[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3075 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 3075

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.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            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

_______________________________________________________________________

                                 A BILL


 
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.''.
                                 <all>