[Congressional Record Volume 144, Number 41 (Thursday, April 2, 1998)]
[Senate]
[Pages S3124-S3125]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MOYNIHAN (for himself and Mr. D'Amato):
  S. 1908. A bill to amend title XVIII of the Social Security Act to 
carve out form payments to Medicare+Choice organizations amounts 
attributable to disproportionate share hospital payments and pay such 
amounts directly to those disproportionate share hospitals in which 
their enrollees receive care; to the Committee on Finance.


               THE MANAGED CARE FAIR PAYMENT ACT OF 1998

  Mr. MOYNIHAN, Mr. President, I rise today to introduce with my 
colleague Senator D'Amato, the ``Managed Care Fair Payment Act of 
1998,'' a companion to H.R. 2701 which was introduced in the House of 
Representatives last year by my colleague and friend, Representative 
Rangel.
  In the Balanced Budget Act of 1997 (BBA), Congress and the President 
agreed to ``carve out'' the payment made to Medicare HMOs attributed to 
the cost for graduate medical education (GME), and instead make the 
payment for GME directly to teaching hospitals. The BBA did not 
contain, however, a provision passed by the Senate to ``carve out'' 
payments to disproportionate share hospitals--often called DSH 
payments.
  Medicare DSH payments are paid to almost 2000 hospitals that serve a 
``disproportionate share'' of low-income--often uninsured--patients. 
The DSH adjustment for each hospital is determined by a complex set of 
formulas relating to a hospital's location, size and percentage of low-
income patients.
  Until 1998, Medicare's payments to private health plans were based on 
the average payments made on behalf of Medicare beneficiaries in the 
fee-for-service program. Under the BBA, Medicare+Choice payment rates 
are no longer directly linked to local fee-for-service spending. 
Instead, they blend average spending locally and nationally. Because 
the DSH payment was not carved out in the BBA, the DSH payment will 
continue to be made with the expectation that HMOs will, when 
negotiating rates with hospitals, ``pass on'' the DSH payment to 
hospitals that serve a large number of low-income, uninsured 
individuals. Unfortunately, as was the case before the BBA was enacted, 
DSH payments to managed care plans will likely not be passed on to 
hospitals. This bill seeks to correct this problem by ``carving out'' 
the DSH payment from the Medicare+Choice payments to managed care plans 
and giving the payments directly to hospitals.
  This issue is particularly important to New York state. Hospitals in 
New York currently receive approximately $700 million per year in DSH 
payments. The number of New York Medicare beneficiaries enrolled in 
HMOs and other managed care plans has grown by nearly 86 percent to 
more than 300,000 since 1995. At this level of penetration, a DSH carve 
out would redirect $150 million each year to New York's 127 DSH 
hospitals.
  To preserve the viability of hospitals that provide the bulk of the 
care to low-income--often uninsured--patients, it is imperative, as 
managed care enrollment grows, that Medicare DSH payments be carved out 
from HMO payments. The bill I am introducing today does just that--it 
would carve out 100 percent of the DSH funds

[[Page S3125]]

from the managed care payment rate, beginning in January 1999 and pay 
these funds directly to hospitals. These payments must go directly to 
hospitals that serve the poor. I urge my colleagues to join me in 
supporting the Managed Care Fair Payment Act of 1998.
  I ask unanimous consent that the full 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:

                                S. 1908

       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 ``Managed Care Fair Payment 
     Act of 1998''.

     SEC. 2. CARVING OUT DSH PAYMENTS FROM PAYMENTS TO 
                   MEDICARE+CHOICE ORGANIZATIONS AND PAYING THE 
                   AMOUNTS DIRECTLY TO DSH HOSPITALS ENROLLING 
                   MEDICARE+CHOICE ENROLLEES.

       (a) In General.--Section 1853(c)(3) of the Social Security 
     Act (42 U.S.C. 1395w-23(c)(3)), as inserted by section 4001 
     of the Balanced Budget Act of 1997, is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (D)'',
       (2) by redesignating subparagraph (D) as subparagraph (E), 
     and
       (3) by inserting after subparagraph (C) the following:
       ``(D) Removal of payments attributable to disproportionate 
     share payments from calculation of adjusted average per 
     capita cost.--
       ``(i) In general.--In determining the area-specific 
     Medicare+Choice capitation rate under subparagraph (A) for a 
     year (beginning with 1999), the annual per capita rate of 
     payment for 1997 determined under section 1876(a)(1)(C) shall 
     be adjusted, subject to clause (ii), to exclude from the rate 
     the additional payments that the Secretary estimates were 
     payment during 1997 for additional payments described in 
     section 1886(d)(5)(F).
       ``(ii) Treatment of payments covered under state hospital 
     reimbursement system.--To the extent that the Secretary 
     estimates that an annual per capita rate of payment for 1997 
     described in clause (i) reflects payments to hospitals 
     reimbursed under section 1814(b)(3), the Secretary shall 
     estimate a payment adjustment that is comparable to the 
     payment adjustment that would have been made under clause (i) 
     if the hospitals had not been reimbursed under such 
     section.''.
       (b) Additional Payments for Managed Care Enrollees.--
     Section 1886(d)(5)(F) of the Social Security Act ((42 U.S.C. 
     1395ww(d)(5)(F)) is amended--
       (1) in clause (ii), by striking ``clause (ix)'' and 
     inserting ``clauses (ix) and (x)'', and
       (2) by adding at the end the following:
       ``(ix)(I) For portions of cost reporting periods occurring 
     on or after January 1, 1999, the Secretary shall provide for 
     an additional payment amount for each applicable discharge of 
     any subsection (d) hospital that is a disproportionate share 
     hospital (as described in clause (i)).
       ``(II) For purposes of this clause, the term `applicable 
     discharge' means the discharge of any individual who is 
     enrolled under a risk-sharing contract with an eligible 
     organization under section 1876 and who is entitled to 
     benefits under part A or any individual who is enrolled with 
     a Medicare+Choice organization under part C.
       ``(III) The amount of the payment under this clause with 
     respect to any applicable discharge shall be equal to the 
     estimated average per discharge amount that would otherwise 
     have been paid under this subparagraph if the individuals had 
     not been enrolled as described in subclause (II).
       ``(IV) The Secretary shall establish rules for an 
     additional payment amount, for any hospital reimbursed under 
     a reimbursement system authorized under section 1814(b)(3) if 
     such hospital would qualify as a disproportionate share 
     hospital under clause (i) were it not so reimbursed. Such 
     payment shall be determined in the same manner as the amount 
     of payment is determined under this clause for 
     disproportionate share hospitals.''.
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