S. 2562Senate108th Congress (2003-2005)In Committee

Medicare Quality Improvement Act of 2004

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2 earlier actions

SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance. (consideration: CR 6/24/2004 S7315-7320)

Finance Committee

June 23, 2004

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SenateIntro Referral

Introduced in Senate

June 23, 2004

SenateIntro Referral

Sponsor introductory remarks on measure. (CR 6/24/2004 S7313-7315)

June 23, 2004

SenateIntro Referral

Read twice and referred to the Committee on Finance. (consideration: CR 6/24/2004 S7315-7320)

Finance Committee

June 23, 2004

Floor Debate

8 members

What members said about S. 2562 on the floor

2 Republicans6 Democrats

Sen. Max BaucusD-MT · Jun 23, 2004

Mr. President, I rise today to introduce the ``Medicare Quality Improvement Act of 2004.'' This bill will establish a new payment incentive structure for quality health care, starting with the…

Mr. President, I rise today to introduce the ``Medicare Quality Improvement Act of 2004.''

This bill will establish a new payment incentive structure for quality health care, starting with the Medicare Advantage and End Stage Renal Disease programs. Under this policy, Medicare would give a financial boost to plans and renal care providers demonstrating the highest quality care and a bonus to those that are working hard to improve.

Why focus on quality? I hear from all corners that the U.S. health care system is unsustainable in its current form. Costs are rising, and the care provided is not always appropriate or necessary. Not to mention that 43 million Americans lack health insurance.

As I travel around Montana, I hear so much from so many constituents about the rising cost of health care. Countless parents tell me they are struggling to pay for health care for their families, afraid that one more illness will force them into bankruptcy. Working people tell me they fear their employers will raise their premiums or drop

coverage altogether due to rising health care costs. And employers, both large industries and small enterprises, tell me they face competition from companies in countries where healthcare is significantly less expensive. While these employers are trying to keep jobs at home, health care costs are pushing them abroad.

And most recently, my personal experience with the health care system has brought the issue of health costs and quality even closer to home.

A few weeks ago, I chose to have an elective procedure to keep my heart healthy. I have excellent health care coverage, and I was able to seek out excellent doctors and nurses at the Mayo Clinic. In short, I am fortunate that the care I received was high-quality care. The doctors and nurses who took care of me were on the ball--making sure I got the right medications with no dangerous interactions, using proper surgical safety so I wouldn't get an infection, and providing good follow-up care so I could get back to my family and back to work.

My experience with the health system was a positive one. Unfortunately, not everyone is as lucky. Ninety-eight thousand people die every year in this country as a result of medical errors. That's 270 people each day. An appalling statistic. Many of these deaths can be prevented, and we must work to make sure that they are.

In addition to the cases of medical error we know about, there are many that go unreported and even undetected. Studies have shown that patients in the U.S. receive recommended care and treatment when they visit the doctor or hospital only about half of the time. Failure to follow proper patterns of care or recommended guidelines can lead to poor outcomes, and it is also more expensive in the short and long run.

Errors can mean more trips to the hospital or to the doctor, more drugs, and sometimes even additional surgeries. Each preventable medication error costs about $4,700 in added hospital costs alone, not to mention the personal costs of childcare and lost wages, and the societal costs of lost productivity.

While not as fatal as actual errors, missed health care opportunities also carry a cost. Each year, missed health care opportunities-- inappropriate care and generally poor quality care costs the U.S. health system more than $1 billion dollars in avoidable hospital bills and 41 million lost work days, which costs American businesses about $11.5 billion. Improving the quality of health care can reduce health care costs and stimulate our economy. In a time of slow economic growth and large deficits, health care is a compelling place to start.

Last year's Medicare Modernization Act got the ball rolling. The Medicare bill ties hospital reimbursement to reporting data on specific quality indicators. And hospitals are responding. Today, almost 2,000 hospitals are sharing data with the Centers for Medicare and Medicaid on at least one of the quality measures. Knowing more about the care that is delivered across the country should help us target incentives and resources to improve quality. It also provides employers and patients with new information about where to find the best deal for their health care dollar. And it also provides hospitals a way to compare their performance to other hospitals.

The bill I am introducing today builds on this strong start. It would establish a mechanism to pay for quality in the Medicare Advantage and End Stage Renal Disease Programs, through bonus payments for the best quality nationwide and bonuses for improving from one year to the next. Rewards for improvement are an important piece of my proposal--last year, the top ten percent of health plans in the country reported perfect scores on a set of quality indicators. There is no doubt that they deserve recognition. But we don't want to leave behind smaller or historically poorer-performing organizations that are making major strides to improve.

Medicare Advantage plans, which tend to utilize a coordinated model of care, have a unique opportunity to impact a patient's health outcomes--plans have access to information about a patient's medical history, and can follow patients more closely to ensure that they are receiving appropriate preventive, acute, and follow-up care. Medicare Advantage plans can translate their own payments into quality incentives downstream. They can reward providers for performing certain procedures known to be effective, or for prescribing drugs known to have equal or greater effectiveness at a reduced cost. And they can improve a beneficiary's preventive and wellness benefits.

Dialysis clinics that participate in Medicare through the program for patients with End Stage Renal Disease have a momentous mission, helping these patients enjoy life for years longer than we might have thought possible just a few decades ago. Because dialysis is such a complex operation, quality of care is extremely important.

Plans and providers in the Medicare Advantage and ESRD programs have already started measuring and reporting on quality, which makes them an excellent place to start. But I want to be clear these programs should not be singled out simply because they are ahead of the game. Working with ESRD providers and Medicare Advantage plans heralds the beginning of a longer journey, and we need to stay the course.

First, we need to monitor this quality incentive program and ensure that the methods used to measure health care quality and evaluate performance are evidence-based and valid.

Second, we should evaluate the impact of a pay-for-performance program on health plans and providers--particularly small organizations and those that are just entering the market. Additionally, because last year's Medicare legislation made payment and policy changes to these providers--for example, a short-term payment increase for ESRD and a new payment policy and the addition of regional plans for Medicare Advantage--we would need to keep a close eye on the consequences of these changes and the interaction with the pay-for-performance quality initiative and take action where necessary.

Third, we should look with a wide lens and move forward with quality initiatives in all government health care programs. It is our responsibility to set an example for the industry through quality improvement programs in Medicare and Medicaid, including traditional fee-for-service Medicare.

As I mentioned, the National Voluntary Hospital Reporting Initiative is a groundbreaking program, but we need to do more in traditional Medicare to encourage high quality care. My bill sketches out a roadmap that will lead us toward expanding the quality measures currently collected for fee-for-service providers, and ultimately toward additional Medicare payment systems that promote quality improvement.

We can also do more to focus on quality care in Medicaid. Today, there are a number of people at the Centers for Medicare and Medicaid Services whose responsibility it is to improve the quality of care in Medicare. On the Medicaid side, there is one person--one person who, while given the responsibility for quality, has no resources or authority to develop program innovations.

You might say that quality is already addressed in Medicaid. I applaud my colleague and Chairman of the Finance Committee, Senator Grassley, for encouraging CMS to increase its quality improvement activities for home and community-based services in Medicaid. We should build on this foundation and broaden the effort. We need to identify barriers to quality improvement throughout the Medicaid program, and take steps toward removing those barriers.

The bill I introduce today would target a few of those barriers, and it would require further studies to identify others. It authorizes money to hire new staff--experienced health professionals--to improve the quality and coordination of care delivered to Medicaid beneficiaries. It explores ways to integrate data on Medicaid beneficiaries who are also enrolled in Medicare--the dual-eligibles and coordinate the care they receive from both programs. Many dual- eligibles are among the sickest and costliest beneficiaries. By better coordinating their care we can improve health outcomes and save money in both programs at once.

As you can tell, I have a lot of ideas. But I have only scratched the surface of this issue and am deeply committed to working with my colleagues in the

Senate to move forward. This bill is a good start, but it is just that--a start. We must do more.

Many of my colleagues in the Senate also care deeply about improving the health care system, and I commend their efforts to develop courageous proposals that will spark change. Senator Clinton introduced a bill last year, the Health Information for Quality Improvement Act. More recently, Senator Kennedy Introduced the Health Care Modernization, Cost Reduction, and Quality Improvement Act.

These bills lay out a comprehensive array of policies to improve health care quality and reduce costs, and my bill focuses on one piece of that picture--paying for quality. They represent the gold standard toward which we should all be working. But we share a common goal to make the most of the American health care dollar, so that we can provide better care to more people.

As I mentioned, health care in this country is more expensive than it is elsewhere. But we don't necessarily get more for our money. The United States spends twice as much on health care than any other country, but studies have shown that quality is about the same. Better in some areas, worse in others, but all in all about the same. No matter how you cut it, that means that the value of our health care-- what we are getting for each dollar is less in the United States than in other developed countries.

I've always believed that Americans were all about value. We are the country of start-up companies and the home of Wal-Mart. We know about good business, and we know about hard work. We should know more--and do more--about health care.

We are an amazing country, but today our health care system is sick. Why? It is not the fault of hard-working doctors and nurses who put in long hours to make their patients healthy. It is our fault. We need to support the work of health care professionals by providing the right resources and designing payment systems to promote quality. Today, it takes an average 17 years for a new discovery in medical care to move from the lab bench into regular clinical practice. And for providers working in settings without regular Internet access or without the luxury of time to peruse medical journals, it may take even longer. As Members of Congress, we have the opportunity to change the system, to provide incentives for good care, funding for research into best medical practices, and to require the development and reporting of quality measures.

The road to this goal is long and difficult. I call on my colleagues for their energy and support, and I call on health care professionals and the health insurance industry to work with us. This is challenging work, and involves many difficult decisions. But I've never been one to shirk a challenge, and I hope you will join me. This bill is the beginning of what must be a strong bipartisan push to improve our health care system--to increase quality of care, to reduce costs, and to strengthen the American spirit.

I ask unanimous consent that the text of the bill be printed in the Record.

Sen. Jeff BingamanD-NM · Jun 23, 2004

Mr. President, I rise today to introduce legislation entitled ``Ending the Medicare Disability Waiting Period Act of 2004'' with Senators Corzine, Lautenberg, Stabenow, Clinton, Johnson, Mikulski,…

Mr. President, I rise today to introduce legislation entitled ``Ending the Medicare Disability Waiting Period Act of 2004'' with Senators Corzine, Lautenberg, Stabenow, Clinton, Johnson, Mikulski, Durbin, and Dayton. This legislation would phase-out the current 2-year waiting period that people with disabilities must endure after qualifying for Social Security Disability Insurance (SSDI). In the interim, the bill would also create a process by which the Secretary can immediately waive the waiting period for people with life-threatening illnesses.

When Medicare was expanded in 1972 to include people with significant disabilities, lawmakers created the 24-month waiting period. According to a July 2003 report from the Commonwealth Fund, it is estimated that over 1.2 million SSDI beneficiaries are in the Medicare waiting period at any given time, ``all of whom are unable to work because of their disability and most of whom have serious health problems, low incomes, and limited access to health insurance.''

As Karen Davis, president of the Commonwealth Fund, said of the report, ``Individuals in the waiting period for Medicare suffer from a broad range of debilitating diseases and are in urgent need of appropriate medical care to manage their conditions. Eliminating the 2- year wait would ensure access to care for those already on the way to Medicare.''

These are people who are the most seriously disabled in our society and most in need of immediate health services. And yet, it is estimated that one-third of the 1.2 million currently federal policy puts the disabled on hold for 2 long years. The consequences are unacceptable and are, in fact, dire.

In fact, various studies show that death rates among SSDI recipients are highest during the first two years of enrollment. For example, the Commonwealth Fund report, entitled Elimination of Medicare's Waiting Period for Seriously Disabled Adults: Impact on Coverage and Costs, 4 percent of these people die during the waiting period. Of the estimated 400,000 uninsured disabled Americans in the waiting period at any given time, 16,000 of them will die awaiting Medicare coverage. This is unacceptable.

Moreover, this does not factor in the serious health problems that others experience while waiting for Medicare coverage during the 2-year period. Although there is no direct data on the profile of SSDI beneficiaries in the 2-year waiting period, the Commonwealth Fund has undertaken a separate analysis of the Medicare Current Beneficiary Survey for 1998 to get a good sense of the demographic characteristics, income, and health conditions of this group.

According to the analysis, ``. . . 45 percent of nonelderly Medicare beneficiaries with disabilities had incomes below the federal poverty line, and 77 percent had incomes below 200 percent of poverty. Fifth- nine percent reported that they were in fair or poor health; of this group, more than 90 percent reported that they suffered from one or more chronic illnesses, including arthritis (52%), hypertension (46%), mental disorder (36%), heart condition (35%), chronic lung disease (26%), cancer (20%), diabetes (19%), and stroke (12%).''

As the Medicare Rights Center has said, ``By forcing Americans with disabilities to wait 24 months for Medicare coverage, the current law effectively sentences these people to inadequate health care, poverty, or death . . . Since disability can strike anyone, at any point in life, the 24-month waiting period should be of concern to everyone, not just the millions of Americans with disabilities today.''

Although elimination of the Medicare waiting period will certainly increase Medicare costs, it is important to note that there will be some corresponding decrease in Medicaid costs. Medicaid, which is financed by both federal and state governments, often provides coverage for a subset of disabled Americans in the waiting period, as long as they meet certain income and asset limits. Income limits are typically at or below the poverty level, including at just 74 percent of the poverty line in New Mexico, with assets generally limited to just $2,000 for individuals and $3,000 for couples.

The Commonwealth Fund estimates that, of the 1.26 million people in the waiting period, 40 percent are enrolled in Medicaid. As a result, the Commonwealth Fund estimates that federal Medicaid savings would offset nearly 30 percent of the increased costs in its study. Furthermore, states, which have been struggling financially with their Medicaid programs, would reap a windfall that would help them better manage their Medicaid programs.

Furthermore, from a continuity of care point of view, it makes little sense that somebody with disabilities must leave their job and their health providers associated with that plan, move on the Medicaid to often have a different set of providers, to then switch to Medicare and yet another set of providers.

And finally, private-sector employers and employees in those risk- pools

would also benefit from the passage of the bill. As the report notes, ``. . . to the extent that disabled adults rely on coverage through their prior employer or their spouse's employer, eliminating the waiting period would also produce savings to employers who provide this coverage.''

I urge passage of this legislation and ask unanimous consent that the text of the bill be printed in the Record.

Sen. Olympia J. SnoweR-ME · Jun 23, 2004

Mr. President, I rise today to introduce the Junk Fax Prevention Act of 2004, a bill to strengthen our laws on protecting consumers and businesses from receiving unwanted commercial advertisements by facsimile, while at the same time preserving a key method of doing business for thousands of companies, large and small, across the United States. The sending of unsolicited commercial communications by facsimile--``junk faxes''--has been illegal since 1991, and the Federal Communications Commission is charged with enforcing that prohibition. Those who engage in ``blast faxes'' can and should be prosecuted to the full extent of the law, as their behavior imposes unreasonable expenses upon residential and business facsimile subscribers.

However, the FCC has long recognized an exception to this general ban on unsolicited faxes when the parties sending and receiving the fax have an established business relationship. Businesses of all shapes and sizes regularly conduct their transactions via facsimile, such as real estate agents, wholesalers and distributors, travel agents, and those in the convention industry. In our modern economy, companies that are often hundreds or thousands of miles away from each other do business together, often with the same or greater frequency as with those just up the street. And the reality of business is that sometimes you need to communicate in writing, and it needs to get there right away.

The established business relationship exemption recognized this reality, and ensured that government was not placing an undue hardship on business owners. Yet inexplicably, on June 26, 2003 the FCC issued a new rule that eliminated the established business relationship. Under this new rule--which is set to take effect on January 1, 2005--the sender of a fax would have to acquire, in writing, the permission of the recipient to receive an unsolicited fax before the fax could be sent, even if the recipient made a verbal request that the information be faxed.

As Chair of the Senate Small Business Committee, I can state that the business community has in unison called upon Congress to take action to rectify this situation. Industry groups estimate that it will cost businesses an average of $5,000 in the first year alone to comply with the new law, and as much as $3,000 each year thereafter in record- keeping costs. These numbers do not take into account the potential lost business that could easily result if a primary method of business- to-business communication is cut off. Quite simply, small businesses in particular will suffer significantly if these rules are allowed to take effect.

My bill will restore the established business relationship exemption, allowing standard business transactions to continue without inhibition. The term ``Established business relationship'' means the same thing in the Junk Fax Prevention Act as in the regulations governing the Federal Do-Not-Call Registry: it means that the fax subscriber either made an inquiry of the sender within the prior three months or a purchase from the sender within the prior 18 months.

The Junk Fax Prevention Act also strengthens the protections available to fax recipients by adding an opt-out provision that the current law does not have. Even if an established business relationship exists, a fax subscriber can still request to not receive unsolicited faxes. The senders of these faxes must, by law, honor these requests, and they must include a notification of this right on every fax they send.

As a strong supporter of consumer rights, I also want to assure my colleagues that this bill does not in any way place consumers at risk. Very few consumers own fax machines, and those who do are protected by the general ban on solicitation and the opt-out provision if they do have an existing business relationship. To ensure that the privacy of consumers and businesses is protected, my bill also provides for studies by both the General Accounting Office and the FCC to evaluate the effectiveness of enforcement.

Small businesses have weathered the storm of the economic downturn over the past several years. As our economy now climbs out of recession and people return back to work, American businesses--our nation's employers do not need these unnecessary economic restraints to further hinder their recovery. I call upon all of my colleagues to join me in bringing relief to American businesses and pass the Junk Fax Prevention Act.

I ask unanimous consent that the text of the bill be printed in the Record.

Sen. Herb KohlD-WI · Jun 23, 2004

Mr. President, I rise today with Senator Hatch to introduce the Imported Explosives Security Act. Domestic manufacturers are required to place identification markings on all explosive materials they produce for important security reasons. These markings enable law enforcement officers to determine the source of explosives and help them solve crimes. Yet, these same identifying markings are not required of those explosives manufactured overseas and imported into our country. This impedes law enforcement efforts and poses a security risk.

The legislation we have introduced today is simple and straightforward. The legislation would simply treat imported explosives just like those manufactured inside the United States, requiring all imported explosives to carry the same markings currently placed on domestic explosives. It would require the name of the manufacturer, along with the time, date and shift of manufacture, to be placed on all explosives materials, whether they are manufactured here or abroad. These markings can be a tremendously useful tool for law enforcement officials, enabling investigators to determine the source of explosive materials. According to the Bureau of Alcohol, Tobacco, Firearms and Explosives, the explosives can then be tracked through records kept by those who manufacture and sell them, often leading them to the criminal who has stolen or misused them. At a recent Senate hearing, FBI Director Mueller acknowledged that ``determining the source of the components to any explosive device will assist you in determining who was responsible for any act using such a device.''

The Bureau of Alcohol, Tobacco, Firearms and Explosives first sought to fill this gap in the law when it published a notice of a proposed rulemaking in November 2000. Now, nearly 4 years later, this rulemaking still has not been finalized. Each year, more than 25,000 pounds of stolen, lost, or abandoned explosives are recovered by law enforcement. When explosives do not carry appropriate markings, they

cannot be quickly and effectively traced for criminal enforcement purposes.

Millions of pounds of unmarked explosives have already been distributed in this country. Each day we delay closing this loophole, we let more untraceable explosive materials cross our borders and undermine our national security. Failure to address this very straightforward issue in a timely manner unnecessarily hinders law enforcement's ability to solve crimes. Because the Department of Justice has not issued regulations to close this loophole in a timely manner, it is now incumbent upon us to act for them.

Sen. Tim JohnsonD-SD · Jun 23, 2004

Mr. President, I rise today to introduce a very important piece of legislation, the Montgomery GI Bill Enhancement Act. This bill will allow a one year open enrollment period for thousands of career military personal who are not allowed to sign up for education benefits under the Montgomery GI Bill (MGIB).

In 1976 Congress created the Veterans' Educational Assistance Program (VEAP) as a recruitment and retention tool for the post-Vietnam era. However, Congress greatly expanded education benefits in 1984 and allowed individuals with VEAP accounts to transfer their benefits to the new MGIB in 1996. The opportunity to convert to MGIB was important because the benefits available were much greater than those under VEAP.

However, those individuals who were on active duty before 1985 and did not participate in VEAP were not eligible to sign-up for MGIB, leaving a gap in available coverage for certain career military personnel. Congress has voted several times in the last decade to allow VEAP participants opportunities to transfer to MGIB, but there has never been an opportunity for those who did not have VEAP accounts to sign up for the new program, excluding them from taking advantage of MGIB educational benefits.

My bill would correct this inequity and allow individuals falling into this gap to attain MGIB benefits. Organizations such as the Non- Commissioned Officers Association, the Association of the United States Army, and the Military Coalition have come out in strong support for this legislation.

I believe that we must do more to honor our Nation's commitments to our military personnel. As the father of a soldier in the Army, I fully appreciate what a poor ``quality of life'' can do to the morale of military families. We have a long way to go, but I will continue to work with my colleagues to make sure our country's military personnel receive the benefits they deserve.

Today, there are fewer than 74,000 VEAP ``decliners'' on active duty. These men and women have dedicated their lives to a career of service to the Nation, and many are deployed in harms way leading our troops in Iraq and Afghanistan.

For these servicemen and women--many of whom are reaching retirement eligibility--time is running out. Therefore, before it is too late, I encourage my Senate colleagues to support the Montgomery GI Bill Enhancement Act and provide our servicemen and women with the benefits they deserve.

I ask unanimous consent that the text of the bill be printed in the Record.

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Sen. Dianne FeinsteinD-CA · Jun 23, 2004

Mr. President, I am pleased to introduce companion legislation to H.R. 3638, a bill introduced by Congressman Mike Thompson in November 2003. This bill will adjust the boundary of Redwood National…

Sen. Mike CrapoR-ID · Jun 23, 2004

Mr. President, I rise to introduce the Milk Forward Contracting Act, a bill to make permanent the dairy forward pricing pilot program. Without question, dairy producers are subject to a very fickle…

Sen. Joseph R. Biden Jr.D-DE · Jun 23, 2004

Mr. President, I rise today to introduce the Benjamin Franklin Commemorative Coin Act. This bill will authorize the U.S. Mint to produce a limited edition silver coin, in two designs, to honor the…

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Introduced in SenateIssued June 23, 2004

        [Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2562 Introduced in Senate (IS)]

108th CONGRESS
2d Session
S. 2562

To amend title XVIII of the Social Security Act to provide incentives
for the furnishing of quality care under Medicare Advantage plans and
by end stage renal disease providers and facilities, and for other
purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

June 23 (legislative day, June 22), 2004

Mr. Baucus 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 provide incentives
for the furnishing of quality care under Medicare Advantage plans and
by end stage renal disease providers and facilities, 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; TABLE OF CONTENTS.

(a) In General.--This Act may be cited as the ``Medicare Quality
Improvement Act of 2004''.
(b) Table of Contents.--The table of contents of this Act is as
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Medicare Advantage and reasonable cost reimbursement contract
quality performance incentive payment
program.
Sec. 4. Quality performance incentive payment program for providers and
facilities that provide services to
medicare beneficiaries with ESRD.
Sec. 5. Medicare innovative quality practice award program.
Sec. 6. Quality improvement demonstration program for pediatric renal
dialysis facilities providing care to
medicare beneficiaries with end stage renal
disease.
Sec. 7. Medicare Quality Advisory Board.
Sec. 8. Studies and reports on financial incentives for quality items
and services under the medicare program.
Sec. 9. MedPAC study and report on use of adjuster mechanisms under
medicare quality performance incentive
payment programs.
Sec. 10. Demonstration program on measuring the quality of health care
furnished to pediatric patients under the
medicaid and SCHIP programs.
Sec. 11. Provisions relating to medicaid quality improvements.
Sec. 12. Demonstration program for Medical Smart Cards.

SEC. 2. FINDINGS.

The Senate makes the following findings:
(1) The Institute of Medicine has highlighted problems with
our health care system in the areas of quality and patient
safety.
(2) The New England Journal of Medicine has published
research in an article entitled ``The Quality of Health Care
Delivered to Adults in the United States'' showing that adults
in the United States receive recommended health care only about
\1/2\ of the time.
(3) Payment policies under the medicare program do not
include mechanisms designed to improve the quality of care.
(4) The medicare program should reward health care
providers who show, through measurement and reporting of
quality indicators and through the practice of innovations,
that they are working to deliver high quality health care to
their patients.
(5) Reimbursement for services provided under the original
medicare fee-for-service program under parts A and B of title
XVIII of the Social Security Act should be based on a pay-for-
performance system.
(6) A more aggressive research agenda on the development of
appropriate quality measurement and payment methodologies under
the medicare program is necessary.

SEC. 3. MEDICARE ADVANTAGE AND REASONABLE COST REIMBURSEMENT CONTRACT
QUALITY PERFORMANCE INCENTIVE PAYMENT PROGRAM.

(a) Program.--Part C of title XVIII of the Social Security Act, as
amended by section 241 of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2214), is
amended by adding at the end the following new section:

``quality performance incentive payment program

``Sec. 1860C-2. (a) Program.--
``(1) In general.--The Secretary shall establish a program
under which financial incentive payments are provided each year
to Medicare Advantage organizations offering Medicare Advantage
plans and organizations that are providing benefits under a
reasonable cost reimbursement contract under section 1876(h)
that demonstrate the provision of superior quality health care
to enrollees under the plan or contract.
``(2) Program to begin in 2007.--The Secretary shall
establish the program so that National Performance Quality
Payments (described in subsection (c)) and National Quality
Improvement Payments (described in subsection (d)) are made
with respect to 2007 and each subsequent year.
``(3) Requirement.--In order for an organization to be
eligible for a financial incentive payment under this section
with respect to a Medicare Advantage plan or a reasonable cost
reimbursement contract under section 1876(h), the organization
shall--
``(A) provide for the collection, analysis, and
reporting of data pursuant to sections 1852(e)(3) and
1876(h)(8), respectively, with respect to the plan or
contract; and
``(B) not later than a date specified by the
Secretary during each baseline year (as defined in
subsection (d)(4)), submit such data on the quality
measures described in subsection (e)(2) as the
Secretary determines appropriate for the purpose of
establishing a baseline with respect to the plan or
contract.
``(4) Use of most recent data.--Financial incentive
payments under this section shall be based upon the most recent
available quality data.
``(5) Timing of quality incentive payments.--The Secretary
shall ensure that financial incentive payments under this
section with respect to a year are made by March 1 of the
subsequent year.
``(6) Applicability of program to ma plans.--For purposes
of this section, the term `Medicare Advantage plan' shall--
``(A) include both MA regional plans and MA local
plans; and
``(B) not include an MA plan described in
subparagraph (A)(ii) or (B) of section 1851(a)(2).
``(b) Quality Incentive Payments.--
``(1) In general.--Beginning with 2007, the Secretary shall
allocate the total amount available for financial incentive
payments in the year under subsection (f) as follows:
``(A) The per beneficiary payment amount for
National Performance Quality Payments established under
paragraph (2) shall be greater than the per beneficiary
payment amount for National Quality Improvement Payments established
under such paragraph.
``(B) With respect to National Performance Quality
Payments, the per beneficiary payment amount
established under paragraph (2) shall be greatest for
the organizations offering the highest performing plans
or contracts.
``(C) With respect to National Quality Improvement
Payments, the per beneficiary payment amount
established under paragraph (2) shall be greatest for
the organizations offering plans or contracts with the
highest degree of improvement.
``(2) Amount of quality incentive payment.--
``(A) In general.--The amount of a financial
incentive payment under subsection (c) or (d) to a
Medicare Advantage organization with respect to a
Medicare Advantage plan or to an organization with
respect to a reasonable cost reimbursement contract
under section 1876(h) shall be determined by
multiplying the number of beneficiaries enrolled under
the plan or contract on the first day of the year for
which the payment is provided by a dollar amount
established by the Secretary (in this section referred
to as the `per beneficiary payment amount') that is the
same for all beneficiaries enrolled under the plan or
contract.
``(B) Limitation on total amount of quality
incentive payments.--The total amount of all the
financial incentive payments given with respect to a
year shall be equal to the amount available for such
payments in the year under subsection (f).
``(3) Use of quality incentive payments.--Financial
incentive payments received under this section may only be used
for the following purposes:
``(A) To reduce any beneficiary cost-sharing
applicable under the plan or contract.
``(B) To reduce any beneficiary premiums applicable
under the plan or contract.
``(C) To initiate, continue, or enhance health care
quality programs for enrollees under the plan or
contract.
``(D) To improve the benefit package under the plan
or contract.
``(4) Reporting on use of quality incentive payments.--
Beginning in 2008, each MA organization that receives a
financial incentive payment under this section shall report to
the Secretary pursuant to section 1854(a)(7) on how the
organization will use such payment.
``(5) Limitations on quality incentive payments.--
``(A) Plan only eligible for 1 payment in a year.--
A Medicare Advantage organization offering a Medicare
Advantage plan or an organization that is providing
benefits under a reasonable cost reimbursement contract
under section 1876(h) may not receive more than 1
financial incentive payment under this section in a
year with respect to such plan or contract. If an
organization with respect to the plan or contract is
eligible for a National Performance Quality Payment and
a National Quality Improvement Payment, the
organization shall be given the National Performance
Quality Payment.
``(B) Plan must be available for entire year.--A
Medicare Advantage organization offering a Medicare
Advantage plan or an organization that is providing
benefits under a reasonable cost reimbursement contract
under section 1876(h) is not eligible for a financial
incentive payment under this section with respect to
such plan or contract unless the plan or contract
offers benefits throughout the year in which the
payment is provided.
``(c) National Performance Quality Payments.--The Secretary shall
make National Performance Quality Payments to the Medicare Advantage
organizations and organizations offering reasonable cost reimbursement
contracts under section 1876(h) with respect to each Medicare Advantage
plan or reasonable cost contract offered by the organization that
receives ratings for the year in the top applicable percent of all
plans and contracts rated by the Secretary pursuant to subsection (e)
for the year. For purposes of the preceding sentence, the term
`applicable percent' means a percent determined appropriate by the
Secretary in consultation with the Quality Advisory Board, but in no
case less than 20 percent.
``(d) National Quality Improvement Payments.--
``(1) In general.--Subject to paragraph (2), the Secretary
shall make National Quality Improvement Payments to Medicare
Advantage organizations and organizations offering reasonable
cost reimbursement contracts under section 1876(h) with respect
to each Medicare Advantage plan or reasonable cost
reimbursement contract offered by the organization that
receives a rating under subsection (e) for the payment year
that exceeds the rating received under such subsection for the
plan or contract for the baseline year.
``(2) National improvement standard.--Beginning with 2009,
the Secretary may implement a national improvement standard
that Medicare Advantage plans and reasonable cost reimbursement
contracts must meet in order to receive a National Quality
Improvement Payment.
``(3) Application of thresholds.--In determining whether a
rating received under subsection (e) for the payment year
exceeds the rating received under such subsection for the
baseline year, the Secretary shall hold any applicable
thresholds constant. For purposes of the preceding sentence,
the term `threshold' means norms used to assess performance.
``(4) Baseline year defined.--In this subsection, the term
`baseline year' means the year prior to the payment year.
``(e) Rating Methodology.--
``(1) Scoring and ranking systems.--
``(A) In general.--The Secretary shall develop
separate scoring and ranking systems for purposes of
determining which organizations offering Medicare
Advantage plans and reasonable cost reimbursement
contracts under section 1876(h) qualify for--
``(i) National Performance Quality
Payments; and
``(ii) National Quality Improvement
Payments.
``(B) Requirements.--In developing, implementing,
and updating the scoring and ranking systems, the
Secretary shall--
``(i) consult with the Quality Advisory
Board established under section 1898;
``(ii) take into account the report on
health care performance measures submitted by
the Institute of Medicine of the National
Academy of Sciences under section 238 of the
Medicare Prescription Drug, Improvement, and
Modernization Act of 2003; and
``(iii) take into account the Managed Care
Organization (MCO) standards and guideline
methodology of the National Committee for
Quality Assurance for awarding total Health
Plan Employer Data and Information Set (HEDIS)
points (based on HEDIS and Consumer Assessment
of Health Plans Survey (CAHPS) measures).
``(2) Measures.--
``(A) In general.--Subject to subparagraph (B), in
developing the scoring and ranking systems under
paragraph (1), the Secretary shall use all measures
determined appropriate by the Secretary. Such measures
may include--
``(i) outcome measures for highly prevalent
chronic conditions;
``(ii) audited HEDIS outcomes and process
measures, CAHPS data, and other data reported
to the Department of Health and Human Services;
and
``(iii) the Joint Commission on
Accreditation of Healthcare Organizations core
measures.
``(B) Scoring and ranking system for national
performance quality payments only based on measures of
clinical effectiveness.--The scoring and ranking system
for National Performance Quality Payments shall only
include measures of clinical effectiveness.
``(3) Weights of measures.--In developing the scoring and
ranking systems under paragraph (1), the Secretary shall assign
weights to the measures used by the Secretary under such system
pursuant to paragraph (2). In assigning such weights, the
Secretary shall provide greater weight to the measures that
measure clinical effectiveness.
``(4) Risk adjustment.--In developing the scoring and
ranking systems under paragraph (1), the Secretary shall
establish procedures for adjusting the data used under the
system to take into account differences in the health status of
individuals enrolled under Medicare Advantage plans and
reasonable cost contracts.
``(5) Update.--
``(A) In general.--The Secretary shall as
determined appropriate, but in no case more often than
once each 12-month period, update the scoring and
ranking systems developed under paragraph (1),
including the measures used by the Secretary under such
system pursuant to paragraph (2), the weights
established pursuant to paragraph (3), and the risk
adjustment procedures established pursuant to paragraph
(4).
``(B) Comparison for national quality improvement
payments.--Each update under subparagraph (A) of the
scoring and ranking system for National Quality
Improvement Payments shall allow for the comparison of
data from one year to the next for purposes of
identifying which plans or contracts will receive such
Payments.
``(C) Consultation.--In determining when and how to
update the scoring and ranking systems under
subparagraph (A), the Secretary shall consult with the
Quality Advisory Board.
``(f) Funding of Payments.--The amount available for financial
incentive payments under this section with respect to a year shall be
equal to the amount of the reduction in expenditures under the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund in the year as a result of the amendments made by
section 3(b) of the Medicare Quality Improvement Act of 2004.''.
(b) Reduction in Payments to Organizations in Order To Fund
Program.--
(1) MA payments.--
(A) In general.--Section 1853(j) of the Social
Security Act (42 U.S.C. 1395w-23(j)), as added by
section 222(d) of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (Public Law
108-173; 117 Stat. 2200), is amended--
(i) in subparagraphs (A) and (B) of
paragraph (1), by inserting ``and, beginning in
2007, reduced by 2 percent in the case of an MA
plan described in subparagraph (A)(i) or (C) of
section 1851(a)(2)'' before the semicolon at
the end; and
(ii) in paragraph (2), by inserting ``and,
beginning in 2007, reduced by 2 percent in the
case of an MA plan described in subparagraph
(A)(i) or (C) of section 1851(a)(2)'' before
the period at the end.
(B) Reductions in payments do not effect the
government savings for bids below the benchmark.--
Section 1854(b)(1)(C)(i) of the Social Security Act (42
U.S.C. 1395w-24(b)(1)(C)(i)), as added by section
222(b) of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (Public Law 108-173; 117
Stat. 2196), is amended--
(i) by striking ``75 percent'' and
inserting ``100 percent''; and
(ii) by inserting the following before the
period at the end: ``, reduced by 25 percent of
such average per capita savings (if any), as
applicable to the plan and year involved, that
would be computed if sections 1853(j) and
1860C-1(e)(1) was applied by substituting `zero
percent' for `2 percent' each place it
appears''.
(2) Reasonable cost contract payments.--Section 1876(h) of
the Social Security Act (42 U.S.C. 1395mm(h)) is amended by
adding at the end the following new paragraph:
``(6) Notwithstanding the preceding provisions of this subsection,
the Secretary shall reduce each payment to an eligible organization
under this subsection with respect to benefits provided on or after
January 1, 2007, by an amount equal to 2 percent of the payment amount.
The preceding sentence shall have no effect on payments to eligible
organizations for the provision of qualified prescription drug coverage
under part D.''.
(3) CCA payments.--The first sentence of section 1860C-
1(e)(1) of the Social Security Act, as added by section 241 of
the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (Public Law 108-173; 117 Stat. 2214) is amended by
inserting ``, reduced by 2 percent in the case of an MA plan
described in subparagraph (A)(i) or (C) of section 1851(a)(2)''
before the period at the end.
(c) Requirement for Reporting on Use of Financial Incentive
Payments.--
(1) MA plans.--Section 1854(a) of the Social Security Act
(42 U.S.C. 1395w-24(a)), as amended by section 222(a) of the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Public Law 108-173; 117 Stat. 2193), is amended--
(A) in paragraph (1)(A)(i), by striking ``or
(6)(A)'' and inserting ``(6)(A), or (7)''; and
(B) by adding at the end the following:
``(7) Submission of information of how financial incentive
payments will be used beginning in 2008.--For an MA plan
described in subparagraph (A)(i) or (C) of section 1851(a)(2)
for a plan year beginning on or after January 1, 2008, the
information described in this paragraph is a description of how
the organization offering the plan will use any financial
incentive payment that the organization received under section
1860C-2 with respect to the plan.''.
(2) Eligible entities with reasonable cost contracts.--
Section 1876(h) of the Social Security Act (42 U.S.C.
1395mm(h)), as amended by subsection (b)(2), is amended by
adding at the end the following new paragraph:
``(7)(A) Not later than July 1 of each year (beginning in 2008),
any eligible entity with a reasonable cost reimbursement contract under
this subsection that receives a financial incentive payment under
section 1860C-2 with respect to each plan year shall submit to the
Secretary a report containing the information described in subparagraph
(B).
``(B) The information described in this subparagraph is a
description of how the organization offering the plan will use any
financial incentive payment that the organization received under
section 1860C-2 with respect to the plan.''.
(d) Submission of Quality Data.--
(1) MA organizations.--Section 1852(e) of the Social
Security Act (42 U.S.C. 1395w-22(e)), as amended by section 722
of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2347),
is amended--
(A) in paragraph (1), by striking ``an MA private
fee-for-service plan or''; and
(B) by striking paragraph (3) and inserting the
following new paragraph:
``(3) Collection, analysis, and reporting.--
``(i) In general.--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) Coordination with commercial enrollee
reporting requirements.--The Secretary shall establish
procedures to ensure the coordination of the reporting
requirement under clause (i) with reporting
requirements for the organization under this part
relating to individuals enrolled with the organization
but not under this part. Although such reporting
requirements shall be coordinated pursuant to the preceding sentence,
the use of the data reported may vary.''.
(2) Eligible entities with reasonable cost contracts.--
Section 1876(h) of the Social Security Act (42 U.S.C.
1395mm(h)), as amended by subsection (c)(2), is amended by
adding at the end the following new paragraph:
``(8)(A) With respect to plan years beginning on or after January
1, 2006, an eligible entity with a reasonable cost reimbursement
contract under this subsection shall provide for the collection,
analysis, and reporting of data that permits the measurement of health
outcomes and other indices of quality.
``(B) The Secretary shall establish procedures to ensure the
coordination of the reporting requirement under subparagraph (A) with
reporting requirements for the entity under this title relating to
individuals enrolled with the entity but not receiving benefits under
this title.''.

SEC. 4. QUALITY PERFORMANCE INCENTIVE PAYMENT PROGRAM FOR PROVIDERS AND
FACILITIES THAT PROVIDE SERVICES TO MEDICARE
BENEFICIARIES WITH ESRD.

Section 1881(b) of the Social Security Act (42 U.S.C. 1395rr(b)),
as amended by section 623(d)(1) of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (Public Law 108-173; 117
Stat. 2313), is amended--
(1) in paragraph (11)(B), by striking ``paragraphs (12) and
(13)'' and inserting ``paragraphs (12), (13), and (14)'';
(2) in paragraph (12), by striking ``In lieu of'' and
inserting ``Subject to paragraph (14), in lieu of'';
(3) in paragraph (13)(A), in the matter preceding clause
(i), by striking ``The payment amounts'' and inserting
``Subject to paragraph (14), the payment amounts''; and
(4) by adding at the end the following new paragraph:
``(14) Renal dialysis performance incentive payment
program.--
``(A) Establishment of program.--
``(i) In general.--The Secretary shall
establish a program under which financial
incentive payments are provided each year to
providers of services and renal dialysis
facilities that receive payments under
paragraph (12) or (13) and demonstrate the
provision of superior quality health care to
individuals with end stage renal disease.
``(ii) Program to begin in 2007.--The
Secretary shall establish the program so that
National Performance Quality Payments
(described in subparagraph (C)) and National
Quality Improvement Payments (described in
subparagraph (D)) are made with respect to 2007
and each subsequent year.
``(iii) Requirement.--In order for a
provider of services or a renal dialysis
facility to be eligible for a financial
incentive payment under this section, the
provider or facility shall, not later than a
date specified by the Secretary during the
baseline year (as defined in subparagraph
(D)(iv)), submit such data on the quality
measures as the Secretary determines
appropriate for the purpose of establishing a
baseline with respect to the provider or
facility.
``(iv) Use of most recent data.--Financial
incentive payments under this paragraph shall
be based upon the most recent available quality
data as provided by the Consolidated Renal
Operations in a Web-enabled Network (CROWN)
system.
``(v) Pediatric facilities not included in
program.--For purposes of this paragraph,
including subparagraph (F)(i), the terms `renal
dialysis facility' and `facility' do not
include a renal dialysis facility at least 50
percent of whose patients are individuals under
18 years of age.
``(B) Payments.--
``(i) In general.--Beginning with 2007, the
Secretary shall allocate the total amount
available for financial incentive payments in
the year under subparagraph (F)(ii) as follows:
``(I) The amount allocated for
National Performance Quality Payments
shall be greater than the amount
allocated for National Quality
Improvement Payments.
``(II) With respect to National
Performance Quality Payments, the per
capita amount of the payments shall be
greatest for the organizations offering
the highest performing plans or
contracts.
``(III) With respect to National
Quality Improvement Payments, the per
capita amount of the payments shall be
greatest for the organizations offering
plans or contracts with the highest
degree of improvement.
``(ii) Amount of quality incentive
payment.--
``(I) In general.--The amount of a
financial incentive payment under
subparagraph (C) or (D) to a provider
of services or renal dialysis facility
shall be determined by multiplying the
number of beneficiaries who received
dialysis services from the provider or
facility during the year for which the
payment is provided by a dollar amount
established by the Secretary that is the same with respect to each
beneficiary receiving dialysis services from the provider or facility.
``(II) Limitation on total amount
of quality incentive payments.--The
total amount of all the financial
incentive payments given with respect
to a year shall be equal to the amount
available for such payments in the year
under subparagraph (F)(ii).
``(iii) Use of quality incentive
payments.--Financial incentive payments
received under this paragraph may be used for
the following purposes:
``(I) To invest in information
technology systems that will improve
the quality of care provided to
individuals with end stage renal
disease.
``(II) To initiate, continue, or
enhance health care quality programs
for individuals with end stage renal
disease.
``(III) Any other purpose
determined appropriate by the
Secretary.
``(iv) Limitations on quality incentive
payments.--
``(I) Only eligible for 1 payment
in a year.--A provider of services or a
renal dialysis facility may not receive
more than 1 financial incentive payment
under this paragraph in a year. If a
provider of services or a renal
dialysis facility is eligible for a
National Performance Quality Payment
and a National Quality Improvement
Payment, the organization shall be
given the National Performance Quality
Payment.
``(II) Services must be available
for entire year.--A provider of
services or renal dialysis facility is
not eligible for a financial incentive
payment under this paragraph unless the
provider or facility is in operation
and providing dialysis services for the
entire year for which the payment is
provided.
``(C) National performance quality payments.--The
Secretary shall make National Performance Quality
Payments to the providers of services and renal
dialysis facilities that receive ratings for the year
in the top applicable percent of all providers and
facilities rated by the Secretary pursuant to
subparagraph (E) for the year. For purposes of the
preceding sentence, the term `applicable percent' means
a percent determined appropriate by the Secretary in
consultation with the Quality Advisory Board, but in no
case less than 20 percent.
``(D) National quality improvement payments.--
``(i) In general.--National Quality
Improvement Payments shall be paid to each
provider of services and renal dialysis
facility that receives ratings under
subparagraph (E) for the payment year that
exceed the ratings received under such
subparagraph for the provider or facility for
the baseline year.
``(ii) National improvement standard.--
Beginning with 2009, the Secretary shall have
the authority to implement a national
improvement standard that providers of services
and renal dialysis facilities must meet in
order to receive a National Quality Improvement
Payment.
``(iii) Application of thresholds.--In
determining whether a rating received under
subparagraph (E) for the payment year exceeds
the rating received under such subsection for
the baseline year, the Secretary shall hold any
applicable thresholds constant.
``(iv) Baseline year defined.--In this
subparagraph, the term `baseline year' means
the year prior to the payment year.
``(E) Rating methodology.--
``(i) Scoring and ranking systems.--
``(I) In general.--The Secretary
shall develop separate scoring and
ranking systems for purposes of
determining which providers of services
and renal dialysis facilities qualify
for--
``(aa) National Performance
Quality Payments; and
``(bb) National Quality
Improvement Payments.
``(II) Requirements.--In
developing, implementing, and updating
the scoring and ranking systems, the
Secretary shall--
``(aa) consult with the
Quality Advisory Board
established under section 1898
and the network administrative
organizations designated under
subsection (c)(1)(A)(i)(II);
and
``(bb) take into account
the report on health care
performance measures submitted
by the Institute of Medicine of
the National Academy of
Sciences under section 238 of
the Medicare Prescription Drug,
Improvement, and Modernization
Act of 2003.
``(ii) Measures.--
``(I) In general.--Subject to
subclause (II), in developing the
scoring and ranking system under clause
(i), the Secretary shall use all
measures determined appropriate by the
Secretary. Such measures may include
the following:
``(aa) The measures
profiled in the ESRD Clinical
Performance Measures (CPM)
project of the Centers for
Medicare & Medicaid Services.
``(bb) The measures for
bone disease to be determined
by the K-DOQI project of the
National Kidney Foundation.
``(II) Scoring and ranking system
for national performance quality
payments only based on measures of
clinical effectiveness.--The scoring
and ranking system for National
Performance Quality Payments shall only
include measures of clinical
effectiveness.
``(iii) Weights of measures.--In developing
the scoring and ranking systems under clause
(i), the Secretary shall assign weights to the
measures used by the Secretary under such
system pursuant to clause (ii). In assigning
such weights, the Secretary shall provide
greater weight to the measures that measure
clinical effectiveness.
``(iv) Risk adjustment.--In developing the
scoring and ranking systems under clause (i),
the Secretary shall establish procedures for
adjusting the data used under the system to
take into account differences in the health
status of individuals receiving dialysis
services from providers of services and renal
dialysis facilities.
``(v) Update.--
``(I) In general.--The Secretary
shall as determined appropriate, but in
no case more often than once each 12-
month period, update the scoring and
ranking systems developed under clause
(i), including the measures used by the
Secretary under such system pursuant to
clause (ii), the weights established
pursuant to clause (iii), and the risk
adjustment procedures established
pursuant to clause (iv).
``(II) Comparison for national
quality improvement payments.--Each
update under subclause (I) of the
National Quality Improvement Payments
shall allow for the comparison of data
from one year to the next for purposes
of identifying which providers of
services and renal dialysis facilities
will receive such Payments.
``(III) Consultation.--In
determining when and how to update the
scoring and ranking systems under
subclause (I), the Secretary shall
consult with the Quality Advisory
Board.
``(F) Funding of payments.--
``(i) Reduction in payments.--In order to
provide the funding for the financial incentive
payments under this paragraph, for each year
(beginning with 2007), the Secretary shall
reduce each payment under paragraphs (12) and
(13) to a provider of service and a renal
dialysis facility by an amount equal to 2
percent of the payment.
``(ii) Amount available.--The amount
available for financial incentive payments
under this section with respect to a year shall
be equal to the amount of the reduction in
expenditures under the Federal Supplementary
Medical Insurance Trust Fund in the year as a
result of the application of clause (i).''.

SEC. 5. MEDICARE INNOVATIVE QUALITY PRACTICE AWARD PROGRAM.

(a) Establishment.--The Secretary of Health and Human Services (in
this section referred to as the ``Secretary'') shall establish a
program under which the Secretary shall award bonus payments to
entities and individuals providing items and services under the
medicare program under title XVIII of the Social Security Act that
demonstrate innovative practices, structural improvements, or capacity
enhancements that improve the quality of health care provided to
medicare beneficiaries by such entities and individuals.
(b) Period of Program.--Awards under the program shall be made
during 2006, 2007, and 2008.
(c) Selection of Recipients.--
(1) In general.--The Secretary shall ensure that the
entities and individuals that receive an award under this
section have demonstrated improvements in the quality of health
care provided to medicare beneficiaries by such entities and
individuals through comparison with a control group or baseline
evaluation. For purposes of the program, improvements in the
quality of health care provided to medicare beneficiaries shall
be defined as providing additional services, such as translator
services and health literacy education services, or providing
care to an expanded service area or an expanded population
through telemedicine, increased cultural competence, or other
means, in combination with improved health outcomes or reduced
beneficiary costs.
(2) All entities and individuals eligible.--Any entity,
including a plan, or individual that is providing services
under the medicare program is eligible for receiving an award
under this section.
(3) Consultation.--In selecting the recipients of the
awards under this section, the Secretary shall consult with the
Quality Advisory Board established under section 1898 of the
Social Security Act, as added by section 7.
(d) Minimum Number of Awards.--The Secretary shall make at least 10
awards under this section in each year of the program.
(e) Application.--An entity or individual desiring an award under
this section shall submit an application to the Secretary at such time,
in such manner, and accompanied by such information as the Secretary
may reasonably require.
(f) Amount of Award.--
(1) In general.--Subject to paragraph (2) and subsection
(h), the Secretary shall determine the amount of awards under
this section.
(2) Requirement.--In determining the amount of awards under
this section, the Secretary shall ensure that--
(A) no single award is excessive; and
(B) consideration is given to the number of
beneficiaries served by the entity or individual
receiving the award.
(g) Report.--Not later than 6 months after the date on which the
program established under subsection (a) ends, the Secretary shall
submit to Congress a report on the program together with such
recommendations for legislation or administrative action as the
Secretary determines appropriate.
(h) Funding.--Out of any funds in the Treasury not otherwise
appropriated, there are appropriated $10,000,000 for each of 2006,
2007, and 2008 to carry out this section.

SEC. 6. QUALITY IMPROVEMENT DEMONSTRATION PROGRAM FOR PEDIATRIC RENAL
DIALYSIS FACILITIES PROVIDING CARE TO MEDICARE
BENEFICIARIES WITH END STAGE RENAL DISEASE.

(a) Demonstration Projects.--
(1) Establishment.--The Secretary of Health and Human
Services (in this section referred to as the ``Secretary'')
shall conduct a 3-year demonstration program under which the
Secretary establishes demonstration projects that encourage
pediatric dialysis facilities to provide superior quality
health care to individuals with end stage renal disease.
(2) Consultation in selecting sites.--In selecting the
demonstration project sites under this section, the Secretary
shall consult with the Quality Advisory Board established under
section 1898 of the Social Security Act, as added by section 7.
(3) Submission of quality data.--Under the demonstration
projects, demonstration sites shall select appropriate measures
of quality of care provided to individuals eligible for
benefits under title XVIII of the Social Security Act who are
under 18 years of age and shall report data on such measures to
the Secretary.
(4) Assessment of measures.--The Secretary, in consultation
with the Quality Advisory Board, shall assess the validity and
reliability of the measures selected under paragraph (2).
(b) 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.
(c) Funding.--
(1) In general.--Subject to paragraph (2), the Secretary
shall provide for the transfer from the Federal Supplementary
Medical 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 program under
this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate expenditures made by the Secretary do not exceed the
amount which the Secretary would have expended if the
demonstration program under this section was not implemented.
(d) Report.--Not later than 6 months after the date on which the
demonstration program established under this section ends, the
Secretary shall prepare and submit to Congress a report on the
demonstration program together with--
(1) recommendations on whether pediatric renal dialysis
facilities should be included in the renal dialysis performance
payment program under section 1881(b)(14) of the Social
Security Act (42 U.S.C. 1395rr(b)(14)), as added by section
4(4); and
(2) such recommendations for legislation or administrative
action as the Secretary determines appropriate.
(e) Pediatric Renal Dialysis Facility Defined.--The term
``pediatric renal dialysis facility'' means a renal dialysis facility
that receives payments under paragraph (12) or (13) of section 1881(b)
of the Social Security Act (42 U.S.C. 1395rr(b)) and is not eligible to
participate in the renal dialysis performance payment program under
paragraph (14) of such section (as added by section 4(4)) because of
the application of subparagraph (A)(iv) of such paragraph.

SEC. 7. MEDICARE QUALITY ADVISORY BOARD.

Title XVIII of the Social Security Act, as amended by section 1016
of the Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Public Law 108-173; 117 Stat. 2447), is amended by adding at
the end the following new section:

``quality advisory board

``Sec. 1898. (a) Establishment.--The Secretary shall establish a
Medicare Quality Advisory Board (in this section referred to as the
`Board').
``(b) Membership and Terms.--
``(1) In general.--Subject to paragraphs (3), (4), and (5),
the Board shall be composed of representatives described in
paragraph (2) who shall serve for such term as the Secretary
may specify.
``(2) Representatives.--Representatives described in this
subparagraph include representatives of the following:
``(A) Patients or patient advocate organizations.
``(B) Individuals with expertise in the provision
of quality care, such as medical directors, heads of
hospital quality improvement committees, health
insurance plan representatives, and academic
researchers.
``(C) Health care professionals and providers.
``(D) Organizations that focus on the measurement
and reporting of quality indicators.
``(E) State government health care programs.
``(3) Majority nonproviders.--Individuals who are directly
involved in the provision, or management of the delivery, of
items and services covered under this title shall not
constitute a majority of the membership of the Board.
``(4) Experience with urban and rural health care issues.--
The membership of the Board should be representative of
individuals with experience with urban health care issues and
individuals with experience with rural health care issues.
``(5) Experience across a spectrum of activities.--The
membership of the Board should be representative of individuals
with experience across the spectrum of activities that the
Secretary is responsible for with respect to this title,
including the coverage of new services and technologies,
payment rates and methodologies, beneficiary services, and
claims processing.
``(c) Duties.--
``(1) Incentive programs.--
``(A) Advice.--The Board shall advise the Secretary
regarding--
``(i) the development, implementation, and
updating of the scoring and ranking systems
under sections 1860C-2(e) and 1881(b)(14)(E);
``(ii) the determination of the applicable
percent for national performance quality
payments under sections 1860C-2(c) and
1881(b)(14)(C);
``(iii) the selection of recipients of
innovative quality practice awards under the
program under section 5 of the Medicare Quality
Improvement Act of 2004;
``(iv) the selection of demonstration
project sites and the assessment of measures of
quality of care under the demonstration program
under section 6 of the Medicare Quality
Improvement Act of 2004; and
``(v) the study and report under section
8(b) of the Medicare Quality Improvement Act of
2004.
``(B) Annual report on incentive programs.--The
Board shall submit an annual report to the Secretary
and Congress on the programs under sections 1860C-2 and
1881(b)(14).
``(C) Additional duties.--The Board shall perform
such additional functions to assist the Secretary in
carrying out the programs described in clauses (ii) and
(iii) of subparagraph (A) and in subparagraph (B) as
the Secretary may specify.
``(2) Development and assessment of national priorities and
agenda.--The Board shall develop and assess national priorities
and an agenda for improving the quality of items and services
furnished to individuals entitled to benefits under this title.
``(d) Waiver of Administrative Limitation.--The Secretary shall
establish the Board 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. 8. STUDIES AND REPORTS ON FINANCIAL INCENTIVES FOR QUALITY ITEMS
AND SERVICES UNDER THE MEDICARE PROGRAM.

(a) IOM Study and Report on How Medicare Payments for Items and
Services Affect the Quality of Such Items and Services.--
(1) Study.--The Secretary of Health and Human Services (in
this section referred to as the ``Secretary'') shall request
the Institute of Medicine of the National Academy of Sciences
to conduct a study on how the payment mechanisms for items and
services under the original medicare fee-for-service program
under parts A and B of title XVIII of the Social Security Act
effect the quality of such items and services.
(2) Report to congress.--Not later than January 1, 2006,
the Secretary shall submit to Congress a report on the results
of the study described in paragraph (1) together with such
recommendations for legislation or administrative action as the
Secretary determines appropriate.
(b) HHS Study and Report on Providing Financial Incentives for
Quality Services Under the Original Medicare Fee-for-Service Program.--
(1) Study.--The Secretary of Health and Human Services
shall conduct a study on the actions necessary to establish a
payment system under the original medicare fee-for-service
program under parts A and B of title XVIII of the Social
Security Act that aligns the quality of services provided under
such program with the reimbursement provided under such program
for such services.
(2) Report.--
(A) In general.--Not later than January 1, 2008,
the Secretary shall submit a report to Congress on the
study conducted under paragraph (1).
(B) Contents.--The report submitted under
subparagraph (A) shall contain recommendations with
respect to--
(i) the incremental steps necessary to
develop the payment system described in
paragraph (1);
(ii) the performance measures to be used
under such payment system;
(iii) the incentive approaches to be used
under such payment system;
(iv) the geographic and risk adjusters to
be used under such payment system; and
(v) a strategy for aligning payment with
performance across all parts of the medicare
program.
(3) Requirement.--In conducting the study under paragraph
(1) and preparing the report under paragraph (2), the Secretary
shall--
(A) consult with the Quality Advisory Board
established under section 1898 of the Social Security
Act, as added by section 7; and
(B) take into account the report on health care
performance measures submitted by the Institute of
Medicine of the National Academy of Sciences under
section 238 of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (Public Law
108-173; 117 Stat. 2213).

SEC. 9. MEDPAC STUDY AND REPORT ON USE OF ADJUSTER MECHANISMS UNDER
MEDICARE QUALITY PERFORMANCE INCENTIVE PAYMENT PROGRAMS.

(a) Study.--The Medicare Payment Advisory Commission shall conduct
a study--
(1) to determine whether it is appropriate to incorporate a
geographic adjuster into the quality performance incentive
payment programs under sections 1860C-2 and 1881(b)(14) of the
Social Security Act, as added by sections 3 and 4,
respectively, to account for different environments of care,
regional payment variation, regional variation of patient
satisfaction, and regional case mix variation; and
(2) on the most appropriate methods to risk adjust data
used under the scoring and ranking system under such programs
pursuant to sections 1860C-2(e)(4) and 1881(b)(14)(E)(iv) of
the Social Security Act.
(b) Report.--Not later than January 1, 2006, the Commission shall
submit a report to Congress and the Secretary of Health and Human
Services on the study conducted under subsection (a) together with
recommendations for such legislation and administrative actions as the
Commission considers appropriate. If such study concludes that a
geographic adjuster described in subsection (a)(1) is appropriate, the
Commission shall include in the report recommendations on how such
adjuster could be incorporated into the quality performance incentive
payment programs described in such subsection.

SEC. 10. DEMONSTRATION PROGRAM ON MEASURING THE QUALITY OF HEALTH CARE
FURNISHED TO PEDIATRIC PATIENTS UNDER THE MEDICAID AND
SCHIP PROGRAMS.

(a) Establishment.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall
conduct a 3-year demonstration program to examine the
development and use of quality measures, pay-for-performance
programs, and other strategies in order to encourage providers
to furnish superior quality health care to individuals under 18
years of age under the medicaid program under title XIX of the
Social Security Act (42 U.S.C. 1396 et seq.) and under the
SCHIP program under title XXI of such Act (42 U.S.C. 1397aa et
seq.).
(2) Authority.--The Secretary shall conduct the
demonstration program under this section pursuant to the
authority provided under this section and not under the
authority provided under section 1115 of the Social Security
Act (42 U.S.C. 1315).
(b) Sites To Include Multiple Settings and Providers.--In selecting
the demonstration program sites under this section, the Secretary shall
ensure that the sites include health care delivery in multiple settings
and through multiple providers, such as school-based settings and
mental health providers.
(c) Waiver Authority.--The Secretary may waive such requirements of
titles XI, XIX, and XXI of the Social Security Act (42 U.S.C. 1301 et
seq.; 1396 et seq.; 1397aa et seq.) as may be necessary to carry out
the purposes of the demonstration program under this section.
(d) Funding.--
(1) In general.--Subject to paragraph (2), for purposes of
conducting the demonstration program under this section,
expenditures under the demonstration program shall be treated
as medical assistance under section 1903 of the Social Security
Act (42 U.S.C. 1396) or child health assistance under section
2105 of such Act (42 U.S.C. 1397).
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that the
aggregate expenditures made by the Secretary do not exceed the
amount which the Secretary would have expended if the
demonstration program under this section had not been
implemented.
(e) Report.--Not later than 6 months after the date on which the
demonstration program under this section ends, the Secretary shall
submit to Congress a report on the demonstration program together with
such recommendations for legislation or administrative action as the
Secretary determines appropriate.

SEC. 11. PROVISIONS RELATING TO MEDICAID QUALITY IMPROVEMENTS.

(a) Authorization for Additional Staff at the Center for Medicaid
and State Operations.--
(1) Additional staff.--The Secretary of Health and Human
Services shall have the authority to hire 5 full-time employees
to be employed within the Center for Medicaid and State
Operations within the Centers for Medicare & Medicaid Services
from among individuals who have experience with, or have been
trained as, health professionals and who have experience in any
of the following areas:
(A) Quality improvement.
(B) Chronic care management.
(C) Care coordination.
(2) Requirement foe experience with pediatric
populations.--At least 1 of the individuals employed within the
Center for Medicaid and State Operations pursuant to paragraph
(1) shall have experience with pediatric populations.
(3) Duties of additional staff.--The employees hired under
paragraph (1) shall be responsible for developing strategies to
access and promote quality improvement, chronic care
management, and care coordination with the medicaid program and
for providing technical assistance to the States.
(4) Authorization of appropriations.--There are authorized
to be appropriated such sums as may be necessary to carry out
this subsection.
(b) CMS Study and Report on Medicare and Medicaid Data
Coordination.--
(1) Study.--The Secretary of Health and Human Services
shall conduct a study to identify--
(A) efforts to coordinate and integrate data from
the medicare program under title XVIII of the Social
Security Act and the medicaid program under title XIX
of such Act;
(B) barriers to data coordination;
(C) the potential benefits of data integration as
perceived by medicare and medicaid program officials,
policymakers, health care providers, and beneficiaries;
and
(D) steps necessary to coordinate and integrate the
beneficiary data from the medicare and medicaid
programs.
(2) Report to congress.--Not later than December 31, 2004,
the Secretary of Health and Human Services shall submit to
Congress a report on the results of the study conducted under
paragraph (1) together with such recommendations for
legislation or administrative action as the Secretary
determines appropriate.
(c) Medpac Study and Report on Beneficiaries Who Are Dually
Eligible for Medicare and Medicaid.--
(1) Study.--The Medicare Payment Advisory Commission shall
conduct a study to determine the characteristics of individuals
who are eligible to receive benefits under both the medicare
and medicaid programs under titles XVIII and XIX of the Social
Security Act, respectively, identify the costliest groups of
individuals who are eligible for benefits under both programs,
identify the services used by such individuals, and develop
recommendations on how the provision of those services could be
better coordinated for improved health outcomes and reduced
costs.
(2) Report.--Not later than June 30, 2005, the Commission
shall submit a report to Congress on the study conducted under
paragraph (1) together with recommendations for such
legislation and administrative actions as the Commission
considers appropriate.
(d) Medpac Study and Report on Care Coordination Programs for Dual-
Eligibles.--
(1) Study.--The Medicare Payment Advisory Commission shall
conduct a study on care coordination programs available to
individuals who are eligible to receive benefits under both the
medicare and medicaid programs under titles XVIII and XIX of
the Social Security Act, respectively, the impact of such care
coordination programs on those individuals, the impact of such
care coordination programs on the costs of the medicare and
medicaid programs to the Federal Government, and whether any
savings from care coordination programs are counted as a
benefit to either program.
(2) Report.--Not later than June 30, 2005, the Commission
shall submit a report to Congress on the study conducted under
paragraph (1) together with recommendations for such
legislation and administrative actions as the Commission
considers appropriate.

SEC. 12. DEMONSTRATION PROGRAM FOR MEDICAL SMART CARDS.

(a) In General.--The Secretary of Health and Human Services (in
this section referred to as the ``Secretary'') shall establish a 5-year
demonstration program under which the Secretary shall award grants for
the establishment of demonstration projects to provide for the
development and use of Medical Smart Cards and to examine the impact of
Medical Smart Cards on health care costs, quality of care, and patient
safety.
(b) Eligibility.--To be eligible to receive a grant under
subsection (a), an entity shall be a public or private nonprofit
entity.
(c) Application.--An eligible entity desiring a grant under this
section shall submit an application to the Secretary at such time, in
such manner, and accompanied by such information as the Secretary may
reasonably require.
(d) Approval of Applications.--
(1) In general.--The Secretary shall approve applications
for grants under this section in accordance with criteria
established by the Secretary.
(2) Limitation.--The Secretary shall approve at least 1
application for a demonstration project that is conducted at a
hospital or hospital system with a large rural service area.
(e) Use of Funds.--An eligible entity shall use amounts received
under a grant under this section to carry out the purposes described in
subsection (a).
(f) Report.--Not later than 6 months after the date on which the
demonstration program established under subsection (a) ends, the
Secretary shall submit to Congress a report on the demonstration
program together with such recommendations for legislation or
administrative action as the Secretary determines appropriate.
(g) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out this section.
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