[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5729 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 5729

 To amend title XVIII of the Social Security Act to revise and improve 
 payments to providers of services under the Medicare Program, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 14, 2002

    Mr. Tanner (for himself, Mr. Berry, Mr. Matheson, Mr. Ross, Mr. 
 Stenholm, Mr. Hill, Mr. Moore, Mr. Peterson of Minnesota, Mr. Turner, 
and Mr. Ford) 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 revise and improve 
 payments to providers of services under the Medicare Program, and for 
                            other purposes.

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

SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; REFERENCES 
              TO BIPA AND SECRETARY; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Reimbursement Equity and Benefits Improvement Act of 2002''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act 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) BIPA; Secretary.--In this Act:
            (1) BIPA.--The term ``BIPA'' means 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.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (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 
                            BIPA and Secretary; table of contents.
                TITLE I--RURAL HEALTH CARE IMPROVEMENTS

Sec. 101. Reference to full market basket increase for sole community 
                            hospitals.
Sec. 102. Enhanced disproportionate share hospital (DSH) treatment for 
                            rural hospitals and urban hospitals with 
                            fewer than 100 beds.
Sec. 103. 2-year phased-in increase in the standardized amount in rural 
                            and small urban areas to achieve a single, 
                            uniform standardized amount.
Sec. 104. More frequent update in weights used in hospital market 
                            basket.
Sec. 105. Improvements to critical access hospital program.
Sec. 106. Extension of temporary increase for home health services 
                            furnished in a rural area.
Sec. 107. Reference to 10 percent increase in payment for hospice care 
                            furnished in a frontier area and rural 
                            hospice demonstration project.
Sec. 108. Reference to priority for hospitals located in rural or small 
                            urban areas in redistribution of unused 
                            graduate medical education residencies.
Sec. 109. GAO study of geographic differences in payments for 
                            physicians' services.
Sec. 110. Providing safe harbor for certain collaborative efforts that 
                            benefit medically underserved populations.
Sec. 111. Relief for certain non-teaching hospitals.
                TITLE II--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 201. Revision of acute care hospital payment updates.
Sec. 202. 2-year increase in level of adjustment for indirect costs of 
                            medical education (IME).
Sec. 203. Recognition of new medical technologies under inpatient 
                            hospital PPS.
Sec. 204. Phase-in of Federal rate for hospitals in Puerto Rico.
Sec. 205. Reference to provision relating to enhanced disproportionate 
                            share hospital (DSH) payments for rural 
                            hospitals and urban hospitals with fewer 
                            than 100 beds.
Sec. 206. Reference to provision relating to 2-year phased-in increase 
                            in the standardized amount in rural and 
                            small urban areas to achieve a single, 
                            uniform standardized amount.
Sec. 207. Reference to provision for more frequent updates in the 
                            weights used in hospital market basket.
Sec. 208. Reference to provision making improvements to critical access 
                            hospital program.
Sec. 209. GAO study on improving the hospital wage index.
             Subtitle B--Skilled Nursing Facility Services

Sec. 211. Payment for covered skilled nursing facility services.
                          Subtitle C--Hospice

Sec. 221. Coverage of hospice consultation services.
Sec. 222. 10 percent increase in payment for hospice care furnished in 
                            a frontier area.
Sec. 223. Rural hospice demonstration project.
                TITLE III--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

Sec. 301. Studies on access to physicians' services.
Sec. 302. MedPAC report on payment for physicians' services.
Sec. 303. 1-year extension of treatment of certain physician pathology 
                            services under medicare.
Sec. 304. Physician fee schedule wage index revision.
                       Subtitle B--Other Services

Sec. 311. Payment for ambulance services.
Sec. 312. 2-year extension of moratorium on therapy caps; provisions 
                            relating to reports.
Sec. 313. Coverage of an initial preventive physical examination.
Sec. 314. Renal dialysis services.
Sec. 315. Improved payment for certain mammography services.
Sec. 316. Waiver of part B late enrollment penalty for certain military 
                            retirees; special enrollment period.
Sec. 317. Coverage of cholesterol and blood lipid screening.
             TITLE IV--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 401. Elimination of 15 percent reduction in payment rates under 
                            the prospective payment system.
Sec. 402. Update in home health services.
Sec. 403. OASIS Task Force; suspension of certain OASIS data collection 
                            requirements pending Task Force submittal 
                            of report.
Sec. 404. MedPAC study on medicare margins of home health agencies.
Sec. 405. Clarification of treatment of occasional absences in 
                            determining whether an individual is 
                            confined to the home.
             Subtitle B--Direct Graduate Medical Education

Sec. 411. Extension of update limitation on high cost programs.
Sec. 412. Redistribution of unused resident positions.
                      Subtitle C--Other Provisions

Sec. 421. Modifications to Medicare Payment Advisory Commission 
                            (MedPAC).
Sec. 422. Demonstration project for disease management for certain 
                            medicare beneficiaries with diabetes.
Sec. 423. Demonstration project for medical adult day care services.
Sec. 424. Publication on final written guidance concerning prohibitions 
                            against discrimination by national origin 
                            with respect to health care services.
                TITLE V--MEDICARE+CHOICE REVITALIZATION

Sec. 501. Medicare+Choice improvements.
Sec. 502. Making permanent change in Medicare+Choice reporting 
                            deadlines and annual, coordinated election 
                            period.
Sec. 503. Specialized Medicare+Choice plans for special needs 
                            beneficiaries.
Sec. 504. Extension of reasonable cost and SHMO contracts.
   TITLE VI--MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS

Sec. 601. Disproportionate share hospital (DSH) payments.

                TITLE I--RURAL HEALTH CARE IMPROVEMENTS

SEC. 101. REFERENCE TO FULL MARKET BASKET INCREASE FOR SOLE COMMUNITY 
              HOSPITALS.

    For provision eliminating any reduction from full market basket in 
the update for inpatient hospital services for sole community 
hospitals, see section 201.

SEC. 102. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) TREATMENT FOR 
              RURAL HOSPITALS AND URBAN HOSPITALS WITH FEWER THAN 100 
              BEDS.

    (a) Blending of Payment Amounts.--
            (1) In general.--Section 1886(d)(5)(F) (42 U.S.C. 
        1395ww(d)(5)(F)) is amended by adding at the end the following 
        new clause:
    ``(xiv)(I) In the case of discharges in a fiscal year beginning on 
or after October 1, 2002, subject to subclause (II), there shall be 
substituted for the disproportionate share adjustment percentage 
otherwise determined under clause (iv) (other than subclause (I)) or 
under clause (viii), (x), (xi), (xii), or (xiii), the old blend 
proportion (specified under subclause (III)) of the disproportionate 
share adjustment percentage otherwise determined under the respective 
clause and 100 percent minus such old blend proportion of the 
disproportionate share adjustment percentage determined under clause 
(vii) (relating to large, urban hospitals).
    ``(II) Under subclause (I), the disproportionate share adjustment 
percentage shall not exceed 10 percent for a hospital that is not 
classified as a rural referral center under subparagraph (C).
    ``(III) For purposes of subclause (I), the old blend proportion for 
fiscal year 2003 is 80 percent, for each subsequent year (through 2006) 
is the old blend proportion under this subclause for the previous year 
minus 20 percentage points, and for each year beginning with 2007 is 0 
percent.''.
            (2) Conforming amendments.--Section 1886(d)(5)(F) (42 
        U.S.C. 1395ww(d)(5)(F)) is amended--
                    (A) in each of subclauses (II), (III), (IV), (V), 
                and (VI) of clause (iv), by inserting ``subject to 
                clause (xiv) and'' before ``for discharges occurring'';
                    (B) in clause (viii), by striking ``The formula'' 
                and inserting ``Subject to clause (xiv), the formula''; 
                and
                    (C) in each of clauses (x), (xi), (xii), and 
                (xiii), by striking ``For purposes'' and inserting 
                ``Subject to clause (xiv), for purposes''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to discharges occurring on or after October 1, 2002.

SEC. 103. 2-YEAR PHASED-IN INCREASE IN THE STANDARDIZED AMOUNT IN RURAL 
              AND SMALL URBAN AREAS TO ACHIEVE A SINGLE, UNIFORM 
              STANDARDIZED AMOUNT.

    Section 1886(d)(3)(A)(iv) (42 U.S.C. 1395ww(d)(3)(A)(iv)) is 
amended--
            (1) by striking ``(iv) For discharges'' and inserting 
        ``(iv)(I) Subject to the succeeding provisions of this clause, 
        for discharges''; and
            (2) by adding at the end the following new subclauses:
            ``(II) For discharges occurring during fiscal year 2003, 
        the average standardized amount for hospitals located other 
        than in a large urban area shall be increased by \1/2\ of the 
        difference between the average standardized amount determined 
        under subclause (I) for hospitals located in large urban areas 
        for such fiscal year and such amount determined (without regard 
        to this subclause) for other hospitals for such fiscal year.
            ``(III) For discharges occurring in a fiscal year beginning 
        with fiscal year 2004, the Secretary shall compute an average 
        standardized amount for hospitals located in any area within 
        the United States and within each region equal to the average 
        standardized amount computed for the previous fiscal year under 
        this subparagraph for hospitals located in a large urban area 
        (or, beginning with fiscal year 2005, for hospitals located in 
        any area) increased by the applicable percentage increase under 
        subsection (b)(3)(B)(i).''.

SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL MARKET 
              BASKET.

    (a) More Frequent Updates in Weights.--After revising the weights 
used in the hospital market basket under section 1886(b)(3)(B)(iii) of 
the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the 
most current data available, the Secretary shall establish a frequency 
for revising such weights in such market basket to reflect the most 
current data available more frequently than once every 5 years.
    (b) Report.--Not later than October 1, 2003, the Secretary shall 
submit a report to Congress on the frequency established under 
subsection (a), including an explanation of the reasons for, and 
options considered, in determining such frequency.

SEC. 105. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

    (a) Reinstatement of Periodic Interim Payment (PIP).--Section 
1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (C);
            (2) by adding ``and'' at the end of subparagraph (D); and
            (3) by inserting after subparagraph (D) the following new 
        subparagraph:
            ``(E) inpatient critical access hospital services;''.
    (b) Condition for Application of Special Physician Payment 
Adjustment.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is amended by 
adding after and below subparagraph (B) the following:
        ``The Secretary may not require, as a condition for applying 
        subparagraph (B) with respect to a critical access hospital, 
        that each physician providing professional services in the 
        hospital must assign billing rights with respect to such 
        services, except that such subparagraph shall not apply to 
        those physicians who have not assigned such billing rights.''.
    (c) Flexibility in Bed Limitation for Hospitals.--Section 1820 (42 
U.S.C. 1395i-4) is amended--
            (1) in subsection (c)(2)(B)(iii), by inserting ``subject to 
        paragraph (3)'' after ``(iii) provides'';
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(3) Increase in maximum number of beds for hospitals with 
        strong seasonal census fluctuations.--
                    ``(A) In general.--Subject to subparagraph (C), in 
                the case of a hospital that demonstrates that it meets 
                the standards established under subparagraph (B) and 
                has not made the election described in subsection 
                (f)(2)(A), the bed limitations otherwise applicable 
                under paragraph (2)(B)(iii) and subsection (f) shall be 
                increased by 5 beds.
                    ``(B) Standards.--The Secretary shall specify 
                standards for determining whether a critical access 
                hospital has sufficiently strong seasonal variations in 
                patient admissions to justify the increase in bed 
                limitation provided under subparagraph (A).''; and
            (3) in subsection (f)--
                    (A) by inserting ``(1)'' after ``(f)''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(2)(A) A hospital may elect to treat the reference in paragraph 
(1) to `15 beds' as a reference to `25 beds', but only if no more than 
10 beds in the hospital are at any time used for non-acute care 
services. A hospital that makes such an election is not eligible for 
the increase provided under subsection (c)(3)(A).
    ``(B) The limitations in numbers of beds under the first sentence 
of paragraph (1) are subject to adjustment under subsection (c)(3).''.
    (d) 5-Year Extension of the Authorization for Appropriations for 
Grant Program.--Section 1820(j) (42 U.S.C. 1395i-4(j)) is amended by 
striking ``through 2002'' and inserting ``through 2007''.
    (e) Prohibition of Retroactive Recoupment.--The Secretary shall not 
recoup (or otherwise seek to recover) overpayments made for outpatient 
critical access hospital services under part B of title XVIII of the 
Social Security Act, for services furnished in cost reporting periods 
that began before October 1, 2002, insofar as such overpayments are 
attributable to payment being based on 80 percent of reasonable costs 
(instead of 100 percent of reasonable costs minus 20 percent of 
charges).
    (f) Effective Dates.--
            (1) Reinstatement of pip.--The amendments made by 
        subsection (a) shall apply to payments made on or after January 
        1, 2003.
            (2) Physician payment adjustment condition.--The amendment 
        made by subsection (b) shall be effective as if included in the 
        enactment of section 403(d) of the Medicare, Medicaid, and 
        SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-
        371).
            (3) Flexibility in bed limitation.--The amendments made by 
        subsection (c) shall apply to designations made on or after 
        January 1, 2003, but shall not apply to critical access 
        hospitals that were designated as of such date.

SEC. 106. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH SERVICES 
              FURNISHED IN A RURAL AREA.

    (a) In General.--Section 508(a) BIPA (114 Stat. 2763A-533) is 
amended--
            (1) by striking ``24-Month Increase Beginning April 1, 
        2001'' and inserting ``In General''; and
            (2) by striking ``April 1, 2003'' and inserting ``January 
        1, 2005''.
    (b) Conforming Amendment.--Section 547(c)(2) of BIPA (114 Stat. 
2763A-553) is amended by striking ``the period beginning on April 1, 
2001, and ending on September 30, 2002,'' and inserting ``a period 
under such section''.

SEC. 107. REFERENCE TO 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE 
              FURNISHED IN A FRONTIER AREA AND RURAL HOSPICE 
              DEMONSTRATION PROJECT.

    For--
            (1) provision of 10 percent increase in payment for hospice 
        care furnished in a frontier area, see section 222; and
            (2) provision of a rural hospice demonstration project, see 
        section 223.

SEC. 108. REFERENCE TO PRIORITY FOR HOSPITALS LOCATED IN RURAL OR SMALL 
              URBAN AREAS IN REDISTRIBUTION OF UNUSED GRADUATE MEDICAL 
              EDUCATION RESIDENCIES.

    For provision providing priority for hospitals located in rural or 
small urban areas in redistribution of unused graduate medical 
education residencies, see section 412.

SEC. 109. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR 
              PHYSICIANS' SERVICES.

    (a) Study.--The Comptroller General of the United States shall 
conduct a study of differences in payment amounts under the physician 
fee schedule under section 1848 of the Social Security Act (42 U.S.C. 
1395w-4) for physicians' services in different geographic areas. Such 
study shall include--
            (1) an assessment of the validity of the geographic 
        adjustment factors used for each component of the fee schedule;
            (2) an evaluation of the measures used for such adjustment, 
        including the frequency of revisions; and
            (3) an evaluation of the methods used to determine 
        professional liability insurance costs used in computing the 
        malpractice component, including a review of increases in 
        professional liability insurance premiums and variation in such 
        increases by State and physician specialty and methods used to 
        update the geographic cost of practice index and relative 
        weights for the malpractice component.
    (b) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Comptroller General shall submit to Congress a report 
on the study conducted under subsection (a). The report shall include 
recommendations regarding the use of more current data in computing 
geographic cost of practice indices as well as the use of data directly 
representative of physicians' costs (rather than proxy measures of such 
costs).

SEC. 110. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE EFFORTS THAT 
              BENEFIT MEDICALLY UNDERSERVED POPULATIONS.

    (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7(b)(3)), as 
amended by section 101(b)(2), is amended--
            (1) in subparagraph (F), by striking ``and'' after the 
        semicolon at the end;
            (2) in subparagraph (G), by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(H) any remuneration between a public or 
                nonprofit private health center entity described under 
                clause (i) or (ii) of section 1905(l)(2)(B) and any 
                individual or entity providing goods, items, services, 
                donations or loans, or a combination thereof, to such 
                health center entity pursuant to a contract, lease, 
                grant, loan, or other agreement, if such agreement 
                contributes to the ability of the health center entity 
                to maintain or increase the availability, or enhance 
                the quality, of services provided to a medically 
                underserved population served by the health center 
                entity.''.
    (b) Rulemaking for Exception for Health Center Entity 
Arrangements.--
            (1) Establishment.--
                    (A) In general.--The Secretary of Health and Human 
                Services (in this subsection referred to as the 
                ``Secretary'') shall establish, on an expedited basis, 
                standards relating to the exception described in 
                section 1128B(b)(3)(H) of the Social Security Act, as 
                added by subsection (a), for health center entity 
                arrangements to the antikickback penalties.
                    (B) Factors to consider.--The Secretary shall 
                consider the following factors, among others, in 
                establishing standards relating to the exception for 
                health center entity arrangements under subparagraph 
                (A):
                            (i) Whether the arrangement between the 
                        health center entity and the other party 
                        results in savings of Federal grant funds or 
                        increased revenues to the health center entity.
                            (ii) Whether the arrangement between the 
                        health center entity and the other party 
                        restricts or limits a patient's freedom of 
                        choice.
                            (iii) Whether the arrangement between the 
                        health center entity and the other party 
                        protects a health care professional's 
                        independent medical judgment regarding 
                        medically appropriate treatment.
                The Secretary may also include other standards and 
                criteria that are consistent with the intent of 
                Congress in enacting the exception established under 
                this section.
            (2) Interim final effect.--No later than 180 days after the 
        date of enactment of this Act, the Secretary shall publish a 
        rule in the Federal Register consistent with the factors under 
        paragraph (1)(B). Such rule shall be effective and final 
        immediately on an interim basis, subject to such change and 
        revision, after public notice and opportunity (for a period of 
        not more than 60 days) for public comment, as is consistent 
        with this subsection.

SEC. 111. RELIEF FOR CERTAIN NON-TEACHING HOSPITALS.

    (a) In General.--In the case of a non-teaching hospital that meets 
the condition of subsection (b), in each of fiscal years 2003, 2004, 
and 2005 the amount of payment made to the hospital under section 
1886(d) of the Social Security Act for discharges occurring during such 
fiscal year only shall be increased as though the applicable percentage 
increase (otherwise applicable to discharges occurring during such 
fiscal year under section 1886(b)(3)(B)(i) of the Social Security Act 
(42 U.S.C. 1395ww(b)(3)(B)(i)) had been increased by 5 percentage 
points. The previous sentence shall be applied for each such fiscal 
year separately without regard to its application in a previous fiscal 
year and shall not affect payment for discharges for any hospital 
occurring during a fiscal year after fiscal year 2005.
    (b) Condition.--A non-teaching hospital meets the condition of this 
subsection if--
            (1) it is located in a rural area and the amount of the 
        aggregate payments under subsection (d) of section 1886 of the 
        Social Security Act for hospitals located in rural areas in the 
        State for their cost reporting periods beginning during fiscal 
        year 1999 is less than the aggregate allowable operating costs 
        of inpatient hospital services (as defined in subsection (a)(4) 
        of such section) for all subsection (d) hospitals in such areas 
        in such State with respect to such cost reporting periods; or
            (2) it is located in an urban area and the amount of the 
        aggregate payments under subsection (d) of such section for 
        hospitals located in urban areas in the State for their cost 
        reporting periods beginning during fiscal year 1999 is less 
        than 103 percent of the aggregate allowable operating costs of 
inpatient hospital services (as defined in subsection (a)(4) of such 
section) for all subsection (d) hospitals in such areas in such State 
with respect to such cost reporting periods.
The amounts under paragraphs (1) and (2) shall be determined by the 
Secretary of Health and Human Services based on data of the Medicare 
Payment Advisory Commission.
    (c) Definitions.--For purposes of this section:
            (1) Non-teaching hospital.--The term ``non-teaching 
        hospital'' means, for a cost reporting period, a subsection (d) 
        hospital (as defined in subsection (d)(1)(B) of section 1886 of 
        the Social Security Act, 42 U.S.C. 1395ww)) that is not 
        receiving any additional payment under subsection (d)(5)(B) of 
        such section or a payment under subsection (h) of such section 
        for discharges occurring during the period. A subsection (d) 
        hospital that receives additional payments under subsection 
        (d)(5)(B) or (h) of such section shall, for purposes of this 
        section, also be treated as a non-teaching hospital unless a 
        chairman of a department in the medical school with which the 
        hospital is affiliated is serving or has been appointed as a 
        clinical chief of service in the hospital.
            (2) Rural; urban.--The terms ``rural'' and ``urban'' have 
        the meanings given such terms for purposes of section 1886(d) 
        of the Social Security Act (42 U.S.C. 1395ww(d)).

                TITLE II--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

SEC. 201. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

    Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C. 
1395ww(b)(3)(B)(i)) is amended to read as follows:
            ``(XVIII) for fiscal year 2003, the market basket 
        percentage increase for sole community hospitals and such 
        increase minus 0.25 percentage points for other hospitals, 
        and''.

SEC. 202. 2-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS OF 
              MEDICAL EDUCATION (IME).

    Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is 
amended--
            (1) in subclause (VI) by striking ``and'' at the end;
            (2) by redesignating subclause (VII) as subclause (IX);
            (3) in subclause (IX) as so redesignated, by striking 
        ``2002'' and inserting ``2004''; and
            (4) by inserting after subclause (VI) the following new 
        subclause:
                    ``(VII) during fiscal year 2003, `c' is equal to 
                1.47;
                    ``(VIII) during fiscal year 2004, `c' is equal to 
                1.45; and''.

SEC. 203. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT 
              HOSPITAL PPS.

    (a) Improving Timeliness of Data Collection.--Section 1886(d)(5)(K) 
(42 U.S.C. 1395ww(d)(5)(K)) is amended by adding at the end the 
following new clause:
    ``(vii) Under the mechanism under this subparagraph, the Secretary 
shall provide for the addition of new diagnosis and procedure codes in 
April 1 of each year, but the addition of such codes shall not require 
the Secretary to adjust the payment (or diagnosis-related group 
classification) under this subsection until the fiscal year that begins 
after such date.''.
    (b) Eligibility Standard.--
            (1) Minimum period for recognition of new technologies.--
        Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
        amended--
                    (A) by inserting ``(I)'' after ``(vi)''; and
                    (B) by adding at the end the following new 
                subclause:
    ``(II) Under such criteria, a service or technology shall not be 
denied treatment as a new service or technology on the basis of the 
period of time in which the service or technology has been in use if 
such period ends before the end of the 2-to-3-year period that begins 
on the effective date of implementation of a code under ICD-9-CM (or a 
successor coding methodology) that enables the identification of a 
significant sample of specific discharges in which the service or 
technology has been used.''.
            (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
        (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
        ``(applying a threshold specified by the Secretary that is the 
        lesser of 50 percent of the national average standardized 
        amount for operating costs of inpatient hospital services for 
        all hospitals and all diagnosis-related groups or one standard 
        deviation for the diagnosis-related group involved)'' after 
        ``is inadequate''.
            (3) Criterion for substantial improvement.--Section 
        1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
        by paragraph (1), is further amended by adding at the end the 
        following subclause:
    ``(III) The Secretary shall by regulation provide for further 
clarification of the criteria applied to determine whether a new 
service or technology represents an advance in medical technology that 
substantially improves the diagnosis or treatment of beneficiaries. 
Under such criteria, in determining whether a new service or technology 
represents an advance in medical technology that substantially improves 
the diagnosis or treatment of beneficiaries, the Secretary shall deem a 
service or technology as meeting such requirement if the service or 
technology is a drug or biological that is designated under section 506 
or 526 of the Federal Food, Drug, and Cosmetic Act, approved under 
section 314.510 or 601.41 of title 21, Code of Federal Regulations, or 
designated for priority review when the marketing application for such 
drug or biological was filed or is a medical device for which an 
exemption has been granted under section 520(m) of such Act, or for 
which priority review has been provided under section 515(d)(5) of such 
Act.''.
            (4) Process for public input.--Section 1886(d)(5)(K) (42 
        U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
        amended--
                    (A) in clause (i), by adding at the end the 
                following: ``Such mechanism shall be modified to meet 
                the requirements of clause (viii).''; and
                    (B) by adding at the end the following new clause:
    ``(viii) The mechanism established pursuant to clause (i) shall be 
adjusted to provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology not described in 
the second sentence of clause (vi)(III) represents an advance in 
medical technology that substantially improves the diagnosis or 
treatment of beneficiaries as follows:
            ``(I) The Secretary shall make public and periodically 
        update a list of all the services and technologies for which an 
        application for additional payment under this subparagraph is 
        pending.
            ``(II) The Secretary shall accept comments, 
        recommendations, and data from the public regarding whether the 
        service or technology represents a substantial improvement.
            ``(III) The Secretary shall provide for a meeting at which 
        organizations representing hospitals, physicians, medicare 
        beneficiaries, manufacturers, and any other interested party 
        may present comments, recommendations, and data to the clinical 
        staff of the Centers for Medicare & Medicaid Services before 
        publication of a notice of proposed rulemaking regarding 
        whether service or technology represents a substantial 
        improvement.''.
    (c) Preference for Use of DRG Adjustment.--Section 1886(d)(5)(K) 
(42 U.S.C. 1395ww(d)(5)(K)) is further amended by adding at the end the 
following new clause:
    ``(ix) Before establishing any add-on payment under this 
subparagraph with respect to a new technology, the Secretary shall seek 
to identify one or more diagnosis-related groups associated with such 
technology, based on similar clinical or anatomical characteristics and 
the cost of the technology. Within such groups the Secretary shall 
assign an eligible new technology into a diagnosis-related group where 
the average costs of care most closely approximate the costs of care of 
using the new technology. In such case, no add-on payment under this 
subparagraph shall be made with respect to such new technology and this 
clause shall not affect the application of paragraph (4)(C)(iii).''.
    (d) Improvement in Payment for New Technology.--Section 
1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) is amended 
by inserting after ``the estimated average cost of such service or 
technology'' the following: ``(based on the marginal rate applied to 
costs under subparagraph (A))''.
    (e) Effective Date.--
            (1) In general.--The Secretary shall implement the 
        amendments made by this section so that they apply to 
        classification for fiscal years beginning with fiscal year 
        2004.
            (2) Reconsiderations of applications for fiscal year 2003 
        that are denied.--In the case of an application for a 
        classification of a medical service or technology as a new 
        medical service or technology under section 1886(d)(5)(K) of 
        the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
        filed for fiscal year 2003 and that is denied--
                    (A) the Secretary shall automatically reconsider 
                the application as an application for fiscal year 2004 
                under the amendments made by this section; and
                    (B) the maximum time period otherwise permitted for 
                such classification of the service or technology shall 
                be extended by 12 months.

SEC. 204. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN PUERTO RICO.

    Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by striking ``for discharges 
                beginning on or after October 1, 1997, 50 percent (and 
                for discharges between October 1, 1987, and September 
                30, 1997, 75 percent)'' and inserting ``the applicable 
                Puerto Rico percentage (specified in subparagraph 
                (E))''; and
                    (B) in clause (ii), by striking ``for discharges 
                beginning in a fiscal year beginning on or after 
                October 1, 1997, 50 percent (and for discharges between 
                October 1, 1987, and September 30, 1997, 25 percent)'' 
                and inserting ``the applicable Federal percentage 
                (specified in subparagraph (E))''; and
            (2) by adding at the end the following new subparagraph:
    ``(E) For purposes of subparagraph (A), for discharges occurring--
            ``(i) between October 1, 1987, and September 30, 1997, the 
        applicable Puerto Rico percentage is 75 percent and the 
        applicable Federal percentage is 25 percent;
            ``(ii) on or after October 1, 1997, and before October 1, 
        2003, the applicable Puerto Rico percentage is 50 percent and 
        the applicable Federal percentage is 50 percent;
            ``(iii) during fiscal year 2004, the applicable Puerto Rico 
        percentage is 45 percent and the applicable Federal percentage 
        is 55 percent;
            ``(iv) during fiscal year 2005, the applicable Puerto Rico 
        percentage is 40 percent and the applicable Federal percentage 
        is 60 percent;
            ``(v) during fiscal year 2006, the applicable Puerto Rico 
        percentage is 35 percent and the applicable Federal percentage 
        is 65 percent;
            ``(vi) during fiscal year 2007, the applicable Puerto Rico 
        percentage is 30 percent and the applicable Federal percentage 
        is 70 percent; and
            ``(vii) on or after October 1, 2007, the applicable Puerto 
        Rico percentage is 25 percent and the applicable Federal 
        percentage is 75 percent.''.

SEC. 205. REFERENCE TO PROVISION RELATING TO ENHANCED DISPROPORTIONATE 
              SHARE HOSPITAL (DSH) PAYMENTS FOR RURAL HOSPITALS AND 
              URBAN HOSPITALS WITH FEWER THAN 100 BEDS.

    For provision enhancing disproportionate share hospital (DSH) 
treatment for rural hospitals and urban hospitals with fewer than 100 
beds, see section 102.

SEC. 206. REFERENCE TO PROVISION RELATING TO 2-YEAR PHASED-IN INCREASE 
              IN THE STANDARDIZED AMOUNT IN RURAL AND SMALL URBAN AREAS 
              TO ACHIEVE A SINGLE, UNIFORM STANDARDIZED AMOUNT.

    For provision phasing in over a 2-year period an increase in the 
standardized amount for rural and small urban areas to achieve a 
single, uniform, standardized amount, see section 103.

SEC. 207. REFERENCE TO PROVISION FOR MORE FREQUENT UPDATES IN THE 
              WEIGHTS USED IN HOSPITAL MARKET BASKET.

    For provision providing for more frequent updates in the weights 
used in hospital market basket, see section 104.

SEC. 208. REFERENCE TO PROVISION MAKING IMPROVEMENTS TO CRITICAL ACCESS 
              HOSPITAL PROGRAM.

    For provision providing making improvements to critical access 
hospital program, see section 105.

SEC. 209. GAO STUDY ON IMPROVING THE HOSPITAL WAGE INDEX.

    (a) Study.--
            (1) In general.--The Comptroller General of the United 
        States shall conduct a study on the improvements that can be 
        made in the measurement of regional differences in hospital 
        wages reflected in the hospital wage index under section 
        1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)).
            (2) Examination of use of metropolitan statistical areas 
        (msas).--The study shall specifically examine the use of 
        metropolitan statistical areas for purposes of computing and 
        applying the wage index and whether the boundaries of such 
        areas accurately reflect local labor markets. In addition, the 
        study shall examine whether regional inequities are created as 
        a result of infrequent updates of such boundaries and policies 
        of the Bureau of the Census relating to commuting criteria.
            (3) Wage data.--The study shall specifically examine the 
        portions of the hospital cost reports relating to wages, and 
        methods for improving the accuracy of the wage data and for 
        reducing inequities resulting from differences among hospitals 
        in the reporting of wage data.
    (b) Consultation With OMB.--The Comptroller General shall consult 
with the Director of Office of Management and Budget in conducting the 
study under subsection (a)(2).
    (c) Report.--Not later than May 1, 2003, the Comptroller General 
shall submit to Congress a report on the study conducted under 
subsection (a) and shall include in the report such recommendations as 
may be appropriate on--
            (1) changes in the definition of labor market areas used 
        for purposes of the area wage index under section 1886 of the 
        Social Security Act; and
            (2) improvements in methods for the collection of wage 
        data.

             Subtitle B--Skilled Nursing Facility Services

SEC. 211. PAYMENT FOR COVERED SKILLED NURSING FACILITY SERVICES.

    (a) Temporary Increase in Nursing Component of PPS Federal Rate.--
Section 312(a) of BIPA is amended by adding at the end the following 
new sentence: ``The Secretary of Health and Human Services shall 
increase by 12, 10, and 8 percent the nursing component of the case-mix 
adjusted Federal prospective payment rate specified in Tables 3 and 4 
of the final rule published in the Federal Register by the Health Care 
Financing Administration on July 31, 2000 (65 Fed. Reg. 46770) and as 
subsequently updated under section 1888(e)(4)(E)(ii) of the Social 
Security Act (42 U.S.C. 1395yy(e)(4)(E)(ii)), effective for services 
furnished during fiscal years 2003, 2004, and 2005, respectively.''.
    (b) Adjustment to RUGs for AIDS Residents.--
            (1) In general.--Paragraph (12) of section 1888(e) (42 
        U.S.C. 1395yy(e)) is amended to read as follows:
            ``(12) Adjustment for residents with aids.--
                    ``(A) In general.--Subject to subparagraph (B), in 
                the case of a resident of a skilled nursing facility 
                who is afflicted with acquired immune deficiency 
                syndrome (AIDS), the per diem amount of payment 
                otherwise applicable shall be increased by 128 percent 
                to reflect increased costs associated with such 
                residents.
                    ``(B) Sunset.--Subparagraph (A) shall not apply on 
                and after such date as the Secretary certifies that 
                there is an appropriate adjustment in the case mix 
                under paragraph (4)(G)(i) to compensate for the 
                increased costs associated with residents described in 
                such subparagraph.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to services furnished on or after October 1, 2003.

                          Subtitle C--Hospice

SEC. 221. COVERAGE OF HOSPICE CONSULTATION SERVICES.

    (a) Coverage of Hospice Consultation Services.--Section 1812(a) (42 
U.S.C. 1395d(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) for individuals who are terminally ill, have not made 
        an election under subsection (d)(1), and have not previously 
        received services under this paragraph, services that are 
        furnished by a physician who is either the medical director or 
        an employee of a hospice program and that consist of--
                    ``(A) an evaluation of the individual's need for 
                pain and symptom management;
                    ``(B) counseling the individual with respect to 
                end-of-life issues and care options; and
                    ``(C) advising the individual regarding advanced 
                care planning.''.
    (b) Payment.--Section 1814(i) (42 U.S.C. l395f(i)) is amended by 
adding at the end the following new paragraph:
    ``(4) The amount paid to a hospice program with respect to the 
services under section 1812(a)(5) for which payment may be made under 
this part shall be equal to an amount equivalent to the amount 
established for an office or other outpatient visit for evaluation and 
management associated with presenting problems of moderate severity 
under the fee schedule established under section 1848(b), other than 
the portion of such amount attributable to the practice expense 
component.''.
    (c) Conforming Amendment.--Section 1861(dd)(2)(A)(i) (42 U.S.C. 
1395x(dd)(2)(A)(i)) is amended by inserting before the comma at the end 
the following: ``and services described in section 1812(a)(5)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services provided by a hospice program on or after January 1, 
2004.

SEC. 222. 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE FURNISHED IN 
              A FRONTIER AREA.

    (a) In General.--Section 1814(i)(1) (42 U.S.C. 1395f(i)(1)) is 
amended by adding at the end the following new subparagraph:
    ``(D) With respect to hospice care furnished in a frontier area on 
or after January 1, 2003, and before January 1, 2008, the payment rates 
otherwise established for such care shall be increased by 10 percent. 
For purposes of this subparagraph, the term `frontier area' means a 
county in which the population density is less than 7 persons per 
square mile.''.
    (b) Report on Costs.--Not later than January 1, 2007, the 
Comptroller General of the United States shall submit to Congress a 
report on the costs of furnishing hospice care in frontier areas. Such 
report shall include recommendations regarding the appropriateness of 
extending, and modifying, the payment increase provided under the 
amendment made by subsection (a).

SEC. 223. RURAL HOSPICE DEMONSTRATION PROJECT.

    (a) In General.--The Secretary shall conduct a demonstration 
project for the delivery of hospice care to medicare beneficiaries in 
rural areas. Under the project medicare beneficiaries who are unable to 
receive hospice care in the home for lack of an appropriate caregiver 
are provided such care in a facility of 20 or fewer beds which offers, 
within its walls, the full range of services provided by hospice 
programs under section 1861(dd) of the Social Security Act (42 U.S.C. 
1395x(dd)).
    (b) Scope of Project.--The Secretary shall conduct the project 
under this section with respect to no more than 3 hospice programs over 
a period of not longer than 5 years each.
    (c) Compliance With Conditions.--Under the demonstration project--
            (1) the hospice program shall comply with otherwise 
        applicable requirements, except that it shall not be required 
        to offer services outside of the home or to meet the 
        requirements of section 1861(dd)(2)(A)(iii) of the Social 
        Security Act; and
            (2) payments for hospice care shall be made at the rates 
        otherwise applicable to such care under title XVIII of such 
        Act.
The Secretary may require the program to comply with such additional 
quality assurance standards for its provision of services in its 
facility as the Secretary deems appropriate.
    (d) Report.--Upon completion of the project, the Secretary shall 
submit a report to Congress on the project and shall include in the 
report recommendations regarding extension of such project to hospice 
programs serving rural areas.

                TITLE III--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

SEC. 301. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.

    (a) GAO Study on Beneficiary Access to Physicians' Services.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct a study on access of medicare beneficiaries to 
        physicians' services under the medicare program. The study 
        shall include--
                    (A) an assessment of the use by beneficiaries of 
                such services through an analysis of claims submitted 
                by physicians for such services under part B of the 
                medicare program;
                    (B) an examination of changes in the use by 
                beneficiaries of physicians' services over time;
                    (C) an examination of the extent to which 
                physicians are not accepting new medicare beneficiaries 
                as patients.
            (2) Report.--Not later than 18 months after the date of the 
        enactment of this Act, the Comptroller General shall submit to 
        Congress a report on the study conducted under paragraph (1). 
        The report shall include a determination whether--
                    (A) data from claims submitted by physicians under 
                part B of the medicare program indicate potential 
                access problems for medicare beneficiaries in certain 
                geographic areas; and
                    (B) access by medicare beneficiaries to physicians' 
                services may have improved, remained constant, or 
                deteriorated over time.
    (b) Study and Report on Supply of Physicians.--
            (1) Study.--The Secretary shall request the Institute of 
        Medicine of the National Academy of Sciences to conduct a study 
        on the adequacy of the supply of physicians (including 
specialists) in the United States and the factors that affect such 
supply.
            (2) Report to congress.--Not later than 2 years after the 
        date of enactment of this section, the Secretary shall submit 
        to Congress a report on the results of the study described in 
        paragraph (1), including any recommendations for legislation.

SEC. 302. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

    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 the effect of refinements to the practice expense component 
of payments for physicians' services, after the transition to a full 
resource-based payment system in 2002, under section 1848 of the Social 
Security Act (42 U.S.C. 1395w-4). Such report shall examine the 
following matters by physician specialty:
            (1) The effect of such refinements on payment for 
        physicians' services.
            (2) The interaction of the practice expense component with 
        other components of and adjustments to payment for physicians' 
        services under such section.
            (3) The appropriateness of the amount of compensation by 
        reason of such refinements.
            (4) The effect of such refinements on access to care by 
        medicare beneficiaries to physicians' services.
            (5) The effect of such refinements on physician 
        participation under the medicare program.

SEC. 303. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY 
              SERVICES UNDER MEDICARE.

    Section 542(c) of BIPA is amended by striking ``2-year period'' and 
inserting ``3-year period''.

SEC. 304. PHYSICIAN FEE SCHEDULE WAGE INDEX REVISION.

    (a) Index Revision.--
            (1) In general.--Subject to paragraph (2), notwithstanding 
        any other provision of law, for purposes of payment under the 
        physician fee schedule under section 1848 of the Social 
        Security Act (42 U.S.C. 1395w-4) for physicians' services 
        furnished during 2004, in no case may the work geographic index 
        otherwise calculated under subsection (e)(1)(A)(iii) of such 
        section be less than 0.985.
            (2) Secretarial discretion.--Paragraph (1) shall not take 
        effect or be in force if the Secretary determines, taking into 
        account the report of the Comptroller General under subsection 
        (b)(2), that there is no sound economic rationale for the 
        implementation of such paragraph.
            (3) Exemption from limitation on annual adjustments.--Any 
        increase in expenditures attributable to paragraph (1) during 
        2004 shall not be taken into account in applying section 
        1848(c)(2)(B)(ii)(II) of the Social Security Act (42 U.S.C. 
        1395w-4(c)(2)(B)(ii)(II)) for that year.
    (b) GAO Report.--
            (1) Evaluation.--As part of the study on geographic 
        differences in payments for physicians' services conducted 
        under section 109, the Comptroller General shall evaluate the 
        following:
                    (A) Whether there is a sound economic basis for the 
                implementation of the adjustment under subsection 
                (a)(1) in those areas in which the adjustment applies.
                    (B) The effect of such adjustment on physician 
                location and retention in areas affected by such 
                adjustment, taking into account--
                            (i) differences in recruitment costs and 
                        retention rates for physicians, including 
                        specialists, between large urban areas and 
                        other areas; and
                            (ii) the mobility of physicians, including 
                        specialists, over the last decade.
                    (C) The appropriateness of establishing a floor of 
                1.0 for the work geographic index.
            (2) Report.--By not later than September 1, 2003, the 
        Comptroller General shall submit to Congress and to the 
        Secretary a report on the evaluation conducted under paragraph 
        (1).

                       Subtitle B--Other Services

SEC. 311. PAYMENT FOR AMBULANCE SERVICES.

    (a) Phase-In Providing Floor Using Blend of Fee Schedule and 
Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 1395m(l)) is 
amended--
            (1) in paragraph (2)(E), by inserting ``consistent with 
        paragraph (10)'' after ``in an efficient and fair manner'';
            (2) by redesignating the paragraph (8) added by section 
        221(a) of BIPA as paragraph (9); and
            (3) by adding at the end the following new paragraph:
            ``(10) Phase-in providing floor using blend of fee schedule 
        and regional fee schedules.--In carrying out the phase-in under 
        paragraph (2)(E) for each level of service furnished in a year 
        before January 1, 2007, the portion of the payment amount that 
        is based on the fee schedule shall not be less than the 
        following blended rate of the fee schedule under paragraph (1) 
        and of a regional fee schedule for the region involved:
                    ``(A) For 2003, the blended rate shall be based 20 
                percent on the fee schedule under paragraph (1) and 80 
                percent on the regional fee schedule.
                    ``(B) For 2004, the blended rate shall be based 40 
                percent on the fee schedule under paragraph (1) and 60 
                percent on the regional fee schedule.
                    ``(C) For 2005, the blended rate shall be based 60 
                percent on the fee schedule under paragraph (1) and 40 
                percent on the regional fee schedule.
                    ``(D) For 2006, the blended rate shall be based 80 
                percent on the fee schedule under paragraph (1) and 20 
                percent on the regional fee schedule.
        For purposes of this paragraph, the Secretary shall establish a 
        regional fee schedule for each of the 9 Census divisions using 
        the methodology (used in establishing the fee schedule under 
        paragraph (1)) to calculate a regional conversion factor and a 
        regional mileage payment rate and using the same payment 
        adjustments and the same relative value units as used in the 
fee schedule under such paragraph.''.
    (b) Adjustment in Payment for Certain Long Trips.--Section 1834(l), 
as amended by subsection (a), is further amended by adding at the end 
the following new paragraph:
            ``(11) Adjustment in payment for certain long trips.--In 
        the case of ground ambulance services furnished on or after 
        January 1, 2003, and before January 1, 2008, regardless of 
        where the transportation originates, the fee schedule 
        established under this subsection shall provide that, with 
        respect to the payment rate for mileage for a trip above 50 
        miles the per mile rate otherwise established shall be 
        increased by \1/4\ of the payment per mile otherwise applicable 
        to such miles.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to ambulance services furnished on or after January 1, 2003.

SEC. 312. 2-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS; PROVISIONS 
              RELATING TO REPORTS.

    (a) 2-Year Extension of Moratorium on Therapy Caps.--Section 
1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by striking ``and 2002'' 
and inserting ``2002, 2003, and 2004''.
    (b) Prompt Submission of Overdue Reports on Payment and Utilization 
of Outpatient Therapy Services.--Not later than December 31, 2002, the 
Secretary shall submit to Congress the reports required under section 
4541(d)(2) of the Balanced Budget Act of 1997 (relating to alternatives 
to a single annual dollar cap on outpatient therapy) and under section 
221(d) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement 
Act of 1999 (relating to utilization patterns for outpatient therapy).
    (c) Identification of Conditions and Diseases Justifying Waiver of 
Therapy Cap.--
            (1) Study.--The Secretary shall request the Institute of 
        Medicine of the National Academy of Sciences to identify 
        conditions or diseases that should justify conducting an 
        assessment of the need to waive the therapy caps under section 
        1833(g)(4) of the Social Security Act (42 U.S.C. 1395l(g)(4)).
            (2) Reports to congress.--Not later than September 1, 2003, 
        the Secretary shall submit to Congress a preliminary report on 
        the conditions and diseases identified under paragraph (1) and 
        not later than December 31, 2003, a final report on the 
        conditions and diseases so identified.
    (d) GAO Study of Patient Access to Physical Therapist Services.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct a study on access to physical therapist services 
        in States authorizing such services without a physician 
        referral and in States that require such a physician referral. 
        The study shall--
                    (A) examine the use of and referral patterns for 
                physical therapist services for patients age 50 and 
                older in States that authorize such services without a 
                physician referral and in States that require such a 
                physician referral;
                    (B) examine the use of and referral patterns for 
                physical therapist services for patients who are 
                medicare beneficiaries;
                    (C) examine the potential effect of prohibiting a 
                physician from referring patients to physical therapy 
                services owned by the physician and provided in the 
                physician's office;
                    (D) examine the delivery of physical therapists' 
                services within the facilities of Department of 
                Defense; and
                    (E) analyze the potential impact on medicare 
                beneficiaries and on expenditures under the medicare 
                program of eliminating the need for a physician 
                referral and physician certification for physical 
                therapist services under the medicare program.
            (2) Report.--The Comptroller General shall submit to 
        Congress a report on the study conducted under paragraph (1) by 
        not later than 1 year after the date of the enactment of this 
        Act.

SEC. 313. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL EXAMINATION.

    (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is 
amended--
            (1) in subparagraph (U), by striking ``and'' at the end;
            (2) in subparagraph (V), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(W) an initial preventive physical examination (as 
        defined in subsection (ww));''.
    (b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended 
by adding at the end the following new subsection:

               ``Initial Preventive Physical Examination

    ``(ww) The term `initial preventive physical examination' means 
physicians' services consisting of a physical examination with the goal 
of health promotion and disease detection and includes items and 
services (excluding clinical laboratory tests), as determined by the 
Secretary, consistent with the recommendations of the United States 
Preventive Services Task Force.''.
    (c) Waiver of Deductible and Coinsurance.--
            (1) Deductible.--The first sentence of section 1833(b) (42 
        U.S.C. 1395l(b)) is amended--
                    (A) by striking ``and'' before ``(6)'', and
                    (B) by inserting before the period at the end the 
                following: ``, and (7) such deductible shall not apply 
                with respect to an initial preventive physical 
                examination (as defined in section 1861(ww))''.
            (2) Coinsurance.--Section 1833(a)(1) (42 U.S.C. 
        1395l(a)(1)) is amended--
                    (A) in clause (N), by inserting ``(or 100 percent 
                in the case of an initial preventive physical 
                examination, as defined in section 1861(ww))'' after 
                ``80 percent''; and
                    (B) in clause (O), by inserting ``(or 100 percent 
                in the case of an initial preventive physical 
                examination, as defined in section 1861(ww))'' after 
                ``80 percent''.
    (d) Payment as Physicians' Services.--Section 1848(j)(3) (42 U.S.C. 
1395w-4(j)(3)) is amended by inserting ``(2)(W),'' after ``(2)(S),''.
    (e) Other Conforming Amendments.--Section 1862(a) (42 U.S.C. 
1395y(a)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``and'' at the end of subparagraph 
                (H);
                    (B) by striking the semicolon at the end of 
                subparagraph (I) and inserting ``, and''; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(J) in the case of an initial preventive physical 
        examination, which is performed not later than 6 months after 
        the date the individual's first coverage period begins under 
        part B;''; and
            (2) in paragraph (7), by striking ``or (H)'' and inserting 
        ``(H), or (J)''.
    (f) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2004, but only for 
individuals whose coverage period begins on or after such date.

SEC. 314. RENAL DIALYSIS SERVICES.

    (a) Report on Differences in Costs in Different Settings.--Not 
later than 1 year after the date of the enactment of this Act, the 
Comptroller General of the United States shall submit to Congress a 
report containing--
            (1) an analysis of the differences in costs of providing 
        renal dialysis services under the medicare program in home 
        settings and in facility settings;
            (2) an assessment of the percentage of overhead costs in 
        home settings and in facility settings; and
            (3) an evaluation of whether the charges for home dialysis 
        supplies and equipment are reasonable and necessary.
    (b) Restoring Composite Rate Exceptions for Pediatric Facilities.--
            (1) In general.--Section 422(a)(2) of BIPA is amended--
                    (A) in subparagraph (A), by striking ``and (C)'' 
                and inserting ``, (C), and (D)'';
                    (B) in subparagraph (B), by striking ``In the 
                case'' and inserting ``Subject to subparagraph (D), in 
                the case''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(D) Inapplicability to pediatric facilities.--
                Subparagraphs (A) and (B) shall not apply, as of 
                October 1, 2002, to pediatric facilities that do not 
                have an exception rate described in subparagraph (C) in 
                effect on such date. For purposes of this subparagraph, 
                the term `pediatric facility' means a renal facility at 
                least 50 percent of whose patients are individuals 
                under 18 years of age.''.
            (2) Conforming amendment.--The fourth sentence of section 
        1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking 
        ``The Secretary'' and inserting ``Subject to section 422(a)(2) 
        of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
        Protection Act of 2000, the Secretary''.
    (c) Increase in Renal Dialysis Composite Rate for Services 
Furnished in 2004.--Notwithstanding any other provision of law, with 
respect to payment under part B of title XVIII of the Social Security 
Act for renal dialysis services furnished in 2004, the composite 
payment rate otherwise established under section 1881(b)(7) of such Act 
(42 U.S.C. 1395rr(b)(7)) shall be increased by 1.2 percent.

SEC. 315. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

    (a) Exclusion From OPD Fee Schedule.--Section 1833(t)(1)(B)(iv) (42 
U.S.C. 1395l(t)(1)(B)(iv)) is amended by inserting before the period at 
the end the following: ``and does not include screening mammography (as 
defined in section 1861(jj)) and unilateral and bilateral diagnostic 
mammography''.
    (b) Adjustment to Technical Component.--For diagnostic mammography 
performed on or after January 1, 2004, for which payment is made under 
the physician fee schedule under section 1848 of the Social Security 
Act (42 U.S.C. 1395w-4), the Secretary, based on the most recent cost 
data available, shall provide for an appropriate adjustment in the 
payment amount for the technical component of the diagnostic 
mammography.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to mammography performed on or after January 1, 2004.

SEC. 316. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN MILITARY 
              RETIREES; SPECIAL ENROLLMENT PERIOD.

    (a) Waiver of Penalty.--
            (1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is 
        amended by adding at the end the following new sentence: ``No 
        increase in the premium shall be effected for a month in the 
        case of an individual who is 65 years of age or older, who 
        enrolls under this part during 2001, 2002, or 2003, and who 
        demonstrates to the Secretary before December 31, 2003, that 
        the individual is a covered beneficiary (as defined in section 
        1072(5) of title 10, United States Code). The Secretary of 
        Health and Human Services shall consult with the Secretary of 
        Defense in identifying individuals described in the previous 
        sentence.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to premiums for months beginning with January 2003. 
        The Secretary of Health and Human Services shall establish a 
        method for providing rebates of premium penalties paid for 
        months on or after January 2003 for which a penalty does not 
        apply under such amendment but for which a penalty was 
        previously collected.
    (b) Medicare Part B Special Enrollment Period.--
            (1) In general.--In the case of any individual who, as of 
        the date of the enactment of this Act, is 65 years of age or 
        older, is eligible to enroll but is not enrolled under part B 
        of title XVIII of the Social Security Act, and is a covered 
        beneficiary (as defined in section 1072(5) of title 10, United 
        States Code), the Secretary of Health and Human Services shall 
        provide for a special enrollment period during which the 
        individual may enroll under such part. Such period shall begin 
        as soon as possible after the date of the enactment of this Act 
        and shall end on December 31, 2003.
            (2) Coverage period.--In the case of an individual who 
        enrolls during the special enrollment period provided under 
        paragraph (1), the coverage period under part B of title XVIII 
        of the Social Security Act shall begin on the first day of the 
        month following the month in which the individual enrolls.

SEC. 317. COVERAGE OF CHOLESTEROL AND BLOOD LIPID SCREENING.

    (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as 
amended by section 313(a), is amended--
            (1) in subparagraph (V), by striking ``and'' at the end;
            (2) in subparagraph (W), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
                    ``(X) cholesterol and other blood lipid screening 
                tests (as defined in subsection (XX));''.
    (b) Services Described.--Section 1861 (42 U.S.C. 1395x), as amended 
by section 313(b), is amended by adding at the end the following new 
subsection:

           ``Cholesterol and Other Blood Lipid Screening Test

    ``(xx)(1) The term `cholesterol and other blood lipid screening 
test' means diagnostic testing of cholesterol and other lipid levels of 
the blood for the purpose of early detection of abnormal cholesterol 
and other lipid levels.
    ``(2) The Secretary shall establish standards, in consultation with 
appropriate organizations, regarding the frequency and type of 
cholesterol and other blood lipid screening tests, except that such 
frequency may not be more often than once every 2 years.''.
    (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), as 
amended by section 313(e), is amended--
            (1) by striking ``and'' at the end of subparagraph (I);
            (2) by striking the semicolon at the end of subparagraph 
        (J) and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(K) in the case of a cholesterol and other blood lipid 
        screening test (as defined in section 1861(xx)(1)), which is 
        performed more frequently than is covered under section 
        1861(xx)(2).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to tests furnished on or after January 1, 2004.

             TITLE IV--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

SEC. 401. 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. 402. 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 by striking ``5 percent'' and 
        inserting ``3 percent''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to years beginning with 2003.

SEC. 403. 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. 404. 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. 405. CLARIFICATION OF TREATMENT OF OCCASIONAL ABSENCES IN 
              DETERMINING WHETHER AN INDIVIDUAL IS CONFINED TO THE 
              HOME.

    (a) In General.--The penultimate sentence of section 1814(a) (42 
U.S.C. 1395f(a) and the penultimate sentence of section 1835(a) (42 
U.S.C. 1395n(a)) are each amended to read as follows: ``Any other 
absence of an individual from the home shall not so disqualify the 
individual if the absence is infrequent or of relatively short 
duration, such as an occasional trip to the barber or a walk around the 
block, and is not inconsistent with the assessment underlying the 
individual's plan of care for home health services.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on the date of the enactment of this Act.

             Subtitle B--Direct Graduate Medical Education

SEC. 411. 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. 412. 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)(i), by inserting ``subject to 
        subparagraph (I),'' after ``October 1, 1997,'';
            (2) in subparagraph (H)(i), 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. 421. 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. The Commission shall 
        examine data on uncompensated care, as well as the share of 
        uncompensated care accounted for by the expenses for treating 
        illegal aliens.
            (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. 422. 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 a member of a health disparity 
                population (as defined in section 485E(d) of the Public 
                Health Service Act), such as Hispanics;
                    (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.
    (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) Working Group on Medicare Disease Management Programs.--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:
            (1) To oversee the project.
            (2) To establish policy and criteria for medicare disease 
        management programs within the Department, including the 
        establishment of policy and criteria for such programs.
            (3) To identify targeted medical conditions and targeted 
        individuals.
            (4) To select areas in which such programs are carried out.
            (5) To monitor health outcomes under such programs.
            (6) To measure the effectiveness of such programs in 
        meeting any budget neutrality requirements.
            (7) Otherwise to serve as a central focal point within the 
        Department for dissemination of information on medicare disease 
        management programs.
    (i) 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. 423. 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 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 are currently licensed or 
certified through common ownership and control to furnish medical adult 
day care services.
    (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 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.

SEC. 424. PUBLICATION ON FINAL WRITTEN GUIDANCE CONCERNING PROHIBITIONS 
              AGAINST DISCRIMINATION BY NATIONAL ORIGIN WITH RESPECT TO 
              HEALTH CARE SERVICES.

    Not later than January 1, 2003, the Secretary shall issue final 
written guidance concerning the application of the prohibition in title 
VI of the Civil Rights Act of 1964 against national origin 
discrimination as it affects persons with limited English proficiency 
with respect to access to health care services under the medicare 
program.

                TITLE V--MEDICARE+CHOICE REVITALIZATION

SEC. 501. MEDICARE+CHOICE IMPROVEMENTS.

    (a) Equalizing Payments Between Fee-for-Service and 
Medicare+Choice.--
            (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
        23(c)(1)) is amended by adding at the end the following:
                    ``(D) Based on 100 percent of fee-for-service 
                costs.--
                            ``(i) In general.--For 2003 and 2004, the 
                        adjusted average per capita cost for the year 
                        involved, determined under section 1876(a)(4) 
                        for the Medicare+Choice payment area for 
                        services covered under parts A and B for 
                        individuals entitled to benefits under part A 
and enrolled under part B who are not enrolled in a Medicare+Choice 
plan under this part for the year, but adjusted to exclude costs 
attributable to payments under section 1886(h).
                            ``(ii) Inclusion of costs of va and dod 
                        military facility services to medicare-eligible 
                        beneficiaries.--In determining the adjusted 
                        average per capita cost under clause (i) for a 
                        year, such cost shall be adjusted to include 
                        the Secretary's estimate, on a per capita 
                        basis, of the amount of additional payments 
                        that would have been made in the area involved 
                        under this title if individuals entitled to 
                        benefits under this title had not received 
                        services from facilities of the Department of 
                        Veterans Affairs or the Department of 
                        Defense.''.
            (2) Conforming amendment.--Such section is further amended, 
        in the matter before subparagraph (A), by striking ``or (C)'' 
        and inserting ``(C), or (D)''.
    (b) Revision of Blend.--
            (1) Revision of national average used in calculation of 
        blend.--Section 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w-
        23(c)(4)(B)(i)(II)) is amended by inserting ``who (with respect 
        to determinations for 2003 and for 2004) are enrolled in a 
        Medicare+Choice plan'' after ``the average number of medicare 
        beneficiaries''.
            (2) Change in budget neutrality.--Section 1853(c) (42 
        U.S.C. 1395w-23(c)) is amended--
                    (A) in paragraph (1)(A), by inserting ``(for a year 
                before 2003)'' after ``multiplied''; and
                    (B) in paragraph (5), by inserting ``(before 
                2003)'' after ``for each year''.
    (c) Revision in Minimum Percentage Increase for 2003 and 2004.--
Section 1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is amended by 
striking clause (iv) and inserting the following:
                            ``(iv) For 2002, 102 percent of the annual 
                        Medicare+Choice capitation rate under this 
                        paragraph for the area for 2001.
                            ``(v) For 2003 and 2004, 103 percent of the 
                        annual Medicare+Choice capitation rate under 
                        this paragraph for the area for the previous 
                        year.
                            ``(vi) For 2005 and each succeeding year, 
                        102 percent of the annual Medicare+Choice 
                        capitation rate under this paragraph for the 
                        area for the previous year.''.
    (d) Inclusion of Costs of DOD and VA Military Facility Services to 
Medicare-Eligible Beneficiaries in Calculation of Medicare+Choice 
Payment Rates.--Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)) is 
amended--
            (1) in subparagraph (A), by striking ``subparagraph (B)'' 
        and inserting ``subparagraphs (B) and (E)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Inclusion of costs of dod and va military 
                facility services to medicare-eligible beneficiaries.--
                In determining the area-specific Medicare+Choice 
                capitation rate under subparagraph (A) for a year 
                (beginning with 2003), the annual per capita rate of 
                payment for 1997 determined under section 1876(a)(1)(C) 
                shall be adjusted to include in the rate the 
                Secretary's estimate, on a per capita basis, of the 
                amount of additional payments that would have been made 
                in the area involved under this title if individuals 
                entitled to benefits under this title had not received 
                services from facilities of the Department of Defense 
                or the Department of Veterans Affairs.''.
    (e) Announcement of Revised Medicare+Choice Payment Rates.--Within 
4 weeks after the date of the enactment of this Act, the Secretary 
shall determine, and shall announce (in a manner intended to provide 
notice to interested parties) Medicare+Choice capitation rates under 
section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for 2003, 
revised in accordance with the provisions of this section.
    (f) MedPAC Study of AAPCC.--
            (1) Study.--The Medicare Payment Advisory Commission shall 
        conduct a study that assesses the method used for determining 
        the adjusted average per capita cost (AAPCC) under section 
        1876(a)(4) of the Social Security Act (42 U.S.C. 1395mm(a)(4)). 
        Such study shall examine--
                    (A) the bases for variation in such costs between 
                different areas, including differences in input prices, 
                utilization, and practice patterns;
                    (B) the appropriate geographic area for payment 
                under the Medicare+Choice program under part C of title 
                XVIII of such Act; and
                    (C) the accuracy of risk adjustment methods in 
                reflecting differences in costs of providing care to 
                different groups of beneficiaries served under such 
                program.
            (2) Report.--Not later than 9 months after the date of the 
        enactment of this Act, the Commission shall submit to Congress 
        a report on the study conducted under paragraph (1). Such 
        report shall include recommendations regarding changes in the 
        methods for computing the adjusted average per capita cost 
        among different areas.
    (g) Report on Impact of Increased Financial Assistance to 
Medicare+Choice Plans.--Not later than July 1, 2003, the Secretary of 
Health and Human Services shall submit to Congress a report that 
describes the impact of additional financing provided under this Act 
and other Acts (including the Medicare, Medicaid, and SCHIP Balanced 
Budget Refinement Act of 1999 and BIPA) on the availability of 
Medicare+Choice plans in different areas and its impact on lowering 
premiums and increasing benefits under such plans.

SEC. 502. MAKING PERMANENT CHANGE IN MEDICARE+CHOICE REPORTING 
              DEADLINES AND ANNUAL, COORDINATED ELECTION PERIOD.

    (a) Change in Reporting Deadline.--Section 1854(a)(1) (42 U.S.C. 
1395w-24(a)(1)), as amended by section 532(b)(1) of the Public Health 
Security and Bioterrorism Preparedness and Response Act of 2002, is 
amended by striking ``2002, 2003, and 2004 (or July 1 of each other 
year)'' and inserting ``2002 and each subsequent year (or July 1 of 
each year before 2002)''.
    (b) Delay in Annual, Coordinated Election Period.--Section 
1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by section 
532(c)(1)(A) of the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002, is amended by striking ``and 
after 2005, the month of November before such year and with respect to 
2003, 2004, and 2005'' and inserting ``, the month of November before 
such year and with respect to 2003 and any subsequent year''.
    (c) Annual Announcement of Payment Rates.--Section 1853(b)(1) (42 
U.S.C. 1395w-23(b)(1)), as amended by section 532(d)(1) of the Public 
Health Security and Bioterrorism Preparedness and Response Act of 2002, 
is amended by striking ``and after 2005 not later than March 1 before 
the calendar year concerned and for 2004 and 2005'' and inserting ``not 
later than March 1 before the calendar year concerned and for 2004 and 
each subsequent year''.
    (d) Requiring Provision of Available Information Comparing Plan 
Options.--The first sentence of section 1851(d)(2)(A)(ii) (42 U.S.C. 
1395w-21(d)(2)(A)(ii)) is amended by inserting before the period the 
following: ``to the extent such information is available at the time of 
preparation of materials for the mailing''.

SEC. 503. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
              BENEFICIARIES.

    (a) Treatment as Coordinated Care Plan.--Section 1851(a)(2)(A) (42 
U.S.C. 1395w-21(a)(2)(A)) is amended by adding at the end the following 
new sentence: ``Specialized Medicare+Choice plans for special needs 
beneficiaries (as defined in section 1859(b)(4)) may be any type of 
coordinated care plan.''.
    (b) Specialized Medicare+Choice Plan for Special Needs 
Beneficiaries Defined.--Section 1859(b) (42 U.S.C. 1395w-29(b)) is 
amended by adding at the end the following new paragraph:
            ``(4) Specialized medicare+choice plans for special needs 
        beneficiaries.--
                    ``(A) In general.--The term `specialized 
                Medicare+Choice plan for special needs beneficiaries' 
                means a Medicare+Choice plan that exclusively serves 
                special needs beneficiaries (as defined in subparagraph 
                (B)).
                    ``(B) Special needs beneficiary.--The term `special 
                needs beneficiary' means a Medicare+Choice eligible 
                individual who--
                            ``(i) is institutionalized (as defined by 
                        the Secretary);
                            ``(ii) is entitled to medical assistance 
                        under a State plan under title XIX; or
                            ``(iii) meets such requirements as the 
                        Secretary may determine would benefit from 
                        enrollment in such a specialized 
                        Medicare+Choice plan described in subparagraph 
                        (A) for individuals with severe or disabling 
                        chronic conditions.''.
    (c) Restriction on Enrollment Permitted.--Section 1859 (42 U.S.C. 
1395w-29) is amended by adding at the end the following new subsection:
    ``(f) Restriction on Enrollment for Specialized Medicare+Choice 
Plans for Special Needs Beneficiaries.--In the case of a specialized 
Medicare+Choice plan (as defined in subsection (b)(4)), notwithstanding 
any other provision of this part and in accordance with regulations of 
the Secretary and for periods before January 1, 2007, the plan may 
restrict the enrollment of individuals under the plan to individuals 
who are within one or more classes of special needs beneficiaries.''.
    (d) Report to Congress.--Not later than December 31, 2005, the 
Medicare Benefits Administrator shall submit to Congress a report that 
assesses the impact of specialized Medicare+Choice plans for special 
needs beneficiaries on the cost and quality of services provided to 
enrollees. Such report shall include an assessment of the costs and 
savings to the medicare program as a result of amendments made by 
subsections (a), (b), and (c).
    (e) Effective Dates.--
            (1) In general.--The amendments made by subsections (a), 
        (b), and (c) shall take effect upon the date of the enactment 
        of this Act.
            (2) Deadline for issuance of requirements for special needs 
        beneficiaries; transition.--No later than 6 months after the 
        date of the enactment of this Act, the Secretary of Health and 
        Human Services shall issue final regulations to establish 
        requirements for special needs beneficiaries under section 
        1859(b)(4)(B)(iii) of the Social Security Act, as added by 
        subsection (b).

SEC. 504. EXTENSION OF REASONABLE COST AND SHMO CONTRACTS.

    (a) Reasonable Cost Contracts.--
            (1) In general.--Section 1876(h)(5)(C) (42 U.S.C. 
        1395mm(h)(5)(C)) is amended--
                    (A) by inserting ``(i)'' after ``(C)'';
                    (B) by inserting before the period the following: 
                ``, except (subject to clause (ii)) in the case of a 
                contract for an area which is not covered in the 
                service area of 1 or more coordinated care 
                Medicare+Choice plans under part C''; and
                    (C) by adding at the end the following new clause:
    ``(ii) In the case in which--
            ``(I) a reasonable cost reimbursement contract includes an 
        area in its service area as of a date that is after December 
        31, 2003;
            ``(II) such area is no longer included in such service area 
        after such date by reason of the operation of clause (i) 
        because of the inclusion of such area within the service area 
        of a Medicare+Choice plan; and
            ``(III) all Medicare+Choice plans subsequently terminate 
        coverage in such area; such reasonable cost reimbursement 
contract may be extended and renewed to cover such area (so long as it 
is not included in the service area of any Medicare+Choice plan).''.
            (2) Study.--The Medicare Benefits Administrator shall 
        conduct a study of an appropriate transition for plans offered 
        under reasonable cost contracts under section 1876 of the 
        Social Security Act on and after January 1, 2005. Such a 
        transition may take into account whether there are one or more 
        coordinated care Medicare+Choice plans being offered in the 
        areas involved. Not later than February 1, 2004, the 
        Administrator shall submit to Congress a report on such study 
        and shall include recommendations regarding any changes in the 
        amendment made by paragraph (1) as the Administrator determines 
        to be appropriate.
    (b) Extension of Social Health Maintenance Organization (SHMO) 
Demonstration Project.--
            (1) In general.--Section 4018(b)(1) of the Omnibus Budget 
        Reconciliation Act of 1987 is amended by striking ``the date 
        that is 30 months after the date that the Secretary submits to 
        Congress the report described in section 4014(c) of the 
        Balanced Budget Act of 1997'' and inserting ``December 31, 
        2004''.
            (2) SHMOs offering medicare+choice plans.--Nothing in such 
        section 4018 shall be construed as preventing a social health 
        maintenance organization from offering a Medicare+Choice plan 
        under part C of title XVIII of the Social Security Act.

   TITLE VI--MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS

SEC. 601. DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.

    Section 1923(f)(3) (42 U.S.C. 1396r-4(f)(3)) is amended--
            (1) in subparagraph (A), by amending subparagraph (A) to 
        read as follows:
                    ``(A) In general.--The DSH allotment for any 
                State--
                            ``(i) for fiscal year 2003 is equal to the 
                        DSH allotment for the State for fiscal year 
                        2001 under the table in paragraph (2), without 
                        regard to paragraph (4), increased, subject to 
                        subparagraph (B) and paragraph (5), by the 
                        percentage change in the consumer price index 
                        for all urban consumers (all items; U.S. city 
                        average), for fiscal year 2001; and
                            ``(ii) for each succeeding fiscal year is 
                        equal to the DSH allotment for the State for 
                        the previous fiscal year under this 
                        subparagraph increased, subject to subparagraph 
                        (B) and paragraph (5), by 1.7 percent or, in 
                        the case of fiscal years beginning with the 
                        fiscal year specified in subparagraph (C) for 
                        that State, the percentage change in the 
                        consumer price index for all urban consumers 
                        (all items; U.S. city average), for the 
                        previous fiscal year.''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Fiscal year specified.--For purposes of 
                subparagraph (A)(ii), the fiscal year specified in this 
                subparagraph for a State is the first fiscal year for 
                which the Secretary estimates that the DSH allotment 
                for that State will equal (or no longer exceed) the DSH 
                allotment for that State under the law as in effect 
                before the date of the enactment of this 
                subparagraph.''.
                                 <all>