special needs
beneficiaries within 6 months after enactment of this
legislation.
This section is effective upon enactment.
Section 205. Medicare MSAs
Section 205 exempts MSA plans from reporting encounter data
to the Trustees. It also permanently extends Medicare MSAs and
removes the enrollment cap. This provision ensures that MSA
plans operate with the same balance billing requirement
limitations as apply to M+C plans.
This section is effective upon enactment.
Section 206. Extension of Reasonable Cost and SHMO Contracts
Section 206 allows a reasonable cost contract to be
extended or renewed beyond December 31, 2004 if there were no
coordinated care M+C plans in its service area. A cost contract
could re-enter a previously served area if all other
coordinated care M+C plans in the area terminated their
contracts. The Medicare Benefits Administrator will submit a
report to Congress no later than February 1, 2004 on an
appropriate transition for cost contract plans.
Section 206 also extends the waivers permitting operation
of SHMOs through December 31, 2004. Nothing would prevent a
SHMO from offering an M+C plan.
This section is effective upon enactment.
Subtitle B--Medicare+Choice Competition Program
Section 211. Medicare+Choice Competition Program
Beginning in 2005, a new M+C payment system would be
established based on competitive bidding amounts for the
provision of all items and services. The provision would
establish a benchmark amount for each payment area and a
procedure for plans to develop a bidamount. Additionally,
enrollees would be eligible for rebates, under certain circumstances.
The bid amount would indicate the proportion of the bid
attributable to the provision of: (1) statutory non-drug
benefits; (2) statutory prescription drug benefits; and (3)
non-statutory benefits. Plans would be required to submit this
information and the actuarial basis for determining these
amounts, as well as other information as the Administrator may
require to verify the actuarial basis. The bid amount could not
vary by enrollees within a plan.
The Administrator would have authority to negotiate monthly
bid amounts (including portions of the bid), and may reject a
bid amount, or a portion of it, that is not supported by the
actuarial bases provided by the plan.
The fee-for-service area-specific non-drug benchmark
(benchmark) amount would be set at the largest of 1 of 3
amounts; (1) the minimum update; (2) the minimum percentage
increase; or (3) a percentage of FFS costs (100% of FFS in
2005-2007 and 95% FFS thereafter). The percentage of FFS costs
would be set at the AAPCC for that year, for a payment area
(including costs for only the fee-for-service beneficiaries and
not the costs for those enrolled in an M+C plan) adjusted for
the exclusion of both direct and indirect medical education
costs as well as inclusion of the costs for VA and DOD. While
the FFS payment mechanism established in Section 201 would
exclude only the direct costs of graduate medical education,
the FFS payment in this section would exclude both direct and
indirect graduate medical education costs.
Both the benchmark and the bids would be risk adjusted
based on statewide assumptions or based on a determination by
the Administrator.
If the risk adjusted benchmark exceeded the risk adjusted
bid (for statutory non-drug benefits), beneficiaries would
qualify for rebates of 75% of the difference in the form of:
(1) a credit towards their M+C monthly supplementary
beneficiary premium, or the premium imposed for prescription
drug coverage; (2) a direct monthly payment; (3) other means
approved by the Secretary; or (4) some combination. The
government would retain the remaining 25% of the difference. If
instead the monthly bid exceeded the benchmark, then enrollees
would pay a M+C monthly basic beneficiary premium, which
covered the amount by which the monthly bid exceeds the
benchmark.
Plans would be paid based on their bid amounts. For plans
with bids below the benchmark, their payment would be the bid
amount, risk adjusted for demographic and health status
factors, plus the rebate amount. The rebate amount would be
distributed to the plan's enrollees by one of the approved
methods, as discussed above. For plans with bids at or above
the benchmark, their payments would equal the benchmark amount,
risk adjusted for demographic and health status factors.
This section applies to payments and premiums beginning on
or after January 2005.
Section 212. Demonstration Program for Competitive Areas
Section 212 establishes a demonstration program for
``competitive-demonstration areas,'' defined as an area with a
substantial number of M+C enrollees that during open season
offers at least 2 M+C plans by different organizations, and
that during March of the previous year had at least 50% of M+C
eligibles enrolled in an M+C plan. The demonstration program
would be limited to a maximum of 4 sites and no area could be
designated as a competitive-demonstration area for more than 2
years.
For each competitive-demonstration area, the Administrator
shall annually determine the choice non-drug benchmark amount
defined as the sum of the weighted FFS and M+C components. The
weighted FFS component would be calculated by multiplying the
national fee-for-service market share for the year (defined as
the nationwide proportion of M+C eligibles during March of the
previous year who were not enrolled in an M+C plan) by the FFS
area-specific non-drug benchmark amount (calculated in the same
manner as the benchmark under Section 211). The M+C component
would be calculated by multiplying 1 minus the FFS market share
for the year by the weighted average of plan bids for the area
and year. The weighted average of plan bids would equal the sum
of the proportion of each plan's enrollees in the area times
the unadjusted monthly non-drug bid amount, as calculated for
each plan.
Similar to the Medicare competition program (defined in
Section 211), if the choice risk adjusted benchmark exceeded
the risk adjusted bid (for statutory non-drug benefits), then
beneficiaries would qualify for rebates for 75% of the
difference in the form of: (1) a credit towards their M+C
monthly supplementary beneficiary premium, or the
premiumimposed for prescription drug coverage; (2) a direct monthly
payment; (3) other means approved by the Secretary; or (4) some
combination. If instead the monthly bid exceeded the benchmark, then
enrollees would pay a M+C monthly basic beneficiary premium, which
covered the amount by which the monthly bid exceeded the benchmark.
Similar to the Medicare competition program (defined in
section 211), plans would be paid based on their bid amounts.
For plans with bids below the choice benchmark, their payment
would be the bid amount, risk adjusted for demographic and
health status factors, plus the rebate amount for
beneficiaries. For plans with bids at or above the choice
benchmark, their payments would equal the benchmark amount,
risk adjusted for demographic and health status factors.
All enrollees in competitive areas, including both FFS
enrollees and M+C enrollees, could have an adjustment made to
their Medicare Part B premium. If the FFS area specific non-
drug benchmark was less than or equal to the choice non-drug
benchmark, the Medicare Part B premium would be reduced by 75%
of the difference. However, if the FFS area specific non-drug
benchmark was greater than the choice non-drug benchmark, then
the Medicare Part B premium would be increased by the full
amount of the difference. Thus reductions or increases in
premiums amounts would be paid by all beneficiaries in the
area, regardless of whether or not they were enrolled in a M+C
plan.
No later than 6 months after the designation of the 4th
competitive-demonstration area, the Medicare Benefits
Administrator would be required to submit a report to Congress
on the impact of this demonstration program on Medicare
beneficiaries, savings to the Medicare program, and adverse
selection issues.
This section applies to payments and premiums beginning on
or after January 1, 2005.
Section 213. Conforming Amendments
This section makes several conforming amendments to M+C
laws and delineates the specific information that must be
announced on an annual basis. It also allows prospective
implementation of national coverage determinations that will
result in a significant change in the costs to a M+C plan and
permits geographic adjustment to allow the Administrator to
consolidate multiple M+C payment areas into a single statewide
M+C payment area.
This section is effective upon enactment.
TITLE IV--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
Section 401. Revision of Acute Care Hospital Payment Updates
For FY 2003, hospitals in rural, small urban, and large
urban areas (a metropolitan statistical area with a population
of a million or more) would receive an update of MBI minus 0.25
percentage points. Sole community hospitals would receive an
update of the full MBI.
This section is effective upon enactment.
Section 402. 2-Year Increase in Level of Adjustment for Indirect Costs
of Medical Education (IME)
Section 402 sets the IME adjustment to 6.0% in FY 2003,
5.9% in FY 2004, and current law thereafter (5.5%).
This section is effective upon enactment.
Section 403. Recognition of New Medical Technologies Under Inpatient
Hospital PPS
The Secretary is required to add new diagnosis codes in
April 1 of each year that would not affect Medicare's payment
or DRG classification until the following fiscal year. The
Secretary will not be able to deny a service or technology
treatment as a new technology if the service (or technology)
has been in use for a period of time shorter than the 2- to 3-
year period after the implementation of a billing code that
permits identification of a sample of specific discharges where
the service had been used. When establishing whether DRG
payments are inadequate, the Secretary would be required to
apply a threshold that is 50% of the national standardized
amount for all hospitals or one standard deviation for the DRG
involved. The Secretary is required to provide additional
clarification in regulation on the criteria used to determine
whether a new service represents a substantial improvement on
existingtreatment and is required to deem that a technology
provides substantial improvement on an existing treatment if the
technology meets certain requirements. The Secretary is also required
to obtain public input regarding whether a new service or technology
represents an advance in medical technology that substantially improves
the diagnosis or treatment of beneficiaries. Further, before
establishing an add-on payment for new technology, the Secretary is
directed to demonstrate a preference for assigning an eligible
technology into a DRG, taking into account similar clinical or
anatomical characteristics and the relative cost of the technology. The
Secretary would assign an eligible technology into a DRG where the
average cost of care most closely approximates the cost of the new
technology. Add-on payments for new technology must be calculated based
on the marginal rate associated with outlier cases.
This section is effective October 1, 2003. The Secretary is
also directed to automatically reconsider a new technology
application that was denied in FY 2003 as a FY 2004 application
under these new provisions. If the application is granted, the
maximum time period permitted for the new technology
classification will be extended by 12 months.
Section 404. Phase-In of Federal Rate for Hospitals in Puerto Rico
Hospitals in Puerto Rico will receive Medicare payments
based on a 50/50 split between federal and local amounts before
October 1, 2003. From FY 2004 through FY 2007, an increasing
amount of the payment rate would be based on the federal rate-
55% federal and 45% local in FY 2004, 60% federal and 40% local
in FY 2005, 65% federal and 35% local in FY 2006, 70% federal
and 30% local in FY 2007, and 75% federal and 25% local for FY
2007 and subsequent fiscal years.
This section is effective upon enactment.
Section 405. Reference to Provision Relating to Enhanced
Disproportionate Share Hospital (DSH) Payments for Rural
Hospitals and Urban Hospitals with Fewer than 100 Beds
Section 405 increases the adjustment for rural hospitals
and small urban hospitals that serve a disproportionate share
of low-income Medicare and Medicaid patients. (see section
302).
This section is effective upon enactment.
Section 406. Reference to Provision Relating to 2-Year Phased-In
Increase in the Standardized Amount in Rural and Small Urban
Areas to Achieve a Single, Uniform Standardized Amount
The provision increases the standardized amount for other
areas to the standardized amount paid to hospitals in large
urban areas over a 2-year period. (see section 303).
This section is effective upon enactment.
Section 407. Reference to Provision for More Frequent Updates in the
Weights Used in Hospital Market Basket
The provision requires more frequent updates in the
hospital market basket. (see section 304).
This section is effective upon enactment.
Section 408. Reference to Provision Making Improvements to Critical
Access Hospital Program
Starting with payments made on or after January 1, 2003,
eligible critical access hospitals (CAHs) will be able to
receive payments made on a PIP basis for inpatient services.
This section precludes the Secretary from requiring that all
physicians providing services in a CAH assign their billing
right to the CAH in order for it to be able to be paid at 115%
of the fee schedule for the professional services provided by
the physicians. A CAH cannot receive payment based on 115% of
the fee schedule for any individual physician who did not
assign billing rights to the CAH. The Secretary is required to
specify standards for determining whether a CAH has seasonal
variations in patient admissions that would justify a 5-bed
increase in the number of beds it can maintain (and still
retain its classification as a CAH). This provision extends the
grant program that permits annual appropriations from
Medicare's Federal Hospital Insurance Trust Fund of $25 million
through FY 2007.
PIP payments are effective starting with payments made on
or after January 1, 2003. The condition for application of the
special physician payment provision is effective as if included
in BBRA. The CAH bed limit applies to designations made on or
after January 1, 2003.
Subtitle B--Skilled Nursing Facility Services
Section 411. Payment for Covered Skilled Nursing Facility Services
The nursing component of the case-mix adjusted Federal
payment rate will be increased 8% over the rates for SNF care
specified in the PPS final rule. This increase applies to SNF
services furnished on or after October 1, 2002 through
September 30, 2005. Starting October 1, 2003, the per diem
payment amount for a SNF resident with AIDS will be increased
by 128%. The 128% increase will not apply on or after such date
as the Secretary certifies that there is an appropriate change
to the SNF case mix adjustment to cover the increased costs
associated with caring for residents with AIDS.
This section applies to services furnished on or after
October 1, 2003.
Subtitle C--Hospice
Section 421. Coverage of Hospice Consultation Services
Beginning January 1, 2004, consultation services for
individuals who are terminally ill, including (1) an evaluation
of the individual's need for pain and symptom management, (2)
counseling the individual with respect to end-of-life issues
and care options, and (3) advising the individual regarding
advanced care planning, will be covered by the Medicare program
when provided by a physician who is the medical director or an
employee of a hospice program. Persons entitled to these
services are individuals who had not elected the hospice
benefit or had not previously received consultation services.
The hospice program will be paid an amount equivalent to the
amount established for an office or other outpatient visit for
evaluation and management associated with presenting problems
of moderate severity under the physician fee schedule
(excluding practice expense).
This section applies to consultation services provided by a
hospice program on or after January 1, 2004.
Section 422. 10 Percent Increase in Payment for Hospice Care Furnished
in a Frontier Area
The Medicare daily payment rate for hospice care furnished
in a frontier area, i.e., a county in which the population
density is less than 7 persons per square mile, is increased by
10% for 5 years (January 1, 2003 through December 31, 2007).
Not later than January 1, 2007, the Comptroller General will
report to Congress on the costs of furnishing hospice care in
frontier areas and recommend whether it is appropriate to
extend, or modify, the 10% payment rate increase.
This section is effective upon enactment.
Section 423. Rural Hospice Demonstration Project
Section 423 requires the Secretary to conduct a
demonstration project for the delivery of hospice care for
beneficiaries in rural areas. Under the project, beneficiaries
who are unable to receive hospice care at home because they
lack an appropriate caregiver will be provided such care in a
facility of 20 or fewer beds, which offers within its walls the
full range of covered hospice benefits. The project is limited
to three hospice programs over a period of 3 years for each.
The hospice programs participating in the project will comply
with requirements otherwise applicable to hospice care, except
that they will not be required to offer services outside the
home nor be subject to the limitation on inpatient days.
Payments will be at the same rates. The Secretary may require
the participating programs to comply with additional quality
assurance standards for provisions of services in their
facilities. The Secretary is required to submit a report to
Congress, including recommendations regarding extension of such
project to all programs serving rural areas upon completion of
the project.
This section is effective upon enactment.
Subtitle D--Other Provisions
Section 431. Demonstration Project for Use of Recovery Audit
Contractors
Section 431 requires the Secretary to conduct a
demonstration project in at least 2 states with at least 3
contractors for at least 3 years to demonstrate the use of
recovery audit contractors under the Medicare Integrity Program
in identifying and recouping overpayments for services under
Part A of the Medicare program. Such contractors can receive
payment on a contingent basis. Further, the Secretary can
retain a percentage of the amount recovered by the recovery
audit contractors for the CMS program management account. The
Secretary is also required to examine the efficacy of using
recovery audit contractors for medical necessity
determinations, accuracy of coding, and other payment policies
in which overpayments arise. The Secretary can waive Medicare
statutory provisions to pay for the contractors' services. The
Secretary is required only to enter into a recovery audit
contract with an entity that has knowledge of the payment rules
and regulations under Medicare or will contract with another
entity that has such knowledge. Existing claims processing
contractors (fiscal intermediaries and carriers) and any other
entity that carries out similar activities with respect to
providers of Part A services that would constitute a conflict
of interest are ineligible. Those who have demonstrated
proficiency in carrying out recovery audits with private
insurers or under the Medicaid program are given preference.
The Secretary must submit a report to Congress within 6 months
of completion of the project on the impact of the project on
savings to the Medicare program and recommendations on the
cost-effectiveness of extending or expanding the project.
This section is effective upon enactment.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SOCIAL SECURITY ACT
* * * * * * *
TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED
* * * * * * *
Part A--Hospital Insurance Benefits for the Aged and Disabled
SCOPE OF BENEFITS
Sec. 1812. (a) The benefits provided to an individual by the
insurance program under this part shall consist of entitlement
to have payment made on his behalf or, in the case of payments
referred to in section 1814(d)(2) to him (subject to the
provisions of this part) for--
(1) * * *
* * * * * * *
(3) for individuals not enrolled in part B, home
health services, and for individuals so enrolled, post-
institutional home health services furnished during a
home health spell of illness for up to 100 visits
during such spell of illness; [and]
(4) in lieu of certain other benefits, hospice care
with respect to the individual during up to two periods
of 90 days each and an unlimited number of subsequent
periods of 60 days each with respect to which the
individual makes an election under subsection
(d)(1)[.]; and
(5) for individuals who are terminally ill, have not
made an election under subsection (d)(1), and have not
have previously received services under this paragraph,
services that are furnished by a physician who is the
medical director or an employee of a hospice program
and that consist of--
(A) an evaluation of the individual's need
for pain and symptom management;
(B) counseling the individual with respect to
end-of-life issues and care options; and
(C) advising the individual regarding
advanced care planning.
* * * * * * *
CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES
Requirement of Requests and Certifications
Sec. 1814. (a) * * *
* * * * * * *
Payment for Hospice Care
(i)(1)(A) * * *
* * * * * * *
(D) With respect to hospice care furnished in a frontier area
on or after January 1, 2003, and before January 1, 2008, the
payment rates otherwise established for such care shall be
increased by 10 percent. For purposes of this subparagraph, the
term ``frontier area'' means a county in which the population
density is less than 7 persons per square mile.
* * * * * * *
(4) The amount paid to a hospice program with respect to the
services under section 1812(a)(5) for which payment may be made
under this part shall be equal to an amount equivalent to the
amount established for an office or other outpatient visit for
evaluation and management associated with presenting problems
of moderate severity under the fee schedule established under
section 1848(b), other than the portion of such amount
attributable to the practice expense component.
* * * * * * *
AMOUNTS OF PREMIUMS
Sec. 1839. (a)(1) * * *
(2) The monthly premium of each individual enrolled under
this part for each month after December 1983 shall be the
amount determined under paragraph (3), adjusted as required in
accordance with subsections (b), (c), and (f )[, and to reflect
80 percent of any reduction elected under section 1854(f
)(1)(E).].
* * * * * * *
(h)(1) In the case of an individual who resides in a
competitive-demonstration area designated under section
1851(k)(1) and who is not enrolled in a Medicare+Choice plan
under part C, the monthly premium otherwise applied under this
part (determined without regard to subsections (b) and (f) or
any adjustment under this subsection) shall be adjusted as
follows: If the fee-for-service area-specific non-drug bid (as
defined in section 1853(k)(6)) for the Medicare+Choice area in
which the individual resides for a month--
(A) does not exceed the choice non-drug benchmark (as
determined under section 1853(k)(2)) for such area, the
amount of the premium for the individual for the month
shall be reduced by an amount equal to 75 percent of
the amount by which such benchmark exceeds such fee-
for-service bid; or
(B) exceeds such choice non-drug benchmark, the
amount of the premium for the individual for the month
shall be adjusted to ensure that--
(i) the sum of the amount of the adjusted
premium and the choice non-drug benchmark for
the area, is equal to
(ii) the sum of the unadjusted premium plus
amount of the fee-for-service area-specific
non-drug bid for the area.
(2) Nothing in this subsection shall be construed as
preventing a reduction under paragraph (1)(A) in the premium
otherwise applicable under this part to zero or from requiring
the provision of a rebate to the extent such premium would
otherwise be required to be less than zero.
(3) The adjustment in the premium under this subsection shall
be effected in such manner as the Medicare Benefits
Administrator determines appropriate.
(4) In order to carry out this subsection (insofar as it is
effected through the manner of collection of premiums under
1840(a)), the Medicare Benefits Administrator shall transmit to
the Commissioner of Social Security--
(A) at the beginning of each year, the name, social
security account number, and the amount of the
adjustment (if any) under this subsection for each
individual enrolled under this part for each month
during the year; and
(B) periodically throughout the year, information to
update the information previously transmitted under
this paragraph for the year.
* * * * * * *
APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS AND CONTINGENCY
RESERVE
Sec. 1844. (a) * * *
* * * * * * *
(c) The Secretary shall determine the Government contribution
under subparagraphs (A) and (B) of subsection (a)(1) without
regard to any premium reduction resulting from an election
under section 1854(f )(1)(E) and without regard to any premium
adjustment effected under section 1839(h).
* * * * * * *
Part C--Medicare+Choice Program
ELIGIBILITY, ELECTION, AND ENROLLMENT
Sec. 1851. (a) Choice of Medicare Benefits Through
Medicare+Choice Plans.--
(1) * * *
(2) Types of medicare+choice plans that may be
available.--A Medicare+Choice plan may be any of the
following types of plans of health insurance:
(A) Coordinated care plans.--Coordinated care
plans which provide health care services,
including but not limited to health maintenance
organization plans (with or without point of
service options), plans offered by provider-
sponsored organizations (as defined in section
1855(d)), and preferred provider organization
plans. Specialized Medicare+Choice plans for
special needs beneficiaries (as defined in
section 1859(b)(4)) may be any type of
coordinated care plan.
* * * * * * *
(b) Special Rules.--
(1) * * *
* * * * * * *
(4) Coverage under msa plans [on a demonstration
basis].--
(A) In general.--[An individual is not
eligible to enroll in an MSA plan under this
part--
[(i) on or after January 1, 2003,
unless the enrollment is the
continuation of such an enrollment in
effect as of such date; or
[(ii) as of any date if the number of
such individuals so enrolled as of such
date has reached 390,000.]
Under rules established by the Secretary, an
individual is not eligible to enroll (or
continue enrollment) in an MSA plan for a year
unless the individual provides assurances
satisfactory to the Secretary that the
individual will reside in the United States for
at least 183 days during the year.
* * * * * * *
(C) Reports.--The Secretary shall submit to
Congress periodic reports on the numbers of
individuals enrolled in such plans and on the
evaluation being conducted under subparagraph
(B). [The Secretary shall submit such a report,
by not later than March 1, 2002, on whether the
time limitation under subparagraph (A)(i)
should be extended or removed and whether to
change the numerical limitation under
subparagraph (A)(ii).]
* * * * * * *
(d) Providing Information To Promote Informed Choice.--
(1) * * *
(2) Provision of notice.--
(A) Open season notification.--At least 15
days before the beginning of each annual,
coordinated election period (as defined in
subsection (e)(3)(B)), the Secretary shall mail
to each Medicare+Choice eligible individual
residing in an area the following:
(i) General information.--The general
information described in paragraph (3).
(ii) List of plans and comparison of
plan options.--A list identifying the
Medicare+Choice plans that are (or will
be) available to residents of the area
and information described in paragraph
(4) concerning such plans to the extent
such information is available at the
time of preparation of materials for
the mailing. Such information shall be
presented in a comparative form.
* * * * * * *
(e) Coverage Election Periods.--
(1) * * *
* * * * * * *
(3) Annual, coordinated election period.--
(A) * * *
(B) Annual, coordinated election period.--For
purposes of this section, the term ``annual,
coordinated election period'' means, with
respect to a year before 2003 [and after 2005,
the month of November before such year and with
respect to 2003, 2004, and 2005], the month of
November before such year and with respect to
2003 and any subsequent year, the period
beginning on November 15 and ending on December
31 of the year before such year.
* * * * * * *
(5) Special rules for msa plans.--Notwithstanding the
preceding provisions of this subsection, an
individual--
(A) may elect an MSA plan only during--
(i) an initial open enrollment period
described in paragraph (1), or
(ii) an annual, coordinated election
period described in paragraph (3)(B)[,
or];
[(iii) the month of November 1998;]
* * * * * * *
(h) Approval of Marketing Material and Application Forms.--
(1) * * *
* * * * * * *
(4) Prohibition of certain marketing practices.--Each
Medicare+Choice organization shall conform to fair
marketing standards, in relation to Medicare+Choice
plans offered under this part, included in the
standards established under section 1856. Such
standards--
(A) shall not permit a Medicare+Choice
organization to provide for cash or other
monetary rebates as an inducement for
enrollment or otherwise except as provided
under section 1854(b)(1)(C), and
* * * * * * *
BENEFITS AND BENEFICIARY PROTECTIONS
Sec. 1852. (a) Basic Benefits.--
(1) * * *
* * * * * * *
[(5) National coverage determinations and legislative
changes in benefits.--If there is a national coverage
determination or legislative change in benefits
required to be provided under this part made in the
period beginning on the date of an announcement under
section 1853(b) and ending on the date of the next
announcement under such section and the Secretary
projects that the determination will result in a
significant change in the costs to a Medicare+Choice
organization of providing the benefits that are the
subject of such national coverage determination and
that such change in costs was not incorporated in the
determination of the annual Medicare+Choice capitation
rate under section 1853 included in the announcement
made at the beginning of such period, then, unless
otherwise required by law--
[(A) such determination or legislative change
in benefits shall not apply to contracts under
this part until the first contract year that
begins after the end of such period, and
[(B) if such coverage determination or
legislative change provides for coverage of
additional benefits or coverage under
additional circumstances, section 1851(i)(1)
shall not apply to payment for such additional
benefits or benefits provided under such
additional circumstances until the first
contract year that begins after the end of such
period.
The projection under the previous sentence shall be
based on an analysis by the Chief Actuary of the Health
Care Financing Administration of the actuarial costs
associated with the coverage determination or
legislative change in benefits.]
(5) Prospective implementation of national coverage
determinations.--The Secretary shall only implement a
national coverage determination that will result in a
significant change in the costs to a Medicare+Choice
organization in a prospective manner that applies to
announcements made under section 1853(b) after the date
of the implementation of the determination.
(b) Antidiscrimination.--
(1) Beneficiaries.--
(A) In general.--A Medicare+Choice
organization may not deny, limit, or condition
the coverage or provision of benefits under
this part, for individuals permitted to be
enrolled with the organization under this part,
based on any health status-related factor
described in section 2702(a)(1) of the Public
Health Service Act. The Administrator shall not
approve a plan of an organization if the
Administrator determines that the benefits are
designed to substantially discourage enrollment
by certain Medicare+Choice eligible individuals
with the organization.
* * * * * * *
(c) Disclosure Requirements.--
(1) Detailed description of plan provisions.--A
Medicare+Choice organization shall disclose, in clear,
accurate, and standardized form to each enrollee with a
Medicare+Choice plan offered by the organization under
this part at the time of enrollment and at least
annually thereafter, the following information
regarding such plan:
(A) * * *
* * * * * * *
(I) Quality assurance program.--A description
of the organization's quality assurance program
under subsection (e) if required under such
section.
* * * * * * *
(e) Quality Assurance Program.--
(1) In general.--Each Medicare+Choice organization
must have arrangements, consistent with any regulation,
for an ongoing quality assurance program for health
care services it provides to individuals enrolled with
Medicare+Choice plans (other than MSA plans) of the
organization.
* * * * * * *
(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[,
a non-network MSA plan,] or a preferred
provider organization plan) it offers shall--
(i) * * *
* * * * * * *
(B) Elements of program for organizations
offering medicare+choice private fee-for-
service plans[, non-network msa plans,] and
preferred provider organization plans.--The
quality assurance program of an organization
with respect to a Medicare+Choice private fee-
for-service plan[, a non-network MSA plan,] or
a preferred provider organization plan it
offers shall--
(i) * * *
* * * * * * *
(k) Treatment of Services Furnished by Certain Providers.--
(1) In general.--Except as provided in paragraph (2),
a physician or other entity (other than a provider of
services) that does not have a contract establishing
payment amounts for services furnished to an individual
enrolled under this part with a Medicare+Choice
organization described in section 1851(a)(2)(A) or with
an organization offering a MSA plan shall accept as
payment in full for covered services under this title
that are furnished to such an individual the amounts
that the physician or other entity could collect if the
individual were not so enrolled. Any penalty or other
provision of law that applies to such a payment with
respect to an individual entitled to benefits under
this title (but not enrolled with a Medicare+Choice
organization under this part) also applies with respect
to an individual so enrolled.
* * * * * * *
PAYMENTS TO MEDICARE+CHOICE ORGANIZATIONS
Sec. 1853. (a) Payments to Organizations.--
(1) Monthly payments.--
(A) In general.--Under a contract under
section 1857 and subject to subsections (e),
(g), and (i) and section 1859(e)(4), the
Secretary shall make monthly payments under
this section in advance to each Medicare+Choice
organization, with respect to coverage of an
individual under this part in a Medicare+Choice
payment area for a month, [in an amount equal
to \1/12\ of the annual Medicare+Choice
capitation rate (as calculated under subsection
(c)) with respect to that individual for that
area, reduced by the amount of any reduction
elected under section 1854(f )(1)(E) and
adjusted for such risk factors as age,
disability status, gender, institutional
status, and such other factors as the Secretary
determines to be appropriate, so as to ensure
actuarial equivalence. The Secretary may add
to, modify, or substitute for such factors, if
such changes will improve the determination of
actuarial equivalence.] in an amount determined
as follows:
(i) Payment before 2005.--For years
before 2005, the payment amount shall
be equal to \1/12\ of the annual
Medicare+Choice capitation rate (as
calculated under subsection (c)) with
respect to that individual for that
area, reduced by the amount of any
reduction elected under section 1854(f
)(1)(E) and adjusted under clause
(iii).
(ii) Payment for statutory non-drug
benefits beginning with 2005.--For
years beginning with 2005--
(I) Plans with bids below
benchmark.--In the case of a
plan for which there are
average per capita monthly
savings described in section
1854(b)(3)(C), the payment
under this subsection is equal
to the unadjusted non-drug
monthly bid amount, adjusted
under clause (iii), plus the
amount of the monthly rebate
computed under section
1854(b)(1)(C)(i) for that plan
and year.
(II) Plans with bids at or
above benchmark.--In the case
of a plan for which there are
no average per capita monthly
savings described in section
1854(b)(3)(C), the payment
amount under this subsection is
equal to the fee-for-service
area-specific non-drug
benchmark amount, adjusted
under clause (iii).
(iii) Demographic adjustment,
including adjustment for health
status.--The Administrator shall adjust
the payment amount under clause (i),
the unadjusted non-drug monthly bid
amount under clause (ii)(I), and the
fee-for-service area-specific non-drug
benchmark amount under clause (ii)(II)
for such risk factors as age,
disability status, gender,
institutional status, and such other
factors as the Administrator determines
to be appropriate, including adjustment
for health status under paragraph (3),
so as to ensure actuarial equivalence.
The Administrator may add to, modify,
or substitute for such adjustment
factors if such changes will improve
the determination of actuarial
equivalence.
(iv) Reference to subsidy payment for
statutory drug benefits.--In the case
in which an enrollee is enrolled under
part D, the Medicare+Choice
organization also is entitled to a
subsidy payment amount under section
1860H.
* * * * * * *
(b) Annual Announcement of Payment Rates.--
(1) Annual announcement.--The Secretary shall
annually determine, and shall announce (in a manner
intended to provide notice to interested parties) for
years before 2004 [and after 2005 not later than March
1 before the calendar year concerned and for 2004 and
2005] not later than March 1 before the calendar year
concerned and for 2004 and each subsequent year not
later than the second Monday in May before [the
respective calendar year--
[(A) the annual Medicare+Choice capitation
rate for each Medicare+Choice payment area for
the year, and
[(B) the risk and other factors to be used in
adjusting such rates under subsection (a)(1)(A)
for payments for months in that year.]
* * * * * * *
(3) Explanation of assumptions.--In each announcement
made under paragraph (1), the Secretary shall include
an explanation of the assumptions and changes in
methodology used in the announcement [in sufficient
detail so that Medicare+Choice organizations can
compute monthly adjusted Medicare+Choice capitation
rates for individuals in each Medicare+Choice payment
area which is in whole or in part within the service
area of such an organization].
(c) Calculation of Annual Medicare+Choice Capitation Rates.--
(1) In general.--For purposes of this part, subject
to paragraphs (6)(C) and (7), each annual
Medicare+Choice capitation rate, for a Medicare+Choice
payment area for a contract year consisting of a
calendar year, is equal to the largest of the amounts
specified in the following subparagraph (A), (B), [or
(C)] (C), or (D):
(A) Blended capitation rate.--The sum of--
(i) * * *
* * * * * * *
multiplied (for a year before 2003) by the
budget neutrality adjustment factor determined
under paragraph (5).
* * * * * * *
(C) Minimum percentage increase.--
(i) * * *
* * * * * * *
[(iv) For 2002 and each succeeding
year, 102 percent of the annual
Medicare+Choice capitation rate under
this paragraph for the area for the
previous year.]
(iv) For 2002, 102 percent of the
annual Medicare+Choice capitation rate
under this paragraph for the area for
2001.
(v) For 2003 and 2004, 103 percent of
the annual Medicare+Choice capitation
rate under this paragraph for the area
for the previous year.
(vi) For 2005 and each succeeding
year, 102 percent of the annual
Medicare+Choice capitation rate under
this paragraph for the area for the
previous year.
(D) Based on 100 percent of fee-for-service
costs.--
(i) In general.--For 2003 and 2004,
the adjusted average per capita cost
for the year involved, determined under
section 1876(a)(4) for the
Medicare+Choice payment area for
services covered under parts A and B
for individuals entitled to benefits
under part A and enrolled under part B
who are not enrolled in a
Medicare+Choice plan under this part
for the year, but adjusted to exclude
costs attributable to payments under
section 1886(h).
(ii) Inclusion of costs of va and dod
military facility services to medicare-
eligible beneficiaries.--In determining
the adjusted average per capita cost
under clause (i) for a year, such cost
shall be adjusted to include the
Secretary's estimate, on a per capita
basis, of the amount of additional
payments that would have been made in
the area involved under this title if
individuals entitled to benefits under
this title had not received services
from facilities of the Department of
Veterans Affairs or the Department of
Defense.
* * * * * * *
(3) Annual area-specific medicare+choice capitation
rate.--
(A) In general.--For purposes of paragraph
(1)(A), subject to [subparagraph (B)]
subparagraphs (B) and (E), the annual area-
specific Medicare+Choice capitation rate for a
Medicare+Choice payment area--
(i) * * *
* * * * * * *
(E) Inclusion of costs of dod and va military
facility services to medicare-eligible
beneficiaries.--In determining the area-
specific Medicare+Choice capitation rate under
subparagraph (A) for a year (beginning with
2003), the annual per capita rate of payment
for 1997 determined under section 1876(a)(1)(C)
shall be adjusted to include in the rate the
Secretary's estimate, on a per capita basis, of
the amount of additional payments that would
have been made in the area involved under this
title if individuals entitled to benefits under
this title had not received services from
facilities of the Department of Defense or the
Department of Veterans Affairs.
(4) Input-price-adjusted annual national
medicare+choice capitation rate.--
(A) * * *
(B) National standardized annual
medicare+choice capitation rate.--In
subparagraph (A)(i), the ``national
standardized annual Medicare+Choice capitation
rate'' for a year is equal to--
(i) the sum (for all Medicare+Choice
payment areas) of the product of--
(I) the annual area-specific
Medicare+Choice capitation rate
for that year for the area
under paragraph (3), and
(II) the average number of
medicare beneficiaries who
(with respect to determinations
for 2003 and for 2004) are
enrolled in a Medicare+Choice
plan residing in that area in
the year, multiplied by the
average of the risk factor
weights used to adjust payments
under subsection (a)(1)(A) for
such beneficiaries in such
area; divided by
* * * * * * *
(5) Payment adjustment budget neutrality factor.--For
purposes of paragraph (1)(A), for each year (before
2003), the Secretary shall determine a budget
neutrality adjustment factor so that the aggregate of
the payments under this part (other than those
attributable to subsections (a)(3)(C)(iii) and (i))
shall equal the aggregate payments that would have been
made under this part if payment were based entirely on
area-specific capitation rates.
(d) Medicare+Choice Payment Area Defined.--
(1) * * *
* * * * * * *
(3) Geographic adjustment.--
(A) In general.--Upon written request of the
chief executive officer of a State for a
contract year (beginning after 1998) made by
not later than February 1 of the previous year,
the Secretary shall make a geographic
adjustment to a Medicare+Choice payment area in
the State otherwise determined under paragraph
(1)--
[(i) to a single statewide
Medicare+Choice payment area,]
(i) to a single statewide
Medicare+Choice payment area,
* * * * * * *
[(B) Budget neutrality adjustment.--In the
case of a State requesting an adjustment under
this paragraph, the Secretary shall initially
(and annually thereafter) adjust the payment
rates otherwise established under this section
for Medicare+Choice payment areas in the State
in a manner so that the aggregate of the
payments under this section in the State shall
not exceed the aggregate payments that would
have been made under this section for
Medicare+Choice payment areas in the State in
the absence of the adjustment under this
paragraph.]
(B) Budget neutrality adjustment.--In the
case of a State requesting an adjustment under
this paragraph, the Medicare Benefits
Administrator shall initially (and annually
thereafter) adjust the payment rates otherwise
established under this section for
Medicare+Choice payment areas in the State in a
manner so that the aggregate of the payments
under this section in the State shall not
exceed the aggregate payments that would have
been made under this section for
Medicare+Choice payment areas in the State in
the absence of the adjustment under this
paragraph.
* * * * * * *
(j) Computation of Fee-for-Service Area-Specific Non-Drug
Benchmark Amount.--For purposes of this part, the term ``fee-
for-service area-specific non-drug benchmark amount'' means,
with respect to a Medicare+Choice payment area for a month in a
year, an amount equal to the greater of the following (but in
no case less than \1/12\ of the rate computed under subsection
(c)(1), without regard to subparagraph (A), for the year):
(1) Based on 100 percent of fee-for-service costs in
the area.--An amount equal to \1/12\ of 100 percent
(for 2005 through 2007, or 95 percent for 2008 and
years thereafter) of the adjusted average per capita
cost for the year involved, determined under section
1876(a)(4) for the Medicare+Choice payment area, for
the area and the year involved, for services covered
under parts A and B for individuals entitled to
benefits under part A and enrolled under part B who are
not enrolled in a Medicare+Choice plan under this part
for the year, and adjusted to exclude from such cost
the amount the Medicare Benefits Administrator
estimates is payable for costs described in subclauses
(I) and (II) of subsection (c)(3)(C)(i) for the year
involved and also adjusted in the manner described in
subsection (c)(1)(D)(ii) (relating to inclusion of
costs of VA and DOD military facility services to
medicare-eligible beneficiaries).
(2) Minimum monthly amount.--The minimum amount
specified in this paragraph is the amount specified in
subsection (c)(1)(B)(iv) for the year involved.
(k) Establishment of Competitive Demonstration Program.--
(1) Designation of competitive-demonstration areas as
part of program.--
(A) In general.--For purposes of this part,
the Administrator shall establish a
demonstration program under which the
Administrator designates Medicare+Choice areas
as competitive-demonstration areas consistent
with the following limitations:
(i) Limitation on number of areas
that may be designated.--The
Administrator may not designate more
than 4 areas as competitive-
demonstration areas.
(ii) Limitation on period of
designation of any area.--The
Administrator may not designate any
area as a competitive-demonstration
area for a period of more than 2 years.
The Administrator has the discretion to decide
whether or not to designate as a competitive-
demonstration area an area that qualifies for
such designation.
(B) Qualifications for designation.--For
purposes of this title, a Medicare+Choice area
(which is a metropolitan statistical area or
other area with a substantial number of
Medicare+Choice enrollees) may not be
designated as a ``competitive-demonstration
area'' for a 2-year period beginning with a
year unless the Administrator determines, by
such date before the beginning of the year as
the Administrator determines appropriate,
that--
(i) there will be offered during the
open enrollment period under this part
before the beginning of the year at
least 2 Medicare+Choice plans (in
addition to the fee-for-service program
under parts A and B), each offered by a
different Medicare+Choice organization;
and
(ii) during March of the previous
year at least 50 percent of the number
of Medicare+Choice eligible individuals
who reside in the area were enrolled in
a Medicare+Choice plan.
(2) Choice non-drug benchmark amount.--For purposes
of this part, the term ``choice non-drug benchmark
amount'' means, with respect to a Medicare+Choice
payment area for a month in a year, the sum of the 2
components described in paragraph (3) for the area and
year. The Administrator shall compute such benchmark
amount for each competitive-demonstration area before
the beginning of each annual, coordinated election
period under section 1851(e)(3)(B) for each year
(beginning with 2005) in which it is designated as such
an area.
(3) 2 components.--For purposes of paragraph (2), the
2 components described in this paragraph for an area
and a year are the following:
(A) Fee-for-service component weighted by
national fee-for-service market share.--The
product of the following:
(i) National fee-for-service market
share.--The national fee-for-service
market share percentage (determined
under paragraph (5)) for the year.
(ii) Fee-for-service area-specific
non-drug bid.--The fee-for-service
area-specific non-drug bid (as defined
in paragraph (6)) for the area and
year.
(B) M+C component weighted by national
medicare+choice market share.--The product of
the following:
(i) National medicare+choice market
share.--1 minus the national fee-for-
service market share percentage for the
year.
(ii) Weighted average of plan bids in
area.--The weighted average of the plan
bids for the area and year (as
determined under paragraph (4)(A)).
(4) Determination of weighted average bids for an
area.--
(A) In general.--For purposes of paragraph
(3)(B)(ii), the weighted average of plan bids
for an area and a year is the sum of the
following products for Medicare+Choice plans
described in subparagraph (C) in the area and
year:
(i) Proportion of each plan's
enrollees in the area.--The number of
individuals described in subparagraph
(B), divided by the total number of
such individuals for all
Medicare+Choice plans described in
subparagraph (C) for that area and
year.
(ii) Monthly non-drug bid amount.--
The unadjusted non-drug monthly bid
amount.
(B) Counting of individuals.--The
Administrator shall count, for each
Medicare+Choice plan described in subparagraph
(C) for an area and year, the number of
individuals who reside in the area and who were
enrolled under such plan under this part during
March of the previous year.
(C) Exclusion of plans not offered in
previous year.--For an area and year, the
Medicare+Choice plans described in this
subparagraph are plans that are offered in the
area and year and were offered in the area in
March of the previous year.
(5) Computation of national fee-for-service market
share percentage.--The Administrator shall determine,
for a year, the proportion (in this subsection referred
to as the ``national fee-for-service market share
percentage'') of Medicare+Choice eligible individuals
who during March of the previous year were not enrolled
in a Medicare+Choice plan.
(6) Fee-for-service area-specific non-drug bid.--For
purposes of this part, the term ``fee-for-service area-
specific non-drug bid'' means, for an area and year,
the amount described in section 1853(j)(1) for the area
and year, except that any reference to a percent of
less than 100 percent shall be deemed a reference to
100 percent.
PREMIUMS AND BID AMOUNTS.
Sec. 1854. (a) Submission of Proposed Premiums and Bid
Amounts and Related Information.--
(1) In general.--Not later than the second Monday in
September of [2002, 2003, and 2004 (or July 1 of each
other year)] 2002 and each subsequent year (or July 1
of each year before 2002), each Medicare+Choice
organization shall submit to the Secretary, in a form
and manner specified by the Secretary and for each
Medicare+Choice plan for the service area (or segment
of such an area if permitted under subsection (h)) in
which it intends to be offered in the following year--
[(A)] (A)(i) if the following year is before
2005, the information described in paragraph
(2), (3), or (4) for the type of plan involved
or (ii) if the following year is 2005 or later,
the information described in paragraph (6)(A);
and
* * * * * * *
(5) Review.--
(A) In general.--Subject to subparagraph (B),
the Secretary shall review the adjusted
community rates, the amounts of the basic and
supplemental premiums, and values filed under
paragraphs (2), (3), and (4) of this subsection
and shall approve or disapprove such rates,
amounts, and values so submitted. The Chief
Actuary of the Health Care Financing
Administration shall review the actuarial
assumptions and data used by the
Medicare+Choice organization with respect to
such rates, amounts, and values so submitted to
determine the appropriateness of such
assumptions and data.
* * * * * * *
(6) Submission of bid amounts by medicare+choice
organizations.--
(A) Information to be submitted.--The
information described in this subparagraph is
as follows:
(i) The monthly aggregate bid amount
for provision of all items and services
under this part and the actuarial basis
for determining such amount.
(ii) The proportions of such bid
amount that are attributable to--
(I) the provision of
statutory non-drug benefits
(such portion referred to in
this part as the ``unadjusted
non-drug monthly bid amount'');
(II) the provision of
statutory prescription drug
benefits; and
(III) the provision of non-
statutory benefits;
and the actuarial basis for determining
such proportions.
(iii) Such additional information as
the Administrator may require to verify
the actuarial bases described in
clauses (i) and (ii).
(B) Statutory benefits defined.--For purposes
of this part:
(i) The term ``statutory non-drug
benefits'' means benefits under parts A
and B.
(ii) The term ``statutory
prescription drug benefits'' means
benefits under part D.
(iii) The term ``statutory benefits''
means statutory prescription drug
benefits and statutory non-drug
benefits.
(C) Acceptance and negotiation of bid
amounts.--The Administrator has the authority
to negotiate regarding monthly bid amounts
submitted under subparagraph (A) (and the
proportion described in subparagraph (A)(ii)).
The Administrator may reject such a bid amount
or proportion if the Administrator determines
that such amount or proportion is not supported
by the actuarial bases provided under
subparagraph (A).
(b) Monthly Premium Charged.--
(1) In general.--
(A) * * *
* * * * * * *
(C) Beneficiary rebate rule.--
(i) Requirement.--The Medicare+Choice
plan shall provide to the enrollee a
monthly rebate equal to 75 percent of
the average per capita savings (if any)
described in paragraph (3) applicable
to the plan and year involved.
(ii) Requirement for competitive-
demonstration areas.--In the case of a
Medicare+Choice payment area that is
designated as a competitive-
demonstration area under section
1853(k)(1), if there are average per
capita monthly savings described in
paragraph (4) for a Medicare+Choice
plan and year, the Medicare+Choice plan
shall provide to the enrollee a monthly
rebate equal to 75 percent of such
savings.
(iii) Form of rebate.--A rebate
required under this subparagraph shall
be provided--
(I) through the crediting of
the amount of the rebate
towards the Medicare+Choice
monthly supplementary
beneficiary premium or the
premium imposed for
prescription drug coverage
under part D;
(II) through a direct monthly
payment (through electronic
funds transfer or otherwise);
or
(III) through other means
approved by the Medicare
Benefits Administrator,
or any combination thereof.
(2) Premium terminology defined.--For purposes of
this part:
[(A) The Medicare+choice monthly basic
beneficiary premium.--The term
``Medicare+Choice monthly basic beneficiary
premium'' means, with respect to a
Medicare+Choice plan, the amount authorized to
be charged under subsection (e)(1) for the
plan, or, in the case of a Medicare+Choice
private fee-for-service plan, the amount filed
under subsection (a)(4)(A)(ii).
[(B) Medicare+choice monthly supplemental
beneficiary premium.--The term
``Medicare+Choice monthly supplemental
beneficiary premium'' means, with respect to a
Medicare+Choice plan, the amount authorized to
be charged under subsection (e)(2) for the plan
or, in the case of a MSA plan or
Medicare+Choice private fee-for-service plan,
the amount filed under paragraph (3)(B) or
(4)(B) of subsection (a).]
(A) Medicare+choice monthly basic beneficiary
premium.--The term ``Medicare+Choice monthly
basic beneficiary premium'' means, with respect
to a Medicare+Choice plan--
(i) described in section
1853(a)(1)(A)(ii)(I) (relating to plans
providing rebates), zero; or
(ii) described in section
1853(a)(1)(A)(ii)(II), the amount (if
any) by which the unadjusted non-drug
monthly bid amount exceeds the fee-for-
service area-specific non-drug
benchmark amount (or, in the case of a
competitive-demonstration area, the
choice non-drug benchmark amount).
(B) Medicare+choice monthly supplemental
beneficiary premium.--The term
``Medicare+Choice monthly supplemental
beneficiary premium'' means, with respect to a
Medicare+Choice plan, the portion of the
aggregate monthly bid amount submitted under
clause (i) of subsection (a)(6)(A) for the year
that is attributable under such section to the
provision of nonstatutory benefits.
(3) Computation of average per capita monthly
savings.--For purposes of paragraph (1)(C)(i), the
average per capita monthly savings referred to in such
paragraph for a Medicare+Choice plan and year is
computed as follows:
(A) Determination of state-wide average risk
adjustment.--
(i) In general.--The Medicare
Benefits Administrator shall determine,
at the same time rates are promulgated
under section 1853(b)(1) (beginning
with 2005), for each State the average
of the risk adjustment factors to be
applied to enrollees under section
1853(a)(1)(A) in that State. In the
case of a State in which a
Medicare+Choice plan was offered in the
previous year, the Administrator may
compute such average based upon risk
adjustment factors applied in that
State in a previous year.
(ii) Treatment of new states.--In the
case of a State in which no
Medicare+Choice plan was offered in the
previous year, the Administrator shall
estimate such average. In making such
estimate, the Administrator may use
average risk adjustment factors applied
to comparable States or applied on a
national basis.
(B) Determination of risk adjusted benchmark
and risk-adjusted bid.--For each
Medicare+Choice plan offered in a State, the
Administrator shall--
(i) adjust the fee-for-service area-
specific non-drug benchmark amount by
the applicable average risk adjustment
factor computed under subparagraph (A);
and
(ii) adjust the unadjusted non-drug
monthly bid amount by such applicable
average risk adjustment factor.
(C) Determination of average per capita
monthly savings.--The average per capita
monthly savings described in this subparagraph
is equal to the amount (if any) by which--
(i) the risk-adjusted benchmark
amount computed under subparagraph
(B)(i), exceeds
(ii) the risk-adjusted bid computed
under subparagraph (B)(ii).
(D) Authority to determine risk adjustment
for areas other than states.--The Administrator
may provide for the determination and
application of risk adjustment factors under
this paragraph on the basis of areas other than
States.
(4) Computation of average per capita monthly savings
for competitive-demonstration areas.--For purposes of
paragraph (1)(C)(ii), the average per capita monthly
savings referred to in such paragraph for a
Medicare+Choice plan and year shall be computed in the
same manner as the average per capita monthly savings
is computed under paragraph (3) except that the
reference to the fee-for-service area-specific non-drug
benchmark in paragraph (3)(B)(i) (or to the benchmark
amount as adjusted under paragraph (3)(C)(i)) is deemed
to be a reference to the choice non-drug benchmark
amount (or such amount as adjusted in the manner
described in paragraph (3)(B)(i)).
[(c) Uniform Premium.--The Medicare+Choice monthly basic and
supplemental beneficiary premium, the Medicare+Choice monthly
MSA premium charged under subsection (b) of a Medicare+Choice
organization under this part may not vary among individuals
enrolled in the plan.]
(c) Uniform Bid Amounts.--The Medicare+Choice monthly bid
amount submitted under subsection (a)(6) of a Medicare+Choice
organization under this part may not vary among individuals
enrolled in the plan.
(d) Terms and Conditions of Imposing Premiums.--Each
Medicare+Choice organization shall permit the payment of
Medicare+Choice monthly basic and supplemental beneficiary
premiums on a monthly basis, may terminate election of
individuals for a Medicare+Choice plan for failure to make
premium payments only in accordance with section
1851(g)(3)(B)(i), and may not provide, except as provided under
subsection (b)(1)(C), and subsection (b)(1)(D) for cash or
other monetary rebates as an inducement for enrollment or
otherwise.
[(e) Limitation on Enrollee Liability.--
[(1) For basic and additional benefits.--In no event
may--
[(A) the Medicare+Choice monthly basic
beneficiary premium (multiplied by 12) and the
actuarial value of the deductibles,
coinsurance, and copayments applicable on
average to individuals enrolled under this part
with a Medicare+Choice plan described in
section 1851(a)(2)(A) of an organization with
respect to required benefits described in
section 1852(a)(1)(A) and additional benefits
(if any) required under subsection (f)(1)(A)
for a year, exceed
[(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be
applicable on average to individuals entitled
to benefits under part A and enrolled under
part B if they were not members of a
Medicare+Choice organization for the year.
[(2) For supplemental benefits.--If the
Medicare+Choice organization provides to its members
enrolled under this part in a Medicare+Choice plan
described in section 1851(a)(2)(A) with respect to
supplemental benefits described in section 1852(a)(3),
the sum of the Medicare+Choice monthly supplemental
beneficiary premium (multiplied by 12) charged and the
actuarial value of its deductibles, coinsurance, and
copayments charged with respect to such benefits may
not exceed the adjusted community rate for such
benefits (as defined in subsection (f)(3)).
[(3) Determination on other basis.--If the Secretary
determines that adequate data are not available to
determine the actuarial value under paragraph (1)(A) or
(2), the Secretary may determine such amount with
respect to all individuals in same geographic area, the
State, or in the United States, eligible to enroll in
the Medicare+Choice plan involved under this part or on
the basis of other appropriate data.
[(4) Special rule for private fee-for-service
plans.--With respect to a Medicare+Choice private fee-
for-service plan (other than a plan that is an MSA
plan), in no event may--
[(A) the actuarial value of the deductibles,
coinsurance, and copayments applicable on
average to individuals enrolled under this part
with such a plan of an organization with
respect to required benefits described in
section 1852(a)(1), exceed
[(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be
applicable on average to individuals entitled
to benefits under part A and enrolled under
part B if they were not members of a
Medicare+Choice organization for the year.
[(f) Requirement for Additional Benefits.--
[(1) Requirement.--
[(A) In general.--Each Medicare+Choice
organization (in relation to a Medicare+Choice
plan, other than an MSA plan, it offers) shall
provide that if there is an excess amount (as
defined in subparagraph (B)) for the plan for a
contract year, subject to the succeeding
provisions of this subsection, the organization
shall provide to individuals such additional
benefits (as the organization may specify) in a
value which the Secretary determines is at
least equal to the adjusted excess amount (as
defined in subparagraph (C)).
[(B) Excess amount.--For purposes of this
paragraph, the ``excess amount'', for an
organization for a plan, is the amount (if any)
by which--
[(i) the average of the capitation
payments made to the organization under
section 1853 for the plan at the
beginning of contract year, exceeds
[(ii) the actuarial value of the
required benefits described in section
1852(a)(1)(A) under the plan for
individuals under this part, as
determined based upon an adjusted
community rate described in paragraph
(3) (as reduced for the actuarial value
of the coinsurance, copayments, and
deductibles under parts A and B).
[(C) Adjusted excess amount.--For purposes of
this paragraph, the ``adjusted excess amount'',
for an organization for a plan, is the excess
amount reduced to reflect any amount withheld
and reserved for the organization for the year
under paragraph (2).
[(D) Uniform application.--This paragraph
shall be applied uniformly for all enrollees
for a plan.
[(E) Premium reductions.--
[(i) In general.--Subject to clause
(ii), as part of providing any
additional benefits required under
subparagraph (A), a Medicare+Choice
organization may elect a reduction in
its payments under section
1853(a)(1)(A) with respect to a
Medicare+Choice plan and the Secretary
shall apply such reduction to reduce
the premium under section 1839 of each
enrollee in such plan as provided in
section 1840(i).
[(ii) Amount of reduction.--The
amount of the reduction under clause
(i) with respect to any enrollee in a
Medicare+Choice plan--
[(I) may not exceed 125
percent of the premium
described under section
1839(a)(3); and
[(II) shall apply uniformly
to each enrollee of the
Medicare+Choice plan to which
such reduction applies.
[(F) Construction.--Nothing in this
subsection shall be construed as preventing a
Medicare+Choice organization from providing
supplemental benefits (described in section
1852(a)(3)) that are in addition to the health
care benefits otherwise required to be provided
under this paragraph and from imposing a
premium for such supplemental benefits.
[(2) Stabilization fund.--A Medicare+Choice
organization may provide that a part of the value of an
excess amount described in paragraph (1) be withheld
and reserved in the Federal Hospital Insurance Trust
Fund and in the Federal Supplementary Medical Insurance
Trust Fund (in such proportions as the Secretary
determines to be appropriate) by the Secretary for
subsequent annual contract periods, to the extent
required to stabilize and prevent undue fluctuations in
the additional benefits offered in those subsequent
periods by the organization in accordance with such
paragraph. Any of such value of the amount reserved
which is not provided as additional benefits described
in paragraph (1)(A) to individuals electing the
Medicare+Choice plan of the organization in accordance
with such paragraph prior to the end of such periods,
shall revert for the use of such trust funds.
[(3) Adjusted community rate.--For purposes of this
subsection, subject to paragraph (4), the term
``adjusted community rate'' for a service or services
means, at the election of a Medicare+Choice
organization, either--
[(A) the rate of payment for that service or
services which the Secretary annually
determines would apply to an individual
electing a Medicare+Choice plan under this part
if the rate of payment were determined under a
``community rating system'' (as defined in
section 1302(8) of the Public Health Service
Act, other than subparagraph (C)), or
[(B) such portion of the weighted aggregate
premium, which the Secretary annually estimates
would apply to such an individual, as the
Secretary annually estimates is attributable to
that service or services,
but adjusted for differences between the utilization
characteristics of the individuals electing coverage
under this part and the utilization characteristics of
the other enrollees with the plan (or, if the Secretary
finds that adequate data are not available to adjust
for those differences, the differences between the
utilization characteristics of individuals selecting
other Medicare+Choice coverage, or Medicare+Choice
eligible individuals in the area, in the State, or in
the United States, eligible to elect Medicare+Choice
coverage under this part and the utilization
characteristics of the rest of the population in the
area, in the State, or in the United States,
respectively).
[(4) Determination based on insufficient data.--For
purposes of this subsection, if the Secretary finds
that there is insufficient enrollment experience to
determine an average of the capitation payments to be
made under this part at the beginning of a contract
period or to determine (in the case of a newly operated
provider-sponsored organization or other new
organization) the adjusted community rate for the
organization, the Secretary may determine such an
average based on the enrollment experience of other
contracts entered into under this part and may
determine such a rate using data in the general
commercial marketplace.]
* * * * * * *
ESTABLISHMENT OF STANDARDS
Sec. 1856. (a) * * *
(b) Establishment of Other Standards.--
(1) * * *
* * * * * * *
[(3) Relation to state laws.--
[(A) In general.--The standards established
under this subsection shall supersede any State
law or regulation (including standards
described in subparagraph (B)) with respect to
Medicare+Choice plans which are offered by
Medicare+Choice organizations under this part
to the extent such law or regulation is
inconsistent with such standards.
[(B) Standards specifically superseded.--
State standards relating to the following are
superseded under this paragraph:
[(i) Benefit requirements (including
cost-sharing requirements).
[(ii) Requirements relating to
inclusion or treatment of providers.
[(iii) Coverage determinations
(including related appeals and
grievance processes).
[(iv) Requirements relating to
marketing materials and summaries and
schedules of benefits regarding a
Medicare+Choice plan.]
(3) Relation to state laws.--The standards
established under this subsection shall supersede any
State law or regulation (other than State licensing
laws or State laws relating to plan solvency) with
respect to Medicare+Choice plans which are offered by
Medicare+Choice organizations under this part.
* * * * * * *
DEFINITIONS; MISCELLANEOUS PROVISIONS
Sec. 1859. (a) * * *
(b) Definitions Relating to Medicare+Choice Plans.--
(1) * * *
* * * * * * *
(4) Specialized medicare+choice plans for special
needs beneficiaries.--
(A) In general.--The term ``specialized
Medicare+Choice plan for special needs
beneficiaries'' means a Medicare+Choice plan
that exclusively serves special needs
beneficiaries (as defined in subparagraph (B)).
(B) Special needs beneficiary.--The term
``special needs beneficiary'' means a
Medicare+Choice eligible individual who--
(i) is institutionalized (as defined
by the Secretary);
(ii) is entitled to medical
assistance under a State plan under
title XIX; or
(iii) meets such requirements as the
Secretary may determine would benefit
from enrollment in such a specialized
Medicare+Choice plan described in
subparagraph (A) for individuals with
severe or disabling chronic conditions.
* * * * * * *
(f) Restriction on Enrollment for Specialized Medicare+Choice
Plans for Special Needs Beneficiaries.--In the case of a
specialized Medicare+Choice plan (as defined in subsection
(b)(4)), notwithstanding any other provision of this part and
in accordance with regulations of the Secretary and for periods
before January 1, 2007, the plan may restrict the enrollment of
individuals under the plan to individuals who are within one or
more classes of special needs beneficiaries.
Part D--Miscellaneous Provisions
DEFINITIONS OF SERVICES, INSTITUTIONS, ETC.
Sec. 1861. For purposes of this title--
Spell of Illness
(a) * * *
* * * * * * *
Hospice Care; Hospice Program
(dd)(1) * * *
(2) The term ``hospice program'' means a public agency or
private organization (or a subdivision thereof) which--
(A)(i) is primarily engaged in providing the care and
services described in paragraph (1) and makes such
services available (as needed) on a 24-hour basis and
which also provides bereavement counseling for the
immediate family of terminally ill individuals and
services described in section 1812(a)(5),
* * * * * * *
PAYMENTS TO HEALTH MAINTENANCE ORGANIZATIONS AND COMPETITIVE MEDICAL
PLANS
Sec. 1876. (a) * * *
* * * * * * *
(h)(1) * * *
* * * * * * *
(5)(A) * * *
* * * * * * *
(C)(i) The Secretary may not extend or renew a reasonable
cost reimbursement contract under this subsection for any
period beyond December 31, 2004, except (subject to clause
(ii)) in the case of a contract for an area which is not
covered in the service area of 1 or more coordinated care
Medicare+Choice plans under part C.
(ii) In the case in which--
(I) a reasonable cost reimbursement contract includes
an area in its service area as of a date that is after
December 31, 2003;
(II) such area is no longer included in such service
area after such date by reason of the operation of
clause (i) because of the inclusion of such area within
the service area of a Medicare+Choice plan; and
(III) all Medicare+Choice plans subsequently
terminate coverage in such area;
such reasonable cost reimbursement contract may be extended and
renewed to cover such area (so long as it is not included in
the service area of any Medicare+Choice plan).
* * * * * * *
PAYMENT TO HOSPITALS FOR INPATIENT HOSPITAL SERVICES
Sec. 1886. (a) * * *
(b)(1) * * *
* * * * * * *
(3)(A) * * *
(B)(i) For purposes of subsection (d) and subsection (j) for
discharges occurring during a fiscal year, the ``applicable
percentage increase'' shall be--
(I) * * *
* * * * * * *
[(XVIII) for fiscal year 2003, the market basket
percentage increase minus 0.55 percentage points for
hospitals in all areas, and]
(XVIII) for fiscal year 2003, the market basket
percentage increase for sole community hospitals and
such increase minus 0.25 percentage points for other
hospitals, and
(d)(1) * * *
* * * * * * *
(5)(A) * * *
(B) The Secretary shall provide for an additional payment
amount for subsection (d) hospitals with indirect costs of
medical education, in an amount computed in the same manner as
the adjustment for such costs under regulations (in effect as
of January 1, 1983) under subsection (a)(2), except as follows:
(i) * * *
(ii) For purposes of clause (i)(II), the indirect
teaching adjustment factor is equal to c
(((1+r) to the nth power) - 1), where ``r'' is the
ratio of the hospital's full-time equivalent interns
and residents to beds and ``n'' equals .405. For
discharges occurring--
(I) * * *
* * * * * * *
(VI) during fiscal year 2002, ``c'' is equal
to 1.6; [and]
(VII) during fiscal year 2003, ``c'' is equal
to 1.47;
(VIII) during fiscal year 2004, ``c'' is
equal to 1.45; and
[(VII)] (IX) on or after October 1, [2002]
2004, ``c'' is equal to 1.35.
* * * * * * *
(K)(i) Effective for discharges beginning on or after October
1, 2001, the Secretary shall establish a mechanism to recognize
the costs of new medical services and technologies under the
payment system established under this subsection. Such
mechanism shall be established after notice and opportunity for
public comment (in the publications required by subsection
(e)(5) for a fiscal year or otherwise). Such mechanism shall be
modified to meet the requirements of clause (viii).
(ii) The mechanism established pursuant to clause (i) shall--
(I) apply to a new medical service or technology if,
based on the estimated costs incurred with respect to
discharges involving such service or technology, the
DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate
(applying a threshold specified by the Secretary that
is the lesser of 50 percent of the national average
standardized amount for operating costs of inpatient
hospital services for all hospitals and all diagnosis-
related groups or one standard deviation for the
diagnosis-related group involved);
* * * * * * *
(III) subject to paragraph (4)(C)(iii), provide for
additional payment to be made under this subsection
with respect to discharges involving a new medical
service or technology described in subclause (I) that
occur during the period described in subclause (II) in
an amount that adequately reflects the estimated
average cost of such service or technology (based on
the marginal rate applied to costs under subparagraph
(A)); and
* * * * * * *
(vi)(I) For purposes of this subparagraph and subparagraph
(L), a medical service or technology will be considered a ``new
medical service or technology'' if the service or technology
meets criteria established by the Secretary after notice and an
opportunity for public comment.
(II) Under such criteria, a service or technology shall not
be denied treatment as a new service or technology on the basis
of the period of time in which the service or technology has
been in use if such period ends before the end of the 2-to-3-
year period that begins on the effective date of implementation
of a code under ICD-9-CM (or a successor coding methodology)
that enables the identification of a significant sample of
specific discharges in which the service or technology has been
used.
(III) The Secretary shall by regulation provide for further
clarification of the criteria applied to determine whether a
new service or technology represents an advance in medical
technology that substantially improves the diagnosis or
treatment of beneficiaries. Under such criteria, in determining
whether a new service or technology represents an advance in
medical technology that substantially improves the diagnosis or
treatment of beneficiaries, the Secretary shall deem a service
or technology as meeting such requirement if the service or
technology is a drug or biological that is designated under
section 506 or 526 of the Federal Food, Drug, and Cosmetic Act,
approved under section 314.510 or 601.41 of title 21, Code of
Federal Regulations, or designated for priority review when the
marketing application for such drug or biological was filed or
is a medical device for which an exemption has been granted
under section 520(m) of such Act, for which priority review has
been provided under section 515(d)(5) of such Act, or is a
substantially equivalent device for which an expedited review
is provided under section 513(f) of such Act.
(vii) Under the mechanism under this subparagraph, the
Secretary shall provide for the addition of new diagnosis and
procedure codes in April 1 of each year, but the addition of
such codes shall not require the Secretary to adjust the
payment (or diagnosis-related group classification) under this
subsection until the fiscal year that begins after such date.
(viii) The mechanism established pursuant to clause (i) shall
be adjusted to provide, before publication of a proposed rule,
for public input regarding whether a new service or technology
not described in the second sentence of clause (vi)(III)
represents an advance in medical technology that substantially
improves the diagnosis or treatment of beneficiaries as
follows:
(I) The Secretary shall make public and periodically
update a list of all the services and technologies for
which an application for additional payment under this
subparagraph is pending.
(II) The Secretary shall accept comments,
recommendations, and data from the public regarding
whether the service or technology represents a
substantial improvement.
(III) The Secretary shall provide for a meeting at
which organizations representing hospitals, physicians,
medicare beneficiaries, manufacturers, and any other
interested party may present comments, recommendations,
and data to the clinical staff of the Centers for
Medicare & Medicaid Services before publication of a
notice of proposed rulemaking regarding whether service
or technology represents a substantial improvement.
(ix) Before establishing any add-on payment under this
subparagraph with respect to a new technology, the Secretary
shall seek to identify one or more diagnosis-related groups
associated with such technology, based on similar clinical or
anatomical characteristics and the cost of the technology.
Within such groups the Secretary shall assign an eligible new
technology into a diagnosis-related group where the average
costs of care most closely approximate the costs of care of
using the new technology. In such case, no add-on payment under
this subparagraph shall be made with respect to such new
technology and this clause shall not affect the application of
paragraph (4)(C)(iii).
* * * * * * *
(9)(A) Notwithstanding section 1814(b) but subject to the
provisions of section 1813, the amount of the payment with
respect to the operating costs of inpatient hospital services
of a subsection (d) Puerto Rico hospital for inpatient hospital
discharges is equal to the sum of--
(i) [for discharges beginning on or after October 1,
1997, 50 percent (and for discharges between October 1,
1987, and September 30, 1997, 75 percent)] the
applicable Puerto Rico percentage (specified in
subparagraph (E)) of the Puerto Rico adjusted DRG
prospective payment rate (determined under subparagraph
(B) or (C)) for such discharges, and
(ii) [for discharges beginning in a fiscal year
beginning on or after October 1, 1997, 50 percent (and
for discharges between October 1, 1987, and September
30, 1997, 25 percent)] the applicable Federal
percentage (specified in subparagraph (E)) of the
discharge-weighted average of--
(I) * * *
* * * * * * *
(E) For purposes of subparagraph (A), for discharges
occurring--
(i) between October 1, 1987, and September 30, 1997,
the applicable Puerto Rico percentage is 75 percent and
the applicable Federal percentage is 25 percent;
(ii) on or after October 1, 1997, and before October
1, 2003, the applicable Puerto Rico percentage is 50
percent and the applicable Federal percentage is 50
percent;
(iii) during fiscal year 2004, the applicable Puerto
Rico percentage is 45 percent and the applicable
Federal percentage is 55 percent;
(iv) during fiscal year 2005, the applicable Puerto
Rico percentage is 40 percent and the applicable
Federal percentage is 60 percent;
(v) during fiscal year 2006, the applicable Puerto
Rico percentage is 35 percent and the applicable
Federal percentage is 65 percent;
(vi) during fiscal year 2007, the applicable Puerto
Rico percentage is 30 percent and the applicable
Federal percentage is 70 percent; and
(vii) on or after October 1, 2007, the applicable
Puerto Rico percentage is 25 percent and the applicable
Federal percentage is 75 percent.
* * * * * * *
PAYMENT TO SKILLED NURSING FACILITIES FOR ROUTINE SERVICE COSTS
Sec. 1888. (a) * * *
* * * * * * *
(e) Prospective Payment.--
(1) * * *
* * * * * * *
[(12) Payment rule for certain facilities.--
[(A) In general.--In the case of a qualified
acute skilled nursing facility described in
subparagraph (B), the per diem amount of
payment shall be determined by applying the
non-Federal percentage and Federal percentage
specified in paragraph (2)(C)(ii).
[(B) Facility described.--For purposes of
subparagraph (A), a qualified acute skilled
nursing facility is a facility that--
[(i) was certified by the Secretary
as a skilled nursing facility eligible
to furnish services under this title
before July 1, 1992;
[(ii) is a hospital-based facility;
and
[(iii) for the cost reporting period
beginning in fiscal year 1998, the
facility had more than 60 percent of
total patient days comprised of
patients who are described in
subparagraph (C).
[(C) Description of patients.--For purposes
of subparagraph (B), a patient described in
this subparagraph is an individual who--
[(i) is entitled to benefits under
part A; and
[(ii) is immuno-compromised secondary
to an infectious disease, with specific
diagnoses as specified by the
Secretary.]
(12) Adjustment for residents with aids.--
(A) In general.--Subject to subparagraph (B),
in the case of a resident of a skilled nursing
facility who is afflicted with acquired immune
deficiency syndrome (AIDS), the per diem amount
of payment otherwise applicable shall be
increased by 128 percent to reflect increased
costs associated with such residents.
(B) Sunset.--Subparagraph (A) shall not apply
on and after such date as the Secretary
certifies that there is an appropriate
adjustment in the case mix under paragraph
(4)(G)(i) to compensate for the increased costs
associated with residents described in such
subparagraph.
* * * * * * *
----------
SECTION 4018 OF THE OMNIBUS BUDGET RECONCILIATION ACT OF 1987
SEC. 4018. SPECIAL RULES.
(a) * * *
(b) Extension of Waivers for Social Health Maintenance
Organizations.--
(1) The Secretary of Health and Human Services shall
extend without interruption, through [the date that is
30 months after the date that the Secretary submits to
Congress the report described in section 4014(c) of the
Balanced Budget Act of 1997] December 31, 2004, the
approval of waivers granted under subsection (a) of
section 2355 of the Deficit Reduction Act of 1984 for
the demonstration project described in subsection (b)
of that section, subject to the terms and conditions
(other than duration of the project) established under
that section (as amended by paragraph (2) of this
subsection).
* * * * * * *
----------
SECTION 312 OF THE MEDICARE, MEDICAID, AND SCHIP BENEFITS IMPROVEMENT
AND PROTECTION ACT OF 2000 (BIPA)
SEC. 312. INCREASE IN NURSING COMPONENT OF PPS FEDERAL RATE.
(a) In General.--The Secretary of Health and Human Services
shall increase by 16.66 percent the nursing component of the
case-mix adjusted Federal prospective payment rate specified in
Tables 3 and 4 of the final rule published in the Federal
Register by the Health Care Financing Administration on July
31, 2000 (65 Fed. Reg. 46770) and as subsequently updated,
effective for services furnished on or after April 1, 2001, and
before October 1, 2002. The Secretary of Health and Human
Services shall increase by 8 percent the nursing component of
the case-mix adjusted Federal prospective payment rate
specified in Tables 3 and 4 of the final rule published in the
Federal Register by the Health Care Financing Administration on
July 31, 2000 (65 Fed. Reg. 46770) and as subsequently updated
under section 1888(e)(4)(E)(ii) of the Social Security Act (42
U.S.C. 1395yy(e)(4)(E)(ii)), effective for services furnished
on or after October 1, 2002, and before October 1, 2005.
* * * * * * *
DISSENTING VIEWS
Today, seniors who enroll in Medicare fee-for-service are
guaranteed the same set of defined benefits at the same
predictable and affordable premium, regardless of where they
live or what other private Medicare+Choice plans are
participating in their area. H.R. 4985 contains several
provisions that if enacted, would mark the beginning of the end
of that guarantee.
In particular, this bill includes a demonstration program
that sets the stage for the privatization of Medicare. Under
this demonstration, the Federal Government's subsidy for each
senior would be based on something other than the full cost of
the fee-for-service program. By definition, this is premium
support system. Instead of entitling seniors to a package of
defined benefits, a premium support system would entitle
Medicare beneficiaries to a monetary contribution--a voucher--
that could be used toward the purchase of health insurance
coverage.
In this demonstration, the amount of the voucher would be
determined by the value of the ``reference premium'' for the
county in which a senior lived. Seniors would enroll in either
fee-for-service or an Medicare+Choice plan, and make up the
difference between the fee-for-service or Medicare+Choice
premium and the reference premium.
The coverage seniors could buy with this voucher would
depend on the type of benefits Medicare+Choice plans decided to
offer, which plans decided to offer coverage in these
demonstration areas, and how much plans in these areas decided
to charge. Different plans participating in the demonstration
could charge different premiums, and the same plan could charge
different premiums in different demonstration sites. In
addition, the reference premium would vary among demonstration
sites, so seniors in higher-cost demonstration sites would
receive larger vouchers than seniors in lower-cost
demonstration sites. As a result of this variation, the free-
for-service premium would be different in each demonstration
site. Also, seniors living in demonstration areas would pay
different fee-for-service premiums than seniors in the rest of
the country. This geographic disparity in premiums would be a
first for the Medicare fee-for-service program, which has
always charged seniors the same premium regardless of where
they lived.
Another effect of the demonstrations is that seniors in
these areas would pay more for the same coverage they have
today. Fee-for-service premiums in the demonstration sites
would almost certainly increase due to the difference in the
populations enrolled in the fee-for-service program versus
Medicare+Choice plans. Several studies from the General
Accounting Office have demonstrated that seniors who enroll in
Medicare+Choice plans tend to be younger and healthier than
seniors in the fee-for-service program.\1\ Consequently, the
initial reference premium would be lower than the fee-for-
service premium. Seniors in these demonstration sites who
wanted or needed to stay in fee-for-service would have to pay
more out of their own pockets than the seniors who joined
Medicare+Choice plans.
---------------------------------------------------------------------------
\1\ GAO, Medicare+Choice: Reforms Have Reduced, but Likely Not
Eliminated, Excess Plan Payments, June 1999, GAO/HEHS-99-144.
---------------------------------------------------------------------------
The seniors who would be particularly hurt by this premium
support, or voucher experiment, would be the poorest seniors,
who would no longer have the ``choice'' of staying in fee-for-
service Medicare because it was too expensive. Their ``choice''
would be limited to the lowest-cost Medicare+Choice plan in
their community. Seniors with chronic health care conditions
would also be hurt, because they would have to pay more to
preserve their ``choice'' of doctors and hospitals.
H.R. 4985 would unfairly penalize seniors who had the
misfortune of living in one of these demonstration sites, who
would not have chosen to participate in such an experiment.
Instead, they would find themselves paying more for Medicare
fee-for-service simply because the Secretary of Health and
Human Services had designated their communities as testing
grounds. We believe it is wrong to experiment with the Medicare
program by shifting costs to seniors and the disabled.
The Committee bill includes another section that lays the
groundwork for a privatized Medicare program. Beginning in
2005, H.R. 4985 establishes a Medicare+Choice ``competition''
program. This program also includes the concept of a
``reference premium,'' which is the foundation for a premium
support system.
Apart from the demonstration and competition sections, H.R.
4985 increases payments to Medicare+Choice plans. While we
support this increase in funds, we disagree with several other
pieces of the bill that make changes to the current
Medicare+Choice program. First, the bill exempts
Medicare+Choice plans from all state regulations, including
laws that protect people enrolled in managed care plans. We
oppose this provision because it takes away protections that
seniors currently enjoy.
Second, H.R. 4985 permanently delays from July to September
the adjusted community rate (ACR) filing deadline for
Medicare+Choice plans. The bill, however, does not permanently
delay the ``lock-in provision,'' which limits seniors' ability
to move in and out of managed care plans. The Bioterrorism
Preparedness and Response Act of 2002 included equal delays in
these two provisions, but the Committee bill only addresses the
provision that is most favorable to Medicare+Choice plans.
Finally, H.R. 4985 re-institutes payments to
Medicare+Choice plans for Indirect Medical Education (IME)
payments, which have been carved out of plan payments since
1997. Again, we are not opposed to an increase in
Medicare+Choice plan payments. We do object to the fact that
Medicare+Choice plans are not required to pass along these IME
payments to teaching hospitals. This provision is especially
ill-conceived because a later section of H.R. 4985 allows IME
adjustments to teaching hospitals to decrease from 6.5% to 6.0%
in 2003, to 5.9% in 2004, then to 5.5% in 2005 and beyond. We
would much rather have used additional IME payments to maintain
the adjustment for teaching hospitals at the current level of
6.5%.
John D. Dingell.
Sherrod Brown.
Henry A. Waxman.
Rick Boucher.
Edolphus Towns.
Frank Pallone, Jr.
Gene Green.
Mike Doyle.
Karen McCarthy.
Tom Barrett.
Chris John.
Bobby L. Rush.
Ted Strickland.
Lois Capps.
Peter Deutsch.
Eliot L. Engel.
Tom Sawyer.
Diana DeGette.
Bart Gordon.