[Congressional Record Volume 143, Number 59 (Thursday, May 8, 1997)]
[Senate]
[Pages S4227-S4232]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  By Mr. GRASSLEY (for himself, Mr. Inouye, and Mr. Frist):

  S. 720. A bill to amend titles XVIII and XIX of the Social Security 
Act to expand and make permanent the availability of cost-effective, 
comprehensive acute and long-term care services to frail elderly 
persons through Programs of All-inclusive Care for the Elderly (PACE) 
under the medicare and medicaid programs; to the Committee on Finance.


                     THE PACE PROVIDER ACT OF 1997

 Mr. GRASSLEY. Mr. President, I am pleased to introduce today, 
along with Senator Inouye, the distinguished Senator from Hawaii, the 
PACE Provider Act of 1997. PACE, the Program of All-Inclusive Care for 
the Elderly, is a unique system of integrated care for the frail 
elderly. This Act increases the number of PACE sites authorized to 
provide comprehensive, community-based services to frail, elderly 
persons.
  As our population ages, we must continue to place a high priority on 
long-term care services. Giving our seniors alternatives to nursing 
home care and expanding the choices available, is not only cost 
effective, but will also improve the quality of life for older 
Americans.
  PACE programs achieve this goal. PACE enables the frail elderly to 
remain as healthy as possible, at home in their communities. By doing 
so, elderly individuals maintain their independence, dignity and 
quality of life.
  Each PACE participant receives a comprehensive care package, 
including all Medicare and Medicaid services, as well as community-
based long-term care services. Each individual is cared for by an 
interdisciplinary team consisting of a primary care physician, nurse, 
social worker, rehabilitation therapist, home health worker, and 
others. Because care providers on the PACE team work together, they are 
able to successfully accommodate the complex medical and social needs 
of the elderly person in fragile health.
  What's more, PACE provides high-quality care at a lower cost to 
Medicare and Medicaid, relative to their payments in the traditional 
system. Studies show a 5-15 percent reduction in Medicare and Medicaid 
spending for individuals in PACE.
  The potential savings to Medicare and Medicaid is significant. PACE 
programs provide services for one of our most vulnerable, and costly, 
population: frail, elderly adults who are eligible for Medicare and 
Medicaid. In many cases, these ``dually eligible'' individuals have 
complex, chronic care needs and require ongoing, long-term care 
services. The current structure of Medicare and Medicaid does not 
encourage coordination of these services. The result is fragmented and 
costly care for our nation's most vulnerable population.
  The PACE Provider Act does not alter the criteria for eligibility for 
PACE participation in any way. Instead, it makes PACE programs more 
available to individuals already eligible for nursing home care, 
because of their poor health status. PACE is a preferable, and less 
costly, alternative. Specifically, this Act increases the number of 
PACE programs authorized from 15 to 40, with an additional 20 to be 
added each year, and affords regular ``provider'' status to existing 
sites.
  The PACE Provider Act allows the success of PACE programs to be 
replicated throughout the country. And, with an emphasis on 
preventative and supportive services, PACE services can substantially 
reduce the high-costs associated with emergency room visits and 
extended nursing home stays often needed by the frail elderly in the 
traditional Medicare and Medicaid programs.
  My sponsorship of this bill grows out of my Aging Committee hearing 
on April 29, Torn Between Two Systems: Improving Chronic Care in 
Medicare and Medicaid. The plight of the dual eligibles is 
unacceptable. This bill is an immediate and positive step in the right 
direction.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

[[Page S4228]]

                                 S. 720

       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 ``Programs of All-inclusive 
     Care for the Elderly (PACE) Coverage Act of 1997''.

     SEC. 2. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.

       (a) In General.--Title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.) is amended by adding at the end the 
     following new section:


    ``payments to, and coverage of benefits under, programs of all-
                 inclusive care for the elderly (pace)

       ``Sec. 1894. (a) Receipt of Benefits Through Enrollment in 
     PACE Program; Definitions for PACE Program Related Terms.--
       ``(1) Benefits through enrollment in a pace program.--In 
     accordance with this section, in the case of an individual 
     who is entitled to benefits under part A or enrolled under 
     part B and who is a PACE program eligible individual (as 
     defined in paragraph (5)) with respect to a PACE program 
     offered by a PACE provider under a PACE program agreement--
       ``(A) the individual may enroll in the program under this 
     section; and
       ``(B) so long as the individual is so enrolled and in 
     accordance with regulations--
       ``(i) the individual shall receive benefits under this 
     title solely through such program, and
       ``(ii) the PACE provider is entitled to payment under and 
     in accordance with this section and such agreement for 
     provision of such benefits.
       ``(2) PACE program defined.--For purposes of this section 
     and section 1932, the term `PACE program' means a program of 
     all-inclusive care for the elderly that meets the following 
     requirements:
       ``(A) Operation.--The entity operating the program is a 
     PACE provider (as defined in paragraph (3)).
       ``(B) Comprehensive benefits.--The program provides 
     comprehensive health care services to PACE program eligible 
     individuals in accordance with the PACE program agreement and 
     regulations under this section.
       ``(C) Transition.--In the case of an individual who is 
     enrolled under the program under this section and whose 
     enrollment ceases for any reason (including the individual no 
     longer qualifies as a PACE program eligible individual, the 
     termination of a PACE program agreement, or otherwise), the 
     program provides assistance to the individual in obtaining 
     necessary transitional care through appropriate referrals and 
     making the individual's medical records available to new 
     providers.
       ``(3) PACE provider defined.--
       ``(A) In general.--For purposes of this section, the term 
     `PACE provider' means an entity that--
       ``(i) subject to subparagraph (B), is (or is a distinct 
     part of) a public entity or a private, nonprofit entity 
     organized for charitable purposes under section 501(c)(3) of 
     the Internal Revenue Code of 1986, and
       ``(ii) has entered into a PACE program agreement with 
     respect to its operation of a PACE program.
       ``(B) Treatment of private, for-profit providers.--Clause 
     (i) of subparagraph (A) shall not apply--
       ``(i) to entities subject to a demonstration project waiver 
     under subsection (h); and
       ``(ii) after the date the report under section 5(b) of the 
     Programs of All-inclusive Care for the Elderly (PACE) 
     Coverage Act of 1997 is submitted, unless the Secretary 
     determines that any of the findings described in subparagraph 
     (A), (B), (C) or (D) of paragraph (2) of such section are 
     true.
       ``(4) PACE program agreement defined.--For purposes of this 
     section, the term `PACE program agreement' means, with 
     respect to a PACE provider, an agreement, consistent with 
     this section, section 1932 (if applicable), and regulations 
     promulgated to carry out such sections, between the PACE 
     provider and the Secretary, or an agreement between the PACE 
     provider and a State administering agency for the operation 
     of a PACE program by the provider under such sections.
       ``(5) PACE program eligible individual defined.--For 
     purposes of this section, the term `PACE program eligible 
     individual' means, with respect to a PACE program, an 
     individual who--
       ``(A) is 55 years of age or older;
       ``(B) subject to subsection (c)(4), is determined under 
     subsection (c) to require the level of care required under 
     the State medicaid plan for coverage of nursing facility 
     services;
       ``(C) resides in the service area of the PACE program; and
       ``(D) meets such other eligibility conditions as may be 
     imposed under the PACE program agreement for the program 
     under subsection (e)(2)(A)(ii).
       ``(6) PACE protocol.--For purposes of this section, the 
     term `PACE protocol' means the Protocol for the Program of 
     All-inclusive Care for the Elderly (PACE), as published by On 
     Lok, Inc., as of April 14, 1995.
       ``(7) PACE demonstration waiver program defined.--For 
     purposes of this section, the term `PACE demonstration waiver 
     program' means a demonstration program under either of the 
     following sections (as in effect before the date of their 
     repeal):
       ``(A) Section 603(c) of the Social Security Amendments of 
     1983 (Public Law 98-21), as extended by section 9220 of the 
     Consolidated Omnibus Budget Reconciliation Act of 1985 
     (Public Law 99-272).
       ``(B) Section 9412(b) of the Omnibus Budget Reconciliation 
     Act of 1986 (Public Law 99-509).
       ``(8) State administering agency defined.--For purposes of 
     this section, the term `State administering agency' means, 
     with respect to the operation of a PACE program in a State, 
     the agency of that State (which may be the single agency 
     responsible for administration of the State plan under title 
     XIX in the State) responsible for administering PACE program 
     agreements under this section and section 1932 in the State.
       ``(9) Trial period defined.--
       ``(A) In general.--For purposes of this section, the term 
     `trial period' means, with respect to a PACE program operated 
     by a PACE provider under a PACE program agreement, the first 
     3 contract years under such agreement with respect to such 
     program.
       ``(B) Treatment of entities previously operating pace 
     demonstration waiver programs.--Each contract year (including 
     a year occurring before the effective date of this section) 
     during which an entity has operated a PACE demonstration 
     waiver program shall be counted under subparagraph (A) as a 
     contract year during which the entity operated a PACE program 
     as a PACE provider under a PACE program agreement.
       ``(10) Regulations.--For purposes of this section, the term 
     `regulations' refers to interim final or final regulations 
     promulgated under subsection (f) to carry out this section 
     and section 1932.
       ``(b) Scope of Benefits; Beneficiary Safeguards.--
       ``(1) In general.--Under a PACE program agreement, a PACE 
     provider shall--
       ``(A) provide to PACE program eligible individuals, 
     regardless of source of payment and directly or under 
     contracts with other entities, at a minimum--
       ``(i) all items and services covered under this title (for 
     individuals enrolled under this section) and all items and 
     services covered under title XIX, but without any limitation 
     or condition as to amount, duration, or scope and without 
     application of deductibles, copayments, coinsurance, or other 
     cost-sharing that would otherwise apply under this title or 
     such title, respectively; and
       ``(ii) all additional items and services specified in 
     regulations, based upon those required under the PACE 
     protocol;
       ``(B) provide such enrollees access to necessary covered 
     items and services 24 hours per day, every day of the year;
       ``(C) provide services to such enrollees through a 
     comprehensive, multidisciplinary health and social services 
     delivery system which integrates acute and long-term care 
     services pursuant to regulations; and
       ``(D) specify the covered items and services that will not 
     be provided directly by the entity, and to arrange for 
     delivery of those items and services through contracts 
     meeting the requirements of regulations.
       ``(2) Quality assurance; patient safeguards.--The PACE 
     program agreement shall require the PACE provider to have in 
     effect at a minimum--
       ``(A) a written plan of quality assurance and improvement, 
     and procedures implementing such plan, in accordance with 
     regulations, and
       ``(B) written safeguards of the rights of enrolled 
     participants (including a patient bill of rights and 
     procedures for grievances and appeals) in accordance with 
     regulations and with other requirements of this title and 
     Federal and State law designed for the protection of 
     patients.
       ``(c) Eligibility Determinations.--
       ``(1) In general.--The determination of whether an 
     individual is a PACE program eligible individual--
       ``(A) shall be made under and in accordance with the PACE 
     program agreement, and
       ``(B) who is entitled to medical assistance under title 
     XIX, shall be made (or who is not so entitled, may be made) 
     by the State administering agency.
       ``(2) Condition.--An individual is not a PACE program 
     eligible individual (with respect to payment under this 
     section) unless the individual's health status has been 
     determined, in accordance with regulations, to be comparable 
     to the health status of individuals who have participated in 
     the PACE demonstration waiver programs. Such determination 
     shall be based upon information on health status and related 
     indicators (such as medical diagnoses and measures of 
     activities of daily living, instrumental activities of daily 
     living, and cognitive impairment) that are part of a uniform 
     minimum data set collected by PACE providers on potential 
     eligible individuals.
       ``(3) Annual eligibility recertifications.--
       ``(A) In general.--Subject to subparagraph (B), the 
     determination described in subsection (a)(5)(B) for an 
     individual shall be reevaluated not more frequently than 
     annually.
       ``(B) Exception.--The requirement of annual reevaluation 
     under subparagraph (A) may be waived during a period in 
     accordance with regulations in those cases where the State 
     administering agency determines that there is no reasonable 
     expectation of improvement or significant change in an 
     individual's condition during the period because of the 
     advanced age, severity of the advanced age, severity of 
     chronic condition, or degree

[[Page S4229]]

     of impairment of functional capacity of the individual 
     involved.
       ``(4) Continuation of eligibility.--An individual who is a 
     PACE program eligible individual may be deemed to continue to 
     be such an individual notwithstanding a determination that 
     the individual no longer meets the requirement of subsection 
     (a)(5)(B) if, in accordance with regulations, in the absence 
     of continued coverage under a PACE program the individual 
     reasonably would be expected to meet such requirement within 
     the succeeding 6-month period.
       ``(5) Enrollment; disenrollment.--The enrollment and 
     disenrollment of PACE program eligible individuals in a PACE 
     program shall be pursuant to regulations and the PACE program 
     agreement and shall permit enrollees to voluntarily disenroll 
     without cause at any time.
       ``(d) Payments to PACE Providers on a Capitated Basis.--
       ``(1) In general.--In the case of a PACE provider with a 
     PACE program agreement under this section, except as provided 
     in this subsection or by regulations, the Secretary shall 
     make prospective monthly payments of a capitation amount for 
     each PACE program eligible individual enrolled under the 
     agreement under this section in the same manner and from the 
     same sources as payments are made to an eligible organization 
     under a risk-sharing contract under section 1876. Such 
     payments shall be subject to adjustment in the manner 
     described in section 1876(a)(1)(E).
       ``(2) Capitation amount.--The capitation amount to be 
     applied under this subsection for a provider for a contract 
     year shall be an amount specified in the PACE program 
     agreement for the year. Such amount shall be based upon 
     payment rates established under section 1876 for risk-sharing 
     contracts and shall be adjusted to take into account the 
     comparative frailty of PACE enrollees and such other factors 
     as the Secretary determines to be appropriate. Such amount 
     under such an agreement shall be computed in a manner so that 
     the total payment level for all PACE program eligible 
     individuals enrolled under a program is less than the 
     projected payment under this title for a comparable 
     population not enrolled under a PACE program.
       ``(e) PACE Program Agreement.--
       ``(1) Requirement.--
       ``(A) In general.--The Secretary, in close cooperation with 
     the State administering agency, shall establish procedures 
     for entering into, extending, and terminating PACE program 
     agreements for the operation of PACE programs by entities 
     that meet the requirements for a PACE provider under this 
     section, section 1932, and regulations.
       ``(B) Numerical limitation.--
       ``(i) In general.--The Secretary shall not permit the 
     number of PACE providers with which agreements are in effect 
     under this section or under section 9412(b) of the Omnibus 
     Budget Reconciliation Act of 1986 to exceed--

       ``(I) 40 as of the date of the enactment of this section, 
     or
       ``(II) as of each succeeding anniversary of such date, the 
     numerical limitation under this subparagraph for the 
     preceding year plus 20.

     Subclause (II) shall apply without regard to the actual 
     number of agreements in effect as of a previous anniversary 
     date.
       ``(ii) Treatment of certain private, for-profit 
     providers.--The numerical limitation in clause (i) shall not 
     apply to a PACE provider that--

       ``(I) is operating under a demonstration project waiver 
     under subsection (h), or
       ``(II) was operating under such a waiver and subsequently 
     qualifies for PACE provider status pursuant to subsection 
     (a)(3)(B)(ii).

       ``(2) Service area and eligibility.--
       ``(A) In general.--A PACE program agreement for a PACE 
     program--
       ``(i) shall designate the service area of the program;
       ``(ii) may provide additional requirements for individuals 
     to qualify as PACE program eligible individuals with respect 
     to the program;
       ``(iii) shall be effective for a contract year, but may be 
     extended for additional contract years in the absence of a 
     notice by a party to terminate and is subject to termination 
     by the Secretary and the State administering agency at any 
     time for cause (as provided under the agreement);
       ``(iv) shall require a PACE provider to meet all applicable 
     State and local laws and requirements; and
       ``(v) shall have such additional terms and conditions as 
     the parties may agree to consistent with this section and 
     regulations.
       ``(B) Service area overlap.--In designating a service area 
     under a PACE program agreement under subparagraph (A)(i), the 
     Secretary (in consultation with the State administering 
     agency) may exclude from designation an area that is already 
     covered under another PACE program agreement, in order to 
     avoid unnecessary duplication of services and avoid impairing 
     the financial and service viability of an existing program.
       ``(3) Data collection.--
       ``(A) In general.--Under a PACE program agreement, the PACE 
     provider shall--
       ``(i) collect data,
       ``(ii) maintain, and afford the Secretary and the State 
     administering agency access to, the records relating to the 
     program, including pertinent financial, medical, and 
     personnel records, and
       ``(iii) make to the Secretary and the State administering 
     agency reports that the Secretary finds (in consultation with 
     State administering agencies) necessary to monitor the 
     operation, cost, and effectiveness of the PACE program under 
     this Act.
       ``(B) Requirements during trial period.--During the first 
     three years of operation of a PACE program (either under this 
     section or under a PACE demonstration waiver program), the 
     PACE provider shall provide such additional data as the 
     Secretary specifies in regulations in order to perform the 
     oversight required under paragraph (4)(A).
       ``(4) Oversight.--
       ``(A) Annual, close oversight during trial period.--During 
     the trial period (as defined in subsection (a)(9)) with 
     respect to a PACE program operated by a PACE provider, the 
     Secretary (in cooperation with the State administering 
     agency) shall conduct a comprehensive annual review of the 
     operation of the PACE program by the provider in order to 
     assure compliance with the requirements of this section and 
     regulations. Such a review shall include--
       ``(i) an on-site visit to the program site;
       ``(ii) comprehensive assessment of a provider's fiscal 
     soundness;
       ``(iii) comprehensive assessment of the provider's capacity 
     to provide all PACE services to all enrolled participants;
       ``(iv) detailed analysis of the entity's substantial 
     compliance with all significant requirements of this section 
     and regulations; and
       ``(v) any other elements the Secretary or State agency 
     considers necessary or appropriate.
       ``(B) Continuing oversight.--After the trial period, the 
     Secretary (in cooperation with the State administering 
     agency) shall continue to conduct such review of the 
     operation of PACE providers and PACE programs as may be 
     appropriate, taking into account the performance level of a 
     provider and compliance of a provider with all significant 
     requirements of this section and regulations.
       ``(C) Disclosure.--The results of reviews under this 
     paragraph shall be reported promptly to the PACE provider, 
     along with any recommendations for changes to the provider's 
     program, and shall be made available to the public upon 
     request.
       ``(5) Termination of pace provider agreements.--
       ``(A) In general.--Under regulations--
       ``(i) the Secretary or a State administering agency may 
     terminate a PACE program agreement for cause, and
       ``(ii) a PACE provider may terminate an agreement after 
     appropriate notice to the Secretary, the State agency, and 
     enrollees.
       ``(B) Causes for termination.--In accordance with 
     regulations establishing procedures for termination of PACE 
     program agreements, the Secretary or a State administering 
     agency may terminate a PACE program agreement with a PACE 
     provider for, among other reasons, the fact that--
       ``(i) the Secretary or State administering agency 
     determines that--

       ``(I) there are significant deficiencies in the quality of 
     care provided to enrolled participants; or
       ``(II) the provider has failed to comply substantially with 
     conditions for a program or provider under this section or 
     section 1932; and

       ``(ii) the entity has failed to develop and successfully 
     initiate, within 30 days of the receipt of written notice of 
     such a determination, and continue implementation of a plan 
     to correct the deficiencies.
       ``(C) Termination and transition procedures.--An entity 
     whose PACE provider agreement is terminated under this 
     paragraph shall implement the transition procedures required 
     under subsection (a)(2)(C).
       ``(6) Secretary's oversight; enforcement authority.--
       ``(A) In general.--Under regulations, if the Secretary 
     determines (after consultation with the State administering 
     agency) that a PACE provider is failing substantially to 
     comply with the requirements of this section and regulations, 
     the Secretary (and the State administering agency) may take 
     any or all of the following actions:
       ``(i) Condition the continuation of the PACE program 
     agreement upon timely execution of a corrective action plan.
       ``(ii) Withhold some or all further payments under the PACE 
     program agreement under this section or section 1932 with 
     respect to PACE program services furnished by such provider 
     until the deficiencies have been corrected.
       ``(iii) Terminate such agreement.
       ``(B) Application of intermediate sanctions.--Under 
     regulations, the Secretary may provide for the application 
     against a PACE provider of remedies described in section 
     1876(i)(6)(B) or 1903(m)(5)(B) in the case of violations by 
     the provider of the type described in section 1876(i)(6)(A) 
     or 1903(m)(5)(A), respectively (in relation to agreements, 
     enrollees, and requirements under this section or section 
     1932, respectively).
       ``(7) Procedures for termination or imposition of 
     sanctions.--Under regulations, the provisions of section 
     1876(i)(9) shall apply to termination and sanctions 
     respecting a PACE program agreement and PACE provider under 
     this subsection in the same manner as they apply to a 
     termination and sanctions with respect to a contract and an 
     eligible organization under section 1876.
       ``(8) Timely consideration of applications for pace program 
     provider status.--In considering an application for PACE 
     provider program status, the application shall

[[Page S4230]]

     be deemed approved unless the Secretary, within 90 days after 
     the date of the submission of the application to the 
     Secretary, either denies such request in writing or informs 
     the applicant in writing with respect to any additional 
     information that is needed in order to make a final 
     determination with respect to the application. After the date 
     the Secretary receives such additional information, the 
     application shall be deemed approved unless the Secretary, 
     within 90 days of such date, denies such request.
       ``(f) Regulations.--
       ``(1) In general.--The Secretary shall issue interim final 
     or final regulations to carry out this section and section 
     1932.
       ``(2) Use of pace protocol.--
       ``(A) In general.--In issuing such regulations, the 
     Secretary shall, to the extent consistent with the provisions 
     of this section, incorporate the requirements applied to PACE 
     demonstration waiver programs under the PACE protocol.
       ``(B) Flexibility.--The Secretary (in close consultation 
     with State administering agencies) may modify or waive such 
     provisions of the PACE protocol in order to provide for 
     reasonable flexibility in adapting the PACE service delivery 
     model to the needs of particular organizations (such as those 
     in rural areas or those that may determine it appropriate to 
     use non-staff physicians accordingly to State licensing law 
     requirements) under this section and section 1932 where such 
     flexibility is not inconsistent with and would not impair the 
     essential elements, objectives, and requirements of the this 
     section, including--
       ``(i) the focus on frail elderly qualifying individuals who 
     require the level of care provided in a nursing facility;
       ``(ii) the delivery of comprehensive, integrated acute and 
     long-term care services;
       ``(iii) the interdisciplinary team approach to care 
     management and service delivery;
       ``(iv) capitated, integrated financing that allows the 
     provider to pool payments received from public and private 
     programs and individuals; and
       ``(v) the assumption by the provider over time of full 
     financial risk.
       ``(3) Application of certain additional beneficiary and 
     program protections.--
       ``(A) In general.--In issuing such regulations and subject 
     to subparagraph (B), the Secretary may apply with respect to 
     PACE programs, providers, and agreements such requirements of 
     sections 1876 and 1903(m) relating to protection of 
     beneficiaries and program integrity as would apply to 
     eligible organizations under risk-sharing contracts under 
     section 1876 and to health maintenance organizations under 
     prepaid capitation agreements under section 1903(m).
       ``(B) Considerations.--In issuing such regulations, the 
     Secretary shall--
       ``(i) take into account the differences between populations 
     served and benefits provided under this section and under 
     sections 1876 and 1903(m);
       ``(ii) not include any requirement that conflicts with 
     carrying out PACE programs under this section; and
       ``(iii) not include any requirement restricting the 
     proportion of enrollees who are eligible for benefits under 
     this title or title XIX.
       ``(g) Waivers of Requirements.--With respect to carrying 
     out a PACE program under this section, the following 
     requirements of this title (and regulations relating to such 
     requirements) are waived and shall not apply:
       ``(1) Section 1812, insofar as it limits coverage of 
     institutional services.
       ``(2) Sections 1813, 1814, 1833, and 1886, insofar as such 
     sections relate to rules for payment for benefits.
       ``(3) Sections 1814(a)(2)(B), 1814(a)(2)(C), and 
     1835(a)(2)(A), insofar as they limit coverage of extended 
     care services or home health services.
       ``(4) Section 1861(i), insofar as it imposes a 3-day prior 
     hospitalization requirement for coverage of extended care 
     services.
       ``(5) Sections 1862(a)(1) and 1862(a)(9), insofar as they 
     may prevent payment for PACE program services to individuals 
     enrolled under PACE programs.
       ``(h) Demonstration Project for For-Profit Entities.--
       ``(1) In general.--In order to demonstrate the operation of 
     a PACE program by a private, for-profit entity, the Secretary 
     (in close consultation with State administering agencies) 
     shall grant waivers from the requirement under subsection 
     (a)(3) that a PACE provider may not be a for-profit, private 
     entity.
       ``(2) Similar terms and conditions.--
       ``(A) In general.--Except as provided under subparagraph 
     (B), and paragraph (1), the terms and conditions for 
     operation of a PACE program by a provider under this 
     subsection shall be the same as those for PACE providers that 
     are nonprofit, private organizations.
       ``(B) Numerical limitation.--The number of programs for 
     which waivers are granted under this subsection shall not 
     exceed 10. Programs with waivers granted under this 
     subsection shall not be counted against the numerical 
     limitation specified in subsection (e)(1)(B).
       ``(i) Miscellaneous Provisions.--Nothing in this section or 
     section 1932 shall be construed as preventing a PACE provider 
     from entering into contracts with other governmental or 
     nongovernmental payers for the care of PACE program eligible 
     individuals who are not eligible for benefits under part A, 
     or enrolled under part B, or eligible for medical assistance 
     under title XIX.''.

     SEC. 3. ESTABLISHMENT OF PACE PROGRAM AS MEDICAID STATE 
                   OPTION.

       (a) In General.--Title XIX of the Social Security Act is 
     amended--
       (1) in section 1905(a) (42 U.S.C. 1396d(a))--
       (A) by striking ``and'' at the end of paragraph (24);
       (B) by redesignating paragraph (25) as paragraph (26); and
       (C) by inserting after paragraph (24) the following new 
     paragraph:
       ``(25) services furnished under a PACE program under 
     section 1932 to PACE program eligible individuals enrolled 
     under the program under such section; and'';
       (2) by redesignating section 1932 as section 1933, and
       (3) by inserting after section 1931 the following new 
     section:

     ``SEC. 1932. PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY 
                   (PACE).

       ``(a) Option.--
       ``(1) In general.--A State may elect to provide medical 
     assistance under this section with respect to PACE program 
     services to PACE program eligible individuals who are 
     eligible for medical assistance under the State plan and who 
     are enrolled in a PACE program under a PACE program 
     agreement. Such individuals need not be eligible for benefits 
     under part A, or enrolled under part B, of title XVIII to be 
     eligible to enroll under this section.
       ``(2) Benefits through enrollment in pace program.--In the 
     case of an individual enrolled with a PACE program pursuant 
     to such an election--
       ``(A) the individual shall receive benefits under the plan 
     solely through such program, and
       ``(B) the PACE provider shall receive payment in accordance 
     with the PACE program agreement for provision of such 
     benefits.
       ``(3) Application of definitions.--The definitions of terms 
     under section 1894(a) shall apply under this section in the 
     same manner as they apply under section 1894.
       ``(b) Application of Medicare Terms and Conditions.--Except 
     as provided in this section, the terms and conditions for the 
     operation and participation of PACE program eligible 
     individuals in PACE programs offered by PACE providers under 
     PACE program agreements under section 1894 shall apply for 
     purposes of this section.
       ``(c) Adjustment in Payment Amounts.--In the case of 
     individuals enrolled in a PACE program under this section, 
     the amount of payment under this section shall not be the 
     amount calculated under section 1894(d), but shall be an 
     amount, specified under the PACE agreement, which is less 
     than the amount that would otherwise have been made under the 
     State plan if the individuals were not so enrolled. The 
     payment under this section shall be in addition to any 
     payment made under section 1894 for individuals who are 
     enrolled in a PACE program under such section.
       ``(d) Waivers of Requirements.--With respect to carrying 
     out a PACE program under this section, the following 
     requirements of this title (and regulations relating to such 
     requirements) shall not apply:
       ``(1) Section 1902(a)(1), relating to any requirement that 
     PACE programs or PACE program services be provided in all 
     areas of a State.
       ``(2) Section 1902(a)(10), insofar as such section relates 
     to comparability of services among different population 
     groups.
       ``(3) Sections 1902(a)(23) and 1915(b)(4), relating to 
     freedom of choice of providers under a PACE program.
       ``(4) Section 1903(m)(2)(A), insofar as it restricts a PACE 
     provider from receiving prepaid capitation payments.
       ``(e) Post-Eligibility Treatment of Income.--A State may 
     provide for post-eligibility treatment of income for 
     individuals enrolled in PACE programs under this section in 
     the same manner as a State treats post-eligibility income for 
     individuals receiving services under a waiver under section 
     1915(c).''.
       (b) Conforming Amendments.--
       (1) Section 1902(j) of such Act (42 U.S.C. 1396a(j)) is 
     amended by striking ``(25)'' and inserting ``(26)''.
       (2) Section 1924(a)(5) of such Act (42 U.S.C. 1396r-
     5(a)(5)) is amended--
       (A) in the heading, by striking ``from organizations 
     receiving certain waivers'' and inserting ``under pace 
     programs'', and
       (B) by striking ``from any organization'' and all that 
     follows and inserting ``under a PACE demonstration waiver 
     program (as defined in subsection (a)(7) of section 1894) or 
     under a PACE program under section 1932.''.
       (3) Section 1903(f)(4)(C) of such Act (42 U.S.C. 
     1396b(f)(4)(C)) is amended by inserting ``or who is a PACE 
     program eligible individual enrolled in a PACE program under 
     section 1932,'' after ``section 1902(a)(10)(A),''.

     SEC. 4. EFFECTIVE DATE; TRANSITION.

       (a) Timely Issuance of Regulations; Effective Date.--The 
     Secretary of Health and Human Services shall promulgate 
     regulations to carry out this Act in a timely manner. Such 
     regulations shall be designed so that entities may establish 
     and operate PACE programs under sections 1894 and 1932 for 
     periods beginning not later than 1 year after the date of the 
     enactment of this Act.
       (b) Expansion and Transition for PACE Demonstration Project 
     Waivers.--
       (1) Expansion in current number of demonstration 
     projects.--Section 9412(b) of the Omnibus Budget 
     Reconciliation Act of 1986, as amended by section 4118(g) of 
     the Omnibus

[[Page S4231]]

     Budget Reconciliation Act of 1987, is amended--
       (A) in paragraph (1), by inserting before the period at the 
     end the following: ``, except that the Secretary shall grant 
     waivers of such requirements to up to the applicable 
     numerical limitation specified in section 1894(e)(1)(B) of 
     the Social Security Act''; and
       (B) in paragraph (2)--
       (i) in subparagraph (A), by striking ``, including 
     permitting the organization to assume progressively (over the 
     initial 3-year period of the waiver) the full financial 
     risk''; and
       (ii) in subparagraph (C), by adding at the end the 
     following: ``In granting further extensions, an organization 
     shall not be required to provide for reporting of information 
     which is only required because of the demonstration nature of 
     the project.''.
       (3) Elimination of replication requirement.--Subparagraph 
     (B) of paragraph (2) of such section shall not apply to 
     waivers granted under such section after the date of the 
     enactment of this Act.
       (4) Timely consideration of applications.--In considering 
     an application for waivers under such section before the 
     effective date of repeals under subsection (c), subject to 
     the numerical limitation under the amendment made by 
     paragraph (1), the application shall be deemed approved 
     unless the Secretary of Health and Human Services, within 90 
     days after the date of its submission to the Secretary, 
     either denies such request in writing or informs the 
     applicant in writing with respect to any additional 
     information which is needed in order to make a final 
     determination with respect to the application. After the date 
     the Secretary receives such additional information, the 
     application shall be deemed approved unless the Secretary, 
     within 90 days of such date, denies such request.
       (c) Priority and Special Consideration in Application.--
     During the 3-year period beginning on the date of enactment 
     of this Act:
       (1) Provider status.--The Secretary of Health and Human 
     Services shall give priority, in processing applications of 
     entities to qualify as PACE programs under section 1894 or 
     1932 of the Social Security Act--
       (A) first, to entities that are operating a PACE 
     demonstration waiver program (as defined in section 
     1894(a)(7) of such Act), and
       (B) then entities that have applied to operate such a 
     program as of May 1, 1997.
       (2) New waivers.--The Secretary shall give priority, in the 
     awarding of additional waivers under section 9412(b) of the 
     Omnibus Budget Reconciliation Act of 1986--
       (A) to any entities that have applied for such waivers 
     under such section as of May 1, 1997; and
       (B) to any entity that, as of May 1, 1997, has formally 
     contracted with a State to provide services for which payment 
     is made on a capitated basis with an understanding that the 
     entity was seeking to become a PACE provider.
       (3) Special consideration.--The Secretary shall give 
     special consideration, in the processing of applications 
     described in paragraph (1) and the awarding of waivers 
     described in paragraph (2), to an entity which as of May 1, 
     1997 through formal activities (such as entering into 
     contracts for feasibility studies) has indicated a specific 
     intent to become a PACE provider.
       (d) Repeal of Current PACE Demonstration Project Waiver 
     Authority.--
       (1) In general.--Subject to paragraph (2), the following 
     provisions of law are repealed:
       (A) Section 603(c) of the Social Security Amendments of 
     1983 (Public Law 98-21).
       (B) Section 9220 of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (Public Law 99-272).
       (C) Section 9412(b) of the Omnibus Budget Reconciliation 
     Act of 1986 (Public Law 99-509).
       (2) Delay in application.--
       (A) In general.--Subject to subparagraph (B), the repeals 
     made by paragraph (1) shall not apply to waivers granted 
     before the initial effective date of regulations described in 
     subsection (a).
       (B) Application to approved waivers.--Such repeals shall 
     apply to waivers granted before such date only after allowing 
     such organizations a transition period (of up to 24 months) 
     in order to permit sufficient time for an orderly transition 
     from demonstration project authority to general authority 
     provided under the amendments made by this Act.

     SEC. 5. STUDY AND REPORTS.

       (a) Study.--
       (1) In general.--The Secretary of Health and Human Services 
     (in close consultation with State administering agencies, as 
     defined in section 1894(a)(8) of the Social Security Act) 
     shall conduct a study of the quality and cost of providing 
     PACE program services under the medicare and medicaid 
     programs under the amendments made by this Act
       (2) Study of private, for-profit providers.-- Such study 
     shall specifically compare the costs, quality, and access to 
     services by entities that are private, for-profit entities 
     operating under demonstration projects waivers granted under 
     section 1894(h) of the Social Security Act with the costs, 
     quality, and access to services of other PACE providers.
       (b) Report.--
       (1) In general.--Not later than 4 years after the date of 
     enactment of this Act, the Secretary shall provide for a 
     report to Congress on the impact of such amendments on 
     quality and cost of services. The Secretary shall include in 
     such report such recommendations for changes in the operation 
     of such amendments as the Secretary deems appropriate.
       (2) Treatment of private, for-profit providers.--The report 
     shall include specific findings on whether any of the 
     following findings is true:
       (A) The number of covered lives enrolled with entities 
     operating under demonstration project waivers under section 
     1894(h) of the Social Security Act is fewer than 800 (or such 
     lesser number as the Secretary may find statistically 
     sufficient to make determinations respecting findings 
     described in the succeeding subparagraphs).
       (B) The population enrolled with such entities is less 
     frail than the population enrolled with other PACE providers.
       (C) Access to or quality of care for individuals enrolled 
     with such entities is lower than such access or quality for 
     individuals enrolled with other PACE providers.
       (D) The application of such section has resulted in an 
     increase in expenditures under the medicare or medicaid 
     programs above the expenditures that would have been made if 
     such section did not apply.
       (c) Information Included in Annual Recommendations.--The 
     Physician Payment Review Commission shall include in its 
     annual recommendations under section 1845(b) of the Social 
     Security Act (42 U.S.C. 1395w-1), and the Prospective Payment 
     Review Commission shall include in its annual recommendations 
     reported under section 1886(e)(3)(A) of such Act (42 U.S.C. 
     1395ww(e)(3)(A)), recommendations on the methodology and 
     level of payments made to PACE providers under section 
     1894(d) of such Act and on the treatment of private, for-
     profit entities as PACE providers.
 Mr. FRIST. Mr. President, I join my colleagues in introducing 
the PACE Provider Act of 1997. I am pleased to support this very worthy 
program, aimed at increasing community based long term care options for 
seniors which was initiated and pursued by Senator Dole over the past 
several years.
  This bill amends present law by increasing the number of high 
quality, comprehensive, community based services available to seniors 
who would otherwise be forced into nursing homes.
  Frail older people, particularly those 85 years and older are the 
fastest growing population group in this country and have multiple and 
complex chronic illnesses. More than 50 percent of this population 
require some assistance with activities of daily living.
  At the same time, the cost of caring for the frail elderly is 
skyrocketing. Many elderly and individuals with disabilities are 
eligible for both Medicare and Medicaid. These dual eligibles have 
multidimensional, interdependent, and chronic health care needs. They 
are at risk for nursing home placement and require acute and long-term 
care service integration if they are to remain at home. However, as 
currently structured, the Medicare and Medicaid Programs are not 
sufficiently coordinated to serve many of these complex health needs. 
In addition, these programs have traditionally favored institutional 
care rather than community based or home care. These problems result in 
duplication and fragmentation of services as well as increased health 
costs.
  In my own State of Tennessee, the home health industry has come under 
fire because of high Medicare utilization rates. This is partly because 
there are almost no Medicaid long term care options available to 
Tennesseans who want to stay at home. Consequently, nursing home care 
is the only option for frail elders unless they have enough money to 
pay privately for their care or if family members can afford to be the 
primary giver. Tennesseans should be able to choose from a broad array 
of community based long term care services and should not be limited to 
institutional care.
  So, if we are to control costs while providing high quality care to 
this vulnerable population, we must increase long term care 
opportunities and provide better coordination between Medicare and 
Medicaid reimbursement systems.
  PACE, Program for All-inclusive Care of the Elderly, is the only 
program which integrates acute and long term care service delivery and 
finance. Designed to help the at-risk elderly who need service 
integration, it represents a fundamental shift in the way needed health 
services are accessed. By using capitation mechanisms which pool funds 
from Medicare, Medicaid and private pay sources, this program joins 
medical services with established long term care services. Care is 
managed and coordinated by an interdisciplinary team that is 
responsible for service allocation decisions.

[[Page S4232]]

  As a result: duplicate services and ineffective treatments are 
eliminated; participants have access to the entire spectrum of acute 
and long-term care services, all provided and coordinated by a single 
organization; and enrollees are relieved of the burden of independently 
navigating the bewildering health-care maze.
  How well has it worked? The accomplishments of PACE include: 
controlled utilization of both outpatient and inpatient services; 
controlled utilization of specialist services; high consumer 
satisfaction; capitation rates which provide significant savings from 
per capita nursing home costs or community long term care costs; and 
ethnic and racial distributions of beneficiaries served which reflect 
the communities from which PACE draws its participants.
  Most importantly, PACE has been able to shift location of care from 
the inpatient acute care setting to the community setting. By 
integrating social and medical services through adult day health care, 
PACE has made it possible for frail elders to continue to live at home, 
not in a nursing care facility.
  Are there other alternatives? Medicare HMO's and Social HMO's have 
also attempted to control costs while providing access to high quality 
care. However, Medicare HMO's exclude long term care and typically do 
not serve many frail older persons on an ongoing basis. Social HMO's 
also limit the long term care benefits available to their members. 
These programs are important, but simply do not meet the needs of this 
particular population. PACE, on the other hand, serves frail elders 
exclusively and provide a continuum of care. It provides all acute and 
long term care services according to participant needs and without 
limits on benefits.
  Unfortunately, the number of persons enrolled in PACE nationally is 
minuscule compared with other managed care systems. States such as 
Tennessee are eager to participate. However, the number of 
participating sites has been capped under current legislation.

  The PACE Provider Act of 1997 increases the number of sites 
authorized to provide comprehensive, community-based services to frail, 
older adults from 15 to 40 with an additional 20 to be added each year; 
and affords regular provider status to existing sites.
  Specifically, the bill:
  Specifies that PACE sites be lower in cost than the alternative 
health care services available to PACE enrollees, a goal which has 
already been accomplished; includes quality of care safeguards; gives 
States the option of utilizing PACE programs based on their need for 
alternatives to long-term institutional care and the program's 
continuing cost-effectiveness; and allows for-profit entities to 
participate in PACE as a demonstration project.
  PACE services frail older people of diverse ethnic heritage and has 
operated successfully under different state and local environments. 
This program deserves expansion.
  The PACE Provider Act of 1997 does exactly that. It makes the PACE 
alternative available for the first time to many communities. It also 
allows more entities in the healthcare marketplace to participate in a 
new way of providing care for frail elders. PACE gives us a chance to 
contain costs while providing high quality care to one of our most 
vulnerable populations.
  The PACE program's integration of health and social services, its 
cost-effective, coordinated system of care delivery and its method of 
integrated financing have wide applicability and appeal. It is an 
exciting way to satisfying an urgent need and I wholeheartedly support 
it.
 Mr. INOUYE. Mr. President, I introduce the PACE Provider Act 
of 1997 with my distinguished colleague Senator Grassley.
  The Program for All-inclusive Care for the Elderly [PACE] Act of 1997 
began in 1983 with the passage of legislation authorizing On Lok, the 
prototype for the PACE model, as a demonstration program. In 1986 
Congress passed legislation to test the replicability of On Lok's 
success by authorizing Medicare and Medicaid waivers for up to 10 
replication sites; and in 1989 the number of authorized sites was 
increased to 15. The PACE Provider Act of 1997 is the next step in a 
series of legislative actions taken by Congress to develop PACE as a 
community-based alternative to nursing home care.
  Currently PACE programs provide services to approximately 3,000 
individuals in eight States: California, Colorado, Massachusetts, New 
York, Oregon, South Carolina, Texas, and Wisconsin. There are also 15 
PACE programs in development which are operational, although not 
involved in Medicare capitation. In addition, a number of other 
organizations are actively working to develop PACE programs in other 
States including: Florida, Hawaii, Illinois, New Mexico, Michigan, 
Ohio, Pennsylvania, Virginia, and Washington.
  PACE is unique in a variety of ways. First, PACE programs serve only 
the very frail--older persons who meet their States' eligibility 
criteria for nursing home care. This high-cost population is of 
particular concern to policy makers because of the disproportionate 
share of resources they use relative to their numbers.
  Second, PACE programs provide a comprehensive package of primary 
acute and long-term care services. All services, including primary and 
specialty medical care, adult day care, home care, nursing, social work 
services, physical and occupational therapies, prescription drugs, 
hospital and nursing home care are coordinated and administered by PACE 
program staff.
  Third, PACE programs are cost-effective in that they are reimbursed 
on a capitated basis, at rates that provide payers savings relative to 
their expenditures in the traditional Medicare, Medicaid, and private 
pay systems. Finally, PACE programs are unique in that a mature program 
assumes total financial risk and responsibility for all acute and long-
term care without limitation.
  The PACE Provider Act does not expand eligibility criteria for 
benefits in any way. Rather, it makes available to individuals already 
eligible for nursing home care, because of their poor health status, a 
preferable, and less costly alternative.
  By expanding the availability of community-based long-term care 
services, On Lok's success of providing high quality care with an 
emphasis on preventive and supportive services, can be replicated 
throughout the country. PACE programs have substantially reduced 
utilization of high-cost inpatient services. Although all PACE 
enrollees are eligible for nursing home care, just 6 percent of these 
individuals are permanently institutionalized. The vast majority are 
able to remain in the community and PACE enrollees are also 
hospitalized less frequently. Through PACE, dollars that would have 
been spent on hospital and nursing home services are used to expand the 
availability of community-based long-term care.
  This bill would expand the number of non-profit entities to become 
PACE providers to 45 within the first year and allow 20 new such 
programs each year thereafter. In addition, the PACE Provider Act of 
1997 will establish a demonstration project to allow no more than 10 
for-profit organizations to establish themselves as PACE providers. The 
number of for-profit entities will not be counted against the numerical 
limitation specified for non-profit organizations.
  Analyses of costs for individuals enrolled in PACE show a 5- to 15-
percent reduction in Medicare and Medicaid spending relative to a 
comparably frail population in the traditional Medicare and Medicaid 
systems.
  States have voluntarily joined together with community organizations 
to develop PACE programs out of their commitment to developing viable 
alternatives to institutionalization. This legislation provides States 
with the option of pursuing PACE development; and, as under present 
law, State participation would remain voluntary.
  As our population ages, we must continue to place a high priority on 
long-term care services. Giving our seniors alternatives to nursing 
home care and expanding the choices available, is not only cost-
effective, but will also improve the quality of life for older 
Americans.
                                 ______