Requires the Secretary, for cost reporting periods beginning on or after July 1, 2008, to include patients with comorbidity in the inpatient population that counts towards such 60% compliance rate.

Requires the Centers for Medicare & Medicaid Services and Medicare fiscal intermediaries, Medicare administrative contractors, recovery audit contractors, and other government agents to use and apply the criteria established in HCFA Ruling 85-2, as issued on July 31, 1985, as the sole standard for determining the medical necessity of servivces provided by inpatient rehabilitation hospitals and units to Medicare beneficiaries.

Directs the Secretary to report to specified congressional committees: (1) an examination of the impact of the 75% rule on the Medicare program, and specifically on Medicare beneficiaries; and (2) alternatives to the 75% rule policy for determining exclusion criteria for inpatient rehabilitation hospital and unit designation under the Medicare program.