HR 3075 IH

To amend title XVIII of the Social Security Act to make corrections and refinements in the Medicare Program as revised by the Balanced Budget Act of 1997.

October 14, 1999

Mr. THOMAS (for himself, Mr. ARCHER, Mr. CRANE, Mr. SHAW, Mrs. JOHNSON of Connecticut, Mr. HOUGHTON, Mr. HERGER, Mr. MCCRERY, Mr. CAMP, Mr. RAMSTAD, Mr. NUSSLE, Mr. SAM JOHNSON of Texas, Ms. DUNN, Mr. COLLINS, Mr. PORTMAN, Mr. ENGLISH, Mr. WATKINS, Mr. HAYWORTH, Mr. WELLER, Mr. HULSHOF, Mr. MCINNIS, Mr. LEWIS of Kentucky, Mr. FOLEY, Mr. BLUNT, Mr. THUNE, Mr. RYAN of Wisconsin, Mr. HUTCHINSON, Mr. RILEY, Mr. PETERSON of Pennsylvania, Mr. LATHAM, Mr. STUMP, Mr. SMITH of Michigan, Mr. WALDEN of Oregon, Ms. DANNER, Mr. SWEENEY, Mr. HASTINGS of Washington, Mr. BACHUS, Mr. KOLBE, Mr. LATOURETTE, Mr. BASS, Mr. PICKERING, Mr. SHAYS, Mr. MORAN of Kansas, Mr. LUCAS of Oklahoma, and Ms. PRYCE of Ohio) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To amend title XVIII of the Social Security Act to make corrections and refinements in the Medicare Program as revised by the Balanced Budget Act of 1997.

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 BBA; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Medicare Balanced Budget Refinement Act of 1999'.

(b) AMENDMENTS TO SOCIAL SECURITY ACT- Except as otherwise specifically provided, whenever in this title an amendment is expressed in terms of an amendment to or repeal of a section or other provision, the reference shall be considered to be made to that section or other provision of the Social Security Act.

(c) REFERENCES TO BALANCED BUDGET ACT OF 1997- In this Act, the term `BBA' means the Balanced Budget Act of 1997 (Public Law 105-33).

(d) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; references to BBA; table of contents.

Sec. 2. Congressional policies regarding implementation of certain provisions.

TITLE I--PROVISIONS RELATING TO PART A

Subtitle A--PPS Hospitals

Sec. 101. One-year delay in transition for indirect medical education (IME) percentage adjustment.

Subtitle B--PPS Exempt Hospitals

Sec. 111. Wage adjustment of percentile cap for PPS-exempt hospitals.

Sec. 112. Enhanced payments for long-term care and psychiatric hospitals until development of prospective payment systems for those hospitals.

Sec. 113. Per discharge prospective payment system for long-term care hospitals.

Sec. 114. Per diem prospective payment system for psychiatric hospitals.

Subtitle C--Adjustments to PPS Payments for Skilled Nursing Facilities

Sec. 121. Temporary increase in payment for certain high cost patients.

Sec. 122. Market basket increase.

Sec. 123. Authorizing for facilities to elect immediate transition to federal rate.

Sec. 124. Part a pass-through payment for certain ambulance services, prostheses, and chemotherapy drugs.

Sec. 125. Provision for part B add-ons for facilities participating in the NHCMQ demonstration project.

TITLE II--PROVISIONS RELATING TO PART B

Subtitle A--Adjustments to Physician Payment Updates

Sec. 201. Modification of update adjustment factor provisions to reduce update oscillations and allow for estimate revisions.

Subtitle B--Hospital Outpatient Services

Sec. 211. Outlier adjustment and transitional pass-through for certain medical devices, drugs, and biologicals.

Sec. 212. Establishing a transitional corridor for application of OPD PPS.

Subtitle C--Other

Sec. 221. Application of separate caps to physical and speech therapy services.

Sec. 222. Optional exemption of certain high acuity facility patients.

Sec. 223. Update in renal dialysis composite rate.

Sec. 224. Temporary update in durable medical equipment and oxygen rates.

TITLE III--PROVISIONS RELATING TO PARTS A AND B

Subtitle A--Home Health Services

Sec. 301. Adjustment to reflect administrative costs not included in the interim payment system.

Sec. 302. Delay in application of 15 percent reduction in payment rates for home health services until 1 year after implementation of prospective payment system.

Subtitle B--Direct Graduate Medical Education

Sec. 311. Use of national average payment methodology in computing direct graduate medical education (DGME) payments.

TITLE IV--RURAL PROVIDER PROVISIONS

Sec. 401. Permitting reclassification of certain urban hospitals as rural hospitals.

Sec. 402. Update of standards applied for geographic reclassification for certain hospitals.

Sec. 403. Improvements in the critical access hospital (CAH) program.

Sec. 404. 5-year extension of medicare dependent hospital (MDH) program.

Sec. 405. Rebasing for certain sole community hospitals.

Sec. 406. Increased flexibility in providing graduate physician training in rural areas.

Sec. 407. Elimination of certain restrictions with respect to hospital swing bed program.

Sec. 408. Grant program for rural hospital transition to prospective payment.

Sec. 409. MedPAC study of rural providers.

TITLE V--PROVISIONS RELATING TO PART C (MEDICARE+CHOICE PROGRAM)

Subtitle A--Medicare+Choice

Sec. 501. Phase-in of new risk adjustment methodology.

Sec. 502. Encouraging offering of medicare+choice plans in areas without plans.

Sec. 503. Modification of 5-year re-entry rule for contract terminations.

Sec. 504. Continued computation and publication of AAPCC data.

Sec. 505. Permitting enrollment in alternative medicare+choice plans and medigap coverage in case of involuntary termination of medicare+choice enrollment.

Sec. 506. Allowing variation in premium waivers within a service area if Medicare+Choice payment rates vary within the area.

Sec. 507. Delay in deadline for submission of adjusted community rates and related information.

Sec. 508. 2 year extension of medicare cost contracts.

Sec. 509. Miscellaneous changes.

Sec. 510. MedPAC report on medicare MSA (medical savings account) plans.

Subtitle B--Social Health Maintenance Organizations (SHMOs)

Sec. 511. Extension of social health maintenance organization demonstration project authority.

SEC. 2. CONGRESSIONAL POLICIES REGARDING IMPLEMENTATION OF CERTAIN PROVISIONS.

(a) INTENTION TO MAKE 1999 BASELINE BUDGET NEUTRAL IN APPLYING THE HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM- With respect to determining the amount of copayments described in paragraph (3)(a)(ii) of section 1833(t) of the Social Security Act, as added by section 4523(a) of Balanced Budget Act of 1997, Congress finds that such amount should be determined in a budget neutral manner without regard to such section and that the Secretary of Health and Human Services has the authority to determine such amount without regard to such section.

(b) INTENTION TO USE CURRENT RISK ADJUSTMENT AND CONTINUOUS OPEN ENROLLMENT UNDER THE FRAIL ELDERLY DEMONSTRATION PROJECT- Congress finds that, in any period in which the demonstration project (known as the `EverCare' project) to demonstrate the application of capitation payment rates for frail elderly medicare beneficiaries under a specialized program that utilizes a specialized interdisciplinary team is in effect, with respect to a nursing facility which is participating in such project as of the date of the enactment of this Act, the Secretary of Health and Human Services has the authority to provide, and the Secretary should provide, that the risk-adjustment described in section 1853(c)(3) of such Act will not apply to a frail elderly Medicare+Choice beneficiary who is receiving services from the facility under the demonstration project.

(c) INTENTION TO USE REGULATORY PROCESS FOR IMPLEMENTING INHERENT REASONABLENESS POLICY- Congress finds that the Secretary of Health and Human Services should not use, or permit fiscal intermediaries or carriers to use, the inherent reasonableness authority under part B of title XVIII of such Act until the Secretary has published proposed and final rules outlining the process for the exercise of such authority.

(d) INTENTION TO DELAY VOLUME CAPS FOR HOSPITAL OUTPATIENT SERVICES- Congress finds that the Secretary of Health and Human Services has the authority to delay, and should delay for a period of 2 years, implementation of a volume cap for hospital outpatient services under part B of title XVIII of such Act.

(e) INTENTION TO PROTECT HOSPITALS FROM RECOUPMENT RESULTING FROM ERRORS BY FISCAL INTERMEDIARIES IN CERTAIN DSH DETERMINATIONS-

(1) IN GENERAL- Congress finds that the Secretary of Health and Human Services has the authority to not seek recoupment of (or otherwise to reduce, disallow, or adjust payments), and should not seek to recoup, payments that result from an error of a fiscal intermediary in providing for the treatment described in paragraph (2) for discharges occurring before October 1, 1998.

(2) TREATMENT DESCRIBED- The treatment described in this paragraph is that, in calculating the disproportionate patient percentage (as defined in section 1886(d)(5)(F)(vi) of such Act) of a hospital, patient days for individuals eligible for general assistance under the laws of the State in which the hospital is located, for purposes of subclause (II) of such section, consist of patients who (for such days) were eligible for medical assistance under a State plan approved under title XIX of such Act.

TITLE I--PROVISIONS RELATING TO PART A

Subtitle A--PPS Hospitals

SEC. 101. ONE-YEAR DELAY IN TRANSITION FOR INDIRECT MEDICAL EDUCATION (IME) PERCENTAGE ADJUSTMENT.

(a) IN GENERAL- Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)), as amended by section 4621(a)(1) of BBA, is amended--

(1) in subclause (IV), by inserting `and 2001' after `2000'; and

(2) by striking `2000' in subclause (V) and inserting `2001'.

(b) CONFORMING AMENDMENT RELATING TO DETERMINATION OF STANDARDIZED AMOUNT- Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)), as amended by section 4621(a)(2) of BBA, is amended by inserting `or any additional payments under such paragraph resulting from the amendment made by section 101(a) of Medicare Balanced Budget Refinement Act of 1999' after `Balanced Budget Act of 1997'.

Subtitle B--PPS Exempt Hospitals

SEC. 111. WAGE ADJUSTMENT OF PERCENTILE CAP FOR PPS-EXEMPT HOSPITALS.

(a) IN GENERAL- Section 1886(b)(3)(H) (42 U.S.C. 1395ww(b)(3)(H)), as amended by section 4414 of BBA, is amended--

(1) in clause (i), by inserting `, as adjusted under clause (iii)',

(2) in clause (ii), by striking `clause (i)' and `such clause' and inserting `subclause (I)' and `such subclause' respectively,

(3) by striking `(H)(i)' and inserting `(ii)(I)',

(4) by redesignating clauses (ii) and (iii) as subclauses (II) and (III),

(5) by inserting after clause (ii), as so redesignated, the following new clause:

`(iii) In applying clause (ii)(I) in the case of a hospital or unit, the Secretary shall provide for an appropriate adjustment to the labor-related portion of the amount determined under such subparagraph to take into account differences between average wage-related costs in the area of the hospital and the national average of such costs within the same class of hospital.',

and

(6) by inserting before clause (ii), as so redesignated, the following new clause:

`(H)(i) In the case of a hospital or unit that is within a class of hospital described in clause (iv), for a cost reporting period beginning during fiscal years 1998 through 2002, the target amount for such a hospital or unit may not exceed the amount as updated up to or for such cost reporting period under clause (ii).'

(b) EFFECTIVE DATE- The amendments made by subsection (a) apply to cost reporting periods beginning on or after October 1, 1999.

SEC. 112. ENHANCED PAYMENTS FOR LONG-TERM CARE AND PSYCHIATRIC HOSPITALS UNTIL DEVELOPMENT OF PROSPECTIVE PAYMENT SYSTEMS FOR THOSE HOSPITALS.

Section 1886(b)(2) (42 U.S.C. 1395ww(b)(2)), as added by section 4415(b) of BBA, is amended--

(1) in subparagraph (A), by striking `In addition to' and inserting `Except as provided in subparagraph (E), in addition to'; and

(2) by adding at the end the following new subparagraph:

`(E)(i) In the case of an eligible hospital that is a hospital or unit that is within a class of hospital described in clause (ii) with a 12-month cost reporting period beginning before the enactment of this subparagraph, in determining the amount of the increase under subparagraph (A), the Secretary shall substitute for the percentage of the target amount applicable under subparagraph (A)(ii)--

`(I) for a cost reporting period beginning on or after October 1, 2000, and before September 30, 2001, 1.5 percent; and

`(II) for a cost reporting period beginning on or after October 1, 2001, and before September 30, 2002, 2 percent.

`(ii) For purposes of clause (i), each of the following shall be treated as a separate class of hospital:

`(I) Hospitals described in clause (i) of subsection (d)(1)(B) and psychiatric units described in the matter following clause (v) of such subsection.

`(II) Hospitals described in clause (iv) of such subsection.'.

SEC. 113. PER DISCHARGE PROSPECTIVE PAYMENT SYSTEM FOR LONG-TERM CARE HOSPITALS.

(a) DEVELOPMENT OF SYSTEM-

(1) IN GENERAL- The Secretary of Health and Human Services shall develop a per discharge prospective payment system for payment for inpatient hospital services of long-term care hospitals described in section 1886(d)(1)(B)(iv) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(iv)) under the medicare program. Such system shall include an adequate patient classification system that reflects the differences in patient resource use and costs and shall maintain budget neutrality.

(2) COLLECTION OF DATA AND EVALUATION- In developing the system described in paragraph (1), the Secretary may require such long-term care hospitals to submit such information to the Secretary as the Secretary may require to develop the system.

(b) REPORT- Not later than October 1, 2001, the Secretary shall submit to the appropriate committees of

Congress a report that includes a description of the system developed under subsection (a)(1).

(c) IMPLEMENTATION OF PROSPECTIVE PAYMENT SYSTEM- Notwithstanding section 1886(b)(3) of the Social Security Act (42 U.S.C. 1395ww(b)(3)), the Secretary shall provide, for cost reporting periods beginning on or after October 1, 2002, for payments for inpatient hospital services furnished by long-term care hospitals and units under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) in accordance with the system described in subsection (a).

SEC. 114. PER DIEM PROSPECTIVE PAYMENT SYSTEM FOR PSYCHIATRIC HOSPITALS.

(a) DEVELOPMENT OF SYSTEM-

(1) IN GENERAL- The Secretary of Health and Human Services shall develop a per diem prospective payment system for payment for inpatient hospital services of psychiatric hospitals and units (as defined in paragraph (3)) under the medicare program. Such system shall include an adequate patient classification system that reflects the differences in patient resource use and costs among such hospitals and shall maintain budget neutrality.

(2) COLLECTION OF DATA AND EVALUATION- In developing the system described in paragraph (1), the Secretary may require such psychiatric hospitals and units to submit such information to the Secretary as the Secretary may require to develop the system.

(3) DEFINITION- In this section, the term `psychiatric hospitals and units' means a psychiatric hospital described in clause (i) of section 1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)) and psychiatric units described in the matter following clause (v) of such section.

(b) REPORT- Not later than October 1, 2001, the Secretary shall submit to the appropriate committees of Congress a report that includes a description of the system developed under subsection (a)(1).

(c) IMPLEMENTATION OF PROSPECTIVE PAYMENT SYSTEM- Notwithstanding section 1886(b)(3) of the Social Security Act (42 U.S.C. 1395ww(b)(3)), the Secretary shall provide, for cost reporting periods beginning on or after October 1, 2002, for payments for inpatient hospital services furnished by psychiatric hospitals and units under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) in accordance with the prospective payment system established by the Secretary under this section.

Subtitle C--Adjustments to PPS Payments for Skilled Nursing Facilities

SEC. 121. TEMPORARY INCREASE IN PAYMENT FOR CERTAIN HIGH COST PATIENTS.

(a) ADJUSTMENT FOR MEDICALLY COMPLEX PATIENTS UNTIL ESTABLISHMENT OF REFINED CASE-MIX ADJUSTMENT- For purposes of computing payments for covered skilled nursing facility payments under paragraph (1) of section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)), as added by section 4432(a) of BBA, for such services furnished on or after April 1, 2000, and before October 1, 2000, the Secretary of Health and Human Services shall increase by 10 percent the adjusted Federal per diem rate otherwise determined under paragraph (4) of such section (but for this section) for covered skilled nursing facility services for RUG-III groups described in subsection (b) furnished to an individual entitled to benefits under part A of title XVIII of such Act during the period in which such individual is classified in such a RUG-III category.

(b) GROUPS DESCRIBED- The RUG-III groups for which the adjustment described in subsection (a) applies are SE3, SE2, SE1, SSC, SSB, SSA, CC2, CC1, CB2, CB1, CA2, and CA1, as specified in Tables 3 and 4 of the final rule published in the Federal Register by the Health Care Financing Administration on July 30, 1999 (64 FR 41684).

SEC. 122. MARKET BASKET INCREASE.

Section 1888(e)(4)(E)(ii) (42 U.S.C. 1395yy(e)(4)(E)(ii)) is amended--

(1) by redesignating subclause (III) as subclause (IV); and

(2) by striking subclause (II) and inserting after subclause (I) the following:

`(II) for fiscal year 2001, the rate computed for fiscal year 2000 (determined without regard to section 121 of the Medicare Balanced Budget Refinement Act of 1999) increased by the skilled nursing facility market basket percentage change for the fiscal year involved plus 0.8 percentage point;

`(III) for fiscal year 2002, the rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved minus 1 percentage point; and'.

SEC. 123. AUTHORIZING FACILITIES TO ELECT IMMEDIATE TRANSITION TO FEDERAL RATE.

(a) IN GENERAL- Section 1888(e) (42 U.S.C. 1395yy(e)), as added by section 4432(a) of BBA, is amended--

(1) in paragraph (1), in the matter preceding subparagraph (A), by striking `paragraph (7)' and inserting `paragraphs (7) and (11)'; and

(2) by adding at the end the following new paragraph:

`(11) PERMITTING FACILITIES TO WAIVE 3-YEAR TRANSITION- Notwithstanding paragraph (1)(A), a facility may elect to have the amount of the payment for all costs of covered skilled nursing facility services for each day of such services furnished in cost reporting periods beginning after the date of such election determined pursuant to subparagraph (B) of paragraph (1).'.

(b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to elections made more than 60 days after the date of enactment of this Act.

SEC. 124. PART A PASS-THROUGH PAYMENT FOR CERTAIN AMBULANCE SERVICES, PROSTHESES, AND CHEMOTHERAPY DRUGS.

(a) IN GENERAL- Section 1888(e) (42 U.S.C. 1395yy(e)), as added by section 4432(a) of BBA, is amended--

(1) in paragraph (2)(A)(i)(II), by striking `services described in clause (ii)' and inserting `items and services described in clauses (ii) and (iii)';

(2) by adding at the end of paragraph (2)(A) the following new clause:

`(iii) EXCLUSION OF CERTAIN ADDITIONAL ITEMS- Items described in this clause are the following:

`(I) Ambulance services described in section 1861(s)(2)(F)

furnished to an individual in conjunction renal dialysis services.

`(II) Chemotherapy items (identified as of July 1, 1999, by HCPCS codes J9000-J9020; J9040-J9151; J9170-J9185; J9200-J9201; J9206-J9208; J9211; J9230-J9245; and J9265-J9600 (and as subsequently modified by the Secretary)).

`(III) Chemotherapy administration services (identified as of July 1, 1999, by HCPCS codes 36260-36262; 36489; 36530-36535; 36640; 36823; and 96405-96542 (and as subsequently modified by the Secretary)).

`(IV) Radioisotope services (identified as of July 1, 1999, by HCPCS codes 79030-79440 (and as subsequently modified by the Secretary)).

`(V) Durable medical equipment (commonly known as artificial limbs) classified as customized prosthetic devices under the following HCPCS codes (as of July 1, 1999 (and as subsequently modified by the Secretary)) if delivered to an inpatient for use during the stay in the extended care facility and intended to be used by the patient after discharge from the facility: L5050-L5340; L5500-L5610; L5613-L5986; L5988; L6050-L6370; L6400-L6880; L6920-L7274; and L7362-7366.'; and

(3) by adding at the end of paragraph (9), the following: `In the case of an item described in clause (iii) of paragraph (2)(A) that would be payable under part A but for the exclusion of such item under such clause, payment shall be made in an amount otherwise provided under this title for the item from the Federal Hospital Insurance Trust Fund under section 1817 (rather than from the Federal Supplementary Medical Insurance Trust Fund under section 1841).'.

(b) CONFORMING FOR BUDGET NEUTRALITY FOR FISCAL YEAR 2001- Section 1888(e)(4)(G) (42 U.S.C. 1395yy(e)(4)(G)) is amended by adding at the end the following new clause:

`(iii) ADJUSTMENT FOR EXCLUSION OF CERTAIN ADDITIONAL ITEMS- The Secretary shall provide for an appropriate proportional reduction in payments so that beginning with fiscal year 2001, the aggregate amount of such reductions is equal to the aggregate increase in payments attributable to the exclusion effected under clause (iii) of paragraph (2)(A).'.

(c) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to payments made for items furnished on or after April 1, 2000.

SEC. 125. PROVISION FOR PART B ADD-ONS FOR FACILITIES PARTICIPATING IN THE NHCMQ DEMONSTRATION PROJECT.

(a) IN GENERAL- Subsection 1888(e)(3) (42 U.S.C. 1395yy(e)(3)), as added by section 4432(a) of BBA, is amended--

(1) in subparagraph (A)--

(A) in clause (i), by inserting `or, in the case of a facility participating in the Nursing Home Case-Mix and Quality Demonstration (RUGS-III), the RUGS-III rate received by the facility during the cost reporting period beginning in 1997' after `to nonsettled cost reports'; and

(B) in clause (ii), by striking `furnished during such period' and inserting `furnished during the applicable cost reporting period described in clause (i)'.

(2) in subparagraph (B), to read as follows:

`(B) UPDATE TO FIRST COST REPORTING PERIOD- The Secretary shall update the amount determined under subparagraph (A), for each cost reporting period after the applicable cost reporting period described in subparagraph (A)(i) and up to the first cost reporting period by a factor equal to the skilled nursing facility market basket percentage increase minus 1 percentage point (except that for the cost reporting period beginning in fiscal year 2001, the factor shall be equal to such market basket percentage plus 0.8 percentage point).'.

(b) EFFECTIVE DATE- The amendments made by subsection (a) shall be effective as if included in the enactment of section 4432(a) of BBA.

TITLE II--PROVISIONS RELATING TO PART B

Subtitle A--Adjustments to Physician Payment Updates

SEC. 201. MODIFICATION OF UPDATE ADJUSTMENT FACTOR PROVISIONS TO REDUCE UPDATE OSCILLATIONS AND ALLOW FOR ESTIMATE REVISIONS.

(a) UPDATE ADJUSTMENT FACTOR-

(1) IN GENERAL- Section 1848(d) (42 U.S.C. 1395w-4(d)) is amended--

(A) in paragraph (3)--

(i) in the heading, by inserting `FOR 1999' after `UPDATE';

(ii) in subparagraph (A), by striking `a year beginning with 1999' and inserting `1999'; and

(iii) in subparagraph (C), by inserting `and paragraph (4)' after `For purposes of this paragraph'; and

(B) by adding at the end the following new paragraph:

`(4) UPDATE FOR YEARS BEGINNING WITH 2000-

`(A) IN GENERAL- Unless otherwise provided by law, subject to the budget-neutrality factor determined by the Secretary under subsection (c)(2)(B)(ii), the update to the single conversion factor established in paragraph (1)(C) for a year beginning with 2000 is equal to the product of--

`(i) 1 plus the Secretary's estimate of the percentage increase in the MEI (as defined in section 1842(i)(3)) for the year (divided by 100), and

`(ii) 1 plus the Secretary's estimate of the update adjustment factor under subparagraph (B) for the year.

`(B) UPDATE ADJUSTMENT FACTOR- For purposes of subparagraph (A)(ii), subject to subparagraph (D), the `update adjustment factor' for a year is equal (as estimated by the Secretary) to the sum of the following:--

`(i) PAST YEAR ADJUSTMENT- An amount determined by--

`(I) computing the difference (which may be positive or negative) between the amount of the allowed expenditures for physicians' services for the prior year (as determined under subparagraph (C)) and the amount of the actual expenditures for such services for that year;

`(II) dividing that difference by the amount of the actual expenditures for such services for that year; and

`(III) multiplying that quotient by 0.75.

`(ii) CUMULATIVE ADJUSTMENT- An amount determined by--

`(I) computing the difference (which may be positive or negative) between the amount of the allowed expenditures for physicians' services (as determined under subparagraph (C)) from April 1, 1996, through the end of the prior year and the amount of the actual expenditures for such services during that period;

`(II) dividing that difference by actual expenditures for such services for the prior year as increased by the sustainable growth rate under subsection (f) for the year for which the update adjustment factor is to be determined; and

`(III) multiplying that quotient by 0.33.

`(C) DETERMINATION OF ALLOWED EXPENDITURES- For purposes of this paragraph--

`(i) PERIOD UP TO APRIL 1, 1999- The allowed expenditures for physicians' services for periods before April 1, 1999, shall be the Secretary's estimate of the amount of the allowed expenditures as determined under paragraph (3)(C).

`(ii) TRANSITION IN CALENDAR YEAR 1999- The allowed expenditures for--

`(I) the 9-month period beginning April 1, 1999, shall be the Secretary's estimate of the amount of the allowed expenditures that would be permitted under paragraph (3)(C) for such period; and

`(II) the year of 1999, shall be the Secretary's estimate of the amount of the allowed expenditures

that would be permitted under paragraph (3)(C) for such year.

The Secretary shall estimate the amounts under subclauses (I) and (II) of this clause in a manner so that the expenditures under this part for physicians' services beginning with 2000 are not greater or less than the expenditures that would have been made under this part for such services if the amendments made by section 201 of the Medicare Balanced Budget Refinement Act of 1999 had been enacted.

`(iii) YEARS BEGINNING WITH 2000- The allowed expenditures for a year (beginning with 2000) is equal to the allowed expenditures for physicians' services for the previous year, increased by the sustainable growth rate under subsection (f) for the year involved.

`(D) RESTRICTION ON UPDATE ADJUSTMENT FACTOR- The update adjustment factor determined under subparagraph (B) for a year may not be less than -0.07 or greater than 0.03.'.

(2) PUBLICATION CHANGE-

(A) IN GENERAL- Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) by amending subparagraph (E) to read as follows:

`(E) PUBLICATION- The Secretary shall cause to have published in the Federal Register not later than--

`(i) November 1 of each year (beginning with 1999) the conversion factor which will apply to physicians' services for the succeeding year and the update determined under paragraph (4) for such succeeding year and the allowed expenditures under such paragraph for such succeeding year; and

`(ii) April 1 of each year (beginning with 2000) an estimate of the conversion factor which will apply to physicians' services for the succeeding year.

Such publication under clause (i) for November 1, 1999, shall include the allowed expenditures for the 9-month period beginning on April 1, 1999, and for 1999, as described in subclauses (I) and (II) of paragraph (4)(C)(ii), and the estimated actual expenditures for 1999.'.

(B) MEDPAC REVIEW OF CONVERSION FACTOR ESTIMATES- Section 1805(b)(1)(D) (42 U.S.C. 1395b-6(b)(1)(D)) is amended by inserting `and including a review of the estimate of the conversion factor submitted under section 1848(d)(1)(E)(ii)' before the period at the end.

(3) CONFORMING AMENDMENTS-

(A) Section 1848 (42 U.S.C. 1395w-4) is amended--

(i) in subsection (d)(1)(A), by inserting `(for years before 2000) and, for years beginning with 2000, multiplied by the update (established under paragraph (4)) for the year involved' after `for the year involved'; and

(ii) in subsection (f)(2)(D), by inserting `or (d)(4)(B), as the case may be' after `(d)(3)(B)'.

(B) Section 1842(k)(4)(A)(i)(VII) (42 U.S.C. 1395u(k)(4)(A)(i)(VII)) is amended by striking `1848(d)(3)' and inserting `1848(d)'.

(b) SUSTAINABLE GROWTH RATES- Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended--

(1) by amending paragraph (1) to read as follows:

`(1) PUBLICATION- The Secretary shall cause to have published in the Federal Register not later than--

`(A) November 1, 1999, the sustainable growth rate for 2000;

`(B) November 1, 2000, the sustainable growth rate for 2000 and 2001; and

`(C) November 1 of each succeeding year the sustainable growth rate for such succeeding year and each of the preceding 2 years.';

(2) in paragraph (2)--

(A) in the matter before subparagraph (A), by striking `fiscal year 1998)' and inserting `fiscal year 1998 and ending with fiscal year 2000) and for a year beginning with 2000';

(B) in subparagraph (A), by inserting `or year' after `fiscal year';

(C) in subparagraphs (B) and (C), by inserting `or from the previous year to the year involved (as the case may be)' after `fiscal year involved'; and

(D) in subparagraph (D), by inserting `in the year (compared with the previous year), as

the case may be,' after `in the fiscal year (compared with the previous fiscal year)';

(3) by redesignating paragraph (3) as paragraph (4); and

(4) by inserting after paragraph (3) the following new paragraph:

`(3) DATA TO BE USED- For purposes of determining the update adjustment factor under subsection (d)(4)(B) and allowed expenditures under subsection (d)(4)(C) for a year beginning with 2000, the sustainable growth rate for each year taken into consideration in the determination under paragraph (2) shall be determined as follows:

`(A) FOR 2000- For purposes of such calculations for 2000, the sustainable growth rate for such year shall be determined on the basis of the best data available to the Secretary as of September 1, 1999.

`(B) FOR 2001- For purposes of such calculations for 2001, the sustainable growth rate for 2000 and 2001 shall be determined on the basis of the best data available to the Secretary as of September 1, 2000.

`(C) FOR 2002- For purposes of such calculations for 2002, the sustainable growth rate for 2000, 2001, and 2002 shall be determined on the basis of the best data available to the Secretary as of September 1, 2001.

`(D) FOR 2003 AND SUCCEEDING YEARS- For purposes of such calculations for a year after 2002, the sustainable growth rate for--

`(i) that year and the preceding 2 years shall be determined on the basis of the best data available to the Secretary as of September 1 of the year preceding the year for which the calculation is made; and

`(ii) any year before a year described in clause (i) shall be the rate as most recently determined for that year under subparagraph (C) or clause (i) of this subparagraph (as the case may be) and shall not be changed based upon any change in the data available.

Nothing in this paragraph shall be construed as affecting the sustainable growth rates established for years before 2000.'.

(c) EFFECTIVE DATE- The amendments made by this section shall be effective in determining the conversion factor under section 1848(d) of the Social Security Act for years beginning with 2000 and shall not apply to or affect any update (or any update adjustment factor) for any year before 2000.

Subtitle B--Hospital Outpatient Services

SEC. 211. OUTLIER ADJUSTMENT AND TRANSITIONAL PASS-THROUGH FOR CERTAIN MEDICAL DEVICES, DRUGS, AND BIOLOGICALS.

(a) OUTLIER ADJUSTMENT- Section 1833(t) (42 U.S.C. 1395l(t)), as added by section 4523(a) of BBA, is amended--

(1) by redesignating paragraphs (5) through (9) as paragraphs (7) through (11), respectively; and

(2) by inserting after paragraph (4) the following new paragraph:

`(5) OUTLIER ADJUSTMENT-

`(A) IN GENERAL- The Secretary shall provide for an additional payment for each covered OPD service (or group of services) for which a hospital's charges, adjusted to cost, exceed--

`(i) a fixed multiple of the sum of--

`(I) the applicable Medicare OPD fee schedule amount determined under paragraph (3)(D), as adjusted under paragraph (4)(A) (other than for adjustments under this paragraph or paragraph (6)); and

`(II) any transitional pass-through payment under paragraph (6); and

`(ii) at the option of the Secretary, such fixed dollar amount as the Secretary may establish.

`(B) AMOUNT OF ADJUSTMENT- The amount of the additional payment under subparagraph (A) shall be determined by the Secretary and shall approximate the marginal cost of care beyond the applicable cutoff point under such subparagraph.

`(C) LIMIT ON AGGREGATE OUTLIER ADJUSTMENTS-

`(i) IN GENERAL- The total of the additional payments made under this paragraph for covered OPD services furnished in a year (as projected or estimated by the Secretary before the beginning of the year) may not exceed the applicable percentage (specified in clause (ii)) of the total program payments projected or estimated to be made under this subsection for all

covered OPD services furnished in that year. If this paragraph is first applied to less than a full year, the previous sentence shall apply only to the portion of such year.

`(ii) APPLICABLE PERCENTAGE- For purposes of clause (i), the term `applicable percentage' means a percentage specified by the Secretary up to (but not to exceed)--

`(I) for a year (or portion of a year) before 2004, 2.5 percent; and

`(II) for 2004 and thereafter, 3.0 percent.'.

(b) TRANSITIONAL PASS-THROUGH FOR ADDITIONAL COSTS OF INNOVATIVE MEDICAL DEVICES, DRUGS, AND BIOLOGICALS- Such section is further amended by inserting after paragraph (5) the following new paragraph:

`(6) TRANSITIONAL PASS-THROUGH FOR ADDITIONAL COSTS OF INNOVATIVE MEDICAL DEVICES, DRUGS, AND BIOLOGICALS-

`(A) IN GENERAL- The Secretary shall provide for an additional payment under this paragraph for a covered OPD service (or group of services) that includes the provision of any of the following:

`(i) CURRENT ORPHAN DRUGS- A drug or biological that is used for a rare disease or condition with respect to which the drug or biological has been designated as an orphan drug under section 526 of the Federal Food, Drug and Cosmetic Act if payment for the drug or biological as an outpatient hospital service under this part was being made on the first date that the system under this subsection is implemented.

`(ii) CURRENT CANCER THERAPY DRUGS AND BIOLOGICALS- A drug or biological that is used in cancer therapy, including a chemotherapeutic agent, antiemetic, hematopoietic growth factor, colony stimulating factor, and a biological response modifier, if payment for the drug or biological as an outpatient hospital service under this part was being made on such first date.

`(iii) NEW MEDICAL DEVICES, DRUGS, AND BIOLOGICALS- A medical device, drug, or biological not described in clause (i) or (ii) if--

`(I) payment for the device, drug, or biological as an outpatient hospital services under this part was not being made as of December 31, 1996; and

`(II) the cost of the device, drug, or biological is not insignificant in relation to the OPD fee schedule amount (as calculated under paragraph (3)(D)) payable for the service (or group of services) involved.

`(B) LIMITED PERIOD OF PAYMENT- The payment under this paragraph with respect to a medical device, drug, or biological shall only apply during a period of at least 2 years, but not more than 3 years, that begins--

`(i) on the first date this subsection is implemented in the case of a drug or biological described in clause (i) or (ii) of subparagraph (A) and in the case of a device, drug, or biological described in subparagraph (A)(iii) for which payment under this part is made as an outpatient hospital service before such first date; or

`(ii) in the case of a device, drug, or biological described in subparagraph (A)(iii) not described in clause (i), on the first date on which payment is made under this part for the device, drug, or biological as an outpatient hospital service.

`(C) AMOUNT OF ADDITIONAL PAYMENT- Subject to subparagraph (D)(iii), the amount of the payment under this paragraph with respect to a device, drug, or biological provided as part of a covered OPD service is--

`(i) in the case of a drug or biological, the amount by which the amount determined under section 1842(o) for the drug or biological exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the drug or biological; or

`(ii) in the case of a medical device, the amount by which the hospital's charges for the device, adjusted to cost, exceeds the portion (described in clause (i)) associated with the device.

`(D) LIMIT ON AGGREGATE ANNUAL ADJUSTMENT-

`(i) IN GENERAL- The total of the additional payments made under this paragraph for covered OPD services furnished in a year (as projected or estimated by the Secretary before the beginning of the year) may not exceed the applicable percentage (specified in clause (ii)) of the total program payments projected or estimated to be made under this subsection for all covered OPD services furnished in that year. If this paragraph is first applied to less than a full year, the previous sentence shall apply only to the portion of such year.

`(ii) APPLICABLE PERCENTAGE- For purposes of clause (i), the term `applicable percentage' means--

`(I) for a year (or portion of a year) before 2004, 2.5 percent; and

`(II) for 2004 and thereafter, a percentage specified by the Secretary up to (but not to exceed) 2.0 percent.

`(iii) UNIFORM PROSPECTIVE REDUCTION IF AGGREGATE LIMIT PROJECTED TO BE EXCEEDED- If the Secretary projects or estimates before the beginning of a year that the amount of the additional payments under this paragraph for the year (or portion thereof) as determined under clause (i) without regard to this clause) will exceed the limit established under such clause, the Secretary shall reduce pro rata the amount of each of the additional payments under this paragraph for that year (or portion thereof) in order to ensure that the aggregate additional payments under this paragraph (as so projected or estimated) do not exceed such limit.'.

(c) APPLICATION OF NEW ADJUSTMENTS ON A BUDGET NEUTRAL BASIS- Section 1833(t)(2)(E) (42 U.S.C. 1395l(t)(2)(E)) is amended by striking `other adjustments, in a budget neutral manner, as determined to be necessary to ensure equitable payments, such a outlier adjustments or' and inserting `, in a budget neutral manner, outlier adjustments under paragraph (5) and transitional pass-through payments under paragraph (6) and other adjustments as determined to be necessary to ensure equitable payments, such as'.

(d) LIMITATION ON JUDICIAL REVIEW FOR NEW ADJUSTMENTS- Section 1833(t)(11), as redesignated by subsection (a)(1), is amended--

(1) by striking `and' at the end of subparagraph (C);

(2) by striking the period at the end of subparagraph (D) and inserting `; and'; and

(3) by adding at the end the following:

`(E) the determination of the fixed multiple, or a fixed dollar cutoff amount, the marginal cost of care, or applicable percentage under paragraph (5) or the determination of insignificance of cost, the duration of the additional payments (consistent with paragraph (6)(B)), the portion of the Medicare OPD fee schedule amount associated with particular devices, drugs, or biologicals, and the application of any pro rata reduction under paragraph (6).'.

(e) INCLUSION OF MEDICAL DEVICES UNDER SYSTEM- Section 1833(t)(1)(B) (42 U.S.C. 1395l(t)(1)(B)) is amended--

(1) in clause (ii), by striking `clause (iii)' and inserting `clause (iv)' and by striking `but'; and

(2) by redesignating clause (iii) as clause (iv) and inserting after clause (ii) the following new clause:

`(iii) includes medical devices (such as implantable medical devices); but'.

(f) AUTHORIZING PAYMENT WEIGHTS BASED ON MEAN HOSPITAL COSTS- Section 1833(t)(2)(C) (42 U.S.C. 1395l(t)(2)(C)) is amended by inserting `(or, at the election of the Secretary, mean)' after `median'.

(g) LIMITING VARIATION OF COSTS OF SERVICES CLASSIFIED WITH A GROUP- Section 1833(t)(2) (42 U.S.C. 1395l(t)(2)) is amended by adding at the end the following: `For purposes of subparagraph (B), items and services within a group shall not be treated as `comparable with respect to the use of resources' if the highest median cost (or mean cost, if elected by the Secretary under subparagraph (C)) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the group; except that the Secretary may make exceptions in unusual cases, such as low volume items and services.'.

(h) ANNUAL REVIEW OF OPD PPS COMPONENTS-

(1) IN GENERAL- Section 1833(t)(6)(A) (42 U.S.C. 1395l(t)(6)(A)) is amended by striking `may periodically review' and inserting `shall review not less often than annually'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) applies beginning with 2002.

(i) EFFECTIVE DATE- Except as provided in this section, the amendments made by this section shall be effective as if included in the enactment of BBA.

SEC. 212. ESTABLISHING A TRANSITIONAL CORRIDOR FOR APPLICATION OF OPD PPS.

(a) IN GENERAL- Section 1833(t) (42 U.S.C. 1395l(t)), as amended by section 211(a), is further amended--

(1) in paragraph (4), in the matter before subparagraph (A), by inserting `, subject to paragraph (7),' after `is determined'; and

(2) by redesignating paragraphs (7) through (11) as paragraphs (8) through (12), respectively; and

(3) by inserting after paragraph (6), as inserted by section 211(b), the following new paragraph:

`(7) TRANSITIONAL ADJUSTMENT TO LIMIT DECLINE IN PAYMENT-

`(A) BEFORE 2002- For covered OPD services furnished before January 1, 2002, for which the PPS amount (as defined in subparagraph (D)(i)) is--

`(i) at least 90 percent, but less than 100 percent, of the pre-BBA amount (as defined in subparagraph (D)(ii)), the amount of payment under this subsection shall be increased by 80 percent of the amount of such difference;

`(ii) at least 80 percent, but less than 90 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by the sum of--

`(I) 70 percent of the amount by which 90 percent of the pre-BBA amount exceeds the PPS amount; and

`(II) 8.0 percent of the pre-BBA amount;

`(iii) at least 70 percent, but less than 80 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by the sum of--

`(I) 60 percent of the amount by which 80 percent of the pre-BBA amount exceeds the PPS amount; and

`(II) 15.0 percent of the pre-BBA amount; and

`(iv) less than 70 percent of the pre-BBA amount, the amount of payment under this subsection shall be increased by 21 percent of the pre-BBA amount.

`(B) 2002- For covered OPD services furnished during 2002, for which the PPS amount is--

`(i) at least 90 percent, but less than 100 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by 70 percent of the amount of such difference;

`(ii) at least 80 percent, but less than 90 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by the sum of--

`(I) 60 percent of the amount by which 90 percent of the pre-BBA amount exceeds the PPS amount; and

`(II) 7.0 percent of the pre-BBA amount; and

`(iii) less than 80 percent of the pre-BBA amount, the amount of payment under this subsection shall be increased by 13 percent of the pre-BBA amount.

`(C) 2003- For covered OPD services furnished during 2003, for which the PPS amount is--

`(i) at least 90 percent, but less than 100 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by 60 percent of the amount of such difference; or

`(iii) less than 90 percent of the pre-BBA amount, the amount of payment under this subsection shall be increased by 6 percent of the pre-BBA amount.

`(D) DEFINITIONS- For purposes of this subparagraph:

`(i) PPS AMOUNT- The term `PPS amount' means, with respect to a covered OPD service, the amount of payment under this title for such service (determined without regard to this paragraph).

`(ii) PRE-BBA AMOUNT- The term `pre-BBA amount' means, with respect to a covered OPD service, the amount that would have been paid under this title for

such service if this subsection did not apply.

`(E) CONSTRUCTION- Nothing in this paragraph shall be construed to affect the copayment amount under paragraph (5).'.

(b) EFFECTIVE DATE- The amendments made by subsection shall be effective as if included in the enactment of BBA.

Subtitle C--Other

SEC. 221. APPLICATION OF SEPARATE CAPS TO PHYSICAL AND SPEECH THERAPY SERVICES.

(a) IN GENERAL- Section 1833(g) (42 U.S.C. 1395l(g)) is amended--

(1) in paragraph (1)--

(A) by inserting `(A)' after `(g)(1)'; and

(B) by adding at the end the following new subparagraph:

`(B) Subparagraph (A) shall be applied separately for speech-language pathology services described in the fourth sentence of section 1861(p) and for other outpatient physical therapy services.';

and

(2) by adding at the end the following new paragraph:

`(4) The limitations of this subsection apply to the services involved on a per beneficiary, per facility basis.'.

(b) EFFECTIVE DATE- The amendments made by subsection (a) apply to services furnished on or after January 1, 2000.

SEC. 222. OPTIONAL EXEMPTION OF CERTAIN HIGH ACUITY FACILITY PATIENTS.

Section 1833(g) (42 U.S.C. 1395l(g)), as amended by section 221, is further amended by adding at the end the following new paragraph:

`(5) The Secretary shall establish a process under which a facility that is providing therapy services to which the limitation of this subsection applies may elect, for each of calendar years 2000 and 2001, to exempt from such limitation up to 1 percent of its patients who are receiving such services under this title. The process shall include a method by which the facility identifies and selects such patients.'.

SEC. 223. UPDATE IN RENAL DIALYSIS COMPOSITE RATE.

(a) IN GENERAL- Section 1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by adding at the end the following new flush sentence:

`The Secretary shall increase the amount of each composite rate payment for dialysis services furnished on or after January 1, 2000, and on or before December 31, 2000, by 1.2 percent above such composite rate payment amounts for such services furnished on December 31, 1999, and for such services furnished on or after January 1, 2001, by 1.2 percent above such composite rate payment amounts for such services furnished on December 31, 2000.'.

(b) CONFORMING AMENDMENT-

(1) IN GENERAL- Section 9335(a) of the Omnibus Budget Reconciliation Act of 1986 (42 U.S.C. 1395rr note) is amended by striking paragraph (1).

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall take effect on January 1, 2000.

SEC. 224. TEMPORARY UPDATE IN DURABLE MEDICAL EQUIPMENT AND OXYGEN RATES.

(a) DURABLE MEDICAL EQUIPMENT AND OXYGEN- Section 1834(a)(14) (42 U.S.C. 1395m(a)(14)), as amended by section 4551(a)(1) of BBA, is amended--

(1) by redesignating subparagraph (D) as subparagraph (E); and

(2) by striking subparagraph (C) and inserting the following:

`(C) for each of the years 1998 through 2000, 0 percentage points;

`(D) for each of the years 2001 and 2002, the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of the previous year minus 2 percentage points; and'.

(c) TECHNICAL CORRECTION- Section 1834(a)(9)(B) (42 U.S.C. 1395m(a)(9)(B)), as amended by section 4552(a) of BBA, is amended--

(1) by striking `and' at the end of clause (v);

(2) in clause (vi), by striking `and each subsequent year' and inserting `and 2000' and by striking the period at the end and inserting `; and'; and

(3) by adding at the end the following new clause:

`(vii) for 2001 and each subsequent year, the amount determined under this subparagraph for the preceding year increased by the covered item update for such subsequent year.'.

TITLE III--PROVISIONS RELATING TO PARTS A AND B

Subtitle A--Home Health Services

SEC. 301. ADJUSTMENT TO REFLECT ADMINISTRATIVE COSTS NOT INCLUDED IN THE INTERIM PAYMENT SYSTEM.

(a) IN GENERAL- In the case of a home health agency that furnishes home health services to a medicare

beneficiary, for each such beneficiary to whom the agency furnished such services during the agency's cost reporting period beginning in fiscal year 2000, the Secretary of Health Services shall pay the agency, in addition to any amount of payment made under subsection (v)(1)(L) of such section for the beneficiary and only for such cost reporting period, an amount of $10 to defray costs incurred by the agency attributable to data collection and reporting requirements under the Outcome and Assessment Information Set (OASIS) required by reason of section 4602(e) of the Balanced Budget Act of 1997 (42 U.S.C. 1395fff note).

(b) PAYMENT UPON SETTLED COST REPORT- The Secretary may not make any payment under subsection (a) to a home health agency until such time as the cost report submitted by the agency for the cost reporting period beginning in fiscal year 2000 is settled.

(c) PAYMENT FROM TRUST FUNDS- Payments under this section shall be made, in appropriate part as specified by the Secretary, from the Federal Hospital Insurance Trust Fund and from the Federal Supplementary Medical Insurance Trust Fund.

(d) DEFINITIONS- In this section:

(1) HOME HEALTH AGENCY- The term `home health agency' has the meaning given that term under section 1861(o) of the Social Security Act (42 U.S.C. 1395x(o)).

(2) HOME HEALTH SERVICES- The term `home health services' has the meaning given that term under section 1861(m) of such Act (42 U.S.C. 1395x(m)).

(3) MEDICARE BENEFICIARY- The term `medicare beneficiary' means an individual entitled to benefits under part A, B, or C of title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.).

SEC. 302. DELAY IN APPLICATION OF 15 PERCENT REDUCTION IN PAYMENT RATES FOR HOME HEALTH SERVICES UNTIL 1 YEAR AFTER IMPLEMENTATION OF PROSPECTIVE PAYMENT SYSTEM.

(a) CONTINGENCY REDUCTION- Section 4603(e) of the Balanced Budget Act of 1997 (42 U.S.C. 1395fff note) (as amended by section 5101(c)(3) of the Tax and Trade Relief Extension Act of 1998 (contained in division J of Public Law 105-277)) is amended by striking `September 30, 2000' and inserting `September 30, 2001'.

(b) PROSPECTIVE PAYMENT SYSTEM- Section 1895(b)(3)(A)(i) (42 U.S.C. 1395fff(b)(3)(A)(i)) (as amended by section 5101 of the Tax and Trade Relief Extension Act of 1998 (contained in division J of Public Law 105-277)) is amended to read as follows:

`(i) IN GENERAL- Under such system the Secretary shall provide for computation of a standard prospective payment amount (or amounts). Such amount (or amounts) shall initially be based on the most current audited cost report data available to the Secretary and shall be computed in a manner so that the total amounts payable under the system--

`(I) for fiscal year 2001, shall be equal to the total amount that would have been made if the system had not been in effect; and

`(II) for fiscal year 2002, shall be equal to the total amount that would have been made for fiscal year 2001 if the system had not been in effect but if the reduction in limits described in clause (ii) had been in effect, and updated under subparagraph (B).

Each such amount shall be standardized in a manner that eliminates the effect of variations in relative case mix and wage levels among different home health agencies in a budget neutral manner consistent with the case mix and wage level adjustments provided under paragraph (4)(A). Under the system, the Secretary may recognize regional differences or differences based upon whether or not the services or agency are in an urbanized area.'.

Subtitle B--Direct Graduate Medical Education

SEC. 311. USE OF NATIONAL AVERAGE PAYMENT METHODOLOGY IN COMPUTING DIRECT GRADUATE MEDICAL EDUCATION (DGME) PAYMENTS.

Section 1886(h) (42 U.S.C. 1395ww(h)) is amended--

(1) by amending clause (i) of paragraph (3)(B) to read as follows:

`(i)(I) for a cost reporting period beginning before October 1, 2000, the hospital's approved FTE resident amount (determined under paragraph (2)) for that period;

`(II) for a cost reporting period beginning on or after October 1, 2000, and before October 1, 2003, the national average per resident amount determined under

paragraph (9) or, if greater, the sum of the hospital-specific percentage (as defined in subparagraph (E)) of the hospital's approved FTE resident amount (determined under paragraph (2)) for the period and the national percentage (as defined in such subparagraph) of the national average per resident amount determined under paragraph (9); and

`(III) for a cost reporting period beginning on or after October 1, 2003, the national average per resident amount determined under paragraph (9); and';

(2) in paragraph (3), by adding at the end the following new subparagraph:

`(E) TRANSITION TO NATIONAL AVERAGE PER RESIDENT PAYMENT SYSTEM- For purposes of subparagraph (B)(i)(II), for the cost reporting period of a hospital beginning--

`(i) during fiscal year 2001, the hospital-specific percentage is 75 percent and the national percentage is 25 percent;

`(ii) during fiscal year 2002, the hospital-specific percentage is 50 percent and the national percentage is 50 percent; and

`(iii) during fiscal year 2003, the hospital-specific percentage is 25 percent and the national percentage is 75 percent.'; and

(3) by adding at the end the following new paragraph:

`(7) NATIONAL AVERAGE PER RESIDENT AMOUNT- The national average per resident amount for a hospital for a cost reporting period beginning in a fiscal year is an amount determined as follows:

`(A) DETERMINATION OF HOSPITAL SINGLE PER RESIDENT AMOUNT- The Secretary shall compute for each hospital operating an approved graduate medical education program a single per resident amount equal to the average (weighted by number of full-time equivalent residents) of the primary care per resident amount and the non-primary care per resident amount computed under paragraph (2) for cost reporting periods ending during fiscal year 1997.

`(B) DETERMINATION OF WAGE AND NON-WAGE-RELATED PROPORTION OF THE SINGLE PER RESIDENT AMOUNT- The Secretary shall estimate the average proportion of the single per resident amounts computed under subparagraph (A) that is attributable to wages and wage-related costs.

`(C) STANDARDIZING PER RESIDENT AMOUNTS- The Secretary shall establish a standardized per resident amount for each such hospital--

`(i) by dividing the single per resident amount computed under subparagraph (A) into a wage-related portion and a non-wage-related portion by applying the proportion determined under subparagraph (B);

`(ii) by dividing the wage-related portion by the factor applied under subsection (d)(3)(E) for discharges occurring during fiscal year 1999 for the hospital's area; and

`(iii) by adding the non-wage-related portion to the amount computed under clause (ii).

`(D) DETERMINATION OF NATIONAL AVERAGE- The Secretary shall compute a national average per resident amount equal to the average of the standardized per resident amounts computed under subparagraph (C) for such hospitals, with the amount for each hospital weighted by the average number of full-time equivalent residents at such hospital.

`(E) APPLICATION TO INDIVIDUAL HOSPITALS- The Secretary shall compute for each such hospital a per resident amount--

`(i) by dividing the national average per resident amount computed under subparagraph (D) into a wage-related portion and a non-wage-related portion by applying the proportion determined under subparagraph (B);

`(ii) by multiplying the wage-related portion by the factor described in subparagraph (C)(ii) for the hospital's area; and

`(iii) by adding the non-wage-related portion to the amount computed under clause (ii).

`(F) INITIAL UPDATING RATE- The Secretary shall update such per resident amount for the hospital's cost reporting period that begins during fiscal year 2001 for each such hospital by the estimated percentage increase in

the consumer price index for all urban consumers during the period beginning October 1997 and ending with the midpoint of the hospital's cost reporting period that begins during fiscal year 2001.

`(G) SUBSEQUENT UPDATING- For each subsequent cost reporting period, the national average per resident amount for a hospital is equal to the amount determined under this paragraph for the previous cost reporting period updated, through the midpoint of the period, by projecting the estimated percentage change in the consumer price index during the 12-month period ending at that midpoint, with appropriate adjustments to reflect previous under-or over-estimations under this subparagraph in the projected percentage change in the consumer price index.'.

TITLE IV--RURAL PROVIDER PROVISIONS

SEC. 401. PERMITTING RECLASSIFICATION OF CERTAIN URBAN HOSPITALS AS RURAL HOSPITALS.

(a) IN GENERAL- Section 1886(d)(8) (42 U.S.C. 1395ww(d)(8)) is amended by adding at the end the following new subparagraph:

`(E)(i) For purposes of this subsection and section 1833(t), not later than 60 days after the receipt of an application from a subsection (d) hospital described in clause (ii), the Secretary shall treat the hospital as being located in the rural area (as defined in such paragraph (2)(D)) of the State in which the hospital is located.

`(ii) For purposes of clause (i), a subsection (d) hospital described in this clause is a subsection (d) hospital that is located in an urban area (as defined in paragraph (2)(D)) and satisfies any of the following criteria:

`(I) The hospital is located in a rural census tract of a metropolitan statistical area (as determined under the Goldsmith Modification, as published in the Federal Register on February 27, 1992 (57 FR 6725)).

`(II) The hospital is located in an area designated by any law or regulation of such State as a rural area (or is designated by such State as a rural hospital).

`(III) The hospital would qualify as a sole community hospital under paragraph (5)(D) if the hospital were located in a rural area.

`(IV) The hospital meets such other criteria as the Secretary may specify.'.

(b) CONFORMING CHANGE- Section 1820(c)(2)(B)(i) (42 U.S.C. 1395i-4(c)(2)(B)(i)) is amended by inserting `or is treated as being located in a rural area pursuant to section 1886(d)(8)(E)' after `section 1886(d)(2)(D)).'.

(c) EFFECTIVE DATE- The amendments made by this section shall become effective on January 1, 2000.

SEC. 402. UPDATE OF STANDARDS APPLIED FOR GEOGRAPHIC RECLASSIFICATION FOR CERTAIN HOSPITALS.

(a) IN GENERAL- Section 1886(d)(8)(B) (42 U.S.C. 1395ww(d)(8)(B)) is amended--

(1) by inserting `(i)' after `(B)';

(2) by striking `for designating Metropolitan Statistical Areas (and for designating New England County Metropolitan Areas) published in the Federal Register on January 3, 1980' and inserting `described in clause (ii)'; and

(3) by adding at the end the following new clause:

`(ii)(I) For fiscal years ending on or before September 30, 2002, standards described in this clause are standards for designating Metropolitan Statistical Areas (and for designating New England County Metropolitan Areas) published in the Federal Register on January 3, 1980.

`(II) For fiscal years beginning on or after October 1, 2002, standards described in this clause are standards for designating Metropolitan Statistical Areas (and for designating New England County Metropolitan Areas) based on the most recent available decennial population data published by the Bureau of the Census, as revised by the Director of the Office of Management and Budget.'.

(b) TRANSITIONAL RULE FOR CERTAIN HOSPITALS-

(1) IN GENERAL- Notwithstanding clause (ii)(I) of section 1886(d)(8)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(8)(B)), in the case of a hospital that would be described in that section if the standards for designating Metropolitan Statistical Areas (and for designating New England County Metropolitan Areas) applicable to the hospital under that section were those standards published on March 30, 1990, such hospital is deemed to be described in such section for discharges occurring during cost reporting periods beginning during fiscal years 2001 and 2002.

(2) WAIVING BUDGET NEUTRALITY ADJUSTMENT- Subparagraphs (C) and (D) of section 1886(d)(8) shall not apply in the case of a hospital deemed to be described in subparagraph (B) of such section under paragraph (1).

(c) EFFECTIVE DATE- The amendment made by subsection (a) applies with respect to discharges occurring during cost reporting periods beginning on or after October 1, 2000.

SEC. 403. IMPROVEMENTS IN THE CRITICAL ACCESS HOSPITAL (CAH) PROGRAM.

(a) APPLYING 96-HOUR LIMIT ON A AVERAGE ANNUAL BASIS-

(1) IN GENERAL- Section 1820(c)(2)(B)(iii) (42 U.S.C. 1395i-4(c)(2)(B)(iii)), as added by section 4201(a) of BBA, is amended by striking `for a period not to exceed 96 hours' and all that follows and inserting `for a period that does not exceed, as determined on an annual, average basis, 96 hours per patient.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) takes effect on the date of the enactment of this Act.

(b) PERMITTING FOR-PROFIT HOSPITALS TO QUALIFY FOR DESIGNATION AS A CRITICAL ACCESS HOSPITAL- Section 1820(c)(2)(B)(i)(I) (42 U.S.C. 1395i-4(c)(2)(B)(i)(I)), as added by section 4201(a) of BBA, is amended by striking `nonprofit or public hospital' and inserting `hospital'.

(c) ALLOWING CLOSED OR DOWNSIZED HOSPITALS TO CONVERT TO CRITICAL ACCESS HOSPITALS- Section 1820(c)(2) (42 U.S.C. 1395i-4(c)(2)), as added by section 4201(a) of BBA, is amended--

(1) in subparagraph (A), by striking `subparagraph (B)' and inserting `subparagraphs (B), (C), and (D)'; and

(2) by adding at the end the following new subparagraphs:

`(C) RECENTLY CLOSED FACILITIES- A State may designate a facility as a critical access hospital if the facility--

`(i) was a hospital that ceased operations on or after the date that is 10 years before the date of enactment of this subparagraph; and

`(ii) as of the effective date of such designation, meets the criteria for designation under subparagraph (B).

`(D) DOWNSIZED FACILITIES- A State may designate a health clinic or a health center (as defined by

the State) as a critical access hospital if such clinic or center--

`(i) is licensed by the State as a health clinic or a health center;

`(ii) was a hospital that was downsized to a health clinic or health center; and

`(iii) as of the effective date of such designation, meets the criteria for designation under subparagraph (B).'.

(d) ALL-INCLUSIVE PAYMENT OPTION FOR OUTPATIENT CRITICAL ACCESS HOSPITAL SERVICES-

(1) IN GENERAL- Section 1834(g) (42 U.S.C. 1395m(g)), as added by section 4201(c)(5) of BBA, is amended to read as follows:

`(g) PAYMENT FOR OUTPATIENT CRITICAL ACCESS HOSPITAL SERVICES-

`(1) ELECTION OF CAH- At the election of a critical access hospital, the amount of payment for outpatient critical access hospital services under this part shall be determined under paragraph (2) or (3), such amount determined under either paragraph without regard to the amount of the customary or other charge.

`(2) COST-BASED HOSPITAL OUTPATIENT SERVICE PAYMENT PLUS FEE SCHEDULE FOR PROFESSIONAL SERVICES- If a hospital elects this paragraph to apply, there shall be paid amounts equal to the sum of the following:

`(A) FACILITY FEE- With respect to facility services, not including any services for which payment may be made under subparagraph (B), the reasonable costs of the critical access hospital in providing such services, less the amount that such hospital may charge as described in section 1866(a)(2)(A).

`(B) FEE SCHEDULE FOR PROFESSIONAL SERVICES- With respect to professional services otherwise included within outpatient critical access hospital services, such amounts as would otherwise be paid under this part if such services were not included in outpatient critical access hospital services.

`(3) ALL-INCLUSIVE RATE- If a hospital elects this paragraph to apply, with respect to both facility services and professional services, there shall be paid amounts equal to the reasonable costs of the critical access hospital in providing such services, less the amount that such hospital may charge as described in section 1866(a)(2)(A).

(2) EFFECTIVE DATE- The amendment made by subsection (a) shall apply for cost reporting periods beginning on or after October 1, 1999.

(e) ELIMINATION OF COINSURANCE FOR CLINICAL DIAGNOSTIC LABORATORY TESTS FURNISHED BY A CRITICAL ACCESS HOSPITAL ON AN OUTPATIENT BASIS-

(1) IN GENERAL- Section 1833(a)(1)(D) (42 U.S.C. 1395l(a)(1)(D)) is amended by inserting `or which are furnished on an outpatient basis by a critical access hospital' after `on an assignment-related basis'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to services furnished on or after the date of the enactment of this Act.

(f) PARTICIPATION IN SWING BED PROGRAM- Section 1883 (42 U.S.C. 1395tt) is amended--

(1) in subsection (a)(1), by striking `(other than a hospital which has in effect a waiver under subparagraph (A) of the last sentence of section 1861(e))'; and

(2) in subsection (c), by striking `, or during which there is in effect for the hospital a waiver under subparagraph (A) of the last sentence of section 1861(e)'.

SEC. 404. 5-YEAR EXTENSION OF MEDICARE DEPENDENT HOSPITAL (MDH) PROGRAM.

(a) EXTENSION OF PAYMENT METHODOLOGY- Section 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)), as amended by section 4204(a)(1) of BBA, is amended--

(1) in clause (i), by striking `and before October 1, 2001,' and inserting `and before October 1, 2006'; and

(2) in clause (ii)(II), by striking `and before October 1, 2001,' and inserting `and before October 1, 2006'.

(b) CONFORMING AMENDMENTS-

(1) EXTENSION OF TARGET AMOUNT- Section 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)), as amended by section 4204(a)(2) of BBA, is amended--

(A) in the matter preceding clause (i), by striking `and before October 1, 2001,' and inserting `and before October 1, 2006'; and

(B) in clause (iv), by striking `during fiscal year 1998 through fiscal year 2000' and inserting `during fiscal year 1998 through fiscal year 2005'.

(2) PERMITTING HOSPITALS TO DECLINE RECLASSIFICATION- Section 13501(e)(2) of Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. 1395ww note), as amended by section 4204(a)(3) of BBA, is amended by striking `or fiscal year 2000' and inserting `or fiscal year 2005'.

SEC. 405. REBASING FOR CERTAIN SOLE COMMUNITY HOSPITALS.

Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by sections 4413 and 4414 of BBA, is amended--

(1) in subparagraph (C), by inserting `subject to subparagraph (I)' before `the term `target amount' means'; and

(2) by adding at the end the following new subparagraph:

`(I)(i) For cost reporting periods beginning on or after October 1, 2000, in the case of a sole community hospital that for its cost reporting period beginning during 1999 is paid on the basis of the target amount applicable to the hospital under subparagraph (C) and that elects (in a form and manner determined by the Secretary) this subparagraph to apply to the hospital, there shall be substituted for the base cost reporting period described subparagraph (C) the rebased target amount determined under this subparagraph.

`(ii) For purposes of clause (i), the rebased target amount applicable to a hospital making an election under this subparagraph is equal to the sum of the following:

`(I) With respect to discharges occurring in fiscal year 2001, 75 percent of the target amount applicable to the hospital under subparagraph (C) (hereinafter in this subparagraph referred to as the `subparagraph (C) target amount') and 25 percent of the amount of the allowable operating costs of inpatient hospital services (as defined in subsection (a)(4)) recognized under this title for the hospital for the 12-month cost reporting period beginning during fiscal year 1996 (hereinafter in this subparagraph referred to as the `rebase target amount'), increased by the applicable percentage increase under subparagraph (B)(iv).

`(II) With respect to discharges occurring in fiscal year 2002, 50 percent of the subparagraph (C) target amount and 50 percent of the rebase target amount, increased by the applicable percentage increase under subparagraph (B)(iv).

`(III) With respect to discharges occurring in fiscal year 2003, 25 percent of the subparagraph (C) target amount and 75 percent of the rebase target amount, increased by the applicable percentage increase under subparagraph (B)(iv).

`(IV) With respect to discharges occurring in fiscal year 2003 or any subsequent fiscal year, 100 percent of the rebase target amount, increased by the applicable percentage increase under subparagraph (B)(iv).'.

SEC. 406. INCREASED FLEXIBILITY IN PROVIDING GRADUATE PHYSICIAN TRAINING IN RURAL AREAS.

(a) PERMITTING 30 PERCENT EXPANSION IN CURRENT GME TRAINING PROGRAMS FOR HOSPITALS LOCATED IN RURAL AREAS-

(1) PAYMENT FOR DIRECT GRADUATE MEDICAL EDUCATION COSTS- Section 1886(h)(4)(F) (42 U.S.C. 1395ww(h)(4)(F)), as added by section 4623 of BBA, is

amended by inserting `(or, 130 percent of such number in the case of a hospital located in a rural area)' after `may not exceed the number'.

(2) PAYMENT FOR INDIRECT GRADUATE MEDICAL EDUCATION COSTS- Section 1886(d)(5)(B)(v) (42 U.S.C. 1395ww(d)(5)(B)(v)), as added by section 4621(b)(1) of BBA, is amended by inserting `(or, 130 percent of such number in the case of a hospital located in a rural area)' after `may not exceed the number'.

(3) EFFECTIVE DATES- (A) The amendment made by paragraph (1) applies to cost reporting periods beginning on or after October 1, 1999.

(B) The amendment made by paragraph (2) applies to discharges occurring during cost reporting periods beginning on or after October 1, 1999.

(b) SPECIAL RULE FOR NON-RURAL FACILITIES SERVING RURAL AREAS-

(1) IN GENERAL- Section 1886(h)(4)(H) (42 U.S.C. 1395ww(h)(4)(H)), as added by section 4623 of BBA, is amended by adding at the end the following new clause:

`(iv) NON-RURAL HOSPITALS OPERATING TRAINING PROGRAMS IN UNDERSERVED RURAL AREAS- In the case of a hospital that is not located in a rural area but establishes separately accredited approved medical residency training programs (or rural tracks) in an underserved rural area, the Secretary shall adjust the limitation under subparagraph (F) in an appropriate manner insofar as it applies to such programs in such underserved rural areas in order to encourage the training of physicians in underserved rural areas.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) apply with respect to payments to hospitals for cost reporting periods beginning on or after October 1, 1999.

SEC. 407. ELIMINATION OF CERTAIN RESTRICTIONS WITH RESPECT TO HOSPITAL SWING BED PROGRAM.

(a) ELIMINATION OF REQUIREMENT FOR STATE CERTIFICATE OF NEED- Section 1883(b) (42 U.S.C. 1395tt(b)) is amended to read as follows:

`(b) The Secretary may not enter into an agreement under this section with any hospital unless, except as provided under subsection (g), the hospital is located in a rural area and has less than 100 beds.'.

(b) ELIMINATION OF SWING BED RESTRICTIONS ON CERTAIN HOSPITALS WITH MORE THAN 49 BEDS- Section 1883(d) (42 U.S.C. 1395tt(d)) is amended--

(1) by striking paragraphs (2) and (3); and

(2) by striking `(d)(1)' and inserting `(d)'.

(c) EFFECTIVE DATE- The amendments made by this section take effect on the date that is the first day after the expiration of the transition period under section 1888(e)(2)(E) of the Social Security Act (42 U.S.C. 1395yy(e)(2)(E)), as added by section 4432(a) of BBA, for payments for covered skilled nursing facility services under the medicare program.

SEC. 408. GRANT PROGRAM FOR RURAL HOSPITAL TRANSITION TO PROSPECTIVE PAYMENT.

Section 1820(g) (42 U.S.C. 1395i-4(g)), as added by section 4201(a) of BBA, is amended by adding at the end the following new paragraph:

`(3) UPGRADING DATA SYSTEMS-

`(A) GRANTS TO HOSPITALS- The Secretary may award grants to hospitals that have submitted applications in accordance with subparagraph (C) to assist eligible small rural hospitals in meeting the costs of implementing data systems required to meet requirements established under the medicare program pursuant to amendments made by the Balanced Budget Act of 1997.

`(B) ELIGIBLE SMALL RURAL HOSPITAL DEFINED- For purposes of this paragraph, the term `eligible small rural hospital' means a non-Federal, short-term general acute care hospital that--

`(i) is located in a rural area (as defined for purposes of section 1886(d)); and

`(ii) has less than 50 beds.

`(C) APPLICATION- A hospital seeking a grant under this paragraph shall submit an application to the Secretary on or before such date and in such form and manner as the Secretary specifies.

`(D) AMOUNT OF GRANT- A grant to a hospital under this paragraph may not exceed $50,000.

`(E) USE OF FUNDS- A hospital receiving a grant under this paragraph may use the funds for the purchase of computer software and hardware and for the education and training of hospital staff on computer information systems and costs related to the implementation of prospective payment systems.

`(F) REPORT-

`(i) INFORMATION- A hospital receiving a grant under this section shall furnish the Secretary with such information as the Secretary may require to evaluate the project for which the grant is made and to ensure that the grant is expended for the purposes for which it is made.

`(ii) REPORTING-

`(I) INTERIM REPORTS- The Secretary shall report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate at least annually on the grant program established under this section, including in such report information on the number of grants made, the nature of the projects involved, the geographic distribution of grant recipients, and such other matters as the Secretary deems appropriate.

`(II) FINAL REPORT- The Secretary shall submit a final report to such committees not later than 180 days after the completion of all of the projects for which a grant is made under this section.'.

SEC. 409. MEDPAC STUDY OF RURAL PROVIDERS.

(a) STUDY- The Medicare Payment Advisory Commission shall conduct a study on rural providers furnishing items and services for which payment is made under title XVIII of the Social Security Act. Such study shall examine and evaluate the adequacy and appropriateness of the categories of special payments (and payment methodologies) established for rural hospitals under the medicare program, and their impact on beneficiary access and quality of health care services.

(b) REPORT- By not later than 18 months after the date of the enactment of this Act, the Medicare Payment Advisory Commission shall submit a report to Congress on the study conducted under subsection (a).

TITLE V--PROVISIONS RELATING TO PART C (MEDICARE+CHOICE PROGRAM)

Subtitle A--Medicare+Choice

SEC. 501. PHASE-IN OF NEW RISK ADJUSTMENT METHODOLOGY.

Section 1853(a)(3)(C) (42 U.S.C. 1395w-23(a)(3)(C)) is amended--

(1) by redesignating the first sentence as clause (i) with the heading `IN GENERAL- ' and appropriate indentation; and

(2) by adding at the end the following new clause:

`(ii) PHASE-IN- Such risk adjustment methodology shall be implemented in a phased-in manner so that the new methodology applies only to--

`(I) 10 percent of the payment amount in 2000 and 2001;

`(II) 20 percent of such amount in 2002;

`(III) 30 percent of such amount in 2003; and

`(IV) 100 percent of such amount in any subsequent year (in which the risk adjustment methodology should reflect data from all settings).'.

SEC. 502. ENCOURAGING OFFERING OF MEDICARE+CHOICE PLANS IN AREAS WITHOUT PLANS.

Section 1853 (42 U.S.C. 1395w-23) is amended--

(1) in subsection (a)(1), by striking `subsections (e) and (f)' and inserting `subsections (e), (g), and (i)';

(2) in subsection (c)(5), by inserting `(other than those attributable to subsection (i))' after `payments under this part'; and

(3) by adding at the end the following new subsection:

`(i) NEW ENTRY BONUS-

`(1) IN GENERAL- Subject to paragraphs (2) and (3), in the case of Medicare+Choice payment area in which a Medicare+Choice plan has not been offered since 1997 (or in which any organization that offered a plan since such date has announced, as of October 13, 1999, that it will not be offering such plan as of January 1, 2000), the amount of the monthly payment otherwise made under this subsection shall be increased--

`(A) only for the first 12 months in which any Medicare+Choice plan is offered in the area, by 5 percent of the payment rate otherwise computed; and

`(B) only for the subsequent 12 months, by 3 percent of the payment rate otherwise computed.

If such 12 months are not a calendar year, the Secretary shall provide for an appropriate blend of such percentage increases for the second and third calendar years in which months described in subparagraph (B) occur to reflect the proportion of such months in each such year.

`(2) PERIOD OF APPLICATION- Paragraph (1) shall only apply to payment for Medicare+Choice plans which are first offered in a Medicare+Choice payment area during the 2-year period beginning with January 1, 2000.

`(3) LIMITATION TO ORGANIZATION OFFERING FIRST PLAN IN AN AREA- Paragraph (1) shall only apply to payment to the first Medicare+Choice organization that offers a Medicare+Choice plan in each Medicare+Choice payment area, except that if more than one such organization first offers such a plan in an area on the same date, paragraph (1) shall apply to payment for such organizations.

`(4) CONSTRUCTION- Nothing in paragraph (1) shall be construed as affecting the Medicare+Choice capitation rate for any area or as applying to payment for any period not described in such paragraph.'.

SEC. 503. MODIFICATION OF 5-YEAR RE-ENTRY RULE FOR CONTRACT TERMINATIONS.

(a) IN GENERAL- Section 1857(c)(4) (42 U.S.C. 1395w-27(c)(4)) is amended--

(1) by inserting `as provided in paragraph (2) and except' after `except as provided';

(2) by redesignating the first sentence as a subparagraph (A) with an appropriate indentation and the heading `IN GENERAL- '; and

(3) by adding at the end the following new subparagraph:

`(B) EARLIER RE-ENTRY PERMITTED WHERE CHANGE IN PAYMENT POLICY AND NO MORE THAN ONE OTHER PLAN AVAILABLE- Subparagraph (A) shall not apply with respect to the offering by a Medicare+Choice organization of a Medicare+Choice plan in a Medicare+Choice payment area if--

`(i) during the 6-month period beginning on the date the organization notified the Secretary of the intention to terminate the most recent previous contract, there was a legislative change enacted (or a regulatory change adopted) that has the effect of increasing payment rates under section 1853 for that Medicare+Choice payment area; and

`(ii) at the time the organization notifies the Secretary of its intent to enter into a contract to offer such a plan in the area, there is no more than one

Medicare+Choice plan offered in the area.'.

(b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to contract terminations occurring before, on, or after the date of the enactment of this Act.

SEC. 504. CONTINUED COMPUTATION AND PUBLICATION OF AAPCC DATA.

(a) IN GENERAL- Section 1853(b) (42 U.S.C. 1395w-23(b)) is amended by adding at the end the following new paragraph:

`(4) CONTINUED COMPUTATION AND PUBLICATION OF COUNTY-SPECIFIC PER CAPITA FEE-FOR-SERVICE EXPENDITURE INFORMATION- The Secretary, through the Chief Actuary of the Health Care Financing Administration, shall provide for the computation and publication, on an annual basis at the time of publication of the annual Medicare+Choice capitation rates, of information on the level of the average annual per capita costs (described in section 1876(a)(4)) for each Medicare+Choice payment area.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect on the date of the enactment of this Act and apply to publications of the annual Medicare+Choice capitation rates made on or after such date.

SEC. 505. PERMITTING ENROLLMENT IN ALTERNATIVE MEDICARE+CHOICE PLANS AND MEDIGAP COVERAGE IN CASE OF INVOLUNTARY TERMINATION OF MEDICARE+CHOICE ENROLLMENT.

(a) IN GENERAL- Section 1851(e)(4) (42 U.S.C. 1395w-21(e)(4)) is amended by striking subparagraph (A) and inserting the following:

`(A)(i) the certification of the organization or plan under this part has been terminated, or the organization or plan has notified the individual or the Secretary of an impending termination of such certification; or

`(ii) the organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides, or has notified the individual or Secretary of an impending termination or discontinuation of such plan;'.

(b) CONFORMING MEDIGAP AMENDMENT- Section 1882(s)(3)(A) (42 U.S.C. 1395ss(s)(3)(A)) is amended, in the matter following clause (iii)--

(1) by inserting `(or, if elected by the individual, the date of notification of the individual or the Secretary by the plan or organization of the impending termination or discontinuance of the plan in the area in which the individual resides)' after `the date of the termination of enrollment described in such subparagraph'; and

(2) by inserting `(or the date of such notification)' after `the date of termination or disenrollment'.

(c) EFFECTIVE DATE- The amendments made by this subsection shall apply to notices of impending terminations or discontinuances made before, on, or after the date of the enactment of this Act, except that, for purposes of applying such amendments with respect to a notice of a termination or discontinuance that was made before such date and for which the termination or discontinuance occurs after such date, such notice shall be treated as having occurred on the date of the enactment of this Act.

SEC. 506. ALLOWING VARIATION IN PREMIUM WAIVERS WITHIN A SERVICE AREA IF MEDICARE+CHOICE PAYMENT RATES VARY WITHIN THE AREA.

(a) IN GENERAL- Section 1854(c) (42 U.S.C. 1395w-24(c)) is amended--

(1) by striking `The' and inserting `Subject to paragraph (2), the';

(2) by redesignating the first sentence as a paragraph (1) with an appropriate indentation and the heading `IN GENERAL- '; and

(3) by adding at the end the following new paragraph:

`(2) VARIATION IN PREMIUM WAIVER PERMITTED- A Medicare+Choice organization may waive part or all of a premium described in paragraph (1) for one or more Medicare+Choice payment areas within its service area if the annual Medicare+Choice capitation rates under section 1853(c) vary between such payment area and other payment areas within such service area.'.

(b) EFFECTIVE DATE- The amendments made by subsection (a) apply to premiums for contract years beginning on or after January 1, 2001.

SEC. 507. DELAY IN DEADLINE FOR SUBMISSION OF ADJUSTED COMMUNITY RATES AND RELATED INFORMATION.

(a) DELAY IN DEADLINE FOR SUBMISSION OF ADJUSTED COMMUNITY RATES AND RELATED INFORMATION- Section 1854(a)(1) (42 U.S.C. 1395w-24(a)(1)) is amended by striking `May 1' and inserting `July 1'.

(b) ADJUSTMENT IN INFORMATION DISCLOSURE PROVISIONS- Section 1851(d)(2)(A)(ii) (42 U.S.C. 1395w-21(d)(2)(A)(ii)) is amended by inserting after `information described in paragraph (4) concerning such plans' the following: `, to the extent such information is available at the time of preparation of the material for mailing'.

SEC. 508. 2 YEAR EXTENSION OF MEDICARE COST CONTRACTS.

Section 1876(h)(5)(B) (42 U.S.C. 1395mm(h)(5)(B)) is amended by striking `2002' and inserting `2004'.

SEC. 509. MISCELLANEOUS CHANGES.

(a) PERMITTING RELIGIOUS FRATERNAL BENEFIT SOCIETIES TO OFFER A RANGE OF MEDICARE+CHOICE PLANS- Section 1859(e)(2)(A) (42 U.S.C. 1395w-29(e)(2)(A)) is amended by striking `section 1851(a)(2)(A)' and inserting `section 1851(a)(2)'.

SEC. 510. MEDPAC REPORT ON MEDICARE MSA (MEDICAL SAVINGS ACCOUNT) PLANS.

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 specific legislative changes that should be made to make MSA plans a viable option under the Medicare+Choice program.

Subtitle B--Social Health Maintenance Organizations (SHMOs)

SEC. 511. EXTENSION OF SOCIAL HEALTH MAINTENANCE ORGANIZATION DEMONSTRATION PROJECT AUTHORITY.

(a) EXTENSION- Section 4018(b) of the Omnibus Budget Reconciliation Act of 1987, as amended by section 4014(a)(1) of BBA, is amended--

(1) in paragraph (1), by striking `December 31, 2000' and inserting `the date that is 18 months after the date that Secretary submits to Congress the report described in section 4014(c) of the Balanced Budget Act of 1997'; and

(2) by adding at the end of paragraph (4) the following: `Not later than 6 months after the date the Secretary submits such final report, the Medicare Payment Advisory Commission shall submit to Congress a report containing recommendations regarding such project.'.

(b) SUBSTITUTION OF AGGREGATE CAP- Section 13567(c) of the Omnibus Budget Reconciliation Act of 1993, as amended by section 4014(b) of BBA, is amended to read as follows:

`(c) AGGREGATE LIMIT ON NUMBER OF MEMBERS- The Secretary of Health and Human Services may not impose a limit on the number of individuals that may participate in a project conducted under section 2355 of the Deficit Reduction Act of 1984, other than an aggregate limit of not less than 324,000 for all sites.'.

END