[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3164 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 3164

 To amend title XVIII of the Social Security Act to reduce fraud under 
                         the Medicare program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 19, 2008

  Mr. Martinez (for himself and Mr. Cornyn) 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 reduce fraud under 
                         the Medicare program.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Seniors and Taxpayers Obligation 
Protection Act of 2008''.

SEC. 2. REQUIRING THE SECRETARY OF HEALTH AND HUMAN SERVICES TO CHANGE 
              THE MEDICARE BENEFICIARY IDENTIFIER USED TO IDENTIFY 
              MEDICARE BENEFICIARIES UNDER THE MEDICARE PROGRAM.

    (a) Procedures.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services (in this section referred to as the ``Secretary'') 
        shall establish and implement procedures to change the Medicare 
        beneficiary identifier used to identify individuals entitled to 
        benefits under part A of title XVIII of the Social Security Act 
        or enrolled under part B of such title so that such an 
        individual's social security account number is not used.
            (2) Maintaining existing hicn structure.--In order to 
        minimize the impact of the change under paragraph (1) on 
        systems that communicate with Medicare beneficiary eligibility 
        systems, the procedures under paragraph (1) shall provide that 
        the new Medicare beneficiary identifier maintain the existing 
        Health Insurance Claim Number structure.
            (3) Protection against fraud.--The procedures under 
        paragraph (1) shall provide for a process for changing the 
        Medicare beneficiary identifier for an individual to a 
        different identifier in the case of the discovery of fraud, 
        including identity theft.
            (4) Phase-in authority.--
                    (A) In general.--Subject to subparagraphs (B) and 
                (C), the Secretary may phase in the change under 
                paragraph (1) in such manner as the Secretary 
                determines appropriate.
                    (B) Limit.--The phase-in period under subparagraph 
                (A) shall not exceed 10 years.
                    (C) Newly entitled and enrolled individuals.--The 
                Secretary shall ensure that the change under paragraph 
                (1) is implemented not later than January 1, 2010 with 
                respect to any individual who first becomes entitled to 
                benefits under part A of title XVIII of the Social 
                Security Act or enrolled under part B of such title on 
                or after such date.
    (b) Education and Outreach.--The Secretary shall establish a 
program of education and outreach for individuals entitled to benefits 
under part A of title XVIII of the Social Security Act or enrolled 
under part B of such title, providers of services (as defined in 
subsection (u) of section 1861 of such Act (42 U.S.C. 1395x)), and 
suppliers (as defined in subsection (d) of such section) on the change 
under paragraph (1).
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.

SEC. 3. MONTHLY VERIFICATION OF ACCURACY OF CHARGES FOR PHYSICIANS' 
              SERVICES.

    (a) In General.--Section 1893 of the Social Security Act (42 U.S.C. 
1395ddd) is amended--
            (1) in subsection (b), by adding at the end the following 
        new paragraph:
            ``(7) The monthly verification of the accuracy of charges 
        for physicians' services under the system under subsection 
        (i).'';
            (2) in subsection (c), by adding at the end of the flush 
        matter following paragraph (4), the following new sentence: 
        ``In the case of the activity described in subsection (b)(7), 
        an entity shall only be eligible to enter into a contract under 
        the Program to carry out the activity if the entity is a 
        medicare administrative contractor with a contract under 
        section 1874A.''; and
            (3) by adding at the end the following new subsection:
    ``(i) Monthly Verification of Accuracy of Charges for Physicians' 
Services.--
            ``(1) System.--
                    ``(A) In general.--Not later than 1 year after the 
                date of the enactment of this subsection, the Secretary 
                shall establish and implement a system to verify 
                (electronically or otherwise, taking into consideration 
                the administrative burden of such verification on 
                physicians and group practices) on a monthly basis that 
                the claims for reimbursement under part B for 
                physicians' services furnished in high risk areas are--
                            ``(i) for physicians' services actually 
                        furnished by the physician (or the physician's 
                        group practice); and
                            ``(ii) otherwise accurate.
                    ``(B) No determination of medical necessity.--In no 
                case shall any verification conducted under the system 
                established under subparagraph (A) include a 
                determination of the medical necessity of the 
                physicians' service.
            ``(2) Verification.--Under the system, the Secretary, at 
        the end of each month, shall provide the physician (or the 
        group practice) with a detailed list of such claims for 
        reimbursement that were submitted during the month in order for 
        the physician (or the group practice) to review and verify the 
        list. In providing the detailed list, the Secretary shall use 
        the provider number of the physician (or the group practice).
            ``(3) Audits.--The Secretary shall conduct audits of the 
        review and verification by physicians and group practices of 
        the detailed list provided under paragraph (2). Such audits 
        shall assess whether the physician or group practice conducted 
        such review and verification in a fraudulent manner. In the 
        case where the Secretary determines such review and 
        verification was conducted in a fraudulent manner, the 
        Secretary shall recoup any payments resulting from the 
        fraudulent review and verification and impose a civil money 
        penalty in an amount determined appropriate by the Secretary on 
        the physician or group practice who conducted the fraudulent 
        review and verification. The provisions of section 1128A (other 
        than subsections (a) and (b)) shall apply to a civil money 
        penalty under the previous sentence in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a).
            ``(4) High risk areas defined.--In this subsection, the 
        term `high risk area' means a county designated as a high risk 
        area under subsection (j)(1).
            ``(5) Actions through medicare administrative 
        contractors.--In carrying out this subsection, the Secretary 
        shall act through medicare administrative contractors with a 
        contract under section 1874A.
            ``(6) Report by the secretary.--Not later than 1 year after 
        implementation of the system established under paragraph (1), 
        the Secretary shall submit a report to Congress on the progress 
        of such implementation. Such report shall include 
        recommendations--
                    ``(A) on how to improve such implementation, 
                including whether the system should be expanded to 
                include verification of claims for reimbursement under 
                part B for physicians' services furnished in additional 
                areas; and
                    ``(B) for such legislation and administrative 
                action as the Secretary determines appropriate.''.
    (b) Authorization of Appropriations.--To carry out the amendments 
made by this section, there are authorized to be appropriated such sums 
as may be necessary for each of fiscal years 2009 through 2013.

SEC. 4. DETECTION OF MEDICARE FRAUD IN HIGH RISK AREAS.

    (a) In General.--Section 1893 of the Social Security Act (42 U.S.C. 
1395ddd), as amended by section 3, is amended--
            (1) in subsection (b), by adding at the end the following 
        new paragraph:
            ``(8) Implementation of prepayment fraud detection methods 
        under subsection (j).'';
            (2) in subsection (c), in the second sentence of the flush 
        matter following paragraph (4), by striking ``activity 
        described in subsection (b)(7)'' and inserting ``activities 
        described in paragraphs (7) and (8) of subsection (b)''; and
            (3) by adding at the end the following new subsection:
    ``(j) Detection of Medicare Fraud in High Risk Areas.--
            ``(1) Establishment of system to identify counties most 
        vulnerable to fraud.--Not later than 6 months after the date of 
        the enactment of this subsection, the Secretary shall establish 
        a system to identify the 50 counties most vulnerable to fraud 
        with respect to items and services furnished by providers of 
        services (other than hospitals and critical access hospitals) 
        and suppliers based on the degree of county-specific 
        reimbursement and analysis of payment trends under this title. 
        The Secretary shall designate the counties identified under the 
        preceding sentence as `high risk areas'.
            ``(2) Prepayment fraud detection.--The Secretary shall 
        establish procedures for the implementation of prepayment fraud 
        detection methods under this title with respect to items and 
        services furnished by such providers of services and suppliers 
        in high risk areas designated under paragraph (1), including 
        the following:
                    ``(A) Pre-enrollment site visits for such providers 
                of services and suppliers which have the highest 
                probability of committing fraud under this title.
                    ``(B) Data analysis to establish prepayment claim 
                edits designed to target the claims for reimbursement 
                under this title for such items and services that are 
                most likely to be fraudulent.
                    ``(C) Prepayment benefit integrity reviews for 
                claims for reimbursement under this title for such 
                items and services that are suspended as a result of 
                such edits.
            ``(3) Actions through medicare administrative 
        contractors.--In carrying out this subsection, the Secretary 
        shall act through medicare administrative contractors with a 
        contract under section 1874A.
            ``(4) Report to congress.--The Secretary shall, upon 
        request, appear and testify before Congress regarding the 
        status of the implementation of prepayment fraud detection 
        methods under this subsection.''.
    (b) Authorization of Appropriations.--To carry out the amendments 
made by this section, there are authorized to be appropriated such sums 
as may be necessary, not to exceed $50,000,000, for each of fiscal 
years 2009 through 2013.

SEC. 5. STUDY ON THE USE OF TECHNOLOGY FOR REAL-TIME DATA REVIEW.

    (a) Study on the Use of Technology for Real-Time Data Review.--The 
Secretary of Health and Human Services shall conduct a study on the use 
of technology (similar to that used with respect to the analysis of 
credit card charging patterns) to provide real-time data analysis of 
claims for reimbursement under the Medicare program under title XVIII 
of the Social Security Act to identify and investigate unusual billing 
or order practices under the Medicare program that could indicate fraud 
or abuse. Such study shall include an analysis of the following:
            (1) Whether such technology could be used to identify 
        unusual billing or order practices under the Medicare program 
        by an individual provider of services or for a certain HCPCS 
        code in a particular area of the country without alerting 
        potentially fraudulent providers of services and allowing them 
        to escape or go unnoticed.
            (2) How such technology can be implemented under the 
        Medicare program to provide for the effective review of claim 
        logs in an accurate and timely manner.
    (b) Report.--Not later than 1 year after the date of enactment of 
this Act, the Secretary shall submit a report to Congress on the study 
conducted under subsection (a), together with recommendations for such 
legislation and administrative action as the Secretary determines 
appropriate.

SEC. 6. EDITS ON 855S MEDICARE ENROLLMENT APPLICATION.

    Section 1834(a) of the Social Security Act (42 U.S.C. 1395m(a)) is 
amended by adding at the end the following new paragraph:
            ``(22) Confirmation with national supplier clearinghouse 
        prior to reimbursement.--
                    ``(A) In general.--Not later than 1 year after the 
                date of enactment of this paragraph, the Secretary 
                shall establish procedures to require carriers, prior 
                to paying a claim for reimbursement for durable medical 
                equipment, prosthetics, orthotics, and supplies under 
                this title, to confirm with the National Supplier 
                Clearinghouse--
                            ``(i) that the Medicare identification 
                        number of the supplier is active; and
                            ``(ii) that the item or service for which 
                        the claim for reimbursement is submitted was 
                        properly identified on the CMS-855S Medicare 
                        enrollment application.
                    ``(B) Online database for implementation.--Not 
                later than 18 months after the date of enactment of 
                this paragraph, the Secretary shall establish an online 
                database similar to that used for the National Provider 
                Identifier to enable providers of services, 
                accreditors, carriers, and the National Supplier 
                Clearinghouse to view information on specialties and 
                the types of items and services each supplier has 
                indicated on the CMS-855S Medicare enrollment 
                application submitted by the supplier.
                    ``(C) Notification of claim denial and 
                resubmission.--In the case where a claim for 
                reimbursement for durable medical equipment, 
                prosthetics, orthotics, and supplies under this title 
                is denied because the item or service furnished does 
                not correctly match up with the information on file 
                with the National Supplier Clearinghouse--
                            ``(i) the National Supplier Clearinghouse 
                        shall--
                                    ``(I) provide the supplier written 
                                notification of the reason for such 
                                denial; and
                                    ``(II) allow the supplier 60 days 
                                to provide the National Supplier 
                                Clearinghouse with appropriate 
                                certification, licensing, or 
                                accreditation; and
                            ``(ii) the Secretary shall waive applicable 
                        requirements relating to the time frame for the 
                        submission of claims for payment under this 
                        title in order to permit the resubmission of 
                        such claim if payment of such claim would 
                        otherwise be allowed under this title.''.

SEC. 7. SERIAL NUMBER TRACKING SYSTEM FOR DURABLE MEDICAL EQUIPMENT.

    (a) In General.--Section 1834(a) of the Social Security Act (42 
U.S.C. 1395m(a)), as amended by section 6(a), is amended by adding at 
the end the following new paragraph:
            ``(23) Serial number tracking system for durable medical 
        equipment.--
                    ``(A) Establishment.--In the case of any item of 
                durable medical equipment which has not been issued a 
                unique identifier under the unique device 
                identification system established under section 519(f) 
                of the Federal Food, Drug, and Cosmetic Act, the 
                Secretary shall promulgate regulations establishing a 
                system for such durable medical equipment requiring the 
                label of such equipment to bear a unique identifier, 
                unless the Secretary requires an alternative placement 
                or provides an exception for a particular item or type 
                of durable medical equipment under such section 519(f).
                    ``(B) Provision of unique identifier to the 
                secretary.--A manufacturer of an item of durable 
                medical equipment shall submit to the Secretary the 
                unique identifier issued under subparagraph (A) or such 
                section 519(f) with respect to such item (in accordance 
                with procedures established by the Secretary). The 
                Secretary shall provide for the storage of such unique 
                identifier in accordance with subparagraph (D)(i).
                    ``(C) Requirements for manufacturers and 
                wholesalers.--A manufacturer of an item of durable 
                medical equipment, or, in the case where a wholesaler 
                provides an item of durable medical equipment to a 
                supplier, the wholesaler, shall--
                            ``(i) upon issuing an item to a supplier, 
                        develop a product description for the item 
                        which includes--
                                    ``(I) the unique identifier of the 
                                item;
                                    ``(II) the specific Healthcare 
                                Common Procedure Coding System (HCPCS) 
                                code for the item;
                                    ``(III) the name of the supplier 
                                the item was shipped to; and
                                    ``(IV) the supplier's Medicare 
                                identification number; and
                            ``(ii) submit the product description 
                        developed under clause (i) to the Secretary for 
                        storage in the unique identifier database in 
                        accordance with subparagraph (E)(i).
                    ``(D) Requirements for suppliers.--A supplier of an 
                item of durable medical equipment shall--
                            ``(i) upon issuing the item to a 
                        beneficiary, note the unique identifier of such 
                        item on--
                                    ``(I) the claim form submitted for 
                                such item; and
                                    ``(II) when appropriate or 
                                otherwise required, the detailed 
                                product description of the item;
                            ``(ii) in the case where the item is issued 
                        to a beneficiary on a rental basis, designate 
                        the unique identifier with an `R' after the 
                        number to indicate that the item was rented, 
                        and not purchased, by the beneficiary; and
                            ``(iii) upon return of the item to the 
                        supplier, notify the Secretary--
                                    ``(I) before reissuing that item 
                                and resubmitting that number on such a 
                                claim form; or
                                    ``(II) upon resubmitting that 
                                number on such a claim form.
                    ``(E) Requirements for the secretary.--
                            ``(i) Maintenance of database of serial 
                        numbers.--The Secretary shall establish and 
                        maintain a database containing the unique 
                        identifiers submitted by manufacturers of items 
                        of durable medical equipment under subparagraph 
                        (B).
                            ``(ii) Payment.--
                                    ``(I) Limitation.--Subject to 
                                subclause (II), payment may only be 
                                made for an item of durable medical 
                                equipment under this part if the unique 
                                identifier on the claim form submitted 
                                for such item matches the unique 
                                identifier submitted by the 
                                manufacturer of such item under 
                                subparagraph (B).
                                    ``(II) Exception to limitation 
                                after verification of receipt.--In the 
                                case where the unique identifier is not 
                                on the claim form submitted for such 
                                item or does not match the unique 
                                identifier submitted by the 
                                manufacturer of such item under 
                                subparagraph (B), no payment shall be 
                                made under this part for the item of 
                                durable medical equipment until the 
                                Secretary has verified that the 
                                beneficiary has received such item in 
                                accordance with subclause (IV).
                                    ``(III) Duplicative unique 
                                identifiers.--In the case where a 
                                unique identifier is submitted on more 
                                than 1 claim form submitted for such an 
                                item and there is no indication from 
                                the supplier that the item of durable 
                                medical equipment has been returned by 
                                1 beneficiary and is now being used by 
                                another beneficiary, no payment shall 
                                be made under this part for such item 
                                of durable medical equipment unless the 
                                Secretary has verified that the 
                                beneficiary has received such item in 
                                accordance with subclause (IV).
                                    ``(IV) Verification.--The Secretary 
                                shall conduct any verification required 
                                under subclause (II) or (III) within 30 
                                days after receipt by the Secretary of 
                                the relevant claim form. In the case 
                                where such verification is not 
                                completed within such time period, the 
                                Secretary shall pay such claim, 
                                complete the verification, and, in the 
                                case where the Secretary has entered 
                                into a contract with an entity for the 
                                conduct of such verification, recover 
                                any payments that would not have been 
                                made if the verification had been 
                                completed within such time period from 
                                such entity.
                            ``(iii) Quality control audits.--The 
                        Secretary shall conduct quality control audits 
                        to identify unusual billing patterns with 
                        respect to items of durable medical equipment 
                        for which payment is made under this part and 
                        may conduct unannounced site visits or 
                        commission other agencies to conduct such site 
                        visits as part of such quality control audits.
                            ``(iv) No use as a precertification 
                        mechanism.--In no case shall a unique 
                        identifier issued under subparagraph (A) or 
                        section 519(f) of the Federal Food, Drug, and 
                        Cosmetic Act be used as a precertification 
                        mechanism for the supply of an item of durable 
                        medical equipment or the payment of a claim for 
                        such an item under this part.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect 3 years after the date of enactment of this Act.

SEC. 8. SENSE OF THE SENATE REGARDING SURETY BOND REQUIREMENTS FOR 
              SUPPLIERS OF DURABLE MEDICAL EQUIPMENT.

    (a) Findings.--The Senate finds the following:
            (1) Documented fraud in the Medicare Durable Medical 
        Equipment, Prosthetics, Orthotics, and Supplies Competitive 
        Bidding Program under section 1847 of the Social Security Act 
        (42 U.S.C. 1395w-3) has potentially cost taxpayers in the 
        United States billions of dollars.
            (2) Congress, having previously recognized fraudulent 
        practices with respect to durable medical equipment under the 
        Medicare program under title XVIII of the Social Security Act, 
        directed the Secretary of Health and Human Services to take 
        action against such fraudulent practices through the 
        implementation of a surety bond requirement under section 
        1834(a)(16) of the Social Security Act (42 U.S.C. 
        1395m(a)(16)), as added by section 4312 of the Balanced Budget 
        Act of 1997 (Public Law 105-33).
            (3) Such surety bond requirement is necessary to--
                    (A) limit the risk to the Medicare program of 
                fraudulent suppliers of durable medical equipment;
                    (B) enhance the enrollment process under the 
                Medicare program to ensure that only legitimate 
                suppliers of durable medical equipment are enrolled or 
                are allowed to remain enrolled in any programs 
                established or implemented under the Medicare program;
                    (C) ensure that the Medicare program recoups 
                erroneous payments that result from fraudulent or 
                abusive billing practices by allowing the Centers for 
                Medicare & Medicaid Services, or entities under a 
                contract with the Centers for Medicare & Medicaid 
                Services, to seek payments from a surety up to the 
                penal sum; and
                    (D) help ensure that beneficiaries under the 
                Medicare program receive items and services that are 
                considered reasonable and necessary from legitimate 
                suppliers of durable medical equipment.
            (4) To date, more than a decade after the enactment of the 
        Balanced Budget Act of 1997 (Public Law 105-33), such section 
        1834(a)(16) has yet to be implemented by the Secretary of 
        Health and Human Services, potentially costing taxpayers and 
        Medicare beneficiaries billions of additional dollars and 
        negatively impacting responsible suppliers of durable medical 
        equipment under the Medicare program.
    (b) Sense of the Senate.--It is the Sense of the Senate that the 
Secretary of Health and Human Services must put in place the surety 
bond requirement under section 1834(a)(16) of the Social Security Act 
(42 U.S.C. 1395m(a)(16)) within 6 months of the date of enactment of 
this Act in order to maintain integrity under the Medicare program.
                                 <all>