[Congressional Record Volume 146, Number 100 (Thursday, July 27, 2000)]
[Senate]
[Pages S7893-S7896]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAHAM (for himself and Mr. Mack):
  S. 2979. A bill to amend the Internal Revenue Code of 1986 to clarify 
the status of professional employer organizations and to promote and 
protect the interests of professional employer organizations, their 
customers, and workers; to the Committee on Finance.


    professional employer organization workers benefits act of 2000

  Mr. GRAHAM. Mr. President, today along with my Finance Committee 
colleague, Senator Mack, I am introducing the Professional Employer 
Organization Workers Benefits Act of 2000. This legislation will expand 
retirement and health benefits for workers at small and medium-sized 
businesses in this country.
  The bill makes it easier for certified professional employer 
organizations (PEO's) to assist small and medium-sized businesses in 
complying with the many responsibilities of being an employer. It 
permits PEO's to collect Federal employment taxes on behalf of the 
employer and provide benefits to the small business' workers. For many 
of these workers, the pension, health and other benefits that a PEO 
provides would not be available from the small business itself because 
they are too costly for the small business to provide on its own. The 
average client of a PEO is a small business with 18 workers and an 
average wage of $20,000. PEO's have the expertise and can take 
advantage of economies of scale to provide health and retirement 
benefits in an affordable and efficient manner.
  A recent Dunn & Bradstreet survey of small businesses reveled that 
only 39 percent offered health care and just 19 percent offer 
retirement plans. We must take every opportunity to assist these small 
businesses in providing retirement and health benefits to their 
employees. PEO's offer one creative way to bridge the gap between what 
workers need and what small businesses can afford to provide. In fact, 
one analyst at Alex. Brown & Sons estimates that 40 percent of 
companies in a PEO coemployment relationship upgrade their total 
employee benefits package as a result of the partnership with the PEO. 
Twenty-five percent of those companies offer health and other benefits 
for the first time.
  Over the past few years, small and medium-sized businesses have 
sought out the services offered by PEO's. In response, many states have 
created programs to recognize, license and regulate PEO's to ensure 
that a viable industry could grow. Unfortunately, federal law has not 
kept pace. Current rules for who can collect employment taxes and 
provide benefits do not fit with the PEO model. Under some 
interpretations, PEO's would be prohibited from performing the very 
services that small businesses are asking them to undertake.
  This legislation clarifies the tax laws to make it clear that PEO's 
meeting certain standards will be able to assist small businesses in 
providing employee benefits and collecting Federal employment taxes. 
This bill is a narrower version of a provision that was included in the 
pension legislation I sponsored in the last Congress. This new bill 
incorporates comments we received from interested parties over the 
course of the past year, including those received from the Treasury and 
Labor Departments. As a result the bill we are introducing today is 
much improved from previous versions.
  In addition, I would like to make clear what this bill does not do. 
Unlike earlier versions, this legislation applies only to PEO's, and 
not to temporary staffing agencies. Further, this bill applies only to 
the two specific areas of tax law--employment taxes and employee 
benefits. It does not affect any other law nor does it affect the 
determination of who is the employer for any other purpose. The bill 
specifically provides that it creates no inferences with respect to 
those issues.
  I am hopeful that, with this narrower focus, this legislation can be 
considered on its own merits, without getting bogged down in larger 
disputes involving contingent workforces and independent contractors. 
Those issues are important ones that Congress may want to examine, but 
we should not allow them to delay resolution of the unrelated PEO 
issued addressed by this bill.
  I look forward to working with Senator Mack, my other colleagues on 
the Finance Committee, and the administration to move this bill during 
the 106th Congress so that we can help small- and medium-sized 
businesses operate more efficiently while at the same time expanding 
the benefits available to their workers.
  Mr. President, I ask unanimous consent that the following explanation 
of the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

  Technical Explanation of Professional Employer Organization Workers 
                          Benefits Act of 2000

       The bill would amend the Internal Revenue Code of 1986 to 
     clarify the treatment of certain qualifying organizations--
     called Certified Professional Employer Organizations 
     (CPEOs)--for employee benefit and employment tax purposes. 
     Generally, the bill provides that an entity which meets 
     certain requirements may be certified as a CPEO by the 
     Internal Revenue Service (IRS) and will be allowed (1) to 
     take responsibility for employment taxes with respect to 
     worksite employees of an unrelated client and (2) to provide 
     such workers with employee benefits

[[Page S7894]]

     under a single employer plan maintained by the CPEO.
       While the legislation will allow the CPEO to take 
     responsibility for certain functions, the bill expressly 
     states (1) that it does not override the common law 
     determination of an individual's employer and (2) that it 
     will not affect the determination of who is a common law 
     employer under federal tax laws or who is an employer under 
     other provisions of law (including the characterization of an 
     arrangement as a MEWA under ERISA). Status as a CPEO (or 
     failure to be a CPEO) will also not be a factor in 
     determining employment status under current rules.


          CERTIFICATION OF PROFESSIONAL EMPLOYER ORGANIZATIONS

       In order to be certified as a CPEO, an entity must 
     demonstrate to the IRS by written application that it meets 
     (or, if applicable, will meet) certain requirements. 
     Generally, the requirements for certification will be 
     developed by the IRS using the ERO (electronic return 
     originator) program and the requirements to practice before 
     the IRS (as described in Circular 230) as a model. Standards 
     will include review of the experience of the PEO and issuance 
     of an opinion by a certified public accountant on the CPEOs 
     financial statements. As part of the certification process, 
     the applicant must disclose any criminal complaints against 
     it, its principal owners and officers, or related entities, 
     and any incidence of failure to timely file tax returns or 
     pay taxes (either income or employment taxes) by it, its 
     principal owners and officer, or related entities. The IRS 
     would have the ability to do a background and tax check of 
     the applicant, its principal owners and officers, or related 
     entities, and may reject an application on the basis of 
     information determined in that process. In addition, in order 
     to be certified, a CPEO must represent that it (or the 
     client) will maintain a qualified retirement plan for the 
     benefit of 95% of worksite employees.
       The CPEO must notify the IRS in writing of any change that 
     affects the continuing accuracy of any representation made in 
     the initial certification request. In addition, after initial 
     certification, the CPEO must continue to file copies of its 
     audited financial statements with the IRS by the last day of 
     the sixth month following the end of the fiscal year. 
     Procedures would be established for suspending or revoking 
     CPEO status (similar to those under the ERO program). There 
     would be a right to administrative appeal from an IRS denial, 
     suspension, or revocation or certification.


               cpeo relationship with particular workers

       After certification, a CPEO will be allowed to take 
     responsibility for employment taxes and to provide employee 
     benefits to ``worksite employees.'' A worker who performs 
     services at a client's worksite is a ``worksite employee'' if 
     the worker (and at least 85% of the individuals working at 
     the worksite) are subject to a written service contract that 
     expressly provide that the CPEO will:
       (1) Assume responsibility for payment of wages to the 
     worker, without regard to the receipt or adequacy of payment 
     from the client for such services;
       (2) Assume responsibility for employment taxes with respect 
     to the worker, without regard to the receipt or adequacy of 
     payment from the client for such services;
       (3) Assume responsibility for any worker benefits that may 
     be required by the service contract, without regard to the 
     receipt or adequacy of payment from the client for such 
     services;
       (4) Assume shared responsibility with the client for firing 
     the worker and recruiting and hiring any new worker; and
       (5) Maintain employee records.
       (6) Agrees to be treated as a CPEO with respect to the 
     worksite employees covered under the agreement.
       For this purpose, a worksite is defined as a physical 
     location at which a worker generally performs service or, if 
     there is no such location, the location from which the worker 
     receives job assignments. Contiguous locations would be 
     treated as a single physical location. Noncontiguous 
     locations would generally be treated as separate worksites, 
     except that each worksite within a reasonably proximate area 
     would be required to satisfy the 85% test for the workers at 
     that worksite.
       While the determination of whether noncontiguous locations 
     are reasonably proximate is a facts and circumstances 
     determination, certain situations will be deemed not to be 
     reasonably proximate. If the worksite is separated from all 
     other client worksites by at least 35 miles, it will not be 
     considered reasonably proximate. Thus, a client (or any 
     member of its controlled group) that maintains two worksites 
     that are more than 35 miles apart could treat the worksites 
     as separate for purposes of applying the 85% standard. Within 
     a 35-mile radius, a worksite will not be considered 
     reasonably proximate to another if the worksite operates in a 
     different industry or industries from other worksites within 
     the 35-mile radius pursuant to standards similar to those 
     established in Revenue Procedure 91-64 (relating to industry 
     classification codes). For example, a client that maintained 
     a restaurant and a hardware store in the same town could 
     treat them as separate worksites because they are in 
     different industries. In addition, based on all the facts 
     and circumstances, under rules prescribed by the IRS, a 
     worksite would not be reasonably proximate if it operates 
     independently for a bona fide business reason (that is 
     unrelated to employment taxes and employee benefits). For 
     example, a convenience store and a restaurant which have 
     no supervisory personnel in common but which are under 
     common ownership control could, under rules prescribed by 
     the IRS, be treated as different worksites. Similarly, two 
     noncontiguous wholesale and retail operations owned by the 
     same individual but which are operated independently 
     (including independent supervisory personnel) may, under 
     rules prescribed by the IRS, be determined to be not 
     reasonably proximate.
       The 85% rule generally is intended to describe the typical, 
     non-abusive PEO arrangement whereby a business contracts with 
     a PEO to take over substantially all its workers at a 
     particular worksite. The 85% rule is intended to ensure that 
     the benefits of the bill are not available in any situation 
     in which a business uses a PEO arrangement to artificially 
     divide its workforce.


                      cpeo employee benefit plans

       To the extent consistent with the Internal Revenue Code and 
     corresponding provisions of other federal laws, the CPEO may 
     generally provide worksite employees with most types of 
     retirement plans or other employee benefit plans that the 
     client could provide. Worksite employees may not, however, be 
     offered a plan that the client would be prohibited from 
     offering on its own. For example, if the client is a state or 
     local government, worksite employees performing services for 
     that client may not be offered participation in a section 
     401(k) plan. Similarly, a CPEO may not maintain a plan that 
     it would be prohibited from offering on its own (e.g., a 
     section 403(b) plan). However, an eligible client could 
     maintain such a plan.
       Size Limitations.--In general, employee benefit provisions 
     (in the Internal Revenue Code and in directly correlative 
     provisions in other Federal laws) that reference the size of 
     the employer or number of employees will generally be applied 
     based on the size or number of employees and worksite 
     employees of the CPEO. For example, worksite employees will 
     be entitled to COBRA health care continuation coverage even 
     if the client would have qualified for the small employer 
     exception to those rules. Similarly, a CPEO welfare benefit 
     plan will be treated as a single employer plan for purposes 
     of Internal Revenue Code section 419A(f)(6). Plan reporting 
     requirements are met at the CPEO level. However, a client 
     which could meet the size requirements for eligibility for an 
     MSA or a SIMPLE plan could contribute to such an arrangement 
     maintained by the CPEO.
       Nondiscriminaiton Testing.--The legislation intends that 
     clients of a CPEO will not generally receive significantly 
     better or worse treatment with respect to coverage, 
     nondiscrimination or other Internal Revenue Code rules than 
     they would get outside of the CPEO arrangement. Consequently, 
     nondiscrimination and other rules of the Code relating to 
     retirement plans (including sections 401(a)(4), 401(a)(17), 
     401(a)(26), 401(k), 401(m), 410(b) and 416 and similar rules 
     applicable to welfare and fringe benefit plans such as 
     section 125) will generally be applied on a client-by-client 
     basis.
       The portion of the CPEO plan covering worksite employees 
     with respect to a client will be tested taking into account 
     the worksite employees at a client location and all other 
     nonexcludable employees of the client taking into account 
     414(b), (c), (m), (n) (with respect to workers not otherwise 
     included as worksite employees) and (o), but one client's 
     worksite employees would not be included in applying the 
     coverage or other nondiscrimination rules (1) to portions of 
     the CPEO plan covering worksite employees of other clients, 
     (2) to the portion of the CPEO plan covering nonworksite 
     employees, (3) to other plans maintained by the CPEO (except 
     to the extent such plan covers worksite employees of the same 
     client), or (4) to other plans maintained by members of the 
     CPEO's controlled group.
       The legislation also treats any worksite employees as ``per 
     se'' leased employees of the client, thus requiring clients 
     to include all worksite employees in plan testing. In 
     accordance with current leased employee rules, the client 
     would take into account CPEO plan contributions or benefits 
     made on behalf of worksite employees of that client. 
     Consistent with this treatment of worksite employees, the 
     client would be permitted to cover worksite employees under 
     any employee benefit plan maintained by the client and 
     compensation paid by the CPEO to worksite employees would be 
     treated as paid by the client for purposes of applying 
     applicable qualification tests.
       For example, assume a CPEO maintained a plan covering 
     worksite employees performing services for Corporation X, 
     worksite employees performing services for Corporation Y, and 
     employees of the CPEO who are not worksite employees. In that 
     case the nondiscrimination tests would be applied separately 
     to the portions of the plan covering (1) worksite employees 
     performing services for Corporation X; (2) worksite employees 
     performing services for corporation Y, and (3) CPEO employees 
     who are not worksite employees, as if each of (1), (2), and 
     (3) were a separate plan. In addition, worksite employees 
     performing services for Corporation X, for example, would be 
     per se leased employees of Corporation X and thus would be 
     included in testing any other plans maintained by Corporation 
     X or any members of Corporation X's controlled group. 
     Similarly, the CPEO workforce (other than worksite employees) 
     will be treated as a separate employer for testing purposes 
     (and will

[[Page S7895]]

     be included in applying the nondiscrimination rules to any 
     plans maintained by the CPEO or members of its controlled 
     group).
       In applying nondiscrimination rules to plans maintained by 
     other entities within the CPEO's controlled group for workers 
     who are not worksite employees, worksite employees will not 
     be taken into account. Thus, in the example above, worksite 
     employees performing services for Corporation X or 
     Corporation Y would not be taken into account in testing 
     plans maintained by other members of the CPEO's controlled 
     group.
       For purposes of testing a particular client's portion of 
     the plan under the rules above, general rules applicable to 
     that client would apply as if the client maintained that 
     portion of the plan. Thus, if the terms of the benefits 
     available to the client's worksite employees satisfied the 
     requirements of the section 401(k) testing safe harbor, then 
     that client could take advantage of the safe harbor. 
     Similarly, a client that meets the eligibility criteria for a 
     SIMPLE 401(k) plan would be allowed to utilize the SIMPLE 
     rules to demonstrate compliance with the applicable 
     nondiscrimination rules for that client.
       Application of certain other qualified plan and welfare 
     benefit plan rules will generally be determined as if the 
     client and the CPOE are a single employer (consistent with 
     the principle that the CPEO arrangement will not result in 
     better or worse treatment). Thus, there would be a single 
     annual limit under section 415. Section 415 will provide that 
     any cutbacks required as a result of the single annual limit 
     will be made in the client plan. Deduction limits and funding 
     requirements would apply at the CPEO level. In addition, if 
     the client portion of a plan is part of a top heavy group, 
     any required top heavy minimum contribution or benefit will 
     generally need to be made by the CPEO plan. There will be 
     complete ``crediting'' of service for all benefit purposes. 
     The ``break in service'' rules for plan vesting will be 
     applied with respect to worksite employees using rules 
     generally based on Code section 413.
       The bill also provides the Secretary with the authority to 
     promulgate rules and regulations that streamline, to the 
     extent possible, the application of certain requirements, the 
     exchange of information between the client and the CPEO, and 
     the reporting and record keeping obligations of the CPEO with 
     respect to its employee benefit plans.
       Worksite employees will not generally be entitled to 
     receive plan distributions of elective deferrals until the 
     worker leaves the CPEO group. In cases where a client 
     relationship terminates with a CPEO that maintains a plan, 
     the CPEO will be able to ``spin off'' the former client's 
     portion of the plan to a new or existing plan maintained by 
     the client. Where the terminated client does not establish a 
     plan or wish to maintain the client's portion of the CPEO 
     plan, the CPEO plan may distribute elective deferrals of 
     worksite employees associated with a terminated client only 
     in a direct rollover to an IRA designated by the worker. In 
     the event that no such IRA is designated before the second 
     anniversary of the termination of the CPEO/client 
     relationship the assets attributable to a client's worksite 
     employees may be distributed under the general plan terms 
     (and law) that applies to a distribution upon a separation 
     from service or severance from employment after that time.
       Similar to IRS practice in multiple employer plans, 
     disqualification of the entire plan will occur if a 
     nondiscrimination failure occurs with respect to worksite 
     employees of a client and either that failure is not 
     corrected under one of the IRS correction programs or that 
     portion of the plan is not spun off and/or terminated. If 
     that portion of the plan is corrected or spun off and/or 
     terminated, then the failure of a CPEO retirement plan to 
     satisfy applicable nondiscrimination requirements with 
     respect to that client will not result in the 
     disqualification of the plan as applied to other clients. 
     Existing government programs for correcting violations would 
     be available to the CPEO for the plan and, in the case of 
     nondiscrimination failures tested at the client level, to the 
     client portion of the plan with the fee to be based on the 
     size of the affected client's portion of the plan. Moreover, 
     the CPEO plan will be treated as one plan for purposes of 
     obtaining a determination letter.


                        employment tax liability

       An entity that has been certified as a CPEO must accept 
     responsibility for employment taxes with respect to wages it 
     pays to worksite employees performing services for clients. 
     Such liability will be exclusive or primary, as provided 
     below. It is expected that the CPEO would (as provided by the 
     Secretary) be required, on an ongoing basis, to provide the 
     IRS with a list of clients for which employment tax liability 
     has been assumed and a list of clients for whom it no longer 
     has employment tax liability. Reporting and other 
     requirements that apply to an employer with respect to 
     employment taxes would generally apply to the CPEO for 
     remuneration remitted by the CPEO (as provided by the 
     Secretary). In addition, the remittance frequency of 
     employment taxes will be determined with reference to 
     collections and the liability of the CPEO.
       Wages paid by the client during the calendar year prior to 
     the assumption of employment tax liability would be counted 
     towards the applicable FICA or FUTA tax wage base for the 
     year in determining the employment tax liability of the CPEO 
     (and vice versa). Exceptions to payments as wages or 
     activities as employment, and thus to the required payment of 
     employment taxes, are determined by reference to the client. 
     Also, for purposes of crediting state unemployment insurance 
     (SUI) taxes against FUTA tax liability, payments by the CPEO 
     (or transmitted by the CPEO for the client) with respect to 
     worksite employees would be taken into account. Thus, in 
     determining FUTA liability, CPEO's would be treated as the 
     employer for crediting SUI collection purposes on essentially 
     the same terms as they would be authorized to process wage 
     withholding, FICA and FUTA. The bill is, however, limited to 
     Federal law and does not address the issue of whether a CPEO 
     (i) would be eligible for successor status for SUI tax 
     collection or (ii) how the state experience rating formula 
     would be applied to the CPEO. Determinations with respect to 
     these issues will be made pursuant to state law.
       A CPEO will have exclusive liability for employment taxes 
     with respect to wage payments made by the CPEO to worksite 
     employees (including owners of the client who are worksite 
     employees) if the CPEO meets the net worth requirement and, 
     at least quarterly, an examination level attestation by an 
     independent Certified Public Accountant attesting to the 
     adequate and timely payment of federal employment taxes has 
     been filed with the IRS.
       The net worth requirement is satisfied if the CPEO's net 
     worth (less goodwill and other intangibles) is, on the last 
     day of the fiscal quarter preceding the date on which payment 
     is due and on the last day of the fiscal quarter in which the 
     payment is due, at least:
       $50,000 if the number of worksite employees is fewer than 
     500;
       $100,000 if the number of worksite employees is 500 to 
     1,499;
       $150,000 if the number of worksite employees is 1,500 to 
     2,499;
       $200,000 if the number of worksite employees is 2,500 to 
     3,999; and
       $250,000 if the number of worksite employees is more than 
     3,999;
       In the alternative, the net worth requirement could be 
     satisfied through a bond (for employment taxes up to the 
     applicable net worth amount) similar to an appeal bond filed 
     with the Tax Court by a taxpayer or by an insurance bond 
     satisfying similar rules.
       Within 60 days after the end of each fiscal quarter, the 
     CPEO will provide the IRS with an examination level 
     attestation from an independent certified public accountant 
     that states that the accountant has found no material reason 
     to question the CPEO's assertions with respect to the 
     adequacy of federal employment tax payments for the fiscal 
     quarter. In the event that such attestation is not provided 
     on a timely basis, the CPEO will cease to have exclusive 
     liability with respect to employment taxes (regardless of the 
     net worth or bonding requirement) effective the due date for 
     the attestation. Exclusive liability will not be restored 
     until the first day of the quarter following two successive 
     quarters for which an examination level attestations were 
     timely filed. In addition, the Secretary will have the 
     authority, under final regulations, to provide limits on a 
     CPEO's exclusive liability for employment taxes with respect 
     to a particular customer in cases where there is an undue and 
     large risk with respect to the ultimate collection of those 
     taxes.
       For any tax period for which any of these criteria for 
     exclusive liability for employment taxes are not satisfied, 
     or to the extent the client has not made adequate payments to 
     the CPEO for the payment of wages, taxes, and benefits, the 
     CPEO will have primary liability and the client will have 
     secondary liability for employment taxes. In that instance, 
     the IRS will assess and attempt to collect unpaid employment 
     taxes against the CPEO first and may not generally take any 
     action against a client with respect to liability for 
     employment taxes until at least 45 days following the date 
     the IRS mails a notice and demand to the CPEO. For this 
     purpose, the statute of limitations for assessment or 
     collection against the client will not expire until one year 
     after the date that is 45 days after mailing of notice and 
     demand to the CPEO (in the same manner as transferee 
     liability under section 6901(c)). With respect to employment 
     taxes attributable to periods during which a CPEO has 
     liability, the client will be liable to the IRS for taxes, 
     penalties (applicable to client actions or to the time 
     periods after assessment of the client for the taxes), and 
     interest (with such liability to be reduced by amounts paid 
     to the IRS by the CPEO that are allocable, under rules to be 
     determined by the IRS, to the client).


                             effective date

       These provisions will be effective on January 1, 2002. The 
     IRS will be directed to establish the PEO certification 
     program at least three months prior to the effective date. 
     The bill directs the IRS to accommodate transfers of assets 
     in existing plans maintained by a CPEO or CPEO clients into a 
     new plan (or amended plan) meeting the requirements of the 
     legislation (e.g., client-by-client nondiscrimination 
     testing) without regard to whether or not such plans might 
     fail the exclusive benefit rule because worksite employees 
     might be considered common law employees of the client.
  Mr. THOMAS. Mr. President, I rise today to join my colleagues in 
introducing the ``Rural Health Care in the 21st Century Act.'' I am 
pleased to have worked with my colleagues in crafting this bill that 
will address the

[[Page S7896]]

needs of rural providers and beneficiaries as we begin the new century.
  This legislation establishes a grant and loan program to assist rural 
providers in acquiring the necessary technologies to improve patient 
safety and meet the continually changing records management 
requirements. Rural hospitals and other providers do not have the 
capital needed to purchase these expensive technologies nor the 
resources to train their staff. This new program will enable these 
providers to purchase such crucial equipment as patient tracking 
systems, bar code systems to avoid drug errors and software equipped 
with artificial intelligence.
  Another reason this legislation is so important is because it will 
bring equity to the Medicare Disproportionate Share Hospital (DSH) 
program, which has been inherently biased against rural providers since 
it was implemented in 1986. The premise of this program is to give 
hospitals that provide a substantial amount of care to low-income 
patients additional funding to assist with the higher costs associated 
with caring for this population.
  Mr. President, the current DSH program does almost nothing for rural 
hospitals because different eligibility requirements have been 
established for rural and urban providers. To qualify for the increased 
payments the DSH program provides, urban hospitals are required to 
demonstrate that 15 percent of their patient load consists of Medicaid 
patients and Medicare patients eligible for Supplemental Security 
Income. However, rural hospitals must meet a higher threshold of 45 
percent. Mr. President, there is no justification for this inequity. 
Our bill will level the playing field by applying the same eligibility 
threshold currently enjoyed by urban hospitals to all rural hospitals 
as well. According to the Medicare Payment Advisory Commission this 
reform will open the door for 55 percent of all rural hospitals to 
benefit from the DSH program--a significant increase over the 15.6 
percent of rural hospitals currently participating.
  The ``Rural Health Care in the 21st Century Act'' also addresses 
other inequities faced by rural providers because federal regulators do 
not adequately reflect the unique circumstances of delivering health 
care in rural America. This bill provides rural home health agencies 
with a 10 percent bonus payment as they have average per episode costs 
that are 20 percent higher than urban agencies.
  Rural Health Clinics and Critical Access Hospitals are a key 
component of maintaining access to primary and emergency services in 
rural communities. This legislation makes modifications to the Balanced 
Budget Act to ensure these providers will continue to be an integral 
part of the rural health care delivery system.
  Mr. President, I believe this bill is an important step in ensuring 
rural providers are treated equally under federal programs. This 
equalization must be accomplished so we can guarantee that rural 
Medicare beneficiaries have the same choices and access to services as 
their urban counterparts.
                                 ______