[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4987 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4987

To amend title XVIII of the Social Security Act to improve payments for 
home health services and for direct graduate medical education, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 21, 2002

  Mr. Tauzin introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committee on Energy 
    and 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 improve payments for 
home health services and for direct graduate medical education, and for 
                            other purposes.

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

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

SEC. 601. ELIMINATION OF 15 PERCENT REDUCTION IN PAYMENT RATES UNDER 
              THE PROSPECTIVE PAYMENT SYSTEM.

    (a) In General.--Section 1895(b)(3)(A) (42 U.S.C. 1395fff(b)(3)(A)) 
is amended to read as follows:
                    ``(A) Initial basis.--Under such system the 
                Secretary shall provide for computation of a standard 
                prospective payment amount (or amounts) as follows:
                            ``(i) 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 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 if section 1861(v)(1)(L)(ix) 
                        had not been enacted.
                            ``(ii) For fiscal year 2002 and for the 
                        first quarter of fiscal year 2003, such amount 
                        (or amounts) shall be equal to the amount (or 
                        amounts) determined under this paragraph for 
                        the previous fiscal year, updated under 
                        subparagraph (B).
                            ``(iii) For 2003, such amount (or amounts) 
                        shall be equal to the amount (or amounts) 
                        determined under this paragraph for fiscal year 
                        2002, updated under subparagraph (B) for 2003.
                            ``(iv) For 2004 and each subsequent year, 
                        such amount (or amounts) shall be equal to the 
                        amount (or amounts) determined under this 
                        paragraph for the previous year, updated under 
                        subparagraph (B).
                Each such amount shall be standardized in a manner that 
                eliminates the effect of variations in relative case 
                mix and area wage adjustments 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.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the amendments made by section 501 of the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
of 2000 (as enacted into law by section 1(a)(6) of Public Law 106-554).

SEC. 602. UPDATE IN HOME HEALTH SERVICES.

    (a) Change to Calendar Year Update.--
            (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
        is amended--
                    (A) in paragraph (3)(B)(i)--
                            (i) by striking ``each fiscal year 
                        (beginning with fiscal year 2002)'' and 
                        inserting ``fiscal year 2002 and for each 
                        subsequent year (beginning with 2003)''; and
                            (ii) by inserting ``or year'' after ``the 
                        fiscal year'';
                    (B) in paragraph (3)(B)(ii)--
                            (i) in subclause (II), by striking ``fiscal 
                        year'' and inserting ``year'' and by 
                        redesignating such subclause as subclause 
                        (III); and
                            (ii) in subclause (I), by striking ``each 
                        of fiscal years 2002 and 2003'' and inserting 
                        the following: ``fiscal year 2002, the home 
                        health market basket percentage increase (as 
                        defined in clause (iii)) minus 1.1 percentage 
                        points;
                                    ``(II) 2003'';
                    (C) in paragraph (3)(B)(iii), by inserting ``or 
                year'' after ``fiscal year'' each place it appears;
                    (D) in paragraph (3)(B)(iv)--
                            (i) by inserting ``or year'' after ``fiscal 
                        year'' each place it appears; and
                            (ii) by inserting ``or years'' after 
                        ``fiscal years''; and
                    (E) in paragraph (5), by inserting ``or year'' 
                after ``fiscal year''.
            (2) Transition rule.--The standard prospective payment 
        amount (or amounts) under section 1895(b)(3) of the Social 
        Security Act for the calendar quarter beginning on October 1, 
        2002, shall be such amount (or amounts) for the previous 
        calendar quarter.
    (b) Changes in Updates for 2003, 2004, and 2005.--Section 
1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as amended by 
subsection (a)(1)(B), is amended--
            (1) in subclause (II), by striking ``the home health market 
        basket percentage increase (as defined in clause (iii)) minus 
        1.1 percentage points'' and inserting ``2.0 percentage 
        points'';
            (2) by striking ``or'' at the end of subclause (II);
            (3) by redesignating subclause (III) as subclause (V); and
            (4) by inserting after subclause (II) the following new 
        subclause:
                                    ``(III) 2004, 1.1 percentage 
                                points;
                                    ``(IV) 2005, 2.7 percentage points; 
                                or''.
    (c) Payment Adjustment.--
            (1) In general.--Section 1895(b)(5) (42 U.S.C. 
        1395fff(b)(5)) is amended ``5 percent'' and inserting ``3 
        percent''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to years beginning with 2003.

SEC. 603. OASIS TASK FORCE; SUSPENSION OF CERTAIN OASIS DATA COLLECTION 
              REQUIREMENTS PENDING TASK FORCE SUBMITTAL OF REPORT.

    (a) Establishment.--The Secretary of Health and Human Services 
shall establish and appoint a task force (to be known as the ``OASIS 
Task Force'') to examine the data collection and reporting requirements 
under OASIS. For purposes of this section, the term ``OASIS'' means the 
Outcome and Assessment Information Set required by reason of section 
4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 1395fff note).
    (b) Composition.--The OASIS Task Force shall be composed of the 
following:
            (1) Staff of the Centers for Medicare & Medicaid Services 
        with expertise in post-acute care.
            (2) Representatives of home health agencies.
            (3) Health care professionals and research and health care 
        quality experts outside the Federal Government with expertise 
        in post-acute care.
            (4) Advocates for individuals requiring home health 
        services.
    (c) Duties.--
            (1) Review and recommendations.--The OASIS Task Force shall 
        review and make recommendations to the Secretary regarding 
        changes in OASIS to improve and simplify data collection for 
        purposes of--
                    (A) assessing the quality of home health services; 
                and
                    (B) providing consistency in classification of 
                patients into home health resource groups (HHRGs) for 
                payment under section 1895 of the Social Security Act 
                (42 U.S.C. 1395fff).
            (2) Specific items.--In conducting the review under 
        paragraph (1), the OASIS Task Force shall specifically 
        examine--
                    (A) the 41 outcome measures currently in use;
                    (B) the timing and frequency of data collection; 
                and
                    (C) the collection of information on comorbidities 
                and clinical indicators.
            (3) Report.--The OASIS Task Force shall submit a report to 
        the Secretary containing its findings and recommendations for 
        changes in OASIS by not later than 18 months after the date of 
        the enactment of this Act.
    (d) Sunset.--The OASIS Task Force shall terminate 60 days after the 
date on which the report is submitted under subsection (c)(2).
    (e) Nonapplication of FACA.--The provisions of the Federal Advisory 
Committee Act shall not apply to the OASIS Task Force.
    (f) Suspension of OASIS Requirement for Collection of Data on Non-
Medicare and Non-Medicaid Patients Pending Task Force Report.--
            (1) In general.--During the period described in paragraph 
        (2), the Secretary of Health and Human Services may not 
        require, under section 4602(e) of the Balanced Budget Act of 
        1997 or otherwise under OASIS, a home health agency to gather 
        or submit information that relates to an individual who is not 
        eligible for benefits under either title XVIII or title XIX of 
        the Social Security Act.
            (2) Period of suspension.--The period described in this 
        paragraph--
                    (A) begins on January 1, 2003, and
                    (B) ends on the last day of the 2nd month beginning 
                after the date the report is submitted under subsection 
                (c)(2).

SEC. 604. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH AGENCIES.

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

SEC. 605. REVIEW OF APPLICATION OF ABSENCE OF INFREQUENT OR SHORT 
              DURATION IN ESTABLISHING HOME CONFINEMENT FOR PURPOSES OF 
              ELIGIBILITY FOR HOME HEALTH SERVICES.

    (a) Review.--The Secretary shall review the standards used, by 
fiscal intermediaries in paying for home health services under title 
XVIII of the Social Security Act, in allowing infrequent or short 
duration absences from the home (described in the penultimate sentence 
of section 1835(a) of the Social Security Act) for individuals eligible 
to receive home health services under such title. In conducting such 
review, the Secretary shall specifically examine how the infrequent or 
short duration absence provision applies to individuals who have, under 
the home health plan of care established by the individual's treating 
physician, permanent and severe disabilities that require technological 
assistance or the assistance of another person, or both, to leave such 
individual's home, and where such condition is expected to persist for 
at least a year, and who continue to receive home health services 
covered under such title.
    (b) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Secretary shall report to Congress on the 
review conducted under subsection (a) and shall include in the report 
such findings and recommendations for changes in guidance or 
regulations respecting the treatment of infrequent or short duration 
absences as the Secretary determines to be appropriate.

             Subtitle B--Direct Graduate Medical Education

SEC. 611. EXTENSION OF UPDATE LIMITATION ON HIGH COST PROGRAMS.

    Section 1886(h)(2)(D)(iv) (42 U.S.C. 1395ww(h)(2)(D)(iv)) is 
amended--
            (1) in subclause (I)--
                    (A) by striking ``and 2002'' and inserting 
                ``through 2012'';
                    (B) by striking ``during fiscal year 2001 or fiscal 
                year 2002'' and inserting ``during the period beginning 
                with fiscal year 2001 and ending with fiscal year 
                2012''; and
                    (C) by striking ``subject to subclause (III),'';
            (2) by striking subclause (II); and
            (3) in subclause (III)--
                    (A) by redesignating such subclause as subclause 
                (II); and
                    (B) by striking ``or (II)''.

SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

    (a) In General.--Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is 
amended--
            (1) in subparagraph (F), by inserting ``subject to 
        subparagraph (I),'' after ``October 1, 1997,'';
            (2) in subparagraph (H), by inserting ``subject to 
        subparagraph (I),'' after ``subparagraphs (F) and (G),''; and
            (3) by adding at the end the following new subparagraph:
                    ``(I) Redistribution of unused resident 
                positions.--
                            ``(i) Reduction in limit based on unused 
                        positions.--
                                    ``(I) In general.--If a hospital's 
                                resident level (as defined in clause 
                                (iii)(I)) is less than the otherwise 
                                applicable resident limit (as defined 
                                in clause (iii)(II)) for each of the 
                                reference periods (as defined in 
                                subclause (II)), effective for cost 
                                reporting periods beginning on or after 
                                January 1, 2003, the otherwise 
                                applicable resident limit shall be 
                                reduced by 75 percent of the difference 
                                between such limit and the reference 
                                resident level specified in subclause 
                                (III) (or subclause (IV) if 
                                applicable).
                                    ``(II) Reference periods defined.--
                                In this clause, the term `reference 
                                periods' means, for a hospital, the 3 
                                most recent consecutive cost reporting 
                                periods of the hospital for which cost 
                                reports have been settled (or, if not, 
                                submitted) on or before September 30, 
                                2001.
                                    ``(III) Reference resident level.--
                                Subject to subclause (IV), the 
                                reference resident level specified in 
                                this subclause for a hospital is the 
                                highest resident level for the hospital 
                                during any of the reference periods.
                                    ``(IV) Adjustment process.--Upon 
                                the timely request of a hospital, the 
                                Secretary may adjust the reference 
                                resident level for a hospital to be the 
                                resident level for the hospital for the 
                                cost reporting period that includes 
                                July 1, 2002.
                            ``(ii) Redistribution.--
                                    ``(I) In general.--The Secretary is 
                                authorized to increase the otherwise 
                                applicable resident limits for 
                                hospitals by an aggregate number 
                                estimated by the Secretary that does 
                                not exceed the aggregate reduction in 
                                such limits attributable to clause (i) 
                                (without taking into account any 
                                adjustment under subclause (IV) of such 
                                clause).
                                    ``(II) Effective date.--No increase 
                                under subclause (I) shall be permitted 
                                or taken into account for a hospital 
                                for any portion of a cost reporting 
                                period that occurs before July 1, 2003, 
                                or before the date of the hospital's 
                                application for an increase under this 
                                clause. No such increase shall be 
                                permitted for a hospital unless the 
                                hospital has applied to the Secretary 
                                for such increase by December 31, 2004.
                                    ``(III) Considerations in 
                                redistribution.--In determining for 
                                which hospitals the increase in the 
                                otherwise applicable resident limit is 
                                provided under subclause (I), the 
                                Secretary shall take into account the 
                                need for such an increase by specialty 
                                and location involved, consistent with 
                                subclause (IV).
                                    ``(IV) Priority for rural and small 
                                urban areas.--In determining for which 
                                hospitals and residency training 
                                programs an increase in the otherwise 
                                applicable resident limit is provided 
                                under subclause (I), the Secretary 
                                shall first distribute the increase to 
                                programs of hospitals located in rural 
areas or in urban areas that are not large urban areas (as defined for 
purposes of subsection (d)) on a first-come-first-served basis (as 
determined by the Secretary) based on a demonstration that the hospital 
will fill the positions made available under this clause and not to 
exceed an increase of 25 full-time equivalent positions with respect to 
any hospital.
                                    ``(V) Application of locality 
                                adjusted national average per resident 
                                amount.--With respect to additional 
                                residency positions in a hospital 
                                attributable to the increase provided 
                                under this clause, notwithstanding any 
                                other provision of this subsection, the 
                                approved FTE resident amount is deemed 
                                to be equal to the locality adjusted 
                                national average per resident amount 
                                computed under subparagraph (E) for 
                                that hospital.
                                    ``(VI) Construction.--Nothing in 
                                this clause shall be construed as 
                                permitting the redistribution of 
                                reductions in residency positions 
                                attributable to voluntary reduction 
                                programs under paragraph (6) or as 
                                affecting the ability of a hospital to 
                                establish new medical residency 
                                training programs under subparagraph 
                                (H).
                            ``(iii) Resident level and limit defined.--
                        In this subparagraph:
                                    ``(I) Resident level.--The term 
                                `resident level' means, with respect to 
                                a hospital, the total number of full-
                                time equivalent residents, before the 
                                application of weighting factors (as 
                                determined under this paragraph), in 
                                the fields of allopathic and 
                                osteopathic medicine for the hospital.
                                    ``(II) Otherwise applicable 
                                resident limit.--The term `otherwise 
                                applicable resident limit' means, with 
                                respect to a hospital, the limit 
                                otherwise applicable under 
                                subparagraphs (F)(i) and (H) on the 
                                resident level for the hospital 
                                determined without regard to this 
                                subparagraph.''.
    (b) No Application of Increase to IME.--Section 1886(d)(5)(B)(v) 
(42 U.S.C. 1395ww(d)(5)(B)(v)) is amended by adding at the end the 
following: ``The provisions of clause (i) of subparagraph (I) of 
subsection (h)(4) shall apply with respect to the first sentence of 
this clause in the same manner as it applies with respect to 
subparagraph (F) of such subsection, but the provisions of clause (ii) 
of such subparagraph shall not apply.''.
    (c) Report on Extension of Applications Under Redistribution 
Program.--Not later than July 1, 2004, the Secretary shall submit to 
Congress a report containing recommendations regarding whether to 
extend the deadline for applications for an increase in resident limits 
under section 1886(h)(4)(I)(ii)(II) of the Social Security Act (as 
added by subsection (a)).

                      Subtitle C--Other Provisions

SEC. 621. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY COMMISSION 
              (MEDPAC).

    (a) Examination of Budget Consequences.--Section 1805(b) (42 U.S.C. 
1395b-6(b)) is amended by adding at the end the following new 
paragraph:
            ``(8) Examination of budget consequences.--Before making 
        any recommendations, the Commission shall examine the budget 
        consequences of such recommendations, directly or through 
        consultation with appropriate expert entities.''.
    (b) Consideration of Efficient Provision of Services.--Section 
1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is amended by 
inserting ``the efficient provision of'' after ``expenditures for''.
    (c) Additional Reports.--
            (1) Data needs and sources.--The Medicare Payment Advisory 
        Commission shall conduct a study, and submit a report to 
        Congress by not later than June 1, 2003, on the need for 
        current data, and sources of current data available, to 
        determine the solvency and financial circumstances of hospitals 
        and other medicare providers of services.
            (2) Use of tax-related returns.--Using return information 
        provided under Form 990 of the Internal Revenue Service, the 
        Commission shall submit to Congress, by not later than June 1, 
        2003, a report on the following:
                    (A) Investments and capital financing of hospitals 
                participating under the medicare program and related 
                foundations.
                    (B) Access to capital financing for private and for 
                not-for-profit hospitals.

SEC. 622. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR CERTAIN 
              MEDICARE BENEFICIARIES WITH DIABETES.

    (a) In General.--The Secretary of Health and Human Services shall 
conduct a demonstration project under this section (in this section 
referred to as the ``project'') to demonstrate the impact on costs and 
health outcomes of applying disease management to certain medicare 
beneficiaries with diagnosed diabetes. In no case may the number of 
participants in the project exceed 30,000 at any time.
    (b) Voluntary Participation.--
            (1) Eligibility.--Medicare beneficiaries are eligible to 
        participate in the project only if--
                    (A) they are Hispanic, as determined by the 
                Secretary;
                    (B) they meet specific medical criteria 
                demonstrating the appropriate diagnosis and the 
                advanced nature of their disease;
                    (C) their physicians approve of participation in 
                the project; and
                    (D) they are not enrolled in a Medicare+Choice 
                plan.
            (2) Benefits.--A medicare beneficiary who is enrolled in 
        the project shall be eligible--
                    (A) for disease management services related to 
                their diabetes; and
                    (B) for payment for all costs for prescription 
                drugs without regard to whether or not they relate to 
                the diabetes, except that the project may provide for 
                modest cost-sharing with respect to prescription drug 
                coverage.
    (c) Contracts With Disease Management Organizations.--
            (1) In general.--The Secretary of Health and Human Services 
        shall carry out the project through contracts with up to three 
        disease management organizations. The Secretary shall not enter 
        into such a contract with an organization unless the 
        organization demonstrates that it can produce improved health 
        outcomes and reduce aggregate medicare expenditures consistent 
        with paragraph (2).
            (2) Contract provisions.--Under such contracts--
                    (A) such an organization shall be required to 
                provide for prescription drug coverage described in 
                subsection (b)(2)(B);
                    (B) such an organization shall be paid a fee 
                negotiated and established by the Secretary in a manner 
                so that (taking into account savings in expenditures 
                under parts A and B of the medicare program under title 
                XVIII of the Social Security Act) there will be no net 
                increase, and to the extent practicable, there will be 
                a net reduction in expenditures under the medicare 
                program as a result of the project; and
                    (C) such an organization shall guarantee, through 
                an appropriate arrangement with a reinsurance company 
                or otherwise, the prohibition on net increases in 
                expenditures described in subparagraph (B).
            (3) Payments.--Payments to such organizations shall be made 
        in appropriate proportion from the Trust Funds established 
        under title XVIII of the Social Security Act.
            (4) Working group.--The Secretary shall establish within 
        the Department of Health and Human Services a working group 
        consisting of employees of the Department to carry out the 
        following:
                    (A) To oversee the project.
                    (B) To establish policy and criteria for medicare 
                disease management programs within the Department, 
                including the establishment of policy and criteria for 
                such programs.
                    (C) To identify targeted medical conditions and 
                targeted individuals.
                    (D) To select areas in which such programs are 
                carried out.
                    (E) To monitor health outcomes under such programs.
                    (F) To measure the effectiveness of such programs 
                in meeting any budget neutrality requirements.
                    (G) Otherwise to serve as a central focal point 
                within the Department for dissemination of information 
                on medicare disease management programs.
    (d) Application of Medigap Protections to Demonstration Project 
Enrollees.--(1) Subject to paragraph (2), the provisions of section 
1882(s)(3) (other than clauses (i) through (iv) of subparagraph (B)) 
and 1882(s)(4) of the Social Security Act shall apply to enrollment 
(and termination of enrollment) in the demonstration project under this 
section, in the same manner as they apply to enrollment (and 
termination of enrollment) with a Medicare+Choice organization in a 
Medicare+Choice plan.
    (2) In applying paragraph (1)--
            (A) any reference in clause (v) or (vi) of section 
        1882(s)(3)(B) of such Act to 12 months is deemed a reference to 
        the period of the demonstration project; and
            (B) the notification required under section 1882(s)(3)(D) 
        of such Act shall be provided in a manner specified by the 
        Secretary of Health and Human Services.
    (e) Duration.--The project shall last for not longer than 3 years.
    (f) Waiver.--The Secretary of Health and Human Services shall waive 
such provisions of title XVIII of the Social Security Act as may be 
necessary to provide for payment for services under the project in 
accordance with subsection (c)(3).
    (g) Report.--The Secretary of Health and Human Services shall 
submit to Congress an interim report on the project not later than 2 
years after the date it is first implemented and a final report on the 
project not later than 6 months after the date of its completion. Such 
reports shall include information on the impact of the project on costs 
and health outcomes and recommendations on the cost-effectiveness of 
extending or expanding the project.
    (h) GAO Study on Disease Management Programs.--The Comptroller 
General of the United States shall conduct a study that compares 
disease management programs under title XVIII of the Social Security 
Act with such programs conducted in the private sector, including the 
prevalence of such programs and programs for case management. The study 
shall identify the cost-effectiveness of such programs and any savings 
achieved by such programs. The Comptroller General shall submit a 
report on such study to Congress by not later than 18 months after the 
date of the enactment of this Act.

SEC. 623. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE SERVICES.

    (a) Establishment.--Subject to the succeeding provisions of this 
section, the Secretary of Health and Human Services shall establish a 
demonstration project (in this section referred to as the 
``demonstration project'') under which the Secretary shall, as part of 
a plan of an episode of care for home health services established for a 
medicare beneficiary, permit a home health agency, directly or under 
arrangements with a medical adult day care facility, to provide medical 
adult day care services as a substitute for a portion of home health 
services that would otherwise be provided in the beneficiary's home.
    (b) Payment.--
            (1) In general.--The amount of payment for an episode of 
        care for home health services, a portion of which consists of 
        substitute medical adult day care services, under the 
        demonstration project shall be made at a rate equal to 95 
        percent of the amount that would otherwise apply for such home 
        health services under section 1895 of the Social Security Act 
        (42 U.S.C. 1395fff). In no case may a home health agency, or a 
        medical adult day care facility under arrangements with a home 
        health agency, separately charge a beneficiary for medical 
        adult day care services furnished under the plan of care.
            (2) Budget neutrality for demonstration project.--
        Notwithstanding any other provision of law, the Secretary shall 
        provide for an appropriate reduction in the aggregate amount of 
        additional payments made under section 1895 of the Social 
        Security Act (42 U.S.C. 1395fff) to reflect any increase in 
        amounts expended from the Trust Funds as a result of the 
        demonstration project conducted under this section.
    (c) Demonstration Project Sites.--The project established under 
this section shall be conducted in not more than 5 sites in States 
selected by the Secretary that license or certify providers of services 
that furnish medical adult day care services.
    (d) Duration.--The Secretary shall conduct the demonstration 
project for a period of 3 years.
    (e) Voluntary Participation.--Participation of medicare 
beneficiaries in the demonstration project shall be voluntary. The 
total number of such beneficiaries that may participate in the project 
at any given time may not exceed 15,000.
    (f) Preference in Selecting Agencies.--In selecting home health 
agencies to participate under the demonstration project, the Secretary 
shall give preference to those agencies that--
            (1) are currently licensed or certified to furnish medical 
        adult day care services; and
            (2) have furnished medical adult day care services to 
        medicare beneficiaries for a continuous 2-year period before 
        the beginning of the demonstration project.
    (g) Waiver Authority.--The Secretary may waive such requirements of 
title XVIII of the Social Security Act as may be necessary for the 
purposes of carrying out the demonstration project, other than waiving 
the requirement that an individual be homebound in order to be eligible 
for benefits for home health services.
    (h) Evaluation and Report.--The Secretary shall conduct an 
evaluation of the clinical and cost effectiveness of the demonstration 
project. Not later than 30 months after the commencement of the 
project, the Secretary shall submit to Congress a report on the 
evaluation, and shall include in the report the following:
            (1) An analysis of the patient outcomes and costs of 
        furnishing care to the medicare beneficiaries participating in 
        the project as compared to such outcomes and costs to 
        beneficiaries receiving only home health services for the same 
        health conditions.
            (2) Such recommendations regarding the extension, 
        expansion, or termination of the project as the Secretary 
        determines appropriate.
    (i) Definitions.--In this section:
            (1) Home health agency.--The term ``home health agency'' 
        has the meaning given such term in section 1861(o) of the 
        Social Security Act (42 U.S.C. 1395x(o)).
            (2) Medical adult day care facility.--The term ``medical 
        adult day care facility'' means a facility that--
                    (A) has been licensed or certified by a State to 
                furnish medical adult day care services in the State 
                for a continuous 2-year period;
                    (B) is engaged in providing skilled nursing 
                services and other therapeutic services directly or 
                under arrangement with a home health agency;
                    (C) meets such standards established by the 
                Secretary to assure quality of care and such other 
                requirements as the Secretary finds necessary in the 
                interest of the health and safety of individuals who 
                are furnished services in the facility; and
                    (D) provides medical adult day care services.
            (3) Medical adult day care services.--The term ``medical 
        adult day care services'' means--
                    (A) home health service items and services 
                described in paragraphs (1) through (7) of section 
                1861(m) furnished in a medical adult day care facility;
                    (B) a program of supervised activities furnished in 
                a group setting in the facility that--
                            (i) meet such criteria as the Secretary 
                        determines appropriate; and
                            (ii) is designed to promote physical and 
                        mental health of the individuals; and
                    (C) such other services as the Secretary may 
                specify.
            (4) Medicare beneficiary.--The term ``medicare 
        beneficiary'' means an individual entitled to benefits under 
        part A of this title, enrolled under part B of this title, or 
        both.
                                 <all>