[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2562 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2562

 To amend title XVIII of the Social Security Act to provide incentives 
 for the furnishing of quality care under Medicare Advantage plans and 
  by end stage renal disease providers and facilities, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                June 23 (legislative day, June 22), 2004

  Mr. Baucus introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend title XVIII of the Social Security Act to provide incentives 
 for the furnishing of quality care under Medicare Advantage plans and 
  by end stage renal disease providers and facilities, 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; TABLE OF CONTENTS.

    (a) In General.--This Act may be cited as the ``Medicare Quality 
Improvement Act of 2004''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Medicare Advantage and reasonable cost reimbursement contract 
                            quality performance incentive payment 
                            program.
Sec. 4. Quality performance incentive payment program for providers and 
                            facilities that provide services to 
                            medicare beneficiaries with ESRD.
Sec. 5. Medicare innovative quality practice award program.
Sec. 6. Quality improvement demonstration program for pediatric renal 
                            dialysis facilities providing care to 
                            medicare beneficiaries with end stage renal 
                            disease.
Sec. 7. Medicare Quality Advisory Board.
Sec. 8. Studies and reports on financial incentives for quality items 
                            and services under the medicare program.
Sec. 9. MedPAC study and report on use of adjuster mechanisms under 
                            medicare quality performance incentive 
                            payment programs.
Sec. 10. Demonstration program on measuring the quality of health care 
                            furnished to pediatric patients under the 
                            medicaid and SCHIP programs.
Sec. 11. Provisions relating to medicaid quality improvements.
Sec. 12. Demonstration program for Medical Smart Cards. 

SEC. 2. FINDINGS.

    The Senate makes the following findings:
            (1) The Institute of Medicine has highlighted problems with 
        our health care system in the areas of quality and patient 
        safety.
            (2) The New England Journal of Medicine has published 
        research in an article entitled ``The Quality of Health Care 
        Delivered to Adults in the United States'' showing that adults 
        in the United States receive recommended health care only about 
        \1/2\ of the time.
            (3) Payment policies under the medicare program do not 
        include mechanisms designed to improve the quality of care.
            (4) The medicare program should reward health care 
        providers who show, through measurement and reporting of 
        quality indicators and through the practice of innovations, 
        that they are working to deliver high quality health care to 
        their patients.
            (5) Reimbursement for services provided under the original 
        medicare fee-for-service program under parts A and B of title 
        XVIII of the Social Security Act should be based on a pay-for-
        performance system.
            (6) A more aggressive research agenda on the development of 
        appropriate quality measurement and payment methodologies under 
        the medicare program is necessary.

SEC. 3. MEDICARE ADVANTAGE AND REASONABLE COST REIMBURSEMENT CONTRACT 
              QUALITY PERFORMANCE INCENTIVE PAYMENT PROGRAM.

    (a) Program.--Part C of title XVIII of the Social Security Act, as 
amended by section 241 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2214), is 
amended by adding at the end the following new section:

            ``quality performance incentive payment program

    ``Sec. 1860C-2. (a) Program.--
            ``(1) In general.--The Secretary shall establish a program 
        under which financial incentive payments are provided each year 
        to Medicare Advantage organizations offering Medicare Advantage 
        plans and organizations that are providing benefits under a 
        reasonable cost reimbursement contract under section 1876(h) 
        that demonstrate the provision of superior quality health care 
        to enrollees under the plan or contract.
            ``(2) Program to begin in 2007.--The Secretary shall 
        establish the program so that National Performance Quality 
        Payments (described in subsection (c)) and National Quality 
        Improvement Payments (described in subsection (d)) are made 
        with respect to 2007 and each subsequent year.
            ``(3) Requirement.--In order for an organization to be 
        eligible for a financial incentive payment under this section 
        with respect to a Medicare Advantage plan or a reasonable cost 
        reimbursement contract under section 1876(h), the organization 
        shall--
                    ``(A) provide for the collection, analysis, and 
                reporting of data pursuant to sections 1852(e)(3) and 
                1876(h)(8), respectively, with respect to the plan or 
                contract; and
                    ``(B) not later than a date specified by the 
                Secretary during each baseline year (as defined in 
                subsection (d)(4)), submit such data on the quality 
                measures described in subsection (e)(2) as the 
                Secretary determines appropriate for the purpose of 
                establishing a baseline with respect to the plan or 
                contract.
            ``(4) Use of most recent data.--Financial incentive 
        payments under this section shall be based upon the most recent 
        available quality data.
            ``(5) Timing of quality incentive payments.--The Secretary 
        shall ensure that financial incentive payments under this 
        section with respect to a year are made by March 1 of the 
        subsequent year.
            ``(6) Applicability of program to ma plans.--For purposes 
        of this section, the term `Medicare Advantage plan' shall--
                    ``(A) include both MA regional plans and MA local 
                plans; and
                    ``(B) not include an MA plan described in 
                subparagraph (A)(ii) or (B) of section 1851(a)(2).
    ``(b) Quality Incentive Payments.--
            ``(1) In general.--Beginning with 2007, the Secretary shall 
        allocate the total amount available for financial incentive 
        payments in the year under subsection (f) as follows:
                    ``(A) The per beneficiary payment amount for 
                National Performance Quality Payments established under 
                paragraph (2) shall be greater than the per beneficiary 
payment amount for National Quality Improvement Payments established 
under such paragraph.
                    ``(B) With respect to National Performance Quality 
                Payments, the per beneficiary payment amount 
                established under paragraph (2) shall be greatest for 
                the organizations offering the highest performing plans 
                or contracts.
                    ``(C) With respect to National Quality Improvement 
                Payments, the per beneficiary payment amount 
                established under paragraph (2) shall be greatest for 
                the organizations offering plans or contracts with the 
                highest degree of improvement.
            ``(2) Amount of quality incentive payment.--
                    ``(A) In general.--The amount of a financial 
                incentive payment under subsection (c) or (d) to a 
                Medicare Advantage organization with respect to a 
                Medicare Advantage plan or to an organization with 
                respect to a reasonable cost reimbursement contract 
                under section 1876(h) shall be determined by 
                multiplying the number of beneficiaries enrolled under 
                the plan or contract on the first day of the year for 
                which the payment is provided by a dollar amount 
                established by the Secretary (in this section referred 
                to as the `per beneficiary payment amount') that is the 
                same for all beneficiaries enrolled under the plan or 
                contract.
                    ``(B) Limitation on total amount of quality 
                incentive payments.--The total amount of all the 
                financial incentive payments given with respect to a 
                year shall be equal to the amount available for such 
                payments in the year under subsection (f).
            ``(3) Use of quality incentive payments.--Financial 
        incentive payments received under this section may only be used 
        for the following purposes:
                    ``(A) To reduce any beneficiary cost-sharing 
                applicable under the plan or contract.
                    ``(B) To reduce any beneficiary premiums applicable 
                under the plan or contract.
                    ``(C) To initiate, continue, or enhance health care 
                quality programs for enrollees under the plan or 
                contract.
                    ``(D) To improve the benefit package under the plan 
                or contract.
            ``(4) Reporting on use of quality incentive payments.--
        Beginning in 2008, each MA organization that receives a 
        financial incentive payment under this section shall report to 
        the Secretary pursuant to section 1854(a)(7) on how the 
        organization will use such payment.
            ``(5) Limitations on quality incentive payments.--
                    ``(A) Plan only eligible for 1 payment in a year.--
                A Medicare Advantage organization offering a Medicare 
                Advantage plan or an organization that is providing 
                benefits under a reasonable cost reimbursement contract 
                under section 1876(h) may not receive more than 1 
                financial incentive payment under this section in a 
                year with respect to such plan or contract. If an 
                organization with respect to the plan or contract is 
                eligible for a National Performance Quality Payment and 
                a National Quality Improvement Payment, the 
                organization shall be given the National Performance 
                Quality Payment.
                    ``(B) Plan must be available for entire year.--A 
                Medicare Advantage organization offering a Medicare 
                Advantage plan or an organization that is providing 
                benefits under a reasonable cost reimbursement contract 
                under section 1876(h) is not eligible for a financial 
                incentive payment under this section with respect to 
                such plan or contract unless the plan or contract 
                offers benefits throughout the year in which the 
                payment is provided.
    ``(c) National Performance Quality Payments.--The Secretary shall 
make National Performance Quality Payments to the Medicare Advantage 
organizations and organizations offering reasonable cost reimbursement 
contracts under section 1876(h) with respect to each Medicare Advantage 
plan or reasonable cost contract offered by the organization that 
receives ratings for the year in the top applicable percent of all 
plans and contracts rated by the Secretary pursuant to subsection (e) 
for the year. For purposes of the preceding sentence, the term 
`applicable percent' means a percent determined appropriate by the 
Secretary in consultation with the Quality Advisory Board, but in no 
case less than 20 percent.
    ``(d) National Quality Improvement Payments.--
            ``(1) In general.--Subject to paragraph (2), the Secretary 
        shall make National Quality Improvement Payments to Medicare 
        Advantage organizations and organizations offering reasonable 
        cost reimbursement contracts under section 1876(h) with respect 
        to each Medicare Advantage plan or reasonable cost 
        reimbursement contract offered by the organization that 
        receives a rating under subsection (e) for the payment year 
        that exceeds the rating received under such subsection for the 
        plan or contract for the baseline year.
            ``(2) National improvement standard.--Beginning with 2009, 
        the Secretary may implement a national improvement standard 
        that Medicare Advantage plans and reasonable cost reimbursement 
        contracts must meet in order to receive a National Quality 
        Improvement Payment.
            ``(3) Application of thresholds.--In determining whether a 
        rating received under subsection (e) for the payment year 
        exceeds the rating received under such subsection for the 
        baseline year, the Secretary shall hold any applicable 
        thresholds constant. For purposes of the preceding sentence, 
        the term `threshold' means norms used to assess performance.
            ``(4) Baseline year defined.--In this subsection, the term 
        `baseline year' means the year prior to the payment year.
    ``(e) Rating Methodology.--
            ``(1) Scoring and ranking systems.--
                    ``(A) In general.--The Secretary shall develop 
                separate scoring and ranking systems for purposes of 
                determining which organizations offering Medicare 
                Advantage plans and reasonable cost reimbursement 
                contracts under section 1876(h) qualify for--
                            ``(i) National Performance Quality 
                        Payments; and
                            ``(ii) National Quality Improvement 
                        Payments.
                    ``(B) Requirements.--In developing, implementing, 
                and updating the scoring and ranking systems, the 
                Secretary shall--
                            ``(i) consult with the Quality Advisory 
                        Board established under section 1898;
                            ``(ii) take into account the report on 
                        health care performance measures submitted by 
                        the Institute of Medicine of the National 
                        Academy of Sciences under section 238 of the 
                        Medicare Prescription Drug, Improvement, and 
                        Modernization Act of 2003; and
                            ``(iii) take into account the Managed Care 
                        Organization (MCO) standards and guideline 
                        methodology of the National Committee for 
                        Quality Assurance for awarding total Health 
                        Plan Employer Data and Information Set (HEDIS) 
                        points (based on HEDIS and Consumer Assessment 
                        of Health Plans Survey (CAHPS) measures).
            ``(2) Measures.--
                    ``(A) In general.--Subject to subparagraph (B), in 
                developing the scoring and ranking systems under 
                paragraph (1), the Secretary shall use all measures 
                determined appropriate by the Secretary. Such measures 
                may include--
                            ``(i) outcome measures for highly prevalent 
                        chronic conditions;
                            ``(ii) audited HEDIS outcomes and process 
                        measures, CAHPS data, and other data reported 
                        to the Department of Health and Human Services; 
                        and
                            ``(iii) the Joint Commission on 
                        Accreditation of Healthcare Organizations core 
                        measures.
                    ``(B) Scoring and ranking system for national 
                performance quality payments only based on measures of 
                clinical effectiveness.--The scoring and ranking system 
                for National Performance Quality Payments shall only 
                include measures of clinical effectiveness.
            ``(3) Weights of measures.--In developing the scoring and 
        ranking systems under paragraph (1), the Secretary shall assign 
        weights to the measures used by the Secretary under such system 
        pursuant to paragraph (2). In assigning such weights, the 
        Secretary shall provide greater weight to the measures that 
        measure clinical effectiveness.
            ``(4) Risk adjustment.--In developing the scoring and 
        ranking systems under paragraph (1), the Secretary shall 
        establish procedures for adjusting the data used under the 
        system to take into account differences in the health status of 
        individuals enrolled under Medicare Advantage plans and 
        reasonable cost contracts.
            ``(5) Update.--
                    ``(A) In general.--The Secretary shall as 
                determined appropriate, but in no case more often than 
                once each 12-month period, update the scoring and 
                ranking systems developed under paragraph (1), 
                including the measures used by the Secretary under such 
                system pursuant to paragraph (2), the weights 
                established pursuant to paragraph (3), and the risk 
                adjustment procedures established pursuant to paragraph 
                (4).
                    ``(B) Comparison for national quality improvement 
                payments.--Each update under subparagraph (A) of the 
                scoring and ranking system for National Quality 
                Improvement Payments shall allow for the comparison of 
                data from one year to the next for purposes of 
                identifying which plans or contracts will receive such 
                Payments.
                    ``(C) Consultation.--In determining when and how to 
                update the scoring and ranking systems under 
                subparagraph (A), the Secretary shall consult with the 
                Quality Advisory Board.
    ``(f) Funding of Payments.--The amount available for financial 
incentive payments under this section with respect to a year shall be 
equal to the amount of the reduction in expenditures under the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund in the year as a result of the amendments made by 
section 3(b) of the Medicare Quality Improvement Act of 2004.''.
    (b) Reduction in Payments to Organizations in Order To Fund 
Program.--
            (1) MA payments.--
                    (A) In general.--Section 1853(j) of the Social 
                Security Act (42 U.S.C. 1395w-23(j)), as added by 
                section 222(d) of the Medicare Prescription Drug, 
                Improvement, and Modernization Act of 2003 (Public Law 
                108-173; 117 Stat. 2200), is amended--
                            (i) in subparagraphs (A) and (B) of 
                        paragraph (1), by inserting ``and, beginning in 
                        2007, reduced by 2 percent in the case of an MA 
                        plan described in subparagraph (A)(i) or (C) of 
                        section 1851(a)(2)'' before the semicolon at 
                        the end; and
                            (ii) in paragraph (2), by inserting ``and, 
                        beginning in 2007, reduced by 2 percent in the 
                        case of an MA plan described in subparagraph 
                        (A)(i) or (C) of section 1851(a)(2)'' before 
                        the period at the end.
                    (B) Reductions in payments do not effect the 
                government savings for bids below the benchmark.--
                Section 1854(b)(1)(C)(i) of the Social Security Act (42 
                U.S.C. 1395w-24(b)(1)(C)(i)), as added by section 
                222(b) of the Medicare Prescription Drug, Improvement, 
                and Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2196), is amended--
                            (i) by striking ``75 percent'' and 
                        inserting ``100 percent''; and
                            (ii) by inserting the following before the 
                        period at the end: ``, reduced by 25 percent of 
                        such average per capita savings (if any), as 
                        applicable to the plan and year involved, that 
                        would be computed if sections 1853(j) and 
                        1860C-1(e)(1) was applied by substituting `zero 
                        percent' for `2 percent' each place it 
                        appears''.
            (2) Reasonable cost contract payments.--Section 1876(h) of 
        the Social Security Act (42 U.S.C. 1395mm(h)) is amended by 
        adding at the end the following new paragraph:
    ``(6) Notwithstanding the preceding provisions of this subsection, 
the Secretary shall reduce each payment to an eligible organization 
under this subsection with respect to benefits provided on or after 
January 1, 2007, by an amount equal to 2 percent of the payment amount. 
The preceding sentence shall have no effect on payments to eligible 
organizations for the provision of qualified prescription drug coverage 
under part D.''.
            (3) CCA payments.--The first sentence of section 1860C-
        1(e)(1) of the Social Security Act, as added by section 241 of 
        the Medicare Prescription Drug, Improvement, and Modernization 
        Act of 2003 (Public Law 108-173; 117 Stat. 2214) is amended by 
        inserting ``, reduced by 2 percent in the case of an MA plan 
        described in subparagraph (A)(i) or (C) of section 1851(a)(2)'' 
        before the period at the end.
    (c) Requirement for Reporting on Use of Financial Incentive 
Payments.--
            (1) MA plans.--Section 1854(a) of the Social Security Act 
        (42 U.S.C. 1395w-24(a)), as amended by section 222(a) of the 
        Medicare Prescription Drug, Improvement, and Modernization Act 
        of 2003 (Public Law 108-173; 117 Stat. 2193), is amended--
                    (A) in paragraph (1)(A)(i), by striking ``or 
                (6)(A)'' and inserting ``(6)(A), or (7)''; and
                    (B) by adding at the end the following:
            ``(7) Submission of information of how financial incentive 
        payments will be used beginning in 2008.--For an MA plan 
        described in subparagraph (A)(i) or (C) of section 1851(a)(2) 
        for a plan year beginning on or after January 1, 2008, the 
        information described in this paragraph is a description of how 
        the organization offering the plan will use any financial 
        incentive payment that the organization received under section 
        1860C-2 with respect to the plan.''.
            (2) Eligible entities with reasonable cost contracts.--
        Section 1876(h) of the Social Security Act (42 U.S.C. 
        1395mm(h)), as amended by subsection (b)(2), is amended by 
        adding at the end the following new paragraph:
    ``(7)(A) Not later than July 1 of each year (beginning in 2008), 
any eligible entity with a reasonable cost reimbursement contract under 
this subsection that receives a financial incentive payment under 
section 1860C-2 with respect to each plan year shall submit to the 
Secretary a report containing the information described in subparagraph 
(B).
    ``(B) The information described in this subparagraph is a 
description of how the organization offering the plan will use any 
financial incentive payment that the organization received under 
section 1860C-2 with respect to the plan.''.
    (d) Submission of Quality Data.--
            (1) MA organizations.--Section 1852(e) of the Social 
        Security Act (42 U.S.C. 1395w-22(e)), as amended by section 722 
        of the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2347), 
        is amended--
                    (A) in paragraph (1), by striking ``an MA private 
                fee-for-service plan or''; and
                    (B) by striking paragraph (3) and inserting the 
                following new paragraph:
            ``(3) Collection, analysis, and reporting.--
                    ``(i) In general.--As part of the quality 
                improvement program under paragraph (1), each MA 
                organization shall provide for the collection, 
                analysis, and reporting of data that permits the 
                measurement of health outcomes and other indices of 
                quality.
                    ``(ii) Coordination with commercial enrollee 
                reporting requirements.--The Secretary shall establish 
                procedures to ensure the coordination of the reporting 
                requirement under clause (i) with reporting 
                requirements for the organization under this part 
                relating to individuals enrolled with the organization 
                but not under this part. Although such reporting 
requirements shall be coordinated pursuant to the preceding sentence, 
the use of the data reported may vary.''.
            (2) Eligible entities with reasonable cost contracts.--
        Section 1876(h) of the Social Security Act (42 U.S.C. 
        1395mm(h)), as amended by subsection (c)(2), is amended by 
        adding at the end the following new paragraph:
    ``(8)(A) With respect to plan years beginning on or after January 
1, 2006, an eligible entity with a reasonable cost reimbursement 
contract under this subsection shall provide for the collection, 
analysis, and reporting of data that permits the measurement of health 
outcomes and other indices of quality.
    ``(B) The Secretary shall establish procedures to ensure the 
coordination of the reporting requirement under subparagraph (A) with 
reporting requirements for the entity under this title relating to 
individuals enrolled with the entity but not receiving benefits under 
this title.''.

SEC. 4. QUALITY PERFORMANCE INCENTIVE PAYMENT PROGRAM FOR PROVIDERS AND 
              FACILITIES THAT PROVIDE SERVICES TO MEDICARE 
              BENEFICIARIES WITH ESRD.

    Section 1881(b) of the Social Security Act (42 U.S.C. 1395rr(b)), 
as amended by section 623(d)(1) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (Public Law 108-173; 117 
Stat. 2313), is amended--
            (1) in paragraph (11)(B), by striking ``paragraphs (12) and 
        (13)'' and inserting ``paragraphs (12), (13), and (14)'';
            (2) in paragraph (12), by striking ``In lieu of'' and 
        inserting ``Subject to paragraph (14), in lieu of'';
            (3) in paragraph (13)(A), in the matter preceding clause 
        (i), by striking ``The payment amounts'' and inserting 
        ``Subject to paragraph (14), the payment amounts''; and
            (4) by adding at the end the following new paragraph:
            ``(14) Renal dialysis performance incentive payment 
        program.--
                    ``(A) Establishment of program.--
                            ``(i) In general.--The Secretary shall 
                        establish a program under which financial 
                        incentive payments are provided each year to 
                        providers of services and renal dialysis 
                        facilities that receive payments under 
                        paragraph (12) or (13) and demonstrate the 
                        provision of superior quality health care to 
                        individuals with end stage renal disease.
                            ``(ii) Program to begin in 2007.--The 
                        Secretary shall establish the program so that 
                        National Performance Quality Payments 
                        (described in subparagraph (C)) and National 
                        Quality Improvement Payments (described in 
                        subparagraph (D)) are made with respect to 2007 
                        and each subsequent year.
                            ``(iii) Requirement.--In order for a 
                        provider of services or a renal dialysis 
                        facility to be eligible for a financial 
                        incentive payment under this section, the 
                        provider or facility shall, not later than a 
                        date specified by the Secretary during the 
                        baseline year (as defined in subparagraph 
                        (D)(iv)), submit such data on the quality 
                        measures as the Secretary determines 
                        appropriate for the purpose of establishing a 
                        baseline with respect to the provider or 
                        facility.
                            ``(iv) Use of most recent data.--Financial 
                        incentive payments under this paragraph shall 
                        be based upon the most recent available quality 
                        data as provided by the Consolidated Renal 
                        Operations in a Web-enabled Network (CROWN) 
                        system.
                            ``(v) Pediatric facilities not included in 
                        program.--For purposes of this paragraph, 
                        including subparagraph (F)(i), the terms `renal 
                        dialysis facility' and `facility' do not 
                        include a renal dialysis facility at least 50 
                        percent of whose patients are individuals under 
                        18 years of age.
                    ``(B) Payments.--
                            ``(i) In general.--Beginning with 2007, the 
                        Secretary shall allocate the total amount 
                        available for financial incentive payments in 
                        the year under subparagraph (F)(ii) as follows:
                                    ``(I) The amount allocated for 
                                National Performance Quality Payments 
                                shall be greater than the amount 
                                allocated for National Quality 
                                Improvement Payments.
                                    ``(II) With respect to National 
                                Performance Quality Payments, the per 
                                capita amount of the payments shall be 
                                greatest for the organizations offering 
                                the highest performing plans or 
                                contracts.
                                    ``(III) With respect to National 
                                Quality Improvement Payments, the per 
                                capita amount of the payments shall be 
                                greatest for the organizations offering 
                                plans or contracts with the highest 
                                degree of improvement.
                            ``(ii) Amount of quality incentive 
                        payment.--
                                    ``(I) In general.--The amount of a 
                                financial incentive payment under 
                                subparagraph (C) or (D) to a provider 
                                of services or renal dialysis facility 
                                shall be determined by multiplying the 
                                number of beneficiaries who received 
                                dialysis services from the provider or 
                                facility during the year for which the 
                                payment is provided by a dollar amount 
established by the Secretary that is the same with respect to each 
beneficiary receiving dialysis services from the provider or facility.
                                    ``(II) Limitation on total amount 
                                of quality incentive payments.--The 
                                total amount of all the financial 
                                incentive payments given with respect 
                                to a year shall be equal to the amount 
                                available for such payments in the year 
                                under subparagraph (F)(ii).
                            ``(iii) Use of quality incentive 
                        payments.--Financial incentive payments 
                        received under this paragraph may be used for 
                        the following purposes:
                                    ``(I) To invest in information 
                                technology systems that will improve 
                                the quality of care provided to 
                                individuals with end stage renal 
                                disease.
                                    ``(II) To initiate, continue, or 
                                enhance health care quality programs 
                                for individuals with end stage renal 
                                disease.
                                    ``(III) Any other purpose 
                                determined appropriate by the 
                                Secretary.
                            ``(iv) Limitations on quality incentive 
                        payments.--
                                    ``(I) Only eligible for 1 payment 
                                in a year.--A provider of services or a 
                                renal dialysis facility may not receive 
                                more than 1 financial incentive payment 
                                under this paragraph in a year. If a 
                                provider of services or a renal 
                                dialysis facility is eligible for a 
                                National Performance Quality Payment 
                                and a National Quality Improvement 
                                Payment, the organization shall be 
                                given the National Performance Quality 
                                Payment.
                                    ``(II) Services must be available 
                                for entire year.--A provider of 
                                services or renal dialysis facility is 
                                not eligible for a financial incentive 
                                payment under this paragraph unless the 
                                provider or facility is in operation 
                                and providing dialysis services for the 
                                entire year for which the payment is 
                                provided.
                    ``(C) National performance quality payments.--The 
                Secretary shall make National Performance Quality 
                Payments to the providers of services and renal 
                dialysis facilities that receive ratings for the year 
                in the top applicable percent of all providers and 
                facilities rated by the Secretary pursuant to 
                subparagraph (E) for the year. For purposes of the 
                preceding sentence, the term `applicable percent' means 
                a percent determined appropriate by the Secretary in 
                consultation with the Quality Advisory Board, but in no 
                case less than 20 percent.
                    ``(D) National quality improvement payments.--
                            ``(i) In general.--National Quality 
                        Improvement Payments shall be paid to each 
                        provider of services and renal dialysis 
                        facility that receives ratings under 
                        subparagraph (E) for the payment year that 
                        exceed the ratings received under such 
                        subparagraph for the provider or facility for 
                        the baseline year.
                            ``(ii) National improvement standard.--
                        Beginning with 2009, the Secretary shall have 
                        the authority to implement a national 
                        improvement standard that providers of services 
                        and renal dialysis facilities must meet in 
                        order to receive a National Quality Improvement 
                        Payment.
                            ``(iii) Application of thresholds.--In 
                        determining whether a rating received under 
                        subparagraph (E) for the payment year exceeds 
                        the rating received under such subsection for 
                        the baseline year, the Secretary shall hold any 
                        applicable thresholds constant.
                            ``(iv) Baseline year defined.--In this 
                        subparagraph, the term `baseline year' means 
                        the year prior to the payment year.
                    ``(E) Rating methodology.--
                            ``(i) Scoring and ranking systems.--
                                    ``(I) In general.--The Secretary 
                                shall develop separate scoring and 
                                ranking systems for purposes of 
                                determining which providers of services 
                                and renal dialysis facilities qualify 
                                for--
                                            ``(aa) National Performance 
                                        Quality Payments; and
                                            ``(bb) National Quality 
                                        Improvement Payments.
                                    ``(II) Requirements.--In 
                                developing, implementing, and updating 
                                the scoring and ranking systems, the 
                                Secretary shall--
                                            ``(aa) consult with the 
                                        Quality Advisory Board 
                                        established under section 1898 
                                        and the network administrative 
                                        organizations designated under 
                                        subsection (c)(1)(A)(i)(II); 
                                        and
                                            ``(bb) take into account 
                                        the report on health care 
                                        performance measures submitted 
                                        by the Institute of Medicine of 
                                        the National Academy of 
                                        Sciences under section 238 of 
                                        the Medicare Prescription Drug, 
                                        Improvement, and Modernization 
                                        Act of 2003.
                            ``(ii) Measures.--
                                    ``(I) In general.--Subject to 
                                subclause (II), in developing the 
                                scoring and ranking system under clause 
                                (i), the Secretary shall use all 
                                measures determined appropriate by the 
                                Secretary. Such measures may include 
                                the following:
                                            ``(aa) The measures 
                                        profiled in the ESRD Clinical 
                                        Performance Measures (CPM) 
                                        project of the Centers for 
                                        Medicare & Medicaid Services.
                                            ``(bb) The measures for 
                                        bone disease to be determined 
                                        by the K-DOQI project of the 
                                        National Kidney Foundation.
                                    ``(II) Scoring and ranking system 
                                for national performance quality 
                                payments only based on measures of 
                                clinical effectiveness.--The scoring 
                                and ranking system for National 
                                Performance Quality Payments shall only 
                                include measures of clinical 
                                effectiveness.
                            ``(iii) Weights of measures.--In developing 
                        the scoring and ranking systems under clause 
                        (i), the Secretary shall assign weights to the 
                        measures used by the Secretary under such 
                        system pursuant to clause (ii). In assigning 
                        such weights, the Secretary shall provide 
                        greater weight to the measures that measure 
                        clinical effectiveness.
                            ``(iv) Risk adjustment.--In developing the 
                        scoring and ranking systems under clause (i), 
                        the Secretary shall establish procedures for 
                        adjusting the data used under the system to 
                        take into account differences in the health 
                        status of individuals receiving dialysis 
                        services from providers of services and renal 
                        dialysis facilities.
                            ``(v) Update.--
                                    ``(I) In general.--The Secretary 
                                shall as determined appropriate, but in 
                                no case more often than once each 12-
                                month period, update the scoring and 
                                ranking systems developed under clause 
                                (i), including the measures used by the 
                                Secretary under such system pursuant to 
                                clause (ii), the weights established 
                                pursuant to clause (iii), and the risk 
                                adjustment procedures established 
                                pursuant to clause (iv).
                                    ``(II) Comparison for national 
                                quality improvement payments.--Each 
                                update under subclause (I) of the 
                                National Quality Improvement Payments 
                                shall allow for the comparison of data 
                                from one year to the next for purposes 
                                of identifying which providers of 
                                services and renal dialysis facilities 
                                will receive such Payments.
                                    ``(III) Consultation.--In 
                                determining when and how to update the 
                                scoring and ranking systems under 
                                subclause (I), the Secretary shall 
                                consult with the Quality Advisory 
                                Board.
                    ``(F) Funding of payments.--
                            ``(i) Reduction in payments.--In order to 
                        provide the funding for the financial incentive 
                        payments under this paragraph, for each year 
                        (beginning with 2007), the Secretary shall 
                        reduce each payment under paragraphs (12) and 
                        (13) to a provider of service and a renal 
                        dialysis facility by an amount equal to 2 
                        percent of the payment.
                            ``(ii) Amount available.--The amount 
                        available for financial incentive payments 
                        under this section with respect to a year shall 
                        be equal to the amount of the reduction in 
                        expenditures under the Federal Supplementary 
                        Medical Insurance Trust Fund in the year as a 
                        result of the application of clause (i).''.

SEC. 5. MEDICARE INNOVATIVE QUALITY PRACTICE AWARD PROGRAM.

    (a) Establishment.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish a 
program under which the Secretary shall award bonus payments to 
entities and individuals providing items and services under the 
medicare program under title XVIII of the Social Security Act that 
demonstrate innovative practices, structural improvements, or capacity 
enhancements that improve the quality of health care provided to 
medicare beneficiaries by such entities and individuals.
    (b) Period of Program.--Awards under the program shall be made 
during 2006, 2007, and 2008.
    (c) Selection of Recipients.--
            (1) In general.--The Secretary shall ensure that the 
        entities and individuals that receive an award under this 
        section have demonstrated improvements in the quality of health 
        care provided to medicare beneficiaries by such entities and 
        individuals through comparison with a control group or baseline 
        evaluation. For purposes of the program, improvements in the 
        quality of health care provided to medicare beneficiaries shall 
        be defined as providing additional services, such as translator 
        services and health literacy education services, or providing 
        care to an expanded service area or an expanded population 
        through telemedicine, increased cultural competence, or other 
        means, in combination with improved health outcomes or reduced 
        beneficiary costs.
            (2) All entities and individuals eligible.--Any entity, 
        including a plan, or individual that is providing services 
        under the medicare program is eligible for receiving an award 
        under this section.
            (3) Consultation.--In selecting the recipients of the 
        awards under this section, the Secretary shall consult with the 
        Quality Advisory Board established under section 1898 of the 
        Social Security Act, as added by section 7.
    (d) Minimum Number of Awards.--The Secretary shall make at least 10 
awards under this section in each year of the program.
    (e) Application.--An entity or individual desiring an award under 
this section shall submit an application to the Secretary at such time, 
in such manner, and accompanied by such information as the Secretary 
may reasonably require.
    (f) Amount of Award.--
            (1) In general.--Subject to paragraph (2) and subsection 
        (h), the Secretary shall determine the amount of awards under 
        this section.
            (2) Requirement.--In determining the amount of awards under 
        this section, the Secretary shall ensure that--
                    (A) no single award is excessive; and
                    (B) consideration is given to the number of 
                beneficiaries served by the entity or individual 
                receiving the award.
    (g) Report.--Not later than 6 months after the date on which the 
program established under subsection (a) ends, the Secretary shall 
submit to Congress a report on the program together with such 
recommendations for legislation or administrative action as the 
Secretary determines appropriate.
    (h) Funding.--Out of any funds in the Treasury not otherwise 
appropriated, there are appropriated $10,000,000 for each of 2006, 
2007, and 2008 to carry out this section.

SEC. 6. QUALITY IMPROVEMENT DEMONSTRATION PROGRAM FOR PEDIATRIC RENAL 
              DIALYSIS FACILITIES PROVIDING CARE TO MEDICARE 
              BENEFICIARIES WITH END STAGE RENAL DISEASE.

    (a) Demonstration Projects.--
            (1) Establishment.--The Secretary of Health and Human 
        Services (in this section referred to as the ``Secretary'') 
        shall conduct a 3-year demonstration program under which the 
        Secretary establishes demonstration projects that encourage 
        pediatric dialysis facilities to provide superior quality 
        health care to individuals with end stage renal disease.
            (2) Consultation in selecting sites.--In selecting the 
        demonstration project sites under this section, the Secretary 
        shall consult with the Quality Advisory Board established under 
        section 1898 of the Social Security Act, as added by section 7.
            (3) Submission of quality data.--Under the demonstration 
        projects, demonstration sites shall select appropriate measures 
        of quality of care provided to individuals eligible for 
        benefits under title XVIII of the Social Security Act who are 
        under 18 years of age and shall report data on such measures to 
        the Secretary.
            (4) Assessment of measures.--The Secretary, in consultation 
        with the Quality Advisory Board, shall assess the validity and 
        reliability of the measures selected under paragraph (2).
    (b) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII as may be necessary to carry out the purposes of 
the demonstration program established under this section.
    (c) Funding.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall provide for the transfer from the Federal Supplementary 
        Medical Insurance Trust Fund under section 1841 of the Social 
        Security Act (42 U.S.C. 1395t) of such funds as are necessary 
        for the costs of carrying out the demonstration program under 
        this section.
            (2) Budget neutrality.--In conducting the demonstration 
        program under this section, the Secretary shall ensure that the 
        aggregate expenditures made by the Secretary do not exceed the 
        amount which the Secretary would have expended if the 
        demonstration program under this section was not implemented.
    (d) Report.--Not later than 6 months after the date on which the 
demonstration program established under this section ends, the 
Secretary shall prepare and submit to Congress a report on the 
demonstration program together with--
            (1) recommendations on whether pediatric renal dialysis 
        facilities should be included in the renal dialysis performance 
        payment program under section 1881(b)(14) of the Social 
        Security Act (42 U.S.C. 1395rr(b)(14)), as added by section 
        4(4); and
            (2) such recommendations for legislation or administrative 
        action as the Secretary determines appropriate.
    (e) Pediatric Renal Dialysis Facility Defined.--The term 
``pediatric renal dialysis facility'' means a renal dialysis facility 
that receives payments under paragraph (12) or (13) of section 1881(b) 
of the Social Security Act (42 U.S.C. 1395rr(b)) and is not eligible to 
participate in the renal dialysis performance payment program under 
paragraph (14) of such section (as added by section 4(4)) because of 
the application of subparagraph (A)(iv) of such paragraph.

SEC. 7. MEDICARE QUALITY ADVISORY BOARD.

    Title XVIII of the Social Security Act, as amended by section 1016 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Public Law 108-173; 117 Stat. 2447), is amended by adding at 
the end the following new section:

                        ``quality advisory board

    ``Sec. 1898. (a) Establishment.--The Secretary shall establish a 
Medicare Quality Advisory Board (in this section referred to as the 
`Board').
    ``(b) Membership and Terms.--
            ``(1) In general.--Subject to paragraphs (3), (4), and (5), 
        the Board shall be composed of representatives described in 
        paragraph (2) who shall serve for such term as the Secretary 
        may specify.
            ``(2) Representatives.--Representatives described in this 
        subparagraph include representatives of the following:
                    ``(A) Patients or patient advocate organizations.
                    ``(B) Individuals with expertise in the provision 
                of quality care, such as medical directors, heads of 
                hospital quality improvement committees, health 
                insurance plan representatives, and academic 
                researchers.
                    ``(C) Health care professionals and providers.
                    ``(D) Organizations that focus on the measurement 
                and reporting of quality indicators.
                    ``(E) State government health care programs.
            ``(3) Majority nonproviders.--Individuals who are directly 
        involved in the provision, or management of the delivery, of 
        items and services covered under this title shall not 
        constitute a majority of the membership of the Board.
            ``(4) Experience with urban and rural health care issues.--
        The membership of the Board should be representative of 
        individuals with experience with urban health care issues and 
        individuals with experience with rural health care issues.
            ``(5) Experience across a spectrum of activities.--The 
        membership of the Board should be representative of individuals 
        with experience across the spectrum of activities that the 
        Secretary is responsible for with respect to this title, 
        including the coverage of new services and technologies, 
        payment rates and methodologies, beneficiary services, and 
        claims processing.
    ``(c) Duties.--
            ``(1) Incentive programs.--
                    ``(A) Advice.--The Board shall advise the Secretary 
                regarding--
                            ``(i) the development, implementation, and 
                        updating of the scoring and ranking systems 
                        under sections 1860C-2(e) and 1881(b)(14)(E);
                            ``(ii) the determination of the applicable 
                        percent for national performance quality 
                        payments under sections 1860C-2(c) and 
                        1881(b)(14)(C);
                            ``(iii) the selection of recipients of 
                        innovative quality practice awards under the 
                        program under section 5 of the Medicare Quality 
                        Improvement Act of 2004;
                            ``(iv) the selection of demonstration 
                        project sites and the assessment of measures of 
                        quality of care under the demonstration program 
                        under section 6 of the Medicare Quality 
                        Improvement Act of 2004; and
                            ``(v) the study and report under section 
                        8(b) of the Medicare Quality Improvement Act of 
                        2004.
                    ``(B) Annual report on incentive programs.--The 
                Board shall submit an annual report to the Secretary 
                and Congress on the programs under sections 1860C-2 and 
                1881(b)(14).
                    ``(C) Additional duties.--The Board shall perform 
                such additional functions to assist the Secretary in 
                carrying out the programs described in clauses (ii) and 
                (iii) of subparagraph (A) and in subparagraph (B) as 
                the Secretary may specify.
            ``(2) Development and assessment of national priorities and 
        agenda.--The Board shall develop and assess national priorities 
        and an agenda for improving the quality of items and services 
        furnished to individuals entitled to benefits under this title.
    ``(d) Waiver of Administrative Limitation.--The Secretary shall 
establish the Board notwithstanding any limitation that may apply to 
the number of advisory committees that may be established (within the 
Department of Health and Human Services or otherwise).''.

SEC. 8. STUDIES AND REPORTS ON FINANCIAL INCENTIVES FOR QUALITY ITEMS 
              AND SERVICES UNDER THE MEDICARE PROGRAM.

    (a) IOM Study and Report on How Medicare Payments for Items and 
Services Affect the Quality of Such Items and Services.--
            (1) Study.--The Secretary of Health and Human Services (in 
        this section referred to as the ``Secretary'') shall request 
        the Institute of Medicine of the National Academy of Sciences 
        to conduct a study on how the payment mechanisms for items and 
        services under the original medicare fee-for-service program 
        under parts A and B of title XVIII of the Social Security Act 
        effect the quality of such items and services.
            (2) Report to congress.--Not later than January 1, 2006, 
        the Secretary shall submit to Congress a report on the results 
        of the study described in paragraph (1) together with such 
        recommendations for legislation or administrative action as the 
        Secretary determines appropriate.
    (b) HHS Study and Report on Providing Financial Incentives for 
Quality Services Under the Original Medicare Fee-for-Service Program.--
            (1) Study.--The Secretary of Health and Human Services 
        shall conduct a study on the actions necessary to establish a 
        payment system under the original medicare fee-for-service 
        program under parts A and B of title XVIII of the Social 
        Security Act that aligns the quality of services provided under 
        such program with the reimbursement provided under such program 
        for such services.
            (2) Report.--
                    (A) In general.--Not later than January 1, 2008, 
                the Secretary shall submit a report to Congress on the 
                study conducted under paragraph (1).
                    (B) Contents.--The report submitted under 
                subparagraph (A) shall contain recommendations with 
                respect to--
                            (i) the incremental steps necessary to 
                        develop the payment system described in 
                        paragraph (1);
                            (ii) the performance measures to be used 
                        under such payment system;
                            (iii) the incentive approaches to be used 
                        under such payment system;
                            (iv) the geographic and risk adjusters to 
                        be used under such payment system; and
                            (v) a strategy for aligning payment with 
                        performance across all parts of the medicare 
                        program.
            (3) Requirement.--In conducting the study under paragraph 
        (1) and preparing the report under paragraph (2), the Secretary 
        shall--
                    (A) consult with the Quality Advisory Board 
                established under section 1898 of the Social Security 
                Act, as added by section 7; and
                    (B) take into account the report on health care 
                performance measures submitted by the Institute of 
                Medicine of the National Academy of Sciences under 
                section 238 of the Medicare Prescription Drug, 
                Improvement, and Modernization Act of 2003 (Public Law 
                108-173; 117 Stat. 2213).

SEC. 9. MEDPAC STUDY AND REPORT ON USE OF ADJUSTER MECHANISMS UNDER 
              MEDICARE QUALITY PERFORMANCE INCENTIVE PAYMENT PROGRAMS.

    (a) Study.--The Medicare Payment Advisory Commission shall conduct 
a study--
            (1) to determine whether it is appropriate to incorporate a 
        geographic adjuster into the quality performance incentive 
        payment programs under sections 1860C-2 and 1881(b)(14) of the 
        Social Security Act, as added by sections 3 and 4, 
        respectively, to account for different environments of care, 
        regional payment variation, regional variation of patient 
        satisfaction, and regional case mix variation; and
            (2) on the most appropriate methods to risk adjust data 
        used under the scoring and ranking system under such programs 
        pursuant to sections 1860C-2(e)(4) and 1881(b)(14)(E)(iv) of 
        the Social Security Act.
    (b) Report.--Not later than January 1, 2006, the Commission shall 
submit a report to Congress and the Secretary of Health and Human 
Services on the study conducted under subsection (a) together with 
recommendations for such legislation and administrative actions as the 
Commission considers appropriate. If such study concludes that a 
geographic adjuster described in subsection (a)(1) is appropriate, the 
Commission shall include in the report recommendations on how such 
adjuster could be incorporated into the quality performance incentive 
payment programs described in such subsection.

SEC. 10. DEMONSTRATION PROGRAM ON MEASURING THE QUALITY OF HEALTH CARE 
              FURNISHED TO PEDIATRIC PATIENTS UNDER THE MEDICAID AND 
              SCHIP PROGRAMS.

    (a) Establishment.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        conduct a 3-year demonstration program to examine the 
        development and use of quality measures, pay-for-performance 
        programs, and other strategies in order to encourage providers 
        to furnish superior quality health care to individuals under 18 
        years of age under the medicaid program under title XIX of the 
        Social Security Act (42 U.S.C. 1396 et seq.) and under the 
        SCHIP program under title XXI of such Act (42 U.S.C. 1397aa et 
        seq.).
            (2) Authority.--The Secretary shall conduct the 
        demonstration program under this section pursuant to the 
        authority provided under this section and not under the 
        authority provided under section 1115 of the Social Security 
        Act (42 U.S.C. 1315).
    (b) Sites To Include Multiple Settings and Providers.--In selecting 
the demonstration program sites under this section, the Secretary shall 
ensure that the sites include health care delivery in multiple settings 
and through multiple providers, such as school-based settings and 
mental health providers.
    (c) Waiver Authority.--The Secretary may waive such requirements of 
titles XI, XIX, and XXI of the Social Security Act (42 U.S.C. 1301 et 
seq.; 1396 et seq.; 1397aa et seq.) as may be necessary to carry out 
the purposes of the demonstration program under this section.
    (d) Funding.--
            (1) In general.--Subject to paragraph (2), for purposes of 
        conducting the demonstration program under this section, 
        expenditures under the demonstration program shall be treated 
        as medical assistance under section 1903 of the Social Security 
        Act (42 U.S.C. 1396) or child health assistance under section 
        2105 of such Act (42 U.S.C. 1397).
            (2) Budget neutrality.--In conducting the demonstration 
        program under this section, the Secretary shall ensure that the 
        aggregate expenditures made by the Secretary do not exceed the 
        amount which the Secretary would have expended if the 
        demonstration program under this section had not been 
        implemented.
    (e) Report.--Not later than 6 months after the date on which the 
demonstration program under this section ends, the Secretary shall 
submit to Congress a report on the demonstration program together with 
such recommendations for legislation or administrative action as the 
Secretary determines appropriate.

SEC. 11. PROVISIONS RELATING TO MEDICAID QUALITY IMPROVEMENTS.

    (a) Authorization for Additional Staff at the Center for Medicaid 
and State Operations.--
            (1) Additional staff.--The Secretary of Health and Human 
        Services shall have the authority to hire 5 full-time employees 
        to be employed within the Center for Medicaid and State 
        Operations within the Centers for Medicare & Medicaid Services 
        from among individuals who have experience with, or have been 
        trained as, health professionals and who have experience in any 
        of the following areas:
                    (A) Quality improvement.
                    (B) Chronic care management.
                    (C) Care coordination.
            (2) Requirement foe experience with pediatric 
        populations.--At least 1 of the individuals employed within the 
        Center for Medicaid and State Operations pursuant to paragraph 
        (1) shall have experience with pediatric populations.
            (3) Duties of additional staff.--The employees hired under 
        paragraph (1) shall be responsible for developing strategies to 
        access and promote quality improvement, chronic care 
        management, and care coordination with the medicaid program and 
        for providing technical assistance to the States.
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary to carry out 
        this subsection.
    (b) CMS Study and Report on Medicare and Medicaid Data 
Coordination.--
            (1) Study.--The Secretary of Health and Human Services 
        shall conduct a study to identify--
                    (A) efforts to coordinate and integrate data from 
                the medicare program under title XVIII of the Social 
                Security Act and the medicaid program under title XIX 
                of such Act;
                    (B) barriers to data coordination;
                    (C) the potential benefits of data integration as 
                perceived by medicare and medicaid program officials, 
                policymakers, health care providers, and beneficiaries; 
                and
                    (D) steps necessary to coordinate and integrate the 
                beneficiary data from the medicare and medicaid 
                programs.
            (2) Report to congress.--Not later than December 31, 2004, 
        the Secretary of Health and Human Services shall submit to 
        Congress a report on the results of the study conducted under 
        paragraph (1) together with such recommendations for 
        legislation or administrative action as the Secretary 
        determines appropriate.
    (c) Medpac Study and Report on Beneficiaries Who Are Dually 
Eligible for Medicare and Medicaid.--
            (1) Study.--The Medicare Payment Advisory Commission shall 
        conduct a study to determine the characteristics of individuals 
        who are eligible to receive benefits under both the medicare 
        and medicaid programs under titles XVIII and XIX of the Social 
        Security Act, respectively, identify the costliest groups of 
        individuals who are eligible for benefits under both programs, 
        identify the services used by such individuals, and develop 
        recommendations on how the provision of those services could be 
        better coordinated for improved health outcomes and reduced 
        costs.
            (2) Report.--Not later than June 30, 2005, the Commission 
        shall submit a report to Congress on the study conducted under 
        paragraph (1) together with recommendations for such 
        legislation and administrative actions as the Commission 
        considers appropriate.
    (d) Medpac Study and Report on Care Coordination Programs for Dual-
Eligibles.--
            (1) Study.--The Medicare Payment Advisory Commission shall 
        conduct a study on care coordination programs available to 
        individuals who are eligible to receive benefits under both the 
        medicare and medicaid programs under titles XVIII and XIX of 
        the Social Security Act, respectively, the impact of such care 
        coordination programs on those individuals, the impact of such 
        care coordination programs on the costs of the medicare and 
        medicaid programs to the Federal Government, and whether any 
        savings from care coordination programs are counted as a 
        benefit to either program.
            (2) Report.--Not later than June 30, 2005, the Commission 
        shall submit a report to Congress on the study conducted under 
        paragraph (1) together with recommendations for such 
        legislation and administrative actions as the Commission 
        considers appropriate.

SEC. 12. DEMONSTRATION PROGRAM FOR MEDICAL SMART CARDS.

    (a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish a 5-year 
demonstration program under which the Secretary shall award grants for 
the establishment of demonstration projects to provide for the 
development and use of Medical Smart Cards and to examine the impact of 
Medical Smart Cards on health care costs, quality of care, and patient 
safety.
    (b) Eligibility.--To be eligible to receive a grant under 
subsection (a), an entity shall be a public or private nonprofit 
entity.
    (c) Application.--An eligible entity desiring a grant under this 
section shall submit an application to the Secretary at such time, in 
such manner, and accompanied by such information as the Secretary may 
reasonably require.
    (d) Approval of Applications.--
            (1) In general.--The Secretary shall approve applications 
        for grants under this section in accordance with criteria 
        established by the Secretary.
            (2) Limitation.--The Secretary shall approve at least 1 
        application for a demonstration project that is conducted at a 
        hospital or hospital system with a large rural service area.
    (e) Use of Funds.--An eligible entity shall use amounts received 
under a grant under this section to carry out the purposes described in 
subsection (a).
    (f) Report.--Not later than 6 months after the date on which the 
demonstration program established under subsection (a) ends, the 
Secretary shall submit to Congress a report on the demonstration 
program together with such recommendations for legislation or 
administrative action as the Secretary determines appropriate.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.
                                 <all>