Support Our Health Care Providers Act of 2003

        [Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1926 Introduced in Senate (IS)]

1st Session
S. 1926

To amend title XVIII of the Social Security Act to restore the medicare
program, and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

November 21, 2003

Ms. Stabenow (for herself, Mr. Graham of Florida, Mrs. Clinton, Mrs.
Murray, Mr. Leahy, Mr. Daschle, Mr. Pryor, Mr. Levin, Mr. Schumer, and
Ms. Cantwell) introduced the following bill; which was read twice and
referred to the Committee on Finance

_______________________________________________________________________

A BILL

To amend title XVIII of the Social Security Act to restore the medicare
program, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; REFERENCES
TO BIPA AND SECRETARY; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Support Our Health
Care Providers Act of 2003''.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in division A of this Act an amendment
is expressed in terms of an amendment to or repeal of a section or
other provision, the reference shall be considered to be made to that
section or other provision of the Social Security Act.
(c) BIPA; Secretary.--In this Act:
(1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000, as
enacted into law by section 1(a)(6) of Public Law 106-554.
(2) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(d) Table of Contents.--The table of contents of this Act is as
follows:

Sec. 1. Short title; table of contents.
TITLE I--RURAL PROVISIONS

Subtitle A--Provisions Relating to Part A Only

Sec. 101. Equalizing urban and rural standardized payment amounts under
the medicare inpatient hospital prospective
payment system.
Sec. 102. Enhanced disproportionate share hospital (DSH) treatment for
rural hospitals and urban hospitals with
fewer than 100 beds.
Sec. 103. Adjustment to the medicare inpatient hospital prospective
payment system wage index to revise the
labor-related share of such index.
Sec. 104. More frequent update in weights used in hospital market
basket.
Sec. 105. Improvements to critical access hospital program.
Sec. 106. Medicare inpatient hospital payment adjustment for low-volume
hospitals.
Sec. 107. Treatment of missing cost reporting periods for sole
community hospitals.
Sec. 108. Recognition of attending nurse practitioners as attending
physicians to serve hospice patients.
Sec. 109. Rural hospice demonstration project.
Sec. 110. Exclusion of certain rural health clinic and federally
qualified health center services from the
prospective payment system for skilled
nursing facilities.
Sec. 110A. Rural community hospital demonstration program.
Subtitle B--Provisions Relating to Part B Only

Sec. 111. 2-year extension of hold harmless provisions for small rural
hospitals and sole community hospitals
under the prospective payment system for
hospital outpatient department services.
Sec. 112. Establishment of floor on work geographic adjustment.
Sec. 113. Medicare incentive payment program improvements for physician
scarcity.
Sec. 114. Payment for rural and urban ambulance services.
Sec. 115. Providing appropriate coverage of rural air ambulance
services.
Sec. 116. Treatment of certain clinical diagnostic laboratory tests
furnished to hospital outpatients in
certain rural areas.
Sec. 117. Extension of telemedicine demonstration project.
Sec. 118. Report on demonstration project permitting skilled nursing
facilities to be originating telehealth
sites; authority to implement.
Subtitle C--Provisions Relating to Parts A and B

Sec. 121. 1-year increase for home health services furnished in a rural
area.
Sec. 122. Redistribution of unused resident positions.
Subtitle D--Other Provisions

Sec. 131. Providing safe harbor for certain collaborative efforts that
benefit medically underserved populations.
Sec. 132. Office of rural health policy improvements.
Sec. 133. MedPac study on rural hospital payment adjustments.
Sec. 134. Frontier extended stay clinic demonstration project.
TITLE II--PROVISIONS RELATING TO PART A

Subtitle A--Inpatient Hospital Services

Sec. 201. Revision of acute care hospital payment updates.
Sec. 202. Revision of the indirect medical education (IME) adjustment
percentage.
Sec. 203. Recognition of new medical technologies under inpatient
hospital prospective payment system.
Sec. 204. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 205. Wage index adjustment reclassification reform.
Sec. 206. Limitation on charges for inpatient hospital contract health
services provided to Indians by medicare
participating hospitals.
Sec. 207. Clarifications to certain exceptions to medicare limits on
physician referrals.
Sec. 208. 1-time appeals process for hospital wage index
classification.
Subtitle B--Other Provisions

Sec. 211. Payment for covered skilled nursing facility services.
Sec. 212. Coverage of hospice consultation services.
Sec. 213. Study on portable diagnostic ultrasound services for
beneficiaries in skilled nursing
facilities.
TITLE III--PROVISIONS RELATING TO PART B

Subtitle A--Provisions Relating to Physicians' Services

Sec. 301. Revision of updates for physicians' services.
Sec. 302. Treatment of physicians' services furnished in Alaska.
Sec. 303. Inclusion of podiatrists, dentists, and optometrists under
private contracting authority.
Sec. 304. GAO study on access to physicians' services.
Sec. 305. Collaborative demonstration-based review of physician
practice expense geographic adjustment
data.
Sec. 306. MedPac report on payment for physicians' services.
Subtitle B--Preventive Services

Sec. 311. Coverage of an initial preventive physical examination.
Sec. 312. Coverage of cardiovascular screening blood tests.
Sec. 313. Coverage of diabetes screening tests.
Sec. 314. Improved payment for certain mammography services.
Subtitle C--Other Provisions

Sec. 321. Hospital outpatient department (HOPD) payment reform.
Sec. 322. Limitation of application of functional equivalence standard.
Sec. 323. Payment for renal dialysis services.
Sec. 324. 2-year moratorium on therapy caps; provisions relating to
reports.
Sec. 325. Waiver of part B late enrollment penalty for certain military
retirees; special enrollment period.
Sec. 326. Payment for services furnished in ambulatory surgical
centers.
Sec. 327. Payment for certain shoes and inserts under the fee schedule
for orthotics and prosthetics.
Sec. 328. 5-year authorization of reimbursement for all medicare part B
services furnished by certain Indian
hospitals and clinics.
Subtitle D--Additional Demonstrations, Studies, and Other Provisions

Sec. 341. Demonstration project for coverage of certain prescription
drugs and biologicals.
Sec. 342. Extension of coverage of intravenous immune globulin (IVIG)
for the treatment of primary immune
deficiency diseases in the home.
Sec. 343. MedPac study of coverage of surgical first assisting services
of certified registered nurse first
assistants.
Sec. 344. MedPac study of payment for cardio-thoracic surgeons.
Sec. 345. Studies relating to vision impairments.
Sec. 346. Medicare health care quality demonstration programs.
Sec. 347. MedPac study on direct access to physical therapy services.
Sec. 348. Demonstration project for consumer-directed chronic
outpatient services.
Sec. 349. Medicare care management performance demonstration.
Sec. 350. GAO study and report on the propagation of concierge care.
Sec. 351. Demonstration of coverage of chiropractic services under
medicare.
TITLE IV--PROVISIONS RELATING TO PARTS A AND B

Subtitle A--Home Health Services

Sec. 401. Demonstration project to clarify the definition of homebound.
Sec. 402. Demonstration project for medical adult day-care services.
Sec. 403. Temporary suspension of oasis requirement for collection of
data on non-medicare and non-medicaid
patients.
Sec. 404. MedPac study on medicare margins of home health agencies.
Sec. 405. Coverage of religious nonmedical health care institution
services furnished in the home.
Subtitle B--Graduate Medical Education

Sec. 411. Exception to initial residency period for geriatric residency
or fellowship programs.
Sec. 412. Treatment of volunteer supervision.
Subtitle C--Chronic Care Improvement

Sec. 421. Voluntary chronic care improvement under traditional fee-for-
service.
Sec. 422. Medicare advantage quality improvement programs.
Sec. 423. Chronically ill medicare beneficiary research, data,
demonstration strategy.
Subtitle D--Other Provisions

Sec. 431. Improvements in national and local coverage determination
process to respond to changes in
technology.
Sec. 432. Extension of treatment of certain physician pathology
services under medicare.
Sec. 433. Payment for pancreatic islet cell investigational transplants
for medicare beneficiaries in clinical
trials.
Sec. 434. Restoration of medicare trust funds.
Sec. 435. Modifications to Medicare Payment Advisory Commission
(MedPac).
Sec. 436. Technical amendments.
TITLE V--ADMINISTRATIVE IMPROVEMENTS, REGULATORY REDUCTION, AND
CONTRACTING REFORM

Sec. 500. Administrative improvements within the Centers for Medicare &
Medicaid Services (CMS).
Subtitle A--Regulatory Reform

Sec. 501. Construction; definition of supplier.
Sec. 502. Issuance of regulations.
Sec. 503. Compliance with changes in regulations and policies.
Sec. 504. Reports and studies relating to regulatory reform.
Subtitle B--Contracting Reform

Sec. 511. Increased flexibility in medicare administration.
Sec. 512. Requirements for information security for medicare
administrative contractors.
Subtitle C--Education and Outreach

Sec. 521. Provider education and technical assistance.
Sec. 522. Small provider technical assistance demonstration program.
Sec. 523. Medicare beneficiary ombudsman.
Sec. 524. Beneficiary outreach demonstration program.
Sec. 525. Inclusion of additional information in notices to
beneficiaries about skilled nursing
facility benefits.
Sec. 526. Information on medicare-certified skilled nursing facilities
in hospital discharge plans.
Subtitle D--Appeals and Recovery

Sec. 531. Transfer of responsibility for medicare appeals.
Sec. 532. Process for expedited access to review.
Sec. 533. Revisions to medicare appeals process.
Sec. 534. Prepayment review.
Sec. 535. Recovery of overpayments.
Sec. 536. Provider enrollment process; right of appeal.
Sec. 537. Process for correction of minor errors and omissions without
pursuing appeals process.
Sec. 538. Prior determination process for certain items and services;
advance beneficiary notices.
Sec. 539. Appeals by providers when there is no other party available.
Sec. 540. Revisions to appeals timeframes and amounts.
Sec. 540A. Mediation process for local coverage determinations.
Subtitle E--Miscellaneous Provisions

Sec. 541. Policy development regarding evaluation and management (E &
M) documentation guidelines.
Sec. 542. Improvement in oversight of technology and coverage.
Sec. 543. Treatment of hospitals for certain services under medicare
secondary payor (MSP) provisions.
Sec. 544. EMTALA improvements.
Sec. 545. Emergency Medical Treatment and Labor Act (EMTALA) Technical
Advisory Group.
Sec. 546. Authorizing use of arrangements to provide core hospice
services in certain circumstances.
Sec. 547. Application of OSHA bloodborne pathogens standard to certain
hospitals.
Sec. 548. Bipa-related technical amendments and corrections.
Sec. 549. Conforming authority to waive a program exclusion.
Sec. 550. Treatment of certain dental claims.
Sec. 551. Furnishing hospitals with information to compute DSH formula.
Sec. 552. Revisions to reassignment provisions.
Sec. 553. Other provisions.
TITLE VI--MEDICAID AND MISCELLANEOUS PROVISIONS

Subtitle A--Medicaid Provisions

Sec. 601. Medicaid disproportionate share hospital (DSH) payments.
Sec. 602. Clarification of inclusion of inpatient drug prices charged
to certain public hospitals in the best
price exemptions for the medicaid drug
rebate program.
Sec. 603. Extension of moratorium.
Subtitle B--Miscellaneous Provisions

Sec. 611. Federal reimbursement of emergency health services furnished
to undocumented aliens.
Sec. 612. Commission on Systemic Interoperability.
Sec. 613. Research on outcomes of health care items and services.
Sec. 614. Health care that works for all Americans: Citizens Health
Care Working Group.
Sec. 615. Funding start-up administrative costs for medicare reform.
Sec. 616. Health care infrastructure improvement program.

TITLE I--RURAL PROVISIONS

Subtitle A--Provisions Relating to Part A Only

SEC. 101. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT AMOUNTS UNDER
THE MEDICARE INPATIENT HOSPITAL PROSPECTIVE PAYMENT
SYSTEM.

(a) In General.--Section 1886(d)(3)(A)(iv) (42 U.S.C.
1395ww(d)(3)(A)(iv)) is amended--
(1) by striking ``(iv) For discharges'' and inserting
``(iv)(I) Subject to subclause (II), for discharges''; and
(2) by adding at the end the following new subclause:
``(II) For discharges occurring in a fiscal year (beginning
with fiscal year 2004), the Secretary shall compute a
standardized amount for hospitals located in any area within
the United States and within each region equal to the
standardized amount computed for the previous fiscal year under
this subparagraph for hospitals located in a large urban area
(or, beginning with fiscal year 2005, for all hospitals in the
previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B)(i) for the fiscal year
involved.''.
(b) Conforming Amendments.--
(1) Computing drg-specific rates.--Section 1886(d)(3)(D)
(42 U.S.C. 1395ww(d)(3)(D)) is amended--
(A) in the heading, by striking ``in different
areas'';
(B) in the matter preceding clause (i), by striking
``, each of'';
(C) in clause (i)--
(i) in the matter preceding subclause (I),
by inserting ``for fiscal years before fiscal
year 2004,'' before ``for hospitals''; and
(ii) in subclause (II), by striking ``and''
after the semicolon at the end;
(D) in clause (ii)--
(i) in the matter preceding subclause (I),
by inserting ``for fiscal years before fiscal
year 2004,'' before ``for hospitals''; and
(ii) in subclause (II), by striking the
period at the end and inserting ``; and''; and
(E) by adding at the end the following new clause:
``(iii) for a fiscal year beginning after fiscal
year 2003, for hospitals located in all areas, to the
product of--
``(I) the applicable standardized amount
(computed under subparagraph (A)), reduced
under subparagraph (B), and adjusted or reduced
under subparagraph (C) for the fiscal year; and
``(II) the weighting factor (determined
under paragraph (4)(B)) for that diagnosis-
related group.''.
(2) Technical conforming sunset.--Section 1886(d)(3) (42
U.S.C. 1395ww(d)(3)) is amended--
(A) in the matter preceding subparagraph (A), by
inserting ``, for fiscal years before fiscal year
1997,'' before ``a regional adjusted DRG prospective
payment rate''; and
(B) in subparagraph (D), in the matter preceding
clause (i), by inserting ``, for fiscal years before
fiscal year 1997,'' before ``a regional DRG prospective
payment rate for each region,''.
(3) Additional technical amendment.--Section
1886(d)(3)(A)(iii) (42 U.S.C. 1395ww(d)(3)(A)(iii)) is amended
by striking ``in an other urban area'' and inserting ``in an
urban area''.
(c) Equalizing Urban and Rural Standardized Payment Amounts Under
the Medicare Inpatient Hospital Prospective Payment System for
Hospitals in Puerto Rico.--
(1) In general.--Section 1886(d)(9)(A) (42 U.S.C.
1395ww(d)(9)(A)), as amended by section 204, is amended--
(A) in clause (i), by striking ``and'' after the
comma at the end; and
(B) by striking clause (ii) and inserting the
following new clause:
``(ii) the applicable Federal percentage (specified in
subparagraph (E)) of--
``(I) for discharges beginning in a fiscal year
beginning on or after October 1, 1997, and before
October 1, 2003, the discharge-weighted average of--
``(aa) the national adjusted DRG
prospective payment rate (determined under
paragraph (3)(D)) for hospitals located in a
large urban area,
``(bb) such rate for hospitals located in
other urban areas, and
``(cc) such rate for hospitals located in a
rural area,
for such discharges, adjusted in the manner provided in
paragraph (3)(E) for different area wage levels; and
``(II) for discharges in a fiscal year beginning on
or after October 1, 2003, the national DRG prospective
payment rate determined under paragraph (3)(D)(iii) for
hospitals located in any area for such discharges,
adjusted in the manner provided in paragraph (3)(E) for
different area wage levels.
As used in this section, the term `subsection (d) Puerto Rico hospital'
means a hospital that is located in Puerto Rico and that would be a
subsection (d) hospital (as defined in paragraph (1)(B)) if it were
located in one of the 50 States.''.
(2) Application of puerto rico standardized amount based on
large urban areas.--Section 1886(d)(9)(C) (42 U.S.C.
1395ww(d)(9)(C)) is amended--
(A) in clause (i)--
(i) by striking ``(i) The Secretary'' and
inserting ``(i)(I) For discharges in a fiscal
year after fiscal year 1988 and before fiscal
year 2004, the Secretary''; and
(ii) by adding at the end the following new
subclause:
``(II) For discharges occurring in a fiscal year (beginning
with fiscal year 2004), the Secretary shall compute an average
standardized amount for hospitals located in any area of Puerto
Rico that is equal to the average standardized amount computed
under subclause (I) for fiscal year 2003 for hospitals in a
large urban area (or, beginning with fiscal year 2005, for all
hospitals in the previous fiscal year) increased by the
applicable percentage increase under subsection (b)(3)(B) for
the fiscal year involved.'';
(B) in clause (ii), by inserting ``(or for fiscal
year 2004 and thereafter, the average standardized
amount)'' after ``each of the average standardized
amounts''; and
(C) in clause (iii)(I), by striking ``for hospitals
located in an urban or rural area, respectively''.
(d) Implementation.--
(1) In general.--The amendments made by subsections (a),
(b), and (c)(1) of this section shall have no effect on the
authority of the Secretary, under subsection (b)(2) of section
402 of Public Law 108-89, to delay implementation of the
extension of provisions equalizing urban and rural standardized
inpatient hospital payments under subsection (a) of such
section 402.
(2) Application of puerto rico standardized amount based on
large urban areas.--The authority of the Secretary referred to
in paragraph (1) shall apply with respect to the amendments
made by subsection (c)(2) of this section in the same manner as
that authority applies with respect to the extension of
provisions equalizing urban and rural standardized inpatient
hospital payments under subsection (a) of such section 402,
except that any reference in subsection (b)(2)(A) of such
section 402 is deemed to be a reference to April 1, 2004.

SEC. 102. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) TREATMENT FOR
RURAL HOSPITALS AND URBAN HOSPITALS WITH FEWER THAN 100
BEDS.

(a) Doubling the Cap.--Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended by adding at the end the following new
clause:
``(xiv)(I) In the case of discharges occurring on or after April 1,
2004, subject to subclause (II), there shall be substituted for the
disproportionate share adjustment percentage otherwise determined under
clause (iv) (other than subclause (I)) or under clause (viii), (x),
(xi), (xii), or (xiii), the disproportionate share adjustment
percentage determined under clause (vii) (relating to large, urban
hospitals).
``(II) Under subclause (I), the disproportionate share adjustment
percentage shall not exceed 12 percent for a hospital that is not
classified as a rural referral center under subparagraph (C).''.
(b) Conforming Amendments.--Section 1886(d) (42 U.S.C. 1395ww(d))
is amended--
(1) in paragraph (5)(F)--
(A) in each of subclauses (II), (III), (IV), (V),
and (VI) of clause (iv), by inserting ``subject to
clause (xiv) and'' before ``for discharges occurring'';
(B) in clause (viii), by striking ``The formula''
and inserting ``Subject to clause (xiv), the formula'';
and
(C) in each of clauses (x), (xi), (xii), and
(xiii), by striking ``For purposes'' and inserting
``Subject to clause (xiv), for purposes''; and
(2) in paragraph (2)(C)(iv)--
(A) by striking ``or'' before ``the enactment of
section 303''; and
(B) by inserting before the period at the end the
following: ``, or the enactment of section 402(a)(1) of
the Medicare Provider Restoration Act of 2003''.

SEC. 103. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL PROSPECTIVE
PAYMENT SYSTEM WAGE INDEX TO REVISE THE LABOR-RELATED
SHARE OF SUCH INDEX.

(a) Adjustment.--
(1) In general.--Section 1886(d)(3)(E) (42 U.S.C.
1395ww(d)(3)(E)) is amended--
(A) by striking ``wage levels.--The Secretary'' and
inserting ``wage levels.--
``(i) In general.--Except as provided in clause
(ii), the Secretary''; and
(B) by adding at the end the following new clause:
``(ii) Alternative proportion to be adjusted
beginning in fiscal year 2005.--For discharges
occurring on or after October 1, 2004, the Secretary
shall substitute `62 percent' for the proportion
described in the first sentence of clause (i), unless
the application of this clause would result in lower
payments to a hospital than would otherwise be made.''.
(2) Waiving budget neutrality.--Section 1886(d)(3)(E) (42
U.S.C. 1395ww(d)(3)(E)), as amended by subsection (a), is
amended by adding at the end of clause (i) the following new
sentence: ``The Secretary shall apply the previous sentence for
any period as if the amendments made by section 103(a)(1) of
the Medicare Provider Restoration Act of 2003 had not been
enacted.''.
(b) Application to Puerto Rico Hospitals.--Section
1886(d)(9)(C)(iv) (42 U.S.C. 1395ww(d)(9)(C)(iv)) is amended--
(1) by inserting ``(I)'' after ``(iv)'';
(2) by striking ``paragraph (3)(E)'' and inserting
``paragraph (3)(E)(i)''; and
(3) by adding at the end the following new subclause:
``(II) For discharges occurring on or after October 1,
2004, the Secretary shall substitute `62 percent' for the
proportion described in the first sentence of clause (i),
unless the application of this subclause would result in lower
payments to a hospital than would otherwise be made.''.

SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL MARKET
BASKET.

(a) More Frequent Updates in Weights.--After revising the weights
used in the hospital market basket under section 1886(b)(3)(B)(iii) of
the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the
most current data available, the Secretary shall establish a frequency
for revising such weights, including the labor share, in such market
basket to reflect the most current data available more frequently than
once every 5 years.
(b) Incorporation of Explanation in Rulemaking.--The Secretary
shall include in the publication of the final rule for payment for
inpatient hospital services under section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)) for fiscal year 2006, an explanation
of the reasons for, and options considered, in determining frequency
established under subsection (a).

SEC. 105. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

(a) Increase in Payment Amounts.--
(1) In general.--Sections 1814(l), 1834(g)(1), and
1883(a)(3) (42 U.S.C. 1395f(l), 1395m(g)(1), and 1395tt(a)(3))
are each amended by inserting ``equal to 101 percent of''
before ``the reasonable costs''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to payments for services furnished during cost
reporting periods beginning on or after January 1, 2004.
(b) Coverage of Costs for Certain Emergency Room On-Call
Providers.--
(1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5))
is amended--
(A) in the heading--
(i) by inserting ``certain'' before
``emergency''; and
(ii) by striking ``physicians'' and
inserting ``providers'';
(B) by striking ``emergency room physicians who are
on-call (as defined by the Secretary)'' and inserting
``physicians, physician assistants, nurse
practitioners, and clinical nurse specialists who are
on-call (as defined by the Secretary) to provide
emergency services''; and
(C) by striking ``physicians' services'' and
inserting ``services covered under this title''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply with respect to costs incurred for services
furnished on or after January 1, 2005.
(c) Authorization of Periodic Interim Payment (PIP).--
(1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2))
is amended--
(A) in the matter before subparagraph (A), by
inserting ``, in the cases described in subparagraphs
(A) through (D)'' after ``1986'';
(B) by striking ``and'' at the end of subparagraph
(C);
(C) by adding ``and'' at the end of subparagraph
(D); and
(D) by inserting after subparagraph (D) the
following new subparagraph:
``(E) inpatient critical access hospital services;''.
(2) Development of alternative timing methods of periodic
interim payments.--With respect to periodic interim payments to
critical access hospitals for inpatient critical access
hospital services under section 1815(e)(2)(E) of the Social
Security Act, as added by paragraph (1), the Secretary shall
develop alternative methods for the timing of such payments.
(3) Authorization of pip.--The amendments made by paragraph
(1) shall apply to payments made on or after July 1, 2004.
(d) Condition for Application of Special Professional Service
Payment Adjustment.--
(1) In general.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2))
is amended by adding after and below subparagraph (B) the
following:
``The Secretary may not require, as a condition for applying
subparagraph (B) with respect to a critical access hospital,
that each physician or other practitioner providing
professional services in the hospital must assign billing
rights with respect to such services, except that such
subparagraph shall not apply to those physicians and
practitioners who have not assigned such billing rights.''.
(2) Effective date.--
(A) In general.--Except as provided in subparagraph
(B), the amendment made by paragraph (1) shall apply to
cost reporting periods beginning on or after July 1,
2004.
(B) Rule of application.--In the case of a critical
access hospital that made an election under section
1834(g)(2) of the Social Security Act (42 U.S.C.
1395m(g)(2)) before November 1, 2003, the amendment
made by paragraph (1) shall apply to cost reporting
periods beginning on or after July 1, 2001.
(e) Revision of Bed Limitation for Hospitals.--
(1) In general.--Section 1820(c)(2)(B)(iii) (42 U.S.C.
1395i-4(c)(2)(B)(iii)) is amended by striking ``15 (or, in the
case of a facility under an agreement described in subsection
(f), 25)'' and inserting ``25''.
(2) Conforming amendment.--Section 1820(f) (42 U.S.C.
1395i-4(f)) is amended by striking ``and the number of beds
used at any time for acute care inpatient services does not
exceed 15 beds''.
(3) Effective date.--The amendments made by this subsection
shall apply to designations made before, on, or after January
1, 2004, but any election made pursuant to regulations
promulgated to carry out such amendments shall only apply
prospectively.
(f) Provisions Relating to FLEX Grants.--
(1) Additional 4-year period of funding.--Section 1820(j)
(42 U.S.C. 1395i-4(j)) is amended by inserting before the
period at the end the following: ``, and for making grants to
all States under paragraphs (1) and (2) of subsection (g),
$35,000,000 in each of fiscal years 2005 through 2008''.
(2) Additional requirements and administration.--Section
1820(g) (42 U.S.C. 1395i-4(g)) is amended by adding at the end
the following new paragraphs:
``(4) Additional requirements with respect to flex
grants.--With respect to grants awarded under paragraph (1) or
(2) from funds appropriated for fiscal year 2005 and subsequent
fiscal years--
``(A) Consultation with the state hospital
association and rural hospitals on the most appropriate
ways to use grants.--A State shall consult with the
hospital association of such State and rural hospitals
located in such State on the most appropriate ways to
use the funds under such grant.
``(B) Limitation on use of grant funds for
administrative expenses.--A State may not expend more
than the lesser of--
``(i) 15 percent of the amount of the grant
for administrative expenses; or
``(ii) the State's federally negotiated
indirect rate for administering the grant.
``(5) Use of funds for federal administrative expenses.--Of
the total amount appropriated for grants under paragraphs (1)
and (2) for a fiscal year (beginning with fiscal year 2005), up
to 5 percent of such amount shall be available to the Health
Resources and Services Administration for purposes of
administering such grants.''.
(g) Authority To Establish Psychiatric and Rehabilitation Distinct
Part Units.--
(1) In general.--Section 1820(c)(2) (42 U.S.C. 1395i-
4(c)(2)) is amended by adding at the end the following:
``(E) Authority to establish psychiatric and
rehabilitation distinct part units.--
``(i) In general.--Subject to the
succeeding provisions of this subparagraph, a
critical access hospital may establish--
``(I) a psychiatric unit of the
hospital that is a distinct part of the
hospital; and
``(II) a rehabilitation unit of the
hospital that is a distinct part of the
hospital,
if the distinct part meets the requirements
(including conditions of participation) that
would otherwise apply to the distinct part if
the distinct part were established by a
subsection (d) hospital in accordance with the
matter following clause (v) of section
1886(d)(1)(B), including any regulations
adopted by the Secretary under such section.
``(ii) Limitation on number of beds.--The
total number of beds that may be established
under clause (i) for a distinct part unit may
not exceed 10.
``(iii) Exclusion of beds from bed count.--
In determining the number of beds of a critical
access hospital for purposes of applying the
bed limitations referred to in subparagraph
(B)(iii) and subsection (f), the Secretary
shall not take into account any bed established
under clause (i).
``(iv) Effect of failure to meet
requirements.--If a psychiatric or
rehabilitation unit established under clause
(i) does not meet the requirements described in
such clause with respect to a cost reporting
period, no payment may be made under this title
to the hospital for services furnished in such
unit during such period. Payment to the
hospital for services furnished in the unit may
resume only after the hospital has demonstrated
to the Secretary that the unit meets such
requirements.''.
(2) Payment on a prospective payment basis.--Section
1814(l) (42 U.S.C. 1395f(l)) is amended--
(A) by striking ``(l) The amount'' and inserting
``(l)(1) Except as provided in paragraph (2), the
amount''; and
(B) by adding at the end the following new
paragraph:
``(2) In the case of a distinct part psychiatric or rehabilitation
unit of a critical access hospital described in section 1820(c)(2)(E),
the amount of payment for inpatient critical access hospital services
of such unit shall be equal to the amount of the payment that would
otherwise be made if such services were inpatient hospital services of
a distinct part psychiatric or rehabilitation unit, respectively,
described in the matter following clause (v) of section
1886(d)(1)(B).''.
(3) Effective date.--The amendments made by this subsection
shall apply to cost reporting periods beginning on or after
October 1, 2004.
(h) Waiver Authority.--
(1) In general.--Section 1820(c)(2)(B)(i)(II) (42 U.S.C.
1395i-4(c)(2)(B)(i)(II)) is amended by inserting ``before
January 1, 2006,'' after ``is certified''.
(2) Grandfathering waiver authority for certain
facilities.--Section 1820(h) (42 U.S.C. 1395i-4(h)) is
amended--
(A) in the heading preceding paragraph (1), by
striking ``of Certain Facilities'' and inserting
``Provisions''; and
(B) by adding at the end the following new
paragraph:
``(3) State authority to waive 35-mile rule.--In the case
of a facility that was designated as a critical access hospital
before January 1, 2006, and was certified by the State as being
a necessary provider of health care services to residents in
the area under subsection (c)(2)(B)(i)(II), as in effect before
such date, the authority under such subsection with respect to
any redesignation of such facility shall continue to apply
notwithstanding the amendment made by section 105(h)(1) of the
Medicare Provider Restoration Act of 2003.''.

SEC. 106. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR LOW-VOLUME
HOSPITALS.

(a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is amended
by adding at the end the following new paragraph:
``(12) Payment adjustment for low-volume hospitals.--
``(A) In general.--In addition to any payments
calculated under this section for a subsection (d)
hospital, for discharges occurring during a fiscal year
(beginning with fiscal year 2005), the Secretary shall
provide for an additional payment amount to each low-
volume hospital (as defined in subparagraph (C)(i)) for
discharges occurring during that fiscal year that is
equal to the applicable percentage increase (determined
under subparagraph (B) for the hospital involved) in
the amount paid to such hospital under this section for
such discharges (determined without regard to this
paragraph).
``(B) Applicable percentage increase.--The
Secretary shall determine an applicable percentage
increase for purposes of subparagraph (A) as follows:
``(i) The Secretary shall determine the
empirical relationship for subsection (d)
hospitals between the standardized cost-per-
case for such hospitals and the total number of
discharges of such hospitals and the amount of
the additional incremental costs (if any) that
are associated with such number of discharges.
``(ii) The applicable percentage increase
shall be determined based upon such
relationship in a manner that reflects, based
upon the number of such discharges for a
subsection (d) hospital, such additional
incremental costs.
``(iii) In no case shall the applicable
percentage increase exceed 25 percent.
``(C) Definitions.--
``(i) Low-volume hospital.--For purposes of
this paragraph, the term `low-volume hospital'
means, for a fiscal year, a subsection (d)
hospital (as defined in paragraph (1)(B)) that
the Secretary determines is located more than
25 road miles from another subsection (d)
hospital and has less than 800 discharges
during the fiscal year.
``(ii) Discharge.--For purposes of
subparagraph (B) and clause (i), the term
`discharge' means an inpatient acute care
discharge of an individual regardless of
whether the individual is entitled to benefits
under part A.''.
(b) Judicial Review.--Section 1886(d)(7)(A) (42 U.S.C.
1395ww(d)(7)(A)) is amended by inserting after ``to subsection (e)(1)''
the following: ``or the determination of the applicable percentage
increase under paragraph (12)(A)(ii)''.

SEC. 107. TREATMENT OF MISSING COST REPORTING PERIODS FOR SOLE
COMMUNITY HOSPITALS.

(a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 1395ww(b)(3)(I))
is amended by adding at the end the following new clause:
``(iii) In no case shall a hospital be denied treatment as a sole
community hospital or payment (on the basis of a target rate as such as
a hospital) because data are unavailable for any cost reporting period
due to changes in ownership, changes in fiscal intermediaries, or other
extraordinary circumstances, so long as data for at least one
applicable base cost reporting period is available.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to cost reporting periods beginning on or after January 1, 2004.

SEC. 108. RECOGNITION OF ATTENDING NURSE PRACTITIONERS AS ATTENDING
PHYSICIANS TO SERVE HOSPICE PATIENTS.

(a) In General.--Section 1861(dd)(3)(B) (42 U.S.C. 1395x(dd)(3)(B))
is amended by inserting ``or nurse practitioner (as defined in
subsection (aa)(5))'' after ``the physician (as defined in subsection
(r)(1))''.
(b) Clarification of Hospice Role of Nurse Practitioners.--Section
1814(a)(7)(A)(i)(I) (42 U.S.C. 1395f(a)(7)(A)(i)(I)) is amended by
inserting ``(which for purposes of this subparagraph does not include a
nurse practitioner)'' after ``attending physician (as defined in
section 1861(dd)(3)(B))''.

SEC. 109. RURAL HOSPICE DEMONSTRATION PROJECT.

(a) In General.--The Secretary shall conduct a demonstration
project for the delivery of hospice care to medicare beneficiaries in
rural areas. Under the project medicare beneficiaries who are unable to
receive hospice care in the facility for lack of an appropriate
caregiver are provided such care in a facility of 20 or fewer beds
which offers, within its walls, the full range of services provided by
hospice programs under section 1861(dd) of the Social Security Act (42
U.S.C. 1395x(dd)).
(b) Scope of Project.--The Secretary shall conduct the project
under this section with respect to no more than 3 hospice programs over
a period of not longer than 5 years each.
(c) Compliance with Conditions.--Under the demonstration project--
(1) the hospice program shall comply with otherwise
applicable requirements, except that it shall not be required
to offer services outside of the home or to meet the
requirements of section 1861(dd)(2)(A)(iii) of the Social
Security Act; and
(2) payments for hospice care shall be made at the rates
otherwise applicable to such care under title XVIII of such
Act.
The Secretary may require the program to comply with such additional
quality assurance standards for its provision of services in its
facility as the Secretary deems appropriate.
(d) Report.--Upon completion of the project, the Secretary shall
submit a report to Congress on the project and shall include in the
report recommendations regarding extension of such project to hospice
programs serving rural areas.

SEC. 110. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND FEDERALLY
QUALIFIED HEALTH CENTER SERVICES FROM THE PROSPECTIVE
PAYMENT SYSTEM FOR SKILLED NURSING FACILITIES.

(a) In General.--Section 1888(e)(2)(A) (42 U.S.C. 1395yy(e)(2)(A))
is amended--
(1) in clause (i)(II), by striking ``clauses (ii) and
(iii)'' and inserting ``clauses (ii), (iii), and (iv)''; and
(2) by adding at the end the following new clause:
``(iv) Exclusion of certain rural health
clinic and federally qualified health center
services.--Services described in this clause
are--
``(I) rural health clinic services
(as defined in paragraph (1) of section
1861(aa)); and
``(II) Federally qualified health
center services (as defined in
paragraph (3) of such section);
that would be described in clause (ii) if such
services were furnished by an individual not
affiliated with a rural health clinic or a
Federally qualified health center.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to services furnished on or after January 1, 2005.

SEC. 110A. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.

(a) Establishment of Rural Community Hospital (RCH) Demonstration
Program.--
(1) In general.--The Secretary shall establish a
demonstration program to test the feasibility and advisability
of the establishment of rural community hospitals (as defined
in subsection (f)(1)) to furnish covered inpatient hospital
services (as defined in subsection (f)(2)) to medicare
beneficiaries.
(2) Demonstration areas.--The program shall be conducted in
rural areas selected by the Secretary in States with low
population densities, as determined by the Secretary.
(3) Application.--Each rural community hospital that is
located in a demonstration area selected under paragraph (2)
that desires to participate in the demonstration program under
this section shall submit an application to the Secretary at
such time, in such manner, and containing such information as
the Secretary may require.
(4) Selection of hospitals.--The Secretary shall select
from among rural community hospitals submitting applications
under paragraph (3) not more than 15 of such hospitals to
participate in the demonstration program under this section.
(5) Duration.--The Secretary shall conduct the
demonstration program under this section for a 5-year period.
(6) Implementation.--The Secretary shall implement the
demonstration program not later than January 1, 2005, but may
not implement the program before October 1, 2004.
(b) Payment.--
(1) In general.--The amount of payment under the
demonstration program for covered inpatient hospital services
furnished in a rural community hospital, other than such
services furnished in a psychiatric or rehabilitation unit of
the hospital which is a distinct part, is--
(A) for discharges occurring in the first cost
reporting period beginning on or after the
implementation of the demonstration program, the
reasonable costs of providing such services; and
(B) for discharges occurring in a subsequent cost
reporting period under the demonstration program, the
lesser of--
(i) the reasonable costs of providing such
services in the cost reporting period involved;
or
(ii) the target amount (as defined in
paragraph (2), applicable to the cost reporting
period involved.
(2) Target amount.--For purposes of paragraph (1)(B)(ii),
the term ``target amount'' means, with respect to a rural
community hospital for a particular 12-month cost reporting
period--
(A) in the case of the second such reporting period
for which this subsection is in effect, the reasonable
costs of providing such covered inpatient hospital
services as determined under paragraph (1)(A), and
(B) in the case of a later reporting period, the
target amount for the preceding 12-month cost reporting
period,
increased by the applicable percentage increase (under clause
(i) of section 1886(b)(3)(B) of the Social Security Act (42
U.S.C. 1395ww(b)(3)(B))) in the market basket percentage
increase (as defined in clause (iii) of such section) for that
particular cost reporting period.
(c) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Hospital Insurance Trust Fund under
section 1817 of the Social Security Act (42 U.S.C. 1395i) of
such funds as are necessary for the costs of carrying out the
demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration
program under this section was not implemented.
(d) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as may
be necessary for the purpose of carrying out the demonstration program
under this section.
(e) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, together with recommendations for
such legislation and administrative action as the Secretary determines
to be appropriate.
(f) Definitions.--In this section:
(1) Rural community hospital defined.--
(A) In general.--The term ``rural community
hospital'' means a hospital (as defined in section
1861(e) of the Social Security Act (42 U.S.C.
1395x(e))) that--
(i) is located in a rural area (as defined
in section 1886(d)(2)(D) of such Act (42 U.S.C.
1395ww(d)(2)(D))) or treated as being so
located pursuant to section 1886(d)(8)(E) of
such Act (42 U.S.C. 1395ww(d)(8)(E));
(ii) subject to paragraph (2), has fewer
than 51 acute care inpatient beds, as reported
in its most recent cost report;
(iii) makes available 24-hour emergency
care services; and
(iv) is not eligible for designation, or
has not been designated, as a critical access
hospital under section 1820.
(B) Treatment of psychiatric and rehabilitation
units.--For purposes of paragraph (1)(B), beds in a
psychiatric or rehabilitation unit of the hospital
which is a distinct part of the hospital shall not be
counted.
(2) Covered inpatient hospital services.--The term
``covered inpatient hospital services'' means inpatient
hospital services, and includes extended care services
furnished under an agreement under section 1883 of the Social
Security Act (42 U.S.C. 1395tt).

Subtitle B--Provisions Relating to Part B Only

SEC. 111. 2-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR SMALL RURAL
HOSPITALS AND SOLE COMMUNITY HOSPITALS UNDER THE
PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.

(a) Hold Harmless Provisions.--
(1) In general.--Section 1833(t)(7)(D)(i) (42 U.S.C.
1395l(t)(7)(D)(i)) is amended--
(A) in the heading, by striking ``small'' and
inserting ``certain'';
(B) by inserting ``or a sole community hospital (as
defined in section 1886(d)(5)(D)(iii)) located in a
rural area'' after ``100 beds''; and
(C) by striking ``2004'' and inserting ``2006''.
(2) Effective date.--The amendment made by paragraph (1)(B)
shall apply with respect to cost reporting periods beginning on
and after January 1, 2004.
(b) Study; Authorization of Adjustment.--Section 1833(t) (42 U.S.C.
1395l(t)) is amended--
(1) by redesignating paragraph (13) as paragraph (16); and
(2) by inserting after paragraph (12) the following new
paragraph:
``(13) Authorization of adjustment for rural hospitals.--
``(A) Study.--The Secretary shall conduct a study
to determine if, under the system under this
subsection, costs incurred by hospitals located in
rural areas by ambulatory payment classification groups
(APCs) exceed those costs incurred by hospitals located
in urban areas.
``(B) Authorization of adjustment.--Insofar as the
Secretary determines under subparagraph (A) that costs
incurred by hospitals located in rural areas exceed
those costs incurred by hospitals located in urban
areas, the Secretary shall provide for an appropriate
adjustment under paragraph (2)(E) to reflect those
higher costs by January 1, 2006.''.

SEC. 112. ESTABLISHMENT OF FLOOR ON WORK GEOGRAPHIC ADJUSTMENT.

Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)) is amended--
(1) in subparagraph (A), by striking ``subparagraphs (B)
and (C)'' and inserting ``subparagraphs (B), (C), and (E)'';
and
(2) by adding at the end the following new subparagraph:
``(E) Floor at 1.0 on work geographic index.--After
calculating the work geographic index in subparagraph
(A)(iii), for purposes of payment for services
furnished on or after January 1, 2004, and before
January 1, 2007, the Secretary shall increase the work
geographic index to 1.00 for any locality for which
such work geographic index is less than 1.00.''.

SEC. 113. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS FOR PHYSICIAN
SCARCITY.

(a) Additional Incentive Payment for Certain Physician Scarcity
Areas.--Section 1833 (42 U.S.C. 1395l) is amended by adding at the end
the following new subsection:
``(u) Incentive Payments for Physician Scarcity Areas.--
``(1) In general.--In the case of physicians' services
furnished on or after January 1, 2005, and before January 1,
2008--
``(A) by a primary care physician in a primary care
scarcity county (identified under paragraph (4)); or
``(B) by a physician who is not a primary care
physician in a specialist care scarcity county (as so
identified),
in addition to the amount of payment that would otherwise be
made for such services under this part, there also shall be
paid an amount equal to 5 percent of the payment amount for the
service under this part.
``(2) Determination of ratios of physicians to medicare
beneficiaries in area.--Based upon available data, the
Secretary shall establish for each county or equivalent area in
the United States, the following:
``(A) Number of physicians practicing in the
area.--The number of physicians who furnish physicians'
services in the active practice of medicine or
osteopathy in that county or area, other than
physicians whose practice is exclusively for the
Federal Government, physicians who are retired, or
physicians who only provide administrative services. Of
such number, the number of such physicians who are--
``(i) primary care physicians; or
``(ii) physicians who are not primary care
physicians.
``(B) Number of medicare beneficiaries residing in
the area.--The number of individuals who are residing
in the county and are entitled to benefits under part A or enrolled
under this part, or both (in this subsection referred to as
`individuals').
``(C) Determination of ratios.--
``(i) Primary care ratio.--The ratio (in
this paragraph referred to as the `primary care
ratio') of the number of primary care
physicians (determined under subparagraph
(A)(i)), to the number of individuals
determined under subparagraph (B).
``(ii) Specialist care ratio.--The ratio
(in this paragraph referred to as the
`specialist care ratio') of the number of other
physicians (determined under subparagraph
(A)(ii)), to the number of individuals
determined under subparagraph (B).
``(3) Ranking of counties.--The Secretary shall rank each
such county or area based separately on its primary care ratio
and its specialist care ratio.
``(4) Identification of counties.--
``(A) In general.--The Secretary shall identify--
``(i) those counties and areas (in this
paragraph referred to as `primary care scarcity
counties') with the lowest primary care ratios
that represent, if each such county or area
were weighted by the number of individuals
determined under paragraph (2)(B), an aggregate
total of 20 percent of the total of the
individuals determined under such paragraph;
and
``(ii) those counties and areas (in this
subsection referred to as `specialist care
scarcity counties') with the lowest specialist
care ratios that represent, if each such county
or area were weighted by the number of
individuals determined under paragraph (2)(B),
an aggregate total of 20 percent of the total
of the individuals determined under such
paragraph.
``(B) Periodic revisions.--The Secretary shall
periodically revise the counties or areas identified in
subparagraph (A) (but not less often than once every
three years) unless the Secretary determines that there
is no new data available on the number of physicians
practicing in the county or area or the number of
individuals residing in the county or area, as
identified in paragraph (2).
``(C) Identification of counties where service is
furnished.--For purposes of paying the additional
amount specified in paragraph (1), if the Secretary
uses the 5-digit postal ZIP Code where the service is
furnished, the dominant county of the postal ZIP Code
(as determined by the United States Postal Service, or
otherwise) shall be used to determine whether the
postal ZIP Code is in a scarcity county identified in
subparagraph (A) or revised in subparagraph (B).
``(D) Judicial review.--There shall be no
administrative or judicial review under section 1869,
1878, or otherwise, respecting--
``(i) the identification of a county or
area;
``(ii) the assignment of a specialty of any
physician under this paragraph;
``(iii) the assignment of a physician to a
county under paragraph (2); or
``(iv) the assignment of a postal ZIP Code
to a county or other area under this
subsection.
``(5) Rural census tracts.--To the extent feasible, the
Secretary shall treat a rural census tract of a metropolitan
statistical area (as determined under the most recent
modification of the Goldsmith Modification, originally
published in the Federal Register on February 27, 1992 (57 Fed.
Reg. 6725)), as an equivalent area for purposes of qualifying
as a primary care scarcity county or specialist care scarcity
county under this subsection.
``(6) Physician Defined.--For purposes of this paragraph,
the term `physician' means a physician described in section
1861(r)(1) and the term `primary care physician' means a
physician who is identified in the available data as a general
practitioner, family practice practitioner, general internist,
or obstetrician or gynecologist.
``(7) Publication of list of counties; posting on
website.--With respect to a year for which a county or area is
identified or revised under paragraph (4), the Secretary shall
identify such counties or areas as part of the proposed and
final rule to implement the physician fee schedule under
section 1848 for the applicable year. The Secretary shall post
the list of counties identified or revised under paragraph (4)
on the Internet website of the Centers for Medicare & Medicaid
Services.''.
(b) Improvement to Medicare Incentive Payment Program.--
(1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is
amended--
(A) by inserting ``(1)'' after ``(m)'';
(B) in paragraph (1), as designated by subparagraph
(A)--
(i) by inserting ``in a year'' after ``In
the case of physicians' services furnished'';
and
(ii) by inserting ``as identified by the
Secretary prior to the beginning of such year''
after ``as a health professional shortage
area''; and
(C) by adding at the end the following new
paragraphs:
``(2) For each health professional shortage area identified in
paragraph (1) that consists of an entire county, the Secretary shall
provide for the additional payment under paragraph (1) without any
requirement on the physician to identify the health professional
shortage area involved. The Secretary may implement the previous
sentence using the method specified in subsection (u)(4)(C).
``(3) The Secretary shall post on the Internet website of the
Centers for Medicare & Medicaid Services a list of the health
professional shortage areas identified in paragraph (1) that consist of
a partial county to facilitate the additional payment under paragraph
(1) in such areas.
``(4) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, respecting--
``(A) the identification of a county or area;
``(B) the assignment of a specialty of any physician under
this paragraph;
``(C) the assignment of a physician to a county under this
subsection; or
``(D) the assignment of a postal zip code to a county or
other area under this subsection.''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to physicians' services furnished on or after
January 1, 2005.
(c) GAO Study of Geographic Differences in Payments for Physicians'
Services.--
(1) Study.--The Comptroller General of the United States
shall conduct a study of differences in payment amounts under
the physician fee schedule under section 1848 of the Social
Security Act (42 U.S.C. 1395w-4) for physicians' services in
different geographic areas. Such study shall include--
(A) an assessment of the validity of the geographic
adjustment factors used for each component of the fee
schedule;
(B) an evaluation of the measures used for such
adjustment, including the frequency of revisions;
(C) an evaluation of the methods used to determine
professional liability insurance costs used in
computing the malpractice component, including a review
of increases in professional liability insurance
premiums and variation in such increases by State and
physician specialty and methods used to update the
geographic cost of practice index and relative weights
for the malpractice component; and
(D) an evaluation of the effect of the adjustment
to the physician work geographic index under section
1848(e)(1)(E) of the Social Security Act, as added by
section 112, on physician location and retention in
areas affected by such adjustment, taking into
account--
(i) differences in recruitment costs and
retention rates for physicians, including
specialists, between large urban areas and
other areas; and
(ii) the mobility of physicians, including
specialists, over the last decade.
(2) Report.--Not later than 1 year after the date of the
enactment of this Act, the Comptroller General shall submit to
Congress a report on the study conducted under paragraph (1).
The report shall include recommendations regarding the use of
more current data in computing geographic cost of practice
indices as well as the use of data directly representative of
physicians' costs (rather than proxy measures of such costs).

SEC. 114. PAYMENT FOR RURAL AND URBAN AMBULANCE SERVICES.

(a) Phase-In Providing Floor Using Blend of Fee Schedule and
Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 1395m(l)) is
amended--
(1) in paragraph (2)(E), by inserting ``consistent with
paragraph (11)'' after ``in an efficient and fair manner''; and
(2) by redesignating paragraph (8), as added by section
221(a) of BIPA (114 Stat. 2763A-486), as paragraph (9); and
(3) by adding at the end the following new paragraph:
``(10) Phase-in providing floor using blend of fee schedule
and regional fee schedules.--In carrying out the phase-in under
paragraph (2)(E) for each level of ground service furnished in
a year, the portion of the payment amount that is based on the
fee schedule shall be the greater of the amount determined
under such fee schedule (without regard to this paragraph) or
the following blended rate of the fee schedule under paragraph
(1) and of a regional fee schedule for the region involved:
``(A) For 2004 (for services furnished on or after
July 1, 2004), the blended rate shall be based 20
percent on the fee schedule under paragraph (1) and 80
percent on the regional fee schedule.
``(B) For 2005, the blended rate shall be based 40
percent on the fee schedule under paragraph (1) and 60
percent on the regional fee schedule.
``(C) For 2006, the blended rate shall be based 60
percent on the fee schedule under paragraph (1) and 40
percent on the regional fee schedule.
``(D) For 2007, 2008, and 2009, the blended rate
shall be based 80 percent on the fee schedule under
paragraph (1) and 20 percent on the regional fee
schedule.
``(E) For 2010 and each succeeding year, the
blended rate shall be based 100 percent on the fee
schedule under paragraph (1).
For purposes of this paragraph, the Secretary shall establish a
regional fee schedule for each of the nine census divisions
(referred to in section 1886(d)(2)) using the methodology (used
in establishing the fee schedule under paragraph (1)) to
calculate a regional conversion factor and a regional mileage
payment rate and using the same payment adjustments and the
same relative value units as used in the fee schedule under
such paragraph.''.
(b) Adjustment in Payment for Certain Long Trips.--Section 1834(l),
as amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(11) Adjustment in payment for certain long trips.--In
the case of ground ambulance services furnished on or after
July 1, 2004, and before January 1, 2009, regardless of where
the transportation originates, the fee schedule established
under this subsection shall provide that, with respect to the
payment rate for mileage for a trip above 50 miles the per mile
rate otherwise established shall be increased by \1/4\ of the
payment per mile otherwise applicable to miles in excess of 50
miles in such trip.''.
(c) Improvement in Payments To Retain Emergency Capacity for
Ambulance Services in Rural Areas.--
(1) In general.--Section 1834(l) (42 U.S.C. 1395m(l)), as
amended by subsections (a) and (b), is amended by adding at the
end the following new paragraph:
``(12) Assistance for rural providers furnishing services
in low population density areas.--
``(A) In general.--In the case of ground ambulance
services furnished on or after July 1, 2004, and before
January 1, 2010, for which the transportation
originates in a qualified rural area (identified under
subparagraph (B)(iii)), the Secretary shall provide for
a percent increase in the base rate of the fee schedule
for a trip established under this subsection. In
establishing such percent increase, the Secretary shall
estimate the average cost per trip for such services
(not taking into account mileage) in the lowest
quartile as compared to the average cost per trip for
such services (not taking into account mileage) in the
highest quartile of all rural county populations.
``(B) Identification of qualified rural areas.--
``(i) Determination of population density
in area.--Based upon data from the United
States decennial census for the year 2000, the
Secretary shall determine, for each rural area,
the population density for that area.
``(ii) Ranking of areas.--The Secretary
shall rank each such area based on such
population density.
``(iii) Identification of qualified rural
areas.--The Secretary shall identify those
areas (in subparagraph (A) referred to as
`qualified rural areas') with the lowest
population densities that represent, if each
such area were weighted by the population of
such area (as used in computing such population
densities), an aggregate total of 25 percent of
the total of the population of all such areas.
``(iv) Rural area.--For purposes of this
paragraph, the term `rural area' has the
meaning given such term in section
1886(d)(2)(D). If feasible, the Secretary shall
treat a rural census tract of a metropolitan
statistical area (as determined under the most
recent modification of the Goldsmith
Modification, originally published in the
Federal Register on February 27, 1992 (57 Fed.
Reg. 6725) as a rural area for purposes of this
paragraph.
``(v) Judicial review.--There shall be no
administrative or judicial review under section
1869, 1878, or otherwise, respecting the
identification of an area under this
subparagraph.''.
(2) Use of data.--In order to promptly implement section
1834(l)(12) of the Social Security Act, as added by paragraph
(1), the Secretary may use data furnished by the Comptroller
General of the United States.
(d) Temporary Increase for Ground Ambulance Services.--Section
1834(l) (42 U.S.C. 1395m(l)), as amended by subsections (a), (b), and
(c), is amended by adding at the end the following new paragraph:
``(13) Temporary increase for ground ambulance services.--
``(A) In general.--After computing the rates with
respect to ground ambulance services under the other
applicable provisions of this subsection, in the case
of such services furnished on or after July 1, 2004,
and before January 1, 2007, for which the
transportation originates in--
``(i) a rural area described in paragraph
(9) or in a rural census tract described in
such paragraph, the fee schedule established
under this section shall provide that the rate
for the service otherwise established, after
the application of any increase under
paragraphs (11) and (12), shall be increased by
2 percent; and
``(ii) an area not described in clause (i),
the fee schedule established under this
subsection shall provide that the rate for the
service otherwise established, after the
application of any increase under paragraph
(11), shall be increased by 1 percent.
``(B) Application of increased payments after
2006.--The increased payments under subparagraph (A)
shall not be taken into account in calculating payments
for services furnished after the period specified in
such subparagraph.''.
(e) Implementation.--The Secretary may implement the amendments
made by this section, and revise the conversion factor applicable under
section 1834(l) of the Social Security Act (42 U.S.C. 1395m(l)) for
purposes of implementing such amendments, on an interim final basis, or
by program instruction.
(f) GAO Report on Costs and Access.--Not later than December 31,
2005, the Comptroller General of the United States shall submit to
Congress an initial report on how costs differ among the types of
ambulance providers and on access, supply, and quality of ambulance
services in those regions and States that have a reduction in payment
under the medicare ambulance fee schedule (under section 1834(l) of the
Social Security Act, as amended by this Act). Not later than December
31, 2007, the Comptroller General shall submit to Congress a final
report on such access and supply.
(g) Technical Amendments.--(1) Section 221(c) of BIPA (114 Stat.
2763A-487) is amended by striking ``subsection (b)(2)'' and inserting
``subsection (b)(3)''.
(2) Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by moving
subparagraph (U) 4 ems to the left.

SEC. 115. PROVIDING APPROPRIATE COVERAGE OF RURAL AIR AMBULANCE
SERVICES.

(a) Coverage.--Section 1834(l) (42 U.S.C. 1395m(l)), as amended by
subsections (a), (b), (c), and (d) of section 114, is amended by adding
at the end the following new paragraph:
``(14) Providing appropriate coverage of rural air
ambulance services.--
``(A) In general.--The regulations described in
section 1861(s)(7) shall provide, to the extent that
any ambulance services (whether ground or air) may be
covered under such section, that a rural air ambulance
service (as defined in subparagraph (C)) is reimbursed
under this subsection at the air ambulance rate if the
air ambulance service--
``(i) is reasonable and necessary based on
the health condition of the individual being
transported at or immediately prior to the time
of the transport; and
``(ii) complies with equipment and crew
requirements established by the Secretary.
``(B) Satisfaction of requirement of medically
necessary.--The requirement of subparagraph (A)(i) is
deemed to be met for a rural air ambulance service if--
``(i) subject to subparagraph (D), such
service is requested by a physician or other
qualified medical personnel (as specified by
the Secretary) who reasonably determines or
certifies that the individual's condition is
such that the time needed to transport the
individual by land or the instability of
transportation by land poses a threat to the
individual's survival or seriously endangers
the individual's health; or
``(ii) such service is furnished pursuant
to a protocol that is established by a State or
regional emergency medical service (EMS) agency
and recognized or approved by the Secretary
under which the use of an air ambulance is
recommended, if such agency does not have an
ownership interest in the entity furnishing
such service.
``(C) Rural air ambulance service defined.--For
purposes of this paragraph, the term `rural air
ambulance service' means fixed wing and rotary wing air
ambulance service in which the point of pick up of the
individual occurs in a rural area (as defined in
section 1886(d)(2)(D)) or in a rural census tract of a
metropolitan statistical area (as determined under the
most recent modification of the Goldsmith Modification,
originally published in the Federal Register on
February 27, 1992 (57 Fed. Reg. 6725)).
``(D) Limitation.--
``(i) In general.--Subparagraph (B)(i)
shall not apply if there is a financial or
employment relationship between the person
requesting the rural air ambulance service and
the entity furnishing the ambulance service, or
an entity under common ownership with the
entity furnishing the air ambulance service, or
a financial relationship between an immediate
family member of such requester and such an
entity.
``(ii) Exception.--Where a hospital and the
entity furnishing rural air ambulance services
are under common ownership, clause (i) shall
not apply to remuneration (through employment
or other relationship) by the hospital of the
requester or immediate family member if the
remuneration is for provider-based physician
services furnished in a hospital (as described
in section 1887) which are reimbursed under
part A and the amount of the remuneration is
unrelated directly or indirectly to the
provision of rural air ambulance services.''.
(b) Conforming Amendment.--Section 1861(s)(7) (42 U.S.C.
1395x(s)(7)) is amended by inserting ``, subject to section
1834(l)(14),'' after ``but''.
(c) Effective Date.--The amendments made by this subsection shall
apply to services furnished on or after January 1, 2005.

SEC. 116. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC LABORATORY TESTS
FURNISHED TO HOSPITAL OUTPATIENTS IN CERTAIN RURAL AREAS.

(a) In General.--Notwithstanding subsections (a), (b), and (h) of
section 1833 of the Social Security Act (42 U.S.C. 1395l) and section
1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in the case of a
clinical diagnostic laboratory test covered under part B of title XVIII
of such Act that is furnished during a cost reporting period described
in subsection (b) by a hospital with fewer than 50 beds that is located
in a qualified rural area (identified under paragraph (12)(B)(iii) of
section 1834(l) of the Social Security Act (42 U.S.C. 1395m(l)), as
added by section 114(c)) as part of outpatient services of the
hospital, the amount of payment for such test shall be 100 percent of
the reasonable costs of the hospital in furnishing such test.
(b) Application.--A cost reporting period described in this
subsection is a cost reporting period beginning during the 2-year
period beginning on July 1, 2004.
(c) Provision as Part of Outpatient Hospital Services.--For
purposes of subsection (a), in determining whether clinical diagnostic
laboratory services are furnished as part of outpatient services of a
hospital, the Secretary shall apply the same rules that are used to
determine whether clinical diagnostic laboratory services are furnished
as an outpatient critical access hospital service under section
1834(g)(4) of the Social Security Act (42 U.S.C. 1395m(g)(4)).

SEC. 117. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.

Section 4207 of the Balanced Budget Act of 1997 (Public Law 105-33)
is amended--
(1) in subsection (a)(4), by striking ``4-year'' and
inserting ``8-year''; and
(2) in subsection (d)(3), by striking ``$30,000,000'' and
inserting ``$60,000,000''.

SEC. 118. REPORT ON DEMONSTRATION PROJECT PERMITTING SKILLED NURSING
FACILITIES TO BE ORIGINATING TELEHEALTH SITES; AUTHORITY
TO IMPLEMENT.

(a) Evaluation.--The Secretary, acting through the Administrator of
the Health Resources and Services Administration in consultation with
the Administrator of the Centers for Medicare & Medicaid Services,
shall evaluate demonstration projects conducted by the Secretary under
which skilled nursing facilities (as defined in section 1819(a) of the
Social Security Act (42 U.S.C. 1395i-3(a)) are treated as originating
sites for telehealth services.
(b) Report.--Not later than January 1, 2005, the Secretary shall
submit to Congress a report on the evaluation conducted under
subsection (a). Such report shall include recommendations on mechanisms
to ensure that permitting a skilled nursing facility to serve as an
originating site for the use of telehealth services or any other
service delivered via a telecommunications system does not serve as a
substitute for in-person visits furnished by a physician, or for in-
person visits furnished by a physician assistant, nurse practitioner or
clinical nurse specialist, as is otherwise required by the Secretary.
(c) Authority To Expand Originating Telehealth Sites To Include
Skilled Nursing Facilities.--Insofar as the Secretary concludes in the
report required under subsection (b) that is advisable to permit a
skilled nursing facility to be an originating site for telehealth
services under section 1834(m) of the Social Security Act (42 U.S.C.
1395m(m)), and that the Secretary can establish the mechanisms to
ensure such permission does not serve as a substitute for in-person
visits furnished by a physician, or for in-person visits furnished by a
physician assistant, nurse practitioner or clinical nurse specialist,
the Secretary may deem a skilled nursing facility to be an originating
site under paragraph (4)(C)(ii) of such section beginning on January 1,
2006.

Subtitle C--Provisions Relating to Parts A and B

SEC. 121. 1-YEAR INCREASE FOR HOME HEALTH SERVICES FURNISHED IN A RURAL
AREA.

(a) In General.--With respect to episodes and visits ending on or
after April 1, 2004, and before April 1, 2005, in the case of home
health services furnished in a rural area (as defined in section
1886(d)(2)(D) of the Social Security Act (42 U.S.C. 1395ww(d)(2)(D))),
the Secretary shall increase the payment amount otherwise made under
section 1895 of such Act (42 U.S.C. 1395fff) for such services by 5
percent.
(b) Waiving Budget Neutrality.--The Secretary shall not reduce the
standard prospective payment amount (or amounts) under section 1895 of
the Social Security Act (42 U.S.C. 1395fff) applicable to home health
services furnished during a period to offset the increase in payments
resulting from the application of subsection (a).
(c) No Effect on Subsequent Periods.--The payment increase provided
under subsection (a) for a period under such subsection--
(1) shall not apply to episodes and visits ending after
such period; and
(2) shall not be taken into account in calculating the
payment amounts applicable for episodes and visits occurring
after such period.

SEC. 122. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

(a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)(4)) is
amended--
(1) in paragraph (4)(F)(i), by inserting ``subject to
paragraph (7),'' after ``October 1, 1997,'';
(2) in paragraph (4)(H)(i), by inserting ``and subject to
paragraph (7),'' after ``subparagraphs (F) and (G)''; and
(3) by adding at the end the following new paragraph:
``(7) Redistribution of unused resident positions.--
``(A) Reduction in limit based on unused
positions.--
``(i) Programs subject to reduction.--
``(I) In general.--Except as
provided in subclause (II), if a
hospital's reference resident level
(specified in clause (ii)) is less than
the otherwise applicable resident limit
(as defined in subparagraph (C)(ii)),
effective for portions of cost
reporting periods occurring on or after
July 1, 2005, the otherwise applicable
resident limit shall be reduced by 75
percent of the difference between such
otherwise applicable resident limit and
such reference resident level.
``(II) Exception for small rural
hospitals.--This subparagraph shall not
apply to a hospital located in a rural
area (as defined in subsection
(d)(2)(D)(ii)) with fewer than 250
acute care inpatient beds.
``(ii) Reference resident level.--
``(I) In general.--Except as
otherwise provided in subclauses (II)
and (III), the reference resident level
specified in this clause for a hospital
is the resident level for the most
recent cost reporting period of the
hospital ending on or before September
30, 2002, for which a cost report has
been settled (or, if not, submitted
(subject to audit)), as determined by
the Secretary.
``(II) Use of most recent
accounting period to recognize
expansion of existing programs.--If a
hospital submits a timely request to
increase its resident level due to an
expansion of an existing residency
training program that is not reflected
on the most recent settled cost report,
after audit and subject to the
discretion of the Secretary, the
reference resident level for such
hospital is the resident level for the
cost reporting period that includes
July 1, 2003, as determined by the
Secretary.
``(III) Expansions under newly
approved programs.--Upon the timely
request of a hospital, the Secretary
shall adjust the reference resident
level specified under subclause (I) or
(II) to include the number of medical
residents that were approved in an
application for a medical residency
training program that was approved by
an appropriate accrediting organization
(as determined by the Secretary) before
January 1, 2002, but which was not in
operation during the cost reporting
period used under subclause (I) or
(II), as the case may be, as determined
by the Secretary.
``(iii) Affiliation.--The provisions of
clause (i) shall be applied to hospitals which
are members of the same affiliated group (as
defined by the Secretary under paragraph
(4)(H)(ii)) as of July 1, 2003.
``(B) Redistribution.--
``(i) In general.--The Secretary is
authorized to increase the otherwise applicable
resident limit for each qualifying hospital
that submits a timely application under this
subparagraph by such number as the Secretary
may approve for portions of cost reporting
periods occurring on or after July 1, 2005. The
aggregate number of increases in the otherwise
applicable resident limits under this
subparagraph may not exceed the Secretary's
estimate of the aggregate reduction in such
limits attributable to subparagraph (A).
``(ii) Considerations in redistribution.--
In determining for which hospitals the increase
in the otherwise applicable resident limit is
provided under clause (i), the Secretary shall
take into account the demonstrated likelihood
of the hospital filling the positions within
the first 3 cost reporting periods beginning on or after July 1, 2005,
made available under this subparagraph, as determined by the Secretary.
``(iii) Priority for rural and small urban
areas.--In determining for which hospitals and
residency training programs an increase in the
otherwise applicable resident limit is provided
under clause (i), the Secretary shall
distribute the increase to programs of
hospitals located in the following priority
order:
``(I) First, to hospitals located
in rural areas (as defined in
subsection (d)(2)(D)(ii)).
``(II) Second, to hospitals located
in urban areas that are not large urban
areas (as defined for purposes of
subsection (d)).
``(III) Third, to other hospitals
in a State if the residency training
program involved is in a specialty for
which there are not other residency
training programs in the State.
Increases of residency limits within the same
priority category under this clause shall be
determined by the Secretary.
``(iv) Limitation.--In no case shall more
than 25 full-time equivalent additional
residency positions be made available under
this subparagraph with respect to any hospital.
``(v) Application of locality adjusted
national average per resident amount.--With
respect to additional residency positions in a
hospital attributable to the increase provided
under this subparagraph, notwithstanding any
other provision of this subsection, the
approved FTE resident amount is deemed to be
equal to the locality adjusted national average
per resident amount computed under paragraph
(4)(E) for that hospital.
``(vi) Construction.--Nothing in this
subparagraph shall be construed as permitting
the redistribution of reductions in residency
positions attributable to voluntary reduction
programs under paragraph (6), under a
demonstration project approved as of October
31, 2003, under the authority of section 402 of
Public Law 90-248, or as affecting the ability
of a hospital to establish new medical
residency training programs under paragraph
(4)(H).
``(C) Resident level and limit defined.--In this
paragraph:
``(i) Resident level.--The term `resident
level' means, with respect to a hospital, the
total number of full-time equivalent residents,
before the application of weighting factors (as
determined under paragraph (4)), in the fields
of allopathic and osteopathic medicine for the
hospital.
``(ii) Otherwise applicable resident
limit.--The term `otherwise applicable resident
limit' means, with respect to a hospital, the
limit otherwise applicable under subparagraphs
(F)(i) and (H) of paragraph (4) on the resident
level for the hospital determined without
regard to this paragraph.
``(D) Judicial review.--There shall be no
administrative or judicial review under section 1869,
1878, or otherwise, with respect to determinations made
under this paragraph.''.
(b) Conforming Provisions.--(1) Section 1886(d)(5)(B) (42 U.S.C.
1395ww(d)(5)(B)) is amended--
(A) in the second sentence of clause (ii), by striking
``For discharges'' and inserting ``Subject to clause (ix), for
discharges''; and
(B) in clause (v), by adding at the end the following:
``The provisions of subsection (h)(7) shall apply with respect
to the first sentence of this clause in the same manner as it
applies with respect to subsection (h)(4)(F)(i).''; and
(C) by adding at the end the following new clause:
``(ix) For discharges occurring on or after July 1, 2005,
insofar as an additional payment amount under this subparagraph
is attributable to resident positions redistributed to a
hospital under subsection (h)(7)(B), in computing the indirect
teaching adjustment factor under clause (ii) the adjustment
shall be computed in a manner as if `c' were equal to 0.66 with
respect to such resident positions.''.
(2) Chapter 35 of title 44, United States Code, shall not apply
with respect to applications under section 1886(h)(7) of the Social
Security Act, as added by subsection (a)(3).
(c) Report on Extension of Applications Under Redistribution
Program.--Not later than July 1, 2005, the Secretary shall submit to
Congress a report containing recommendations regarding whether to
extend the deadline for applications for an increase in resident limits
under section 1886(h)(4)(I)(ii)(II) of the Social Security Act (as
added by subsection (a)).

Subtitle D--Other Provisions

SEC. 131. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE EFFORTS THAT
BENEFIT MEDICALLY UNDERSERVED POPULATIONS.

(a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7(b)(3)), as
amended by section 101(e)(2), is amended--
(1) in subparagraph (F), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (G), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(H) any remuneration between a health center
entity described under clause (i) or (ii) of section
1905(l)(2)(B) and any individual or entity providing
goods, items, services, donations, loans, or a
combination thereof, to such health center entity
pursuant to a contract, lease, grant, loan, or other
agreement, if such agreement contributes to the ability
of the health center entity to maintain or increase the
availability, or enhance the quality, of services
provided to a medically underserved population served
by the health center entity.''.
(b) Rulemaking for Exception for Health Center Entity
Arrangements.--
(1) Establishment.--
(A) In general.--The Secretary shall establish, on
an expedited basis, standards relating to the exception
described in section 1128B(b)(3)(H) of the Social
Security Act, as added by subsection (a), for health
center entity arrangements to the antikickback
penalties.
(B) Factors to consider.--The Secretary shall
consider the following factors, among others, in
establishing standards relating to the exception for
health center entity arrangements under subparagraph
(A):
(i) Whether the arrangement between the
health center entity and the other party
results in savings of Federal grant funds or
increased revenues to the health center entity.
(ii) Whether the arrangement between the
health center entity and the other party
restricts or limits an individual's freedom of
choice.
(iii) Whether the arrangement between the
health center entity and the other party
protects a health care professional's
independent medical judgment regarding
medically appropriate treatment.
The Secretary may also include other standards and
criteria that are consistent with the intent of
Congress in enacting the exception established under
this section.
(2) Deadline.--Not later than 1 year after the date of the
enactment of this Act the Secretary shall publish final
regulations establishing the standards described in paragraph
(1).

SEC. 132. OFFICE OF RURAL HEALTH POLICY IMPROVEMENTS.

Section 711(b) (42 U.S.C. 912(b)) is amended--
(1) in paragraph (3), by striking ``and'' after the comma
at the end;
(2) in paragraph (4), by striking the period at the end and
inserting ``, and''; and
(3) by inserting after paragraph (4) the following new
paragraph:
``(5) administer grants, cooperative agreements, and
contracts to provide technical assistance and other activities
as necessary to support activities related to improving health
care in rural areas.''.

SEC. 133. MEDPAC STUDY ON RURAL HOSPITAL PAYMENT ADJUSTMENTS.

(a) In General.--The Medicare Payment Advisory Commission shall
conduct a study of the impact of sections 401 through 406, 411, 416,
and 505. The Commission shall analyze the effect on total payments,
growth in costs, capital spending, and such other payment effects under
those sections.
(b) Reports.--
(1) Interim report.--Not later than 18 months after the
date of the enactment of this Act, the Commission shall submit
to Congress an interim report on the matters studied under
subsection (a) with respect only to changes to the critical
access hospital provisions under section 105.
(2) Final report.--Not later than 3 years after the date of
the enactment of this Act, the Commission shall submit to
Congress a final report on all matters studied under subsection
(a).

SEC. 134. FRONTIER EXTENDED STAY CLINIC DEMONSTRATION PROJECT.

(a) Authority To Conduct Demonstration Project.--The Secretary
shall waive such provisions of the medicare program established under
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as are
necessary to conduct a demonstration project under which frontier
extended stay clinics described in subsection (b) in isolated rural
areas are treated as providers of items and services under the medicare
program.
(b) Clinics Described.--A frontier extended stay clinic is
described in this subsection if the clinic--
(1) is located in a community where the closest short-term
acute care hospital or critical access hospital is at least 75
miles away from the community or is inaccessible by public
road; and
(2) is designed to address the needs of--
(A) seriously or critically ill or injured patients
who, due to adverse weather conditions or other
reasons, cannot be transferred quickly to acute care
referral centers; or
(B) patients who need monitoring and observation
for a limited period of time.
(c) Specification of Codes.--The Secretary shall determine the
appropriate life-safety codes for such clinics that treat patients for
needs referred to in subsection (b)(2).
(d) Funding.--
(1) In general.--Subject to paragraph (2), there are
authorized to be appropriated, in appropriate part from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund, such sums as are
necessary to conduct the demonstration project under this
section.
(2) Budget neutral implementation.--In conducting the
demonstration project under this section, the Secretary shall
ensure that the aggregate payments made by the Secretary under
the medicare program do not exceed the amount which the
Secretary would have paid under the medicare program if the
demonstration project under this section was not implemented.
(e) 3-Year Period.--The Secretary shall conduct the demonstration
under this section for a 3-year period.
(f) Report.--Not later than the date that is 1 year after the date
on which the demonstration project concludes, the Secretary shall
submit to Congress a report on the demonstration project, together with
such recommendations for legislation or administrative action as the
Secretary determines appropriate.
(g) Definitions.--In this section, the terms ``hospital'' and
``critical access hospital'' have the meanings given such terms in
subsections (e) and (mm), respectively, of section 1861 of the Social
Security Act (42 U.S.C. 1395x).

TITLE II--PROVISIONS RELATING TO PART A

Subtitle A--Inpatient Hospital Services

SEC. 201. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

(a) In General.--Section 1886(b)(3)(B)(i) (42 U.S.C.
1395ww(b)(3)(B)(i)) is amended--
(1) by striking ``and'' at the end of subclause (XVIII);
(2) by striking subclause (XIX); and
(3) by inserting after subclause (XVIII) the following new
subclauses:
``(XIX) for each of fiscal years 2004 through 2007, subject
to clause (vii), the market basket percentage increase for
hospitals in all areas; and
``(XX) for fiscal year 2008 and each subsequent fiscal
year, the market basket percentage increase for hospitals in
all areas.''.
(b) Submission of Hospital Quality Data.--Section 1886(b)(3)(B) (42
U.S.C. 1395ww(b)(3)(B)) is amended by adding at the end the following
new clause:
``(vii)(I) For purposes of clause (i)(XIX) for each of fiscal years
2005 through 2007, in a case of a subsection (d) hospital that does not
submit data to the Secretary in accordance with subclause (II) with
respect to such a fiscal year, the applicable percentage increase under
such clause for such fiscal year shall be reduced by 0.4 percentage
points. Such reduction shall apply only with respect to the fiscal year
involved, and the Secretary shall not take into account such reduction
in computing the applicable percentage increase under clause (i)(XIX)
for a subsequent fiscal year.
``(II) Each subsection (d) hospital shall submit to the Secretary
quality data (for a set of 10 indicators established by the Secretary
as of November 1, 2003) that relate to the quality of care furnished by
the hospital in inpatient settings in a form and manner, and at a time,
specified by the Secretary for purposes of this clause, but with
respect to fiscal year 2005, the Secretary shall provide for a 30-day
grace period for the submission of data by a hospital.''.
(c) GAO Study and Report on Appropriateness of Payments Under the
Prospective Payment System for Inpatient Hospital Services.--
(1) Study.--The Comptroller General of the United States,
using the most current data available, shall conduct a study to
determine--
(A) the appropriate level and distribution of
payments in relation to costs under the prospective
payment system under section 1886 of the Social
Security Act (42 U.S.C. 1395ww) for inpatient hospital
services furnished by subsection (d) hospitals (as
defined in subsection (d)(1)(B) of such section); and
(B) whether there is a need to adjust such payments
under such system to reflect legitimate differences in
costs across different geographic areas, kinds of
hospitals, and types of cases.
(2) Report.--Not later than 24 months after the date of the
enactment of this Act, the Comptroller General of the United
States shall submit to Congress a report on the study conducted
under paragraph (1) together with such recommendations for
legislative and administrative action as the Comptroller
General determines appropriate.

SEC. 202. REVISION OF THE INDIRECT MEDICAL EDUCATION (IME) ADJUSTMENT
PERCENTAGE.

(a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C.
1395ww(d)(5)(B)(ii)) is amended--
(1) in subclause (VI), by striking ``and'' after the
semicolon at the end;
(2) in subclause (VII)--
(A) by inserting ``and before April 1, 2004,''
after ``on or after October 1, 2002,''; and
(B) by striking the period at the end and inserting
a semicolon; and
(3) by adding at the end the following new subclauses:
``(VIII) on or after April 1, 2004, and before
October 1, 2004, `c' is equal to 1.47;
``(IX) during fiscal year 2005, `c' is equal to
1.42;
``(X) during fiscal year 2006, `c' is equal to
1.37;
``(XI) during fiscal year 2007, `c' is equal to
1.32; and
``(XII) on or after October 1, 2007, `c' is equal
to 1.35.''.
(b) Conforming Amendment Relating to Determination of Standardized
Amount.--Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended--
(1) by striking ``1999 or'' and inserting ``1999,''; and
(2) by inserting ``, or the Medicare Provider Restoration
Act of 2003'' after ``2000''.
(c) Effective Date.--The amendments made by this section shall
apply to discharges occurring on or after April 1, 2004.

SEC. 203. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT
HOSPITAL PROSPECTIVE PAYMENT SYSTEM.

(a) Improving Timeliness of Data Collection.--Section 1886(d)(5)(K)
(42 U.S.C. 1395ww(d)(5)(K)) is amended by adding at the end the
following new clause:
``(vii) Under the mechanism under this subparagraph, the Secretary
shall provide for the addition of new diagnosis and procedure codes in
April 1 of each year, but the addition of such codes shall not require
the Secretary to adjust the payment (or diagnosis-related group
classification) under this subsection until the fiscal year that begins
after such date.''.
(b) Eligibility Standard for Technology Outliers.--
(1) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I)
(42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting
``(applying a threshold specified by the Secretary that is the
lesser of 75 percent of the standardized amount (increased to
reflect the difference between cost and charges) or 75 percent
of one standard deviation for the diagnosis-related group
involved)'' after ``is inadequate''.
(2) Process for public input.--Section 1886(d)(5)(K) (42
U.S.C. 1395ww(d)(5)(K)), as amended by subsection (a), is
amended--
(A) in clause (i), by adding at the end the
following: ``Such mechanism shall be modified to meet
the requirements of clause (viii).''; and
(B) by adding at the end the following new clause:
``(viii) The mechanism established pursuant to clause (i) shall be
adjusted to provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of individuals entitled to benefits under part A 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, such
individuals, manufacturers, and any other interested party may
present comments, recommendations, and data to the clinical
staff of the Centers for Medicare & Medicaid Services before
publication of a notice of proposed rulemaking regarding
whether service or technology represents a substantial
improvement.''.
(c) Preference for Use of DRG Adjustment.--Section 1886(d)(5)(K)
(42 U.S.C. 1395ww(d)(5)(K)), as amended by subsections (a) and (b), is
amended by adding at the end the following new clause:
``(ix) Before establishing any add-on payment under this
subparagraph with respect to a new technology, the Secretary shall seek
to identify one or more diagnosis-related groups associated with such
technology, based on similar clinical or anatomical characteristics and
the cost of the technology. Within such groups the Secretary shall
assign an eligible new technology into a diagnosis-related group where
the average costs of care most closely approximate the costs of care of
using the new technology. No add-on payment under this subparagraph
shall be made with respect to such new technology and this clause shall
not affect the application of paragraph (4)(C)(iii).''.
(d) Establishment of New Funding for Hospital Inpatient
Technology.--
(1) In general.--Section 1886(d)(5)(K)(ii)(III) (42 U.S.C.
1395ww(d)(5)(K)(ii)(III)) is amended by striking ``subject to
paragraph (4)(C)(iii),''.
(2) Not budget neutral.--There shall be no reduction or
other adjustment in payments under section 1886 of the Social
Security Act because an additional payment is provided under
subsection (d)(5)(K)(ii)(III) of such section.
(e) Effective Date.--
(1) In general.--The Secretary shall implement the
amendments made by this section so that they apply to
classification for fiscal years beginning with fiscal year
2005.
(2) Reconsiderations of applications for fiscal year 2004
that are denied.--In the case of an application for a
classification of a medical service or technology as a new
medical service or technology under section 1886(d)(5)(K) of
the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was
filed for fiscal year 2004 and that is denied--
(A) the Secretary shall automatically reconsider
the application as an application for fiscal year 2005
under the amendments made by this section; and
(B) the maximum time period otherwise permitted for
such classification of the service or technology shall
be extended by 12 months.

SEC. 204. INCREASE IN FEDERAL RATE FOR HOSPITALS IN PUERTO RICO.

Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``for discharges
beginning on or after October 1, 1997, 50 percent (and
for discharges between October 1, 1987, and September
30, 1997, 75 percent)'' and inserting ``the applicable
Puerto Rico percentage (specified in subparagraph
(E))''; and
(B) in clause (ii), by striking ``for discharges
beginning in a fiscal year beginning on or after
October 1, 1997, 50 percent (and for discharges between
October 1, 1987, and September 30, 1997, 25 percent)''
and inserting ``the applicable Federal percentage
(specified in subparagraph (E))''; and
(2) by adding at the end the following new subparagraph:
``(E) For purposes of subparagraph (A), for discharges occurring--
``(i) on or after October 1, 1987, and before October 1,
1997, the applicable Puerto Rico percentage is 75 percent and
the applicable Federal percentage is 25 percent;
``(ii) on or after October 1, 1997, and before April 1,
2004, the applicable Puerto Rico percentage is 50 percent and
the applicable Federal percentage is 50 percent;
``(iii) on or after April 1, 2004, and before October 1,
2004, the applicable Puerto Rico percentage is 37.5 percent and
the applicable Federal percentage is 62.5 percent; and
``(iv) on or after October 1, 2004, the applicable Puerto
Rico percentage is 25 percent and the applicable Federal
percentage is 75 percent.''.

SEC. 205. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM.

(a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)), as amended
by section 106, is amended by adding at the end the following new
paragraph:
``(13)(A) In order to recognize commuting patterns among geographic
areas, the Secretary shall establish a process through application or
otherwise for an increase of the wage index applied under paragraph
(3)(E) for subsection (d) hospitals located in a qualifying county
described in subparagraph (B) in the amount computed under subparagraph
(D) based on out-migration of hospital employees who reside in that
county to any higher wage index area.
``(B) The Secretary shall establish criteria for a qualifying
county under this subparagraph based on the out-migration referred to
in subparagraph (A) and differences in the area wage indices. Under
such criteria the Secretary shall, utilizing such data as the Secretary
determines to be appropriate, establish--
``(i) a threshold percentage, established by the Secretary,
of the weighted average of the area wage index or indices for
the higher wage index areas involved;
``(ii) a threshold (of not less than 10 percent) for
minimum out-migration to a higher wage index area or areas; and
``(iii) a requirement that the average hourly wage of the
hospitals in the qualifying county equals or exceeds the
average hourly wage of all the hospitals in the area in which
the qualifying county is located.
``(C) For purposes of this paragraph, the term `higher wage index
area' means, with respect to a county, an area with a wage index that
exceeds that of the county.
``(D) The increase in the wage index under subparagraph (A) for a
qualifying county shall be equal to the percentage of the hospital
employees residing in the qualifying county who are employed in any
higher wage index area multiplied by the sum of the products, for each
higher wage index area of--
``(i) the difference between--
``(I) the wage index for such higher wage index
area, and
``(II) the wage index of the qualifying county; and
``(ii) the number of hospital employees residing in the
qualifying county who are employed in such higher wage index
area divided by the total number of hospital employees residing
in the qualifying county who are employed in any higher wage
index area.
``(E) The process under this paragraph may be based upon the
process used by the Medicare Geographic Classification Review Board
under paragraph (10). As the Secretary determines to be appropriate to
carry out such process, the Secretary may require hospitals (including
subsection (d) hospitals and other hospitals) and critical access
hospitals, as required under section 1866(a)(1)(T), to submit data
regarding the location of residence, or the Secretary may use data from
other sources.
``(F) A wage index increase under this paragraph shall be effective
for a period of 3 fiscal years, except that the Secretary shall
establish procedures under which a subsection (d) hospital may elect to
waive the application of such wage index increase.
``(G) A hospital in a county that has a wage index increase under
this paragraph for a period and that has not waived the application of
such an increase under subparagraph (F) is not eligible for
reclassification under paragraph (8) or (10) during that period.
``(H) Any increase in a wage index under this paragraph for a
county shall not be taken into account for purposes of--
``(i) computing the wage index for portions of the wage
index area (not including the county) in which the county is
located; or
``(ii) applying any budget neutrality adjustment with
respect to such index under paragraph (8)(D).
``(I) The thresholds described in subparagraph (B), data on
hospital employees used under this paragraph, and any determination of
the Secretary under the process described in subparagraph (E) shall be
final and shall not be subject to judicial review.''.
(b) Conforming Amendments.--Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended--
(1) in subparagraph (R), by striking ``and'' at the end;
(2) in subparagraph (S), by striking the period at the end
and inserting ``, and''; and
(3) by inserting after subparagraph (S) the following new
subparagraph:
``(T) in the case of hospitals and critical access
hospitals, to furnish to the Secretary such data as the
Secretary determines appropriate pursuant to subparagraph (E)
of section 1886(d)(12) to carry out such section.''.
(c) Effective Date.--The amendments made by this section shall
first apply to the wage index for discharges occurring on or after
October 1, 2004. In initially implementing such amendments, the
Secretary may modify the deadlines otherwise applicable under clauses
(ii) and (iii)(I) of section 1886(d)(10)(C) of the Social Security Act
(42 U.S.C. 1395ww(d)(10)(C)), for submission of, and actions on,
applications relating to changes in hospital geographic
reclassification.

SEC. 206. LIMITATION ON CHARGES FOR INPATIENT HOSPITAL CONTRACT HEALTH
SERVICES PROVIDED TO INDIANS BY MEDICARE PARTICIPATING
HOSPITALS.

(a) In General.--Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)), as
amended by section 205(b), is amended--
(1) in subparagraph (S), by striking ``and'' at the end;
(2) in subparagraph (T), by striking the period and
inserting ``, and''; and
(3) by inserting after subparagraph (T) the following new
subparagraph:
``(U) in the case of hospitals which furnish
inpatient hospital services for which payment may be
made under this title, to be a participating provider
of medical care both--
``(i) under the contract health services
program funded by the Indian Health Service and
operated by the Indian Health Service, an
Indian tribe, or tribal organization (as those
terms are defined in section 4 of the Indian
Health Care Improvement Act), with respect to
items and services that are covered under such
program and furnished to an individual eligible
for such items and services under such program;
and
``(ii) under any program funded by the
Indian Health Service and operated by an urban
Indian organization with respect to the
purchase of items and services for an eligible
urban Indian (as those terms are defined in
such section 4),
in accordance with regulations promulgated by the
Secretary regarding admission practices, payment
methodology, and rates of payment (including the
acceptance of no more than such payment rate as payment
in full for such items and services.''.
(b) Effective Date.--The amendments made by this section shall
apply as of a date specified by the Secretary of Health and Human
Services (but in no case later than 1 year after the date of enactment
of this Act) to medicare participation agreements in effect (or entered
into) on or after such date.
(c) Promulgation of Regulations.--The Secretary shall promulgate
regulations to carry out the amendments made by subsection (a).

SEC. 207. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE LIMITS ON
PHYSICIAN REFERRALS.

(a) Limits on Physician Referrals.--
(1) Ownership and investment interests in whole
hospitals.--
(A) In general.--Section 1877(d)(3) (42 U.S.C.
1395nn(d)(3)) is amended--
(i) by striking ``, and'' at the end of
subparagraph (A) and inserting a semicolon; and
(ii) by redesignating subparagraph (B) as
subparagraph (C) and inserting after
subparagraph (A) the following new
subparagraph:
``(B) effective for the 18-month period beginning
on the date of the enactment of the Medicare Provider
Restoration Act of 2003, the hospital is not a
specialty hospital (as defined in subsection (h)(7));
and''.
(B) Definition.--Section 1877(h) (42 U.S.C.
1395nn(h)) is amended by adding at the end the
following:
``(7) Specialty hospital.--
``(A) In general.--For purposes of this section,
except as provided in subparagraph (B), the term
`specialty hospital' means a subsection (d) hospital
(as defined in section 1886(d)(1)(B)) that is primarily
or exclusively engaged in the care and treatment of one
of the following categories:
``(i) Patients with a cardiac condition.
``(ii) Patients with an orthopedic
condition.
``(iii) Patients receiving a surgical
procedure.
``(iv) Any other specialized category of
services that the Secretary designates as
inconsistent with the purpose of permitting
physician ownership and investment interests in
a hospital under this section.
``(B) Exception.--For purposes of this section, the
term `specialty hospital' does not include any
hospital--
``(i) determined by the Secretary--
``(I) to be in operation before
November 18, 2003; or
``(II) under development as of such
date;
``(ii) for which the number of physician
investors at any time on or after such date is
no greater than the number of such investors as
of such date;
``(iii) for which the type of categories
described in subparagraph (A) at any time on or
after such date is no different than the type
of such categories as of such date;
``(iv) for which any increase in the number
of beds occurs only in the facilities on the
main campus of the hospital and does not exceed
50 percent of the number of beds in the
hospital as of November 18, 2003, or 5 beds,
whichever is greater; and
``(v) that meets such other requirements as
the Secretary may specify.''.
(2) Ownership and investment interests in a rural
provider.--Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is
amended to read as follows:
``(2) Rural providers.--In the case of designated health
services furnished in a rural area (as defined in section
1886(d)(2)(D)) by an entity, if--
``(A) substantially all of the designated health
services furnished by the entity are furnished to
individuals residing in such a rural area; and
``(B) effective for the 18-month period beginning
on the date of the enactment of the Medicare Provider
Restoration Act of 2003, the entity is not a specialty
hospital (as defined in subsection (h)(7)).''.
(b) Application of Exception for Hospitals Under Development.--For
purposes of section 1877(h)(7)(B)(i)(II) of the Social Security Act, as
added by subsection (a)(1)(B), in determining whether a hospital is
under development as of November 18, 2003, the Secretary shall
consider--
(1) whether architectural plans have been completed,
funding has been received, zoning requirements have been met,
and necessary approvals from appropriate State agencies have
been received; and
(2) any other evidence the Secretary determines would
indicate whether a hospital is under development as of such
date.
(c) Studies.--
(1) MedPAC study.--The Medicare Payment Advisory
Commission, in consultation with the Comptroller General of the
United States, shall conduct a study to determine--
(A) any differences in the costs of health care
services furnished to patients by physician-owned
specialty hospitals and the costs of such services
furnished by local full-service community hospitals
within specific diagnosis-related groups;
(B) the extent to which specialty hospitals,
relative to local full-service community hospitals,
treat patients in certain diagnosis-related groups
within a category, such as cardiology, and an analysis
of the selection;
(C) the financial impact of physician-owned
specialty hospitals on local full-service community
hospitals;
(D) how the current diagnosis-related group system
should be updated to better reflect the cost of
delivering care in a hospital setting; and
(E) the proportions of payments received, by type
of payer, between the specialty hospitals and local
full-service community hospitals.
(2) HHS study.--The Secretary shall conduct a study of a
representative sample of specialty hospitals--
(A) to determine the percentage of patients
admitted to physician-owned specialty hospitals who are
referred by physicians with an ownership interest;
(B) to determine the referral patterns of physician
owners, including the percentage of patients they
referred to physician-owned specialty hospitals and the
percentage of patients they referred to local full-
service community hospitals for the same condition;
(C) to compare the quality of care furnished in
physician-owned specialty hospitals and in local full-
service community hospitals for similar conditions and
patient satisfaction with such care; and
(D) to assess the differences in uncompensated
care, as defined by the Secretary, between the
specialty hospital and local full-service community
hospitals, and the relative value of any tax exemption
available to such hospitals.
(3) Reports.--Not later than 15 months after the date of
the enactment of this Act, the Commission and the Secretary,
respectively, shall each submit to Congress a report on the
studies conducted under paragraphs (1) and (2), respectively,
and shall include any recommendations for legislation or
administrative changes.

SEC. 208. 1-TIME APPEALS PROCESS FOR HOSPITAL WAGE INDEX
CLASSIFICATION.

(a) Establishment of Process.--
(1) In general.--The Secretary shall establish not later
than January 1, 2004, by instruction or otherwise a process
under which a hospital may appeal the wage index classification
otherwise applicable to the hospital and select another area
within the State (or, at the discretion of the Secretary,
within a contiguous State) to which to be reclassified.
(2) Process requirements.--The process established under
paragraph (1) shall be consistent with the following:
(A) Such an appeal may be filed as soon as possible
after the date of the enactment of this Act but shall
be filed by not later than February 15, 2004.
(B) Such an appeal shall be heard by the Medicare
Geographic Reclassification Review Board.
(C) There shall be no further administrative or
judicial review of a decision of such Board.
(3) Reclassification upon successful appeal.--If the
Medicare Geographic Reclassification Review Board determines
that the hospital is a qualifying hospital (as defined in
subsection (c)), the hospital shall be reclassified to the area
selected under paragraph (1). Such reclassification shall apply
with respect to discharges occurring during the 3-year period
beginning with April 1, 2004.
(4) Inapplicability of certain provisions.--Except as the
Secretary may provide, the provisions of paragraphs (8) and
(10) of section 1886(d) of the Social Security Act (42 U.S.C.
1395ww(d)) shall not apply to an appeal under this section.
(b) Application of Reclassification.--In the case of an appeal
decided in favor of a qualifying hospital under subsection (a), the
wage index reclassification shall not affect the wage index computation
for any area or for any other hospital and shall not be effected in a
budget neutral manner. The provisions of this section shall not affect
payment for discharges occurring after the end of the 3-year-period
referred to in subsection (a).
(c) Qualifying Hospital Defined.--For purposes of this section, the
term ``qualifying hospital'' means a subsection (d) hospital (as
defined in section 1886(d)(1)(B) of the Social Security Act, 42 U.S.C.
1395ww(d)(1)(B)) that--
(1) does not qualify for a change in wage index
classification under paragraph (8) or (10) of section 1886(d)
of the Social Security Act (42 U.S.C. 1395ww(d)) on the basis
of requirements relating to distance or commuting; and
(2) meets such other criteria, such as quality, as the
Secretary may specify by instruction or otherwise.
The Secretary may modify the wage comparison guidelines promulgated
under section 1886(d)(10)(D) of such Act (42 U.S.C. 1395ww(d)(10)(D))
in carrying out this section.
(d) Wage Index Classification.--For purposes of this section, the
term ``wage index classification'' means the geographic area in which
it is classified for purposes of determining for a fiscal year the
factor used to adjust the DRG prospective payment rate under section
1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) for area
differences in hospital wage levels that applies to such hospital under
paragraph (3)(E) of such section.
(e) Limitation on Expenditures.--The aggregate amount of additional
expenditures resulting from the application of this section shall not
exceed $900,000,000.
(f) Transitional Extension.--Any reclassification of a county or
other area made by Act of Congress for purposes of making payments
under section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d))
that expired on September 30, 2003, shall be deemed to be in effect
during the period beginning on January 1, 2004, and ending on September
30, 2004.

Subtitle B--Other Provisions

SEC. 211. PAYMENT FOR COVERED SKILLED NURSING FACILITY SERVICES.

(a) Adjustment to RUGs for AIDS Residents.--Paragraph (12) of
section 1888(e) (42 U.S.C. 1395yy(e)) is amended to read as follows:
``(12) Adjustment for residents with aids.--
``(A) In general.--Subject to subparagraph (B), in
the case of a resident of a skilled nursing facility
who is afflicted with acquired immune
deficiency syndrome (AIDS), the per diem amount of payment otherwise
applicable (determined without regard to any increase under section 101
of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, or under section 314(a) of Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000), shall be increased by 128
percent to reflect increased costs associated with such residents.
``(B) Sunset.--Subparagraph (A) shall not apply on
and after such date as the Secretary certifies that
there is an appropriate adjustment in the case mix
under paragraph (4)(G)(i) to compensate for the
increased costs associated with residents described in
such subparagraph.''.
(b) Effective Date.--The amendment made by paragraph (1) shall
apply to services furnished on or after October 1, 2004.

SEC. 212. COVERAGE OF HOSPICE CONSULTATION SERVICES.

(a) Coverage of Hospice Consultation Services.--Section 1812(a) (42
U.S.C. 1395d(a)) is amended--
(1) by striking ``and'' at the end of paragraph (3);
(2) by striking the period at the end of paragraph (4) and
inserting ``; and''; and
(3) by inserting after paragraph (4) the following new
paragraph:
``(5) for individuals who are terminally ill, have not made
an election under subsection (d)(1), and have not previously
received services under this paragraph, services that are
furnished by a physician (as defined in section 1861(r)(1)) who
is either the medical director or an employee of a hospice
program and that--
``(A) consist of--
``(i) an evaluation of the individual's
need for pain and symptom management, including
the individual's need for hospice care; and
``(ii) counseling the individual with
respect to hospice care and other care options;
and
``(B) may include advising the individual regarding
advanced care planning.''.
(b) Payment.--Section 1814(i) (42 U.S.C. 1395f(i)) is amended by
adding at the end the following new paragraph:
``(4) The amount paid to a hospice program with respect to the
services under section 1812(a)(5) for which payment may be made under
this part shall be equal to an amount established for an office or
other outpatient visit for evaluation and management associated with
presenting problems of moderate severity and requiring medical
decisionmaking of low complexity under the fee schedule established
under section 1848(b), other than the portion of such amount
attributable to the practice expense component.''.
(c) Conforming Amendment.--Section 1861(dd)(2)(A)(i) (42 U.S.C.
1395x(dd)(2)(A)(i)) is amended by inserting before the comma at the end
the following: ``and services described in section 1812(a)(5)''.
(d) Effective Date.--The amendments made by this section shall
apply to services provided by a hospice program on or after January 1,
2005.

SEC. 213. STUDY ON PORTABLE DIAGNOSTIC ULTRASOUND SERVICES FOR
BENEFICIARIES IN SKILLED NURSING FACILITIES.

(a) Study.--The Comptroller General of the United States shall
conduct a study of portable diagnostic ultrasound services furnished to
medicare beneficiaries in skilled nursing facilities. Such study shall
consider the following:
(1) Types of equipment; training.--The types of portable
diagnostic ultrasound services furnished to such beneficiaries,
the types of portable ultrasound equipment used to furnish such
services, and the technical skills, or training, or both,
required for technicians to furnish such services.
(2) Clinical appropriateness.--The clinical appropriateness
of transporting portable diagnostic ultrasound diagnostic and
technicians to patients in skilled nursing facilities as
opposed to transporting such patients to a hospital or other
facility that furnishes diagnostic ultrasound services.
(3) Financial impact.--The financial impact if Medicare
were make a separate payment for portable ultrasound diagnostic
services, including the impact of separate payments--
(A) for transportation and technician services for
residents during a resident in a part A stay, that
would otherwise be paid for under the prospective
payment system for covered skilled nursing facility
services (under section 1888(e) of the Social Security
Act (42 U.S.C. 1395yy(e)); and
(B) for such services for residents in a skilled
nursing facility after a part A stay.
(4) Credentialing requirements.--Whether the Secretary
should establish credentialing or other requirements for
technicians that furnish diagnostic ultrasound services to
medicare beneficiaries.
(b) Report.--Not later than 2 years after the date of the enactment
of this Act, the Comptroller General shall submit to Congress a report
on the study conducted under subsection (a), and shall include any
recommendations for legislation or administrative change as the
Comptroller General determines appropriate.

TITLE III--PROVISIONS RELATING TO PART B

Subtitle A--Provisions Relating to Physicians' Services

SEC. 301. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

(a) Update for 2004 and 2005.--
(1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is
amended by adding at the end the following new paragraph:
``(5) Update for 2004 and 2005.--The update to the single
conversion factor established in paragraph (1)(C) for each of
2004 and 2005 shall be not less than 1.5 percent.''.
(2) Conforming amendment.--Paragraph (4)(B) of such section
is amended, in the matter before clause (i), by inserting ``and
paragraph (5)'' after ``subparagraph (D)''.
(3) Not treated as change in law and regulation in
sustainable growth rate determination.--The amendments made by
this subsection shall not be treated as a change in law for
purposes of applying section 1848(f)(2)(D) of the Social
Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
(b) Use of 10-Year Rolling Average in Computing Gross Domestic
Product.--
(1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
4(f)(2)(C)) is amended--
(A) by striking ``projected'' and inserting
``annual average''; and
(B) by striking ``from the previous applicable
period to the applicable period involved'' and
inserting ``during the 10-year period ending with the
applicable period involved''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to computations of the sustainable growth rate for
years beginning with 2003.

SEC. 302. TREATMENT OF PHYSICIANS' SERVICES FURNISHED IN ALASKA.

Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)), as amended by section
121, is amended--
(1) in subparagraph (A), by striking ``subparagraphs (B),
(C), (E), and (F)'' and inserting ``subparagraphs (B), (C),
(E), (F) and (G)''; and
(2) by adding at the end the following new subparagraph:
``(G) Floor for practice expense, malpractice, and
work geographic indices for services furnished in
alaska.--For purposes of payment for services furnished
in Alaska on or after January 1, 2004, and before
January 1, 2006, after calculating the practice
expense, malpractice, and work geographic indices in
clauses (i), (ii), and (iii) of subparagraph (A) and in
subparagraph (B), the Secretary shall increase any such
index to 1.67 if such index would otherwise be less
than 1.67.''.

SEC. 303. INCLUSION OF PODIATRISTS, DENTISTS, AND OPTOMETRISTS UNDER
PRIVATE CONTRACTING AUTHORITY.

Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(B)) is amended by
striking ``section 1861(r)(1)'' and inserting ``paragraphs (1), (2),
(3), and (4) of section 1861(r)''.

SEC. 304. GAO STUDY ON ACCESS TO PHYSICIANS' SERVICES.

(a) Study.--The Comptroller General of the United States shall
conduct a study on access of medicare beneficiaries to physicians'
services under the medicare program. The study shall include--
(1) an assessment of the use by beneficiaries of such
services through an analysis of claims submitted by physicians
for such services under part B of the medicare program;
(2) an examination of changes in the use by beneficiaries
of physicians' services over time; and
(3) an examination of the extent to which physicians are
not accepting new medicare beneficiaries as patients.
(b) Report.--Not later than 18 months after the date of the
enactment of this Act, the Comptroller General shall submit to Congress
a report on the study conducted under subsection (a). The report shall
include a determination whether--
(1) data from claims submitted by physicians under part B
of the medicare program indicate potential access problems for
medicare beneficiaries in certain geographic areas; and
(2) access by medicare beneficiaries to physicians'
services may have improved, remained constant, or deteriorated
over time.

SEC. 305. COLLABORATIVE DEMONSTRATION-BASED REVIEW OF PHYSICIAN
PRACTICE EXPENSE GEOGRAPHIC ADJUSTMENT DATA.

(a) In General.--Not later than January 1, 2005, the Secretary
shall, in collaboration with State and other appropriate organizations
representing physicians, and other appropriate persons, review and
consider alternative data sources than those currently used in
establishing the geographic index for the practice expense component
under the medicare physician fee schedule under section
1848(e)(1)(A)(i) of the Social Security Act (42 U.S.C. 1395w-
4(e)(1)(A)(i)).
(b) Sites.--The Secretary shall select two physician payment
localities in which to carry out subsection (a). One locality shall
include rural areas and at least one locality shall be a statewide
locality that includes both urban and rural areas.
(c) Report and Recommendations.--
(1) Report.--Not later than January 1, 2006, the Secretary
shall submit to Congress a report on the review and
consideration conducted under subsection (a). Such report shall
include information on the alternative developed data sources
considered by the Secretary under subsection (a), including the
accuracy and validity of the data as measures of the elements
of the geographic index for practice expenses under the
medicare physician fee schedule as well as the feasibility of
using such alternative data nationwide in lieu of current proxy
data used in such index, and the estimated impacts of using
such alternative data.
(2) Recommendations.--The report submitted under paragraph
(1) shall contain recommendations on which data sources
reviewed and considered under subsection (a) are appropriate
for use in calculating the geographic index for practice
expenses under the medicare physician fee schedule.

SEC. 306. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

(a) Practice Expense Component.--Not later than 1 year after the
date of the enactment of this Act, the Medicare Payment Advisory
Commission shall submit to Congress a report on the effect of
refinements to the practice expense component of payments for
physicians' services, after the transition to a full resource-based
payment system in 2002, under section 1848 of the Social Security Act
(42 U.S.C. 1395w-4). Such report shall examine the following matters by
physician specialty:
(1) The effect of such refinements on payment for
physicians' services.
(2) The interaction of the practice expense component with
other components of and adjustments to payment for physicians'
services under such section.
(3) The appropriateness of the amount of compensation by
reason of such refinements.
(4) The effect of such refinements on access to care by
medicare beneficiaries to physicians' services.
(5) The effect of such refinements on physician
participation under the medicare program.
(b) Volume of Physicians' Services.--Not later than 1 year after
the date of the enactment of this Act, the Medicare Payment Advisory
Commission shall submit to Congress a report on the extent to which
increases in the volume of physicians' services under part B of the
medicare program are a result of care that improves the health and
well-being of medicare beneficiaries. The study shall include the
following:
(1) An analysis of recent and historic growth in the
components that the Secretary includes under the sustainable
growth rate (under section 1848(f) of the Social Security Act
(42 U.S.C. 1395w-4(f))).
(2) An examination of the relative growth of volume in
physicians' services between medicare beneficiaries and other
populations.
(3) An analysis of the degree to which new technology,
including coverage determinations of the Centers for Medicare &
Medicaid Services, has affected the volume of physicians'
services.
(4) An examination of the impact on volume of demographic
changes.
(5) An examination of shifts in the site of service or
services that influence the number and intensity of services
furnished in physicians' offices and the extent to which
changes in reimbursement rates to other providers have effected
these changes.
(6) An evaluation of the extent to which the Centers for
Medicare & Medicaid Services takes into account the impact of
law and regulations on the sustainable growth rate.

Subtitle B--Preventive Services

SEC. 311. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL EXAMINATION.

(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is
amended--
(1) in subparagraph (U), by striking ``and'' at the end;
(2) in subparagraph (V)(iii), by inserting ``and'' at the
end; and
(3) by adding at the end the following new subparagraph:
``(W) an initial preventive physical examination (as
defined in subsection (ww));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended
by adding at the end the following new subsection:

``Initial Preventive Physical Examination

``(ww)(1) The term `initial preventive physical examination' means
physicians' services consisting of a physical examination (including
measurement of height, weight, and blood pressure, and an
electrocardiogram) with the goal of health promotion and disease
detection and includes education, counseling, and referral with respect
to screening and other preventive services described in paragraph (2),
but does not include clinical laboratory tests.
``(2) The screening and other preventive services described in this
paragraph include the following:
``(A) Pneumococcal, influenza, and hepatitis B vaccine and
administration under subsection (s)(10).
``(B) Screening mammography as defined in subsection (jj).
``(C) Screening pap smear and screening pelvic exam as
defined in subsection (nn).
``(D) Prostate cancer screening tests as defined in
subsection (oo).
``(E) Colorectal cancer screening tests as defined in
subsection (pp).
``(F) Diabetes outpatient self-management training services
as defined in subsection (qq)(1).
``(G) Bone mass measurement as defined in subsection (rr).
``(H) Screening for glaucoma as defined in subsection (uu).
``(I) Medical nutrition therapy services as defined in
subsection (vv).
``(J) Cardiovascular screening blood tests as defined in
subsection (xx)(1).
``(K) Diabetes screening tests as defined in subsection
(yy).''.
(c) Payment as Physicians' Services.--Section 1848(j)(3) (42 U.S.C.
1395w-4(j)(3)) is amended by inserting ``(2)(W),'' after ``(2)(S),''.
(d) Other Conforming Amendments.--(1) Section 1862(a) (42 U.S.C.
1395y(a)), as amended by section 303(i)(3)(B), is amended--
(A) in paragraph (1)--
(i) by striking ``and'' at the end of subparagraph
(I);
(ii) by striking the semicolon at the end of
subparagraph (J) and inserting ``, and''; and
(iii) by adding at the end the following new
subparagraph:
``(K) in the case of an initial preventive physical
examination, which is performed not later than 6 months after
the date the individual's first coverage period begins under
part B;''; a
(B) in paragraph (7), by striking ``or (H)'' and inserting
``(H), or (K)''.
(2) Clauses (i) and (ii) of section 1861(s)(2)(K) (42 U.S.C.
1395x(s)(2)(K)) are each amended by inserting ``and services described
in subsection (ww)(1)'' after ``services which would be physicians'
services''.
(e) Effective Date.--The amendments made by this section shall
apply to services furnished on or after January 1, 2005, but only for
individuals whose coverage period under part B begins on or after such
date.

SEC. 312. COVERAGE OF CARDIOVASCULAR SCREENING BLOOD TESTS.

(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as
amended by section 311(a), is amended--
(1) in subparagraph (V)(iii), by striking ``and'' at the
end;
(2) in subparagraph (W), by inserting ``and'' at the end;
and
(3) by adding at the end the following new subparagraph:
``(X) cardiovascular screening blood tests (as defined in
subsection (xx)(1));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended
by adding at the end the following new subsection:

``Cardiovascular Screening Blood Test

``(xx)(1) The term `cardiovascular screening blood test' means a
blood test for the early detection of cardiovascular disease (or
abnormalities associated with an elevated risk of cardiovascular
disease) that tests for the following:
``(A) Cholesterol levels and other lipid or triglyceride
levels.
``(B) Such other indications associated with the presence
of, or an elevated risk for, cardiovascular disease as the
Secretary may approve for all individuals (or for some
individuals determined by the Secretary to be at risk for
cardiovascular disease), including indications measured by
noninvasive testing.
The Secretary may not approve an indication under subparagraph (B) for
any individual unless a blood test for such is recommended by the
United States Preventive Services Task Force.
``(2) The Secretary shall establish standards, in consultation with
appropriate organizations, regarding the frequency for each type of
cardiovascular screening blood tests, except that such frequency may
not be more often than once every 2 years.''.
(c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), as
amended by section 311(d), is amended--
(1) by striking ``and'' at the end of subparagraph (K);
(2) by striking the semicolon at the end of subparagraph
(L) and inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(M) in the case of cardiovascular screening blood tests
(as defined in section 1861(xx)(1)), which are performed more
frequently than is covered under section 1861(xx)(2);''.
(d) Effective Date.--The amendments made by this section shall
apply to tests furnished on or after January 1, 2005.

SEC. 313. COVERAGE OF DIABETES SCREENING TESTS.

(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as
amended by section 312(a), is amended--
(1) in subparagraph (W), by striking ``and'' at the end;
(2) in subparagraph (X), by adding ``and'' at the end; and
(3) by adding at the end the following new subparagraph:
``(Y) diabetes screening tests (as defined in subsection
(yy));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x), as amended
by section 312(b), is amended by adding at the end the following new
subsection:

``Diabetes Screening Tests

``(yy)(1) The term `diabetes screening tests' means testing
furnished to an individual at risk for diabetes (as defined in
paragraph (2)) for the purpose of early detection of diabetes,
including--
``(A) a fasting plasma glucose test; and
``(B) such other tests, and modifications to tests, as the
Secretary determines appropriate, in consultation with
appropriate organizations.
``(2) For purposes of paragraph (1), the term `individual at risk
for diabetes' means an individual who has any of the following risk
factors for diabetes:
``(A) Hypertension.
``(B) Dyslipidemia.
``(C) Obesity, defined as a body mass index greater than or
equal to 30 kg/m<SUP>2</SUP>.
``(D) Previous identification of an elevated impaired
fasting glucose.
``(E) Previous identification of impaired glucose
tolerance.
``(F) A risk factor consisting of at least 2 of the
following characteristics:
``(i) Overweight, defined as a body mass index
greater than 25, but less than 30, kg/m<SUP>2</SUP>.
``(ii) A family history of diabetes.
``(iii) A history of gestational diabetes mellitus
or delivery of a baby weighing greater than 9 pounds.
``(iv) 65 years of age or older.
``(3) The Secretary shall establish standards, in consultation with
appropriate organizations, regarding the frequency of diabetes
screening tests, except that such frequency may not be more often than
twice within the 12-month period following the date of the most recent
diabetes screening test of that individual.''.
(c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), as
amended by section 312(c), is amended--
(1) by striking ``and'' at the end of subparagraph (L);
(2) by striking the semicolon at the end of subparagraph
(M) and inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(N) in the case of a diabetes screening test (as defined
in section 1861(yy)(1)), which is performed more frequently
than is covered under section 1861(yy)(3);''.
(d) Effective Date.--The amendments made by this section shall
apply to tests furnished on or after January 1, 2005.

SEC. 314. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

(a) Exclusion From OPD Fee Schedule.--Section 1833(t)(1)(B)(iv) (42
U.S.C. 1395l(t)(1)(B)(iv)) is amended by inserting before the period at
the end the following: ``and does not include screening mammography (as
defined in section 1861(jj)) and diagnostic mammography''.
(b) Conforming Amendment.--Section 1833(a)(2)(E)(i) (42 U.S.C.
1395l(a)(2)(E)(i)) is amended by inserting ``and, for services
furnished on or after January 1, 2005, diagnostic mammography'' after
``screening mammography''.
(c) Effective Date.--The amendments made by this section shall
apply--
(1) in the case of screening mammography, to services
furnished on or after the date of the enactment of this Act;
and
(2) in the case of diagnostic mammography, to services
furnished on or after January 1, 2005.

Subtitle C--Other Provisions

SEC. 321. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT REFORM.

(a) Payment for Drugs.--
(1) Special rules for certain drugs and biologicals.--
Section 1833(t) (42 U.S.C. 1395l(t)), as amended by section
111(b), is amended by inserting after paragraph (13) the
following new paragraphs:
``(14) Drug apc payment rates.--
``(A) In general.--The amount of payment under this
subsection for a specified covered outpatient drug
(defined in subparagraph (B)) that is furnished as part
of a covered OPD service (or group of services)--
``(i) in 2004, in the case of--
``(I) a sole source drug shall in
no case be less than 88 percent, or
exceed 95 percent, of the reference
average wholesale price for the drug;
``(II) an innovator multiple source
drug shall in no case exceed 68 percent
of the reference average wholesale
price for the drug; or
``(III) a noninnovator multiple
source drug shall in no case exceed 46
percent of the reference average
wholesale price for the drug;
``(ii) in 2005, in the case of--
``(I) a sole source drug shall in
no case be less than 83 percent, or
exceed 95 percent, of the reference
average wholesale price for the drug;
``(II) an innovator multiple source
drug shall in no case exceed 68 percent
of the reference average wholesale
price for the drug; or
``(III) a noninnovator multiple
source drug shall in no case exceed 46
percent of the reference average
wholesale price for the drug; or
``(iii) in a subsequent year, shall be
equal, subject to subparagraph (E)--
``(I) to the average acquisition
cost for the drug for that year (which,
at the option of the Secretary, may
vary by hospital group (as defined by
the Secretary based on volume of
covered OPD services or other relevant
characteristics)), as determined by the
Secretary taking into account the
hospital acquisition cost survey data
under subparagraph (D); or
``(II) if hospital acquisition cost
data are not available, the average
price for the drug in the year
established under section 1842(o),
section 1847A, or section 1847B, as the
case may be, as calculated and adjusted
by the Secretary as necessary for
purposes of this paragraph.
``(B) Specified covered outpatient drug defined.--
``(i) In general.--In this paragraph, the
term `specified covered outpatient drug' means,
subject to clause (ii), a covered outpatient
drug (as defined in section 1927(k)(2)) for
which a separate ambulatory payment
classification group (APC) has been established
and that is--
``(I) a radiopharmaceutical; or
``(II) a drug or biological for
which payment was made under paragraph
(6) (relating to pass-through payments)
on or before December 31, 2002.
``(ii) Exception.--Such term does not
include--
``(I) a drug or biological for
which payment is first made on or after
January 1, 2003, under paragraph (6);
``(II) a drug or biological for
which a temporary HCPCS code has not
been assigned; or
``(III) during 2004 and 2005, an
orphan drug (as designated by the
Secretary).
``(C) Payment for designated orphan drugs during
2004 and 2005.--The amount of payment under this
subsection for an orphan drug designated by the
Secretary under subparagraph (B)(ii)(III) that is
furnished as part of a covered OPD service (or group of
services) during 2004 and 2005 shall equal such amount
as the Secretary may specify.
``(D) Acquisition cost survey for hospital
outpatient drugs.--
``(i) Annual gao surveys in 2004 and
2005.--
``(I) In general.--The Comptroller
General of the United States shall
conduct a survey in each of 2004 and
2005 to determine the hospital
acquisition cost for each specified
covered outpatient drug. Not later than
April 1, 2005, the Comptroller General
shall furnish data from such surveys to
the Secretary for use in setting the
payment rates under subparagraph (A)
for 2006.
``(II) Recommendations.--Upon the
completion of such surveys, the
Comptroller General shall recommend to
the Secretary the frequency and
methodology of subsequent surveys to be
conducted by the Secretary under clause
(ii).
``(ii) Subsequent secretarial surveys.--The
Secretary, taking into account such
recommendations, shall conduct periodic
subsequent surveys to determine the hospital
acquisition cost for each specified covered
outpatient drug for use in setting the payment
rates under subparagraph (A).
``(iii) Survey requirements.--The surveys
conducted under clauses (i) and (ii) shall have
a large sample of hospitals that is sufficient
to generate a statistically significant
estimate of the average hospital acquisition
cost for each specified covered outpatient
drug. With respect to the surveys conducted
under clause (i), the Comptroller General shall
report to Congress on the justification for the
size of the sample used in order to assure the
validity of such estimates.
``(iv) Differentiation in cost.--In
conducting surveys under clause (i), the
Comptroller General shall determine and report
to Congress if there is (and the extent of any)
variation in hospital acquisition costs for
drugs among hospitals based on the volume of
covered OPD services performed by such
hospitals or other relevant characteristics of
such hospitals (as defined by the Comptroller
General).
``(v) Comment on proposed rates.--Not later
than 30 days after the date the Secretary
promulgated proposed rules setting forth the
payment rates under subparagraph (A) for 2006,
the Comptroller General shall evaluate such
proposed rates and submit to Congress a report
regarding the appropriateness of such rates
based on the surveys the Comptroller General
has conducted under clause (i).
``(E) Adjustment in payment rates for overhead
costs.--
``(i) Medpac report on drug apc design.--
The Medicare Payment Advisory Commission shall
submit to the Secretary, not later than July 1,
2005, a report on adjustment of payment for
ambulatory payment classifications for
specified covered outpatient drugs to take into
account overhead and related expenses, such as
pharmacy services and handling costs. Such
report shall include--
``(I) a description and analysis of
the data available with regard to such
expenses;
``(II) a recommendation as to
whether such a payment adjustment
should be made; and
``(III) if such adjustment should
be made, a recommendation regarding the
methodology for making such an
adjustment.
``(ii) Adjustment authorized.--The
Secretary may adjust the weights for ambulatory
payment classifications for specified covered
outpatient drugs to take into account the
recommendations contained in the report
submitted under clause (i).
``(F) Classes of drugs.--For purposes of this
paragraph:
``(i) Sole source drugs.--The term `sole
source drug' means--
``(I) a biological product (as
defined under section 1861(t)(1)); or
``(II) a single source drug (as
defined in section 1927(k)(7)(A)(iv)).
``(ii) Innovator multiple source drugs.--
The term `innovator multiple source drug' has
the meaning given such term in section
1927(k)(7)(A)(ii).
``(iii) Noninnovator multiple source
drugs.--The term `noninnovator multiple source
drug' has the meaning given such term in
section 1927(k)(7)(A)(iii).
``(G) Reference average wholesale price.--The term
`reference average wholesale price' means, with respect
to a specified covered outpatient drug, the average
wholesale price for the drug as determined under
section 1842(o) as of May 1, 2003.
``(H) Inapplicability of expenditures in
determining conversion, weighting, and other adjustment
factors.--Additional expenditures resulting from this
paragraph shall not be taken into account in
establishing the conversion, weighting, and other
adjustment factors for 2004 and 2005 under paragraph
(9), but shall be taken into account for subsequent
years.
``(15) Payment for new drugs and biologicals until hcpcs
code assigned.--With respect to payment under this part for an
outpatient drug or biological that is covered under this part
and is furnished as part of covered OPD services for which a
HCPCS code has not been assigned, the amount provided for
payment for such drug or biological under this part shall be
equal to 95 percent of the average wholesale price for the drug
or biological.''.
(2) Reduction in threshold for separate apcs for drugs.--
Section 1833(t)(16), as redesignated section 111(b), is amended
by adding at the end the following new subparagraph:
``(B) Threshold for establishment of separate apcs
for drugs.--The Secretary shall reduce the threshold
for the establishment of separate ambulatory payment
classification groups (APCs) with respect to drugs or
biologicals to $50 per administration for drugs and
biologicals furnished in 2005 and 2006.''.
(3) Exclusion of separate drug apcs from outlier
payments.--Section 1833(t)(5) is amended by adding at the end
the following new subparagraph:
``(E) Exclusion of separate drug and biological
apcs from outlier payments.--No additional payment
shall be made under subparagraph (A) in the case of
ambulatory payment classification groups established
separately for drugs or biologicals.''.
(4) Payment for pass through drugs.--Section
1833(t)(6)(D)(i) (42 U.S.C. 1395l(t)(6)(D)(i)) is amended by
inserting after ``under section 1842(o)'' the following: ``(or
if the drug or biological is covered under a competitive
acquisition contract under section 1847B, an amount determined
by the Secretary equal to the average price for the drug or
biological for all competitive acquisition areas and year established
under such section as calculated and adjusted by the Secretary for
purposes of this paragraph)''.
(5) Conforming amendment to budget neutrality
requirement.--Section 1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B))
is amended by adding at the end the following: ``In determining
adjustments under the preceding sentence for 2004 and 2005, the
Secretary shall not take into account under this subparagraph
or paragraph (2)(E) any expenditures that would not have been
made but for the application of paragraph (14).''.
(6) Effective date.--The amendments made by this subsection
shall apply to items and services furnished on or after January
1, 2004.
(b) Special Payment for Brachytherapy.--
(1) In general.--Section 1833(t)(16), as redesignated by
section 111(b) and as amended by subsection (a)(2), is amended
by adding at the end the following new subparagraph:
``(C) Payment for devices of brachytherapy at
charges adjusted to cost.--Notwithstanding the
preceding provisions of this subsection, for a device
of brachytherapy consisting of a seed or seeds (or
radioactive source) furnished on or after January 1,
2004, and before January 1, 2007, the payment basis for
the device under this subsection shall be equal to the
hospital's charges for each device furnished, adjusted
to cost. Charges for such devices shall not be included
in determining any outlier payment under this
subsection.''.
(2) Specification of groups for brachytherapy devices.--
Section 1833(t)(2) (42 U.S.C. 1395l(t)(2)) is amended--
(A) in subparagraph (F), by striking ``and'' at the
end;
(B) in subparagraph (G), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(H) with respect to devices of brachytherapy
consisting of a seed or seeds (or radioactive source),
the Secretary shall create additional groups of covered
OPD services that classify such devices separately from
the other services (or group of services) paid for
under this subsection in a manner reflecting the
number, isotope, and radioactive intensity of such
devices furnished, including separate groups for
palladium-103 and iodine-125 devices.''.
(3) GAO report.--The Comptroller General of the United
States shall conduct a study to determine appropriate payment
amounts under section 1833(t)(16)(C) of the Social Security
Act, as added by paragraph (1), for devices of brachytherapy.
Not later than January 1, 2005, the Comptroller General shall
submit to Congress and the Secretary a report on the study
conducted under this paragraph, and shall include specific
recommendations for appropriate payments for such devices.

SEC. 322. LIMITATION OF APPLICATION OF FUNCTIONAL EQUIVALENCE STANDARD.

Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended by adding at
the end the following new subparagraph:
``(F) Limitation of application of functional
equivalence standard.--
``(i) In general.--The Secretary may not
publish regulations that apply a functional
equivalence standard to a drug or biological
under this paragraph.
``(ii) Application.--Clause (i) shall apply
to the application of a functional equivalence
standard to a drug or biological on or after
the date of enactment of the Medicare Provider
Restoration Act of 2003 unless--
``(I) such application was being
made to such drug or biological prior
to such date of enactment; and
``(II) the Secretary applies such
standard to such drug or biological
only for the purpose of determining
eligibility of such drug or biological
for additional payments under this
paragraph and not for the purpose of
any other payments under this title.
``(iii) Rule of construction.--Nothing in
this subparagraph shall be construed to effect
the Secretary's authority to deem a particular
drug to be identical to another drug if the 2
products are pharmaceutically equivalent and
bioequivalent, as determined by the
Commissioner of Food and Drugs.''.

SEC. 323. PAYMENT FOR RENAL DIALYSIS SERVICES.

(a) Increase in Renal Dialysis Composite Rate for Services
Furnished.--The last sentence of section 1881(b)(7) (42 U.S.C.
1395rr(b)(7)) is amended--
(1) by striking ``and'' before ``for such services'' the
second place it appears;
(2) by inserting ``and before January 1, 2005,'' after
``January 1, 2001,''; and
(3) by inserting before the period at the end the
following: ``, and for such services furnished on or after
January 1, 2005, by 1.6 percent above such composite rate
payment amounts for such services furnished on December 31,
2004''.
(b) Restoring Composite Rate Exceptions for Pediatric Facilities.--
(1) In general.--Section 422(a)(2) of BIPA is amended--
(A) in subparagraph (A), by striking ``and (C)''
and inserting ``, (C), and (D)'';
(B) in subparagraph (B), by striking ``In the
case'' and inserting ``Subject to subparagraph (D), in
the case''; and
(C) by adding at the end the following new
subparagraph:
``(D) Inapplicability to pediatric facilities.--
Subparagraphs (A) and (B) shall not apply, as of
October 1, 2002, to pediatric facilities that do not
have an exception rate described in subparagraph (C) in
effect on such date. For purposes of this subparagraph,
the term `pediatric facility' means a renal facility at
least 50 percent of whose patients are individuals
under 18 years of age.''.
(2) Conforming amendment.--The fourth sentence of section
1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking
``The Secretary'' and inserting ``Subject to section 422(a)(2)
of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, the Secretary''.
(c) Inspector General Studies on ESRD Drugs.--
(1) In general.--The Inspector General of the Department of
Health and Human Services shall conduct two studies with
respect to drugs and biologicals (including erythropoietin)
furnished to end-stage renal disease patients under the
medicare program which are separately billed by end stage renal
disease facilities.
(2) Studies on esrd drugs.--
(A) Existing drugs.--The first study under
paragraph (1) shall be conducted with respect to such
drugs and biologicals for which a billing code exists
prior to January 1, 2004.
(B) New drugs.--The second study under paragraph
(1) shall be conducted with respect to such drugs and
biologicals for which a billing code does not exist
prior to January 1, 2004.
(3) Matters studied.--Under each study conducted under
paragraph (1), the Inspector General shall--
(A) determine the difference between the amount of
payment made to end stage renal disease facilities
under title XVIII of the Social Security Act for such
drugs and biologicals and the acquisition costs of such
facilities for such drugs and biologicals and which are
separately billed by end stage renal disease
facilities, and
(B) estimate the rates of growth of expenditures
for such drugs and biologicals billed by such
facilities.
(4) Reports.--
(A) Existing esrd drugs.--Not later than April 1,
2004, the Inspector General shall report to the
Secretary on the study described in paragraph (2)(A).
(B) New esrd drugs.--Not later than April 1, 2006,
the Inspector General shall report to the Secretary on
the study described in paragraph (2)(B).
(d) Basic Case-Mix Adjusted Composite Rate for Renal Dialysis
Facility Services.--(1) Section 1881(b) (42 U.S.C. 1395rr(b)) is
amended by adding at the end the following new paragraphs:
``(12)(A) In lieu of payment under paragraph (7) beginning with
services furnished on January 1, 2005, the Secretary shall establish a
basic case-mix adjusted prospective payment system for dialysis
services furnished by providers of services and renal dialysis
facilities in a year to individuals in a facility and to such
individuals at home. The case-mix under such system shall be for a
limited number of patient characteristics.
``(B) The system described in subparagraph (A) shall include--
``(i) the services comprising the composite rate
established under paragraph (7); and
``(ii) the difference between payment amounts under this
title for separately billed drugs and biologicals (including
erythropoietin) and acquisition costs of such drugs and
biologicals, as determined by the Inspector General reports to
the Secretary as required by section 323(c) of the Medicare
Provider Restoration Act of 2003--
``(I) beginning with 2005, for such drugs and
biologicals for which a billing code exists prior to
January 1, 2004; and
``(II) beginning with 2007, for such drugs and
biologicals for which a billing code does not exist
prior to January 1, 2004,
adjusted to 2005, or 2007, respectively, as determined to be
appropriate by the Secretary.
``(C)(i) In applying subparagraph (B)(ii) for 2005, such payment
amounts under this title shall be determined using the methodology
specified in paragraph (13)(A)(i).
``(ii) For 2006, the Secretary shall provide for an
adjustment to the payments under clause (i) to reflect the
difference between the payment amounts using the methodology
under paragraph (13)(A)(i) and the payment amount determined
using the methodology applied by the Secretary under paragraph
(13)(A)(iii) of such paragraph, as estimated by the Secretary.
``(D) The Secretary shall adjust the payment rates under such
system by a geographic index as the Secretary determines to be
appropriate. If the Secretary applies a geographic index under this
paragraph that differs from the index applied under paragraph (7) the
Secretary shall phase-in the application of the index under this
paragraph over a multiyear period.
``(E)(i) Such system shall be designed to result in the same
aggregate amount of expenditures for such services, as estimated by the
Secretary, as would have been made for 2005 if this paragraph did not
apply.
``(ii) The adjustment made under subparagraph (B)(ii)(II) shall be
done in a manner to result in the same aggregate amount of expenditures
after such adjustment as would otherwise have been made for such
services for 2006 or 2007, respectively, as estimated by the Secretary,
if this paragraph did not apply.
``(F) Beginning with 2006, the Secretary shall annually increase
the basic case-mix adjusted payment amounts established under this
paragraph, by an amount determined by--
``(i) applying the estimated growth in expenditures for
drugs and biologicals (including erythropoietin) that are
separately billable to the component of the basic case-mix
adjusted system described in subparagraph (B)(ii); and
``(ii) converting the amount determined in clause (i) to an
increase applicable to the basic case-mix adjusted payment
amounts established under subparagraph (B).
Nothing in this paragraph shall be construed as providing for an update
to the composite rate component of the basic case-mix adjusted system
under subparagraph (B).
``(G) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of the case-mix system,
relative weights, payment amounts, the geographic adjustment factor, or
the update for the system established under this paragraph, or the
determination of the difference between medicare payment amounts and
acquisition costs for separately billed drugs and biologicals
(including erythropoietin) under this paragraph and paragraph (13).
``(13)(A) The payment amounts under this title for separately
billed drugs and biologicals furnished in a year, beginning with 2004,
are as follows:
``(i) For such drugs and biologicals (other than
erythropoietin) furnished in 2004, the amount determined under
section 1842(o)(1)(A)(v) for the drug or biological.
``(ii) For such drugs and biologicals (including
erythropoietin) furnished in 2005, the acquisition cost of the
drug or biological, as determined by the Inspector General
reports to the Secretary as required by section 323(c) of the
Medicare Provider Restoration Act of 2003. Insofar as the
Inspector General has not determined the acquisition cost with
respect to a drug or biological, the Secretary shall determine
the payment amount for such drug or biological.
``(iii) For such drugs and biologicals (including
erythropoietin) furnished in 2006 and subsequent years, such
acquisition cost or the amount determined under section 1847A
for the drug or biological, as the Secretary may specify.
``(B)(i) Drugs and biologicals (including erythropoietin) which
were separately billed under this subsection on the day before the date
of the enactment of the Medicare Provider Restoration Act of 2003 shall
continue to be separately billed on and after such date.
``(ii) Nothing in this paragraph, section 1842(o), section 1847A,
or section 1847B shall be construed as requiring or authorizing the
bundling of payment for drugs and biologicals into the basic case-mix
adjusted payment system under this paragraph.''.
(2) Paragraph (7) of such section is amended in the first sentence
by striking ``The Secretary'' and inserting ``Subject to paragraph
(12), the Secretary''.
(3) Paragraph (11)(B) of such section is amended by inserting
``subject to paragraphs (12) and (13)'' before ``payment for such
item''.
(e) Demonstration of Bundled Case-Mix Adjusted Payment System for
ESRD Services.--
(1) In general.--The Secretary shall establish a
demonstration project of the use of a fully case-mix adjusted
payment system for end stage renal disease services under
section 1881 of the Social Security Act (42 U.S.C. 1395rr) for
patient characteristics identified in the report under
subsection (f) that bundles into such payment rates amounts
for--
(A) drugs and biologicals (including
erythropoietin) furnished to end-stage renal disease
patients under the medicare program which are
separately billed by end stage renal disease facilities
(as of the date of the enactment of this Act); and
(B) clinical laboratory tests related to such drugs
and biologicals.
(2) Facilities included in the demonstration.--In
conducting the demonstration under this subsection, the
Secretary shall ensure the participation of a sufficient number
of providers of dialysis services and renal dialysis
facilities, but in no case to exceed 500. In selecting such
providers and facilities, the Secretary shall ensure that the
following types of providers are included in the demonstration:
(A) Urban providers and facilities.
(B) Rural providers and facilities.
(C) Not-for-profit providers and facilities.
(D) For-profit providers and facilities.
(E) Independent providers and facilities.
(F) Specialty providers and facilities, including
pediatric providers and facilities and small providers
and facilities.
(3) Temporary add-on payment for dialysis services
furnished under the demonstration.--
(A) In general.--During the period of the
demonstration project, the Secretary shall increase
payment rates that would otherwise apply under section
1881(b) of such Act (42 U.S.C. 1395rr(b)) by 1.6
percent for dialysis services furnished in facilities
in the demonstration site.
(B) Rules of construction.--Nothing in this
subsection shall be construed as--
(i) as an annual update under section
1881(b) of the Social Security Act (42 U.S.C.
1395rr(b));
(ii) as increasing the baseline for
payments under such section; or
(iii) requiring the budget neutral
implementation of the demonstration project
under this subsection.
(4) 3-year period.--The Secretary shall conduct the
demonstration under this subsection for the 3-year period
beginning on January 1, 2006.
(5) Use of advisory board.--
(A) In general.--In carrying out the demonstration
under this subsection, the Secretary shall establish an
advisory board comprised of representatives described
in subparagraph (B) to provide advice
and recommendations with respect to the establishment and operation of
such demonstration.
(B) Representatives.--Representatives referred to
in subparagraph (A) include representatives of the
following:
(i) Patient organizations.
(ii) Individuals with expertise in end-
stage renal dialysis services, such as
clinicians, economists, and researchers.
(iii) The Medicare Payment Advisory
Commission, established under section 1805 of
the Social Security Act (42 U.S.C. 1395b-6).
(iv) The National Institutes of Health.
(v) Network organizations under section
1881(c) of the Social Security Act (42 U.S.C.
1395rr(c)).
(vi) Medicare contractors to monitor
quality of care.
(vii) Providers of services and renal
dialysis facilities furnishing end-stage renal
disease services.
(C) Termination of advisory panel.--The advisory
panel shall terminate on December 31, 2008.
(6) Authorization of appropriations.--There are authorized
to be appropriated, in appropriate part from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund, $5,000,000 in fiscal year 2006 to
conduct the demonstration under this subsection.
(f) Report on a Bundled Prospective Payment System for End Stage
Renal Disease Services.--
(1) Report.--
(A) In general.--Not later than October 1, 2005,
the Secretary shall submit to Congress a report
detailing the elements and features for the design and
implementation of a bundled prospective payment system
for services furnished by end stage renal disease
facilities including, to the maximum extent feasible,
bundling of drugs, clinical laboratory tests, and other
items that are separately billed by such facilities.
The report shall include a description of the
methodology to be used for the establishment of payment
rates, including components of the new system described
in paragraph (2).
(B) Recommendations.--The Secretary shall include
in such report recommendations on elements, features,
and methodology for a bundled prospective payment
system or other issues related to such system as the
Secretary determines to be appropriate.
(2) Elements and features of a bundled prospective payment
system.--The report required under paragraph (1) shall include
the following elements and features of a bundled prospective
payment system:
(A) Bundle of items and services.--A description of
the bundle of items and services to be included under
the prospective payment system.
(B) Case mix.--A description of the case-mix
adjustment to account for the relative resource use of
different types of patients.
(C) Wage index.--A description of an adjustment to
account for geographic differences in wages.
(D) Rural areas.--The appropriateness of
establishing a specific payment adjustment to account
for additional costs incurred by rural facilities.
(E) Other adjustments.--Such other adjustments as
may be necessary to reflect the variation in costs
incurred by facilities in caring for patients with end
stage renal disease.
(F) Update framework.--A methodology for
appropriate updates under the prospective payment
system.
(G) Additional recommendations.--Such other matters
as the Secretary determines to be appropriate.

SEC. 324. 2-YEAR MORATORIUM ON THERAPY CAPS; PROVISIONS RELATING TO
REPORTS.

(a) Additional Moratorium on Therapy Caps.--
(1) 2004 and 2005.--Section 1833(g)(4) (42 U.S.C.
1395l(g)(4)) is amended by striking ``and 2002'' and inserting
``2002, 2004, and 2005''.
(2) Remainder of 2003.--For the period beginning on the
date of the enactment of this Act and ending of December 31,
2003, the Secretary shall not apply the provisions of
paragraphs (1), (2), and (3) of section 1833(g) to expenses
incurred with respect to services described in such paragraphs
during such period. Nothing in the preceding sentence shall be
construed as affecting the application of such paragraphs by
the Secretary before the date of the enactment of this Act.
(b) Prompt Submission of Overdue Reports on Payment and Utilization
of Outpatient Therapy Services.--Not later than March 31, 2004, the
Secretary shall submit to Congress the reports required under section
4541(d)(2) of the Balanced Budget Act of 1997 (Public Law 105-33; 111
Stat. 457) (relating to alternatives to a single annual dollar cap on
outpatient therapy) and under section 221(d) of the Medicare, Medicaid,
and SCHIP Balanced Budget Refinement Act of 1999 (Appendix F, 113 Stat.
1501A-352), as enacted into law by section 1000(a)(6) of Public Law
106-113 (relating to utilization patterns for outpatient therapy).
(c) GAO Report Identifying Conditions and Diseases Justifying
Waiver of Therapy Cap.--
(1) Study.--The Comptroller General of the United States
shall identify conditions or diseases that may justify waiving
the application of the therapy caps under section 1833(g) of
the Social Security Act (42 U.S.C. 1395l(g)) with respect to
such conditions or diseases.
(2) Report to congress.--Not later than October 1, 2004,
the Comptroller General shall submit to Congress a report on
the conditions and diseases identified under paragraph (1), and
shall include a recommendation of criteria, with respect to
such conditions and disease, under which a waiver of the therapy caps
would apply.

SEC. 325. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN MILITARY
RETIREES; SPECIAL ENROLLMENT PERIOD.

(a) Waiver of Penalty.--
(1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is
amended by adding at the end the following new sentence: ``No
increase in the premium shall be effected for a month in the
case of an individual who enrolls under this part during 2001,
2002, 2003, or 2004 and who demonstrates to the Secretary
before December 31, 2004, that the individual is a covered
beneficiary (as defined in section 1072(5) of title 10, United
States Code). The Secretary of Health and Human Services shall
consult with the Secretary of Defense in identifying
individuals described in the previous sentence.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to premiums for months beginning with January 2004.
The Secretary shall establish a method for providing rebates of
premium penalties paid for months on or after January 2004 for
which a penalty does not apply under such amendment but for
which a penalty was previously collected.
(b) Medicare Part B Special Enrollment Period.--
(1) In general.--In the case of any individual who, as of
the date of the enactment of this Act, is eligible to enroll
but is not enrolled under part B of title XVIII of the Social
Security Act and is a covered beneficiary (as defined in
section 1072(5) of title 10, United States Code), the Secretary
of Health and Human Services shall provide for a special
enrollment period during which the individual may enroll under
such part. Such period shall begin as soon as possible after
the date of the enactment of this Act and shall end on December
31, 2004.
(2) Coverage period.--In the case of an individual who
enrolls during the special enrollment period provided under
paragraph (1), the coverage period under part B of title XVIII
of the Social Security Act shall begin on the first day of the
month following the month in which the individual enrolls.

SEC. 326. PAYMENT FOR SERVICES FURNISHED IN AMBULATORY SURGICAL
CENTERS.

(a) Reductions in Payment Updates.--Section 1833(i)(2)(C) (42
U.S.C. 1395l(i)(2)(C)) is amended to read as follows:
``(C)(i) Notwithstanding the second sentence of each of
subparagraphs (A) and (B), except as otherwise specified in clauses
(ii), (iii), and (iv), if the Secretary has not updated amounts
established under such subparagraphs or under subparagraph (D), with
respect to facility services furnished during a fiscal year (beginning
with fiscal year 1986 or a calendar year (beginning with 2006)), such
amounts shall be increased by the percentage increase in the Consumer
Price Index for all urban consumers (U.S. city average) as estimated by
the Secretary for the 12-month period ending with the midpoint of the
year involved.
``(ii) In each of the fiscal years 1998 through 2002, the increase
under this subparagraph shall be reduced (but not below zero) by 2.0
percentage points.
``(iii) In fiscal year 2004, beginning with April 1, 2004, the
increase under this subparagraph shall be the Consumer Price Index for
all urban consumers (U.S. city average) as estimated by the Secretary
for the 12-month period ending with March 31, 2003, minus 3.0
percentage points.
``(iv) In fiscal year 2005, the last quarter of calendar year 2005,
and each of calendar years 2006 through 2009, the increase under this
subparagraph shall be 0 percent.''.
(b) Repeal of Survey Requirement and Implementation of New
System.--Section 1833(i)(2) (42 U.S.C. 1395l(i)(2)) is amended--
(1) in subparagraph (A)--
(A) in the matter preceding clause (i), by striking
``The'' and inserting ``For services furnished prior to
the implementation of the system described in
subparagraph (D), the''; and
(B) in clause (i), by striking ``taken not later
than January 1, 1995, and every 5 years thereafter,'';
and
(2) by adding at the end the following new subparagraph:
``(D)(i) Taking into account the recommendations in the report
under section 326(d) of Medicare Provider Restoration Act of 2003, the
Secretary shall implement a revised payment system for payment of
surgical services furnished in ambulatory surgical centers.
``(ii) In the year the system described in clause (i) is
implemented, such system shall be designed to result in the same
aggregate amount of expenditures for such services as would be made if
this subparagraph did not apply, as estimated by the Secretary.
``(iii) The Secretary shall implement the system described in
clause (i) for periods in a manner so that it is first effective
beginning on or after January 1, 2006, and not later than January 1,
2008.
``(iv) There shall be no administrative or judicial review under
section 1869, 1878, or otherwise, of the classification system, the
relative weights, payment amounts, and the geographic adjustment
factor, if any, under this subparagraph.''.
(c) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)) is amended by adding the following new subparagraph:
``(G) with respect to facility services furnished
in connection with a surgical procedure specified
pursuant to subsection (i)(1)(A) and furnished to an
individual in an ambulatory surgical center described
in such subsection, for services furnished beginning
with the implementation date of a revised payment
system for such services in such facilities specified
in subsection (i)(2)(D), the amounts paid shall be 80
percent of the lesser of the actual charge for the
services or the amount determined by the Secretary
under such revised payment system,''.
(d) GAO Study of Ambulatory Surgical Center Payments.--
(1) Study.--
(A) In general.--The Comptroller General of the
United States shall conduct a study that compares the
relative costs of procedures furnished in ambulatory
surgical centers to the relative costs of procedures
furnished in hospital outpatient departments under
section 1833(t) of the Social Security Act (42 U.S.C.
1395l(t)). The study shall also examine how accurately
ambulatory payment categories reflect procedures
furnished in ambulatory surgical centers.
(B) Consideration of asc data.--In conducting the
study under paragraph (1), the Comptroller General
shall consider data submitted by ambulatory surgical
centers regarding the matters described in clauses (i)
through (iii) of paragraph (2)(B).
(2) Report and recommendations.--
(A) Report.--Not later than January 1, 2005, the
Comptroller General shall submit to Congress a report
on the study conducted under paragraph (1).
(B) Recommendations.--The report submitted under
subparagraph (A) shall include recommendations on the
following matters:
(i) The appropriateness of using the groups
of covered services and relative weights
established under the outpatient prospective
payment system as the basis of payment for
ambulatory surgical centers.
(ii) If the relative weights under such
hospital outpatient prospective payment system
are appropriate for such purpose--
(I) whether the payment rates for
ambulatory surgical centers should be
based on a uniform percentage of the
payment rates or weights under such
outpatient system; or
(II) whether the payment rates for
ambulatory surgical centers should
vary, or the weights should be revised,
based on specific procedures or types
of services (such as ophthalmology and
pain management services).
(iii) Whether a geographic adjustment
should be used for payment of services
furnished in ambulatory surgical centers, and
if so, the labor and nonlabor shares of such
payment.

SEC. 327. PAYMENT FOR CERTAIN SHOES AND INSERTS UNDER THE FEE SCHEDULE
FOR ORTHOTICS AND PROSTHETICS.

(a) In General.--Section 1833(o) (42 U.S.C. 1395l(o)) is amended--
(1) in paragraph (1)(B), by striking ``no more than the
limits established under paragraph (2)'' and inserting ``no
more than the amount of payment applicable under paragraph
(2)''; and
(2) in paragraph (2), to read as follows:
``(2)(A) Except as provided by the Secretary under subparagraphs
(B) and (C), the amount of payment under this paragraph for custom
molded shoes, extra-depth shoes, and inserts shall be the amount
determined for such items by the Secretary under section 1834(h).
``(B) The Secretary may establish payment amounts for shoes and
inserts that are lower than the amount established under section
1834(h) if the Secretary finds that shoes and inserts of an appropriate
quality are readily available at or below the amount established under
such section.
``(C) In accordance with procedures established by the Secretary,
an individual entitled to benefits with respect to shoes described in
section 1861(s)(12) may substitute modification of such shoes instead
of obtaining one (or more, as specified by the Secretary) pair of
inserts (other than the original pair of inserts with respect to such
shoes). In such case, the Secretary shall substitute, for the payment
amount established under section 1834(h), a payment amount that the
Secretary estimates will assure that there is no net increase in
expenditures under this subsection as a result of this subparagraph.''.
(b) Conforming Amendments.--(1) Section 1834(h)(4)(C) (42 U.S.C.
1395m(h)(4)(C)) is amended by inserting ``(and includes shoes described
in section 1861(s)(12))'' after ``in section 1861(s)(9)''.
(2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is amended by
striking subparagraph (C).
(c) Effective Date.--The amendments made by this section shall
apply to items furnished on or after January 1, 2005.

SEC. 329. 5-YEAR AUTHORIZATION OF REIMBURSEMENT FOR ALL MEDICARE PART B
SERVICES FURNISHED BY CERTAIN INDIAN HOSPITALS AND
CLINICS.

Section 1880(e)(1)(A) (42 U.S.C. 1395qq(e)(1)(A)) is amended by
inserting ``(and for items and services furnished during the 5-year
period beginning on January 1, 2005, all items and services for which
payment may be made under part B)'' after ``for services described in
paragraph (2)''.

Subtitle D--Additional Demonstrations, Studies, and Other Provisions

SEC. 341. DEMONSTRATION PROJECT FOR COVERAGE OF CERTAIN PRESCRIPTION
DRUGS AND BIOLOGICALS.

(a) Demonstration Project.--The Secretary shall conduct a
demonstration project under part B of title XVIII of the Social
Security Act under which payment is made for drugs or biologicals that
are prescribed as replacements for drugs and biologicals described in
section 1861(s)(2)(A) or 1861(s)(2)(Q) of such Act (42 U.S.C.
1395x(s)(2)(A), 1395x(s)(2)(Q)), or both, for which payment is made
under such part. Such project shall provide for cost-sharing applicable
with respect to such drugs or biologicals.
(b) Demonstration Project Sites.--The project established under
this section shall be conducted in sites selected by the Secretary.
(c) Duration.--The Secretary shall conduct the demonstration
project for the 2-year period beginning on the date that is 90 days
after the date of the enactment of this Act, but in no case may the
project extend beyond December 31, 2005.
(d) Limitation.--Under the demonstration project over the duration
of the project, the Secretary may not provide--
(1) coverage for more than 50,000 patients; and
(2) more than $500,000,000 in funding.
(e) Report.--Not later than July 1, 2006, the Secretary shall
submit to Congress a report on the project. The report shall include an
evaluation of patient access to care and patient outcomes under the
project, as well as an analysis of the cost effectiveness of the
project, including an evaluation of the costs savings (if any) to the
medicare program attributable to reduced physicians' services and
hospital outpatient departments services for administration of the
biological.

SEC. 342. EXTENSION OF COVERAGE OF INTRAVENOUS IMMUNE GLOBULIN (IVIG)
FOR THE TREATMENT OF PRIMARY IMMUNE DEFICIENCY DISEASES
IN THE HOME.

(a) In General.--Section 1861 (42 U.S.C. 1395x), as amended by
sections 611(a) and 612(a) is amended--
(1) in subsection (s)(2)--
(A) by striking ``and'' at the end of subparagraph
(X);
(B) by adding ``and'' at the end of subparagraph
(Y); and
(C) by adding at the end the following new
subparagraph:
``(Z) intravenous immune globulin for the treatment
of primary immune deficiency diseases in the home (as
defined in subsection (zz));''; and
(2) by adding at the end the following new subsection:

``Intravenous Immune Globulin

``(zz) The term `intravenous immune globulin' means an approved
pooled plasma derivative for the treatment in the patient's home of a
patient with a diagnosed primary immune deficiency disease, but not
including items or services related to the administration of the
derivative, if a physician determines administration of the derivative
in the patient's home is medically appropriate.''.
(b) Payment as a Drug or Biological.--Section 1833(a)(1)(S) (42
U.S.C. 1395l(a)(1)(S)) is amended by inserting ``(including intravenous
immune globulin (as defined in section 1861(zz)))'' after ``with
respect to drugs and biologicals''.
(c) Effective Date.--The amendments made by this section shall
apply to items furnished administered on or after January 1, 2004.

SEC. 343. MEDPAC STUDY OF COVERAGE OF SURGICAL FIRST ASSISTING SERVICES
OF CERTIFIED REGISTERED NURSE FIRST ASSISTANTS.

(a) Study.--The Medicare Payment Advisory Commission (in this
section referred to as the ``Commission'') shall conduct a study on the
feasibility and advisability of providing for payment under part B of
title XVIII of the Social Security Act for surgical first assisting
services furnished by a certified registered nurse first assistant to
medicare beneficiaries.
(b) Report.--Not later than January 1, 2005, the Commission shall
submit to Congress a report on the study conducted under subsection (a)
together with recommendations for such legislation or administrative
action as the Commission determines to be appropriate.
(c) Definitions.--In this section:
(1) Surgical first assisting services.--The term ``surgical
first assisting services'' means services consisting of first
assisting a physician with surgery and related preoperative,
intraoperative, and postoperative care (as determined by the
Secretary) furnished by a certified registered nurse first
assistant (as defined in paragraph (2)) which the certified
registered nurse first assistant is legally authorized to
perform by the State in which the services are performed.
(2) Certified registered nurse first assistant.--The term
``certified registered nurse first assistant'' means an
individual who--
(A) is a registered nurse and is licensed to practice
nursing in the State in which the surgical first assisting
services are performed;
(B) has completed a minimum of 2,000 hours of first
assisting a physician with surgery and related preoperative,
intraoperative, and postoperative care; and
(C) is certified as a registered nurse first assistant by
an organization recognized by the Secretary.

SEC. 344. MEDPAC STUDY OF PAYMENT FOR CARDIO-THORACIC SURGEONS.

(a) Study.--The Medicare Payment Advisory Commission (in this
section referred to as the ``Commission'') shall conduct a study on the
practice expense relative values established by the Secretary of Health
and Human Services under the medicare physician fee schedule under
section 1848 of the Social Security Act (42 U.S.C. 1395w-4) for
physicians in the specialties of thoracic and cardiac surgery to
determine whether such values adequately take into account the
attendant costs that such physicians incur in providing clinical staff
for patient care in hospitals.
(b) Report.--Not later than January 1, 2005, the Commission shall
submit to Congress a report on the study conducted under subsection (a)
together with recommendations for such legislation or administrative
action as the Commission determines to be appropriate.

SEC. 345. STUDIES RELATING TO VISION IMPAIRMENTS.

(a) Coverage of Outpatient Vision Services Furnished by Vision
Rehabilitation Professionals Under Part B.--
(1) Study.--The Secretary shall conduct a study to
determine the feasibility and advisability of providing
for payment for vision rehabilitation services furnished by vision
rehabilitation professionals.
(2) Report.--Not later than January 1, 2005, the Secretary
shall submit to Congress a report on the study conducted under
paragraph (1) together with recommendations for such
legislation or administrative action as the Secretary
determines to be appropriate.
(3) Vision rehabilitation professional defined.--In this
subsection, the term ``vision rehabilitation professional''
means an orientation and mobility specialist, a rehabilitation
teacher, or a low vision therapist.
(b) Report on Appropriateness of a Demonstration Project To Test
Feasibility of Using PPO Networks To Reduce Costs of Acquiring
Eyeglasses for Medicare Beneficiaries After Cataract Surgery.--Not
later than 1 year after the date of the enactment of this Act, the
Secretary shall submit to Congress a report on the feasibility of
establishing a two-year demonstration project under which the Secretary
enters into arrangements with vision care preferred provider
organization networks to furnish and pay for conventional eyeglasses
subsequent to each cataract surgery with insertion of an intraocular
lens on behalf of Medicare beneficiaries. In such report, the Secretary
shall include an estimate of potential cost savings to the Medicare
program through the use of such networks, taking into consideration
quality of service and beneficiary access to services offered by vision
care preferred provider organization networks.

SEC. 346. MEDICARE HEALTH CARE QUALITY DEMONSTRATION PROGRAMS.

Title XVIII (42 U.S.C. 1395 et seq.) is amended by inserting after
section 1866B the following new section:

``SEC. 1866C. HEALTH CARE QUALITY DEMONSTRATION PROGRAM.

``Sec. (a) Definitions.--In this section:
``(1) Beneficiary.--The term `beneficiary' means an
individual who is entitled to benefits under part A and
enrolled under part B, including any individual who is enrolled
in a Medicare Advantage plan under part C.
``(2) Health care group.--
``(A) In general.--The term `health care group'
means--
``(i) a group of physicians that is
organized at least in part for the purpose of
providing physician's services under this
title;
``(ii) an integrated health care delivery
system that delivers care through coordinated
hospitals, clinics, home health agencies,
ambulatory surgery centers, skilled nursing
facilities, rehabilitation facilities and
clinics, and employed, independent, or
contracted physicians; or
``(iii) an organization representing
regional coalitions of groups or systems
described in clause (i) or (ii).
``(B) Inclusion.--As the Secretary determines
appropriate, a health care group may include a hospital
or any other individual or entity furnishing items or
services for which payment may be made under this title
that is affiliated with the health care group under an
arrangement structured so that such hospital,
individual, or entity participates in a demonstration
project under this section.
``(3) Physician.--Except as otherwise provided for by the
Secretary, the term `physician' means any individual who
furnishes services that may be paid for as physicians' services
under this title.
``(b) Demonstration Projects.--The Secretary shall establish a 5-
year demonstration program under which the Secretary shall approve
demonstration projects that examine health delivery factors that
encourage the delivery of improved quality in patient care, including--
``(1) the provision of incentives to improve the safety of
care provided to beneficiaries;
``(2) the appropriate use of best practice guidelines by
providers and services by beneficiaries;
``(3) reduced scientific uncertainty in the delivery of
care through the examination of variations in the utilization
and allocation of services, and outcomes measurement and
research;
``(4) encourage shared decision making between providers
and patients;
``(5) the provision of incentives for improving the quality
and safety of care and achieving the efficient allocation of
resources;
``(6) the appropriate use of culturally and ethnically
sensitive health care delivery; and
``(7) the financial effects on the health care marketplace
of altering the incentives for care delivery and changing the
allocation of resources.
``(c) Administration by Contract.--
``(1) In general.--Except as otherwise provided in this
section, the Secretary may administer the demonstration program
established under this section in a manner that is similar to
the manner in which the demonstration program established under
section 1866A is administered in accordance with section 1866B.
``(2) Alternative payment systems.--A health care group
that receives assistance under this section may, with respect
to the demonstration project to be carried out with such
assistance, include proposals for the use of alternative
payment systems for items and services provided to
beneficiaries by the group that are designed to--
``(A) encourage the delivery of high quality care
while accomplishing the objectives described in
subsection (b); and
``(B) streamline documentation and reporting
requirements otherwise required under this title.
``(3) Benefits.--A health care group that receives
assistance under this section may, with respect to the
demonstration project to be carried out with such
assistance, include modifications to the package of benefits available
under the original medicare fee-for-service program under parts A and B
or the package of benefits available through a Medicare Advantage plan
under part C. The criteria employed under the demonstration program
under this section to evaluate outcomes and determine best practice
guidelines and incentives shall not be used as a basis for the denial
of medicare benefits under the demonstration program to patients
against their wishes (or if the patient is incompetent, against the
wishes of the patient's surrogate) on the basis of the patient's age or
expected length of life or of the patient's present or predicted
disability, degree of medical dependency, or quality of life.
``(d) Eligibility Criteria.--To be eligible to receive assistance
under this section, an entity shall--
``(1) be a health care group;
``(2) meet quality standards established by the Secretary,
including--
``(A) the implementation of continuous quality
improvement mechanisms that are aimed at integrating
community-based support services, primary care, and
referral care;
``(B) the implementation of activities to increase
the delivery of effective care to beneficiaries;
``(C) encouraging patient participation in
preference-based decisions;
``(D) the implementation of activities to encourage
the coordination and integration of medical service
delivery; and
``(E) the implementation of activities to measure
and document the financial impact on the health care
marketplace of altering the incentives of health care
delivery and changing the allocation of resources; and
``(3) meet such other requirements as the Secretary may
establish.
``(e) Waiver Authority.--The Secretary may waive such requirements
of titles XI and XVIII as may be necessary to carry out the purposes of
the demonstration program established under this section.
``(f) Budget Neutrality.--With respect to the 5-year period of the
demonstration program under subsection (b), the aggregate expenditures
under this title for such period shall not exceed the aggregate
expenditures that would have been expended under this title if the
program established under this section had not been implemented.
``(g) Notice Requirements.--In the case of an individual that
receives health care items or services under a demonstration program
carried out under this section, the Secretary shall ensure that such
individual is notified of any waivers of coverage or payment rules that
are applicable to such individual under this title as a result of the
participation of the individual in such program.
``(h) Participation and Support by Federal Agencies.--In carrying
out the demonstration program under this section, the Secretary may
direct--
``(1) the Director of the National Institutes of Health to
expand the efforts of the Institutes to evaluate current
medical technologies and improve the foundation for evidence-
based practice;
``(2) the Administrator of the Agency for Healthcare
Research and Quality to, where possible and appropriate, use
the program under this section as a laboratory for the study of
quality improvement strategies and to evaluate, monitor, and
disseminate information relevant to such program; and
``(3) the Administrator of the Centers for Medicare &
Medicaid Services and the Administrator of the Center for
Medicare Choices to support linkages of relevant medicare data
to registry information from participating health care groups
for the beneficiary populations served by the participating
groups, for analysis supporting the purposes of the
demonstration program, consistent with the applicable
provisions of the Health Insurance Portability and
Accountability Act of 1996.''.

SEC. 347. MEDPAC STUDY ON DIRECT ACCESS TO PHYSICAL THERAPY SERVICES.

(a) Study.--The Medicare Payment Advisory Commission (in this
section referred to as the ``Commission'') shall conduct a study on the
feasibility and advisability of allowing medicare fee-for-service
beneficiaries direct access to outpatient physical therapy services and
physical therapy services furnished as comprehensive rehabilitation
facility services.
(b) Report.--Not later than January 1, 2005, the Commission shall
submit to Congress a report on the study conducted under subsection (a)
together with recommendations for such legislation or administrative
action as the Commission determines to be appropriate.
(c) Direct Access Defined.--The term ``direct access'' means, with
respect to outpatient physical therapy services and physical therapy
services furnished as comprehensive outpatient rehabilitation facility
services, coverage of and payment for such services in accordance with
the provisions of title XVIII of the Social Security Act, except that
sections 1835(a)(2), 1861(p), and 1861(cc) of such Act (42 U.S.C.
1395n(a)(2), 1395x(p), and 1395x(cc), respectively) shall be applied--
(1) without regard to any requirement that--
(A) an individual be under the care of (or referred
by) a physician; or
(B) services be provided under the supervision of a
physician; and
(2) by allowing a physician or a qualified physical
therapist to satisfy any requirement for--
(A) certification and recertification; and
(B) establishment and periodic review of a plan of
care.

SEC. 348. DEMONSTRATION PROJECT FOR CONSUMER-DIRECTED CHRONIC
OUTPATIENT SERVICES.

(a) Establishment.--
(1) In general.--Subject to the succeeding provisions of
this section, the Secretary shall establish demonstration
projects (in this section referred to as ``demonstration
projects'') under which the Secretary shall evaluate methods that
improve the quality of care provided to individuals with chronic
conditions and that reduce expenditures that would otherwise be made
under the medicare program on behalf of such individuals for such
chronic conditions, such methods to include permitting those
beneficiaries to direct their own health care needs and services.
(2) Individuals with chronic conditions defined.--In this
section, the term ``individuals with chronic conditions'' means
an individual entitled to benefits under part A of title XVIII
of the Social Security Act, and enrolled under part B of such
title, but who is not enrolled under part C of such title who
is diagnosed as having one or more chronic conditions (as
defined by the Secretary), such as diabetes.
(b) Design of Projects.--
(1) Evaluation before implementation of project.--
(A) In general.--In establishing the demonstration
projects under this section, the Secretary shall
evaluate best practices employed by group health plans
and practices under State plans for medical assistance
under the medicaid program under title XIX of the
Social Security Act, as well as best practices in the
private sector or other areas, of methods that permit
patients to self-direct the provision of personal care
services. The Secretary shall evaluate such practices
for a 1-year period and, based on such evaluation,
shall design the demonstration project.
(B) Requirement for estimate of budget neutral
costs.--As part of the evaluation under subparagraph
(A), the Secretary shall evaluate the costs of
furnishing care under the projects. The Secretary may
not implement the demonstration projects under this
section unless the Secretary determines that the costs
of providing care to individuals with chronic
conditions under the project will not exceed the costs,
in the aggregate, of furnishing care to such
individuals under title XVIII of the Social Security
Act, that would otherwise be paid without regard to the
demonstration projects for the period of the project.
(2) Scope of services.--The Secretary shall determine the
appropriate scope of personal care services that would apply
under the demonstration projects.
(c) Voluntary Participation.--Participation of providers of
services and suppliers, and of individuals with chronic conditions, in
the demonstration projects shall be voluntary.
(d) Demonstration Project Sites.--Not later than 2 years after the
date of the enactment of this Act, the Secretary shall conduct a
demonstration project in at least one area that the Secretary
determines has a population of individuals entitled to benefits under
part A of title XVIII of the Social Security Act, and enrolled under
part B of such title, with a rate of incidence of diabetes that
significantly exceeds the national average rate of all areas.
(e) Evaluation and Report.--
(1) Evaluations.--The Secretary shall conduct evaluations
of the clinical and cost effectiveness of the demonstration
projects.
(2) Reports.--Not later than 2 years after the commencement
of the demonstration projects, and biannually thereafter, the
Secretary shall submit to Congress a report on the evaluation,
and shall include in the report the following:
(A) An analysis of the patient outcomes and costs
of furnishing care to the individuals with chronic
conditions participating in the projects as compared to
such outcomes and costs to other individuals for the
same health conditions.
(B) Evaluation of patient satisfaction under the
demonstration projects.
(C) Such recommendations regarding the extension,
expansion, or termination of the projects as the
Secretary determines appropriate.
(f) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) to such extent and for such period as the Secretary
determines is necessary to conduct demonstration projects.
(g) Authorization of Appropriations.--(1) Payments for the costs of
carrying out the demonstration project under this section shall be made
from the Federal Supplementary Medical Insurance Trust Fund under
section 1841 of such Act (42 U.S.C. 1395t).
(2) There are authorized to be appropriated from such Trust Fund
such sums as may be necessary for the Secretary to enter into contracts
with appropriate organizations for the deign, implementation, and
evaluation of the demonstration project.
(3) In no case may expenditures under this section exceed the
aggregate expenditures that would otherwise have been made for the
provision of personal care services.

SEC. 349. MEDICARE CARE MANAGEMENT PERFORMANCE DEMONSTRATION.

(a) Establishment.--
(1) In general.--The Secretary shall establish a pay-for-
performance demonstration program with physicians to meet the
needs of eligible beneficiaries through the adoption and use of
health information technology and evidence-based outcomes
measures for--
(A) promoting continuity of care;
(B) helping stabilize medical conditions;
(C) preventing or minimizing acute exacerbations of
chronic conditions; and
(D) reducing adverse health outcomes, such as
adverse drug interactions related to polypharmacy.
(2) Sites.--The Secretary shall designate no more than 4
sites at which to conduct the demonstration program under this
section, of which--
(A) 2 shall be in an urban area;
(B) 1 shall be in a rural area; and
(C) 1 shall be in a State with a medical school
with a Department of Geriatrics that manages rural
outreach sites and is capable of managing patients with
multiple chronic conditions, one of which is dementia.
(3) Duration.--The Secretary shall conduct the
demonstration program under this section for a 3-year period.
(4) Consultation.--In carrying out the demonstration
program under this section, the Secretary shall consult with
private sector and non-profit groups that are undertaking
similar efforts to improve quality and reduce avoidable
hospitalizations for chronically ill patients.
(b) Participation.--
(1) In general.--A physician who provides care for a
minimum number of eligible beneficiaries (as specified by the
Secretary) may participate in the demonstration program under
this section if such physician agrees, to phase-in over the
course of the 3-year demonstration period and with the
assistance provided under subsection (d)(2)--
(A) the use of health information technology to
manage the clinical care of eligible beneficiaries
consistent with paragraph (3); and
(B) the electronic reporting of clinical quality
and outcomes measures in accordance with requirements
established by the Secretary under the demonstration
program.
(2) Special rule.--In the case of the sites referred to in
subparagraphs (B) and (C) of subsection (a)(2), a physician who
provides care for a minimum number of beneficiaries with two or
more chronic conditions, including dementia (as specified by
the Secretary), may participate in the program under this
section if such physician agrees to the requirements in
subparagraphs (A) and (B) of paragraph (1).
(3) Practice standards.--Each physician participating in
the demonstration program under this section must demonstrate
the ability--
(A) to assess each eligible beneficiary for
conditions other than chronic conditions, such as
impaired cognitive ability and co-morbidities, for the
purposes of developing care management requirements;
(B) to serve as the primary contact of eligible
beneficiaries in accessing items and services for which
payment may be made under the medicare program;
(C) to establish and maintain health care
information system for such beneficiaries;
(D) to promote continuity of care across providers
and settings;
(E) to use evidence-based guidelines and meet such
clinical quality and outcome measures as the Secretary
shall require;
(F) to promote self-care through the provision of
patient education and support for patients or, where
appropriate, family caregivers;
(G) when appropriate, to refer such beneficiaries
to community service organizations; and
(H) to meet such other complex care management
requirements as the Secretary may specify.
The guidelines and measures required under subparagraph (E)
shall be designed to take into account beneficiaries with
multiple chronic conditions.
(c) Payment Methodology.--Under the demonstration program under
this section the Secretary shall pay a per beneficiary amount to each
participating physician who meets or exceeds specific performance
standards established by the Secretary with respect to the clinical
quality and outcome measures reported under subsection (b)(1)(B). Such
amount may vary based on different levels of performance or
improvement.
(d) Administration.--
(1) Use of quality improvement organizations.--The
Secretary shall contract with quality improvement organizations
or such other entities as the Secretary deems appropriate to
enroll physicians and evaluate their performance under the
demonstration program under this section.
(2) Technical assistance.--The Secretary shall require in
such contracts that the contractor be responsible for technical
assistance and education as needed to physicians enrolled in
the demonstration program under this section for the purpose of
aiding their adoption of health information technology, meeting
practice standards, and implementing required clinical and
outcomes measures.
(e) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Supplementary Medical Insurance Trust
Fund established under section 1841 of the Social Security Act
(42 U.S.C. 1395t) of such funds as are necessary for the costs
of carrying out the demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary do not exceed the
amount which the Secretary estimates would have been paid if
the demonstration program under this section was not
implemented.
(f) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.;
1395 et seq.) as may be necessary for the purpose of carrying out the
demonstration program under this section.
(g) Report.--Not later than 12 months after the date of completion
of the demonstration program under this section, the Secretary shall
submit to Congress a report on such program, together with
recommendations for such legislation and administrative action as the
Secretary determines to be appropriate.
(h) Definitions.--In this section:
(1) Eligible beneficiary.--The term ``eligible
beneficiary'' means any individual who--
(A) is entitled to benefits under part A and
enrolled for benefits under part B of title XVIII of
the Social Security Act and is not enrolled in a plan
under part C of such title; and
(B) has one or more chronic medical conditions
specified by the Secretary (one of which may be
cognitive impairment).
(2) Health information technology.--The term ``health
information technology'' means email communication, clinical
alerts and reminders, and other information technology that
meets such functionality, interoperability, and other standards
as prescribed by the Secretary.

SEC. 350. GAO STUDY AND REPORT ON THE PROPAGATION OF CONCIERGE CARE.

(a) Study.--
(1) In general.--The Comptroller General of the United
States shall conduct a study on concierge care (as defined in
paragraph (2)) to determine the extent to which such care--
(A) is used by medicare beneficiaries (as defined
in section 1802(b)(5)(A) of the Social Security Act (42
U.S.C. 1395a(b)(5)(A))); and
(B) has impacted upon the access of medicare
beneficiaries (as so defined) to items and services for
which reimbursement is provided under the medicare
program under title XVIII of the Social Security Act
(42 U.S.C. 1395 et seq.).
(2) Concierge care.--In this section, the term ``concierge
care'' means an arrangement under which, as a prerequisite for
the provision of a health care item or service to an
individual, a physician, practitioner (as described in section
1842(b)(18)(C) of the Social Security Act (42 U.S.C.
1395u(b)(18)(C))), or other individual--
(A) charges a membership fee or another incidental
fee to an individual desiring to receive the health
care item or service from such physician, practitioner,
or other individual; or
(B) requires the individual desiring to receive the
health care item or service from such physician,
practitioner, or other individual to purchase an item
or service.
(b) Report.--Not later than the date that is 12 months after the
date of enactment of this Act, the Comptroller General of the United
States shall submit to Congress a report on the study conducted under
subsection (a)(1) together with such recommendations for legislative or
administrative action as the Comptroller General determines to be
appropriate.

SEC. 351. DEMONSTRATION OF COVERAGE OF CHIROPRACTIC SERVICES UNDER
MEDICARE.

(a) Definitions.--In this section:
(1) Chiropractic services.--The term ``chiropractic
services'' has the meaning given that term by the Secretary for
purposes of the demonstration projects, but shall include, at a
minimum--
(A) care for neuromusculoskeletal conditions
typical among eligible beneficiaries; and
(B) diagnostic and other services that a
chiropractor is legally authorized to perform by the
State or jurisdiction in which such treatment is
provided.
(2) Demonstration project.--The term ``demonstration
project'' means a demonstration project established by the
Secretary under subsection (b)(1).
(3) Eligible beneficiary.--The term ``eligible
beneficiary'' means an individual who is enrolled under part B
of the medicare program.
(4) Medicare program.--The term ``medicare program'' means
the health benefits program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.).
(b) Demonstration of Coverage of Chiropractic Services Under
Medicare.--
(1) Establishment.--The Secretary shall establish
demonstration projects in accordance with the provisions of
this section for the purpose of evaluating the feasibility and
advisability of covering chiropractic services under the
medicare program (in addition to the coverage provided for
services consisting of treatment by means of manual
manipulation of the spine to correct a subluxation described in
section 1861(r)(5) of the Social Security Act (42 U.S.C.
1395x(r)(5))).
(2) No physician approval required.--In establishing the
demonstration projects, the Secretary shall ensure that an
eligible beneficiary who participates in a demonstration
project, including an eligible beneficiary who is enrolled for
coverage under a Medicare+Choice plan (or, on and after January
1, 2006, under a Medicare Advantage plan), is not required to
receive approval from a physician or other health care provider
in order to receive a chiropractic service under a
demonstration project.
(3) Consultation.--In establishing the demonstration
projects, the Secretary shall consult with chiropractors,
organizations representing chiropractors, eligible
beneficiaries, and organizations representing eligible
beneficiaries.
(4) Participation.--Any eligible beneficiary may
participate in the demonstration projects on a voluntary basis.
(c) Conduct of Demonstration Projects.--
(1) Demonstration sites.--
(A) Selection of demonstration sites.--The
Secretary shall conduct demonstration projects at 4
demonstration sites.
(B) Geographic diversity.--Of the sites described
in subparagraph (A)--
(i) 2 shall be in rural areas; and
(ii) 2 shall be in urban areas.
(C) Sites located in hpsas.--At least 1 site
described in clause (i) of subparagraph (B) and at
least 1 site described in clause (ii) of such
subparagraph shall be located in an area that is
designated under section 332(a)(1)(A) of the Public
Health Service Act (42 U.S.C. 254e(a)(1)(A)) as a
health professional shortage area.
(2) Implementation; duration.--
(A) Implementation.--The Secretary shall not
implement the demonstration projects before October 1,
2004.
(B) Duration.--The Secretary shall complete the
demonstration projects by the date that is 2 years
after the date on which the first demonstration project
is implemented.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall conduct an evaluation
of the demonstration projects--
(A) to determine whether eligible beneficiaries who
use chiropractic services use a lesser overall amount
of items and services for which payment is made under
the medicare program than eligible beneficiaries who do
not use such services;
(B) to determine the cost of providing payment for
chiropractic services under the medicare program;
(C) to determine the satisfaction of eligible
beneficiaries participating in the demonstration
projects and the quality of care received by such
beneficiaries; and
(D) to evaluate such other matters as the Secretary
determines is appropriate.
(2) Report.--Not later than the date that is 1 year after
the date on which the demonstration projects conclude, the
Secretary shall submit to Congress a report on the evaluation
conducted under paragraph (1) together with such
recommendations for legislation or administrative action as the
Secretary determines is appropriate.
(e) Waiver of Medicare Requirements.--The Secretary shall waive
compliance with such requirements of the medicare program to the extent
and for the period the Secretary finds necessary to conduct the
demonstration projects.
(f) Funding.--
(1) Demonstration projects.--
(A) In general.--Subject to subparagraph (B) and
paragraph (2), the Secretary shall provide for the
transfer from the Federal Supplementary Insurance Trust
Fund under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the
costs of carrying out the demonstration projects under
this section.
(B) Limitation.--In conducting the demonstration
projects under this section, the Secretary shall ensure
that the aggregate payments made by the Secretary under
the medicare program do not exceed the amount which the
Secretary would have paid under the medicare program if
the demonstration projects under this section were not
implemented.
(2) Evaluation and report.--There are authorized to be
appropriated such sums as are necessary for the purpose of
developing and submitting the report to Congress under
subsection (d).

TITLE IV--PROVISIONS RELATING TO PARTS A AND B

Subtitle A--Home Health Services

SEC. 401. DEMONSTRATION PROJECT TO CLARIFY THE DEFINITION OF HOMEBOUND.

(a) Demonstration Project.--Not later than 180 days after the date
of the enactment of this Act, the Secretary shall conduct a 2-year
demonstration project under part B of title XVIII of the Social
Security Act under which medicare beneficiaries with chronic conditions
described in subsection (b) are deemed to be homebound for purposes of
receiving home health services under the medicare program.
(b) Medicare Beneficiary Described.--For purposes of subsection
(a), a medicare beneficiary is eligible to be deemed to be homebound,
without regard to the purpose, frequency, or duration of absences from
the home, if--
(1) the beneficiary has been certified by one physician as
an individual who has a permanent and severe, disabling
condition that is not expected to improve;
(2) the beneficiary is dependent upon assistance from
another individual with at least 3 out of the 5 activities of
daily living for the rest of the beneficiary's life;
(3) the beneficiary requires skilled nursing services for
the rest of the beneficiary's life and the skilled nursing is
more than medication management;
(4) an attendant is required to visit the beneficiary on a
daily basis to monitor and treat the beneficiary's medical
condition or to assist the beneficiary with activities of daily
living;
(5) the beneficiary requires technological assistance or
the assistance of another person to leave the home; and
(6) the beneficiary does not regularly work in a paid
position full-time or part-time outside the home.
(c) Demonstration Project Sites.--The demonstration project
established under this section shall be conducted in 3 States selected
by the Secretary to represent the Northeast, Midwest, and Western
regions of the United States.
(d) Limitation on Number of Participants.--The aggregate number of
such beneficiaries that may participate in the project may not exceed
15,000.
(e) Data.--The Secretary shall collect such data on the
demonstration project with respect to the provision of home health
services to medicare beneficiaries that relates to quality of care,
patient outcomes, and additional costs, if any, to the medicare
program.
(f) Report to Congress.--Not later than 1 year after the date of
the completion of the demonstration project under this section, the
Secretary shall submit to Congress a report on the project using the
data collected under subsection (e). The report shall include the
following:
(1) An examination of whether the provision of home health
services to medicare beneficiaries under the project has had
any of the following effects:
(A) Has adversely affected the provision of home
health services under the medicare program.
(B) Has directly caused an increase of expenditures
under the medicare program for the provision of such
services that is directly attributable to such
clarification.
(2) The specific data evidencing the amount of any increase
in expenditures that is directly attributable to the
demonstration project (expressed both in absolute dollar terms
and as a percentage) above expenditures that would otherwise
have been incurred for home health services under the medicare
program.
(3) Specific recommendations to exempt permanently and
severely disabled homebound beneficiaries from restrictions on
the length, frequency, and purpose of their absences from the
home to qualify for home health services without incurring
additional costs to the medicare program.
(g) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) to such extent and for such period as the Secretary
determines is necessary to conduct demonstration projects.
(h) Construction.--Nothing in this section shall be construed as
waiving any applicable civil monetary penalty, criminal penalty, or
other remedy available to the Secretary under title XI or title XVIII
of the Social Security Act for acts prohibited under such titles,
including penalties for false certifications for purposes of receipt of
items or services under the medicare program.
(i) Authorization of Appropriations.--Payments for the costs of
carrying out the demonstration project under this section shall be made
from the Federal Supplementary Medical Insurance Trust Fund under
section 1841 of such Act (42 U.S.C. 1395t).
(j) Definitions.--In this section:
(1) Medicare beneficiary.--The term ``medicare
beneficiary'' means an individual who is enrolled under part B
of title XVIII of the Social Security Act.
(2) Home health services.--The term ``home health
services'' has the meaning given such term in section 1861(m)
of the Social Security Act (42 U.S.C. 1395x(m)).
(3) Activities of daily living defined.--The term
``activities of daily living'' means eating, toileting,
transferring, bathing, and dressing.

SEC. 402. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY-CARE SERVICES.

(a) Establishment.--Subject to the succeeding provisions of this
section, the Secretary shall establish a demonstration project (in this
section referred to as the ``demonstration project'') under which the
Secretary shall, as part of a plan of an episode of care for home
health services established for a medicare beneficiary, permit a home
health agency, directly or under arrangements with a medical adult day-
care facility, to provide medical adult day-care services as a
substitute for a portion of home health services that would otherwise
be provided in the beneficiary's home.
(b) Payment.--
(1) In general.--Subject to paragraph (2), the amount of
payment for an episode of care for home health services, a
portion of which consists of substitute medical adult day-care
services, under the demonstration project shall be made at a
rate equal to 95 percent of the amount that would otherwise
apply for such home health services under section 1895 of the
Social Security Act (42 U.S.C. 1395fff). In no case may a home
health agency, or a medical adult day-care facility under
arrangements with a home health agency, separately charge a
beneficiary for medical adult day-care services furnished under
the plan of care.
(2) Adjustment in case of overutilization of substitute
adult day-care services to ensure budget neutrality.--The
Secretary shall monitor the expenditures under the
demonstration project and under title XVIII of the Social
Security Act for home health services. If the Secretary
estimates that the total expenditures under the demonstration
project and under such title XVIII for home health services for
a period determined by the Secretary exceed expenditures that
would have been made under such title XVIII for home health
services for such period if the demonstration project had not
been conducted, the Secretary shall adjust the rate of payment
to medical adult day-care facilities under paragraph (1) in
order to eliminate such excess.
(c) Demonstration Project Sites.--The demonstration project
established under this section shall be conducted in not more than 5
sites in States selected by the Secretary that license or certify
providers of services that furnish medical adult day-care services.
(d) Duration.--The Secretary shall conduct the demonstration
project for a period of 3 years.
(e) Voluntary Participation.--Participation of medicare
beneficiaries in the demonstration project shall be voluntary. The
total number of such beneficiaries that may participate in the project
at any given time may not exceed 15,000.
(f) Preference in Selecting Agencies.--In selecting home health
agencies to participate under the demonstration project, the Secretary
shall give preference to those agencies that are currently licensed or
certified through common ownership and control to furnish medical adult
day-care services.
(g) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of the Social Security Act as may be necessary for the
purposes of carrying out the demonstration project, other than waiving
the requirement that an individual be homebound in order to be eligible
for benefits for home health services.
(h) Evaluation and Report.--The Secretary shall conduct an
evaluation of the clinical and cost-effectiveness of the demonstration
project. Not later than 6 months after the completion of the project,
the Secretary shall submit to Congress a report on the evaluation, and
shall include in the report the following:
(1) An analysis of the patient outcomes and costs of
furnishing care to the medicare beneficiaries participating in
the project as compared to such outcomes and costs to
beneficiaries receiving only home health services for the same
health conditions.
(2) Such recommendations regarding the extension,
expansion, or termination of the project as the Secretary
determines appropriate.
(i) Definitions.--In this section:
(1) Home health agency.--The term ``home health agency''
has the meaning given such term in section 1861(o) of the
Social Security Act (42 U.S.C. 1395x(o)).
(2) Medical adult day-care facility.--The term ``medical
adult day-care facility'' means a facility that--
(A) has been licensed or certified by a State to
furnish medical adult day-care services in the State
for a continuous 2-year period;
(B) is engaged in providing skilled nursing
services and other therapeutic services directly or
under arrangement with a home health agency;
(C) is licensed and certified by the State in which
it operates or meets such standards established by the
Secretary to assure quality of care and such other
requirements as the Secretary finds necessary in the
interest of the health and safety of individuals who
are furnished services in the facility; and
(D) provides medical adult day-care services.
(3) Medical adult day-care services.--The term ``medical
adult day-care services'' means--
(A) home health service items and services
described in paragraphs (1) through (7) of section
1861(m) furnished in a medical adult day-care facility;
(B) a program of supervised activities furnished in
a group setting in the facility that--
(i) meet such criteria as the Secretary
determines appropriate; and
(ii) is designed to promote physical and
mental health of the individuals; and
(C) such other services as the Secretary may
specify.
(4) Medicare beneficiary.--The term ``medicare
beneficiary'' means an individual entitled to benefits under
part A of this title, enrolled under part B of this title, or
both.

SEC. 403. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR COLLECTION OF
DATA ON NON-MEDICARE AND NON-MEDICAID PATIENTS.

(a) In General.--During the period described in subsection (b), the
Secretary may not require, under section 4602(e) of the Balanced Budget
Act of 1997 (Public Law 105-33; 111 Stat. 467) or otherwise under
OASIS, a home health agency to gather or submit information that
relates to an individual who is not eligible for benefits under either
title XVIII or title XIX of the Social Security Act (such information
in this section referred to as ``non-medicare/medicaid OASIS
information'').
(b) Period of Suspension.--The period described in this
subsection--
(1) begins on the date of the enactment of this Act; and
(2) ends on the last day of the second month beginning
after the date as of which the Secretary has published final
regulations regarding the collection and use by the Centers for
Medicare & Medicaid Services of non-medicare/medicaid OASIS
information following the submission of the report required
under subsection (c).
(c) Report.--
(1) Study.--The Secretary shall conduct a study on how non-
medicare/medicaid OASIS information is and can be used by large
home health agencies. Such study shall examine--
(A) whether there are unique benefits from the
analysis of such information that cannot be derived
from other information available to, or collected by,
such agencies; and
(B) the value of collecting such information by
small home health agencies compared to the
administrative burden related to such collection.
In conducting the study the Secretary shall obtain
recommendations from quality assessment experts in the use of
such information and the necessity of small, as well as large,
home health agencies collecting such information.
(2) Report.--The Secretary shall submit to Congress a
report on the study conducted under paragraph (1) by not later
than 18 months after the date of the enactment of this Act.
(d) Construction.--Nothing in this section shall be construed as
preventing home health agencies from collecting non-medicare/medicaid
OASIS information for their own use.

SEC. 404. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH AGENCIES.

(a) Study.--The Medicare Payment Advisory Commission shall conduct
a study of payment margins of home health agencies under the home
health prospective payment system under section 1895 of the Social
Security Act (42 U.S.C. 1395fff). Such study shall examine whether
systematic differences in payment margins are related to differences in
case mix (as measured by home health resource groups (HHRGs)) among
such agencies. The study shall use the partial or full-year cost
reports filed by home health agencies.
(b) Report.--Not later than 2 years after the date of the enactment
of this Act, the Commission shall submit to Congress a report on the
study under subsection (a).

SEC. 405. COVERAGE OF RELIGIOUS NONMEDICAL HEALTH CARE INSTITUTION
SERVICES FURNISHED IN THE HOME.

(a) In General.--Section 1821(a) (42 U.S.C. 1395i-5(a)) is
amended--
(1) in the matter preceding paragraph (1), by inserting
``and for home health services furnished an individual by a
religious nonmedical health care institution'' after ``religious
nonmedical health care institution''; and
(2) in paragraph (2)--
(A) by striking ``or extended care services'' and
inserting ``, extended care services, or home health
services''; and
(B) by inserting ``, or receiving services from a
home health agency,'' after ``skilled nursing
facility''.
(b) Definition.--Section 1861 (42 U.S.C. 1395x), as amended by
section 342, is amended by adding at the end the following new section:

``Extended Care in Religious Nonmedical Health Care Institutions

``(aaa)(1) The term `home health agency' also includes a religious
nonmedical health care institution (as defined in subsection (ss)(1)),
but only with respect to items and services ordinarily furnished by
such an institution to individuals in their homes, and that are
comparable to items and services furnished to individuals by a home
health agency that is not religious nonmedical health care institution.
``(2)(A) Subject to subparagraphs (B), payment may be made with
respect to services provided by such an institution only to such extent
and under such conditions, limitations, and requirements (in addition
to or in lieu of the conditions, limitations, and requirements
otherwise applicable) as may be provided in regulations consistent with
section 1821.
``(B) Notwithstanding any other provision of this title, payment
may not be made under subparagraph (A)--
``(i) in a year insofar as such payments exceed $700,000;
and
``(ii) after December 31, 2006.''.

Subtitle B--Graduate Medical Education

SEC. 411. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR GERIATRIC RESIDENCY
OR FELLOWSHIP PROGRAMS.

(a) Clarification of Congressional Intent.--Congress intended
section 1886(h)(5)(F)(ii) of the Social Security Act (42 U.S.C.
1395ww(h)(5)(F)(ii)), as added by section 9202 of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272), to
provide an exception to the initial residency period for geriatric
residency or fellowship programs such that, where a particular approved
geriatric training program requires a resident to complete 2 years of
training to initially become board eligible in the geriatric specialty,
the 2 years spent in the geriatric training program are treated as part
of the resident's initial residency period, but are not counted against
any limitation on the initial residency period.
(b) Interim Final Regulatory Authority and Effective Date.--The
Secretary shall promulgate interim final regulations consistent with
the congressional intent expressed in this section after notice and
pending opportunity for public comment to be effective for cost
reporting periods beginning on or after October 1, 2003.

SEC. 412. TREATMENT OF VOLUNTEER SUPERVISION.

(a) Moratorium on Changes in Treatment.--During the 1-year period
beginning on January 1, 2004, for purposes of applying subsections
(d)(5)(B) and (h) of section 1886 of the Social Security Act (42 U.S.C.
1395ww), the Secretary shall allow all hospitals to count residents in
osteopathic and allopathic family practice programs in existence as of
January 1, 2002, who are training at non-hospital sites, without regard
to the financial arrangement between the hospital and the teaching
physician practicing in the non-hospital site to which the resident has
been assigned.
(b) Study and Report.--
(1) Study.--The Inspector General of the Department of
Health and Human Services shall conduct a study of the
appropriateness of alternative payment methodologies under such
sections for the costs of training residents in non-hospital
settings.
(2) Report.--Not later than 1 year after the date of the
enactment of this Act, the Inspector General shall submit to
Congress a report on the study conducted under paragraph (1),
together with such recommendations as the Inspector General
determines appropriate.

Subtitle C--Chronic Care Improvement

SEC. 421. VOLUNTARY CHRONIC CARE IMPROVEMENT UNDER TRADITIONAL FEE-FOR-
SERVICE.

(a) In General.--Title XVIII is amended by inserting after section
1806 the following new section:

``chronic care improvement

``Sec. 1807. (a) Implementation of Chronic Care Improvement
Programs.--
``(1) In general.--The Secretary shall provide for the
phased-in development, testing, evaluation, and implementation
of chronic care improvement programs in accordance with this
section. Each such program shall be designed to improve
clinical quality and beneficiary satisfaction and achieve
spending targets with respect to expenditures under this title
for targeted beneficiaries with one or more threshold
conditions.
``(2) Definitions.--For purposes of this section:
``(A) Chronic care improvement program.--The term
`chronic care improvement program' means a program
described in paragraph (1) that is offered under an
agreement under subsection (b) or (c).
``(B) Chronic care improvement organization.--The
term `chronic care improvement organization' means an
entity that has entered into an agreement under
subsection (b) or (c) to provide, directly or through
contracts with subcontractors, a chronic care
improvement program under this section. Such an entity
may be a disease management organization,
health insurer, integrated delivery system, physician group practice, a
consortium of such entities, or any other legal entity that the
Secretary determines appropriate to carry out a chronic care
improvement program under this section.
``(C) Care management plan.--The term `care
management plan' means a plan established under
subsection (d) for a participant in a chronic care
improvement program.
``(D) Threshold condition.--The term `threshold
condition' means a chronic condition, such as
congestive heart failure, diabetes, chronic obstructive
pulmonary disease (COPD), or other diseases or
conditions, as selected by the Secretary as appropriate
for the establishment of a chronic care improvement
program.
``(E) Targeted beneficiary.--The term `targeted
beneficiary' means, with respect to a chronic care
improvement program, an individual who--
``(i) is entitled to benefits under part A
and enrolled under part B, but not enrolled in
a plan under part C;
``(ii) has one or more threshold conditions
covered under such program; and
``(iii) has been identified under
subsection (d)(1) as a potential participant in
such program.
``(3) Construction.--Nothing in this section shall be
construed as--
``(A) expanding the amount, duration, or scope of
benefits under this title;
``(B) providing an entitlement to participate in a
chronic care improvement program under this section;
``(C) providing for any hearing or appeal rights
under section 1869, 1878, or otherwise, with respect to
a chronic care improvement program under this section;
or
``(D) providing benefits under a chronic care
improvement program for which a claim may be submitted
to the Secretary by any provider of services or
supplier (as defined in section 1861(d)).
``(b) Developmental Phase (Phase I).--
``(1) In general.--In carrying out this section, the
Secretary shall enter into agreements consistent with
subsection (f) with chronic care improvement organizations for
the development, testing, and evaluation of chronic care
improvement programs using randomized controlled trials. The
first such agreement shall be entered into not later than 12
months after the date of the enactment of this section.
``(2) Agreement period.--The period of an agreement under
this subsection shall be for 3 years.
``(3) Minimum participation.--
``(A) In general.--The Secretary shall enter into
agreements under this subsection in a manner so that
chronic care improvement programs offered under this
section are offered in geographic areas that, in the
aggregate, consist of areas in which at least 10
percent of the aggregate number of medicare
beneficiaries reside.
``(B) Medicare beneficiary defined.--In this
paragraph, the term `medicare beneficiary' means an
individual who is entitled to benefits under part A,
enrolled under part B, or both, and who resides in the
United States.
``(4) Site selection.--In selecting geographic areas in
which agreements are entered into under this subsection, the
Secretary shall ensure that each chronic care improvement
program is conducted in a geographic area in which at least
10,000 targeted beneficiaries reside among other individuals
entitled to benefits under part A, enrolled under part B, or
both to serve as a control population.
``(5) Independent evaluations of phase i programs.--The
Secretary shall contract for an independent evaluation of the
programs conducted under this subsection. Such evaluation shall
be done by a contractor with knowledge of chronic care
management programs and demonstrated experience in the
evaluation of such programs. Each evaluation shall include an
assessment of the following factors of the programs:
``(A) Quality improvement measures, such as
adherence to evidence-based guidelines and
rehospitalization rates.
``(B) Beneficiary and provider satisfaction.
``(C) Health outcomes.
``(D) Financial outcomes, including any cost
savings to the program under this title.
``(c) Expanded Implementation Phase (Phase II).--
``(1) In general.--With respect to chronic care improvement
programs conducted under subsection (b), if the Secretary finds
that the results of the independent evaluation conducted under
subsection (b)(6) indicate that the conditions specified in
paragraph (2) have been met by a program (or components of such
program), the Secretary shall enter into agreements consistent
with subsection (f) to expand the implementation of the program
(or components) to additional geographic areas not covered
under the program as conducted under subsection (b), which may
include the implementation of the program on a national basis.
Such expansion shall begin not earlier than 2 years after the
program is implemented under subsection (b) and not later than
6 months after the date of completion of such program.
``(2) Conditions for expansion of programs.--The conditions
specified in this paragraph are, with respect to a chronic care
improvement program conducted under subsection (b) for a
threshold condition, that the program is expected to--
``(A) improve the clinical quality of care;
``(B) improve beneficiary satisfaction; and
``(C) achieve targets for savings to the program
under this title specified by the Secretary in the
agreement within a range determined to be appropriate
by the Secretary, subject to the application of budget
neutrality with respect to the program and not taking
into account any payments by the organization under the
agreement under the program for risk under subsection
(f)(3)(B).
``(3) Independent evaluations of phase ii programs.--The
Secretary shall carry out evaluations of programs expanded
under this subsection as the Secretary determines appropriate.
Such evaluations shall be carried out in the similar manner as
is provided under subsection (b)(5).
``(d) Identification and Enrollment of Prospective Program
Participants.--
``(1) Identification of prospective program participants.--
The Secretary shall establish a method for identifying targeted
beneficiaries who may benefit from participation in a chronic
care improvement program.
``(2) Initial contact by secretary.--The Secretary shall
communicate with each targeted beneficiary concerning
participation in a chronic care improvement program. Such
communication may be made by the Secretary and shall include
information on the following:
``(A) A description of the advantages to the
beneficiary in participating in a program.
``(B) Notification that the organization offering a
program may contact the beneficiary directly concerning
such participation.
``(C) Notification that participation in a program
is voluntary.
``(D) A description of the method for the
beneficiary to participate or for declining to
participate and the method for obtaining additional
information concerning such participation.
``(3) Voluntary participation.--A targeted beneficiary may
participate in a chronic care improvement program on a
voluntary basis and may terminate participation at any time.
``(e) Chronic Care Improvement Programs.--
``(1) In general.--Each chronic care improvement program
shall--
``(A) have a process to screen each targeted
beneficiary for conditions other than threshold
conditions, such as impaired cognitive ability and co-
morbidities, for the purposes of developing an
individualized, goal-oriented care management plan
under paragraph (2);
``(B) provide each targeted beneficiary
participating in the program with such plan; and
``(C) carry out such plan and other chronic care
improvement activities in accordance with paragraph
(3).
``(2) Elements of care management plans.--A care management
plan for a targeted beneficiary shall be developed with the
beneficiary and shall, to the extent appropriate, include the
following:
``(A) A designated point of contact responsible for
communications with the beneficiary and for
facilitating communications with other health care
providers under the plan.
``(B) Self-care education for the beneficiary
(through approaches such as disease management or
medical nutrition therapy) and education for primary
caregivers and family members.
``(C) Education for physicians and other providers
and collaboration to enhance communication of relevant
clinical information.
``(D) The use of monitoring technologies that
enable patient guidance through the exchange of
pertinent clinical information, such as vital signs,
symptomatic information, and health self-assessment.
``(E) The provision of information about hospice
care, pain and palliative care, and end-of-life care.
``(3) Conduct of programs.--In carrying out paragraph
(1)(C) with respect to a participant, the chronic care
improvement organization shall--
``(A) guide the participant in managing the
participant's health (including all co-morbidities,
relevant health care services, and pharmaceutical
needs) and in performing activities as specified under
the elements of the care management plan of the
participant;
``(B) use decision-support tools such as evidence-
based practice guidelines or other criteria as
determined by the Secretary; and
``(C) develop a clinical information database to
track and monitor each participant across settings and
to evaluate outcomes.
``(4) Additional responsibilities.--
``(A) Outcomes report.--Each chronic care
improvement organization offering a chronic care
improvement program shall monitor and report to the
Secretary, in a manner specified by the Secretary, on
health care quality, cost, and outcomes.
``(B) Additional requirements.--Each such
organization and program shall comply with such
additional requirements as the Secretary may specify.
``(5) Accreditation.--The Secretary may provide that
chronic care improvement programs and chronic care improvement
organizations that are accredited by qualified organizations
(as defined by the Secretary) may be deemed to meet such
requirements under this section as the Secretary may specify.
``(f) Terms of Agreements.--
``(1) Terms and conditions.--
``(A) In general.--An agreement under this section
with a chronic care improvement organization shall
contain such terms and conditions as the Secretary may
specify consistent with this section.
``(B) Clinical, quality improvement, and financial
requirements.--The Secretary may not enter into an
agreement with such an organization under this section
for the operation of a chronic care improvement program
unless--
``(i) the program and organization meet the
requirements of subsection (e) and such
clinical, quality improvement, financial, and
other requirements as the Secretary deems to be
appropriate for the targeted beneficiaries to
be served; and
``(ii) the organization demonstrates to the
satisfaction of the Secretary that the
organization is able to assume financial risk
for performance under the agreement (as applied
under paragraph (3)(B)) with respect to
payments made to the organization under such
agreement through available reserves,
reinsurance, withholds, or such other means as
the Secretary determines appropriate.
``(2) Manner of payment.--Subject to paragraph (3)(B), the
payment under an agreement under--
``(A) subsection (b) shall be computed on a per-
member per-month basis; or
``(B) subsection (c) may be on a per-member per-
month basis or such other basis as the Secretary and
organization may agree.
``(3) Application of performance standards.--
``(A) Specification of performance standards.--Each
agreement under this section with a chronic care
improvement organization shall specify performance
standards for each of the factors specified in
subsection (c)(2), including clinical quality and
spending targets under this title, against which the
performance of the chronic care improvement
organization under the agreement is measured.
``(B) Adjustment of payment based on performance.--
``(i) In general.--Each such agreement
shall provide for adjustments in payment rates
to an organization under the agreement insofar
as the Secretary determines that the
organization failed to meet the performance
standards specified in the agreement under
subparagraph (A).
``(ii) Financial risk for performance.--In
the case of an agreement under subsection (b)
or (c), the agreement shall provide for a full
recovery for any amount by which the fees paid
to the organization under the agreement exceed
the estimated savings to the programs under
this title attributable to implementation of
such agreement.
``(4) Budget neutral payment condition.--Under this
section, the Secretary shall ensure that the aggregate sum of
medicare program benefit expenditures for beneficiaries
participating in chronic care improvement programs and funds
paid to chronic care improvement organizations under this
section, shall not exceed the medicare program benefit
expenditures that the Secretary estimates would have been made
for such targeted beneficiaries in the absence of such
programs.
``(g) Funding.--(1) Subject to paragraph (2), there are
appropriated to the Secretary, in appropriate part from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund, such sums as may be necessary to provide for
agreements with chronic care improvement programs under this section.
``(2) In no case shall the funding under this section exceed
$100,000,000 in aggregate increased expenditures under this title
(after taking into account any savings attributable to the operation of
this section) over the 3-fiscal-year period beginning on October 1,
2003.''.
(b) Reports.--The Secretary shall submit to Congress reports on the
operation of section 1807 of the Social Security Act, as added by
subsection (a), as follows:
(1) Not later than 2 years after the date of the
implementation of such section, the Secretary shall submit to
Congress an interim report on the scope of implementation of
the programs under subsection (b) of such section, the design
of the programs, and preliminary cost and quality findings with
respect to those programs based on the following measures of
the programs:
(A) Quality improvement measures, such as adherence
to evidence-based guidelines and rehospitalization
rates.
(B) Beneficiary and provider satisfaction.
(C) Health outcomes.
(D) Financial outcomes.
(2) Not later than 3 years and 6 months after the date of
the implementation of such section the Secretary shall submit
to Congress an update to the report required under paragraph
(1) on the results of such programs.
(3) The Secretary shall submit to Congress 2 additional
biennial reports on the chronic care improvement programs
conducted under such section. The first such report shall be
submitted not later than 2 years after the report is submitted
under paragraph (2). Each such report shall include information
on--
(A) the scope of implementation (in terms of both
regions and chronic conditions) of the chronic care
improvement programs;
(B) the design of the programs; and
(C) the improvements in health outcomes and
financial efficiencies that result from such
implementation.

SEC. 422. MEDICARE ADVANTAGE QUALITY IMPROVEMENT PROGRAMS.

(a) In General.--Section 1852(e) (42 U.S.C. 1395w-22(e)) is
amended--
(1) in the heading, by striking ``Assurance'' and inserting
``Improvement'';
(2) by amending paragraphs (1) through (3) to read as
follows:
``(1) In general.--Each MA organization shall have an
ongoing quality improvement program for the purpose of
improving the quality of care provided to enrollees in each MA
plan offered by such organization (other than an MA private
fee-for-service plan or an MSA plan).
``(2) Chronic care improvement programs.--As part of the
quality improvement program under paragraph (1), each MA
organization shall have a chronic care improvement program.
Each chronic care improvement program shall have a method for
monitoring and identifying enrollees with multiple or
sufficiently severe chronic conditions that meet criteria
established by the organization for participation under the
program.
``(3) Data.--
``(A) Collection, analysis, and reporting.--
``(i) In general.--Except as provided in
clauses (ii) and (iii) with respect to plans
described in such clauses and subject to
subparagraph (B), as part of the quality
improvement program under paragraph (1), each
MA organization shall provide for the
collection, analysis, and reporting of data
that permits the measurement of health outcomes
and other indices of quality.
``(ii) Application to ma regional plans.--
The Secretary shall establish as appropriate by
regulation requirements for the collection,
analysis, and reporting of data that permits
the measurement of health outcomes and other
indices of quality for MA organizations with
respect to MA regional plans. Such requirements
may not exceed the requirements under this
subparagraph with respect to MA local plans
that are preferred provider organization plans.
``(iii) Application to preferred provider
organizations.--Clause (i) shall apply to MA
organizations with respect to MA local plans
that are preferred provider organization plans
only insofar as services are furnished by
providers or services, physicians, and other
health care practitioners and suppliers that
have contracts with such organization to
furnish services under such plans.
``(iv) Definition of preferred provider
organization plan.--In this subparagraph, the
term `preferred provider organization plan'
means an MA plan that--
``(I) has a network of providers
that have agreed to a contractually
specified reimbursement for covered
benefits with the organization offering
the plan;
``(II) provides for reimbursement
for all covered benefits regardless of
whether such benefits are provided
within such network of providers; and
``(III) is offered by an
organization that is not licensed or
organized under State law as a health
maintenance organization.
``(B) Limitations.--
``(i) Types of data.--The Secretary shall
not collect under subparagraph (A) data on
quality, outcomes, and beneficiary satisfaction
to facilitate consumer choice and program
administration other than the types of data
that were collected by the Secretary as of
November 1, 2003.
``(ii) Changes in types of data.--Subject
to subclause (iii), the Secretary may only
change the types of data that are required to
be submitted under subparagraph (A) after
submitting to Congress a report on the reasons
for such changes that was prepared in
consultation with MA organizations and private
accrediting bodies.
``(iii) Construction.--Nothing in the
subsection shall be construed as restricting
the ability of the Secretary to carry out the
duties under section 1851(d)(4)(D).'';
(3) in paragraph (4)(B), by amending clause (i) to read as
follows:
``(i) Paragraphs (1) through (3) of this
subsection (relating to quality improvement
programs).''; and
(4) by striking paragraph (5).
(b) Conforming Amendment.--Section 1852(c)(1)(I) (42 U.S.C. 1395w-
22(c)(1)(I)) is amended to read as follows:
``(I) Quality improvement program.--A description
of the organization's quality improvement program under
subsection (e).''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to contract years beginning on and after January 1,
2006.

SEC. 423. CHRONICALLY ILL MEDICARE BENEFICIARY RESEARCH, DATA,
DEMONSTRATION STRATEGY.

(a) Development of Plan.--Not later than 6 months after the date of
the enactment of this Act, the Secretary shall develop a plan to
improve quality of care and reduce the cost of care for chronically ill
medicare beneficiaries.
(b) Plan Requirements.--The plan will utilize existing data and
identify data gaps, develop research initiatives, and propose
intervention demonstration programs to provide better health care for
chronically ill medicare beneficiaries. The plan shall--
(1) integrate existing data sets including, the Medicare
Current Beneficiary Survey (MCBS), Minimum Data Set (MDS),
Outcome and Assessment Information Set (OASIS), data from
Quality Improvement Organizations (QIO), and claims data;
(2) identify any new data needs and a methodology to
address new data needs;
(3) plan for the collection of such data in a data
warehouse; and
(4) develop a research agenda using such data.
(c) Consultation.--In developing the plan under this section, the
Secretary shall consult with experts in the fields of care for the
chronically ill (including clinicians).
(d) Implementation.--Not later than 2 years after the date of the
enactment of this Act, the Secretary shall implement the plan developed
under this section. The Secretary may contract with appropriate
entities to implement such plan.
(e) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary such sums as may be necessary in fiscal
years 2004 and 2005 to carry out this section.

Subtitle D--Other Provisions

SEC. 431. IMPROVEMENTS IN NATIONAL AND LOCAL COVERAGE DETERMINATION
PROCESS TO RESPOND TO CHANGES IN TECHNOLOGY.

(a) National and Local Coverage Determination Process.--
(1) In general.--Section 1862 (42 U.S.C. 1395y), as amended
by sections 948 and 950, is amended--
(A) in the third sentence of subsection (a), by
inserting ``consistent with subsection (l)'' after
``the Secretary shall ensure''; and
(B) by adding at the end the following new
subsection:
``(l) National and Local Coverage Determination Process.--
``(1) Factors and evidence used in making national coverage
determinations.--The Secretary shall make available to the
public the factors considered in making national coverage
determinations of whether an item or service is reasonable and
necessary. The Secretary shall develop guidance documents to
carry out this paragraph in a manner similar to the development
of guidance documents under section 701(h) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 371(h)).
``(2) Timeframe for decisions on requests for national
coverage determinations.--In the case of a request for a
national coverage determination that--
``(A) does not require a technology assessment from
an outside entity or deliberation from the Medicare
Coverage Advisory Committee, the decision on the
request shall be made not later than 6 months after the
date of the request; or
``(B) requires such an assessment or deliberation
and in which a clinical trial is not requested, the
decision on the request shall be made not later than 9
months after the date of the request.
``(3) Process for public comment in national coverage
determinations.--
``(A) Period for proposed decision.--Not later than
the end of the 6-month period (or 9-month period for
requests described in paragraph (2)(B)) that begins on
the date a request for a national coverage
determination is made, the Secretary shall make a draft
of proposed decision on the request available to the
public through the Internet website of the Centers for
Medicare & Medicaid Services or other appropriate
means.
``(B) 30-day period for public comment.--Beginning
on the date the Secretary makes a draft of the proposed
decision available under subparagraph (A), the
Secretary shall provide a 30-day period for public
comment on such draft.
``(C) 60-day period for final decision.--Not later
than 60 days after the conclusion of the 30-day period
referred to under subparagraph (B), the Secretary
shall--
``(i) make a final decision on the request;
``(ii) include in such final decision
summaries of the public comments received and
responses to such comments;
``(iii) make available to the public the
clinical evidence and other data used in making
such a decision when the decision differs from
the recommendations of the Medicare Coverage
Advisory Committee; and
``(iv) in the case of a final decision
under clause (i) to grant the request for the
national coverage determination, the Secretary
shall assign a temporary or permanent code
(whether existing or unclassified) and
implement the coding change.
``(4) Consultation with outside experts in certain national
coverage determinations.--With respect to a request for a
national coverage determination for which there is not a review
by the Medicare Coverage Advisory Committee, the Secretary
shall consult with appropriate outside clinical experts.
``(5) Local coverage determination process.--
``(A) Plan to promote consistency of coverage
determinations.--The Secretary shall develop a plan to
evaluate new local coverage determinations to determine
which determinations should be adopted nationally and
to what extent greater consistency can be achieved
among local coverage determinations.
``(B) Consultation.--The Secretary shall require
the fiscal intermediaries or carriers providing
services within the same area to consult on all new
local coverage determinations within the area.
``(C) Dissemination of information.--The Secretary
should serve as a center to disseminate information on
local coverage determinations among fiscal
intermediaries and carriers to reduce duplication of
effort.
``(6) National and local coverage determination defined.--
For purposes of this subsection--
``(A) National coverage determination.--The term
`national coverage determination' means a determination
by the Secretary with respect to whether or not a
particular item or service is covered nationally under this title.
``(B) Local coverage determination.--The term
`local coverage determination' has the meaning given
that in section 1869(f)(2)(B).''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to national coverage determinations as of January
1, 2004, and section 1862(l)(5) of the Social Security Act, as
added by such paragraph, shall apply to local coverage
determinations made on or after July 1, 2004.
(b) Medicare Coverage of Routine Costs Associated With Certain
Clinical Trials of Category A Devices.--
(1) In general.--Section 1862 (42 U.S.C. 1395y), as amended
by subsection (a), is amended by adding at the end the
following new subsection:
``(m) Coverage of Routine Costs Associated With Certain Clinical
Trials of Category A Devices.--
``(1) In general.--In the case of an individual entitled to
benefits under part A, or enrolled under part B, or both who
participates in a category A clinical trial, the Secretary
shall not exclude under subsection (a)(1) payment for coverage
of routine costs of care (as defined by the Secretary)
furnished to such individual in the trial.
``(2) Category a clinical trial.--For purposes of paragraph
(1), a `category A clinical trial' means a trial of a medical
device if--
``(A) the trial is of an experimental/
investigational (category A) medical device (as defined
in regulations under section 405.201(b) of title 42,
Code of Federal Regulations (as in effect as of
September 1, 2003));
``(B) the trial meets criteria established by the
Secretary to ensure that the trial conforms to
appropriate scientific and ethical standards; and
``(C) in the case of a trial initiated before
January 1, 2010, the device involved in the trial has
been determined by the Secretary to be intended for use
in the diagnosis, monitoring, or treatment of an
immediately life-threatening disease or condition.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to routine costs incurred on and after January 1,
2005, and, as of such date, section 411.15(o) of title 42, Code
of Federal Regulations, is superseded to the extent
inconsistent with section 1862(m) of the Social Security Act,
as added by such paragraph.
(3) Rule of construction.--Nothing in the amendment made by
paragraph (1) shall be construed as applying to, or affecting,
coverage or payment for a nonexperimental/investigational
(category B) device.
(c) Issuance of Temporary National Codes.--Not later than July 1,
2004, the Secretary shall implement revised procedures for the issuance
of temporary national HCPCS codes under part B of title XVIII of the
Social Security Act.

SEC. 432. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY
SERVICES UNDER MEDICARE.

Section 542(c) of BIPA (114 Stat. 2763A-551) is amended by
inserting ``, and for services furnished during 2005 and 2006'' before
the period at the end.

SEC. 433. PAYMENT FOR PANCREATIC ISLET CELL INVESTIGATIONAL TRANSPLANTS
FOR MEDICARE BENEFICIARIES IN CLINICAL TRIALS.

(a) Clinical Trial.--
(1) In general.--The Secretary, acting through the National
Institute of Diabetes and Digestive and Kidney Disorders, shall
conduct a clinical investigation of pancreatic islet cell
transplantation which includes medicare beneficiaries.
(2) Authorization of appropriations.--There are authorized
to be appropriated to the Secretary such sums as may be
necessary to conduct the clinical investigation under paragraph
(1).
(b) Medicare Payment.--Not earlier than October 1, 2004, the
Secretary shall pay for the routine costs as well as transplantation
and appropriate related items and services (as described in subsection
(c)) in the case of medicare beneficiaries who are participating in a
clinical trial described in subsection (a) as if such transplantation
were covered under title XVIII of such Act and as would be paid under
part A or part B of such title for such beneficiary.
(c) Scope of Payment.--For purposes of subsection (b):
(1) The term ``routine costs'' means reasonable and
necessary routine patient care costs (as defined in the Centers
for Medicare & Medicaid Services Coverage Issues Manual,
section 30-1), including immunosuppressive drugs and other
followup care.
(2) The term ``transplantation and appropriate related
items and services'' means items and services related to the
acquisition and delivery of the pancreatic islet cell
transplantation, notwithstanding any national noncoverage
determination contained in the Centers for Medicare & Medicaid
Services Coverage Issues Manual.
(3) The term ``medicare beneficiary'' means an individual
who is entitled to benefits under part A of title XVIII of the
Social Security Act, or enrolled under part B of such title, or
both.
(d) Construction.--The provisions of this section shall not be
construed--
(1) to permit payment for partial pancreatic tissue or
islet cell transplantation under title XVIII of the Social
Security Act other than payment as described in subsection (b);
or
(2) as authorizing or requiring coverage or payment
conveying--
(A) benefits under part A of such title to a
beneficiary not entitled to such part A; or
(B) benefits under part B of such title to a
beneficiary not enrolled in such part B.

SEC. 434. RESTORATION OF MEDICARE TRUST FUNDS.

(a) Definitions.--In this section:
(1) Clerical error.--The term ``clerical error'' means a
failure that occurs on or after April 15, 2001, to have
transferred the correct amount from the general fund of the
Treasury to a Trust Fund.
(2) Trust fund.--The term ``Trust Fund'' means the Federal
Hospital Insurance Trust Fund established under section 1817 of
the Social Security Act (42 U.S.C. 1395i) and the Federal
Supplementary Medical Insurance Trust Fund established under
section 1841 of such Act (42 U.S.C. 1395t).
(b) Correction of Trust Fund Holdings.--
(1) In general.--The Secretary of the Treasury shall take
the actions described in paragraph (2) with respect to the
Trust Fund with the goal being that, after such actions are
taken, the holdings of the Trust Fund will replicate, to the
extent practicable in the judgment of the Secretary of the
Treasury, in consultation with the Secretary, the holdings that
would have been held by the Trust Fund if the clerical error
involved had not occurred.
(2) Obligations issued and redeemed.--The Secretary of the
Treasury shall--
(A) issue to the Trust Fund obligations under
chapter 31 of title 31, United States Code, that bear
issue dates, interest rates, and maturity dates that
are the same as those for the obligations that--
(i) would have been issued to the Trust
Fund if the clerical error involved had not
occurred; or
(ii) were issued to the Trust Fund and were
redeemed by reason of the clerical error
involved; and
(B) redeem from the Trust Fund obligations that
would have been redeemed from the Trust Fund if the
clerical error involved had not occurred.
(c) Appropriation.--There is appropriated to the Trust Fund, out of
any money in the Treasury not otherwise appropriated, an amount
determined by the Secretary of the Treasury, in consultation with the
Secretary, to be equal to the interest income lost by the Trust Fund
through the date on which the appropriation is being made as a result
of the clerical error involved.
(d) Congressional Notice.--In the case of a clerical error that
occurs after April 15, 2001, the Secretary of the Treasury, before
taking action to correct the error under this section, shall notify the
appropriate committees of Congress concerning such error and the
actions to be taken under this section in response to such error.
(e) Deadline.--With respect to the clerical error that occurred on
April 15, 2001, not later than 120 days after the date of the enactment
of this Act--
(1) the Secretary of the Treasury shall take the actions
under subsection (b)(1); and
(2) the appropriation under subsection (c) shall be made.

SEC. 435. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY COMMISSION
(MEDPAC).

(a) Examination of Budget Consequences.--Section 1805(b) (42 U.S.C.
1395b-6(b)) is amended by adding at the end the following new
paragraph:
``(8) Examination of budget consequences.--Before making
any recommendations, the Commission shall examine the budget
consequences of such recommendations, directly or through
consultation with appropriate expert entities.''.
(b) Consideration of Efficient Provision of Services.--Section
1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is amended by
inserting ``the efficient provision of'' after ``expenditures for''.
(c) Application of Disclosure Requirements.--
(1) In general.--Section 1805(c)(2)(D) (42 U.S.C. 1395b-
6(c)(2)(D)) is amended by adding at the end the following:
``Members of the Commission shall be treated as employees of
Congress for purposes of applying title I of the Ethics in
Government Act of 1978 (Public Law 95-521).''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on January 1, 2004.
(d) Additional Reports.--
(1) Data needs and sources.--The Medicare Payment Advisory
Commission shall conduct a study, and submit a report to
Congress by not later than June 1, 2004, on the need for
current data, and sources of current data available, to
determine the solvency and financial circumstances of hospitals
and other medicare providers of services.
(2) Use of tax-related returns.--Using return information
provided under Form 990 of the Internal Revenue Service, the
Commission shall submit to Congress, by not later than June 1,
2004, a report on the following:
(A) Investments, endowments, and fundraising of
hospitals participating under the medicare program and
related foundations.
(B) Access to capital financing for private and for
not-for-profit hospitals.
(e) Representation of Experts in Prescription Drugs.--
(1) In general.--Section 1805(c)(2)(B) (42 U.S.C. 1395b-
6(c)(2)(B)) is amended by inserting ``experts in the area of
pharmaco-economics or prescription drug benefit programs,''
after ``other health professionals,''.
(2) Appointment.--The Comptroller General of the United
States shall ensure that the membership of the Commission
complies with the amendment made by paragraph (1) with respect
to appointments made on or after the date of the enactment of
this Act.

SEC. 436. TECHNICAL AMENDMENTS.

(a) Part A.--(1) Section 1814(a) (42 U.S.C. 1395f(a)) is amended--
(A) by striking the seventh sentence, as added by section
322(a)(1) of BIPA (114 Stat. 2763A-501); and
(B) in paragraph (7)(A)--
(i) in clause (i), by inserting before the comma at
the end the following: ``based on the physician's or
medical director's clinical judgment regarding the
normal course of the individual's illness''; and
(ii) in clause (ii), by inserting before the
semicolon at the end the following: ``based on such
clinical judgment''.
(2) Section 1814(b) (42 U.S.C. 1395f(b)), in the matter preceding
paragraph (1), is amended by inserting a comma after ``1813''.
(3) Section 1815(e)(1)(B) (42 U.S.C. 1395g(e)(1)(B)), in the matter
preceding clause (i), is amended by striking ``of hospital'' and
inserting ``of a hospital''.
(4) Section 1816(c)(2)(B)(ii) (42 U.S.C. 1395h(c)(2)(B)(ii)) is
amended--
(A) by striking ``and'' at the end of subclause (III); and
(B) by striking the period at the end of subclause (IV) and
inserting ``, and''.
(5) Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is amended--
(A) in clause (i)(I), by striking the comma at the end and
inserting a semicolon; and
(B) in clause (ii), by striking ``the Medicare and medicaid
programs'' and inserting ``the programs under this title and
title XIX''.
(6) Section 1817(k)(6)(B) (42 U.S.C. 1395i(k)(6)(B)) is amended by
striking ``Medicare program under title XVIII'' and inserting ``program
under this title''.
(7) Section 1818 (42 U.S.C. 1395i-2) is amended--
(A) in subsection (d)(6)(A) is amended by inserting ``of
such Code'' after ``3111(b)''; and
(B) in subsection (g)(2)(B) is amended by striking
``subsection (b).'' and inserting ``subsection (b)''.
(8) Section 1819 (42 U.S.C. 1395i-3) is amended--
(A) in subsection (b)(4)(C)(i), by striking ``at least at
least'' and inserting ``at least'';
(B) in subsection (d)(1)(A), by striking ``physical
mental'' and inserting ``physical, mental''; and
(C) in subsection (f)(2)(B)(iii), by moving the last
sentence 2 ems to the left.
(9) Section 1886(b)(3)(I)(i)(I) (42 U.S.C. 1395ww(b)(3)(I)(i)(I))
is amended by striking ``the the'' and inserting ``the''.
(10) The heading of subsection (mm) of section 1861 (42 U.S.C.
1395x) is amended to read as follows:

``Critical Access Hospital; Critical Access Hospital Services''.

(11) Paragraphs (1) and (2) of section 1861(tt) (42 U.S.C.
1395x(tt)) are each amended by striking ``rural primary care'' and
inserting ``critical access''.
(12) Section 1865(b)(3)(B) (42 U.S.C. 1395bb(b)(3)(B)) is amended
by striking ``section 1819 and 1861(j)'' and inserting ``sections 1819
and 1861(j)''.
(13) Section 1866(b)(2) (42 U.S.C. 1395cc(b)(2)) is amended by
moving subparagraph (D) 2 ems to the left.
(14) Section 1867 (42 U.S.C. 1395dd) is amended--
(A) in the matter following clause (ii) of subsection
(d)(1)(B), by striking ``is is'' and inserting ``is'';
(B) in subsection (e)(1)(B), by striking ``a pregnant
women'' and inserting ``a pregnant woman''; and
(C) in subsection (e)(2), by striking ``means hospital''
and inserting ``means a hospital''.
(15) Section 1886(g)(3)(B) (42 U.S.C. 1395ww(g)(3)(B)) is amended
by striking ``(as defined in subsection (d)(5)(D)(iii)'' and inserting
``(as defined in subsection (d)(5)(D)(iii))''.
(b) Part B.--(1) Section 1833(h)(5)(D) (42 U.S.C. 1395l(h)(5)(D))
is amended by striking ``clinic,,'' and inserting ``clinic,''.
(2) Section 1833(t)(3)(C)(ii) (42 U.S.C. 1395l(t)(3)(C)(ii)) is
amended by striking ``clause (iii)'' and inserting ``clause (iv)''.
(3) Section 1861(v)(1)(S)(ii)(III) (42 U.S.C.
1395x(v)(1)(S)(ii)(III)) is amended by striking ``(as defined in
section 1886(d)(5)(D)(iii)'' and inserting ``(as defined in section
1886(d)(5)(D)(iii))''.
(4) Section 1834(b)(4)(D)(iv) (42 U.S.C. 1395m(b)(4)(D)(iv)) is
amended by striking ``clauses (vi)'' and inserting ``clause (vi)''.
(5) Section 1834(m)(4)(C)(ii)(III) (42 U.S.C.
1395m(m)(4)(C)(ii)(III)) is amended by striking ``1861(aa)(s)'' and
inserting ``1861(aa)(2)''.
(6) Section 1838(a)(1) (42 U.S.C. 1395q(a)(1)) is amended by
inserting a comma after ``1966''.
(7) The second sentence of section 1839(a)(4) (42 U.S.C.
1395r(a)(4)) is amended by striking ``which will'' and inserting
``will''.
(8) Section 1842(c)(2)(B)(ii) (42 U.S.C. 1395u(c)(2)(B)(ii)) is
amended--
(A) by striking ``and'' at the end of subclause (III); and
(B) by striking the period at the end of subclause (IV) and
inserting ``, and''.
(9) Section 1842(i)(2) (42 U.S.C. 1395u(i)(2)) is amended by
striking ``services, a physician'' and inserting ``services, to a
physician''.
(10) Section 1848(i)(3)(A) (42 U.S.C. 1395w-4(i)(3)(A)) is amended
by striking ``a comparable services'' and inserting ``comparable
services''.
(11) Section 1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is
amended by striking ``; and but'' and inserting ``, but''.
(12) Section 1861(aa)(1)(B) (42 U.S.C. 1395x(aa)(1)(B)) is amended
by striking ``,,'' and inserting a comma.
(13) Section 128(b)(2) of BIPA (114 Stat. 2763A-480) is amended by
striking ``Not later that'' and inserting ``Not later than'' each place
it appears.
(c) Parts A and B.--(1) Section 1812(a)(3) (42 U.S.C. 1395d(a)(3))
is amended--
(A) by striking ``for individuals not'' and inserting ``in
the case of individuals not''; and
(B) by striking ``for individuals so'' and inserting ``in
the case of individuals so''.
(2)(A) Section 1814(a) (42 U.S.C. 1395f(a)) is amended in the sixth
sentence by striking ``leave home,'' and inserting ``leave home and''.
(B) Section 1835(a) (42 U.S.C. 1395n(a)) is amended in the seventh
sentence by striking ``leave home,'' and inserting ``leave home and''.
(3) Section 1891(d)(1) (42 U.S.C. 1395bbb(d)(1)) is amended by
striking ``subsection (c)(2)(C)(I)'' and inserting ``subsection
(c)(2)(C)(i)(I)''.
(4) Section 1861(v) (42 U.S.C. 1395x(v)) is amended by moving
paragraph (8) (including clauses (i) through (v) of such paragraph) 2
ems to the left.
(5) Section 1866B(b)(7)(D) (42 U.S.C. 1395cc-2(b)(7)(D)) is amended
by striking ``(c)(2)(A)(ii)'' and inserting ``(c)(2)(B)''.
(6) Section 1886(h)(3)(D)(ii)(III) (42 U.S.C.
1395ww(h)(3)(D)(ii)(III)) is amended by striking ``and'' after the
comma at the end.
(7) Section 1893(a) (42 U.S.C. 1395ddd(a)) is amended by striking
``Medicare program'' and inserting ``medicare program''.
(8) Section 1896(b)(4) (42 U.S.C. 1395ggg(b)(4)) is amended by
striking ``701(f)'' and inserting ``712(f)''.
(d) Part C.--(1) Section 1853 (42 U.S.C. 1395w-23), as amended by
section 307 of BIPA (114 Stat. 2763A-558), is amended--
(A) in subsection (a)(3)(C)(ii), by striking ``clause
(iii)'' and inserting ``clause (iv)'';
(B) in subsection (a)(3)(C), by redesignating the clause
(iii) added by such section 307 as clause (iv); and
(C) in subsection (c)(5), by striking ``(a)(3)(C)(iii)''
and inserting ``(a)(3)(C)(iv)''.
(2) Section 1876 (42 U.S.C. 1395mm) is amended--
(A) in subsection (c)(2)(B), by striking ``signifcant'' and
inserting ``significant''; and
(B) in subsection (j)(2), by striking ``this setion'' and
inserting ``this section''.
(e) Medigap.--Section 1882 (42 U.S.C. 1395ss) is amended--
(1) in subsection (d)(3)(A)(i)(II), by striking ``plan a
medicare supplemental policy'' and inserting ``plan, a medicare
supplemental policy'';
(2) in subsection (d)(3)(B)(iii)(II), by striking ``to the
best of the issuer or seller's knowledge'' and inserting ``to
the best of the issuer's or seller's knowledge'';
(3) in subsection (g)(2)(A), by striking ``medicare
supplement policies'' and inserting ``medicare supplemental
policies'';
(4) in subsection (p)(2)(B), by striking ``, and'' and
inserting ``; and''; and
(5) in subsection (s)(3)(A)(iii), by striking ``pre-
existing'' and inserting ``preexisting''.

TITLE V--ADMINISTRATIVE IMPROVEMENTS, REGULATORY REDUCTION, AND
CONTRACTING REFORM

SEC. 500. ADMINISTRATIVE IMPROVEMENTS WITHIN THE CENTERS FOR MEDICARE &
MEDICAID SERVICES (CMS).

(a) Coordinated Administration of Medicare Prescription Drug and
Medicare Advantage Programs.--Title XVIII (42 U.S.C. 1395 et seq.), as
amended by section 421, is amended by inserting after 1807 the
following new section:

``provisions relating to administration

``Sec. 1808. (a) Coordinated Administration of Medicare
Prescription Drug and Medicare Advantage Programs.--
``(1) In general.--There is within the Centers for Medicare
& Medicaid Services a center to carry out the duties described
in paragraph (3).
``(2) Director.--Such center shall be headed by a director
who shall report directly to the Administrator of the Centers
for Medicare & Medicaid Services.
``(3) Duties.--The duties described in this paragraph are
the following:
``(A) The administration of parts C and D.
``(B) The provision of notice and information under
section 1804.
``(C) Such other duties as the Secretary may
specify.
``(4) Deadline.--The Secretary shall ensure that the center
is carrying out the duties described in paragraph (3) by not
later than January 1, 2008.''.
(b) Management Staff for the Centers for Medicare & Medicaid
Services.--Such section is further amended by adding at the end the
following new subsection:
``(b) Employment of Management Staff.--
``(1) In general.--The Secretary may employ, within the
Centers for Medicare & Medicaid Services, such individuals as
management staff as the Secretary determines to be appropriate.
With respect to the administration of parts C and D, such
individuals shall include individuals with private sector
expertise in negotiations with health benefits plans.
``(2) Eligibility.--To be eligible for employment under
paragraph (1) an individual shall be required to have
demonstrated, by their education and experience (either in the
public or private sector), superior expertise in at least one
of the following areas:
``(A) The review, negotiation, and administration of health
care contracts.
``(B) The design of health care benefit plans.
``(C) Actuarial sciences.
``(D) Compliance with health plan contracts.
``(E) Consumer education and decision making.
``(F) Any other area specified by the Secretary that
requires specialized management or other expertise.
``(3) Rates of payment.--
``(A) Performance-related pay.--Subject to
subparagraph (B), the Secretary shall establish the
rate of pay for an individual employed under paragraph
(1). Such rate shall take into account expertise,
experience, and performance.
``(B) Limitation.--In no case may the rate of
compensation determined under subparagraph (A) exceed
the highest rate of basic pay for the Senior Executive
Service under section 5382(b) of title 5, United States
Code.''.
(c) Requirement for Dedicated Actuary for Private Health Plans.--
Section 1117(b) (42 U.S.C. 1317(b)) is amended by adding at the end the
following new paragraph:
``(3) In the office of the Chief Actuary there shall be an actuary
whose duties relate exclusively to the programs under parts C and D of
title XVIII and related provisions of such title.''.
(d) Increase in Grade to Executive Level III for the Administrator
of the Centers for Medicare & Medicaid Services.--
(1) In general.--Section 5314 of title 5, United States
Code, is amended by adding at the end the following:
``Administrator of the Centers for Medicare & Medicaid
Services.''.
(2) Conforming amendment.--Section 5315 of such title is
amended by striking ``Administrator of the Health Care
Financing Administration.''.
(3) Effective date.--The amendments made by this subsection
take effect on January 1, 2004.
(e) Conforming Amendments Relating to Health Care Financing
Administration.--
(1) Amendments to the social security act.--The Social
Security Act is amended--
(A) in section 1117 (42 U.S.C. 1317)--
(i) in the heading to read as follows:

``appointment of the administrator and chief actuary of the centers for
medicare & medicaid services'';

(ii) in subsection (a), by striking
``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid
Services''; and
(iii) in subsection (b)(1)--
(I) by striking ``Health Care
Financing Administration'' and
inserting ``Centers for Medicare &
Medicaid Services''; and
(II) by striking ``Administration''
and inserting ``Centers'';
(B) in section 1140(a) (42 U.S.C. 1320b-10(a))--
(i) in paragraph (1), by striking ``Health
Care Financing Administration'' both places it
appears in the
matter following subparagraph (B) and inserting
``Centers for Medicare & Medicaid Services'';
(ii) in paragraph (1)(A)--
(I) by striking ``Health Care
Financing Administration'' and
inserting ``Centers for Medicare &
Medicaid Services''; and
(II) by striking ``HCFA'' and
inserting ``CMS''; and
(iii) in paragraph (1)(B), by striking
``Health Care Financing Administration'' both
places it appears and inserting ``Centers for
Medicare & Medicaid Services'';
(C) in section 1142(b)(3) (42 U.S.C. 1320b-
12(b)(3)), by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services'';
(D) in section 1817(b) (42 U.S.C. 1395i(b))--
(i) by striking ``Health Care Financing
Administration'', both in the fifth sentence of
the matter preceding paragraph (1) and in the
second sentence of the
matter following paragraph (4), and inserting ``Centers
for Medicare & Medicaid Services''; and
(ii) by striking ``Chief Actuarial
Officer'' in the second sentence of the
matter following paragraph (4) and inserting ``Chief
Actuary'';
(E) in section 1841(b) (42 U.S.C. 1395t(b))--
(i) by striking ``Health Care Financing
Administration'', both in the fifth sentence of
the matter preceding paragraph (1) and in the
second sentence of the
matter following paragraph (4), and inserting ``Centers
for Medicare & Medicaid Services''; and
(ii) by striking ``Chief Actuarial
Officer'' in the second sentence of the
matter following paragraph (4) and inserting ``Chief
Actuary'';
(F) in section 1852(a)(5) (42 U.S.C. 1395w-
22(a)(5)), by striking ``Health Care Financing
Administration'' in the
matter following subparagraph (B) and inserting
``Centers for Medicare & Medicaid Services'';
(G) in section 1853 (42 U.S.C. 1395w-23)--
(i) in subsection (b)(4), by striking
``Health Care Financing Administration'' in the
first sentence and inserting ``Centers for
Medicare & Medicaid Services''; and
(ii) in subsection (c)(7), by striking
``Health Care Financing Administration'' in the
last sentence and inserting ``Centers for
Medicare & Medicaid Services'';
(H) in section 1854(a)(5)(A) (42 U.S.C. 1395w-
24(a)(5)(A)), by striking ``Health Care Financing
Administration''and inserting ``Centers for Medicare &
Medicaid Services'';
(I) in section 1857(d)(4)(A)(ii) (42 U.S.C. 1395w-
27(d)(4)(A)(ii)), by striking ``Health Care Financing
Administration'' and inserting ``Secretary'';
(J) in section 1862(b)(5)(A)(ii) (42 U.S.C.
1395y(b)(5)(A)(ii)), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services'';
(K) in section 1927(e)(4) (42 U.S.C. 1396r-
8(e)(4)), by striking ``HCFA'' and inserting ``The
Secretary'';
(L) in section 1927(f)(2) (42 U.S.C. 1396r-
8(f)(2)), by striking ``HCFA'' and inserting ``The
Secretary''; and
(M) in section 2104(g)(3) (42 U.S.C. 1397dd(g)(3))
by inserting ``or CMS Form 64 or CMS Form 21, as the
case may be,'' after ``HCFA Form 64 or HCFA Form 21''
(2) Amendments to the public health service act.--The
Public Health Service Act is amended--
(A) in section 501(d)(18) (42 U.S.C. 290aa(d)(18)),
by striking ``Health Care Financing Administration''
and inserting ``Centers for Medicare & Medicaid
Services'';
(B) in section 507(b)(6) (42 U.S.C. 290bb(b)(6)),
by striking ``Health Care Financing Administration''
and inserting ``Centers for Medicare & Medicaid
Services'';
(C) in section 916 (42 U.S.C. 299b-5)--
(i) in subsection (b)(2), by striking
``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid
Services''; and
(ii) in subsection (c)(2), by striking
``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid
Services'';
(D) in section 921(c)(3)(A) (42 U.S.C.
299c(c)(3)(A)), by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services'';
(E) in section 1318(a)(2) (42 U.S.C. 300e-
17(a)(2)), by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services'';
(F) in section 2102(a)(7) (42 U.S.C. 300aa-
2(a)(7)), by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services''; and
(G) in section 2675(a) (42 U.S.C. 300ff-75(a)), by
striking ``Health Care Financing Administration'' in
the first sentence and inserting ``Centers for Medicare
& Medicaid Services''.
(3) Amendments to the internal revenue code of 1986.--
Section 6103(l)(12) of the Internal Revenue Code of 1986 is
amended--
(A) in subparagraph (B), by striking ``Health Care
Financing Administration'' in the matter preceding
clause (i) and inserting ``Centers for Medicare &
Medicaid Services''; and
(B) in subparagraph (C)--
(i) by striking ``health care financing
administration'' in the heading and inserting
``centers for medicare & medicaid services'';
and
(ii) by striking ``Health Care Financing
Administration'' in the matter preceding clause
(i) and inserting ``Centers for Medicare &
Medicaid Services''.
(4) Amendments to title 10, united states code.--Title 10,
United States Code, is amended--
(A) in section 1086(d)(4), by striking
``administrator of the Health Care Financing
Administration'' in the last sentence and inserting
``Administrator of the Centers for Medicare & Medicaid
Services''; and
(B) in section 1095(k)(2), by striking ``Health
Care Financing Administration'' in the second sentence
and inserting ``Centers for Medicare & Medicaid
Services''.
(5) Amendments to the alzheimer's disease and related
dementias services research act of 1992.--The Alzheimer's
Disease and Related Dementias Research Act of 1992 (42 U.S.C.
11271 et seq.) is amended--
(A) in the heading of subpart 3 of part D to read
as follows:

``Subpart 3--Responsibilities of the Centers for Medicare & Medicaid
Services'';

(B) in section 937 (42 U.S.C. 11271)--
(i) in subsection (a), by striking
``National Health Care Financing
Administration'' and inserting ``Centers for
Medicare & Medicaid Services'';
(ii) in subsection (b)(1), by striking
``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid
Services'';
(iii) in subsection (b)(2), by striking
``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid
Services''; and
(iv) in subsection (c), by striking
``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid
Services''; and
(C) in section 938 (42 U.S.C. 11272), by striking
``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''.
(6) Miscellaneous amendments.--
(A) Rehabilitation act of 1973.--Section 202(b)(8)
of the Rehabilitation Act of 1973 (29 U.S.C. 762(b)(8))
is amended by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services''.
(B) Indian health care improvement act.--Section
405(d)(1) of the Indian Health Care Improvement Act (25
U.S.C. 1645(d)(1)) is amended by striking ``Health Care
Financing Administration'' in the matter preceding
subparagraph (A) and inserting ``Centers for Medicare & Medicaid
Services''.
(C) Individuals with disabilities education act.--
Section 644(b)(5) of the Individuals with Disabilities
Education Act (20 U.S.C. 1444(b)(5)) is amended by
striking ``Health Care Financing Administration'' and
inserting ``Centers for Medicare & Medicaid Services''.
(D) The home health care and alzheimer's disease
amendments of 1990.--Section 302(a)(9) of the Home
Health Care and Alzheimer's Disease Amendments of 1990
(42 U.S.C. 242q-1(a)(9)) is amended by striking
``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''.
(E) The children's health act of 2000.--Section
2503(a) of the Children's Health Act of 2000 (42 U.S.C.
247b-3a(a)) is amended by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services''.
(F) The national institutes of health
revitalization act of 1993.--Section 1909 of the
National Institutes of Health Revitalization Act of
1993 (42 U.S.C. 299a note) is amended by striking
``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''.
(G) The omnibus budget reconciliation act of
1990.--Section 4359(d) of the Omnibus Budget
Reconciliation Act of 1990 (42 U.S.C. 1395b-3(d)) is
amended by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services''.
(H) The medicare, medicaid, and schip benefits
improvement and protection act of 2000.--Section
104(d)(4) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (42 U.S.C. 1395m
note) is amended by striking ``Health Care Financing
Administration'' and inserting ``Health Care''.
(7) Additional amendment.--Section 403 of the Act entitled,
``An Act to authorize certain appropriations for the
territories of the United States, to amend certain Acts
relating thereto, and for other purposes'', enacted October 15,
1977 (48 U.S.C. 1574-1; 48 U.S.C. 1421q-1), is amended by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''.

Subtitle A--Regulatory Reform

SEC. 501. CONSTRUCTION; DEFINITION OF SUPPLIER.

(a) Construction.--Nothing in this title shall be construed--
(1) to compromise or affect existing legal remedies for
addressing fraud or abuse, whether it be criminal prosecution,
civil enforcement, or administrative remedies, including under
sections 3729 through 3733 of title 31, United States Code
(commonly known as the ``False Claims Act''); or
(2) to prevent or impede the Department of Health and Human
Services in any way from its ongoing efforts to eliminate
waste, fraud, and abuse in the medicare program.
Furthermore, the consolidation of medicare administrative contracting
set forth in this division does not constitute consolidation of the
Federal Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund or reflect any position on that issue.
(b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) is
amended by inserting after subsection (c) the following new subsection:

``Supplier

``(d) The term `supplier' means, unless the context otherwise
requires, a physician or other practitioner, a facility, or other
entity (other than a provider of services) that furnishes items or
services under this title.''.

SEC. 502. ISSUANCE OF REGULATIONS.

(a) Regular Timeline for Publication of Final Rules.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is
amended by adding at the end the following new paragraph:
``(3)(A) The Secretary, in consultation with the Director of the
Office of Management and Budget, shall establish and publish a regular
timeline for the publication of final regulations based on the previous
publication of a proposed regulation or an interim final regulation.
``(B) Such timeline may vary among different regulations based on
differences in the complexity of the regulation, the number and scope
of comments received, and other relevant factors, but shall not be
longer than 3 years except under exceptional circumstances. If the
Secretary intends to vary such timeline with respect to the publication
of a final regulation, the Secretary shall cause to have published in
the Federal Register notice of the different timeline by not later than
the timeline previously established with respect to such regulation.
Such notice shall include a brief explanation of the justification for
such variation.
``(C) In the case of interim final regulations, upon the expiration
of the regular timeline established under this paragraph for the
publication of a final regulation after opportunity for public comment,
the interim final regulation shall not continue in effect unless the
Secretary publishes (at the end of the regular timeline and, if
applicable, at the end of each succeeding 1-year period) a notice of
continuation of the regulation that includes an explanation of why the
regular timeline (and any subsequent 1-year extension) was not complied
with. If such a notice is published, the regular timeline (or such
timeline as previously extended under this paragraph) for publication
of the final regulation shall be treated as having been extended for 1
additional year.
``(D) The Secretary shall annually submit to Congress a report that
describes the instances in which the Secretary failed to publish a
final regulation within the applicable regular timeline under this
paragraph and that provides an explanation for such failures.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act. The
Secretary shall provide for an appropriate transition to take
into account the backlog of previously published interim final
regulations.
(b) Limitations on New Matter in Final Regulations.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as
amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(4) If the Secretary publishes a final regulation that includes a
provision that is not a logical outgrowth of a previously published
notice of proposed rulemaking or interim final rule, such provision
shall be treated as a proposed regulation and shall not take effect
until there is the further opportunity for public comment and a
publication of the provision again as a final regulation.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to final regulations published on or after the date
of the enactment of this Act.

SEC. 503. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES.

(a) No Retroactive Application of Substantive Changes.--
(1) In general.--Section 1871 (42 U.S.C. 1395hh), as
amended by section 502(a), is amended by adding at the end the
following new subsection:
``(e)(1)(A) A substantive change in regulations, manual
instructions, interpretative rules, statements of policy, or guidelines
of general applicability under this title shall not be applied (by
extrapolation or otherwise) retroactively to items and services
furnished before the effective date of the change, unless the Secretary
determines that--
``(i) such retroactive application is necessary to comply
with statutory requirements; or
``(ii) failure to apply the change retroactively would be
contrary to the public interest.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to substantive changes issued on or after the date
of the enactment of this Act.
(b) Timeline for Compliance With Substantive Changes After
Notice.--
(1) In general.--Section 1871(e)(1), as added by subsection
(a), is amended by adding at the end the following:
``(B)(i) Except as provided in clause (ii), a substantive change
referred to in subparagraph (A) shall not become effective before the
end of the 30-day period that begins on the date that the Secretary has
issued or published, as the case may be, the substantive change.
``(ii) The Secretary may provide for such a substantive change to
take effect on a date that precedes the end of the 30-day period under
clause (i) if the Secretary finds that waiver of such 30-day period is
necessary to comply with statutory requirements or that the application
of such 30-day period is contrary to the public interest. If the
Secretary provides for an earlier effective date pursuant to this
clause, the Secretary shall include in the issuance or publication of
the substantive change a finding described in the first sentence, and a
brief statement of the reasons for such finding.
``(C) No action shall be taken against a provider of services or
supplier with respect to noncompliance with such a substantive change
for items and services furnished before the effective date of such a
change.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to compliance actions undertaken on or after the
date of the enactment of this Act.
(c) Reliance on Guidance.--
(1) In general.--Section 1871(e), as added by subsection
(a), is further amended by adding at the end the following new
paragraph:
``(2)(A) If--
``(i) a provider of services or supplier follows the
written guidance (which may be transmitted electronically)
provided by the Secretary or by a medicare contractor (as
defined in section 1889(g)) acting within the scope of the
contractor's contract authority, with respect to the furnishing
of items or services and submission of a claim for benefits for
such items or services with respect to such provider or
supplier;
``(ii) the Secretary determines that the provider of
services or supplier has accurately presented the circumstances
relating to such items, services, and claim to the contractor
in writing; and
``(iii) the guidance was in error;
the provider of services or supplier shall not be subject to any
penalty or interest under this title or the provisions of title XI
insofar as they relate to this title (including interest under a
repayment plan under section 1893 or otherwise) relating to the
provision of such items or service or such claim if the provider of
services or supplier reasonably relied on such guidance.
``(B) Subparagraph (A) shall not be construed as preventing the
recoupment or repayment (without any additional penalty) relating to an
overpayment insofar as the overpayment was solely the result of a
clerical or technical operational error.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act and
shall only apply to a penalty or interest imposed with respect
to guidance provided on or after July 24, 2003.

SEC. 504. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.

(a) GAO Study on Advisory Opinion Authority.--
(1) Study.--The Comptroller General of the United States
shall conduct a study to determine the feasibility and
appropriateness of establishing in the Secretary authority to
provide legally binding advisory opinions on appropriate
interpretation and application of regulations to carry out the
medicare program under title XVIII of the Social Security Act.
Such study shall examine the appropriate timeframe for issuing
such advisory opinions, as well as the need for additional
staff and funding to provide such opinions.
(2) Report.--The Comptroller General shall submit to
Congress a report on the study conducted under paragraph (1) by
not later than 1 year after the date of the enactment of this
Act.
(b) Report on Legal and Regulatory Inconsistencies.--Section 1871
(42 U.S.C. 1395hh), as amended by section 503(a)(1), is amended by
adding at the end the following new subsection:
``(f)(1) Not later than 2 years after the date of the enactment of
this subsection, and every 3 years thereafter, the Secretary shall
submit to Congress a report with respect to the administration of this
title and areas of inconsistency or conflict among the various
provisions under law and regulation.
``(2) In preparing a report under paragraph (1), the Secretary
shall collect--
``(A) information from individuals entitled to benefits
under part A or enrolled under part B, or both, providers of
services, and suppliers and from the Medicare Beneficiary
Ombudsman with respect to such areas of inconsistency and
conflict; and
``(B) information from medicare contractors that tracks the
nature of written and telephone inquiries.
``(3) A report under paragraph (1) shall include a description of
efforts by the Secretary to reduce such inconsistency or conflicts, and
recommendations for legislation or administrative action that the
Secretary determines appropriate to further reduce such inconsistency
or conflicts.''.

Subtitle B--Contracting Reform

SEC. 511. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

(a) Consolidation and Flexibility in Medicare Administration.--
(1) In general.--Title XVIII is amended by inserting after
section 1874 the following new section:

``contracts with medicare administrative contractors

``Sec. 1874A. (a) Authority.--
``(1) Authority to enter into contracts.--The Secretary may
enter into contracts with any eligible entity to serve as a
medicare administrative contractor with respect to the
performance of any or all of the functions described in
paragraph (4) or parts of those functions (or, to the extent
provided in a contract, to secure performance thereof by other
entities).
``(2) Eligibility of entities.--An entity is eligible to
enter into a contract with respect to the performance of a
particular function described in paragraph (4) only if--
``(A) the entity has demonstrated capability to
carry out such function;
``(B) the entity complies with such conflict of
interest standards as are generally applicable to
Federal acquisition and procurement;
``(C) the entity has sufficient assets to
financially support the performance of such function;
and
``(D) the entity meets such other requirements as
the Secretary may impose.
``(3) Medicare administrative contractor defined.--For
purposes of this title and title XI--
``(A) In general.--The term `medicare
administrative contractor' means an agency,
organization, or other person with a contract under
this section.
``(B) Appropriate medicare administrative
contractor.--With respect to the performance of a
particular function in relation to an individual
entitled to benefits under part A or enrolled under
part B, or both, a specific provider of services or
supplier (or class of such providers of services or
suppliers), the `appropriate' medicare administrative
contractor is the medicare administrative contractor
that has a contract under this section with respect to
the performance of that function in relation to that
individual, provider of services or supplier or class
of provider of services or supplier.
``(4) Functions described.--The functions referred to in
paragraphs (1) and (2) are payment functions (including the
function of developing local coverage determinations, as
defined in section 1869(f)(2)(B)), provider services functions,
and functions relating to services furnished to individuals
entitled to benefits under part A or enrolled under part B, or
both, as follows:
``(A) Determination of payment amounts.--
Determining (subject to the provisions of section 1878
and to such review by the Secretary as may be provided
for by the contracts) the amount of the payments
required pursuant to this title to be made to providers
of services, suppliers and individuals.
``(B) Making payments.--Making payments described
in subparagraph (A) (including receipt, disbursement,
and accounting for funds in making such payments).
``(C) Beneficiary education and assistance.--
Providing education and outreach to individuals
entitled to benefits under part A or enrolled under
part B, or both, and providing assistance to those
individuals with specific issues, concerns, or
problems.
``(D) Provider consultative services.--Providing
consultative services to institutions, agencies, and
other persons to enable them to establish and maintain
fiscal records necessary for purposes of this title and
otherwise to qualify as providers of services or
suppliers.
``(E) Communication with providers.--Communicating
to providers of services and suppliers any information
or instructions furnished to the medicare
administrative contractor by the Secretary, and
facilitating communication between such providers and
suppliers and the Secretary.
``(F) Provider education and technical
assistance.--Performing the functions relating to
provider education, training, and technical assistance.
``(G) Additional functions.--Performing such other
functions, including (subject to paragraph (5))
functions under the Medicare Integrity Program under
section 1893, as are necessary to carry out the
purposes of this title.
``(5) Relationship to mip contracts.--
``(A) Nonduplication of duties.--In entering into
contracts under this section, the Secretary shall
assure that functions of medicare administrative
contractors in carrying out activities under parts A
and B do not duplicate activities carried out under a
contract entered into under the Medicare Integrity
Program under section 1893. The previous sentence shall
not apply with respect to the activity described in
section 1893(b)(5) (relating to prior authorization of
certain items of durable medical equipment under
section 1834(a)(15)).
``(B) Construction.--An entity shall not be treated
as a medicare administrative contractor merely by
reason of having entered into a contract with the
Secretary under section 1893.
``(6) Application of federal acquisition regulation.--
Except to the extent inconsistent with a specific requirement
of this section, the Federal Acquisition Regulation applies to
contracts under this section.
``(b) Contracting Requirements.--
``(1) Use of competitive procedures.--
``(A) In general.--Except as provided in laws with
general applicability to Federal acquisition and
procurement or in subparagraph (B), the Secretary shall
use competitive procedures when entering into contracts
with medicare administrative contractors under this
section, taking into account performance quality as
well as price and other factors.
``(B) Renewal of contracts.--The Secretary may
renew a contract with a medicare administrative
contractor under this section from term to term without
regard to section 5 of title 41, United States Code, or
any other provision of law requiring competition, if
the medicare administrative contractor has met or
exceeded the performance requirements applicable with
respect to the contract and contractor, except that the
Secretary shall provide for the application of
competitive procedures under such a contract not less
frequently than once every 5 years.
``(C) Transfer of functions.--The Secretary may
transfer functions among medicare administrative
contractors consistent with the provisions of this
paragraph. The Secretary shall ensure that performance
quality is considered in such transfers. The Secretary
shall provide public notice (whether in the Federal
Register or otherwise) of any such transfer (including
a description of the functions so transferred, a
description of the providers of services and suppliers
affected by such transfer, and contact information for
the contractors involved).
``(D) Incentives for quality.--The Secretary shall
provide incentives for medicare administrative
contractors to provide quality service and to promote
efficiency.
``(2) Compliance with requirements.--No contract under this
section shall be entered into with any medicare administrative
contractor unless the Secretary finds that such medicare
administrative contractor will perform its obligations under
the contract efficiently and effectively and will meet such
requirements as to financial responsibility, legal authority,
quality of services provided, and other matters as the
Secretary finds pertinent.
``(3) Performance requirements.--
``(A) Development of specific performance
requirements.--
``(i) In general.--The Secretary shall
develop contract performance requirements to
carry out the specific requirements applicable
under this title to a function described in
subsection (a)(4) and shall develop standards
for measuring the extent to which a contractor
has met such requirements.
``(ii) Consultation.--In developing such
performance requirements and standards for
measurement, the Secretary shall consult with
providers of services, organizations
representative of beneficiaries under this
title, and organizations and agencies
performing functions necessary to carry out the
purposes of this section with respect to such
performance requirements.
``(iii) Publication of standards.--The
Secretary shall make such performance
requirements and measurement standards
available to the public.
``(B) Considerations.--The Secretary shall include,
as one of the standards developed under subparagraph
(A), provider and beneficiary satisfaction levels.
``(C) Inclusion in contracts.--All contractor
performance requirements shall be set forth in the
contract between the Secretary and the appropriate
medicare administrative contractor. Such performance
requirements--
``(i) shall reflect the performance
requirements published under subparagraph (A),
but may include additional performance
requirements;
``(ii) shall be used for evaluating
contractor performance under the contract; and
``(iii) shall be consistent with the
written statement of work provided under the
contract.
``(4) Information requirements.--The Secretary shall not
enter into a contract with a medicare administrative contractor
under this section unless the contractor agrees--
``(A) to furnish to the Secretary such timely
information and reports as the Secretary may find
necessary in performing his functions under this title;
and
``(B) to maintain such records and afford such
access thereto as the Secretary finds necessary to
assure the correctness and verification of the
information and reports under subparagraph (A) and
otherwise to carry out the purposes of this title.
``(5) Surety bond.--A contract with a medicare
administrative contractor under this section may require the
medicare administrative contractor, and any of its officers or
employees certifying payments or disbursing funds pursuant to
the contract, or otherwise participating in carrying out the
contract, to give surety bond to the United States in such
amount as the Secretary may deem appropriate.
``(c) Terms and Conditions.--
``(1) In general.--A contract with any medicare
administrative contractor under this section may contain such
terms and conditions as the Secretary finds necessary or
appropriate and may provide for advances of funds to the
medicare administrative contractor for the making of payments
by it under subsection (a)(4)(B).
``(2) Prohibition on mandates for certain data
collection.--The Secretary may not require, as a condition of
entering into, or renewing, a contract under this section, that
the medicare administrative contractor match data obtained
other than in its activities under this title with data used in
the administration of this title for purposes of identifying
situations in which the provisions of section 1862(b) may
apply.
``(d) Limitation on Liability of Medicare Administrative
Contractors and Certain Officers.--
``(1) Certifying officer.--No individual designated
pursuant to a contract under this section as a certifying
officer shall, in the absence of the reckless disregard of the
individual's obligations or the intent by that individual to
defraud the United States, be liable with respect to any
payments certified by the individual under this section.
``(2) Disbursing officer.--No disbursing officer shall, in
the absence of the reckless disregard of the officer's
obligations or the intent by that officer to defraud the United
States, be liable with respect to any payment by such officer
under this section if it was based upon an authorization (which
meets the applicable requirements for such internal controls
established by the Comptroller General of the United States) of
a certifying officer designated as provided in paragraph (1) of
this subsection.
``(3) Liability of medicare administrative contractor.--
``(A) In general.--No medicare administrative
contractor shall be liable to the United States for a
payment by a certifying or disbursing officer unless,
in connection with such payment, the medicare
administrative contractor acted with reckless disregard
of its obligations under its medicare administrative
contract or with intent to defraud the United States.
``(B) Relationship to false claims act.--Nothing in
this subsection shall be construed to limit liability
for conduct that would constitute a violation of
sections 3729 through 3731 of title 31, United States
Code.
``(4) Indemnification by secretary.--
``(A) In general.--Subject to subparagraphs (B) and
(D), in the case of a medicare administrative
contractor (or a person who is a director, officer, or
employee of such a contractor or who is engaged by the
contractor to participate directly in the claims
administration process) who is made a party to any
judicial or administrative proceeding arising from or
relating directly to the claims administration process
under this title, the Secretary may, to the extent the
Secretary determines to be appropriate and as specified
in the contract with the contractor, indemnify the
contractor and such persons.
``(B) Conditions.--The Secretary may not provide
indemnification under subparagraph (A) insofar as the
liability for such costs arises directly from conduct
that is determined by the judicial proceeding or by the
Secretary to be criminal in nature, fraudulent, or
grossly negligent. If indemnification is provided by
the Secretary with respect to a contractor before a
determination that such costs arose directly from such
conduct, the contractor shall reimburse the Secretary
for costs of indemnification.
``(C) Scope of indemnification.--Indemnification by
the Secretary under subparagraph (A) may include
payment of judgments, settlements (subject to
subparagraph (D)), awards, and costs (including
reasonable legal expenses).
``(D) Written approval for settlements or
compromises.--A contractor or other person described in
subparagraph (A) may not propose to negotiate a
settlement or compromise of a proceeding described in
such subparagraph without the prior written approval of
the Secretary to negotiate such settlement or
compromise. Any indemnification under subparagraph (A)
with respect to amounts paid under a settlement or
compromise of a proceeding described in such
subparagraph are conditioned upon prior written
approval by the Secretary of the final settlement or
compromise.
``(E) Construction.--Nothing in this paragraph
shall be construed--
``(i) to change any common law immunity
that may be available to a medicare
administrative contractor or person described
in subparagraph (A); or
``(ii) to permit the payment of costs not
otherwise allowable, reasonable, or allocable
under the Federal Acquisition Regulation.''.
(2) Consideration of incorporation of current law
standards.--In developing contract performance requirements
under section 1874A(b) of the Social Security Act, as inserted
by paragraph (1), the Secretary shall consider inclusion of the
performance standards described in sections 1816(f)(2) of such
Act (relating to timely processing of reconsiderations and
applications for exemptions) and section 1842(b)(2)(B) of such
Act (relating to timely review of determinations and fair
hearing requests), as such sections were in effect before the
date of the enactment of this Act.
(b) Conforming Amendments to Section 1816 (Relating to Fiscal
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:

``provisions relating to the administration of part a''.

(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended--
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and (3)(A), by
striking ``agreement under this section'' and inserting
``contract under section 1874A that provides for making
payments under this part''.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended--
(A) by striking ``An agreement with an agency or
organization under this section'' and inserting ``A
contract with a medicare administrative contractor
under section 1874A with respect to the administration
of this part''; and
(B) by striking ``such agency or organization'' and
inserting ``such medicare administrative contractor''
each place it appears.
(7) Subsection (l) is repealed.
(c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
(1) The heading is amended to read as follows:

``provisions relating to the administration of part b''.

(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)--
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking
``carriers'' and inserting ``medicare
administrative contractors''; and
(iii) by striking subparagraphs (D) and
(E);
(C) in paragraph (3)--
(i) in the matter before subparagraph (A),
by striking ``Each such contract shall provide
that the carrier'' and inserting ``The
Secretary'';
(ii) by striking ``will'' the first place
it appears in each of subparagraphs (A), (B),
(F), (G), (H), and (L) and inserting ``shall'';
(iii) in subparagraph (B), in the matter
before clause (i), by striking ``to the
policyholders and subscribers of the carrier''
and inserting ``to the policyholders and
subscribers of the medicare administrative
contractor'';
(iv) by striking subparagraphs (C), (D),
and (E);
(v) in subparagraph (H)--
(I) by striking ``if it makes
determinations or payments with respect
to physicians' services,'' in the
matter preceding clause (i); and
(II) by striking ``carrier'' and
inserting ``medicare administrative
contractor'' in clause (i);
(vi) by striking subparagraph (I);
(vii) in subparagraph (L), by striking the
semicolon and inserting a period;
(viii) in the first sentence, after
subparagraph (L), by striking ``and shall
contain'' and all that follows through the
period; and
(ix) in the seventh sentence, by inserting
``medicare administrative contractor,'' after
``carrier,'';
(D) by striking paragraph (5);
(E) in paragraph (6)(D)(iv), by striking
``carrier'' and inserting ``medicare administrative
contractor''; and
(F) in paragraph (7), by striking ``the carrier''
and inserting ``the Secretary'' each place it appears.
(4) Subsection (c) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)(A), by striking ``contract
under this section which provides for the disbursement
of funds, as described in subsection (a)(1)(B),'' and
inserting ``contract under section 1874A that provides
for making payments under this part'';
(C) in paragraph (3)(A), by striking ``subsection
(a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
(D) in paragraph (4), in the matter preceding
subparagraph (A), by striking ``carrier'' and inserting
``medicare administrative contractor''; and
(E) by striking paragraphs (5) and (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ``carrier or
carriers'' and inserting ``medicare administrative contractor
or contractors''.
(7) Subsection (h) is amended--
(A) in paragraph (2)--
(i) by striking ``Each carrier having an
agreement with the Secretary under subsection
(a)'' and inserting ``The Secretary''; and
(ii) by striking ``Each such carrier'' and
inserting ``The Secretary'';
(B) in paragraph (3)(A)--
(i) by striking ``a carrier having an
agreement with the Secretary under subsection
(a)'' and inserting ``medicare administrative
contractor having a contract under section
1874A that provides for making payments under
this part''; and
(ii) by striking ``such carrier'' and
inserting ``such contractor'';
(C) in paragraph (3)(B)--
(i) by striking ``a carrier'' and inserting
``a medicare administrative contractor'' each
place it appears; and
(ii) by striking ``the carrier'' and
inserting ``the contractor'' each place it
appears; and
(D) in paragraphs (5)(A) and (5)(B)(iii), by
striking ``carriers'' and inserting ``medicare
administrative contractors'' each place it appears.
(8) Subsection (l) is amended--
(A) in paragraph (1)(A)(iii), by striking
``carrier'' and inserting ``medicare administrative
contractor''; and
(B) in paragraph (2), by striking ``carrier'' and
inserting ``medicare administrative contractor''.
(9) Subsection (p)(3)(A) is amended by striking ``carrier''
and inserting ``medicare administrative contractor''.
(10) Subsection (q)(1)(A) is amended by striking
``carrier''.
(d) Effective Date; Transition Rule.--
(1) Effective date.--
(A) In general.--Except as otherwise provided in
this subsection, the amendments made by this section
shall take effect on October 1, 2005, and the Secretary
is authorized to take such steps before such date as
may be necessary to implement such amendments on a
timely basis.
(B) Construction for current contracts.--Such
amendments shall not apply to contracts in effect
before the date specified under subparagraph (A) that
continue to retain the terms and conditions in effect
on such date (except as otherwise provided under this
Act, other than under this section) until such date as
the contract is let out for competitive bidding under
such amendments.
(C) Deadline for competitive bidding.--The
Secretary shall provide for the letting by competitive
bidding of all contracts for functions of medicare
administrative contractors for annual contract periods
that begin on or after October 1, 2011.
(2) General transition rules.--
(A) Authority to continue to enter into new
agreements and contracts and waiver of provider
nomination provisions during transition.--Prior to
October 1, 2005, the Secretary may, consistent with
subparagraph (B), continue to enter into agreements
under section 1816 and contracts under section 1842 of
the Social Security Act (42 U.S.C. 1395h, 1395u). The
Secretary may enter into new agreements under section
1816 prior to October 1, 2005, without regard to any of
the provider nomination provisions of such section.
(B) Appropriate transition.--The Secretary shall
take such steps as are necessary to provide for an
appropriate transition from agreements under section
1816 and contracts under section 1842 of the Social
Security Act (42 U.S.C. 1395h, 1395u) to contracts
under section 1874A, as added by subsection (a)(1).
(3) Authorizing continuation of mip functions under current
contracts and agreements and under transition contracts.--
Notwithstanding the amendments made by this section, the
provisions contained in the exception in section 1893(d)(2) of
the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall
continue to apply during the period that begins on the date of
the enactment of this Act and ends on October 1, 2011, and any
reference in such provisions to an agreement or contract shall
be deemed to include a contract under section 1874A of such
Act, as inserted by subsection (a)(1), that continues the
activities referred to in such provisions.
(e) References.--On and after the effective date provided under
subsection (d)(1), any reference to a fiscal intermediary or carrier
under title XI or XVIII of the Social Security Act (or any regulation,
manual instruction, interpretative rule, statement of policy, or
guideline issued to carry out such titles) shall be deemed a reference
to a medicare administrative contractor (as provided under section
1874A of the Social Security Act).
(f) Secretarial Submission of Legislative Proposal.--Not later than
6 months after the date of the enactment of this Act, the Secretary
shall submit to the appropriate committees of Congress a legislative
proposal providing for such technical and conforming amendments in the
law as are required by the provisions of this section.
(g) Reports on Implementation.--
(1) Plan for implementation.--By not later than October 1,
2004, the Secretary shall submit a report to Congress and the
Comptroller General of the United States that describes the
plan for implementation of the amendments made by this section.
The Comptroller General shall conduct an evaluation of such
plan and shall submit to Congress, not later than 6 months
after the date the report is received, a report on such
evaluation and shall include in such report such
recommendations as the Comptroller General deems appropriate.
(2) Status of implementation.--The Secretary shall submit a
report to Congress not later than October 1, 2008, that
describes the status of implementation of such amendments and
that includes a description of the following:
(A) The number of contracts that have been
competitively bid as of such date.
(B) The distribution of functions among contracts
and contractors.
(C) A timeline for complete transition to full
competition.
(D) A detailed description of how the Secretary has
modified oversight and management of medicare
contractors to adapt to full competition.

SEC. 512. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE
ADMINISTRATIVE CONTRACTORS.

(a) In General.--Section 1874A, as added by section 511(a)(1), is
amended by adding at the end the following new subsection:
``(e) Requirements for Information Security.--
``(1) Development of information security program.--A
medicare administrative contractor that performs the functions
referred to in subparagraphs (A) and (B) of subsection (a)(4)
(relating to determining and making payments) shall implement a
contractor-wide information security program to provide
information security for the operation and assets of the
contractor with respect to such functions under this title. An
information security program under this paragraph shall meet
the requirements for information security programs imposed on Federal
agencies under paragraphs (1) through (8) of section 3544(b) of title
44, United States Code (other than the requirements under paragraphs
(2)(D)(i), (5)(A), and (5)(B) of such section).
``(2) Independent audits.--
``(A) Performance of annual evaluations.--Each year
a medicare administrative contractor that performs the
functions referred to in subparagraphs (A) and (B) of
subsection (a)(4) (relating to determining and making
payments) shall undergo an evaluation of the
information security of the contractor with respect to
such functions under this title. The evaluation shall--
``(i) be performed by an entity that meets
such requirements for independence as the
Inspector General of the Department of Health
and Human Services may establish; and
``(ii) test the effectiveness of
information security control techniques of an
appropriate subset of the contractor's
information systems (as defined in section
3502(8) of title 44, United States Code)
relating to such functions under this title and
an assessment of compliance with the
requirements of this subsection and related
information security policies, procedures,
standards and guidelines, including policies
and procedures as may be prescribed by the
Director of the Office of Management and Budget
and applicable information security standards
promulgated under section 11331 of title 40,
United States Code.
``(B) Deadline for initial evaluation.--
``(i) New contractors.--In the case of a
medicare administrative contractor covered by
this subsection that has not previously
performed the functions referred to in
subparagraphs (A) and (B) of subsection (a)(4)
(relating to determining and making payments)
as a fiscal intermediary or carrier under
section 1816 or 1842, the first independent
evaluation conducted pursuant to subparagraph
(A) shall be completed prior to commencing such
functions.
``(ii) Other contractors.--In the case of a
medicare administrative contractor covered by
this subsection that is not described in clause
(i), the first independent evaluation conducted
pursuant to subparagraph (A) shall be completed
within 1 year after the date the contractor
commences functions referred to in clause (i)
under this section.
``(C) Reports on evaluations.--
``(i) To the department of health and human
services.--The results of independent
evaluations under subparagraph (A) shall be
submitted promptly to the Inspector General of
the Department of Health and Human Services and
to the Secretary.
``(ii) To congress.--The Inspector General
of the Department of Health and Human Services
shall submit to Congress annual reports on the
results of such evaluations, including
assessments of the scope and sufficiency of
such evaluations.
``(iii) Agency reporting.--The Secretary
shall address the results of such evaluations
in reports required under section 3544(c) of
title 44, United States Code.''.
(b) Application of Requirements to Fiscal Intermediaries and
Carriers.--
(1) In general.--The provisions of section 1874A(e)(2) of
the Social Security Act (other than subparagraph (B)), as added
by subsection (a), shall apply to each fiscal intermediary
under section 1816 of the Social Security Act (42 U.S.C. 1395h)
and each carrier under section 1842 of such Act (42 U.S.C.
1395u) in the same manner as they apply to medicare
administrative contractors under such provisions.
(2) Deadline for initial evaluation.--In the case of such a
fiscal intermediary or carrier with an agreement or contract
under such respective section in effect as of the date of the
enactment of this Act, the first evaluation under section
1874A(e)(2)(A) of the Social Security Act (as added by
subsection (a)), pursuant to paragraph (1), shall be completed
(and a report on the evaluation submitted to the Secretary) by
not later than 1 year after such date.

Subtitle C--Education and Outreach

SEC. 521. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

(a) Coordination of Education Funding.--
(1) In general.--Title XVIII is amended by inserting after
section 1888 the following new section:

``provider education and technical assistance

``Sec. 1889. (a) Coordination of Education Funding.--The Secretary
shall coordinate the educational activities provided through medicare
contractors (as defined in subsection (g), including under section
1893) in order to maximize the effectiveness of Federal education
efforts for providers of services and suppliers.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.
(3) Report.--Not later than October 1, 2004, the Secretary
shall submit to Congress a report that includes a description
and evaluation of the steps taken to coordinate the funding of
provider education under section 1889(a) of the Social Security
Act, as added by paragraph (1).
(b) Incentives To Improve Contractor Performance.--
(1) In general.--Section 1874A, as added by section
511(a)(1) and as amended by section 512(a), is amended by
adding at the end the following new subsection:
``(f) Incentives To Improve Contractor Performance in Provider
Education and Outreach.--The Secretary shall use specific claims
payment error rates or similar methodology of medicare administrative
contractors in the processing or reviewing of medicare claims in order
to give such contractors an incentive to implement effective education
and outreach programs for providers of services and suppliers.''.
(2) Application to fiscal intermediaries and carriers.--The
provisions of section 1874A(f) of the Social Security Act, as
added by paragraph (1), shall apply to each fiscal intermediary
under section 1816 of the Social Security Act (42 U.S.C. 1395h)
and each carrier under section 1842 of such Act (42 U.S.C.
1395u) in the same manner as they apply to medicare
administrative contractors under such provisions.
(3) GAO report on adequacy of methodology.--Not later than
October 1, 2004, the Comptroller General of the United States
shall submit to Congress and to the Secretary a report on the
adequacy of the methodology under section 1874A(f) of the
Social Security Act, as added by paragraph (1), and shall
include in the report such recommendations as the Comptroller
General determines appropriate with respect to the methodology.
(4) Report on use of methodology in assessing contractor
performance.--Not later than October 1, 2004, the Secretary
shall submit to Congress a report that describes how the
Secretary intends to use such methodology in assessing medicare
contractor performance in implementing effective education and
outreach programs, including whether to use such methodology as
a basis for performance bonuses. The report shall include an
analysis of the sources of identified errors and potential
changes in systems of contractors and rules of the Secretary
that could reduce claims error rates.
(c) Provision of Access to and Prompt Responses From Medicare
Administrative Contractors.--
(1) In general.--Section 1874A, as added by section
511(a)(1) and as amended by section 512(a) and subsection (b),
is further amended by adding at the end the following new
subsection:
``(g) Communications With Beneficiaries, Providers of Services and
Suppliers.--
``(1) Communication strategy.--The Secretary shall develop
a strategy for communications with individuals entitled to
benefits under part A or enrolled under part B, or both, and
with providers of services and suppliers under this title.
``(2) Response to written inquiries.--Each medicare
administrative contractor shall, for those providers of
services and suppliers which submit claims to the contractor
for claims processing and for those individuals entitled to
benefits under part A or enrolled under part B, or both, with
respect to whom claims are submitted for claims processing,
provide general written responses (which may be through
electronic transmission) in a clear, concise, and accurate
manner to inquiries of providers of services, suppliers, and
individuals entitled to benefits under part A or enrolled under
part B, or both, concerning the programs under this title
within 45 business days of the date of receipt of such
inquiries.
``(3) Response to toll-free lines.--The Secretary shall
ensure that each medicare administrative contractor shall
provide, for those providers of services and suppliers which
submit claims to the contractor for claims processing and for
those individuals entitled to benefits under part A or enrolled
under part B, or both, with respect to whom claims are
submitted for claims processing, a toll-free telephone number
at which such individuals, providers of services, and suppliers
may obtain information regarding billing, coding, claims,
coverage, and other appropriate information under this title.
``(4) Monitoring of contractor responses.--
``(A) In general.--Each medicare administrative
contractor shall, consistent with standards developed
by the Secretary under subparagraph (B)--
``(i) maintain a system for identifying who
provides the information referred to in
paragraphs (2) and (3); and
``(ii) monitor the accuracy, consistency,
and timeliness of the information so provided.
``(B) Development of standards.--
``(i) In general.--The Secretary shall
establish and make public standards to monitor
the accuracy, consistency, and timeliness of
the information provided in response to written
and telephone inquiries under this subsection.
Such standards shall be consistent with the
performance requirements established under
subsection (b)(3).
``(ii) Evaluation.--In conducting
evaluations of individual medicare
administrative contractors, the Secretary shall
take into account the results of the monitoring
conducted under subparagraph (A) taking into
account as performance requirements the
standards established under clause (i). The
Secretary shall, in consultation with
organizations representing providers of
services, suppliers, and individuals entitled
to benefits under part A or enrolled under part
B, or both, establish standards relating to the
accuracy, consistency, and timeliness of the
information so provided.
``(C) Direct monitoring.--Nothing in this paragraph
shall be construed as preventing the Secretary from
directly monitoring the accuracy, consistency, and
timeliness of the information so provided.
``(5) Authorization of appropriations.--There are
authorized to be appropriated such sums as are necessary to
carry out this subsection.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect October 1, 2004.
(3) Application to fiscal intermediaries and carriers.--The
provisions of section 1874A(g) of the Social Security Act, as
added by paragraph (1), shall apply to each fiscal intermediary
under section 1816 of the Social Security Act (42 U.S.C. 1395h)
and each carrier under section 1842 of such Act (42 U.S.C.
1395u) in the same manner as they apply to medicare
administrative contractors under such provisions.
(d) Improved Provider Education and Training.--
(1) In general.--Section 1889, as added by subsection (a),
is amended by adding at the end the following new subsections:
``(b) Enhanced Education and Training.--
``(1) Additional resources.--There are authorized to be
appropriated to the Secretary (in appropriate part from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund) such sums as may be
necessary for fiscal years beginning with fiscal year 2005.
``(2) Use.--The funds made available under paragraph (1)
shall be used to increase the conduct by medicare contractors
of education and training of providers of services and
suppliers regarding billing, coding, and other appropriate
items and may also be used to improve the accuracy,
consistency, and timeliness of contractor responses.
``(c) Tailoring Education and Training Activities for Small
Providers or Suppliers.--
``(1) In general.--Insofar as a medicare contractor
conducts education and training activities, it shall tailor
such activities to meet the special needs of small providers of
services or suppliers (as defined in paragraph (2)). Such
education and training activities for small providers of
services and suppliers may include the provision of technical
assistance (such as review of billing systems and internal
controls to determine program compliance and to suggest more
efficient and effective means of achieving such compliance).
``(2) Small provider of services or supplier.--In this
subsection, the term `small provider of services or supplier'
means--
``(A) a provider of services with fewer than 25
full-time-equivalent employees; or
``(B) a supplier with fewer than 10 full-time-
equivalent employees.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on October 1, 2004.
(e) Requirement To Maintain Internet Websites.--
(1) In general.--Section 1889, as added by subsection (a)
and as amended by subsection (d), is further amended by adding
at the end the following new subsection:
``(d) Internet Websites; FAQs.--The Secretary, and each medicare
contractor insofar as it provides services (including claims
processing) for providers of services or suppliers, shall maintain an
Internet website which--
``(1) provides answers in an easily accessible format to
frequently asked questions, and
``(2) includes other published materials of the contractor,
that relate to providers of services and suppliers under the programs
under this title (and title XI insofar as it relates to such
programs).''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on October 1, 2004.
(f) Additional Provider Education Provisions.--
(1) In general.--Section 1889, as added by subsection (a)
and as amended by subsections (d) and (e), is further amended
by adding at the end the following new subsections:
``(e) Encouragement of Participation in Education Program
Activities.--A medicare contractor may not use a record of attendance
at (or failure to attend) educational activities or other information
gathered during an educational program conducted under this section or
otherwise by the Secretary to select or track providers of services or
suppliers for the purpose of conducting any type of audit or prepayment
review.
``(f) Construction.--Nothing in this section or section 1893(g)
shall be construed as providing for disclosure by a medicare
contractor--
``(1) of the screens used for identifying claims that will
be subject to medical review; or
``(2) of information that would compromise pending law
enforcement activities or reveal findings of law enforcement-
related audits.
``(g) Definitions.--For purposes of this section, the term
`medicare contractor' includes the following:
``(1) A medicare administrative contractor with a contract
under section 1874A, including a fiscal intermediary with a
contract under section 1816 and a carrier with a contract under
section 1842.
``(2) An eligible entity with a contract under section
1893.
Such term does not include, with respect to activities of a specific
provider of services or supplier an entity that has no authority under
this title or title IX with respect to such activities and such
provider of services or supplier.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.

SEC. 522. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION PROGRAM.

(a) Establishment.--
(1) In general.--The Secretary shall establish a
demonstration program (in this section referred to as the
``demonstration program'') under which technical assistance
described in paragraph (2) is made available, upon request and
on a voluntary basis, to small providers of services or
suppliers in order to improve compliance with the applicable
requirements of the programs under the medicare program under title
XVIII of the Social Security Act (including provisions of title XI of
such Act insofar as they relate to such title and are not administered
by the Office of the Inspector General of the Department of Health and
Human Services).
(2) Forms of technical assistance.--The technical
assistance described in this paragraph is--
(A) evaluation and recommendations regarding
billing and related systems; and
(B) information and assistance regarding policies
and procedures under the medicare program, including
coding and reimbursement.
(3) Small providers of services or suppliers.--In this
section, the term ``small providers of services or suppliers''
means--
(A) a provider of services with fewer than 25 full-
time-equivalent employees; or
(B) a supplier with fewer than 10 full-time-
equivalent employees.
(b) Qualification of Contractors.--In conducting the demonstration
program, the Secretary shall enter into contracts with qualified
organizations (such as peer review organizations or entities described
in section 1889(g)(2) of the Social Security Act, as inserted by
section 521(f)(1)) with appropriate expertise with billing systems of
the full range of providers of services and suppliers to provide the
technical assistance. In awarding such contracts, the Secretary shall
consider any prior investigations of the entity's work by the Inspector
General of the Department of Health and Human Services or the
Comptroller General of the United States.
(c) Description of Technical Assistance.--The technical assistance
provided under the demonstration program shall include a direct and in-
person examination of billing systems and internal controls of small
providers of services or suppliers to determine program compliance and
to suggest more efficient or effective means of achieving such
compliance.
(d) GAO Evaluation.--Not later than 2 years after the date the
demonstration program is first implemented, the Comptroller General, in
consultation with the Inspector General of the Department of Health and
Human Services, shall conduct an evaluation of the demonstration
program. The evaluation shall include a determination of whether claims
error rates are reduced for small providers of services or suppliers
who participated in the program and the extent of improper payments
made as a result of the demonstration program. The Comptroller General
shall submit a report to the Secretary and the Congress on such
evaluation and shall include in such report recommendations regarding
the continuation or extension of the demonstration program.
(e) Financial Participation by Providers.--The provision of
technical assistance to a small provider of services or supplier under
the demonstration program is conditioned upon the small provider of
services or supplier paying an amount estimated (and disclosed in
advance of a provider's or supplier's participation in the program) to
be equal to 25 percent of the cost of the technical assistance.
(f) Authorization of Appropriations.--There are authorized to be
appropriated, from amounts not otherwise appropriated in the Treasury,
such sums as may be necessary to carry out this section.

SEC. 523. MEDICARE BENEFICIARY OMBUDSMAN.

(a) In General.--Section 1808, as added and amended by section 500,
is amended by adding at the end the following new subsection:
``(c) Medicare Beneficiary Ombudsman.--
``(1) In general.--The Secretary shall appoint within the
Department of Health and Human Services a Medicare Beneficiary
Ombudsman who shall have expertise and experience in the fields
of health care and education of (and assistance to) individuals
entitled to benefits under this title.
``(2) Duties.--The Medicare Beneficiary Ombudsman shall--
``(A) receive complaints, grievances, and requests
for information submitted by individuals entitled to
benefits under part A or enrolled under part B, or
both, with respect to any aspect of the medicare
program;
``(B) provide assistance with respect to
complaints, grievances, and requests referred to in
subparagraph (A), including--
``(i) assistance in collecting relevant
information for such individuals, to seek an
appeal of a decision or determination made by a
fiscal intermediary, carrier, MA organization,
or the Secretary;
``(ii) assistance to such individuals with
any problems arising from disenrollment from an
MA plan under part C; and
``(iii) assistance to such individuals in
presenting information under section
1839(i)(4)(C) (relating to income-related
premium adjustment); and
``(C) submit annual reports to Congress and the
Secretary that describe the activities of the Office
and that include such recommendations for improvement
in the administration of this title as the Ombudsman
determines appropriate.
The Ombudsman shall not serve as an advocate for any increases
in payments or new coverage of services, but may identify
issues and problems in payment or coverage policies.
``(3) Working with health insurance counseling programs.--
To the extent possible, the Ombudsman shall work with health
insurance counseling programs (receiving funding under section
4360 of the Omnibus Budget Reconciliation Act of 1990) to
facilitate the provision of information to individuals entitled
to benefits under part A or enrolled under part B, or both
regarding MA plans and changes to those plans. Nothing in this
paragraph shall preclude further collaboration between the
Ombudsman and such programs.''.
(b) Deadline for Appointment.--By not later than 1 year after the
date of the enactment of this Act, the Secretary shall appoint the
Medicare Beneficiary Ombudsman under section 1808(c) of the Social
Security Act, as added by subsection (a).
(c) Funding.--There are authorized to be appropriated to the
Secretary (in appropriate part from the Federal Hospital Insurance
Trust Fund, established under section 1817 of the Social Security Act
(42 U.S.C. 1395i), and the Federal Supplementary Medical Insurance
Trust Fund, established under section 1841 of such Act (42 U.S.C.
1395t)) to carry out section 1808(c) of such Act (relating to the
Medicare Beneficiary Ombudsman), as added by subsection (a), such sums
as are necessary for fiscal year 2004 and each succeeding fiscal year.
(d) Use of Central, Toll-Free Number (1-800-MEDICARE).--
(1) Phone triage system; listing in medicare handbook
instead of other toll-free numbers.--Section 1804(b) (42 U.S.C.
1395b-2(b)) is amended by adding at the end the following:
``The Secretary shall provide, through the toll-free telephone
number 1-800-MEDICARE, for a means by which individuals seeking
information about, or assistance with, such programs who phone
such toll-free number are transferred (without charge) to
appropriate entities for the provision of such information or
assistance. Such toll-free number shall be the toll-free number
listed for general information and assistance in the annual
notice under subsection (a) instead of the listing of numbers
of individual contractors.''.
(2) Monitoring accuracy.--
(A) Study.--The Comptroller General of the United
States shall conduct a study to monitor the accuracy
and consistency of information provided to individuals
entitled to benefits under part A or enrolled under
part B, or both, through the toll-free telephone number
1-800-MEDICARE, including an assessment of whether the
information provided is sufficient to answer questions
of such individuals. In conducting the study, the
Comptroller General shall examine the education and
training of the individuals providing information
through such number.
(B) Report.--Not later than 1 year after the date
of the enactment of this Act, the Comptroller General
shall submit to Congress a report on the study
conducted under subparagraph (A).

SEC. 524. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

(a) In General.--The Secretary shall establish a demonstration
program (in this section referred to as the ``demonstration program'')
under which medicare specialists employed by the Department of Health
and Human Services provide advice and assistance to individuals
entitled to benefits under part A of title XVIII of the Social Security
Act, or enrolled under part B of such title, or both, regarding the
medicare program at the location of existing local offices of the
Social Security Administration.
(b) Locations.--
(1) In general.--The demonstration program shall be
conducted in at least 6 offices or areas. Subject to paragraph
(2), in selecting such offices and areas, the Secretary shall
provide preference for offices with a high volume of visits by
individuals referred to in subsection (a).
(2) Assistance for rural beneficiaries.--The Secretary
shall provide for the selection of at least 2 rural areas to
participate in the demonstration program. In conducting the
demonstration program in such rural areas, the Secretary shall
provide for medicare specialists to travel among local offices
in a rural area on a scheduled basis.
(c) Duration.--The demonstration program shall be conducted over a
3-year period.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall provide for an
evaluation of the demonstration program. Such evaluation shall
include an analysis of--
(A) utilization of, and satisfaction of those
individuals referred to in subsection (a) with, the
assistance provided under the program; and
(B) the cost-effectiveness of providing beneficiary
assistance through out-stationing medicare specialists
at local offices of the Social Security Administration.
(2) Report.--The Secretary shall submit to Congress a
report on such evaluation and shall include in such report
recommendations regarding the feasibility of permanently out-
stationing medicare specialists at local offices of the Social
Security Administration.

SEC. 525. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO
BENEFICIARIES ABOUT SKILLED NURSING FACILITY BENEFITS.

(a) In General.--The Secretary shall provide that in medicare
beneficiary notices provided (under section 1806(a) of the Social
Security Act, 42 U.S.C. 1395b-7(a)) with respect to the provision of
post-hospital extended care services under part A of title XVIII of the
Social Security Act, there shall be included information on the number
of days of coverage of such services remaining under such part for the
medicare beneficiary and spell of illness involved.
(b) Effective Date.--Subsection (a) shall apply to notices provided
during calendar quarters beginning more than 6 months after the date of
the enactment of this Act.

SEC. 526. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING FACILITIES
IN HOSPITAL DISCHARGE PLANS.

(a) Availability of Data.--The Secretary shall publicly provide
information that enables hospital discharge planners, medicare
beneficiaries, and the public to identify skilled nursing facilities
that are participating in the medicare program.
(b) Inclusion of Information in Certain Hospital Discharge Plans.--
(1) In general.--Section 1861(ee)(2)(D) (42 U.S.C.
1395x(ee)(2)(D)) is amended--
(A) by striking ``hospice services'' and inserting
``hospice care and post-hospital extended care
services''; and
(B) by inserting before the period at the end the
following: ``and, in the case of individuals who are
likely to need post-hospital extended care services,
the availability of such services through facilities
that participate in the program under this title and
that serve the area in which the patient resides''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to discharge plans made on or after such date as
the Secretary shall specify, but not later than 6 months after
the date the Secretary provides for availability of information
under subsection (a).

Subtitle D--Appeals and Recovery

SEC. 531. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

(a) Transition Plan.--
(1) In general.--Not later than April 1, 2004, the
Commissioner of Social Security and the Secretary shall develop
and transmit to Congress and the Comptroller General of the
United States a plan under which the functions of
administrative law judges responsible for hearing cases under
title XVIII of the Social Security Act (and related provisions
in title XI of such Act) are transferred from the
responsibility of the Commissioner and the Social Security
Administration to the Secretary and the Department of Health
and Human Services.
(2) Contents.--The plan shall include information on the
following:
(A) Workload.--The number of such administrative
law judges and support staff required now and in the
future to hear and decide such cases in a timely
manner, taking into account the current and anticipated
claims volume, appeals, number of beneficiaries, and
statutory changes.
(B) Cost projections and financing.--Funding levels
required for fiscal year 2005 and subsequent fiscal
years to carry out the functions transferred under the
plan.
(C) Transition timetable.--A timetable for the
transition.
(D) Regulations.--The establishment of specific
regulations to govern the appeals process.
(E) Case tracking.--The development of a unified
case tracking system that will facilitate the
maintenance and transfer of case specific data across
both the fee-for-service and managed care components of
the medicare program.
(F) Feasibility of precedential authority.--The
feasibility of developing a process to give decisions
of the Departmental Appeals Board in the Department of
Health and Human Services addressing broad legal issues
binding, precedential authority.
(G) Access to administrative law judges.--The
feasibility of--
(i) filing appeals with administrative law
judges electronically; and
(ii) conducting hearings using tele- or
video-conference technologies.
(H) Independence of administrative law judges.--The
steps that should be taken to ensure the independence
of administrative law judges consistent with the
requirements of subsection (b)(2).
(I) Geographic distribution.--The steps that should
be taken to provide for an appropriate geographic
distribution of administrative law judges throughout
the United States to carry out subsection (b)(3).
(J) Hiring.--The steps that should be taken to hire
administrative law judges (and support staff) to carry
out subsection (b)(4).
(K) Performance standards.--The appropriateness of
establishing performance standards for administrative
law judges with respect to timelines for decisions in
cases under title XVIII of the Social Security Act
taking into account requirements under subsection
(b)(2) for the independence of such judges and
consistent with the applicable provisions of title 5,
United States Code relating to impartiality.
(L) Shared resources.--The steps that should be
taken to carry out subsection (b)(6) (relating to the
arrangements with the Commissioner of Social Security
to share office space, support staff, and other
resources, with appropriate reimbursement).
(M) Training.--The training that should be provided
to administrative law judges with respect to laws and
regulations under title XVIII of the Social Security
Act.
(3) Additional information.--The plan may also include
recommendations for further congressional action, including
modifications to the requirements and deadlines established
under section 1869 of the Social Security Act (42 U.S.C.
1395ff) (as amended by this Act).
(4) GAO evaluation.--The Comptroller General of the United
States shall evaluate the plan and, not later than the date
that is 6 months after the date on which the plan is received
by the Comptroller General, shall submit to Congress a report
on such evaluation.
(b) Transfer of Adjudication Authority.--
(1) In general.--Not earlier than July 1, 2005, and not
later than October 1, 2005, the Commissioner of Social Security
and the Secretary shall implement the transition plan under
subsection (a) and transfer the administrative law judge
functions described in such subsection from the Social Security
Administration to the Secretary.
(2) Assuring independence of judges.--The Secretary shall
assure the independence of administrative law judges performing
the administrative law judge functions transferred under
paragraph (1) from the Centers for Medicare & Medicaid Services
and its contractors. In order to assure such independence, the
Secretary shall place such judges in an administrative office
that is organizationally and functionally separate from such
Centers. Such judges shall report to, and be under the general
supervision of, the Secretary, but shall not report to, or be
subject to supervision by, another officer of the Department of
Health and Human Services.
(3) Geographic distribution.--The Secretary shall provide
for an appropriate geographic distribution of administrative
law judges performing the administrative law judge functions
transferred under paragraph (1) throughout the United States to
ensure timely access to such judges.
(4) Hiring authority.--Subject to the amounts provided in
advance in appropriations Acts, the Secretary shall have
authority to hire administrative law judges to hear such cases,
taking into consideration those judges with expertise in
handling medicare appeals and in a manner consistent with
paragraph (3), and to hire support staff for such judges.
(5) Financing.--Amounts payable under law to the
Commissioner for administrative law judges performing the
administrative law judge functions transferred under paragraph
(1) from the Federal Hospital Insurance Trust Fund and the
Federal Supplementary Medical Insurance Trust Fund shall become
payable to the Secretary for the functions so transferred.
(6) Shared resources.--The Secretary shall enter into such
arrangements with the Commissioner as may be appropriate with
respect to transferred functions of administrative law judges
to share office space, support staff, and other resources, with
appropriate reimbursement from the Trust Funds described in
paragraph (5).
(c) Increased Financial Support.--In addition to any amounts
otherwise appropriated, to ensure timely action on appeals before
administrative law judges and the Departmental Appeals Board consistent
with section 1869 of the Social Security Act (42 U.S.C. 1395ff) (as
amended by this Act), there are authorized to be appropriated (in
appropriate part from the Federal Hospital Insurance Trust Fund,
established under section 1817 of the Social Security Act (42 U.S.C.
1395i), and the Federal Supplementary Medical Insurance Trust Fund,
established under section 1841 of such Act (42 U.S.C. 1395t)) to the
Secretary such sums as are necessary for fiscal year 2005 and each
subsequent fiscal year to--
(1) increase the number of administrative law judges (and
their staffs) under subsection (b)(4);
(2) improve education and training opportunities for
administrative law judges (and their staffs); and
(3) increase the staff of the Departmental Appeals Board.
(d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 U.S.C.
1395ff(f)(2)(A)(i)) is amended by striking ``of the Social Security
Administration''.

SEC. 532. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

(a) Expedited Access to Judicial Review.--
(1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)) is
amended--
(A) in paragraph (1)(A), by inserting ``, subject
to paragraph (2),'' before ``to judicial review of the
Secretary's final decision''; and
(B) by adding at the end the following new
paragraph:
``(2) Expedited access to judicial review.--
``(A) In general.--The Secretary shall establish a
process under which a provider of services or supplier
that furnishes an item or service or an individual
entitled to benefits under part A or enrolled under
part B, or both, who has filed an appeal under
paragraph (1) (other than an appeal filed under
paragraph (1)(F)(i)) may obtain access to judicial
review when a review entity (described in subparagraph
(D)), on its own motion or at the request of the
appellant, determines that the Departmental Appeals
Board does not have the authority to decide the
question of law or regulation relevant to the matters
in controversy and that there is no material issue of
fact in dispute. The appellant may make such request
only once with respect to a question of law or
regulation for a specific matter in dispute in a case
of an appeal.
``(B) Prompt determinations.--If, after or
coincident with appropriately filing a request for an
administrative hearing, the appellant requests a
determination by the appropriate review entity that the
Departmental Appeals Board does not have the authority
to decide the question of law or regulations relevant
to the matters in controversy and that there is no
material issue of fact in dispute, and if such request
is accompanied by the documents and materials as the
appropriate review entity shall require for purposes of
making such determination, such review entity shall
make a determination on the request in writing within
60 days after the date such review entity receives the
request and such accompanying documents and materials.
Such a determination by such review entity shall be
considered a final decision and not subject to review
by the Secretary.
``(C) Access to judicial review.--
``(i) In general.--If the appropriate
review entity--
``(I) determines that there are no
material issues of fact in dispute and
that the only issues to be adjudicated
are ones of law or regulation that the
Departmental Appeals Board does not
have authority to decide; or
``(II) fails to make such
determination within the period
provided under subparagraph (B),
then the appellant may bring a civil action as
described in this subparagraph.
``(ii) Deadline for filing.--Such action
shall be filed, in the case described in--
``(I) clause (i)(I), within 60 days
of the date of the determination
described in such clause; or
``(II) clause (i)(II), within 60
days of the end of the period provided
under subparagraph (B) for the
determination.
``(iii) Venue.--Such action shall be
brought in the district court of the United
States for the judicial district in which the
appellant is located (or, in the case of an
action brought jointly by more than one
applicant, the judicial district in which the
greatest number of applicants are located) or
in the District Court for the District of
Columbia.
``(iv) Interest on any amounts in
controversy.--Where a provider of services or
supplier is granted judicial review pursuant to
this paragraph, the amount in controversy (if
any) shall be subject to annual interest
beginning on the first day of the first month
beginning after the 60-day period as determined
pursuant to clause (ii) and equal to the rate
of interest on obligations issued for purchase
by the Federal Supplementary Medical Insurance
Trust Fund for the month in which the civil
action authorized under this paragraph is
commenced, to be awarded by the reviewing court
in favor of the prevailing party. No interest
awarded pursuant to the preceding sentence
shall be deemed income or cost for the purposes
of determining reimbursement due providers of
services or suppliers under this title.
``(D) Review entity defined.--For purposes of this
subsection, the term `review entity' means an entity of
up to three reviewers who are administrative law judges
or members of the Departmental Appeals Board selected
for purposes of making determinations under this
paragraph.''.
(2) Conforming amendment.--Section 1869(b)(1)(F)(ii) (42
U.S.C. 1395ff(b)(1)(F)(ii)) is amended to read as follows:
``(ii) Reference to expedited access to
judicial review.--For the provision relating to
expedited access to judicial review, see
paragraph (2).''.
(b) Application to Provider Agreement Determinations.--Section
1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
(1) by inserting ``(A)'' after ``(h)(1)''; and
(2) by adding at the end the following new subparagraph:
``(B) An institution or agency described in subparagraph (A) that
has filed for a hearing under subparagraph (A) shall have expedited
access to judicial review under this subparagraph in the same manner as
providers of services, suppliers, and individuals entitled to benefits
under part A or enrolled under part B, or both, may obtain expedited
access to judicial review under the process established under section
1869(b)(2). Nothing in this subparagraph shall be construed to affect
the application of any remedy imposed under section 1819 during the
pendency of an appeal under this subparagraph.''.
(c) Expedited Review of Certain Provider Agreement
Determinations.--
(1) Termination and certain other immediate remedies.--
Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)), as amended by
subsection (b), is amended by adding at the end the following
new subparagraph:
``(C)(i) The Secretary shall develop and implement a process to
expedite proceedings under this subsection in which--
``(I) the remedy of termination of participation has been
imposed;
``(II) a remedy described in clause (i) or (iii) of section
1819(h)(2)(B) has been imposed, but only if such remedy has
been imposed on an immediate basis; or
``(III) a determination has been made as to a finding of
substandard quality of care that results in the loss of
approval of a skilled nursing facility's nurse aide training
program.
``(ii) Under such process under clause (i), priority shall be
provided in cases of termination described in clause (i)(I).
``(iii) Nothing in this subparagraph shall be construed to affect
the application of any remedy imposed under section 1819 during the
pendency of an appeal under this subparagraph.''.
(2) Waiver of disapproval of nurse-aide training
programs.--Sections 1819(f)(2) and section 1919(f)(2) (42
U.S.C. 1395i-3(f)(2) and 1396r(f)(2)) are each amended--
(A) in subparagraph (B)(iii), by striking
``subparagraph (C)'' and inserting ``subparagraphs (C)
and (D)''; and
(B) by adding at the end the following new
subparagraph:
``(D) Waiver of disapproval of nurse-aide training
programs.--Upon application of a nursing facility, the
Secretary may waive the application of subparagraph
(B)(iii)(I)(c) if the imposition of the civil monetary
penalty was not related to the quality of care provided
to residents of the facility. Nothing in this
subparagraph shall be construed as eliminating any
requirement upon a facility to pay a civil monetary
penalty described in the preceding sentence.''.
(3) Increased financial support.--In addition to any
amounts otherwise appropriated, to reduce by 50 percent the
average time for administrative determinations on appeals under
section 1866(h) of the Social Security Act (42 U.S.C.
1395cc(h)), there are authorized to be appropriated (in appropriate
part from the Federal Hospital Insurance Trust Fund, established under
section 1817 of the Social Security Act (42 U.S.C. 1395i), and the
Federal Supplementary Medical Insurance Trust Fund, established under
section 1841 of such Act (42 U.S.C. 1395t)) to the Secretary such
additional sums for fiscal year 2004 and each subsequent fiscal year as
may be necessary. The purposes for which such amounts are available
include increasing the number of administrative law judges (and their
staffs) and the appellate level staff at the Departmental Appeals Board
of the Department of Health and Human Services and educating such
judges and staffs on long-term care issues.
(d) Effective Date.--The amendments made by this section shall
apply to appeals filed on or after October 1, 2004.

SEC. 533. REVISIONS TO MEDICARE APPEALS PROCESS.

(a) Requiring Full and Early Presentation of Evidence.--
(1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as
amended by section 532(a), is further amended by adding at the
end the following new paragraph:
``(3) Requiring full and early presentation of evidence by
providers.--A provider of services or supplier may not
introduce evidence in any appeal under this section that was
not presented at the reconsideration conducted by the qualified
independent contractor under subsection (c), unless there is
good cause which precluded the introduction of such evidence at
or before that reconsideration.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on October 1, 2004.
(b) Use of Patients' Medical Records.--Section 1869(c)(3)(B)(i) (42
U.S.C. 1395ff(c)(3)(B)(i)) is amended by inserting ``(including the
medical records of the individual involved)'' after ``clinical
experience''.
(c) Notice Requirements for Medicare Appeals.--
(1) Initial determinations and redeterminations.--Section
1869(a) (42 U.S.C. 1395ff(a)) is amended by adding at the end
the following new paragraphs:
``(4) Requirements of notice of determinations.--With
respect to an initial determination insofar as it results in a
denial of a claim for benefits--
``(A) the written notice on the determination shall
include--
``(i) the reasons for the determination,
including whether a local medical review policy
or a local coverage determination was used;
``(ii) the procedures for obtaining
additional information concerning the
determination, including the information
described in subparagraph (B); and
``(iii) notification of the right to seek a
redetermination or otherwise appeal the
determination and instructions on how to
initiate such a redetermination under this
section;
``(B) such written notice shall be provided in
printed form and written in a manner calculated to be
understood by the individual entitled to benefits under
part A or enrolled under part B, or both; and
``(C) the individual provided such written notice
may obtain, upon request, information on the specific
provision of the policy, manual, or regulation used in
making the redetermination.
``(5) Requirements of notice of redeterminations.--With
respect to a redetermination insofar as it results in a denial
of a claim for benefits--
``(A) the written notice on the redetermination
shall include--
``(i) the specific reasons for the
redetermination;
``(ii) as appropriate, a summary of the
clinical or scientific evidence used in making
the redetermination;
``(iii) a description of the procedures for
obtaining additional information concerning the
redetermination; and
``(iv) notification of the right to appeal
the redetermination and instructions on how to
initiate such an appeal under this section;
``(B) such written notice shall be provided in
printed form and written in a manner calculated to be
understood by the individual entitled to benefits under
part A or enrolled under part B, or both; and
``(C) the individual provided such written notice
may obtain, upon request, information on the specific
provision of the policy, manual, or regulation used in
making the redetermination.''.
(2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C.
1395ff(c)(3)(E)) is amended--
(A) by inserting ``be written in a manner
calculated to be understood by the individual entitled
to benefits under part A or enrolled under part B, or
both, and shall include (to the extent appropriate)''
after ``in writing,''; and
(B) by inserting ``and a notification of the right
to appeal such determination and instructions on how to
initiate such appeal under this section'' after ``such
decision,''.
(3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)) is
amended--
(A) in the heading, by inserting ``; Notice'' after
``Secretary''; and
(B) by adding at the end the following new
paragraph:
``(4) Notice.--Notice of the decision of an administrative
law judge shall be in writing in a manner calculated to be
understood by the individual entitled to benefits under part A
or enrolled under part B, or both, and shall include--
``(A) the specific reasons for the determination
(including, to the extent appropriate, a summary of the
clinical or scientific evidence used in making the
determination);
``(B) the procedures for obtaining additional
information concerning the decision; and
``(C) notification of the right to appeal the
decision and instructions on how to initiate such an
appeal under this section.''.
(4) Submission of record for appeal.--Section
1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) is amended by
striking ``prepare'' and inserting ``submit'' and by striking
``with respect to'' and all that follows through ``and relevant
policies''.
(d) Qualified Independent Contractors.--
(1) Eligibility requirements of qualified independent
contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)) is
amended--
(A) in subparagraph (A), by striking ``sufficient
training and expertise in medical science and legal
matters'' and inserting ``sufficient medical, legal,
and other expertise (including knowledge of the program
under this title) and sufficient staffing''; and
(B) by adding at the end the following new
subparagraph:
``(K) Independence requirements.--
``(i) In general.--Subject to clause (ii),
a qualified independent contractor shall not
conduct any activities in a case unless the
entity--
``(I) is not a related party (as
defined in subsection (g)(5));
``(II) does not have a material
familial, financial, or professional
relationship with such a party in
relation to such case; and
``(III) does not otherwise have a
conflict of interest with such a party.
``(ii) Exception for reasonable
compensation.--Nothing in clause (i) shall be
construed to prohibit receipt by a qualified
independent contractor of compensation from the
Secretary for the conduct of activities under
this section if the compensation is provided
consistent with clause (iii).
``(iii) Limitations on entity
compensation.--Compensation provided by the
Secretary to a qualified independent contractor
in connection with reviews under this section
shall not be contingent on any decision
rendered by the contractor or by any reviewing
professional.''.
(2) Eligibility requirements for reviewers.--Section 1869
(42 U.S.C. 1395ff) is amended--
(A) by amending subsection (c)(3)(D) to read as
follows:
``(D) Qualifications for reviewers.--The
requirements of subsection (g) shall be met (relating
to qualifications of reviewing professionals).''; and
(B) by adding at the end the following new
subsection:
``(g) Qualifications of Reviewers.--
``(1) In general.--In reviewing determinations under this
section, a qualified independent contractor shall assure that--
``(A) each individual conducting a review shall
meet the qualifications of paragraph (2);
``(B) compensation provided by the contractor to
each such reviewer is consistent with paragraph (3);
and
``(C) in the case of a review by a panel described
in subsection (c)(3)(B) composed of physicians or other
health care professionals (each in this subsection
referred to as a `reviewing professional'), a reviewing
professional meets the qualifications described in
paragraph (4) and, where a claim is regarding the
furnishing of treatment by a physician (allopathic or
osteopathic) or the provision of items or services by a
physician (allopathic or osteopathic), a reviewing
professional shall be a physician (allopathic or
osteopathic).
``(2) Independence.--
``(A) In general.--Subject to subparagraph (B),
each individual conducting a review in a case shall--
``(i) not be a related party (as defined in
paragraph (5));
``(ii) not have a material familial,
financial, or professional relationship with
such a party in the case under review; and
``(iii) not otherwise have a conflict of
interest with such a party.
``(B) Exception.--Nothing in subparagraph (A) shall
be construed to--
``(i) prohibit an individual, solely on the
basis of a participation agreement with a
fiscal intermediary, carrier, or other
contractor, from serving as a reviewing
professional if--
``(I) the individual is not
involved in the provision of items or
services in the case under review;
``(II) the fact of such an
agreement is disclosed to the Secretary
and the individual entitled to benefits
under part A or enrolled under part B,
or both, or such individual's
authorized representative, and neither
party objects; and
``(III) the individual is not an
employee of the intermediary, carrier,
or contractor and does not provide
services exclusively or primarily to or
on behalf of such intermediary,
carrier, or contractor;
``(ii) prohibit an individual who has staff
privileges at the institution where the
treatment involved takes place from serving as
a reviewer merely on the basis of having such
staff privileges if the existence of such
privileges is disclosed to the Secretary and
such individual (or authorized representative),
and neither party objects; or
``(iii) prohibit receipt of compensation by
a reviewing professional from a contractor if
the compensation is provided consistent with
paragraph (3).
For purposes of this paragraph, the term `participation
agreement' means an agreement relating to the provision
of health care services by the individual and does not
include the provision of services as a reviewer under
this subsection.
``(3) Limitations on reviewer compensation.--Compensation
provided by a qualified independent contractor to a reviewer in
connection with a review under this section shall not be
contingent on the decision rendered by the reviewer.
``(4) Licensure and expertise.--Each reviewing professional
shall be--
``(A) a physician (allopathic or osteopathic) who
is appropriately credentialed or licensed in one or
more States to deliver health care services and has
medical expertise in the field of practice that is
appropriate for the items or services at issue; or
``(B) a health care professional who is legally
authorized in one or more States (in accordance with
State law or the State regulatory mechanism provided by
State law) to furnish the health care items or services
at issue and has medical expertise in the field of
practice that is appropriate for such items or
services.
``(5) Related party defined.--For purposes of this section,
the term `related party' means, with respect to a case under
this title involving a specific individual entitled to benefits
under part A or enrolled under part B, or both, any of the
following:
``(A) The Secretary, the medicare administrative
contractor involved, or any fiduciary, officer,
director, or employee of the Department of Health and
Human Services, or of such contractor.
``(B) The individual (or authorized
representative).
``(C) The health care professional that provides
the items or services involved in the case.
``(D) The institution at which the items or
services (or treatment) involved in the case are
provided.
``(E) The manufacturer of any drug or other item
that is included in the items or services involved in
the case.
``(F) Any other party determined under any
regulations to have a substantial interest in the case
involved.''.
(3) Reducing minimum number of qualified independent
contractors.--Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is
amended by striking ``not fewer than 12 qualified independent
contractors under this subsection'' and inserting ``with a
sufficient number of qualified independent contractors (but not
fewer than 4 such contractors) to conduct reconsiderations
consistent with the timeframes applicable under this
subsection''.
(4) Effective date.--The amendments made by paragraphs (1)
and (2) shall be effective as if included in the enactment of
the respective provisions of subtitle C of title V of BIPA (114
Stat. 2763A-534).
(5) Transition.--In applying section 1869(g) of the Social
Security Act (as added by paragraph (2)), any reference to a
medicare administrative contractor shall be deemed to include a
reference to a fiscal intermediary under section 1816 of the
Social Security Act (42 U.S.C. 1395h) and a carrier under
section 1842 of such Act (42 U.S.C. 1395u).

SEC. 534. PREPAYMENT REVIEW.

(a) In General.--Section 1874A, as added by section 511(a)(1) and
as amended by sections 912(b), 921(b)(1), and 921(c)(1), is further
amended by adding at the end the following new subsection:
``(h) Conduct of Prepayment Review.--
``(1) Conduct of random prepayment review.--
``(A) In general.--A medicare administrative
contractor may conduct random prepayment review only to
develop a contractor-wide or program-wide claims
payment error rates or under such additional
circumstances as may be provided under regulations,
developed in consultation with providers of services
and suppliers.
``(B) Use of standard protocols when conducting
prepayment reviews.--When a medicare administrative
contractor conducts a random prepayment review, the
contractor may conduct such review only in accordance
with a standard protocol for random prepayment audits
developed by the Secretary.
``(C) Construction.--Nothing in this paragraph
shall be construed as preventing the denial of payments
for claims actually reviewed under a random prepayment
review.
``(D) Random prepayment review.--For purposes of
this subsection, the term `random prepayment review'
means a demand for the production of records or
documentation absent cause with respect to a claim.
``(2) Limitations on non-random prepayment review.--
``(A) Limitations on initiation of non-random
prepayment review.--A medicare administrative
contractor may not initiate non-random prepayment
review of a provider of services or supplier based on
the initial identification by that provider of services
or supplier of an improper billing practice unless
there is a likelihood of sustained or high level of
payment error under section 1893(f)(3)(A).
``(B) Termination of non-random prepayment
review.--The Secretary shall issue regulations relating
to the termination, including termination dates, of
non-random prepayment review. Such regulations may vary
such a termination date based upon the differences in
the circumstances triggering prepayment review.''.
(b) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendment made by subsection (a) shall take effect 1 year after
the date of the enactment of this Act.
(2) Deadline for promulgation of certain regulations.--The
Secretary shall first issue regulations under section 1874A(h)
of the Social Security Act, as added by subsection (a), by not
later than 1 year after the date of the enactment of this Act.
(3) Application of standard protocols for random prepayment
review.--Section 1874A(h)(1)(B) of the Social Security Act, as
added by subsection (a), shall apply to random prepayment
reviews conducted on or after such date (not later than 1 year
after the date of the enactment of this Act) as the Secretary
shall specify.
(c) Application to Fiscal Intermediaries and Carriers.--The
provisions of section 1874A(h) of the Social Security Act, as added by
subsection (a), shall apply to each fiscal intermediary under section
1816 of the Social Security Act (42 U.S.C. 1395h) and each carrier
under section 1842 of such Act (42 U.S.C. 1395u) in the same manner as
they apply to medicare administrative contractors under such
provisions.

SEC. 535. RECOVERY OF OVERPAYMENTS.

(a) In General.--Section 1893 (42 U.S.C. 1395ddd) is amended by
adding at the end the following new subsection:
``(f) Recovery of Overpayments.--
``(1) Use of repayment plans.--
``(A) In general.--If the repayment, within 30 days
by a provider of services or supplier, of an
overpayment under this title would constitute a
hardship (as described in subparagraph (B)), subject to
subparagraph (C), upon request of the provider of
services or supplier the Secretary shall enter into a
plan with the provider of services or supplier for the
repayment (through offset or otherwise) of such
overpayment over a period of at least 6 months but not
longer than 3 years (or not longer than 5 years in the
case of extreme hardship, as determined by the
Secretary). Interest shall accrue on the balance
through the period of repayment. Such plan shall meet
terms and conditions determined to be appropriate by
the Secretary.
``(B) Hardship.--
``(i) In general.--For purposes of
subparagraph (A), the repayment of an
overpayment (or overpayments) within 30 days is
deemed to constitute a hardship if--
``(I) in the case of a provider of
services that files cost reports, the
aggregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of
services for the cost reporting period
covered by the most recently submitted
cost report; or
``(II) in the case of another
provider of services or supplier, the
aggregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of
services or supplier for the previous
calendar year.
``(ii) Rule of application.--The Secretary
shall establish rules for the application of
this subparagraph in the case of a provider of
services or supplier that was not paid under
this title during the previous year or was paid
under this title only during a portion of that
year.
``(iii) Treatment of previous
overpayments.--If a provider of services or
supplier has entered into a repayment plan
under subparagraph (A) with respect to a
specific overpayment amount, such payment
amount under the repayment plan shall not be
taken into account under clause (i) with
respect to subsequent overpayment amounts.
``(C) Exceptions.--Subparagraph (A) shall not apply
if--
``(i) the Secretary has reason to suspect
that the provider of services or supplier may
file for bankruptcy or otherwise cease to do
business or discontinue participation in the
program under this title; or
``(ii) there is an indication of fraud or
abuse committed against the program.
``(D) Immediate collection if violation of
repayment plan.--If a provider of services or supplier
fails to make a payment in accordance with a repayment
plan under this paragraph, the Secretary may
immediately seek to offset or otherwise recover the
total balance outstanding (including applicable
interest) under the repayment plan.
``(E) Relation to no fault provision.--Nothing in
this paragraph shall be construed as affecting the
application of section 1870(c) (relating to no
adjustment in the cases of certain overpayments).
``(2) Limitation on recoupment.--
``(A) In general.--In the case of a provider of
services or supplier that is determined to have
received an overpayment under this title and that seeks
a reconsideration by a qualified independent contractor
on such determination under section 1869(b)(1), the
Secretary may not take any action (or authorize any
other person, including any medicare contractor, as
defined in subparagraph (C)) to recoup the overpayment
until the date the decision on the reconsideration has
been rendered. If the provisions of section 1869(b)(1)
(providing for such a reconsideration by a qualified independent
contractor) are not in effect, in applying the previous sentence any
reference to such a reconsideration shall be treated as a reference to
a redetermination by the fiscal intermediary or carrier involved.
``(B) Collection with interest.--Insofar as the
determination on such appeal is against the provider of
services or supplier, interest on the overpayment shall
accrue on and after the date of the original notice of
overpayment. Insofar as such determination against the
provider of services or supplier is later reversed, the
Secretary shall provide for repayment of the amount
recouped plus interest at the same rate as would apply
under the previous sentence for the period in which the
amount was recouped.
``(C) Medicare contractor defined.--For purposes of
this subsection, the term `medicare contractor' has the
meaning given such term in section 1889(g).
``(3) Limitation on use of extrapolation.--A medicare
contractor may not use extrapolation to determine overpayment
amounts to be recovered by recoupment, offset, or otherwise
unless the Secretary determines that--
``(A) there is a sustained or high level of payment
error; or
``(B) documented educational intervention has
failed to correct the payment error.
There shall be no administrative or judicial review under section 1869,
section 1878, or otherwise, of determinations by the Secretary of
sustained or high levels of payment errors under this paragraph.
``(4) Provision of supporting documentation.--In the case
of a provider of services or supplier with respect to which
amounts were previously overpaid, a medicare contractor may
request the periodic production of records or supporting
documentation for a limited sample of submitted claims to
ensure that the previous practice is not continuing.
``(5) Consent settlement reforms.--
``(A) In general.--The Secretary may use a consent
settlement (as defined in subparagraph (D)) to settle a
projected overpayment.
``(B) Opportunity to submit additional information
before consent settlement offer.--Before offering a
provider of services or supplier a consent settlement,
the Secretary shall--
``(i) communicate to the provider of
services or supplier--
``(I) that, based on a review of
the medical records requested by the
Secretary, a preliminary evaluation of
those records indicates that there
would be an overpayment;
``(II) the nature of the problems
identified in such evaluation; and
``(III) the steps that the provider
of services or supplier should take to
address the problems; and
``(ii) provide for a 45-day period during
which the provider of services or supplier may
furnish additional information concerning the
medical records for the claims that had been
reviewed.
``(C) Consent settlement offer.--The Secretary
shall review any additional information furnished by
the provider of services or supplier under subparagraph
(B)(ii). Taking into consideration such information,
the Secretary shall determine if there still appears to
be an overpayment. If so, the Secretary--
``(i) shall provide notice of such
determination to the provider of services or
supplier, including an explanation of the
reason for such determination; and
``(ii) in order to resolve the overpayment,
may offer the provider of services or
supplier--
``(I) the opportunity for a
statistically valid random sample; or
``(II) a consent settlement.
The opportunity provided under clause (ii)(I) does not
waive any appeal rights with respect to the alleged
overpayment involved.
``(D) Consent settlement defined.--For purposes of
this paragraph, the term `consent settlement' means an
agreement between the Secretary and a provider of
services or supplier whereby both parties agree to
settle a projected overpayment based on less than a
statistically valid sample of claims and the provider
of services or supplier agrees not to appeal the claims
involved.
``(6) Notice of over-utilization of codes.--The Secretary
shall establish, in consultation with organizations
representing the classes of providers of services and
suppliers, a process under which the Secretary provides for
notice to classes of providers of services and suppliers served
by the contractor in cases in which the contractor has
identified that particular billing codes may be overutilized by
that class of providers of services or suppliers under the
programs under this title (or provisions of title XI insofar as
they relate to such programs).
``(7) Payment audits.--
``(A) Written notice for post-payment audits.--
Subject to subparagraph (C), if a medicare contractor
decides to conduct a post-payment audit of a provider
of services or supplier under this title, the
contractor shall provide the provider of services or
supplier with written notice (which may be in
electronic form) of the intent to conduct such an
audit.
``(B) Explanation of findings for all audits.--
Subject to subparagraph (C), if a medicare contractor
audits a provider of services or supplier under this
title, the contractor shall--
``(i) give the provider of services or
supplier a full review and explanation of the
findings of the audit in a manner that is
understandable to the provider of services or
supplier and permits the development of an
appropriate corrective action plan;
``(ii) inform the provider of services or
supplier of the appeal rights under this title
as well as consent settlement options (which
are at the discretion of the Secretary);
``(iii) give the provider of services or
supplier an opportunity to provide additional
information to the contractor; and
``(iv) take into account information
provided, on a timely basis, by the provider of
services or supplier under clause (iii).
``(C) Exception.--Subparagraphs (A) and (B) shall
not apply if the provision of notice or findings would
compromise pending law enforcement activities, whether
civil or criminal, or reveal findings of law
enforcement-related audits.
``(8) Standard methodology for probe sampling.--The
Secretary shall establish a standard methodology for medicare
contractors to use in selecting a sample of claims for review
in the case of an abnormal billing pattern.''.
(b) Effective Dates and Deadlines.--
(1) Use of repayment plans.--Section 1893(f)(1) of the
Social Security Act, as added by subsection (a), shall apply to
requests for repayment plans made after the date of the
enactment of this Act.
(2) Limitation on recoupment.--Section 1893(f)(2) of the
Social Security Act, as added by subsection (a), shall apply to
actions taken after the date of the enactment of this Act.
(3) Use of extrapolation.--Section 1893(f)(3) of the Social
Security Act, as added by subsection (a), shall apply to
statistically valid random samples initiated after the date
that is 1 year after the date of the enactment of this Act.
(4) Provision of supporting documentation.--Section
1893(f)(4) of the Social Security Act, as added by subsection
(a), shall take effect on the date of the enactment of this
Act.
(5) Consent settlement.--Section 1893(f)(5) of the Social
Security Act, as added by subsection (a), shall apply to
consent settlements entered into after the date of the
enactment of this Act.
(6) Notice of overutilization.--Not later than 1 year after
the date of the enactment of this Act, the Secretary shall
first establish the process for notice of overutilization of
billing codes under section 1893A(f)(6) of the Social Security
Act, as added by subsection (a).
(7) Payment audits.--Section 1893A(f)(7) of the Social
Security Act, as added by subsection (a), shall apply to audits
initiated after the date of the enactment of this Act.
(8) Standard for abnormal billing patterns.--Not later than
1 year after the date of the enactment of this Act, the
Secretary shall first establish a standard methodology for
selection of sample claims for abnormal billing patterns under
section 1893(f)(8) of the Social Security Act, as added by
subsection (a).

SEC. 536. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.

(a) In General.--Section 1866 (42 U.S.C. 1395cc) is amended--
(1) by adding at the end of the heading the following: ``;
enrollment processes''; and
(2) by adding at the end the following new subsection:
``(j) Enrollment Process for Providers of Services and Suppliers.--
``(1) Enrollment process.--
``(A) In general.--The Secretary shall establish by
regulation a process for the enrollment of providers of
services and suppliers under this title.
``(B) Deadlines.--The Secretary shall establish by
regulation procedures under which there are deadlines
for actions on applications for enrollment (and, if
applicable, renewal of enrollment). The Secretary shall
monitor the performance of medicare administrative
contractors in meeting the deadlines established under
this subparagraph.
``(C) Consultation before changing provider
enrollment forms.--The Secretary shall consult with
providers of services and suppliers before making
changes in the provider enrollment forms required of
such providers and suppliers to be eligible to submit
claims for which payment may be made under this title.
``(2) Hearing rights in cases of denial or non-renewal.--A
provider of services or supplier whose application to enroll
(or, if applicable, to renew enrollment) under this title is
denied may have a hearing and judicial review of such denial
under the procedures that apply under subsection (h)(1)(A) to a
provider of services that is dissatisfied with a determination
by the Secretary.''.
(b) Effective Dates.--
(1) Enrollment process.--The Secretary shall provide for
the establishment of the enrollment process under section
1866(j)(1) of the Social Security Act, as added by subsection
(a)(2), within 6 months after the date of the enactment of this
Act.
(2) Consultation.--Section 1866(j)(1)(C) of the Social
Security Act, as added by subsection (a)(2), shall apply with
respect to changes in provider enrollment forms made on or
after January 1, 2004.
(3) Hearing rights.--Section 1866(j)(2) of the Social
Security Act, as added by subsection (a)(2), shall apply to
denials occurring on or after such date (not later than 1 year
after the date of the enactment of this Act) as the Secretary
specifies.

SEC. 537. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS WITHOUT
PURSUING APPEALS PROCESS.

(a) Claims.--The Secretary shall develop, in consultation with
appropriate medicare contractors (as defined in section 1889(g) of the
Social Security Act, as inserted by section 301(a)(1)) and
representatives of providers of services and suppliers, a process
whereby, in the case of minor errors or omissions (as defined by the
Secretary) that are detected in the submission of claims under the
programs under title XVIII of such Act, a provider of services or
supplier is given an opportunity to correct such an error or omission
without the need to initiate an appeal. Such process shall include the
ability to resubmit corrected claims.
(b) Deadline.--Not later than 1 year after the date of the
enactment of this Act, the Secretary shall first develop the process
under subsection (a).

SEC. 538. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND SERVICES;
ADVANCE BENEFICIARY NOTICES.

(a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as amended by
section 533(d)(2)(B), is further amended by adding at the end the
following new subsection:
``(h) Prior Determination Process for Certain Items and Services.--
``(1) Establishment of process.--
``(A) In general.--With respect to a medicare
administrative contractor that has a contract under
section 1874A that provides for making payments under
this title with respect to physicians' services (as
defined in section 1848(j)(3)), the Secretary shall
establish a prior determination process that meets the
requirements of this subsection and that shall be
applied by such contractor in the case of eligible
requesters.
``(B) Eligible requester.--For purposes of this
subsection, each of the following shall be an eligible
requester:
``(i) A participating physician, but only
with respect to physicians' services to be
furnished to an individual who is entitled to
benefits under this title and who has consented
to the physician making the request under this
subsection for those physicians' services.
``(ii) An individual entitled to benefits
under this title, but only with respect to a
physicians' service for which the individual
receives, from a physician, an advance
beneficiary notice under section 1879(a).
``(2) Secretarial flexibility.--The Secretary shall
establish by regulation reasonable limits on the physicians'
services for which a prior determination of coverage may be
requested under this subsection. In establishing such limits,
the Secretary may consider the dollar amount involved with
respect to the physicians' service, administrative costs and
burdens, and other relevant factors.
``(3) Request for prior determination.--
``(A) In general.--Subject to paragraph (2), under
the process established under this subsection an
eligible requester may submit to the contractor a
request for a determination, before the furnishing of a
physicians' service, as to whether the physicians'
service is covered under this title consistent with the
applicable requirements of section 1862(a)(1)(A)
(relating to medical necessity).
``(B) Accompanying documentation.--The Secretary
may require that the request be accompanied by a
description of the physicians' service, supporting
documentation relating to the medical necessity for the
physicians' service, and any other appropriate
documentation. In the case of a request submitted by an
eligible requester who is described in paragraph
(1)(B)(ii), the Secretary may require that the request
also be accompanied by a copy of the advance
beneficiary notice involved.
``(4) Response to request.--
``(A) In general.--Under such process, the
contractor shall provide the eligible requester with
written notice of a determination as to whether--
``(i) the physicians' service is so
covered;
``(ii) the physicians' service is not so
covered; or
``(iii) the contractor lacks sufficient
information to make a coverage determination
with respect to the physicians' service.
``(B) Contents of notice for certain
determinations.--
``(i) Noncoverage.--If the contractor makes
the determination described in subparagraph
(A)(ii), the contractor shall include in the
notice a brief explanation of the basis for the
determination, including on what national or
local coverage or noncoverage determination (if
any) the determination is based, and a
description of any applicable rights under
subsection (a).
``(ii) Insufficient information.--If the
contractor makes the determination described in
subparagraph (A)(iii), the contractor shall
include in the notice a description of the
additional information required to make the
coverage determination.
``(C) Deadline to respond.--Such notice shall be
provided within the same time period as the time period
applicable to the contractor providing notice of
initial determinations on a claim for benefits under
subsection (a)(2)(A).
``(D) Informing beneficiary in case of physician
request.--In the case of a request by a participating
physician under paragraph (1)(B)(i), the process shall
provide that the individual to whom the physicians' service is proposed
to be furnished shall be informed of any determination described in
subparagraph (A)(ii) (relating to a determination of non-coverage) and
the right (referred to in paragraph (6)(B)) to obtain the physicians'
service and have a claim submitted for the physicians' service.
``(5) Binding nature of positive determination.--If the
contractor makes the determination described in paragraph
(4)(A)(i), such determination shall be binding on the
contractor in the absence of fraud or evidence of
misrepresentation of facts presented to the contractor.
``(6) Limitation on further review.--
``(A) In general.--Contractor determinations
described in paragraph (4)(A)(ii) or (4)(A)(iii)
(relating to pre-service claims) are not subject to
further administrative appeal or judicial review under
this section or otherwise.
``(B) Decision not to seek prior determination or
negative determination does not impact right to obtain
services, seek reimbursement, or appeal rights.--
Nothing in this subsection shall be construed as
affecting the right of an individual who--
``(i) decides not to seek a prior
determination under this subsection with
respect to physicians' services; or
``(ii) seeks such a determination and has
received a determination described in paragraph
(4)(A)(ii),
from receiving (and submitting a claim for) such
physicians' services and from obtaining administrative
or judicial review respecting such claim under the
other applicable provisions of this section. Failure to
seek a prior determination under this subsection with
respect to physicians' service shall not be taken into
account in such administrative or judicial review.
``(C) No prior determination after receipt of
services.--Once an individual is provided physicians'
services, there shall be no prior determination under
this subsection with respect to such physicians'
services.''.
(b) Effective Date; Sunset; Transition.--
(1) Effective date.--The Secretary shall establish the
prior determination process under the amendment made by
subsection (a) in such a manner as to provide for the
acceptance of requests for determinations under such process
filed not later than 18 months after the date of the enactment
of this Act.
(2) Sunset.--Such prior determination process shall not
apply to requests filed after the end of the 5-year period
beginning on the first date on which requests for
determinations under such process are accepted.
(3) Transition.--During the period in which the amendment
made by subsection (a) has become effective but contracts are
not provided under section 1874A of the Social Security Act
with medicare administrative contractors, any reference in
section 1869(g) of such Act (as added by such amendment) to
such a contractor is deemed a reference to a fiscal
intermediary or carrier with an agreement under section 1816,
or contract under section 1842, respectively, of such Act.
(4) Limitation on application to sgr.--For purposes of
applying section 1848(f)(2)(D) of the Social Security Act (42
U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection (a)
shall not be considered to be a change in law or regulation.
(c) Provisions Relating to Advance Beneficiary Notices; Report on
Prior Determination Process.--
(1) Data collection.--The Secretary shall establish a
process for the collection of information on the instances in
which an advance beneficiary notice (as defined in paragraph
(5)) has been provided and on instances in which a beneficiary
indicates on such a notice that the beneficiary does not intend
to seek to have the item or service that is the subject of the
notice furnished.
(2) Outreach and education.--The Secretary shall establish
a program of outreach and education for beneficiaries and
providers of services and other persons on the appropriate use
of advance beneficiary notices and coverage policies under the
medicare program.
(3) GAO report on use of advance beneficiary notices.--Not
later than 18 months after the date on which section 1869(h) of
the Social Security Act (as added by subsection (a)) takes
effect, the Comptroller General of the United States shall
submit to Congress a report on the use of advance beneficiary
notices under title XVIII of such Act. Such report shall
include information concerning the providers of services and
other persons that have provided such notices and the response
of beneficiaries to such notices.
(4) GAO report on use of prior determination process.--Not
later than 36 months after the date on which section 1869(h) of
the Social Security Act (as added by subsection (a)) takes
effect, the Comptroller General of the United States shall
submit to Congress a report on the use of the prior
determination process under such section. Such report shall
include--
(A) information concerning--
(i) the number and types of procedures for
which a prior determination has been sought;
(ii) determinations made under the process;
(iii) the percentage of beneficiaries
prevailing;
(iv) in those cases in which the
beneficiaries do not prevail, the reasons why
such beneficiaries did not prevail; and
(v) changes in receipt of services
resulting from the application of such process;
(B) an evaluation of whether the process was useful
for physicians (and other suppliers) and beneficiaries,
whether it was timely, and whether the amount of
information required was burdensome to physicians and beneficiaries;
and
(C) recommendations for improvements or
continuation of such process.
(5) Advance beneficiary notice defined.--In this
subsection, the term ``advance beneficiary notice'' means a
written notice provided under section 1879(a) of the Social
Security Act (42 U.S.C. 1395pp(a)) to an individual entitled to
benefits under part A or enrolled under part B of title XVIII
of such Act before items or services are furnished under such
part in cases where a provider of services or other person that
would furnish the item or service believes that payment will
not be made for some or all of such items or services under
such title.

SEC. 539. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY AVAILABLE.

(a) In General.--Section 1870 (42 U.S.C. 1395gg) is amended by
adding at the end the following new subsection:
``(h) Notwithstanding subsection (f) or any other provision of law,
the Secretary shall permit a provider of services or supplier to appeal
any determination of the Secretary under this title relating to
services rendered under this title to an individual who subsequently
dies if there is no other party available to appeal such
determination.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act and shall apply to
items and services furnished on or after such date.

SEC. 540. REVISIONS TO APPEALS TIMEFRAMES AND AMOUNTS.

(a) Timeframes.--Section 1869 (42 U.S.C. 1395ff) is amended--
(1) in subsection (a)(3)(C)(ii), by striking ``30-day
period'' each place it appears and inserting ``60-day period'';
and
(2) in subsection (c)(3)(C)(i), by striking ``30-day
period'' and inserting ``60-day period''.
(b) Amounts.--
(1) In general.--Section 1869(b)(1)(E) (42 U.S.C.
1395ff(b)(1)(E)) is amended by adding at the end the following
new clause:
``(iii) Adjustment of dollar amounts.--For
requests for hearings or judicial review made
in a year after 2004, the dollar amounts
specified in clause (i) shall be equal to such
dollar amounts increased by the percentage
increase in the medical care component of the
consumer price index for all urban consumers
(U.S. city average) for July 2003 to the July
preceding the year involved. Any amount
determined under the previous sentence that is
not a multiple of $10 shall be rounded to the
nearest multiple of $10.''.
(2) Conforming amendments.--(A) Section 1852(g)(5) (42
U.S.C. 1395w-22(g)(5)) is amended by adding at the end the
following: ``The provisions of section 1869(b)(1)(E)(iii) shall
apply with respect to dollar amounts specified in the first 2
sentences of this paragraph in the same manner as they apply to
the dollar amounts specified in section 1869(b)(1)(E)(i).''.
(B) Section 1876(b)(5)(B) (42 U.S.C. 1395mm(b)(5)(B)) is
amended by adding at the end the following: ``The provisions of
section 1869(b)(1)(E)(iii) shall apply with respect to dollar
amounts specified in the first 2 sentences of this subparagraph
in the same manner as they apply to the dollar amounts
specified in section 1869(b)(1)(E)(i).''.

SEC. 540A. MEDIATION PROCESS FOR LOCAL COVERAGE DETERMINATIONS.

(a) In General.--Section 1869 (42 U.S.C. 1395ff), as amended by
section 538(a), is amended by adding at the end the following new
subsection:
``(i) Mediation Process for Local Coverage Determinations.--
``(1) Establishment of process.--The Secretary shall
establish a mediation process under this subsection through the
use of a physician trained in mediation and employed by the
Centers for Medicare & Medicaid Services.
``(2) Responsibility of mediator.--Under the process
established in paragraph (1), such a mediator shall mediate in
disputes between groups representing providers of services,
suppliers (as defined in section 1861(d)), and the medical
director for a medicare administrative contractor whenever the
regional administrator (as defined by the Secretary) involved
determines that there was a systematic pattern and a large
volume of complaints from such groups regarding decisions of
such director or there is a complaint from the co-chair of the
advisory committee for that contractor to such regional
administrator regarding such dispute.''.
(b) Inclusion in MAC Contracts.--Section 1874A(b)(3)(A)(i), as
added by section 511(a)(1), is amended by adding at the end the
following: ``Such requirements shall include specific performance
duties expected of a medical director of a medicare administrative
contractor, including requirements relating to professional relations
and the availability of such director to conduct medical determination
activities within the jurisdiction of such a contractor.''.

Subtitle E--Miscellaneous Provisions

SEC. 541. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E &
M) DOCUMENTATION GUIDELINES.

(a) In General.--The Secretary may not implement any new or
modified documentation guidelines (which for purposes of this section
includes clinical examples) for evaluation and management physician
services under the title XVIII of the Social Security Act on or after
the date of the enactment of this Act unless the Secretary--
(1) has developed the guidelines in collaboration with
practicing physicians (including both generalists and
specialists) and provided for an assessment of the proposed
guidelines by the physician community;
(2) has established a plan that contains specific goals,
including a schedule, for improving the use of such guidelines;
(3) has conducted appropriate and representative pilot
projects under subsection (b) to test such guidelines;
(4) finds, based on reports submitted under subsection
(b)(5) with respect to pilot projects conducted for such or
related guidelines, that the objectives described in subsection
(c) will be met in the implementation of such guidelines; and
(5) has established, and is implementing, a program to
educate physicians on the use of such guidelines and that
includes appropriate outreach.
The Secretary shall make changes to the manner in which existing
evaluation and management documentation guidelines are implemented to
reduce paperwork burdens on physicians.
(b) Pilot Projects To Test Modified or New Evaluation and
Management Documentation Guidelines.--
(1) In general.--With respect to proposed new or modified
documentation guidelines referred to in subsection (a), the
Secretary shall conduct under this subsection appropriate and
representative pilot projects to test the proposed guidelines.
(2) Length and consultation.--Each pilot project under this
subsection shall--
(A) be voluntary;
(B) be of sufficient length as determined by the
Secretary (but in no case to exceed 1 year) to allow
for preparatory physician and medicare contractor
education, analysis, and use and assessment of
potential evaluation and management guidelines; and
(C) be conducted, in development and throughout the
planning and operational stages of the project, in
consultation with practicing physicians (including both
generalists and specialists).
(3) Range of pilot projects.--Of the pilot projects
conducted under this subsection with respect to proposed new or
modified documentation guidelines--
(A) at least one shall focus on a peer review
method by physicians (not employed by a medicare
contractor) which evaluates medical record information
for claims submitted by physicians identified as
statistical outliers relative to codes used for billing
purposes for such services;
(B) at least one shall focus on an alternative
method to detailed guidelines based on physician
documentation of face to face encounter time with a
patient;
(C) at least one shall be conducted for services
furnished in a rural area and at least one for services
furnished outside such an area; and
(D) at least one shall be conducted in a setting
where physicians bill under physicians' services in
teaching settings and at least one shall be conducted
in a setting other than a teaching setting.
(4) Study of impact.--Each pilot project shall examine the
effect of the proposed guidelines on--
(A) different types of physician practices,
including those with fewer than 10 full-time-equivalent
employees (including physicians); and
(B) the costs of physician compliance, including
education, implementation, auditing, and monitoring.
(5) Report on pilot projects.--Not later than 6 months
after the date of completion of pilot projects carried out
under this subsection with respect to a proposed guideline
described in paragraph (1), the Secretary shall submit to
Congress a report on the pilot projects. Each such report shall
include a finding by the Secretary of whether the objectives
described in subsection (c) will be met in the implementation
of such proposed guideline.
(c) Objectives for Evaluation and Management Guidelines.--The
objectives for modified evaluation and management documentation
guidelines developed by the Secretary shall be to--
(1) identify clinically relevant documentation needed to
code accurately and assess coding levels accurately;
(2) decrease the level of non-clinically pertinent and
burdensome documentation time and content in the physician's
medical record;
(3) increase accuracy by reviewers; and
(4) educate both physicians and reviewers.
(d) Study of Simpler, Alternative Systems of Documentation for
Physician Claims.--
(1) Study.--The Secretary shall carry out a study of the
matters described in paragraph (2).
(2) Matters described.--The matters referred to in
paragraph (1) are--
(A) the development of a simpler, alternative
system of requirements for documentation accompanying
claims for evaluation and management physician services
for which payment is made under title XVIII of the
Social Security Act; and
(B) consideration of systems other than current
coding and documentation requirements for payment for
such physician services.
(3) Consultation with practicing physicians.--In designing
and carrying out the study under paragraph (1), the Secretary
shall consult with practicing physicians, including physicians
who are part of group practices and including both generalists
and specialists.
(4) Application of hipaa uniform coding requirements.--In
developing an alternative system under paragraph (2), the
Secretary shall consider requirements of administrative
simplification under part C of title XI of the Social Security
Act.
(5) Report to congress.--(A) Not later than October 1,
2005, the Secretary shall submit to Congress a report on the
results of the study conducted under paragraph (1).
(B) The Medicare Payment Advisory Commission shall conduct
an analysis of the results of the study included in the report
under subparagraph (A) and shall submit a report on such
analysis to Congress.
(e) Study on Appropriate Coding of Certain Extended Office
Visits.--The Secretary shall conduct a study of the appropriateness of
coding in cases of extended office visits in which there is no
diagnosis made. Not later than October 1, 2005, the Secretary shall
submit a report to Congress on such study and shall include
recommendations on how to code appropriately for such visits in a
manner that takes into account the amount of time the physician spent
with the patient.
(f) Definitions.--In this section--
(1) the term ``rural area'' has the meaning given that term
in section 1886(d)(2)(D) of the Social Security Act (42 U.S.C.
1395ww(d)(2)(D)); and
(2) the term ``teaching settings'' are those settings
described in section 415.150 of title 42, Code of Federal
Regulations.

SEC. 542. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.

(a) Council for Technology and Innovation.--Section 1868 (42 U.S.C.
1395ee), as amended by section 521(a), is amended by adding at the end
the following new subsection:
``(c) Council for Technology and Innovation.--
``(1) Establishment.--The Secretary shall establish a
Council for Technology and Innovation within the Centers for
Medicare & Medicaid Services (in this section referred to as
`CMS').
``(2) Composition.--The Council shall be composed of senior
CMS staff and clinicians and shall be chaired by the Executive
Coordinator for Technology and Innovation (appointed or
designated under paragraph (4)).
``(3) Duties.--The Council shall coordinate the activities
of coverage, coding, and payment processes under this title
with respect to new technologies and procedures, including new
drug therapies, and shall coordinate the exchange of
information on new technologies between CMS and other entities
that make similar decisions.
``(4) Executive coordinator for technology and
innovation.--The Secretary shall appoint (or designate) a
noncareer appointee (as defined in section 3132(a)(7) of title
5, United States Code) who shall serve as the Executive
Coordinator for Technology and Innovation. Such executive
coordinator shall report to the Administrator of CMS, shall
chair the Council, shall oversee the execution of its duties,
and shall serve as a single point of contact for outside groups
and entities regarding the coverage, coding, and payment
processes under this title.''.
(b) Methods for Determining Payment Basis for New Lab Tests.--
Section 1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end
the following:
``(8)(A) The Secretary shall establish by regulation procedures for
determining the basis for, and amount of, payment under this subsection
for any clinical diagnostic laboratory test with respect to which a new
or substantially revised HCPCS code is assigned on or after January 1,
2005 (in this paragraph referred to as `new tests').
``(B) Determinations under subparagraph (A) shall be made only
after the Secretary--
``(i) makes available to the public (through an Internet
website and other appropriate mechanisms) a list that includes
any such test for which establishment of a payment amount under
this subsection is being considered for a year;
``(ii) on the same day such list is made available, causes
to have published in the Federal Register notice of a meeting
to receive comments and recommendations (and data on which
recommendations are based) from the public on the appropriate
basis under this subsection for establishing payment amounts
for the tests on such list;
``(iii) not less than 30 days after publication of such
notice convenes a meeting, that includes representatives of
officials of the Centers for Medicare & Medicaid Services
involved in determining payment amounts, to receive such
comments and recommendations (and data on which the
recommendations are based);
``(iv) taking into account the comments and recommendations
(and accompanying data) received at such meeting, develops and
makes available to the public (through an Internet website and
other appropriate mechanisms) a list of proposed determinations
with respect to the appropriate basis for establishing a
payment amount under this subsection for each such code,
together with an explanation of the reasons for each such
determination, the data on which the determinations are based,
and a request for public written comments on the proposed
determination; and
``(v) taking into account the comments received during the
public comment period, develops and makes available to the
public (through an Internet website and other appropriate
mechanisms) a list of final determinations of the payment
amounts for such tests under this subsection, together with the
rationale for each such determination, the data on which the
determinations are based, and responses to comments and
suggestions received from the public.
``(C) Under the procedures established pursuant to subparagraph
(A), the Secretary shall--
``(i) set forth the criteria for making determinations
under subparagraph (A); and
``(ii) make available to the public the data (other than
proprietary data) considered in making such determinations.
``(D) The Secretary may convene such further public meetings to
receive public comments on payment amounts for new tests under this
subsection as the Secretary deems appropriate.
``(E) For purposes of this paragraph:
``(i) The term `HCPCS' refers to the Health Care Procedure
Coding System.
``(ii) A code shall be considered to be `substantially
revised' if there is a substantive change to the definition
of the test or procedure to which the code applies (such as a new
analyte or a new methodology for measuring an existing analyte-specific
test).''.
(c) GAO Study on Improvements in External Data Collection for Use
in the Medicare Inpatient Payment System.--
(1) Study.--The Comptroller General of the United States
shall conduct a study that analyzes which external data can be
collected in a shorter timeframe by the Centers for Medicare &
Medicaid Services for use in computing payments for inpatient
hospital services. The study may include an evaluation of the
feasibility and appropriateness of using quarterly samples or
special surveys or any other methods. The study shall include
an analysis of whether other executive agencies, such as the
Bureau of Labor Statistics in the Department of Commerce, are
best suited to collect this information.
(2) Report.--By not later than October 1, 2004, the
Comptroller General shall submit a report to Congress on the
study under paragraph (1).

SEC. 543. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER MEDICARE
SECONDARY PAYOR (MSP) PROVISIONS.

(a) In General.--The Secretary shall not require a hospital
(including a critical access hospital) to ask questions (or obtain
information) relating to the application of section 1862(b) of the
Social Security Act (relating to medicare secondary payor provisions)
in the case of reference laboratory services described in subsection
(b), if the Secretary does not impose such requirement in the case of
such services furnished by an independent laboratory.
(b) Reference Laboratory Services Described.--Reference laboratory
services described in this subsection are clinical laboratory
diagnostic tests (or the interpretation of such tests, or both)
furnished without a face-to-face encounter between the individual
entitled to benefits under part A or enrolled under part B, or both,
and the hospital involved and in which the hospital submits a claim
only for such test or interpretation.

SEC. 544. EMTALA IMPROVEMENTS.

(a) Payment for EMTALA-Mandated Screening and Stabilization
Services.--
(1) In general.--Section 1862 (42 U.S.C. 1395y) is amended
by inserting after subsection (c) the following new subsection:
``(d) For purposes of subsection (a)(1)(A), in the case of any item
or service that is required to be provided pursuant to section 1867 to
an individual who is entitled to benefits under this title,
determinations as to whether the item or service is reasonable and
necessary shall be made on the basis of the information available to
the treating physician or practitioner (including the patient's
presenting symptoms or complaint) at the time the item or service was
ordered or furnished by the physician or practitioner (and not on the
patient's principal diagnosis). When making such determinations with
respect to such an item or service, the Secretary shall not consider
the frequency with which the item or service was provided to the
patient before or after the time of the admission or visit.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to items and services furnished on or after January
1, 2004.
(b) Notification of Providers When EMTALA Investigation Closed.--
Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is amended by adding at
the end the following new paragraph:
``(4) Notice upon closing an investigation.--The Secretary
shall establish a procedure to notify hospitals and physicians
when an investigation under this section is closed.''.
(c) Prior Review by Peer Review Organizations in EMTALA Cases
Involving Termination of Participation.--
(1) In general.--Section 1867(d)(3) (42 U.S.C.
1395dd(d)(3)) is amended--
(A) in the first sentence, by inserting ``or in
terminating a hospital's participation under this
title'' after ``in imposing sanctions under paragraph
(1)''; and
(B) by adding at the end the following new
sentences: ``Except in the case in which a delay would
jeopardize the health or safety of individuals, the
Secretary shall also request such a review before
making a compliance determination as part of the
process of terminating a hospital's participation under
this title for violations related to the
appropriateness of a medical screening examination,
stabilizing treatment, or an appropriate transfer as
required by this section, and shall provide a period of
5 days for such review. The Secretary shall provide a
copy of the organization's report to the hospital or
physician consistent with confidentiality requirements
imposed on the organization under such part B.''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to terminations of participation initiated on or
after the date of the enactment of this Act.

SEC. 545. EMERGENCY MEDICAL TREATMENT AND LABOR ACT (EMTALA) TECHNICAL
ADVISORY GROUP.

(a) Establishment.--The Secretary shall establish a Technical
Advisory Group (in this section referred to as the ``Advisory Group'')
to review issues related to the Emergency Medical Treatment and Labor
Act (EMTALA) and its implementation. In this section, the term
``EMTALA'' refers to the provisions of section 1867 of the Social
Security Act (42 U.S.C. 1395dd).
(b) Membership.--The Advisory Group shall be composed of 19
members, including the Administrator of the Centers for Medicare &
Medicaid Services and the Inspector General of the Department of Health
and Human Services and of which--
(1) 4 shall be representatives of hospitals, including at
least one public hospital, that have experience with
the application of EMTALA and at least 2 of which have not been cited
for EMTALA violations;
(2) 7 shall be practicing physicians drawn from the fields
of emergency medicine, cardiology or cardiothoracic surgery,
orthopedic surgery, neurosurgery, pediatrics or a pediatric
subspecialty, obstetrics-gynecology, and psychiatry, with not
more than one physician from any particular field;
(3) 2 shall represent patients;
(4) 2 shall be staff involved in EMTALA investigations from
different regional offices of the Centers for Medicare &
Medicaid Services; and
(5) 1 shall be from a State survey office involved in
EMTALA investigations and 1 shall be from a peer review
organization, both of whom shall be from areas other than the
regions represented under paragraph (4).
In selecting members described in paragraphs (1) through (3), the
Secretary shall consider qualified individuals nominated by
organizations representing providers and patients.
(c) General Responsibilities.--The Advisory Group--
(1) shall review EMTALA regulations;
(2) may provide advice and recommendations to the Secretary
with respect to those regulations and their application to
hospitals and physicians;
(3) shall solicit comments and recommendations from
hospitals, physicians, and the public regarding the
implementation of such regulations; and
(4) may disseminate information on the application of such
regulations to hospitals, physicians, and the public.
(d) Administrative Matters.--
(1) Chairperson.--The members of the Advisory Group shall
elect a member to serve as chairperson of the Advisory Group
for the life of the Advisory Group.
(2) Meetings.--The Advisory Group shall first meet at the
direction of the Secretary. The Advisory Group shall then meet
twice per year and at such other times as the Advisory Group
may provide.
(e) Termination.--The Advisory Group shall terminate 30 months
after the date of its first meeting.
(f) Waiver of Administrative Limitation.--The Secretary shall
establish the Advisory Group notwithstanding any limitation that may
apply to the number of advisory committees that may be established
(within the Department of Health and Human Services or otherwise).

SEC. 546. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE HOSPICE
SERVICES IN CERTAIN CIRCUMSTANCES.

(a) In General.--Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is
amended by adding at the end the following:
``(D) In extraordinary, exigent, or other non-routine
circumstances, such as unanticipated periods of high patient loads,
staffing shortages due to illness or other events, or temporary travel
of a patient outside a hospice program's service area, a hospice
program may enter into arrangements with another hospice program for
the provision by that other program of services described in paragraph
(2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II) shall apply
with respect to the services provided under such arrangements.
``(E) A hospice program may provide services described in paragraph
(1)(A) other than directly by the program if the services are highly
specialized services of a registered professional nurse and are
provided non-routinely and so infrequently so that the provision of
such services directly would be impracticable and prohibitively
expensive.''.
(b) Conforming Payment Provision.--Section 1814(i) (42 U.S.C.
1395f(i)), as amended by section 212(b), is amended by adding at the
end the following new paragraph:
``(5) In the case of hospice care provided by a hospice program
under arrangements under section 1861(dd)(5)(D) made by another hospice
program, the hospice program that made the arrangements shall bill and
be paid for the hospice care.''.
(c) Effective Date.--The amendments made by this section shall
apply to hospice care provided on or after the date of the enactment of
this Act.

SEC. 547. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD TO CERTAIN
HOSPITALS.

(a) In General.--Section 1866 (42 U.S.C. 1395cc), as amended by
section 206, is amended--
(1) in subsection (a)(1)--
(A) in subparagraph (T), by striking ``and'' at the
end;
(B) in subparagraph (U), by striking the period at
the end and inserting ``, and''; and
(C) by inserting after subparagraph (U) the
following new subparagraph:
``(V) in the case of hospitals that are not otherwise
subject to the Occupational Safety and Health Act of 1970 (or a
State occupational safety and health plan that is approved
under 18(b) of such Act), to comply with the Bloodborne
Pathogens standard under section 1910.1030 of title 29 of the
Code of Federal Regulations (or as subsequently
redesignated).''; and
(2) by adding at the end of subsection (b) the following
new paragraph:
``(4)(A) A hospital that fails to comply with the requirement of
subsection (a)(1)(V) (relating to the Bloodborne Pathogens standard) is
subject to a civil money penalty in an amount described in subparagraph
(B), but is not subject to termination of an agreement under this
section.
``(B) The amount referred to in subparagraph (A) is an amount that
is similar to the amount of civil penalties that may be imposed under
section 17 of the Occupational Safety and Health Act of 1970 for a
violation of the Bloodborne Pathogens standard referred to in
subsection (a)(1)(U) by a hospital that is subject to the provisions of
such Act.
``(C) A civil money penalty under this paragraph shall be imposed
and collected in the same manner as civil money penalties under
subsection (a) of section 1128A are imposed and collected under that
section.''.
(b) Effective Date.--The amendments made by this subsection (a)
shall apply to hospitals as of July 1, 2004.

SEC. 548. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.

(a) Technical Amendments Relating to Advisory Committee Under BIPA
Section 522.--(1) Subsection (i) of section 1114 (42 U.S.C. 1314)--
(A) is transferred to section 1862 and added at the end of
such section; and
(B) is redesignated as subsection (j).
(2) Section 1862 (42 U.S.C. 1395y) is amended--
(A) in the last sentence of subsection (a), by striking
``established under section 1114(f)''; and
(B) in subsection (j), as so transferred and redesignated--
(i) by striking ``under subsection (f)''; and
(ii) by striking ``section 1862(a)(1)'' and
inserting ``subsection (a)(1)''.
(b) Terminology Corrections.--(1) Section 1869(c)(3)(I)(ii) (42
U.S.C. 1395ff(c)(3)(I)(ii)) is amended--
(A) in subclause (III), by striking ``policy'' and
inserting ``determination''; and
(B) in subclause (IV), by striking ``medical review
policies'' and inserting ``coverage determinations''.
(2) Section 1852(a)(2)(C) (42 U.S.C. 1395w-22(a)(2)(C)) is amended
by striking ``policy'' and ``policy'' and inserting ``determination''
each place it appears and ``determination'', respectively.
(c) Reference Corrections.--Section 1869(f)(4) (42 U.S.C.
1395ff(f)(4)) is amended--
(1) in subparagraph (A)(iv), by striking ``subclause (I),
(II), or (III)'' and inserting ``clause (i), (ii), or (iii)'';
(2) in subparagraph (B), by striking ``clause (i)(IV)'' and
``clause (i)(III)'' and inserting ``subparagraph (A)(iv)'' and
``subparagraph (A)(iii)'', respectively; and
(3) in subparagraph (C), by striking ``clause (i)'',
``subclause (IV)'' and ``subparagraph (A)'' and inserting
``subparagraph (A)'', ``clause (iv)'' and ``paragraph (1)(A)'',
respectively each place it appears.
(d) Other Corrections.--Effective as if included in the enactment
of section 221(c) of BIPA, section 1154(e) (42 U.S.C. 1320c-3(e)) is
amended by striking paragraph (5).
(e) Effective Date.--Except as otherwise provided, the amendments
made by this section shall be effective as if included in the enactment
of BIPA.

SEC. 549. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

The first sentence of section 1128(c)(3)(B) (42 U.S.C. 1320a-
7(c)(3)(B)) is amended to read as follows: ``Subject to subparagraph
(G), in the case of an exclusion under subsection (a), the minimum
period of exclusion shall be not less than five years, except that,
upon the request of the administrator of a Federal health care program
(as defined in section 1128B(f)) who determines that the exclusion
would impose a hardship on individuals entitled to benefits under part
A of title XVIII or enrolled under part B of such title, or both, the
Secretary may, after consulting with the Inspector General of the
Department of Health and Human Services, waive the exclusion under
subsection (a)(1), (a)(3), or (a)(4) with respect to that program in
the case of an individual or entity that is the sole community
physician or sole source of essential specialized services in a
community.''.

SEC. 550. TREATMENT OF CERTAIN DENTAL CLAIMS.

(a) In General.--Section 1862 (42 U.S.C. 1395y) is amended by
adding at the end, after the subsection transferred and redesignated by
section 548(a), the following new subsection:
``(k)(1) Subject to paragraph (2), a group health plan (as defined
in subsection (a)(1)(A)(v)) providing supplemental or secondary
coverage to individuals also entitled to services under this title
shall not require a medicare claims determination under this title for
dental benefits specifically excluded under subsection (a)(12) as a
condition of making a claims determination for such benefits under the
group health plan.
``(2) A group health plan may require a claims determination under
this title in cases involving or appearing to involve inpatient dental
hospital services or dental services expressly covered under this title
pursuant to actions taken by the Secretary.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date that is 60 days after the date of the enactment
of this Act.

SEC. 551. FURNISHING HOSPITALS WITH INFORMATION TO COMPUTE DSH FORMULA.

Beginning not later than 1 year after the date of the enactment of
this Act, the Secretary shall arrange to furnish to subsection (d)
hospitals (as defined in section 1886(d)(1)(B) of the Social Security
Act, 42 U.S.C. 1395ww(d)(1)(B)) the data necessary for such hospitals
to compute the number of patient days used in computing the
disproportionate patient percentage under such section for that
hospital for the current cost reporting year. Such data shall also be
furnished to other hospitals which would qualify for additional
payments under part A of title XVIII of the Social Security Act on the
basis of such data.

SEC. 552. REVISIONS TO REASSIGNMENT PROVISIONS.

(a) In General.--Section 1842(b)(6)(A) (42 U.S.C. 1395u(b)(6)(A))
is amended by striking ``or (ii) (where the service was provided in a
hospital, critical access hospital, clinic, or other facility) to the
facility in which the service was provided if there is a contractual
arrangement between such physician or other person and such facility
under which such facility submits the bill for such service,'' and
inserting ``or (ii) where the service was provided under a contractual
arrangement between such physician or other person and an entity, to
the entity if, under the contractual arrangement, the entity submits
the bill for the service and the contractual arrangement meets such
program integrity and other safeguards as the Secretary may determine
to be appropriate,''.
(b) Conforming Amendment.--The second sentence of section
1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by striking ``except to
an employer or facility as described in clause (A)'' and inserting
``except to an employer or entity as described in subparagraph (A)''.
(c) Effective Date.--The amendments made by this section shall
apply to payments made on or after the date of the enactment of this
Act.

SEC. 553. OTHER PROVISIONS.

(a) GAO Reports on the Physician Compensation.--
(1) Sustainable growth rate and updates.--Not later than 6
months after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to
Congress a report on the appropriateness of the updates in the
conversion factor under subsection (d)(3) of section 1848 of
the Social Security Act (42 U.S.C. 1395w-4), including the
appropriateness of the sustainable growth rate formula under
subsection (f) of such section for 2002 and succeeding years.
Such report shall examine the stability and predictability of
such updates and rate and alternatives for the use of such rate
in the updates.
(2) Physician compensation generally.--Not later than 12
months after the date of the enactment of this Act, the
Comptroller General shall submit to Congress a report on all
aspects of physician compensation for services furnished under
title XVIII of the Social Security Act, and how those aspects
interact and the effect on appropriate compensation for
physician services. Such report shall review alternatives for
the physician fee schedule under section 1848 of such title (42
U.S.C. 1395w-4).
(b) Annual Publication of List of National Coverage
Determinations.--The Secretary shall provide, in an appropriate annual
publication available to the public, a list of national coverage
determinations made under title XVIII of the Social Security Act in the
previous year and information on how to get more information with
respect to such determinations.
(c) GAO Report on Flexibility in Applying Home Health Conditions of
Participation to Patients Who Are Not Medicare Beneficiaries.--Not
later than 6 months after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to Congress a
report on the implications if there were flexibility in the application
of the medicare conditions of participation for home health agencies
with respect to groups or types of patients who are not medicare
beneficiaries. The report shall include an analysis of the potential
impact of such flexible application on clinical operations and the
recipients of such services and an analysis of methods for monitoring
the quality of care provided to such recipients.
(d) OIG Report on Notices Relating to Use of Hospital Lifetime
Reserve Days.--Not later than 1 year after the date of the enactment of
this Act, the Inspector General of the Department of Health and Human
Services shall submit a report to Congress on--
(1) the extent to which hospitals provide notice to
medicare beneficiaries in accordance with applicable
requirements before they use the 60 lifetime reserve days
described in section 1812(a)(1) of the Social Security Act (42
U.S.C. 1395d(a)(1)); and
(2) the appropriateness and feasibility of hospitals
providing a notice to such beneficiaries before they completely
exhaust such lifetime reserve days.

TITLE VI--MEDICAID AND MISCELLANEOUS PROVISIONS

Subtitle A--Medicaid Provisions

SEC. 601. MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.

(a) Temporary Increase.--Section 1923(f)(3) (42 U.S.C. 1396r-
4(f)(3)) is amended--
(1) in subparagraph (A), by striking ``subparagraph (B)''
and inserting ``subparagraphs (B) and (C)''; and
(2) by adding at the end the following new subparagraphs:
``(C) Special, temporary increase in allotments on
a one-time, non-cumulative basis.--The DSH allotment
for any State (other than a State with a DSH allotment
determined under paragraph (5))--
``(i) for fiscal year 2004 is equal to 116
percent of the DSH allotment for the State for
fiscal year 2003 under this paragraph,
notwithstanding subparagraph (B); and
``(ii) for each succeeding fiscal year is
equal to the DSH allotment for the State for
fiscal year 2004 or, in the case of fiscal
years beginning with the fiscal year specified
in subparagraph (D) for that State, the DSH
allotment for the State for the previous fiscal
year increased by the percentage change in the
consumer price index for all urban consumers
(all items; U.S. city average), for the
previous fiscal year.
``(D) Fiscal year specified.--For purposes of
subparagraph (C)(ii), the fiscal year specified in this
subparagraph for a State is the first fiscal year for
which the Secretary estimates that the DSH allotment
for that State will equal (or no longer exceed) the DSH
allotment for that State under the law as in effect
before the date of the enactment of this
subparagraph.''.
(b) Increase in Floor for Treatment as a Low DSH State.--Section
1923(f)(5) (42 U.S.C. 1396r-4(f)(5)) is amended to read as follows:
``(5) Special rule for low dsh states.--In the case of a
State in which the total expenditures under the State plan
(including Federal and State shares) for disproportionate share
hospital adjustments under this section for fiscal year 2000,
as reported to the Administrator of the Centers for Medicare &
Medicaid Services as of August 31, 2003, is greater than 0 but
less than 3 percent of the State's total amount of expenditures
under the State plan for medical assistance during the fiscal
year, the DSH allotment for the State with respect to--
``(A) fiscal year 2004 shall be the DSH allotment
for the State for fiscal year 2003 increased by 16
percent;
``(B) each succeeding fiscal year before fiscal
year 2009 shall be the DSH allotment for the State for
the previous fiscal year increased by 16 percent; and
``(C) fiscal year 2009 and any subsequent fiscal
year, shall be the DSH allotment for the State for the
previous year subject to an increase for inflation as
provided in paragraph (3)(A).''.
(c) Allotment Adjustment.--Section 1923(f) (42 U.S.C. 1396r-4(f))
is amended--
(1) in paragraph (3)(A), by striking ``The DSH'' and
inserting ``Except as provided in paragraph (6), the DSH'';
(2) by redesignating paragraph (6) as paragraph (7); and
(3) by inserting after paragraph (5) the following:
``(6) Allotment adjustment.--Only with respect to fiscal
year 2004 or 2005, if a statewide waiver under section 1115 is
revoked or terminated before the end of either such fiscal year
and there is no DSH allotment for the State, the Secretary
shall--
``(A) permit the State whose waiver was revoked or
terminated to submit an amendment to its State plan
that would describe the methodology to be used by the
State (after the effective date of such revocation or
termination) to identify and make payments to
disproportionate share hospitals, including children's
hospitals and institutions for mental diseases or other
mental health facilities (other than State-owned
institutions or facilities), on the basis of the
proportion of patients served by such hospitals that
are low-income patients with special needs; and
``(B) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the
State for fiscal year 2004 or 2005 (or both) that would
not exceed the amount allowed under paragraph
(3)(B)(ii) and that does not result in greater
expenditures under this title than would have been made
if such waiver had not been revoked or terminated.
In determining the amount of an appropriate DSH allotment under
subparagraph (B) for a State, the Secretary shall take into
account the level of DSH expenditures for the State for the
fiscal year preceding the fiscal year in which the waiver
commenced.''.
(d) Increased Reporting and Other Requirements To Ensure the
Appropriate Use of Medicaid DSH Payment Adjustments.--Section 1923 (42
U.S.C. 1396r-4) is amended by adding at the end the following new
subsection:
``(j) Annual Reports and Other Requirements Regarding Payment
Adjustments.--With respect to fiscal year 2004 and each fiscal year
thereafter, the Secretary shall require a State, as a condition of
receiving a payment under section 1903(a)(1) with respect to a payment
adjustment made under this section, to do the following:
``(1) Report.--The State shall submit an annual report that
includes the following:
``(A) An identification of each disproportionate
share hospital that received a payment adjustment under
this section for the preceding fiscal year and the
amount of the payment adjustment made to such hospital
for the preceding fiscal year.
``(B) Such other information as the Secretary
determines necessary to ensure the appropriateness of
the payment adjustments made under this section for the
preceding fiscal year.
``(2) Independent certified audit.--The State shall
annually submit to the Secretary an independent certified audit
that verifies each of the following:
``(A) The extent to which hospitals in the State
have reduced their uncompensated care costs to reflect
the total amount of claimed expenditures made under
this section.
``(B) Payments under this section to hospitals that
comply with the requirements of subsection (g).
``(C) Only the uncompensated care costs of
providing inpatient hospital and outpatient hospital
services to individuals described in paragraph (1)(A)
of such subsection are included in the calculation of
the hospital-specific limits under such subsection.
``(D) The State included all payments under this
title, including supplemental payments, in the
calculation of such hospital-specific limits.
``(E) The State has separately documented and
retained a record of all of its costs under this title,
claimed expenditures under this title, uninsured costs
in determining payment adjustments under this section,
and any payments made on behalf of the uninsured from
payment adjustments under this section.''.
(e) Clarification Regarding Non-Regulation of Transfers.--
(1) In general.--Nothing in section 1903(w) of the Social
Security Act (42 U.S.C. 1396b(w)) shall be construed by the
Secretary as prohibiting a State's use of funds as the non-
Federal share of expenditures under title XIX of such Act where
such funds are transferred from or certified by a publicly-
owned regional medical center located in another State and
described in paragraph (2), so long as the Secretary determines
that such use of funds is proper and in the interest of the
program under title XIX.
(2) Center described.--A center described in this paragraph
is a publicly-owned regional medical center that--
(A) provides level 1 trauma and burn care services;
(B) provides level 3 neonatal care services;
(C) is obligated to serve all patients, regardless
of State of origin;
(D) is located within a Standard Metropolitan
Statistical Area (SMSA) that includes at least 3
States, including the States described in paragraph
(1);
(E) serves as a tertiary care provider for patients
residing within a 125 mile radius; and
(F) meets the criteria for a disproportionate share
hospital under section 1923 of such Act in at least one
State other than the one in which the center is
located.
(3) Effective period.--This subsection shall apply through
December 31, 2005.

SEC. 602. CLARIFICATION OF INCLUSION OF INPATIENT DRUG PRICES CHARGED
TO CERTAIN PUBLIC HOSPITALS IN THE BEST PRICE EXEMPTIONS
FOR THE MEDICAID DRUG REBATE PROGRAM.

(a) In General.--Section 1927(c)(1)(C)(i)(I) (42 U.S.C. 1396r-
8(c)(1)(C)(i)(I)) is amended by inserting before the semicolon the
following: ``(including inpatient prices charged to hospitals described
in section 340B(a)(4)(L) of the Public Health Service Act)''.
(b) Anti-Diversion Protection.--Section 1927(c)(1)(C) (42 U.S.C.
1396r-8(c)(1)(C)) is amended by adding at the end the following:
``(iii) Application of auditing and
recordkeeping requirements.--With respect to a
covered entity described in section
340B(a)(4)(L) of the Public Health Service Act,
any drug purchased for inpatient use shall be
subject to the auditing and recordkeeping
requirements described in section 340B(a)(5)(C)
of the Public Health Service Act.''.

SEC. 603. EXTENSION OF MORATORIUM.

(a) In General.--Section 6408(a)(3) of the Omnibus Budget
Reconciliation Act of 1989, as amended by section 13642 of the Omnibus
Budget Reconciliation Act of 1993 and section 4758 of the Balanced
Budget Act of 1997, is amended--
(1) by striking ``until December 31, 2002'', and
(2) by striking ``Kent Community Hospital Complex in
Michigan or.''
(b) Effective Dates.--
(1) Permanent extension.--The amendment made by subsection
(a)(1) shall take effect as if included in the amendment made
by section 4758 of the Balanced Budget Act of 1997.
(2) Modification.--The amendment made by subsection (a)(2)
shall take effect on the date of enactment of this Act.

Subtitle B--Miscellaneous Provisions

SEC. 611. FEDERAL REIMBURSEMENT OF EMERGENCY HEALTH SERVICES FURNISHED
TO UNDOCUMENTED ALIENS.

(a) Total Amount Available for Allotment.--
(1) In general.--Out of any funds in the Treasury not
otherwise appropriated, there are appropriated to the Secretary
$250,000,000 for each of fiscal years 2005 through 2008 for the
purpose of making allotments under this section for payments to
eligible providers in States described in paragraph (1) or (2)
of subsection (b).
(2) Availability.--Funds appropriated under paragraph (1)
shall remain available until expended.
(b) State Allotments.--
(1) Based on percentage of undocumented aliens.--
(A) In general.--Out of the amount appropriated
under subsection (a) for a fiscal year, the Secretary
shall use $167,000,000 of such amount to make
allotments for such fiscal year in accordance with
subparagraph (B).
(B) Formula.--The amount of the allotment for
payments to eligible providers in each State for a
fiscal year shall be equal to the product of--
(i) the total amount available for
allotments under this paragraph for the fiscal
year; and
(ii) the percentage of undocumented aliens
residing in the State as compared to the total
number of such aliens residing in all States,
as determined by the Statistics Division of the
Immigration and Naturalization Service, as of
January 2003, based on the 2000 decennial
census.
(2) Based on number of undocumented alien apprehension
states.--
(A) In general.--Out of the amount appropriated
under subsection (a) for a fiscal year, the Secretary
shall use $83,000,000 of such amount to make
allotments, in addition to amounts allotted under
paragraph (1), for such fiscal year for each of the 6
States with the highest number of undocumented alien
apprehensions for such fiscal year.
(B) Determination of allotments.--The amount of the
allotment for each State described in subparagraph (A)
for a fiscal year shall be equal to the product of--
(i) the total amount available for
allotments under this paragraph for the fiscal
year; and
(ii) the percentage of undocumented alien
apprehensions in the State in that fiscal year
as compared to the total of such apprehensions
for all such States for the preceding fiscal
year.
(C) Data.--For purposes of this paragraph, the
highest number of undocumented alien apprehensions for
a fiscal year shall be based on the apprehension rates
for the 4-consecutive-quarter period ending before the
beginning of the fiscal year for which information is
available for undocumented aliens in such States, as
reported by the Department of Homeland Security.
(c) Use of Funds.--
(1) Authority to make payments.--From the allotments made
for a State under subsection (b) for a fiscal year, the
Secretary shall pay the amount (subject to the total amount
available from such allotments) determined under paragraph (2)
directly to eligible providers located in the State for the
provision of eligible services to aliens described in paragraph
(5) to the extent that the eligible provider was not otherwise
reimbursed (through insurance or otherwise) for such services
during that fiscal year.
(2) Determination of payment amounts.--
(A) In general.--Subject to subparagraph (B), the
payment amount determined under this paragraph shall be
an amount determined by the Secretary that is equal to
the lesser of--
(i) the amount that the provider
demonstrates was incurred for the provision of
such services; or
(ii) amounts determined under a methodology
established by the Secretary for purposes of
this subsection.
(B) Pro-rata reduction.--If the amount of funds
allotted to a State under subsection (b) for a fiscal
year is insufficient to ensure that each eligible
provider in that State receives the amount of payment
calculated under subparagraph (A), the Secretary shall
reduce that amount of payment with respect to each
eligible provider to ensure that the entire amount
allotted to the State for that fiscal year is paid to
such eligible providers.
(3) Methodology.--In establishing a methodology under
paragraph (2)(A)(ii), the Secretary--
(A) may establish different methodologies for types
of eligible providers;
(B) may base payments for hospital services on
estimated hospital charges, adjusted to estimated cost,
through the application of hospital-specific cost-to-
charge ratios;
(C) shall provide for the election by a hospital to
receive either payments to the hospital for--
(i) hospital and physician services; or
(ii) hospital services and for a portion of
the on-call payments made by the hospital to
physicians; and
(D) shall make quarterly payments under this
section to eligible providers.
If a hospital makes the election under subparagraph (C)(i), the
hospital shall pass on payments for services of a physician to
the physician and may not charge any administrative or other
fee with respect to such payments.
(4) Limitation on use of funds.--Payments made to eligible
providers in a State from allotments made under subsection (b)
for a fiscal year may only be used for costs incurred in
providing eligible services to aliens described in paragraph
(5).
(5) Aliens described.--For purposes of paragraphs (1) and
(2), aliens described in this paragraph are any of the
following:
(A) Undocumented aliens.
(B) Aliens who have been paroled into the United
States at a United States port of entry for the purpose
of receiving eligible services.
(C) Mexican citizens permitted to enter the United
States for not more than 72 hours under the authority
of a biometric machine readable border crossing
identification card (also referred to as a ``laser
visa'') issued in accordance with the requirements of
regulations prescribed under section 101(a)(6) of the
Immigration and Nationality Act (8 U.S.C. 1101(a)(6)).
(d) Applications; Advance Payments.--
(1) Deadline for establishment of application process.--
(A) In general.--Not later than September 1, 2004,
the Secretary shall establish a process under which
eligible providers located in a State may request
payments under subsection (c).
(B) Inclusion of measures to combat fraud and
abuse.--The Secretary shall include in the process
established under subparagraph (A) measures to ensure
that inappropriate, excessive, or fraudulent payments
are not made from the allotments determined under
subsection (b), including certification by the eligible
provider of the veracity of the payment request.
(2) Advance payment; retrospective adjustment.--The process
established under paragraph (1) may provide for making payments
under this section for each quarter of a fiscal year on the
basis of advance estimates of expenditures submitted by
applicants for such payments and such other investigation as
the Secretary may find necessary, and for making reductions or
increases in the payments as necessary to adjust for any
overpayment or underpayment for prior quarters of such fiscal
year.
(e) Definitions.--In this section:
(1) Eligible provider.--The term ``eligible provider''
means a hospital, physician, or provider of ambulance services
(including an Indian Health Service facility whether operated
by the Indian Health Service or by an Indian tribe or tribal
organization).
(2) Eligible services.--The term ``eligible services''
means health care services required by the application of
section 1867 of the Social Security Act (42 U.S.C. 1395dd), and
related hospital inpatient and outpatient services and
ambulance services (as defined by the Secretary).
(3) Hospital.--The term ``hospital'' has the meaning given
such term in section 1861(e) of the Social Security Act (42
U.S.C. 1395x(e)), except that such term shall include a
critical access hospital (as defined in section 1861(mm)(1) of
such Act (42 U.S.C. 1395x(mm)(1)).
(4) Physician.--The term ``physician'' has the meaning
given that term in section 1861(r) of the Social Security Act
(42 U.S.C. 1395x(r)).
(5) Indian tribe; tribal organization.--The terms ``Indian
tribe'' and ``tribal organization'' have the meanings given
such terms in section 4 of the Indian Health Care Improvement
Act (25 U.S.C. 1603).
(6) State.--The term ``State'' means the 50 States and the
District of Columbia.

SEC. 612. COMMISSION ON SYSTEMIC INTEROPERABILITY.

(a) Establishment.--The Secretary shall establish a commission to
be known as the ``Commission on Systemic Interoperability'' (in this
section referred to as the ``Commission'').
(b) Duties.--
(1) In general.--The Commission shall develop a
comprehensive strategy for the adoption and implementation of
health care information technology standards, that includes a
timeline and prioritization for such adoption and
implementation.
(2) Considerations.--In developing the comprehensive health
care information technology strategy under paragraph (1), the
Commission shall consider--
(A) the costs and benefits of the standards, both
financial impact and quality improvement;
(B) the current demand on industry resources to
implement this Act and other electronic standards,
including HIPAA standards; and
(C) the most cost-effective and efficient means for
industry to implement the standards.
(3) Noninterference.--In carrying out this section, the
Commission shall not interfere with any standards development
of adoption processes underway in the private or public sector
and shall not replicate activities related to such standards or
the national health information infrastructure underway within
the Department of Health and Human Services.
(4) Report.--Not later than October 31, 2005, the
Commission shall submit to the Secretary and to Congress a
report describing the strategy developed under paragraph (1),
including an analysis of the matters considered under paragraph
(2).
(c) Membership.--
(1) Number and appointment.--The Commission shall be
composed of 11 members appointed as follows:
(A) The President shall appoint 3 members, one of
whom the President shall designate as Chairperson.
(B) The Majority Leader of the Senate shall appoint
2 members.
(C) The Minority Leader of the Senate shall appoint
2 members.
(D) The Speaker of the House of Representatives
shall appoint 2 members.
(E) The Minority Leader of the House of
Representatives shall appoint 2 members.
(2) Qualifications.--The membership of the Commission shall
include individuals with national recognition for their
expertise in health finance and economics, health plans and
integrated delivery systems, reimbursement of health
facilities, practicing physicians, practicing pharmacists, and
other providers of health services, health care technology and
information systems, and other related fields, who provide a
mix of different professionals, broad geographic
representation, and a balance between urban and rural
representatives.
(d) Terms.--Each member shall be appointed for the life of the
Commission.
(e) Compensation.--
(1) Rates of pay.--Members shall each be paid at a rate not
to exceed the daily equivalent of the rate of basic pay for
level IV of the Executive Schedule for each day (including
travel time) during which they are engaged in the actual
performance of duties vested in the Commission.
(2) Prohibition of compensation of federal employees.--
Members of the Commission who are full-time officers or
employees of the United States or Members of Congress may not
receive additional pay, allowances, or benefits by reason of
their service on the Commission.
(3) Travel expenses.--Each member shall receive travel
expenses, including per diem in lieu of subsistence, in
accordance with applicable provisions under subchapter I of
chapter 57 of title 5, United States Code.
(f) Quorum.--A majority of the members of the Commission shall
constitute a quorum but a lesser number may hold hearings.
(g) Director and Staff of Commission; Experts and Consultants.--
(1) Director.--The Commission shall have a Director who
shall be appointed by the Chairperson. The Director shall be
paid at a rate not to exceed the rate of basic pay for level IV
of the Executive Schedule.
(2) Staff.--With the approval of the Commission, the
Director may appoint and fix the pay of such additional
personnel as the Director considers appropriate.
(3) Applicability of certain civil service laws.--The
Director and staff of the Commission may be appointed without
regard to the provisions of title 5, United States Code,
governing appointments in the competitive service, and may be
paid without regard to the provisions of chapter 51 and
subchapter III of chapter 53 of that title relating to
classification and General Schedule pay rates, except that an
individual so appointed may not receive pay in excess of level
IV of the Executive Schedule.
(4) Experts and consultants.--With the approval of the
Commission, the Director may procure temporary and intermittent
services under section 3109(b) of title 5, United States Code.
(5) Staff of federal agencies.--Upon request of the
Chairperson, the head of any Federal department or agency may
detail, on a reimbursable basis, any of the personnel of that
department or agency to the Commission to assist it in carrying
out its duties under this Act.
(h) Powers of Commission.--
(1) Hearings and sessions.--The Commission may, for the
purpose of carrying out this Act, hold hearings, sit and act at
times and places, take testimony, and receive evidence as the
Commission considers appropriate.
(2) Powers of members and agents.--Any member or agent of
the Commission may, if authorized by the Commission, take any
action which the Commission is authorized to take by this
section.
(3) Obtaining official data.--The Commission may secure
directly from any department or agency of the United States
information necessary to enable it to carry out this Act. Upon
request of the Chairperson of the Commission, the head of that
department or agency shall furnish that information to the
Commission.
(4) Gifts, bequests, and devises.--The Commission may
accept, use, and dispose of gifts, bequests, or devises of
services or property, both real and personal, for the purpose
of aiding or facilitating the work of the Commission. Gifts,
bequests, or devises of money and proceeds from sales of other
property received as gifts, bequests, or devises shall be
deposited in the Treasury and shall be available for
disbursement upon order of the Commission. For purposes of
Federal income, estate, and gift taxes, property accepted under
this subsection shall be considered as a gift, bequest, or
devise to the United States.
(5) Mails.--The Commission may use the United States mails
in the same manner and under the same conditions as other
departments and agencies of the United States.
(6) Administrative support services.--Upon the request of
the Commission, the Administrator of General Services shall
provide to the Commission, on a reimbursable basis, the
administrative support services necessary for the Commission to
carry out its responsibilities under this Act.
(7) Contract authority.--The Commission may enter into
contracts or make other arrangements, as may be necessary for
the conduct of the work of the Commission (without regard to
section 3709 of the Revised Statutes (41 U.S.C. 5)).
(i) Termination.--The Commission shall terminate on 30 days after
submitting its report pursuant to subsection (b)(3).
(j) Authorization of Appropriations.--There is authorized to be
appropriated such sums as may be necessary to carry out this section.

SEC. 613. RESEARCH ON OUTCOMES OF HEALTH CARE ITEMS AND SERVICES.

(a) Research, Demonstrations, and Evaluations.--
(1) Improvement of effectiveness and efficiency.--
(A) In general.--To improve the quality,
effectiveness, and efficiency of health care delivered
pursuant to the programs established under titles
XVIII, XIX, and XXI of the Social Security Act, the
Secretary acting through the Director of the Agency for
Healthcare Research and Quality (in this section
referred to as the ``Director''), shall conduct and
support research to meet the priorities and requests
for scientific evidence and information identified by
such programs with respect to--
(i) the outcomes, comparative clinical
effectiveness, and appropriateness of health
care items and services (including prescription
drugs); and
(ii) strategies for improving the
efficiency and effectiveness of such programs,
including the ways in which such items and
services are organized, managed, and delivered
under such programs.
(B) Specification.--To respond to priorities and
information requests in subparagraph (A), the Secretary
may conduct or support, by grant, contract, or
interagency agreement, research, demonstrations,
evaluations, technology assessments, or other
activities, including the provision of technical
assistance, scientific expertise, or methodological
assistance.
(2) Priorities.--
(A) In general.--The Secretary shall establish a
process to develop priorities that will guide the
research, demonstrations, and evaluation activities
undertaken pursuant to this section.
(B) Initial list.--Not later than 6 months after
the date of the enactment of this Act, the Secretary
shall establish an initial list of priorities for
research related to health care items and services
(including prescription drugs).
(C) Process.--In carrying out subparagraph (A), the
Secretary--
(i) shall ensure that there is broad and
ongoing consultation with relevant stakeholders
in identifying the highest priorities for
research, demonstrations, and evaluations to
support and improve the programs established
under titles XVIII, XIX, and XXI of the Social
Security Act;
(ii) may include health care items and
services which impose a high cost on such
programs, as well as those which may be
underutilized or overutilized and which may
significantly improve the prevention,
treatment, or cure of diseases and conditions
(including chronic conditions) which impose
high direct or indirect costs on patients or
society; and
(iii) shall ensure that the research and
activities undertaken pursuant to this section
are responsive to the specified priorities and
are conducted in a timely manner.
(3) Evaluation and synthesis of scientific evidence.--
(A) In general.--The Secretary shall--
(i) evaluate and synthesize available
scientific evidence related to health care
items and services (including prescription
drugs) identified as priorities in accordance
with paragraph (2) with respect to the
comparative clinical effectiveness, outcomes,
appropriateness, and provision of such items
and services (including prescription drugs);
(ii) identify issues for which existing
scientific evidence is insufficient with
respect to such health care items and services
(including prescription drugs);
(iii) disseminate to prescription drug
plans and MA-PD plans under part D of title
XVIII of the Social Security Act, other health
plans, and the public the findings made under clauses (i) and (ii); and
(iv) work in voluntary collaboration with
public and private sector entities to
facilitate the development of new scientific
knowledge regarding health care items and
services (including prescription drugs).
(B) Initial research.--The Secretary shall complete
the evaluation and synthesis of the initial research
required by the priority list developed under paragraph
(2)(B) not later than 18 months after the development
of such list.
(C) Dissemination.--
(i) In general.--To enhance patient safety
and the quality of health care, the Secretary
shall make available and disseminate in
appropriate formats to prescription drugs plans
under part D, and MA-PD plans under part C, of
title XVIII of the Social Security Act, other
health plans, and the public the evaluations
and syntheses prepared pursuant to subparagraph
(A) and the findings of research conducted
pursuant to paragraph (1). In carrying out this
clause the Secretary, in order to facilitate
the availability of such evaluations and
syntheses or findings at every decision point
in the health care system, shall--
(I) present such evaluations and
syntheses or findings in a form that is
easily understood by the individuals
receiving health care items and
services (including prescription drugs)
under such plans and periodically
assess that the requirements of this
subclause have been met; and
(II) provide such evaluations and
syntheses or findings and other
relevant information through easily
accessible and searchable electronic
mechanisms, and in hard copy formats as
appropriate.
(ii) Rule of construction.--Nothing in this
section shall be construed as--
(I) affecting the authority of the
Secretary or the Commissioner of Food
and Drugs under the Federal Food, Drug,
and Cosmetic Act or the Public Health
Service Act; or
(II) conferring any authority
referred to in subclause (I) to the
Director.
(D) Accountability.--In carrying out this
paragraph, the Secretary shall implement activities in
a manner that--
(i) makes publicly available all scientific
evidence relied upon and the methodologies
employed, provided such evidence and method are
not protected from public disclosure by section
1905 of title 18, United States Code, or other
applicable law so that the results of the
research, analyses, or syntheses can be
evaluated or replicated; and
(ii) ensures that any information needs and
unresolved issues identified in subparagraph
(A)(ii) are taken into account in priority-
setting for future research conducted by the
Secretary.
(4) Confidentiality.--
(A) In general.--In making use of administrative,
clinical, and program data and information developed or
collected with respect to the programs established
under titles XVIII, XIX, and XXI of the Social Security
Act, for purposes of carrying out the requirements of
this section or the activities authorized under title
IX of the Public Health Service Act (42 U.S.C. 299 et
seq.), such data and information shall be protected in
accordance with the confidentiality requirements of
title IX of the Public Health Service Act.
(B) Rule of construction.--Nothing in this section
shall be construed to require or permit the disclosure
of data provided to the Secretary that is otherwise
protected from disclosure under the Federal Food, Drug,
and Cosmetic Act, section 1905 of title 18, United
States Code, or other applicable law.
(5) Evaluations.--The Secretary shall conduct and support
evaluations of the activities carried out under this section to
determine the extent to which such activities have had an
effect on outcomes and utilization of health care items and
services.
(6) Improving information available to health care
providers, patients, and policymakers.--Not later than 18
months after the date of enactment of this Act, the Secretary
shall identify options that could be undertaken in voluntary
collaboration with private and public entities (as appropriate)
for the--
(A) provision of more timely information through
the programs established under titles XVIII, XIX, and
XXI of the Social Security Act, regarding the outcomes
and quality of patient care, including clinical and
patient-reported outcomes, especially with respect to
interventions and conditions for which clinical trials
would not be feasible or raise ethical concerns that
are difficult to address;
(B) acceleration of the adoption of innovation and
quality improvement under such programs; and
(C) development of management tools for the
programs established under titles XIX and XXI of the
Social Security Act, and with respect to the programs
established under such titles, assess the feasibility
of using administrative or claims data, to--
(i) improve oversight by State officials;
(ii) support Federal and State initiatives
to improve the quality, safety, and efficiency
of services provided under such programs; and
(iii) provide a basis for estimating the
fiscal and coverage impact of Federal or State
program and policy changes.
(b) Recommendations.--
(1) Disclaimer.--In carrying out this section, the Director
shall--
(A) not mandate national standards of clinical
practice or quality health care standards; and
(B) include in any recommendations resulting from
projects funded and published by the Director, a
corresponding reference to the prohibition described in
subparagraph (A).
(2) Requirement for implementation.--Research, evaluation,
and communication activities performed pursuant to this section
shall reflect the principle that clinicians and patients should
have the best available evidence upon which to make choices in
health care items and services, in providers, and in health
care delivery systems, recognizing that patient subpopulations
and patient and physician preferences may vary.
(3) Rule of construction.--Nothing in this section shall be
construed to provide the Director with authority to mandate a
national standard or require a specific approach to quality
measurement and reporting.
(c) Research With Respect to Dissemination.--The Secretary, acting
through the Director, may conduct or support research with respect to
improving methods of disseminating information in accordance with
subsection (a)(3)(C).
(d) Limitation on CMS.--The Administrator of the Centers for
Medicare & Medicaid Services may not use data obtained in accordance
with this section to withhold coverage of a prescription drug.
(e) Authorization of Appropriations.--There is authorized to be
appropriated to carry out this section, $50,000,000 for fiscal year
2004, and such sums as may be necessary for each fiscal year
thereafter.

SEC. 614. HEALTH CARE THAT WORKS FOR ALL AMERICANS: CITIZENS HEALTH
CARE WORKING GROUP.

(a) Findings.--Congress finds the following:
(1) In order to improve the health care system, the
American public must engage in an informed national public
debate to make choices about the services they want covered,
what health care coverage they want, and how they are willing
to pay for coverage.
(2) More than a trillion dollars annually is spent on the
health care system, yet--
(A) 41,000,000 Americans are uninsured;
(B) insured individuals do not always have access
to essential, effective services to improve and
maintain their health; and
(C) employers, who cover over 170,000,000
Americans, find providing coverage increasingly
difficult because of rising costs and double digit
premium increases.
(3) Despite increases in medical care spending that are
greater than the rate of inflation, population growth, and
Gross Domestic Product growth, there has not been a
commensurate improvement in our health status as a nation.
(4) Health care costs for even just 1 member of a family
can be catastrophic, resulting in medical bills potentially
harming the economic stability of the entire family.
(5) Common life occurrences can jeopardize the ability of a
family to retain private coverage or jeopardize access to
public coverage.
(6) Innovations in health care access, coverage, and
quality of care, including the use of technology, have often
come from States, local communities, and private sector
organizations, but more creative policies could tap this
potential.
(7) Despite our Nation's wealth, the health care system
does not provide coverage to all Americans who want it.
(b) Purposes.--The purposes of this section are--
(1) to provide for a nationwide public debate about
improving the health care system to provide every American with
the ability to obtain quality, affordable health care coverage;
and
(2) to provide for a vote by Congress on the
recommendations that result from the debate.
(c) Establishment.--The Secretary, acting through the Agency for
Healthcare Research and Quality, shall establish an entity to be known
as the Citizens' Health Care Working Group (referred to in this section
as the ``Working Group'').
(d) Membership.--
(1) Number and appointment.--The Working Group shall be
composed of 15 members. One member shall be the Secretary. The
Comptroller General of the United States shall appoint 14
members.
(2) Qualifications.--
(A) In general.--The membership of the Working
Group shall include--
(i) consumers of health services that
represent those individuals who have not had
insurance within 2 years of appointment, that
have had chronic illnesses, including mental
illness, are disabled, and those who receive
insurance coverage through medicare and
medicaid; and
(ii) individuals with expertise in
financing and paying for benefits and access to
care, business and labor perspectives, and
providers of health care.
The membership shall reflect a broad geographic
representation and a balance between urban and rural
representatives.
(B) Prohibited appointments.--Members of the
Working Group shall not include Members of Congress or
other elected government officials (Federal, State, or
local). Individuals appointed to the Working Group
shall not be paid employees or representatives of
associations or advocacy organizations involved in the
health care system.
(e) Period of Appointment.--Members of the Working Group shall be
appointed for a life of the Working Group. Any vacancies shall not
affect the power and duties of the Working Group but shall be filled in
the same manner as the original appointment.
(f) Designation of the Chairperson.--Not later than 15 days after
the date on which all members of the Working Group have been appointed
under subsection (d)(1), the Comptroller General shall designate the
chairperson of the Working Group.
(g) Subcommittees.--The Working Group may establish subcommittees
if doing so increases the efficiency of the Working Group in completing
its tasks.
(h) Duties.--
(1) Hearings.--Not later than 90 days after the date of the
designation of the chairperson under subsection (f), the
Working Group shall hold hearings to examine--
(A) the capacity of the public and private health
care systems to expand coverage options;
(B) the cost of health care and the effectiveness
of care provided at all stages of disease;
(C) innovative State strategies used to expand
health care coverage and lower health care costs;
(D) local community solutions to accessing health
care coverage;
(E) efforts to enroll individuals currently
eligible for public or private health care coverage;
(F) the role of evidence-based medical practices
that can be documented as restoring, maintaining, or
improving a patient's health, and the use of technology
in supporting providers in improving quality of care
and lowering costs; and
(G) strategies to assist purchasers of health care,
including consumers, to become more aware of the impact
of costs, and to lower the costs of health care.
(2) Additional hearings.--The Working Group may hold
additional hearings on subjects other than those listed in
paragraph (1) so long as such hearings are determined to be
necessary by the Working Group in carrying out the purposes of
this section. Such additional hearings do not have to be completed
within the time period specified in paragraph (1) but shall not delay
the other activities of the Working Group under this section.
(3) The health report to the american people.--Not later
than 90 days after the hearings described in paragraphs (1) and
(2) are completed, the Working Group shall prepare and make
available to health care consumers through the Internet and
other appropriate public channels, a report to be entitled,
``The Health Report to the American People''. Such report shall
be understandable to the general public and include--
(A) a summary of--
(i) health care and related services that
may be used by individuals throughout their
life span;
(ii) the cost of health care services and
their medical effectiveness in providing better
quality of care for different age groups;
(iii) the source of coverage and payment,
including reimbursement, for health care
services;
(iv) the reasons people are uninsured or
underinsured and the cost to taxpayers,
purchasers of health services, and communities
when Americans are uninsured or underinsured;
(v) the impact on health care outcomes and
costs when individuals are treated in all
stages of disease;
(vi) health care cost containment
strategies; and
(vii) information on health care needs that
need to be addressed;
(B) examples of community strategies to provide
health care coverage or access;
(C) information on geographic-specific issues
relating to health care;
(D) information concerning the cost of care in
different settings, including institutional-based care
and home and community-based care;
(E) a summary of ways to finance health care
coverage; and
(F) the role of technology in providing future
health care including ways to support the information
needs of patients and providers.
(4) Community meetings.--
(A) In general.--Not later than 1 year after the
date on which all the members of the Working Group have
been appointed under subsection (d)(1) and
appropriations are first made available to carry out
this section, the Working Group shall initiate health
care community meetings throughout the United States
(in this paragraph referred to as ``community
meetings''). Such community meetings may be
geographically or regionally based and shall be
completed within 180 days after the initiation of the
first meeting.
(B) Number of meetings.--The Working Group shall
hold a sufficient number of community meetings in order
to receive information that reflects--
(i) the geographic differences throughout
the United States;
(ii) diverse populations; and
(iii) a balance among urban and rural
populations.
(C) Meeting requirements.--
(i) Facilitator.--A State health officer
may be the facilitator at the community
meetings.
(ii) Attendance.--At least 1 member of the
Working Group shall attend and serve as chair
of each community meeting. Other members may
participate through interactive technology.
(iii) Topics.--The community meetings
shall, at a minimum, address the following
questions:
(I) What health care benefits and
services should be provided?
(II) How does the American public
want health care delivered?
(III) How should health care
coverage be financed?
(IV) What trade-offs are the
American public willing to make in
either benefits or financing to ensure
access to affordable, high quality
health care coverage and services?
(iv) Interactive technology.--The Working
Group may encourage public participation in
community meetings through interactive
technology and other means as determined
appropriate by the Working Group.
(D) Interim requirements.--Not later than 180 days
after the date of completion of the community meetings,
the Working Group shall prepare and make available to
the public through the Internet and other appropriate
public channels, an interim set of recommendations on
health care coverage and ways to improve and strengthen
the health care system based on the information and
preferences expressed at the community meetings. There
shall be a 90-day public comment period on such
recommendations.
(i) Recommendations.--Not later than 120 days after the expiration
of the public comment period described in subsection (h)(4)(D), the
Working Group shall submit to Congress and the President a final set of
recommendations.
(j) Administration.--
(1) Executive director.--There shall be an Executive
Director of the Working Group who shall be appointed by the
chairperson of the Working Group in consultation with the
members of the Working Group.
(2) Compensation.--While serving on the business of the
Working Group (including travel time), a member of the Working
Group shall be entitled to compensation at the per diem
equivalent of the rate provided for level IV of the Executive Schedule
under section 5315 of title 5, United States Code, and while so serving
away from home and the member's regular place of business, a member may
be allowed travel expenses, as authorized by the chairperson of the
Working Group. For purposes of pay and employment benefits, rights, and
privileges, all personnel of the Working Group shall be treated as if
they were employees of the Senate.
(3) Information from federal agencies.--The Working Group
may secure directly from any Federal department or agency such
information as the Working Group considers necessary to carry
out this section. Upon request of the Working Group, the head
of such department or agency shall furnish such information.
(4) Postal services.--The Working Group may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(k) Detail.--Not more than 10 Federal Government employees employed
by the Department of Labor and 10 Federal Government employees employed
by the Department of Health and Human Services may be detailed to the
Working Group under this section without further reimbursement. Any
detail of an employee shall be without interruption or loss of civil
service status or privilege.
(l) Temporary and Intermittent Services.--The chairperson of the
Working Group may procure temporary and intermittent services under
section 3109(b) of title 5, United States Code, at rates for
individuals which do not exceed the daily equivalent of the annual rate
of basic pay prescribed for level V of the Executive Schedule under
section 5316 of such title.
(m) Annual Report.--Not later than 1 year after the date of
enactment of this Act, and annually thereafter during the existence of
the Working Group, the Working Group shall report to Congress and make
public a detailed description of the expenditures of the Working Group
used to carry out its duties under this section.
(n) Sunset of Working Group.--The Working Group shall terminate on
the date that is 2 years after the date on which all the members of the
Working Group have been appointed under subsection (d)(1) and
appropriations are first made available to carry out this section.
(o) Administration Review and Comments.--Not later than 45 days
after receiving the final recommendations of the Working Group under
subsection (i), the President shall submit a report to Congress which
shall contain--
(1) additional views and comments on such recommendations;
and
(2) recommendations for such legislation and administrative
actions as the President considers appropriate.
(p) Required Congressional Action.--Not later than 45 days after
receiving the report submitted by the President under subsection (o),
each committee of jurisdiction of Congress, the Committee on Finance of
the Senate, the Committee on Health, Education, Labor, and Pensions of
the Senate, the Committee on Ways and Means of the House of
Representatives, the Committee on Energy and Commerce of the House of
Representatives, Committee on Education and the Workforce of the House
of Representatives, shall hold at least 1 hearing on such report and on
the final recommendations of the Working Group submitted under
subsection (i).
(q) Authorization of Appropriations.--
(1) In general.--There are authorized to be appropriated to
carry out this section, other than subsection (h)(3),
$3,000,000 for each of fiscal years 2005 and 2006.
(2) Health report to the american people.--There are
authorized to be appropriated for the preparation and
dissemination of the Health Report to the American People
described in subsection (h)(3), such sums as may be necessary
for the fiscal year in which the report is required to be
submitted.

SEC. 615. FUNDING START-UP ADMINISTRATIVE COSTS FOR MEDICARE REFORM.

(a) In General.--There are appropriated to carry out this Act
(including the amendments made by this Act), to be transferred from the
Federal Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund--
(1) not to exceed $1,000,000,000 for the Centers for
Medicare & Medicaid Services; and
(2) not to exceed $500,000,000 for the Social Security
Administration.
(b) Availability.--Amounts provided under subsection (a) shall
remain available until September 30, 2005.
(c) Application.--From amounts provided under subsection (a)(2),
the Social Security Administration may reimburse the Internal Revenue
Service for expenses in carrying out this Act (and the amendments made
by this Act).
(d) Transfer.--The President may transfer amounts provided under
subsection (a) between the Centers for Medicare & Medicaid Services and
the Social Security Administration. Notice of such transfers shall be
transmitted within 15 days to the authorizing committees of the House
of Representatives and of the Senate.

SEC. 616. HEALTH CARE INFRASTRUCTURE IMPROVEMENT PROGRAM.

Title XVIII is amended by adding at the end the following new
section:

``health care infrastructure improvement program

``Sec. 1897. (a) Establishment.--The Secretary shall establish a
loan program that provides loans to qualifying hospitals for payment of
the capital costs of projects described in subsection (d).
``(b) Application.--No loan may be provided under this section to a
qualifying hospital except pursuant to an application that is submitted
and approved in a time, manner, and form specified by the Secretary. A
loan under this section shall be on such terms and conditions and meet
such requirements as the Secretary determines appropriate.
``(c) Selection Criteria.--
``(1) In general.--The Secretary shall establish criteria
for selecting among qualifying hospitals that apply for a loan
under this section. Such criteria shall consider the extent to
which the project for which loan is sought is nationally or
regionally significant, in terms of expanding or improving the
health care infrastructure of the United States or the region
or in terms of the medical benefit that the project will have.
``(2) Qualifying hospital defined.--For purposes of this
section, the term `qualifying hospital' means a hospital that--
``(A) is engaged in research in the causes,
prevention, and treatment of cancer; and
``(B) is designated as a cancer center for the
National Cancer Institute or is designated by the State
as the official cancer institute of the State.
``(d) Projects.--A project described in this subsection is a
project of a qualifying hospital that is designed to improve the health
care infrastructure of the hospital, including construction,
renovation, or other capital improvements.
``(e) State and Local Permits.--The provision of a loan under this
section with respect to a project shall not--
``(1) relieve any recipient of the loan of any obligation
to obtain any required State or local permit or approval with
respect to the project;
``(2) limit the right of any unit of State or local
government to approve or regulate any rate of return on private
equity invested in the project; or
``(3) otherwise supersede any State or local law (including
any regulation) applicable to the construction or operation of
the project.
``(f) Forgiveness of Indebtedness.--The Secretary may forgive a
loan provided to a qualifying hospital under this section under terms
and conditions that are analogous to the loan forgiveness provision for
student loans under part D of title IV of the Higher Education Act of
1965 (20 U.S.C. 1087a et seq.), except that the Secretary shall
condition such forgiveness on the establishment by the hospital of--
``(A) an outreach program for cancer prevention,
early diagnosis, and treatment that provides services
to a substantial majority of the residents of a State
or region, including residents of rural areas;
``(B) an outreach program for cancer prevention,
early diagnosis, and treatment that provides services
to multiple Indian tribes; and
``(C)(i) unique research resources (such as
population databases); or
``(ii) an affiliation with an entity that has
unique research resources.
``(g) Funding.--
``(1) In general.--There are appropriated, out of amounts
in the Treasury not otherwise appropriated, to carry out this
section, $200,000,000, to remain available during the period
beginning on July 1, 2004, and ending on September 30, 2008.
``(2) Administrative costs.--From funds made available
under paragraph (1), the Secretary may use, for the
administration of this section, not more than $2,000,000 for
each of fiscal years 2004 through 2008.
``(3) Availability.--Amounts appropriated under this
section shall be available for obligation on July 1, 2004.
``(h) Report to Congress.--Not later than 4 years after the date of
the enactment of this section, the Secretary shall submit to Congress a
report on the projects for which loans are provided under this section
and a recommendation as to whether the Congress should authorize the
Secretary to continue loans under this section beyond fiscal year
2008.''.
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